exv10w1






Exhibit 10.1




Credit Agreement




Dated as of

June 30, 2011



among



McMoRan Exploration Co.,

As Parent,



McMoRan Oil & Gas LLC,

as Borrower,



JPMorgan Chase Bank, N.A.,

as Administrative Agent,



Toronto Dominion (New York) LLC,

as Syndication Agent,



BNP Paribas,

As Documentation Agent,



and



The Lenders Party Hereto



Sole Lead Arranger and Sole Book runner



J.P. Morgan Securities LLC



 









 





TABLE OF CONTENTS




Page




ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS




	 	 	 	 	 

	Section 1.01 Terms Defined Above
	 	 	1	 
	Section 1.02 Certain Defined Terms
	 	 	1	 
	Section 1.03 Types of Loans and Borrowings
	 	 	20	 
	Section 1.04 Terms Generally; Rules of Construction
	 	 	20	 
	Section 1.05 Accounting Terms and Determinations; GAAP
	 	 	21	 
	 
	 	 	 	 
	ARTICLE II
	THE CREDITS
	 
	 	 	 	 
	Section 2.01 Commitments
	 	 	21	 
	Section 2.02 Loans and Borrowings
	 	 	21	 
	Section 2.03 Requests for Borrowings
	 	 	22	 
	Section 2.04 Interest Elections
	 	 	23	 
	Section 2.05 Funding of Borrowings
	 	 	24	 
	Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts
	 	 	24	 
	Section 2.07 Borrowing Base
	 	 	25	 
	Section 2.08 Letters of Credit
	 	 	27	 
	Section 2.09 Incremental Revolving Commitments
	 	 	31	 
	 
	 	 	 	 
	ARTICLE III
	PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
	 
	 	 	 	 
	Section 3.01 Repayment of Loans
	 	 	32	 
	Section 3.02 Interest
	 	 	32	 
	Section 3.03 Alternate Rate of Interest
	 	 	33	 
	Section 3.04 Prepayments
	 	 	33	 
	Section 3.05 Fees
	 	 	34	 
	 
	 	 	 	 
	ARTICLE IV
	PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
	 
	 	 	 	 
	Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs
	 	 	35	 
	Section 4.02 Presumption of Payment by the Borrower
	 	 	36	 
	Section 4.03 Certain Deductions by the Administrative Agent
	 	 	36	 
	Section 4.04 Disposition of Proceeds
	 	 	36	 
	 
	 	 	 	 
	ARTICLE V
	INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES
	 
	 	 	 	 
	Section 5.01 Increased Costs
	 	 	37	 
	Section 5.02 Break Funding Payments
	 	 	38	 
	Section 5.03 Taxes
	 	 	38	 






i









 





	 	 	 	 	 

	Section 5.04 Designation of Different Lending Office
	 	 	40	 
	Section 5.05 Replacement of Lenders
	 	 	40	 
	Section 5.06 Defaulting Lenders
	 	 	41	 
	 
	 	 	 	 
	ARTICLE VI
	CONDITIONS PRECEDENT
	 
	 	 	 	 
	Section 6.01 Effective Date
	 	 	42	 
	Section 6.02 Each Credit Event
	 	 	44	 
	 
	 	 	 	 
	ARTICLE VII
	REPRESENTATIONS AND WARRANTIES
	 
	 	 	 	 
	Section 7.01 Organization; Powers
	 	 	46	 
	Section 7.02 Authority; Enforceability
	 	 	46	 
	Section 7.03 Approvals; No Conflicts
	 	 	46	 
	Section 7.04 Financial Condition; No Material Adverse Change
	 	 	46	 
	Section 7.05 Litigation
	 	 	47	 
	Section 7.06 Environmental Matters
	 	 	47	 
	Section 7.07 Compliance with the Laws and Agreements; No Defaults
	 	 	48	 
	Section 7.08 Investment Company Act
	 	 	48	 
	Section 7.09 Taxes
	 	 	48	 
	Section 7.10 ERISA
	 	 	48	 
	Section 7.11 Disclosure; No Material Misstatements
	 	 	49	 
	Section 7.12 Insurance
	 	 	50	 
	Section 7.13 Restriction on Liens
	 	 	50	 
	Section 7.14 Subsidiaries
	 	 	50	 
	Section 7.15 Location of Business and Offices
	 	 	50	 
	Section 7.16 Properties; Titles, Etc.
	 	 	51	 
	Section 7.17 Maintenance of Properties
	 	 	51	 
	Section 7.18 Gas Imbalances, Prepayments
	 	 	52	 
	Section 7.19 Marketing of Production
	 	 	52	 
	Section 7.20 Swap Agreements
	 	 	52	 
	Section 7.21 Use of Loans and Letters of Credit
	 	 	52	 
	Section 7.22 Solvency
	 	 	53	 
	 
	 	 	 	 
	ARTICLE VIII
	 AFFIRMATIVE COVENANTS
	 
	 	 	 	 
	Section 8.01 Financial Statements; Other Information
	 	 	53	 
	Section 8.02 Notices of Material Events
	 	 	55	 
	Section 8.03 Existence; Conduct of Business
	 	 	56	 
	Section 8.04 Payment of Obligations
	 	 	56	 
	Section 8.05 Performance of Obligations under Loan Documents
	 	 	56	 
	Section 8.06 Operation and Maintenance of Properties
	 	 	56	 
	Section 8.07 Insurance
	 	 	57	 
	Section 8.08 Books and Records; Inspection Rights
	 	 	57	 
	Section 8.09 Compliance with Laws
	 	 	57	 
	Section 8.10 Environmental Matters
	 	 	57	 
	Section 8.11 Further Assurances
	 	 	58	 






ii









 






	 	 	 	 	 

	Section 8.12 Reserve Reports
	 	 	59	 
	Section 8.13 Title Information
	 	 	60	 
	Section 8.14 Additional Collateral; Additional Guarantors
	 	 	60	 
	Section 8.15 ERISA Compliance
	 	 	61	 
	Section 8.16 Unrestricted Subsidiaries
	 	 	61	 
	Section 8.17 Marketing Activities
	 	 	62	 
	 
	 	 	 	 
	ARTICLE IX
	NEGATIVE COVENANTS
	 
	 	 	 	 
	Section 9.01 Financial Covenants
	 	 	62	 
	Section 9.02 Debt
	 	 	63	 
	Section 9.03 Liens
	 	 	64	 
	Section 9.04 Dividends, Distributions and Redemptions
	 	 	65	 
	Section 9.05 Investments, Loans and Advances
	 	 	66	 
	Section 9.06 Nature of Business; International Operations
	 	 	67	 
	Section 9.07 Proceeds of Notes
	 	 	67	 
	Section 9.08 ERISA Compliance
	 	 	67	 
	Section 9.09 Sale or Discount of Receivables
	 	 	68	 
	Section 9.10 Mergers, Etc.
	 	 	68	 
	Section 9.11 Sale of Properties
	 	 	69	 
	Section 9.12 Environmental Matters
	 	 	69	 
	Section 9.13 Transactions with Affiliates
	 	 	69	 
	Section 9.14 Subsidiaries
	 	 	70	 
	Section 9.15 Negative Pledge Agreements; Dividend Restrictions
	 	 	70	 
	Section 9.16 Gas Imbalances, Take-or-Pay or Other Prepayments
	 	 	70	 
	Section 9.17 Swap Agreements
	 	 	70	 
	Section 9.18 P&A Escrow Agreement
	 	 	71	 
	Section 9.19 Unrestricted Subsidiaries
	 	 	71	 
	 
	 	 	 	 
	ARTICLE X
	EVENTS OF DEFAULT; REMEDIES
	 
	 	 	 	 
	Section 10.01 Events of Default
	 	 	71	 
	Section 10.02 Remedies
	 	 	73	 
	 
	 	 	 	 
	ARTICLE XI
	THE ADMINISTRATIVE AGENT
	 
	 	 	 	 
	Section 11.01 Appointment; Powers
	 	 	74	 
	Section 11.02 Duties and Obligations of Administrative Agent
	 	 	74	 
	Section 11.03 Action by Administrative Agent
	 	 	75	 
	Section 11.04 Reliance by Administrative Agent
	 	 	76	 
	Section 11.05 Subagents
	 	 	76	 
	Section 11.06 Resignation of Administrative Agent
	 	 	76	 
	Section 11.07 Agents as Lenders
	 	 	76	 
	Section 11.08 No Reliance
	 	 	77	 
	Section 11.09 Administrative Agent May File Proofs of Claim
	 	 	77	 
	Section 11.10 Authority of Administrative Agent to Release Collateral and Liens
	 	 	78	 
	Section 11.11 The Arrangers and the Agents
	 	 	78	 






iii









 






	 	 	 	 	 

	 
	 	 	 	 
	ARTICLE XII
	MISCELLANEOUS
	 
	 	 	 	 
	Section 12.01 Notices
	 	 	78	 
	Section 12.02 Waivers; Amendments
	 	 	79	 
	Section 12.03 Expenses, Indemnity; Damage Waiver
	 	 	80	 
	Section 12.04 Successors and Assigns
	 	 	82	 
	Section 12.05 Survival; Revival; Reinstatement
	 	 	85	 
	Section 12.06 Counterparts; Integration; Effectiveness
	 	 	86	 
	Section 12.07 Severability
	 	 	86	 
	Section 12.08 Right of Setoff
	 	 	86	 
	Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
	 	 	86	 
	Section 12.10 Headings
	 	 	87	 
	Section 12.11 Confidentiality
	 	 	88	 
	Section 12.12 Interest Rate Limitation
	 	 	88	 
	Section 12.13 Collateral Matters; Swap Agreements
	 	 	89	 
	Section 12.14 No Third Party Beneficiaries
	 	 	89	 
	Section 12.15 Acknowledgements
	 	 	89	 
	Section 12.16 EXCULPATION PROVISIONS
	 	 	89	 
	Section 12.17 USA Patriot Act Notice
	 	 	90	 






iv









 






ANNEXES, EXHIBITS AND SCHEDULES




	 	 	 

	Annex I

	 	List of Maximum Credit Amounts
	 
	 	 
	Exhibit A

	 	Form of Note
	Exhibit B

	 	Form of Borrowing Request
	Exhibit C

	 	Form of Interest Election Request
	Exhibit D

	 	Form of Compliance Certificate
	Exhibit E

	 	Form of Legal Opinion of Jones Walker, special counsel to the Borrower
	Exhibit F-1

	 	Security Instruments
	Exhibit F-2

	 	Form of Guaranty and Collateral Agreement
	Exhibit G

	 	Form of Assignment and Assumption
	Exhibit H

	 	Form of Exemption Certificate
	Exhibit I

	 	Form of Increased Facility Activation Notice
	Exhibit J

	 	Form of New Lender Supplement
	Exhibit K

	 	Form of Mortgage Release Certificate
	 
	 	 
	Schedule 1.02

	 	Existing Letters of Credit
	Schedule 7.05

	 	Litigation
	Schedule 7.10(d)

	 	ERISA Plan
	Schedule 7.10(f)

	 	Under-funded ERISA Plan
	Schedule 7.12

	 	Insurance
	Schedule 7.14

	 	Subsidiaries
	Schedule 7.16

	 	Title Exceptions
	Schedule 7.18

	 	Gas Imbalances
	Schedule 7.19

	 	Marketing Contracts
	Schedule 7.20

	 	Swap Agreements
	Schedule 9.02

	 	Existing Debt
	Schedule 9.03

	 	Existing Liens
	Schedule 9.05

	 	Investments






v









 






     THIS CREDIT AGREEMENT dated as of June 30, 2011, is among: McMoRan Exploration Co., a Delaware
corporation (the “Parent”), McMoRan Oil & Gas LLC, a Delaware limited liability company
(the “Borrower”); each of the Lenders from time to time party hereto; JPMorgan Chase Bank,
N.A. (in its individual capacity, “JPMorgan”), as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the “Administrative Agent”);
Toronto Dominion (Texas) LLC, as syndication agent for the Lenders (in such capacity, together with
its successors in such capacity, the “Syndication Agent”); and BNP Paribas, as
documentation agent for the Lenders (in such capacity, together with its successors in such
capacity, the “Documentation Agent”)



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



ARTICLE I

Definitions and Accounting Matters



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



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




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



     “Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal
to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.



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



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



     “Agents” means, collectively, the Administrative Agent, the Syndication Agent and the
Documentation Agent; and “Agent” shall mean any of the Administrative Agent, the Syndication Agent
or any Documentation Agent, as the context requires.



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



     “Aggregated Subsidiaries” means any group of Subsidiaries which in the aggregate would
constitute a Significant Subsidiary.



     “Agreement” means this Credit Agreement, including the Schedules and Exhibits hereto,
as the same may be amended or supplemented from time to time.



 









 





     “Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1% or (c) the Adjusted LIBO Rate having an Interest Period of one month on such day
plus 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal
Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective
date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate,
respectively.



     “Applicable Margin” means, for any day, with respect to any ABR Loan or Eurodollar
Loan, as the case may be, the applicable rate per annum set forth below based upon the Borrowing
Base Utilization Percentage then in effect:



	 	 	 	 	 	 	 	 	 

	Borrowing 

Base Utilization Percentage

	 	Eurodollar
Loans
	 	ABR
Loans

	> 90%

	 	 	3.00	%	 	 	2.00	%
	> 75% and < 90%

	 	 	2.75	%	 	 	1.75	%
	> 50% and < 75%

	 	 	2.50	%	 	 	1.50	%
	> 25% and < 50%

	 	 	2.25	%	 	 	1.25	%
	< 25%

	 	 	2.00	%	 	 	1.00	%





     Each change in the Applicable Margin shall apply during the period commencing on the effective
date of a change in the Borrowing Base Utilization Percentage and ending on the date immediately
preceding the effective date of the next such change, provided, however, that if at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a), then the
“Applicable Margin” means the rate per annum set forth on the grid when the Borrowing Base
Utilization Percentage is at its highest level.



     “Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit Amount as such
percentage is set forth on Annex I; provided that in the case of Section 5.06, when a
Defaulting Lender shall exist, “Applicable Percentage” shall mean the percentage of the total
Aggregate Maximum Credit Amounts (disregarding any Defaulting Lender’s Commitment) represented by
such Lender’s Maximum Credit Amount. If the Commitments have terminated or expired, the Applicable
Percentages shall be determined based upon the Commitments most recently in effect, giving effect
to any assignments and to any Lender’s status as a Defaulting Lender at the time of determination.



     “Approved Counterparty” means (a) any Lender or any Affiliate of a Lender or (b) any
other Person whose long term senior unsecured debt rating at the time a particular Swap Agreement
transaction is entered into is A/A2 by S&P or Moody’s (or their equivalent) or higher.



     “Approved Petroleum Engineers” means (a) Netherland, Sewell & Associates, Inc., (b)
Ryder Scott Company Petroleum Consultants, L.P. and (c) any other independent petroleum engineers
reasonably acceptable to the Administrative Agent.



     “Arranger” means J.P. Morgan Securities LLC, in its capacity as the sole lead arranger
and sole book runner hereunder.



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



2









 





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



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



     “Bankruptcy Event” means, with respect to any Person, such Person becomes the subject
of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee,
administrator, custodian, assignee for the benefit of creditors or similar Person charged with the
reorganization or liquidation of its business appointed for it, or, in the good faith determination
of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy
Event shall not result solely by virtue of any ownership interest, or the acquisition of any
ownership interest, in such Person by a Governmental Authority or instrumentality thereof,
provided, further, that such ownership interest does not result in or provide such Person with
immunity from the jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Person (or such Governmental
Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or
agreements made by such Person.



     “Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.



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



     “Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07, as the same may be adjusted from time to time pursuant to Section
8.13(c), Section 9.02(j), Section 9.11(d) or Section 9.17(b).



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



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



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



     “Business Day” means any day that is not a Saturday, Sunday or other day on which
commercial banks in New York City or Houston, Texas are authorized or required by law to remain
closed; and if such day relates to a Borrowing or continuation of, a payment or prepayment of
principal of or interest on, or a conversion of or into, or the Interest Period for, a Eurodollar
Loan or a notice by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which dealings in dollar
deposits are carried out in the London interbank market.



3









 





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



     “Cash Management Services Agreement” means any agreement to provide management
services, including treasury, depository, overdraft, credit or debit card, electronic funds
transfer and other cash management services.



     “Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or similar proceeding of,
any Property of any Loan Party having a fair market value in excess of $1,000,000.



     “Change in Control” means (a) the acquisition of ownership, directly or indirectly,
beneficially or of record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof), of Equity
Interests representing more than 35% of the aggregate ordinary voting power represented by the
issued and outstanding Equity Interests of the Parent, (b) occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Parent by Persons who were neither (i)
nominated by the board of directors of the Parent nor (ii) appointed by directors so nominated, or
(c) the failure of the Parent to at any time own, directly or indirectly, beneficially or of
record, 100% of all of the issued and outstanding Equity Interests of the Borrower.



     “Change in Law” means (a) the adoption of any law, rule or regulation after the date
of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or
application thereof by any Governmental Authority after the date of this Agreement or (c)
compliance by any Lender or the Issuing Bank (or, for purposes of Section 5.01(b)), by any lending
office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any Governmental
Authority made or issued after the date of this Agreement.



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



     “Commitment” means, with respect to each Lender, the commitment of such Lender to make
Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount
representing the maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder, as
such commitment may be (a) reduced or terminated from time to time pursuant to Section 2.06 or
increased pursuant to Section 2.09 and (b) modified from time to time pursuant to assignments by or
to such Lender pursuant to Section 12.04(b); and “Commitments” means the aggregate amount
of the Commitments of all the Lenders. The amount representing each Lender’s Commitment shall at
any time be the lesser of such Lender’s Maximum Credit Amount and such Lender’s Applicable
Percentage of the then effective Borrowing Base. As of the Effective Date, the aggregate
Commitments of the Lenders are $150,000,000.



     “Commitment Fee Rate” means, for any day, a rate per annum equal to 0.50%.



     “Conduit Lender” means any special purpose corporation organized and administered by
any Lender for the purpose of making Loans otherwise required to be made by such Lender and
designated by such Lender in a written instrument delivered to the Administrative Agent and the
Borrower; provided, that the designation by any Lender of a Conduit Lender shall not
relieve the designating Lender of any of its obligations under this Agreement if, for any reason,
its Conduit Lender fails to meet any such obligations, and the designating Lender (and not the
Conduit Lender) shall have the sole right and



4









 




responsibility to deliver all consents and waivers required or requested under this Agreement
with respect to its Conduit Lender, and provided, further, that no Conduit Lender
shall (a) be entitled to receive any greater amount pursuant to Section 5.01, 5.02, 5.03 or 12.03
than the designating Lender would have been entitled to receive in respect of the extensions of
credit made by such Conduit Lender or (b) be deemed to have any Commitment.




     “Consolidated Net Income” means with respect to the Parent and the Consolidated
Subsidiaries, for any period, the aggregate of the net income (or loss) of the Parent and the
Consolidated Subsidiaries after allowances for taxes for such period determined on a consolidated
basis in accordance with GAAP; provided that there shall be excluded from such net income (to the
extent otherwise included therein) the following: (a) the net income of any Person in which the
Parent 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 Parent and the Consolidated
Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in cash during such period by such other Person to the Parent or to a
Consolidated Subsidiary, as the case may be; (b) the net income (but not loss) during such period
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 charter or any agreement, instrument or Governmental
Requirement applicable to such Consolidated Subsidiary or is otherwise restricted or prohibited, in
each case determined in accordance with GAAP; (c) any extraordinary non-cash gains or losses during
such period; (d) non-cash gains or losses under FASB ASC Topic 815 resulting from the net change in
mark to market portfolio of commodity price risk management activities during that period; (e) any
gains or losses attributable to writeups or writedowns of assets, including ceiling test
writedowns; (f) any non-cash gains or losses attributable to any non-cash impairment charges
resulting from the application of FASB ASC Topics 350 and 360 and any amortization of intangibles
pursuant to FASB ASC Topic 350; (g) any net after-tax income or loss from discontinued operations
and any net after-tax gain or loss on disposal of discontinued operations; (h) the cumulative
effect of a change in accounting principles; (i) any non-cash gains or losses on the sale of
Property; (j) any non-cash gains or losses on the early extinguishment of Debt, including
inducement expenses; (k) any non-cash impact of accretion expenses (in accordance with SFAS No.
143); and (l) any non-cash compensation expense under FASB ASC 718 recognized from grants of stock
appreciation or similar rights, stock options, restricted stock, restricted stock units or other
rights to officers, directors and employees of such Person or any of its Restricted Subsidiaries,
provided that if such non-cash expense subsequently becomes a cash expense, it will be included in
the period during which it became a cash expense; provided that for the purposes of calculating
Consolidated Net Income for any period of four consecutive fiscal quarters (each, a “Reference
Period””), if during such Reference Period (or, in the case of pro forma calculations, during
the period from the last day of such Reference Period to and including the date as of which such
calculation is made) the Borrower or any Restricted Subsidiary shall have made a Material
Disposition or Material Acquisition, Consolidated Net Income for such Reference Period shall be
calculated after giving pro forma effect thereto as if such Material Disposition or Material
Acquisition occurred on the first day of such Reference Period (with the Reference Period for the
purposes of pro forma calculations being the most recent period of four consecutive fiscal
quarters for which the relevant financial information is available). As used in this definition,
“Material Acquisition” means any acquisition of property or series of related acquisitions of
property that involves consideration in excess of $10,000,000; and “Material Disposition” means any
sale, transfer or other disposition of property or series of related sales, transfers or other
dispositions of property that yields gross proceeds to the Borrower or any Restricted Subsidiary in
excess of $10,000,000.



     “Consolidated Subsidiaries” means each Restricted Subsidiary of the Parent (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 Parent in accordance with GAAP.



5









 





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



     “Credit Party” means the Administrative Agent, the Issuing Bank or any other Lender.



     “Debt” means, for any Person, the sum of the following (without duplication): (a) all
obligations of such Person for borrowed money or evidenced by bonds, bankers’ acceptances,
debentures, notes or other similar instruments; (b) all obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, surety or other bonds and similar
instruments; (c) all accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all obligations under
Capital Leases; (e) all obligations under Synthetic Leases; (f) all Debt (as defined in the other
clauses of this definition) of others secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) a Lien on any Property of such Person,
whether or not such Debt is assumed by such Person; (g) all Debt (as defined in the other clauses
of this definition) of others guaranteed by such Person or in which such Person otherwise assures a
creditor against loss of the Debt (howsoever such assurance shall be made) but only to the extent
of the lesser of the amount of such Debt and the maximum stated amount of such guarantee or
assurance against loss; (h) all obligations or undertakings of such Person to maintain or cause to
be maintained the financial position or covenants of others or to purchase the Debt or Property of
others; (i) obligations to deliver commodities, goods or services, including, without limitation,
Hydrocarbons, in consideration of one or more advance payments, other than gas balancing
arrangements in the ordinary course of business; (j) obligations to pay for goods or services even
if such goods or services are not actually received or utilized by such Person; (k) any Debt of a
partnership for which such Person is liable either by agreement, by operation of law or by a
Governmental Requirement but only to the extent of such liability; (l) Disqualified Capital Stock;
and (m) the undischarged balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment. The Debt of any Person
shall include all obligations of such Person of the character described above to the extent such
Person remains legally liable in respect thereof notwithstanding that any such obligation is not
included as a liability of such Person under GAAP.



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



     “Defaulting Lender” means any Lender that (a) has failed, within two Business Days of
the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion
of its participations in Letters of Credit or (iii) pay over to any Credit Party any other amount
required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies
the Administrative Agent in writing that such failure is the result of such Lender’s good faith
determination that a condition precedent to funding (specifically identified and including the
particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit
Party in writing, or has made a public statement to the effect, that it does not intend or expect
to comply with any of its funding obligations under this Agreement (unless such writing or public
statement indicates that such position is based on such Lender’s good faith determination that a
condition precedent (specifically identified and including the particular default, if any) to
funding a loan under this Agreement cannot be satisfied) or generally under other agreements in
which it commits to extend credit, (c) has failed, within three Business Days after request by a
Credit Party, acting in good faith, to provide a certification in writing from an authorized
officer of such Lender that it will comply with its obligations (and is financially able to meet
such obligations) to fund prospective Loans and participations in then outstanding Letters of
Credit under this Agreement, provided that such Lender shall cease to be a Defaulting Lender
pursuant to this clause (c) upon such



6









 




Credit Party’s receipt of such certification in form and substance satisfactory to it and the
Administrative Agent, or (d) has become the subject of a Bankruptcy Event.




     “Disqualified Capital Stock” means any Equity Interest that, by its terms (or by the
terms of any security into which it is convertible or for which it is exchangeable) or upon the
happening of any event, matures or is mandatorily redeemable for any consideration other than other
Equity Interests (which would not constitute Disqualified Capital Stock), pursuant to a sinking
fund obligation or otherwise, or is convertible or exchangeable for Debt or redeemable for any
consideration other than other Equity Interests (which would not constitute Disqualified Capital
Stock) at the option of the holder thereof, in whole or in part, on or prior to the date that is
one year after the earlier of (a) the Maturity Date and (b) the date on which there are no Loans,
LC Exposure or other obligations hereunder outstanding and all of the Commitments are terminated.
Notwithstanding the preceding sentence, any Equity Interest that would constitute Disqualified
Capital Stock solely because the holders thereof have the right to require the Person to repurchase
such Equity Interests upon the occurrence of a change of control or an asset sale, shall not
constitute Disqualified Capital Stock.



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



     “Domestic Subsidiary” means any Restricted Subsidiary of the Parent that is organized
under the laws of the United States of America or any state thereof or the District of Columbia.



     “EBITDAX” means, for any period, the sum of Consolidated Net Income for such period
plus the following expenses or charges to the extent deducted from Consolidated Net Income in such
period: interest, income taxes, depreciation, depletion, amortization, exploration expenses and
other similar noncash charges, minus all noncash income added to Consolidated Net Income.



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



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



     “Environmental Laws” means any and all Governmental Requirements pertaining in any way
to health, safety the environment or the preservation or reclamation of natural resources, in
effect in any and all jurisdictions in which the Borrower or any Restricted Subsidiary is
conducting or at any time has conducted business, or where any Property of the Borrower or any
Restricted Subsidiary is located, including without limitation, the Oil Pollution Act of 1990
(“OPA”), as amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, 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 (“RCRA”), as amended, 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 Governmental Requirements. The term “oil” shall
have the meaning specified in OPA, the terms “hazardous substance” and “release”
(or “threatened release”) have the meanings specified in CERCLA, the terms “solid
waste” and “disposal” (or “disposed”) have the meanings specified in RCRA and
the term “oil and gas waste” shall have the meaning specified in Section 91.1011 of the
Texas Natural Resources Code (“Section 91.1011”); provided, however, that (a) in the event
either OPA, CERCLA, RCRA or Section 91.1011 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 or other jurisdiction in which any Property
of the Borrower or any Restricted Subsidiary is located establish a meaning for “oil,”
“hazardous substance,” “release,” “solid waste,” “disposal” or



7









 




“oil and gas waste” which is broader than that specified in either OPA, CERCLA, RCRA
or Section 91.1011, such broader meaning shall apply.




     “Equity Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such Equity Interest (provided that Debt securities which are or by their
terms may be convertible into Equity Interests shall not be Equity Interests).



     “Equity Issuance” means the issuance, sale or other disposition after the Effective
Date by the Parent of its Equity Interests.



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



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



     “ERISA Event” means (a) a “Reportable Event” described in section 4043 of ERISA and
the regulations issued thereunder, (b) the withdrawal of the Parent, any Loan Party or any ERISA
Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in
section 4001(a)(2) of ERISA, (c) the filing (or the receipt by any Loan Party or any ERISA
Affiliate) of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under section 4041 of ERISA, (d) the institution of proceedings to terminate a Plan by
the PBGC, (e) receipt of a notice of withdrawal liability pursuant to Section 4202 of ERISA, (f)
any other event or condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or the incurrence by any
Loan Party or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to
the termination of any Plan, including by not limited to the imposition of any Lien in favor of the
PBGC or any Plan, (g) on and after the effectiveness of the Pension Act, a determination that a
Plan is, or is expected to be, in “at risk” status (as defined in 303(i)(4) of ERISA or 430(i)(4)
of the Code) or (h) the failure of any Loan Party or any ERISA Affiliate to make by its due date a
required installment under Section 430(j) of the Code with respect to any Plan or any failure by
any Plan to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or
Section 302 of ERISA) applicable to such Plan, whether or not waived.



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



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



     “Excepted Liens” means: (a) Liens for taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in accordance with GAAP;
(b) Liens in connection with workers’ compensation, unemployment insurance or other social
security, old age pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’, vendors’,
carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s,
construction or other like Liens arising by operation of law in the ordinary course of business or
incident to the exploration, development, operation and maintenance of Oil and Gas



8









 




Properties each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (d) contractual Liens or preferential purchase rights which
arise in the ordinary course of business under operating agreements, joint venture agreements, oil
and gas partnership agreements, oil and gas leases, farm-out agreements, division orders, contracts
for the sale, transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, royalty agreements, overriding
royalty agreements, marketing agreements, processing agreements, net profits agreements,
development agreements, gas balancing or deferred production agreements, injection, repressuring
and recycling agreements, salt water or other disposal agreements, seismic or other geophysical
permits or agreements, and other agreements which are usual and customary in the oil and gas
business and are for claims which are not delinquent or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially impair the use of the
Property covered by such Lien for the purposes for which such Property is held by the Borrower or
any Restricted Subsidiary or materially impair the value of such Property subject thereto; (e)
Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens,
rights of set-off or similar rights and remedies and burdening only deposit accounts or other funds
maintained with a depository or financial institution; (f) easements, restrictions, servitudes,
permits, conditions, covenants, exceptions or reservations in any Property of the Borrower or any
Restricted Subsidiary for the purpose of roads, pipelines, transmission lines, transportation
lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other
like purposes, or for the joint or common use of real estate, rights of way, facilities and
equipment, that do not secure any monetary obligations and which in the aggregate do not materially
impair the use of such Property for the purposes of which such Property is held by the Borrower or
any or materially impair the value of such Property subject thereto; (g) Liens on cash or
securities pledged or subject to an escrow agreement to secure plugging and abandoning obligations
under the P&A Escrow Agreement, performance of tenders, surety and appeal bonds, government
contracts, performance and return of money bonds, bids, trade contracts, leases, statutory
obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary
course of business and (h) judgment and attachment Liens not giving rise to an Event of Default,
provided that any appropriate legal proceedings which may have been duly initiated for the review
of such judgment shall not have been finally terminated or the period within which such proceeding
may be initiated shall not have expired and no action to enforce such Lien has been commenced;
provided, further that Liens described in clause (e) shall remain “Excepted Liens” only for so long
as no action to enforce such Lien has been commenced, and no intention to subordinate the first
priority Lien granted in favor of the Administrative Agent and the Lenders is to be hereby implied
or expressed by the permitted existence of such Excepted Liens.




     “Excluded Taxes” means, with respect to any payment made by any Loan Party under this
Agreement or any Loan Documents, any of the following Taxes imposed on or with respect to any
Credit Party or any other recipient of any such payment, (a) income or franchise Taxes imposed on
(or measured by) its net income by the United States (or any political subdivision, state or
locality thereof), or by the jurisdiction (or any political subdivision, state or locality thereof)
under the laws of which such recipient is organized or in which its principal office is located or,
in the case of any Lender, in which its applicable lending office is located, or by a jurisdiction
(or any political subdivision, state or locality thereof) as a result of any present or former
connection between such recipient and the jurisdiction of the Governmental Authority imposing such
Tax or any political subdivision or taxing authority thereof (other than any such connection
arising strictly as a result of such recipient having executed, delivered or performed its
obligations under or received a payment pursuant to this Agreement), (b) any branch profits Taxes
imposed by the United States or any similar Tax imposed by any other jurisdiction in which the
applicable Loan Party is located, (c) in the case of a Lender (other than an assignee pursuant to a
request by the Borrower under Section 5.05), any withholding Taxes imposed by the United States
resulting from a Law in effect at the time such Lender first becomes a party to this Agreement (or
designates a new



9









 




lending office) or is attributable to such Lender’s failure to comply with Section 5.03(e),
(f) or (g), except to the extent that such Lender’s assignor (if any) was entitled, at the time of
such designation of a new lending office (or assignment), to receive additional amounts from the
Loan Party with respect to such withholding Taxes pursuant to Section 5.03(a), and (d) any U.S.
withholding Taxes imposed by reason of FATCA.




     “Existing 2014 Notes” means the Parent’s 11.875% senior notes due 2014 issued under
the Indenture, dated as of November 14, 2007, between Parent, the subsidiary guarantors party
thereto and The Bank of New York, as trustee, as may be amended and supplemented from time to time.



     “Existing Convertible Notes” means approximately $274,720,000 of outstanding
convertible notes of the Parent consisting of (i) its $74,720,000 5 1/4 % senior convertible notes
due 2011 and (ii) its $200,000,000 4% senior convertible notes due 2017.



     “Existing Credit Agreement” means the Amended and Restated Credit Agreement, dated as
of August 6, 2007, as amended, among the Borrower, the Parent, JPMorgan, as administrative agent,
and the other agents and lenders party thereto.



     “Existing Letters of Credit” means the letters of credit described on Schedule 1.02
that were issued by JPMorgan under the Existing Credit Agreement and that shall be transferred to
and deemed issued under this Agreement, as such letters of credit may be renewed or amended from
time to time.



     “FATCA” means Section 1471 through 1474 of the Code, as of the date of this Agreement
and any regulations or official interpretations thereof whether in existence as of the date of this
Agreement or promulgated or published thereafter.



     “Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received
by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.



     “Financial Officer” means, for any Person, any vice president, the chief financial
officer, principal accounting officer, treasurer or controller of such Person. Unless otherwise
specified, all references herein to a Financial Officer means a Financial Officer of the Parent.



     “Financial Statements” means the financial statement or statements of the Parent and
its Consolidated Subsidiaries referred to in Section 7.04, including all footnotes attached
thereto.



     “Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic
Subsidiary.



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



     “Governmental Authority” means the government of the United States of America, any
other nation 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 over any Loan Party, any of their Properties, any Agent, the Issuing Bank
or any Lender.



10









 





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



     “Guarantors” means:




	 	(a)	 	the Parent;
	 
	 	(b)	 	K-Mc Venture I LLC, a Delaware limited liability company;
	 
	 	(c)	 	Freeport Canadian Exploration Company, a Delaware corporation;
	 
	 	(d)	 	McMoRan International Inc., a Delaware corporation;
	 
	 	(e)	 	McMoRan Gulf Properties LLC, a Delaware limited liability company;
	 
	 	(f)	 	McMoRan Offshore LLC, a Delaware limited liability company; and
	 
	 	(e)	 	each other Domestic Subsidiary which is a Wholly-Owned Subsidiary that
guarantees the Indebtedness pursuant to Section 8.14(b).





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



     “Highest Lawful Rate” means, as to any Lender, at the particular time in question, the
maximum non-usurious rate of interest which, under applicable law, such Lender is then permitted to
contract for, charge or collect from the Borrower on the Loans or the other obligations of the
Borrower hereunder, and as to any other Person, at the particular time in question, the maximum
non-usurious rate of interest which, under applicable law, such Person is then permitted to
contract for, charge or collect with respect to the obligation in question. If the maximum rate of
interest which, under applicable law, the Lenders are permitted to contract for, charge or collect
from the Borrower on the Loans or the other obligations of the Borrower hereunder shall charge
after the date hereof, the Highest Lawful Rate shall be automatically increased or decreased, as
the case may be, as of the effective time of such change without notice to the Borrower or any
other Person.



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



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



     “Increased Facility Activation Notice” means a notice substantially in the form of
Exhibit I.



     “Increased Facility Closing Date” means any Business Day designated as such in an
Increased Facility Activation Notice.




11











 





     “Indebtedness” means any and all amounts owing or to be owing by any Loan Party
(whether direct or indirect (including those acquired by assumption), absolute or contingent, due
or to become due, now existing or hereafter arising): (a) to the Administrative Agent, the Issuing
Bank or any Lender under any Loan Document; (b) to any Lender or any Affiliate of a Lender under
any Swap Agreement or Cash Management Services Agreement between any Loan Party and such Lender or
Affiliate of a Lender while such Person (or in the case of its Affiliate, the Person affiliated
therewith) is a Lender hereunder and (c) all renewals, extensions and/or rearrangements of any of
the above.



     “Indemnified Taxes” means Taxes, other than Excluded Taxes.



     “Initial Reserve Report” means the engineering information provided by the Borrower
and delivered to the Administrative Agent, with respect to the value of the Oil and Gas Properties
of the Borrower and its Restricted Subsidiaries as of December 31, 2010.



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



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



     “Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two, three or six months (or, if available to each Lender, periods of
less than one month and periods of nine or twelve months) thereafter, as the Borrower may elect;
provided, that (a) if any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest Period shall end on
the next preceding Business Day, (b) no Interest Period may have a term which would extend beyond
the Maturity Date, (c) no Interest Period shall extend beyond the date of scheduled Aggregate
Maximum Credit Amount reductions if repayments of any Loans are required on such dates, and (d) any
Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the
date on which such Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.



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



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



     “Investment” means, for any Person: (a) the acquisition (whether for cash, Property,
services or 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); (b) the making of any advance, loan or capital contribution to, the assumption of Debt of,
the purchase or other acquisition of any other Debt of or equity participation or interest in, or
other extension of credit to, any other Person (including



12









 




the purchase of Property from another Person subject to an understanding or agreement,
contingent or otherwise, to resell such Property to such Person for any value other than the then
fair market value of such Property, but excluding any such advance, loan or extension of credit
having a term not exceeding ninety (90) days representing the purchase price of inventory,
material, equipment or supplies sold by such Person in the ordinary course of business); (c) the
purchase or acquisition (in one or a series of transactions) of Property of another Person that
constitutes a business unit or (d) the entering into of any guarantee of, or other contingent
obligation (including the deposit of any Equity Interests to be sold) with respect to, Debt or
other liability of any other Person and (without duplication) any amount committed to be advanced,
lent or extended to such Person.




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



     “LC Commitment” at any time means One Hundred Fifty Million Dollars ($150,000,000.00).



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



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



     “Lenders” means the Persons listed on Annex I and any Person that shall have become a
party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be
a party hereto pursuant to an Assignment and Assumption; provided, that unless the context
otherwise requires, each reference herein to the Lenders shall be deemed to include any Conduit
Lender.



     “Lender Parent” means, with respect to any Lender, any Person as to which such Lender
is, directly or indirectly, a subsidiary.



     “Letter of Credit” means any letter of credit issued pursuant to this Agreement.



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



     “LIBO Rate” means, with respect to each day during each Interest Period pertaining to
a Eurodollar Loan, the rate per annum determined on the basis of the rate for deposits in dollars
for a period equal to such Interest Period commencing on the first day of such Interest Period
appearing on the Reuters Screen LIBOR01 Page as of 11:00 A.M., London time, two Business Days prior
to the beginning of such Interest Period. In the event that such rate does not appear on such page
(or otherwise on such screen), the “LIBO Rate” shall be determined by reference to such
other comparable publicly available service for displaying eurodollar rates as may be selected by
the Administrative Agent or, in the absence of such availability, by reference to the rate at which
the Administrative Agent is offered dollar deposits at or about 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period in the interbank eurodollar market
where its eurodollar and foreign currency and exchange operations are then being conducted for
delivery on the first day of such Interest Period for the number of days comprised therein.



13









 





     “Lien” means any interest in Property securing an obligation owed to, or a claim by,
a Person other than the owner of the Property, whether such interest is based on the common law,
statute or contract, and whether such obligation or claim is fixed or contingent, and including but
not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or bailment for
security purposes or (b) production payments and the like payable out of Oil and Gas Properties.
The term “Lien” shall include easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations. For the purposes of this Agreement, the Parent and its
Restricted Subsidiaries shall be deemed to be the owner of any Property which 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 Documents” means this Agreement, the Notes, the Letter of Credit Agreements, the
Letters of Credit and the Security Instruments.



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



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



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



     “Material Adverse Effect” means a material adverse change in, or material adverse
effect on (a) the business, operations or financial condition of the Loan Parties taken as a whole,
(b) the ability of any Loan Party to perform any of its obligations under any Loan Document to
which it is a party, (c) the validity or enforceability of any Loan Document or (d) the rights and
remedies of or benefits available to the Administrative Agent, any other Agent, the Issuing Bank or
any Lender under the Loan Documents.



     “Material Indebtedness” means Debt (other than the Loans and Letters of Credit), or
obligations in respect of one or more Swap Agreements, of any one or more of any Loan Party in an
aggregate principal amount exceeding $25,000,000. For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of any Loan Party in respect of any Swap
Agreement at any time shall be the Swap Termination Value.



     “Maturity Date” means June 30, 2016, provided that if, on or prior to August 16, 2014
(the “Early Maturity Date”), the Existing 2014 Notes have not been Redeemed or refinanced
with senior notes having a maturity date not earlier than December 30, 2016, then the Maturity Date
shall be the Early Maturity Date.



     “Maximum Credit Amount” means, as to each Lender, the amount set forth opposite such
Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the same may be (a) reduced
or terminated from time to time in connection with a reduction or termination of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06 or increased pursuant to Section 2.09 or (b)
modified from time to time pursuant to any assignment permitted by Section 12.04(b). As of the
Effective Date, the aggregate Maximum Credit Amounts of the Lenders are $150,000,000.



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



14









 





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



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



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



     “Newfield” means Newfield Exploration Company, a Delaware corporation.



     “New Lender” has the meaning assigned such term in Section 2.09(b).



     “New Lender Supplement” has the meaning assigned such term in Section 2.09(b).



     “Non-Recourse Debt” means any Debt of any Unrestricted Subsidiary, in each case in
respect of which: (a) the holder or holders thereof (i) shall have recourse only to, and shall have
the right to require the obligations of such Unrestricted Subsidiary to be performed, satisfied,
and paid only out of, the Property of such Unrestricted Subsidiary and/or one or more of its
Subsidiaries (but only to the extent that such Subsidiaries are Unrestricted Subsidiaries) and/or
any other Person (other than the Parent, the Borrower and/or any Restricted Subsidiary) and (ii)
shall have no direct or indirect recourse (including by way of guaranty, support or indemnity) to
the Parent, the Borrower or any Restricted Subsidiary or to any of the Property of the Parent, the
Borrower or any Restricted Subsidiary, whether for principal, interest, fees, expenses or
otherwise; and (b) the terms and conditions relating to the non-recourse nature of such Debt are in
form and substance reasonably acceptable to the Administrative Agent.



     “Non-U.S. Lender” has the meaning assigned such term in Section 5.03(e).



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



     “Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now or
hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently existing or future
unitization, pooling agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production sharing contracts and
agreements, which relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds, products, revenues
and other incomes from or attributable to the Hydrocarbon Interests; (f) all tenements,
hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles, interests and
estates described or referred to above, including any and all Property, real or personal, now owned
or hereinafter acquired and situated upon, used, held for use or useful in connection with the
operating, working or development of any of such Hydrocarbon Interests or Property (excluding
drilling rigs, automotive equipment, rental equipment or other personal Property which may be on
such premises for the purpose of drilling a well or for other similar temporary uses) and 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



15









 




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.




     “Other Taxes” means any and all present or future stamp or documentary taxes or any
other similar excise or property taxes, charges or similar levies (including any interest,
additions to tax or penalties applicable thereto) arising from any payment made under any Loan
Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan
Document.



     “P&A Escrow Agreement” means that certain P&A Escrow Agreement dated as of August 6,
2007 among the Borrower and Newfield.



     “Parent Loan” means the intercompany loan agreement by and between the Borrower, as
borrower, and the Parent, as lender, dated as of April 17, 2006.



     “Participant” has the meaning assigned such term in Section 12.04(c)(i).



     “Participant Register” has the meaning assigned such term in Section 12.04(c)(i).



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



     “Pension Act”: means the Pension Protection Act of 2006, as it presently exists or as
it may be amended from time to time.



     “Permitted Additional Debt” means unsecured senior, senior subordinated or
subordinated Debt issued by the Parent or Borrower, (a) the terms of which do not provide for any
scheduled repayment, mandatory redemption or sinking fund obligation prior to the 91st day after
the Maturity Date (other than customary offers to purchase upon a change of control, asset sale or
casualty or condemnation event and customary acceleration rights after an event of default), (b)
the covenants, events of default, guarantees and other terms of which (other than interest rate,
fees, funding discounts and redemption or prepayment premiums determined by the Parent to be
“market” rates, fees, discounts and premiums at the time of issuance or incurrence of any such
Indebtedness), taken as a whole, are determined by the Parent to be “market” terms on the date of
issuance or incurrence and in any event, taken as a whole, are not more restrictive on the Parent
and its Restricted Subsidiaries than the terms of this Agreement (as in effect at the time of such
issuance or incurrence); provided that a certificate of an Authorized Officer of the Parent
delivered to the Administrative Agent at least (5) five Business Days prior to the incurrence or
issuance of such Debt, together with a reasonably detailed description of the material terms and
conditions of such Debt or drafts of the documentation relating thereto, stating that the Parent
has determined in good faith that such terms and conditions satisfy the foregoing requirements
shall be conclusive evidence that such terms and conditions satisfy the foregoing requirements
unless the Administrative Agent notifies the Borrower within such five (5) Business Day period that
it disagrees with such determination (including a reasonable description of the basis upon which it
disagrees), (c) if such Debt is senior subordinated or subordinated Debt, the terms of such Debt
provide for customary subordination of such Debt to the Indebtedness and (d) no Subsidiary of the
Parent (other than a Guarantor) is an obligor under such Debt.



     “Permitted Refinancing Debt” means Debt (for purposes of this definition, “new
Debt”) incurred in exchange for, or proceeds of which are used to refinance, all of any other
Debt (the “Refinanced Debt”); provided that (a) such new Debt is in an aggregate principal
amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the
Refinanced Debt (or, if the Refinanced Debt is exchanged or acquired for an amount less than the
principal amount thereof to be due and payable upon a declaration of acceleration thereof, such
lesser amount) and (ii) an amount necessary to pay any fees and expenses, including premiums,
related to such exchange or refinancing; (b) such new Debt has a stated



16









 




maturity no earlier than the stated maturity of the Refinanced Debt and an average life no
shorter than the average life of the Refinanced Debt; (c) such new Debt (and any guarantees
thereof) is secured by no more collateral than the collateral which secured, or is permitted by the
terms of this Agreement to secure, the Refinanced Debt; (d) the obligor(s) in respect of such new
Debt shall be the same as the obligor(s) in respect of such Refinanced Debt and if such Refinanced
Debt is not guarantied by any Loan Party, then such new Debt shall also not be guarantied by any
Loan Party; and (e) the Liens, if any, securing such new Debt are subordinated to the Liens
securing the Indebtedness (or, if applicable, the Guaranty Agreement) to at least the same extent
as the Liens securing the Refinanced Debt.




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



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



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



     “Prohibited Transaction” has the meaning assigned such term in Section 406 of ERISA
and Section 4975(c) of the Code.



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



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



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



     “Redemption” means with respect to any Debt, the repurchase, redemption, prepayment,
repayment, defeasance or any other acquisition or retirement for value (or the segregation of funds
with respect to any of the foregoing) of such Debt. “Redeem” has the correlative meaning
thereto.



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



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



     “Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.



17









 





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



     “Remedial Work” has the meaning assigned such term in Section 8.10(a).



     “Required Lenders” means, at any time while no Loans or LC Exposure is outstanding,
Lenders having at least sixty-six and two thirds percent (66-2/3%) of the Aggregate Maximum Credit
Amounts; and at any time while any Loans or LC Exposure is outstanding, Lenders holding at least
sixty-six and two thirds percent (66-2/3%) of the outstanding aggregate principal amount of the
Loans or participation interests in Letters of Credit (without regard to any sale by a Lender of a
participation in any Loan under Section 12.04(c)).



     “Reserve Report” means the Initial Reserve Report and each other report setting forth,
as of each January 1st or July 1st (or such other date in the event of an
Interim Redetermination), the oil and gas reserves attributable to the Oil and Gas Properties of
the Borrower and the Restricted Subsidiaries, together with a projection of the rate of production
and future net income, taxes, operating expenses and capital expenditures with respect thereto as
of such date based upon the economic assumptions consistent with the Administrative Agent’s lending
requirements at the time.



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



     “Restricted Payment” means any dividend or other distribution (whether in cash,
securities or other Property) with respect to any Equity Interests in any Person, or any payment
(whether in cash, securities or other Property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, conversion, cancellation or
termination of any such Equity Interests.



     “Restricted Subsidiary” means any direct or indirect Subsidiary of the Parent that is
not an Unrestricted Subsidiary.



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



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



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



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



     “Securities Act” means the Securities Act of 1933, as amended from time to time.



     “Security Instruments” means the Guaranty Agreement, mortgages, deeds of trust and
other agreements, instruments or certificates described or referred to in Exhibit F-1, and any and
all other agreements, instruments, consents or certificates now or hereafter executed and delivered
by the Parent, the Borrower or any other Person (other than Swap Agreements with the Lenders or any
Affiliate of a Lender or participation or similar agreements between any Lender and any other
lender or creditor with respect to any Indebtedness pursuant to this Agreement) in connection with,
or as security for the



18









 




payment or performance of the Indebtedness, the Notes, this Agreement, or reimbursement
obligations under the Letters of Credit, as such agreements may be amended, modified, supplemented
or restated from time to time.




     “Significant Subsidiary” means a Subsidiary of the Parent that meets the definition of
“significant subsidiary” in Article 1, Rule 1-02 of Regulation S-X under the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder.



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



     “Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of
which is the number one and the denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board to which the Administrative Agent is subject, with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding
and to be subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender under such Regulation D
or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.



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



     “Swap Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter”
or otherwise, involving, or settled by reference to, one or more interest rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar transaction or any
combination of these transactions; provided that no phantom stock or similar plan providing for
payments only on account of services provided by current or former directors, officers, employees
or consultants of any Loan Party shall be a Swap Agreement.



     “Swap PV” means, with respect to any Swap Agreement, the present value (as reasonably
determined by the Parent and the Administrative Agent) of the future receipts expected to be
received by the Parent or its Restricted Subsidiaries under such Swap Agreement.



     “Swap Termination Value” means, in respect of any one or more Swap Agreements, after
taking into account the effect of any legally enforceable netting agreement relating to such Swap
Agreements, (a) for any date on or after the date such Swap Agreements have been closed out and
termination value(s) determined in accordance therewith, such termination value(s) and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Agreements, as determined by the counterparties to such Swap Agreements.



19









 





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



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



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



     “Total Debt” means, at any date, all Debt for borrowed money of the Parent and the
Consolidated Subsidiaries on a consolidated basis.



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



     “Transferee” means any Assignee or Participant.



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



     “Unrestricted Subsidiary” means Freeport-McMoRan Energy, LLC, a Delaware limited
liability company, any other Subsidiary of the Parent designated as such on Schedule 7.14 and each
other Subsidiary of any of the foregoing, now existing or hereafter created.



     “Wholly-Owned Subsidiary” means any Restricted Subsidiary of which all of the
outstanding Equity Interests (other than any directors’ qualifying shares mandated by applicable
law), on a fully-diluted basis, are owned by the Parent and/or one or more of the Wholly-Owned
Subsidiaries.



     “Withholding Agent” means any Loan Party and the Administrative Agent.



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



     Section 1.04 Terms Generally; Rules of Construction. The definitions of terms herein shall apply equally to the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be
deemed to be followed by the phrase “without limitation”. The word



20









 




“will” shall be construed to
have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a)
any definition of or reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on such amendments,
supplements or modifications set forth in the Loan Documents), (b) any reference herein to any law
shall be construed as referring to such law as amended, modified, codified or reenacted, in whole
or in part, and in effect from time to time, (c) any reference herein to any Person shall be
construed to include such Person’s successors and assigns (subject to the restrictions contained in
the Loan Documents), (d) the words “herein”, “hereof” and “hereunder”, and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any particular provision
hereof, (e) with respect to the determination of any time period, the word “from” means “from and
including” and the word “to” means “to and including” and (f) any reference herein to Articles,
Sections, Annexes, Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Annexes, Exhibits and Schedules to, this Agreement. No provision of this Agreement or any
other Loan Document shall be interpreted or construed against any Person solely because such Person
or its legal representative drafted such provision.




     Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise specified herein,
all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time; provided that, if the Borrower or the Parent notifies the
Administrative Agent that the Borrower or the Parent requests an amendment to any provision hereof
to eliminate the effect of any change occurring after the date hereof in GAAP or in the application
thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower or
the Parent that the Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such change in GAAP or in
the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect
and applied immediately before such change shall have become effective until such notice shall
have been withdrawn or such provision amended in accordance herewith.



ARTICLE II

The Credits




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



     Section 2.02 Loans and Borrowings.



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




          (b) Types of Loans. Subject to Section 3.03, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each
Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or
Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance with the terms of this
Agreement.




21









 








          (c) Minimum Amounts; Limitation on Number of Borrowings. 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 $1,000,000. At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of
$250,000 and not less than $1,000,000. Borrowings of more than one Type may be outstanding at the
same time, provided that there shall not at any time be more than a total of ten (10) Eurodollar
Borrowings outstanding. Notwithstanding any other provision of this Agreement, the Borrower shall
not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest
Period requested with respect thereto would end after the Maturity Date.




          (d) Notes. If a Lender shall make a written request to the Administrative Agent and
the Borrower to have its Loans evidenced by a promissory note, then the Borrower shall execute and
deliver a single promissory note of the Borrower in substantially the form of Exhibit A, payable to
such Lender in a principal amount equal to its Maximum Credit Amount as then in effect, and
otherwise duly completed. The date, amount, Type, interest rate and, if applicable, Interest
Period of each Loan made by each Lender, and all payments made on account of the principal thereof,
may be recorded by such Lender on its books for its Note, and, prior to any transfer, may be
endorsed by such Lender on a schedule attached to such Note or any continuation thereof or on any
separate record maintained by such Lender; provided that the failure to make any such notation or
to attach a schedule shall not affect any Lender’s or the Borrower’s rights or obligations in
respect of such Loans or affect the validity of such transfer by any Lender of its Note.




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



               (i) the aggregate amount of the requested Borrowing;



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



               (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;



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



               (v) the amount of the then effective Borrowing Base, the current total Revolving Credit
Exposures (without regard to the requested Borrowing) and the pro forma total Revolving Credit
Exposures (giving effect to the requested Borrowing); and



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



22









 




If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an
ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar
Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s
duration. Each Borrowing Request shall constitute a representation that the amount of the
requested Borrowing shall not cause the total Revolving Credit Exposures to exceed the total
Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and the then effective
Borrowing Base).



Promptly following receipt of a Borrowing Request in accordance with this Section 2.03, the
Administrative Agent shall advise each Lender of the details thereof and of the amount of such
Lender’s Loan to be made as part of the requested Borrowing.




     Section 2.04 Interest Elections.



          (a) Conversion and Continuance. Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower
may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the
case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this
Section 2.04. The Borrower may elect different options with respect to different portions of the
affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.




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




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




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



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



               (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and



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


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




23









 








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




          (e) Effect of Failure to Deliver Timely Interest Election Request and Events of Default
and Borrowing Base Deficiencies on Interest Election. If the Borrower fails to deliver a
timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing.
Notwithstanding any contrary provision hereof, if an Event of Default or a Borrowing Base
Deficiency has occurred and is continuing: (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing (and any Interest Election Request that requests the conversion
of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be
ineffective) and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.




     Section 2.05 Funding of Borrowings.



          (a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder
on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., New York
City time, to the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the
Borrower by promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with the Administrative Agent in New York, New York and designated by the
Borrower in the applicable Borrowing Request; provided that ABR Loans made to finance the
reimbursement of an LC Disbursement as provided in Section 2.08(e) shall be remitted by the
Administrative Agent to the Issuing Bank. Nothing herein shall be deemed to obligate any Lender to
obtain the funds for its Loan in any particular place or manner or to constitute a representation
by any Lender that it has obtained or will obtain the funds for its Loan in any particular place or
manner.




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




     Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts.



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





24









 








          (b) Optional Termination and Reduction of Aggregate Maximum Credit Amounts.




               (i) The Borrower may at any time terminate, or from time to time reduce, the Aggregate Maximum
Credit Amounts; provided that (A) each reduction of the Aggregate Maximum Credit Amounts shall be
in an amount that is an integral multiple of $1,000,000 and not less than $10,000,000 and (B) the
Borrower shall not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving effect
to any concurrent prepayment of the Loans in accordance with Section 3.04(c), the total Revolving
Credit Exposures would exceed the total Commitments.



               (ii) The Borrower shall notify the Administrative Agent of any election to terminate or reduce
the Aggregate Maximum Credit Amounts under Section 2.06(b)(i) at least three Business Days prior to
the effective date of such termination or reduction, specifying such election and the effective
date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section
2.06(b)(ii) shall be irrevocable. Any termination or reduction of the Aggregate Maximum Credit
Amounts shall be permanent and may not be reinstated. Each reduction of the Aggregate Maximum
Credit Amounts pursuant to this Section 2.06(b)(ii) shall be made ratably among the Lenders in
accordance with each Lender’s Applicable Percentage.



     Section 2.07 Borrowing Base.



          (a) Borrowing Base. For the period from and including the Effective Date to the next
Scheduled Redetermination Date, the Borrowing Base shall be $150,000,000.



     Notwithstanding the foregoing, the Borrowing Base may be subject to further adjustments from
time to time pursuant to Section 8.13(c), Section 9.02(j), Section 9.11(d) or Section 9.17(b).



          (b) Scheduled and Interim Redeterminations. The Borrowing Base shall be redetermined
semi-annually in accordance with this Section 2.07 (a “Scheduled Redetermination”), and,
subject to Section 2.07(d), such redetermined Borrowing Base shall become effective and applicable
to the Borrower, the Agents, the Issuing Bank and the Lenders on April 1st and October 1st of each
year; provided that the initial Scheduled Redetermination shall be November 1, 2011. In addition,
the Borrower
may, by notifying the Administrative Agent thereof, and the Administrative Agent may, at the
direction of the Required Lenders, by notifying the Borrower thereof, one time during any 12 month
period, each elect to cause the Borrowing Base to be redetermined between Scheduled
Redeterminations (an “Interim Redetermination”) in accordance with this Section 2.07.



          (c) Scheduled and Interim Redetermination Procedure.




          (i) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (A) the Reserve Report
and the certificate required to be delivered by the Borrower to the Administrative Agent,
in the case of a Scheduled Redetermination, pursuant to Section 8.12(a) and (c), and, in
the case of an Interim Redetermination, pursuant to Section 8.12(b) and (c), and (B) such
other reports, data and supplemental information, including, without limitation, the
information provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
requested by the Majority Lenders (the Reserve Report, such certificate and such other
reports, data and supplemental information being the “Engineering Reports”), the
Administrative Agent shall evaluate the information contained in the Engineering Reports
and shall, in its sole discretion, propose a new Borrowing Base ( the “Proposed
Borrowing Base”) based upon such information and such other information (including,
without limitation, the status of title information with respect to the Oil and Gas



25









 






Properties as described in the Engineering Reports and the existence of any other Debt) as
the Administrative Agent deems appropriate in its sole discretion and consistent with its
customary oil and gas lending criteria as it exists at the particular time.




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



                    (A) in the case of a Scheduled Redetermination (1) if the Administrative Agent shall have
received the Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then on or before March 15th and September 15th of
such year following the date of delivery or (2) if the Administrative Agent shall not have received
the Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and
(c) in a timely and complete manner, then promptly after the Administrative Agent has received
complete Engineering Reports from the Borrower and has had a reasonable opportunity to determine
the Proposed Borrowing Base in accordance with Section 2.07(c)(i); and



                    (B) in the case of an Interim Redetermination, promptly, and in any event, within fifteen (15)
days after the Administrative Agent has received the required Engineering Reports.




          (iii) Any Proposed Borrowing Base that would increase the Borrowing Base then in
effect must be approved or deemed to have been approved by all of the Lenders as provided
in this Section 2.07(c)(iii); and any Proposed Borrowing Base that would decrease or
maintain the Borrowing Base then in effect must be approved or be deemed to have been
approved by the Required Lenders as provided in this Section 2.07(c)(iii). Such decisions
will be made by each Lender based upon such criteria as such Lender deems appropriate in
its sole discretion and consistent with its customary oil and gas lending criteria as it
exists at the particular time. Upon receipt of the Proposed Borrowing Base Notice, each
Lender shall have fifteen (15) days to agree with the Proposed Borrowing Base or disagree
with the Proposed Borrowing Base by proposing an alternate Borrowing Base. If at the end
of such fifteen (15) days, any Lender has not communicated its approval or disapproval in
writing to the Administrative Agent, such silence shall be deemed to be an approval of the
Proposed
Borrowing Base. If, at the end of such 15-day period, all of the Lenders, in the case
of a Proposed Borrowing Base that would increase the Borrowing Base then in effect, or the
Required Lenders, in the case of a Proposed Borrowing Base that would decrease or maintain
the Borrowing Base then in effect, have approved or deemed to have approved, as aforesaid,
then the Proposed Borrowing Base shall become the new Borrowing Base, effective on the date
specified in Section 2.07(d). If, however, at the end of such 15-day period, all of the
Lenders or the Required Lenders, as applicable, have not approved or deemed to have
approved, as aforesaid, then the Administrative Agent shall poll the Lenders to ascertain
the highest Borrowing Base then acceptable to a number of Lenders sufficient to constitute
the Required Lenders and, so long as such amount does not increase the Borrowing Base then
in effect, such amount shall become the new Borrowing Base, effective on the date specified
in Section 2.07(d).



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




26









 








               (i) in the case of a Scheduled Redetermination, (A) if the Administrative Agent shall have
received the Engineering Reports required to be delivered by the Borrower pursuant to Section
8.12(a) and (c) in a timely and complete manner, then on the April 1st or October 1st, as
applicable, following such notice, or (B) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section 8.12(a) and (c) in
a timely and complete manner, then on the Business Day next succeeding delivery of such notice; and



               (ii) in the case of an Interim Redetermination, on the Business Day next succeeding delivery
of such notice.


Such amount shall then become the Borrowing Base until the next Scheduled Redetermination Date,
the next Interim Redetermination Date or the next adjustment to the Borrowing Base under Section
8.13(c), Section 9.02(j), Section 9.11(d) or Section 9.17(b), whichever occurs first.
Notwithstanding the foregoing, no Scheduled Redetermination or Interim Redetermination shall become
effective until the New Borrowing Base Notice related thereto is received by the Borrower.




     Section 2.08 Letters of Credit.



          (a) General. The Borrower, the Administrative Agent, the Issuing Bank and the Lenders
hereby agree that all Existing Letters of Credit shall be deemed to be issued under this Agreement
as of the Effective Date and shall constitute Letters of Credit hereunder for all purposes (except
that the Issuing Bank’s standard issuance fee shall not be payable on such deemed issuance).
Subject to the terms and conditions set forth herein, the Borrower may request the issuance of
dollar denominated Letters of Credit for its own account or for the account of the Parent or any of
its Restricted Subsidiaries, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time during the period from the Effective Date until the
day which is five (5) Business Days prior to the end of the Availability Period; provided that the
Borrower may not request the issuance, amendment, renewal or extension of Letters of Credit
hereunder if a Borrowing Base Deficiency exists at such time or would exist as a result thereof.
In the event of any inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of letter of credit application or other agreement submitted by
the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Letter
of Credit, the terms and conditions of this Agreement shall control.




          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter
of Credit), the Borrower shall hand deliver or telecopy (or transmit by electronic communication,
if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (not less than five (5) Business Days in advance of the requested date of
issuance, amendment, renewal or extension) a notice:




               (i) requesting the issuance of a Letter of Credit or identifying the Letter of Credit to be
amended, renewed or extended;



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



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



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



27









 





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



               (vi) specifying the amount of the then effective Borrowing Base and whether a Borrowing Base
Deficiency exists at such time, the current total Revolving Credit Exposures (without regard to the
requested Letter of Credit or the requested amendment, renewal or extension of an outstanding
Letter of Credit) and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of an outstanding
Letter of Credit).


Each notice shall constitute a representation that after giving effect to the requested issuance,
amendment, renewal or extension, as applicable, (i) the LC Exposure shall not exceed the LC
Commitment and (ii) the total Revolving Credit Exposures shall not exceed the total Commitments
(i.e. the lesser of the Aggregate Maximum Credit Amounts and the then effective Borrowing Base).



If requested by the Issuing Bank, the Borrower also shall submit a letter of credit application on
the Issuing Bank’s standard form in connection with any request for a Letter of Credit and shall
guarantee the reimbursement of any Letter of Credit issued for the account of the Parent or a
Restricted Subsidiary.




          (c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of
business on the earlier of (i) the date one year after the date of the issuance of such Letter of
Credit (or, in the case of any renewal or extension thereof, one year after such renewal or
extension) and (ii) the date that is five Business Days prior to the Maturity Date.




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




          (e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect of a
Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative
Agent an amount equal to such LC Disbursement not later than 2:00 p.m., New York City time, on the
date that is one (1) Business Day after such LC Disbursement is made, if the Borrower shall have
received notice of such LC Disbursement prior to 12:00 noon, New York City time, on the payment
date, or, if such notice has not been received by the Borrower prior to such time on the payment
date, then not later than 2:00 p.m., New York City time, on the second Business Day after the
Borrower receives such notice; provided that if such LC Disbursement is not less than $1,000,000,
the Borrower shall, subject to the conditions to Borrowing set forth herein, be deemed to have
requested, and the Borrower does hereby request under such circumstances, that such payment be
financed with an ABR Borrowing in an equivalent amount and, to the extent so financed, the
Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR
Borrowing. If the Borrower fails to make such payment




28









 







when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in
respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of
such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the
payment then due from the Borrower, in the same manner as provided in Section 2.05 with respect to
Loans made by such Lender (and Section 2.05 shall apply, mutatis mutandis, to the payment
obligations of the Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank
the amounts so received by it from the Lenders. Promptly following receipt by the Administrative
Agent of any payment from the Borrower pursuant to this Section 2.08(e), the Administrative Agent
shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments
pursuant to this Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and the
Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this Section
2.08(e) to reimburse the Issuing Bank for any LC Disbursement shall not constitute a Loan and shall
not relieve the Borrower of its obligation to reimburse such LC Disbursement.




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




          (g) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment under a Letter of
Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by
telephone (confirmed by telecopy) of such demand for payment and whether the Issuing Bank has made
or will make





29









 







an LC Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the
Lenders with respect to any such LC Disbursement.




          (h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, until
the Borrower shall have reimbursed the Issuing Bank for such LC Disbursement, the unpaid amount
thereof shall bear interest, for each day from and including the date such LC Disbursement is made
to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum
then applicable to ABR Loans. Interest accrued pursuant to this Section 2.08(h) shall be for the
account of the Issuing Bank, except that interest accrued on and after the date of payment by any
Lender pursuant to Section 2.08(e) to reimburse the Issuing Bank shall be for the account of such
Lender to the extent of such payment.




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




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




30









 







have against any such
beneficiary, the Issuing Bank, the Administrative Agent, the Lenders or any other Person for any
reason whatsoever. Such deposit shall be held as collateral securing the payment and performance
of the Borrower’s and the Guarantor’s obligations under this Agreement and the other Loan
Documents. The Administrative Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole discretion of the
Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest.
Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such
account shall be applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held
for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such
time or, if the maturity of the Loans has been accelerated, be applied to satisfy other obligations
of the Borrower and the Guarantors under this Agreement or the other Loan Documents. If the
Borrower is required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, and the Borrower is not otherwise required to pay to the
Administrative Agent the excess attributable to an LC Exposure in connection with any prepayment
pursuant to Section 3.04(c), then such amount (to the extent not applied as aforesaid) shall be
returned to the Borrower within three Business Days after all Events of Default have been cured or
waived.




     Section 2.09 Incremental Revolving Commitments.



          (a) The Borrower and any one or more Lenders (including New Lenders), with the consent of the
Administrative Agent, may from time to time agree that such Lenders shall make, obtain or increase
the amount of their Maximum Credit Amounts by executing and delivering to the Administrative Agent
an Increased Facility Activation Notice specifying (i) the amount of such increase and (ii) the
applicable Increased Facility Closing Date. Notwithstanding the foregoing, (i) without the consent
of the Required Lenders, the aggregate amount of incremental amounts obtained after the Effective
Date pursuant to this paragraph shall not exceed $150,000,000 and (ii) without the consent of the
Administrative Agent, (x) each increase effected pursuant to this paragraph shall be in a minimum
amount of at least $25,000,000 and (y) no more than 4 Increased Facility Closing Dates may be
selected by the
Borrower after the Effective Date. No Lender shall have any obligation to participate in any
increase described in this paragraph unless it agrees to do so in its sole discretion.




          (b) Any additional bank, financial institution or other entity which, with the consent of the
Borrower and the Administrative Agent (which consent shall not be unreasonably withheld), elects to
become a “Lender” under this Agreement in connection with any transaction described in Section
2.09(a) shall execute a New Lender Supplement (each, a “New Lender Supplement”),
substantially in the form of Exhibit J, whereupon such bank, financial institution or other entity
(a “New Lender”) shall become a Lender for all purposes and to the same extent as if
originally a party hereto and shall be bound by and entitled to the benefits of this Agreement.




          (c) Unless otherwise agreed by the Administrative Agent, on each Increased Facility Closing
Date (i) any Loans thereafter shall be made under the relevant increased Maximum Credit Amounts
from each Lender participating in the relevant increase and shall be determined by reference to the
amount of each Type of Loan (and, in the case of Eurodollar Loans, of each Eurodollar Borrowing)
which would then have been outstanding from such Lender if (x) each such Type or Eurodollar
Borrowing had been borrowed or effected on such Increased Facility Closing Date and (y) the
aggregate amount of each such Type or Eurodollar Borrowing requested to be so borrowed or effected
had been proportionately increased, and (ii) each Lender immediately prior to such increase will
automatically and without further act be deemed to have assigned to each New Lender, and each such
New Lender will automatically and without further act be deemed to have assumed, a portion of such
Lender’s participations hereunder in





31









 







Letters of Credit such that, after giving effect to such
increase and each such deemed assignment and assumption of participations, the percentage of the
aggregate outstanding participations hereunder in Letters of Credit held by each Lender (including
each such New Lender) will equal such Lender’s Applicable Percentage after giving effect to the new
Commitments. The rate applicable to any Eurodollar Loan borrowed pursuant to the preceding
sentence shall equal the rate then applicable to the Eurodollar Loans of the other Lenders in the
same Eurodollar Borrowing (or, until the expiration of the then-current Interest Period, such other
rate as shall be agreed upon between the Borrower and the relevant Lender).




ARTICLE III

Payments of Principal and Interest; Prepayments; Fees




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



     Section 3.02 Interest.



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




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




          (c) Post-Default Rate Rate. Notwithstanding the foregoing, if an Event of Default has
occurred and is continuing, or if any principal of or interest on any Loan or any fee or other
amount payable by the Borrower or any Guarantor hereunder or under any other Loan Document is not
paid when
due, whether at stated maturity, upon acceleration or otherwise, and including any payments in
respect of a Borrowing Base Deficiency under Section 3.04(c), then all Loans outstanding, in the
case of an Event of Default, and such overdue amount, in the case of a failure to pay amounts when
due, shall on or after the date the Required Lenders so request bear interest, after as well as
before judgment, at a rate per annum equal to two percent (2%) plus the rate applicable to ABR
Loans as provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.




          (d) Interest Payment Dates. Accrued interest on each Loan shall be payable in arrears
on each Interest Payment Date for such Loan and on the Termination Date; provided that (i) interest
accrued pursuant to Section 3.02(c) shall be payable on demand, (ii) in the event of any repayment
or prepayment of any Loan (other than an optional prepayment of an ABR Loan prior to the
Termination Date), accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment, and (iii) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such
Loan shall be payable on the effective date of such conversion.




          (e) Interest Rate Computations. All interest hereunder shall be computed on the basis
of a year of 360 days (unless such calculation would exceed the Highest Lawful Rate, then on the
basis of a year of 365/366 days, as applicable), except that interest computed by reference to the
Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be
payable for the actual number of days elapsed (including the first day but excluding the last day).
The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest error, and be
binding upon the parties hereto.




32









 








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



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




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



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




     Section 3.04 Prepayments.




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




          (b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the
case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three
Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing,
not later than 12:00 noon, New York City time, one Business Day before the date of prepayment.
Each such notice shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid. Promptly following receipt of any such
notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in
the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.
Prepayments shall be accompanied by accrued interest to the extent required by Section 3.02 and any
amounts due under Section 5.02.




          (c) Mandatory Prepayments.




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



               (ii) Upon any redetermination of or adjustment to the amount of the Borrowing Base in
accordance with Section 2.07 or Section 8.13(c), if the total Revolving Credit Exposures exceeds
the redetermined or adjusted Borrowing Base, then the Borrower shall (A) prepay the



33









 




Borrowings in an aggregate principal amount equal to such excess, and (B) if any excess remains after prepaying
all of the Borrowings as a result of an LC Exposure, pay to the Administrative Agent on behalf of
the Lenders an amount equal to such excess to be held as cash collateral as provided in Section
2.08(j). The Borrower shall be obligated to make such prepayment and/or deposit of cash collateral
within forty-five (45) days following its receipt of the New Borrowing Base Notice in accordance
with Section 2.07(d) or the date the adjustment occurs; provided that all payments required to be
made pursuant to this Section 3.04(c)(ii) must be made on or prior to the Termination Date.




               (iii) Upon any adjustments to the Borrowing Base pursuant to Section 9.02(j), Section 9.11(d)
or Section 9.17(b), if the total Revolving Credit Exposures exceeds the Borrowing Base as adjusted,
then the Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal to such
excess, and (B) if any excess remains after prepaying all of the Borrowings as a result of an LC
Exposure, pay to the Administrative Agent on behalf of the Lenders an amount equal to such excess
to be held as cash collateral as provided in Section 2.08(j). The Borrower shall be obligated to
make such prepayment and/or deposit of cash collateral within two (2) Business Days following the
date it or any Restricted Subsidiary receives cash proceeds as a result of such disposition or
termination; provided that all payments required to be made pursuant to this Section 3.04(c)(iii)
must be made on or prior to the Termination Date.



               (iv) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be applied, first,
ratably to any ABR Borrowings then outstanding, and, second, to any Eurodollar Borrowings then
outstanding as the Borrower may direct.



               (v) Prepayments pursuant to this Section 3.04(c) shall be accompanied by accrued interest to
the extent required by Section 3.02.



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




     Section 3.05 Fees.



          (a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee, which shall accrue at the applicable Commitment Fee Rate
on the average daily amount of the unused amount of the Commitment of such Lender during the period
from and including the date of this Agreement to but excluding the Termination Date. Accrued
commitment fees shall be payable in arrears on the third Business Day after the last day of March,
June, September and December of each year and on the Termination Date, commencing on the first such
date to occur after the date hereof. All commitment fees shall be computed on the basis of a year
of 360 days and shall be payable for the actual number of days elapsed (including the first day but
excluding the last day).




          (b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative Agent
for the account of each Lender a participation fee with respect to its participations in Letters of
Credit, which shall accrue at the same Applicable Margin used to determine the interest rate
applicable to Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding
any portion thereof attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC Exposure, (ii) to the
Issuing Bank a fronting fee, which shall accrue at the rate of 0.20% per annum on the average daily
amount of the LC Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date of this Agreement to but excluding the
later of the date of termination of the Commitments and the date on which there ceases to be any LC
Exposure and (iii) to the Issuing Bank, for





34









 







its own account, its standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings
thereunder. Participation fees and fronting fees accrued through and including the last day of
March, June, September and December of each year shall be payable on the third Business Day
following such last day, commencing on the first such date to occur after the date of this
Agreement; provided that all such fees shall be payable on the Termination Date and any such fees
accruing after the Termination Date shall be payable on demand. Any other fees payable to the
Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10 days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall
be payable for the actual number of days elapsed (including the first day but excluding the last
day).




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














ARTICLE IV

Payments; Pro Rata Treatment; Sharing of Set-offs




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



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




          (b) Application of Insufficient Payments. If at any time prior the Termination Date,
insufficient funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, unreimbursed LC Disbursements, interest, fees and other amounts then due
hereunder, such funds shall be applied: first, ratably to reimbursement of expenses and
indemnities provided for in this Agreement and the Security Instruments; second, to accrued
interest on the Loans; third, to fees; fourth, pro rata to outstanding principal of the Loans and
unreimbursed LC Disbursements; and fifth, if applicable, to serve as cash collateral to be held by
the Administrative Agent to secure the LC Exposure, in each case, ratably among the parties
entitled thereto in accordance with the amounts then due to such parties.




          (c) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of
set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on
any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment
of a greater proportion of the aggregate amount of its Loans and
participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value) participations in the
Loans and participations in LC




35









 








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



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



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



     Section 4.04 Disposition of Proceeds. The Security Instruments contain an assignment by
the Borrower and/or the Guarantors unto and in favor of the Administrative Agent for the benefit of
the Lenders of all of the Borrower’s or each Guarantor’s interest in and to production and all
proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property.
The Security Instruments further provide in general for the application of such proceeds to the
satisfaction of the Indebtedness and other obligations described therein and secured thereby.
Notwithstanding the assignment contained in such Security Instruments, until the occurrence of an
Event of Default, (a) the Administrative Agent and the Lenders agree that they will neither notify
the purchaser or purchasers of such production nor take any other action to cause such proceeds to
be remitted to the Administrative Agent or the Lenders, but the Lenders will instead permit such
proceeds to be paid to the Borrower and its Restricted Subsidiaries and (b) the Lenders hereby
authorize the Administrative Agent to take such actions as may be necessary to cause such proceeds
to be paid to the Borrower and/or such Subsidiaries.



36









 





ARTICLE V

Increased Costs; Break Funding Payments; Taxes




     Section 5.01 Increased Costs.



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













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



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


and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to
reduce the amount of any sum received or receivable by such Lender (whether of principal, interest
or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.




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




          (c) Certificates. A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company,
as the case may be, as specified in Section 5.01(a) or (b) shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank,
as the case may be, the amount shown as due on any such certificate within 10 days after receipt
thereof.




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




37









 








          (e) Dodd-Frank Act. Notwithstanding anything herein to the contrary, the Dodd-Frank
Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives
thereunder or issued in connection therewith, and all requests, rules, guidelines or directives
promulgated by the Bank for International Settlements, the Basel Committee on Bank Supervision (or
any successor or similar authority) or the United States or foreign regulatory authorities, in each
case pursuant to Basel III, shall in each case be deemed to be a Change in Law, regardless of the
date enacted, adopted or issued.




          (f) This Section shall not apply to matters covered by Section 5.03 relating to Taxes.













     Section 5.02 Break Funding Payments. In the event of (a) the payment of any principal of
any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including
as a result of an Event of Default), (b) the conversion of any Eurodollar Loan into an ABR Loan
other than on the last day of the Interest Period applicable thereto, or (c) the failure to borrow,
convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto, then, in any such event, the Borrower shall compensate each Lender for the loss,
cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or
expense to any Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the principal amount of
such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that
would have been the Interest Period for such Loan), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such Lender would bid
were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market.


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




     Section 5.03 Taxes.



          (a) All payments made by any Loan Party under any Loan Document shall be made free
and clear of, and without deduction or withholding for, any Indemnified Taxes or Other Taxes;
provided that if the applicable Withholding Agent determines in good faith that it is required to
deduct or withhold any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable by the applicable Loan Party shall be increased as necessary so that, net of such
withholding (including, for the avoidance of doubt, deductions and withholdings applicable to
additional amounts payable under this Section) the Administrative Agent or any Lender (as the case
may be) receives the amount it would have received had no such deductions or withholdings been
made, (ii) the applicable Withholding Agent shall make such deductions and withholdings, and (iii)
the applicable Withholding Agent shall pay the full amount deducted or withheld to the appropriate
Governmental Authority in accordance with applicable law.




          (b) Without limiting the provisions of subsection (a) above, the Borrower shall pay
any Other Taxes to the relevant Governmental Authority in accordance with applicable law.




          (c) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by
any Loan Party to a Governmental Authority, such Loan Party shall send to the Administrative Agent
for its own account or for the account of the relevant Lender, as the case may be, a certified copy
of an original official receipt received by such Loan Party showing payment thereof. Without limiting the




38









 








provisions of subsection (a) above, if (i) such Loan Party fails to pay when due any
Indemnified Taxes or Other Taxes that are payable by such Loan Party or (ii) any Indemnified Taxes
or Other Taxes are imposed directly upon the Administrative Agent or any Lender, such Loan Party
shall indemnify the Administrative Agent and each Lender, within 10 days after written demand
therefor, for such amounts and any interest or penalties imposed by any Governmental Authority as a
result of any such failure.



          (d) Each Lender shall indemnify the Administrative Agent for the full amount of any
Taxes that are attributable to such Lender and that are payable or paid by the Administrative
Agent,
together with all reasonable costs and expenses arising therefrom or with respect thereto, as
determined by the Administrative Agent in good faith. A certificate as to the amount of such
payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent
manifest error.




          (e) Each Lender (or Transferee) that is a “United States Person” as defined in
Section 7701(a)(30) of the Code shall deliver to the Borrower and the Administrative Agent on or
before the date on which it becomes a party to this Agreement two properly completed and duly
signed copies of U.S. Internal Revenue Service (“IRS”) Form W-9 (or any successor form)
certifying that such Lender is exempt from U.S. federal withholding tax. Each Lender (or
Transferee) that is not a “United States Person” as defined in Section 7701(a)(30) of the Code (a
“Non-U.S. Lender”) shall deliver to the Borrower and the Administrative Agent (or, in the
case of a Participant, to the Lender from which the related participation shall have been
purchased) (i) two copies of IRS Form W-8BEN, Form W-8ECI or form W-8IMY (together with any
applicable IRS forms), (ii) in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio
interest”, a statement substantially in the form of Exhibit H and the applicable IRS Form W-8, or
any subsequent versions thereof or successors thereto, properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding
tax on payments under this Agreement and the other Loan Documents or (iii) any other form
prescribed by applicable requirements of U.S. federal income tax law as a basis for claiming
exemption from or a reduction in U.S. federal withholding tax duly completed together with such
supplementary documentation as may be prescribed by applicable requirements of law to permit the
Borrower and the Administrative Agent to determine the withholding or deduction required to be
made. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a
party to this Agreement (or, in the case of any Participant, on or before the date such Participant
purchases the related participation) and from time to time thereafter upon the request of the
Borrower or the Administrative Agent. In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower and the Administrative Agent of
any change in circumstances that would modify or render invalid any previously delivered
certificate to the Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this Section 5.03(e), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this Section 5.03(e) that
such Non-U.S. Lender is not legally able to deliver.




          (f) Any Foreign Lender that is entitled to an exemption from or reduction of non-U.S.
withholding Tax under the law of the jurisdiction in which the Borrower is located, or any treaty
to which such jurisdiction is a party, with respect to payments under any Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed
by applicable law or reasonably requested by the Borrower or the Administrative Agent, such
properly completed and executed documentation prescribed by applicable law as will permit such
payments to be made without withholding or at a reduced rate, provided that such Lender is legally
entitled to complete, execute and deliver such documentation.





39












 




          (g) If a payment made to a Lender under any Loan Document would be subject to U.S.
federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable
reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the
Code, as applicable), such Lender shall deliver to the Withholding Agent at the time or times
prescribed by law and at such time or times reasonably requested by the Withholding Agent such
documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of
the Code) and such additional documentation reasonably requested by the Withholding Agent as may be
necessary for the Withholding Agent to comply with its obligations under FATCA, to determine that
such Lender has or has not complied with such Lender’s obligations under FATCA or to determine the
amount to deduct and withhold from such payment. Solely for the purposes of this Section 5.03(g),
“FATCA” shall include any amendments made to FATCA after the date of this Agreement.


          (h) If the Administrative Agent or any Lender determines, in its sole discretion,
that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by a
Loan Party or with respect to which a Loan Party has paid additional amounts pursuant to this
Section 5.03 that in the good faith judgment of the Administrative Agent or such Lender is
allocable to such indemnity or additional amounts, it shall pay over such refund to such Loan Party
(but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party
under this Section 5.03 with respect to the Taxes or Other Taxes giving rise to such refund), net
of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest
(other than any interest paid by the relevant Governmental Authority with respect to such refund);
provided, that such Loan Party, upon the written demand of the Administrative Agent or such
Lender, agrees to repay the amount paid over to such Loan Party (plus any penalties, interest or
other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such
Lender in the event the Administrative Agent or such Lender is required to repay such refund to
such Governmental Authority. This Section 5.03 shall not be construed to require the Administrative
Agent or any Lender to make available its tax returns (or any other information relating to its
taxes which it deems confidential) to the Borrower or any other Person.


          (i) The agreements in this Section 5.03 shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.



     Section 5.04 Designation of Different Lending Office. If any Lender requests compensation under Section
5.01, or if the Borrower is required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 5.03, then such Lender shall use
reasonable efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in the
future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by any Lender in connection with any such designation or assignment.



     Section 5.05 Replacement of Lenders. If (a) any Lender requests compensation under Section 5.01, (b)
the Borrower is required to pay any additional amount to any Lender or any Governmental Authority
for the account of any Lender pursuant to Section 5.03, (c) any Lender is a Defaulting Lender, (d)
any Lender has not approved (or is not deemed to have approved) an increase in the Borrowing Base
proposed by the Administrative Agent pursuant to Section 2.07(c)(iii) which has been approved by
Lenders holding 75% or more of the then outstanding Commitments or (e) any Lender has not approved
a proposed waiver or amendment requiring 100% approval or consent but which has been approved by
Lenders holding 75% or more of the then outstanding Commitments, then the Borrower may, at its sole
expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to



40









 




assign and delegate, without recourse (in accordance with and subject to the restrictions contained
in Section 12.04(b)), all its interests, rights and obligations under this Agreement to an assignee
that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans and participations in
LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such
assignment resulting from a claim for compensation under Section 5.01 or payments required to be
made pursuant to Section 5.03, such assignment will result in a reduction in such compensation or
payments or will result in the approval of the proposed Borrowing Base. A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and
delegation cease to apply.



     Section 5.06 Defaulting Lenders


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


          (a) fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting
Lender pursuant to Section 3.05;


          (b) the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be
included in determining whether the Required Lenders have taken or may take any action hereunder
(including any consent to any amendment or waiver pursuant to Section 12.02), provided,
that any amendment, waiver or other modification (i) requiring the consent of all Lenders or each
Lender affected thereby which affects such Defaulting Lender differently than other affected
Lenders or (ii) which increases or extends the Commitment of a Defaulting Lender shall require the
consent of such Defaulting Lender;


          (c) if any LC Exposure exists at the time such Lender becomes a Defaulting Lender then:



               (i) all or any part of the LC Exposure of such Defaulting Lender shall be reallocated among
the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to
the extent the sum of all non-Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting
Lender’s LC Exposure does not exceed the total of all non-Defaulting Lenders’ Commitments;



               (ii) if the reallocation described in clause (i) above cannot, or can only partially, be
effected, the Borrower shall within one Business Day following notice by the Administrative Agent
cash collateralize for the benefit of the Issuing Bank only the Borrower’s obligations
corresponding to such Defaulting Lender’s LC Exposure (after giving effect to any partial
reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section
2.08(j) for so long as such LC Exposure is outstanding;



               (iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure
pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such
Defaulting Lender pursuant to Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure
during the period such Defaulting Lender’s LC Exposure is cash collateralized;



41









 





               (iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to clause (i)
above, then the fees payable to the Lenders pursuant to Section 3.05(a) and Section 3.05(b) shall
be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and



               (v) if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor
cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or
remedies of the Issuing Bank or any other Lender hereunder, all facility fees that otherwise would
have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting
Lender’s Commitment that was utilized by such LC Exposure) and and letter of credit fees payable
under Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the
Issuing Bank until and to the extent that such LC Exposure is reallocated and/or cash
collateralized; and


          (d) so long as such Lender is a Defaulting Lender, the Issuing Bank shall not be required to
issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure and
the Defaulting Lender’s then outstanding LC Exposure will be 100% covered by the Commitments of the
non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with
Section 5.06(c), and participating interests in newly issued or increased Letters of Credit shall
be allocated among non-Defaulting Lenders in a manner consistent with Section 5.06(c)(i) (and such
Defaulting Lender shall not participate therein).


          If (i) a Bankruptcy Event with respect to a Lender Parent shall occur following the date
hereof and for so long as such event shall continue or (ii) the Issuing Bank has a good faith
belief that any Lender has defaulted in fulfilling its obligations under one or more other
agreements in which such Lender commits to extend credit, the Issuing Bank shall not be required to
issue, amend or increase any Letter of Credit, unless the Issuing Bank shall have entered into
arrangements with the Borrower or such Lender, satisfactory to the Issuing Bank, as the case may
be, to defease any risk to it in respect of such Lender hereunder.


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



ARTICLE VI


Conditions Precedent




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


          (a) The Administrative Agent, the Arrangers and the Lenders shall have received all fees and
other amounts due and payable on or prior to the Effective Date, including, to the extent invoiced,




42









 







reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder.


          (b) The Administrative Agent shall have received a certificate of the Secretary or an
Assistant Secretary of the Borrower and each Guarantor setting forth (i) resolutions of its board
of directors or other appropriate governing body with respect to the authorization of the Borrower
or such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter
into the transactions contemplated in those documents, (ii) the officers of the Borrower or such
Guarantor (y) who are authorized to sign the Loan Documents to which the Borrower or such Guarantor
is a party and (z) who will, until replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions contemplated hereby,
(iii) specimen signatures of such authorized officers, and (iv) the articles or certificate of
incorporation and by-laws or other applicable organizational documents of the Borrower and such
Guarantor, certified as being true and complete. The Administrative Agent and the Lenders may
conclusively rely on such certificate until the Administrative Agent receives notice in writing
from the Borrower to the contrary.


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


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


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



               (i) be reasonably satisfied that the Security Instruments create first priority, perfected
Liens (except that Excepted Liens identified in clauses (a) to (d) and (f) of the definition
thereof, but subject to the provisos at the end of such definition may exist) on at least 85% of
the total value of the Oil and Gas Properties evaluated in the Initial Reserve Report; and



               (ii) have received certificates, if appropriate, together with undated, blank stock powers for
each such certificate, representing all of the issued and outstanding Equity Interests of the
Borrower, each of the Guarantors (other than the Parent) and not less than 65% of all of the issued
and outstanding capital stock of each Foreign Subsidiary that is not a Guarantor, which is directly
owned by either the Borrower or a Domestic Subsidiary.


          (f) The Administrative Agent shall have received an opinion of (i) Jones Walker, special
counsel to the Borrower, substantially in the form of Exhibit D and (ii) local counsel in the State
of Mississippi, substantially in a form and of substance reasonably acceptable to the
Administrative Agent.


          (g) The Administrative Agent shall have received a certificate of insurance coverage of the
Borrower evidencing that the Borrower is carrying insurance in accordance with Section 7.12.


          (h) The Administrative Agent shall have received title information as the Administrative Agent
may reasonably require satisfactory to the Administrative Agent setting forth the




43









 







status of title to at least 85% of the total value of the Oil and Gas Properties evaluated in the Initial Reserve
Report.


          (i) The Administrative Agent shall have received a certificate of a Responsible Officer of the
Borrower certifying that (i) all government and third party approvals necessary in connection with
the Transactions have been obtained on satisfactory terms and (ii) no action or proceeding is
pending or threatened in any court or before any Governmental Authority seeking to restrain or
prohibit the consummation of the transactions contemplated hereby.


          (j) The Administrative Agent shall have received the financial statements referred to in
Section 7.04(a) and the Initial Reserve Report accompanied by a certificate covering the matters
described in Section 8.12(c)(i), (ii) and (iii). The Administrative Agent and the Lenders shall
have received projections (broken down by year) for the Parent and its Restricted Subsidiaries
after giving effect to the transactions contemplated hereby through the fifth anniversary of the
Effective Date.


          (k) The Administrative Agent shall have received appropriate UCC search certificates
reflecting no prior Liens encumbering the Properties of the Parent, the Borrower and the Restricted
Subsidiaries for each of the following jurisdictions: Delaware, Louisiana, Texas, Alabama,
Mississippi and any other jurisdiction requested by the Administrative Agent;
other than those being released on or prior to the Effective Date or Liens permitted by
Section 9.03.


          (l) The Administrative Agent shall have received a certificate of a Responsible Officer of the
Parent certifying that the Parent and its Restricted Subsidiaries will have outstanding no Debt for
borrowed money or Disqualified Capital Stock other than (A) the Indebtedness under this Agreement;
(B) Debt associated with the Existing 2014 Notes and (C) the Existing Convertible Notes and (D) the
Parent Loan.


          (m) The Administrative Agent shall have received a certificate of a Financial Officer of the
Parent certifying that, after giving effect to the borrowings under this Agreement, the Parent and
its Restricted Subsidiaries, taken as a whole, are solvent as contemplated by Section 7.22.


          (n) The Administrative Agent shall have received satisfactory evidence that (i) all
commitments (other than in respect of Existing Letters of Credit) under the Existing Credit
Agreement shall have been terminated in full and all amounts (including accrued fees in respect of
Existing Letters of Credit) outstanding under the Existing Credit Agreement shall have been paid in
full and (ii) satisfactory arrangements shall have been made for the termination of all Liens
granted in connection therewith.


          (o) The Administrative Agent shall have received such other certificates, documents,
instruments and agreements as the Administrative Agent shall reasonably request in connection with
the transactions contemplated by this Agreement and the other Loan Documents.



     The Administrative Agent shall notify the Borrower and the Lenders of the Effective Date, and
such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of the
Lenders make Loans and of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section
12.02) at or prior to 1:00 p.m., New York New York time, on July 30, 2011 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at such time).


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



44









 







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


          (b) At the time of and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no event, development or
circumstance has occurred or shall then exist that has resulted in, or could reasonably be expected
to have, a Material Adverse Effect; provided that with respect to the initial funding on the
Effective Date, this condition precedent shall not apply.


          (c) The representations and warranties of the Borrower and the Guarantors set forth in this
Agreement and in the other Loan Documents shall be true and correct on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent any such representations and warranties are expressly limited to
an earlier date, in which case, on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, such representations and
warranties shall continue to be true and correct as of such specified earlier date; provided that
with respect to the initial funding on the Effective Date, the Parent and the Borrower are not
required to make the representation contained in Section 7.04(b) and the only representations (and
related Defaults) the making of which shall be a condition precedent under this Section 6.02(c) on
the Effective Date shall be (i) with respect to the Parent and its Restricted Subsidiaries, those
representations contained in Sections 7.01, 7.02, 7.03(b) (but only with respect to the extent of a
Loan Party’s charter, by-laws or other organizational documents), 7.08 and 7.21.


          (d) The making of such Loan or the issuance, amendment, renewal or extension of such Letter of
Credit, as applicable, would not conflict with, or cause any Lender or the Issuing Bank to violate
or exceed, any applicable Governmental Requirement, and no Change in Law shall have occurred, and
no litigation shall be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of any Loan, the
issuance, amendment, renewal, extension or repayment of any Letter of Credit or any participations
therein or the consummation of the transactions contemplated by this Agreement or any other Loan
Document; provided that with respect to the initial funding on the Effective Date, this condition
precedent shall not apply.


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



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



45









 





ARTICLE VII


Representations and Warranties




     The Parent and the Borrower represent and warrant to the Lenders that:



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



     Section 7.02 Authority; Enforceability. The Transactions are within each Loan Party’s corporate powers
and have been duly authorized by all necessary corporate and, if required, stockholder action.
Each Loan Document to which a Loan Party is a party has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation, as applicable, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors’ rights generally and subject to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.



     Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of,
registration or filing with, or any other action by, any Governmental Authority or any other third
Person, nor is any such consent, approval, registration, filing or other action necessary for the
validity or enforceability of any Loan Document or the consummation of the transactions
contemplated thereby, except such as have been obtained or made and are in full force and effect
other than the recording and filing of the Security Instruments as required by this Agreement, (b)
will not violate any applicable law or regulation or the charter, by-laws or other organizational
documents of any Loan Party or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture, agreement or other instrument binding upon any Loan Party
or its Properties, or give rise to a right thereunder to require any payment to be made by any Loan
Party and (d) will not result in the creation or imposition of any Lien on any Property of any Loan
Party (other than the Liens created by the Loan Documents).



     Section 7.04 Financial Condition; No Material Adverse Change.


          (a) The Parent has furnished to the Lenders (i) its audited consolidated balance sheet and
related statement of income, stockholders’ equity and cash flow as of and for the fiscal year ended
December 31, 2010 (which audit report for such financial statement is not subject to any
qualification) and (ii) its unaudited consolidated balance sheet and related statement of income,
stockholders’ equity and cash flow for the fiscal quarter ended March 31, 2011, which financial
statement shall be prepared in accordance with GAAP. The financial statements in clauses (i) and
(ii) present fairly, in all material respects, the consolidated financial condition of the Parent
as of the dates and for the periods set forth above in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the unaudited quarterly financial
statements.


          (b) Since December 31, 2010, there has been no event, development or circumstance that has had
or could reasonably be expected to have a Material Adverse Effect.


          (c) Neither the Parent nor any of its Restricted Subsidiaries has on the date hereof any
material Debt (including Disqualified Capital Stock) or any contingent liabilities, off-balance
sheet



46









 







liabilities or partnerships, liabilities for taxes, unusual forward or long-term commitments
or unrealized or anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the Financial Statements.



     Section 7.05 Litigation.


          (a) Except as set forth on Schedule 7.05, there are no actions, suits, investigations or
proceedings by or before any arbitrator or Governmental Authority pending against or, to the
knowledge of the Parent or the Borrower, threatened against or affecting the Parent and its
Restricted Subsidiaries (i) not fully covered by insurance (except for normal deductibles) as to
which there is a reasonable possibility of an adverse determination that, if adversely determined,
could reasonably be expected, individually or in the aggregate, to result in a Material Adverse
Effect or (ii) that involve any Loan Document or the Transactions.


          (b) Since the date of this Agreement, there has been no change in the status of the matters
disclosed in Schedule 7.05 that, individually or in the aggregate, has resulted in, or materially
increased the likelihood of, a Material Adverse Effect.



     Section 7.06 Environmental Matters. Except as could not be reasonably expected to have a Material
Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions
could not be reasonably expected to have a Material Adverse Effect):


          (a) neither any Property of the Parent and its Restricted Subsidiaries nor the operations
conducted thereon violate any order or requirement of any court or Governmental Authority or any
Environmental Laws.


          (b) no Property of the Parent and its Restricted Subsidiaries nor the operations currently
conducted thereon are in violation of or subject to any existing, pending or threatened action,
suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to
any remedial obligations under Environmental Laws.


          (c) all notices, permits, licenses, exemptions, approvals 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 Parent and its Restricted Subsidiaries, including, without limitation, past or present
treatment, storage, disposal or release of a hazardous substance, oil and gas waste or solid waste
into the environment, have been duly obtained or filed, and the Parent and its Restricted
Subsidiaries are in compliance with the terms and conditions of all such notices, permits, licenses
and similar authorizations.


          (d) all hazardous substances, solid waste and oil and gas waste, if any, generated at any and
all Property of the Parent and its Restricted Subsidiaries have in the past been transported,
treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or the environment, and, to the actual knowledge of the
Borrower, all such transport carriers and treatment and disposal facilities have been and are
operating in compliance with Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or the environment, and are not the subject of any existing, pending
or threatened action, investigation or inquiry by any Governmental Authority in connection with any
Environmental Laws.


          (e) the Borrower has taken all steps reasonably necessary to determine and has determined that
no oil, hazardous substances, solid waste or oil and gas waste, have been disposed of or otherwise
released and there has been no threatened release of any oil, hazardous substances, solid waste or
oil and gas waste on or to any Property of the Parent and its Restricted Subsidiaries except in



47









 







compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment
to public health or welfare or the environment.


          (f) to the extent applicable, all Property of the Parent and its Restricted Subsidiaries
currently satisfies all design, operation, and equipment requirements imposed by the OPA, and the
Borrower does not have any reason to believe that such Property, to the extent subject to the OPA,
will not be able to maintain compliance with the OPA requirements during the term of this
Agreement.


          (g) neither the Parent nor any Restricted Subsidiary has any known contingent liability or
Remedial Work in connection with any release or threatened release of any oil, hazardous substance,
solid waste or oil and gas waste into the environment.



     Section 7.07 Compliance with the Laws and Agreements; No Defaults.


          (a) The Parent and its Restricted Subsidiaries are in compliance with all Governmental
Requirements applicable to it or its Property and all agreements and other instruments binding upon
it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and
other governmental authorizations necessary for the ownership of its Property and the conduct of
its business, except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.


          (b) Neither the Parent nor any of its Restricted Subsidiaries are 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 or would require the Parent or any Restricted
Subsidiary to Redeem or make any offer to Redeem all or any portion of any Debt outstanding under
any indenture, note, credit agreement or instrument pursuant to which any Material Indebtedness is
outstanding or by which the Parent or any of its Restricted Subsidiaries or any of their Properties
is bound.


          (c) No Default has occurred and is continuing.



     Section 7.08 Investment Company Act. No Loan Party is an “investment company” or a company “controlled”
by an “investment company,” within the meaning of, or subject to regulation under, the Investment
Company Act of 1940, as amended.



     Section 7.09 Taxes. The Parent and each of its Subsidiaries has timely filed or caused to be filed all
tax returns and reports required to have been filed and has paid or caused to be paid all taxes
required to have been paid by it, except (a) taxes that are being contested in good faith by
appropriate proceedings and for which the Parent, as applicable, has set aside on its books
adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect. To the knowledge of the Parent, no
proposed tax assessment is being asserted with respect to any Loan Party that, if made, could
reasonably be expected to have a Material Adverse Effect.



     Section 7.10 ERISA.


          (a) The Parent and each ERISA Affiliate have complied in all material respects with ERISA and,
where applicable, the Code regarding each Plan.


          (b) Each Plan is, and has been, operated, administered and maintained in substantial
compliance with ERISA and, where applicable, the Code.




48









 







          (c) No act, omission or transaction has occurred which could result in imposition on any the
Parent or any of its Subsidiaries or any ERISA Affiliate (whether directly or indirectly) of (i)
either a civil penalty assessed pursuant to subsections (c), (i) or (l) of section 502 of ERISA or
a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.


          (d) Except as provided in Schedule 7.10(d), no Plan (other than a defined contribution plan)
or any trust created under any such Plan has been terminated since September 2, 1974. No liability
to the PBGC (other than for the payment of current premiums which are not past due) by the Parent
or any of its Subsidiaries or any ERISA Affiliate has been or is expected by any Loan Party or any
ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with respect to any Plan
has occurred.


          (e) Full payment when due has been made of all amounts which Parent or any of its Subsidiaries
or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as
contributions to such Plan as of the date hereof and no Plan has failed to satisfy the minimum
funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA)
applicable to such Plan.


          (f) Except as provided in Schedule 7.10(f), the actuarial present value of the benefit
liabilities under each Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower’s most recently ended fiscal year, exceed the current value of the assets (computed on a
plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities by an amount in excess of $500,000. The term “actuarial present value of the benefit
liabilities” shall have the meaning specified in section 4041 of ERISA.


          (g) Neither the Parent and any of its Subsidiaries nor any ERISA Affiliate sponsors,
maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits to former employees of
such entities, that may not be terminated by the Parent, any of its Subsidiaries or any ERISA
Affiliate in its sole discretion at any time without any material liability.


          (h) Neither the Parent and any of its Subsidiaries nor any ERISA Affiliate sponsors, maintains
or contributes to, or has at any time in the six-year period preceding the date hereof sponsored,
maintained or contributed to, or had any actual or contingent liability to any Multiemployer Plan.


          (i) Neither the Parent and any of its Subsidiaries nor any ERISA Affiliate is required to
provide security under section 401(a)(29) of the Code due to a Plan amendment that results in an
increase in current liability for the Plan.



     Section 7.11 Disclosure; No Material Misstatements. The Parent and the Borrower have disclosed to the
Administrative Agent and the Lenders all material agreements, instruments and corporate or other
restrictions to which it or any of its Restricted Subsidiaries is subject, and all other matters
known to it, that, individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates or other
information furnished by or on behalf of the Parent and its Restricted Subsidiaries to the
Administrative Agent or any Lender or any of their Affiliates in connection with the negotiation of
this Agreement or any other Loan Document or delivered hereunder or under any other Loan Document
(as modified or supplemented by other information so furnished) contain any material misstatement
of fact or omits to state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that, with respect to
projected financial information, the Parent and the



49









 




Borrower represent only that such information
was prepared in good faith based upon assumptions believed to be reasonable at the time. There is
no fact peculiar to the Parent and its Restricted Subsidiaries which could reasonably be expected
to have a Material Adverse Effect or in the future is reasonably likely to have a Material Adverse
Effect and which has not been set forth in this Agreement or the Loan Documents or the other
documents, certificates and statements furnished to the Administrative Agent or the Lenders by or
on behalf of the Parent and its Restricted Subsidiaries prior to, or on, the date hereof in
connection with the transactions contemplated hereby. There are no statements or conclusions in
any Reserve Report which are based upon or include misleading information or fail to take into
account material information regarding the matters reported therein, it being understood that
projections concerning volumes attributable to the Oil and Gas Properties and production and cost
estimates contained in each Reserve Report are necessarily based upon professional opinions,
estimates and projections and that neither the Parent, the Borrower, Restricted the Subsidiaries
nor such Responsible Officer warrants that such opinions, estimates and projections will ultimately
prove to have been accurate.



     Section 7.12 Insurance. The Borrower has, and has caused all of its Restricted Subsidiaries to have,
(a) all insurance policies sufficient for the compliance by each of them with all material
Governmental Requirements and all material agreements and (b) insurance coverage, or
self-insurance, in at least amounts and against such risk (including, without limitation, public
liability) that are usually insured against by companies similarly situated and engaged in the same
or a similar business for the assets and operations of the Borrower and its Restricted
Subsidiaries. Schedule 7.12, as of the date hereof, sets forth a list of all insurance maintained
by the Borrower and all its Restricted Subsidiaries. The Administrative Agent and the Lenders have
been named as additional insureds in respect of such liability insurance policies and the
Administrative Agent has been named as loss payee with respect to Property loss insurance.



     Section 7.13 Restriction on Liens. Neither the Parent nor any of its Restricted Subsidiaries is a party
to any material agreement or arrangement (other than Capital Leases creating Liens permitted by
Section 9.03(c) and Liens permitted by clause (g) of the definition of Excepted Liens), but then
only on the Property subject of such Capital Lease), or subject to any order, judgment, writ or
decree, which either restricts or purports to restrict its ability to grant Liens to the
Administrative Agent and the Lenders on or in respect of their Properties to secure the
Indebtedness and the Loan Documents.



     Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or as disclosed in writing to the
Administrative Agent (which shall promptly furnish a copy to the Lenders), which shall be a
supplement to Schedule 7.14, the Parent has no other Subsidiaries. Schedule 7.14 sets forth each
Subsidiary’s status as a Restricted Subsidiary or an Unrestricted Subsidiary.



     Section 7.15 Location of Business and Offices. The Parent’s jurisdiction of organization is Delaware;
the name of the Parent as listed in the public records of its jurisdiction of organization is
McMoRan Exploration Co.; and the organizational identification number of the Parent in its
jurisdiction of organization is 2927190 (or, in each case, as set forth in a notice delivered to
the Administrative Agent pursuant to Section 8.01(m) in accordance with Section 12.01). The
Borrower’s jurisdiction of organization is Delaware; the name of the Borrower as listed in the
public records of its jurisdiction of organization is McMoRan Oil & Gas LLC; and the organizational
identification number of the Borrower in its jurisdiction of organization is 2927213 (or, in each
case, as set forth in a notice delivered to the Administrative Agent pursuant to Section 8.01(m) in
accordance with Section 12.01). The Parent’s and the Borrower’s principal place of business and
chief executive offices are located at the address specified in Section 12.01 (or as set forth in a
notice delivered pursuant to Section 8.01(m) and Section 12.01(c)). Each Subsidiary’s jurisdiction
of organization, name as listed in the public records of its jurisdiction of organization,
organizational identification number in its jurisdiction of organization, and the location of



50









 




its principal place of business and chief executive office is stated on Schedule 7.14 (or as set forth
in a notice delivered pursuant to Section 8.01(m)).



     Section 7.16 Properties; Titles, Etc.


          (a) Except as set forth in Schedule 7.16, each of the Borrower and the Restricted Subsidiaries
(as applicable) has good and defensible title to the Oil and Gas Properties evaluated in the most
recently delivered Reserve Report and good title to all its personal Properties, in each case, free
and clear of all Liens except Liens permitted by Section 9.03. After giving full effect to the
Excepted Liens, the Borrower or the Restricted Subsidiary specified as the owner owns the net
interests in production attributable to the Hydrocarbon Interests as reflected in the most recently
delivered Reserve Report, and the ownership of such Properties shall not in any material respect
obligate the Borrower or such Restricted Subsidiary 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 Property set forth in the most recently delivered Reserve Report that is not
offset by a corresponding proportionate increase in the Borrower’s or such Restricted Subsidiary’s
net revenue interest in such Property. The Parent owns no direct interests in any Oil and Gas
Properties.


          (b) All material leases and agreements necessary for the conduct of the business of the
Borrower and the Restricted 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 could reasonably be
expected to have a Material Adverse Effect.


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


          (d) All of the Properties of the Borrower and the Restricted Subsidiaries which are reasonably
necessary for the operation of their businesses are in good working condition and are maintained in
accordance with prudent business standards.


          (e) The Borrower and each Restricted Subsidiary owns, or is licensed to use, all trademarks,
tradenames, copyrights, patents and other intellectual Property material to its business, and the
use thereof by the Borrower and such Restricted Subsidiary does not infringe upon the rights of any
other Person, except for any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect. The Borrower and its Restricted
Subsidiaries either own or have valid licenses or other rights to use all databases, geological
data, geophysical data, engineering data, seismic data, maps, interpretations and other technical
information used in their businesses as presently conducted, subject to the limitations contained
in the agreements governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of Hydrocarbons, with such exceptions as
could not reasonably be expected to have a Material Adverse Effect.



     Section 7.17 Maintenance of Properties. Except for such acts or failures to act as could not be
reasonably expected to have a Material Adverse Effect, the Oil and Gas Properties (and Properties
unitized therewith) of the Borrower and its Restricted Subsidiaries have been maintained, operated
and developed in a good and workmanlike manner and in conformity with all Governmental Requirements
and in conformity with the provisions of all leases, subleases or other contracts comprising a part
of the



51









 




Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas
Properties of the Borrower and its Restricted Subsidiaries. Specifically in connection with the
foregoing, except for those as could not be reasonably expected to have a Material Adverse Effect,
(i) no Oil and Gas Property of the Parent or its Restricted Subsidiaries is subject to having
allowable production reduced below the full and regular allowable (including the maximum
permissible tolerance) because of any overproduction (whether or not the same was permissible at
the time) and (ii) none of the wells comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) of the Parent or its Restricted Subsidiaries is deviated from the vertical more
than the maximum permitted by Governmental Requirements, and such wells are, in fact, bottomed
under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or
in the case of wells located on Properties unitized therewith, such unitized Properties) of the
Borrower or such Restricted Subsidiary. All pipelines, wells, gas processing plants, platforms and
other material improvements, fixtures and equipment owned in whole or in part by the Borrower or
any of its Restricted Subsidiaries that are necessary to conduct normal operations are being
maintained in a state adequate to conduct normal operations, and with respect to such of the
foregoing which are operated by the Borrower or any of its Restricted Subsidiaries, in a manner
consistent with the Borrower’s or its Restricted Subsidiaries’ past practices (other than those the
failure of which to maintain in accordance with this Section 7.17 could not reasonably be expected
to have a Material Adverse Effect).



     Section 7.18 Gas Imbalances, Prepayments. Except as set forth on Schedule 7.18 or on the most recent
certificate delivered pursuant to Section 8.12(c), on a net basis there are no gas imbalances, take
or pay or other prepayments which would require the Borrower or any of its Restricted Subsidiaries
to deliver Hydrocarbons produced from the Oil and Gas Properties at some future time without then
or thereafter receiving full payment therefor exceeding two and one-half percent (2.5%) of the
aggregate volumes of Hydrocarbons (on an Mcf equivalent basis) listed in the most recent Reserve
Report.



     Section 7.19 Marketing of Production. Except for contracts listed and in effect on the date hereof on
Schedule 7.19, and thereafter either disclosed in writing to the Administrative Agent or included
in the most recently delivered Reserve Report (with respect to all of which contracts the Borrower
represents that it or its Restricted Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the relevant contract
and are not having deliveries curtailed substantially below the subject Property’s delivery
capacity), no material agreements exist which are not cancelable on 60 days notice or less without
penalty or detriment for the sale of production from the Borrower’s or its Restricted Subsidiaries’
Hydrocarbons (including, without limitation, calls on or other rights to purchase, production,
whether or not the same are currently being exercised) that (a) pertain to the sale of production
at a fixed price and (b) have a maturity or expiry date of longer than six (6) months from the date
hereof.



     Section 7.20 Swap Agreements. Schedule 7.20, as of the date hereof, and after the date hereof, each
report required to be delivered by the Borrower pursuant to Section 8.01(d), sets forth, a true and
complete list of all Swap Agreements of the Parent and its Restricted Subsidiaries, the material
terms thereof (including the type, term, effective date, termination date and notional amounts or
volumes), the net mark to market value thereof, all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such agreement.



     Section 7.21 Use of Loans and Letters of Credit. The proceeds of the Loans and the Letters of Credit
shall be used to provide working capital for exploration and production operations and to provide
funding and Letters of Credit for general corporate purposes of the Borrower and its Restricted
Subsidiaries. Neither the Parent nor any Restricted Subsidiary is engaged principally, or as one
of its or their important activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of
Regulation T, U or X of



52









 




the Board). No part of the proceeds of any Loan or Letter of Credit will
be used for any purpose which violates the provisions of Regulations T, U or X of the Board.



     Section 7.22 Solvency. After giving effect to the transactions contemplated hereby, (a) the aggregate
assets (after giving effect to amounts that could reasonably be received by reason of indemnity,
offset, insurance or any similar arrangement), at a fair valuation, of the Loan Parties, taken as a
whole, will exceed the aggregate Debt of the Loan Parties on a consolidated basis, as the Debt
becomes absolute and matures, (b) each Loan Party will not have incurred or intended to incur, and
will not believe that it will incur, Debt beyond its ability to pay such Debt (after taking into
account the timing and amounts of cash to be received by it and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably be received by
reason of indemnity, offset, insurance or any similar arrangement) as such Debt becomes absolute
and matures and (c) each Loan Party will not have (and will have no reason to believe that it will
have thereafter) unreasonably small capital for the conduct of its business.



ARTICLE VIII


Affirmative Covenants




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



     Section 8.01 Financial Statements; Other Information. The Parent and the Borrower will furnish to the
Administrative Agent and each Lender:


          (a) Annual Financial Statements. As soon as available, but in any event in accordance
with then applicable law and not later than 90 days after the end of each fiscal year of the Parent
and the Borrower, each of their audited consolidated balance sheets and related statements of
operations, stockholders’ equity, as applicable, and cash flows as of the end of and for such year,
setting forth in each case in comparative form the figures for the previous fiscal year, all
reported on by Ernst & Young LLP or other independent public accountants of recognized national
standing (without a “going concern” or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial condition and results of
operations of the Parent and the Borrower and their consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied.


          (b) Quarterly Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of each of the first
three fiscal quarters of each fiscal year of the Parent and the Borrower, each of their
consolidated balance sheet and related statements of operations and cash flows as of the end of and
for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case
in comparative form the figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition and results of
operations of the Parent and the Borrower and their consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments
and the absence of footnotes.


          (c) Certificate of Financial Officer — Compliance. Concurrently with any delivery of
financial statements under Section 8.01(a) or Section 8.01(b), commencing with the delivery of
financial statements for the fiscal quarter ending June 30, 2011, a certificate of a Financial
Officer of the



53









 







Parent in substantially the form of Exhibit D hereto (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto and (ii) setting forth reasonably detailed
calculations demonstrating compliance with Section 9.01.


          (d) Certificate of Financial Officer – Swap Agreements. Concurrently with any
delivery of financial statements under Section 8.01(a) and Section 8.01(b), commencing with the
delivery of financial statements for the fiscal quarter ending June 30, 2011, a certificate of a
Financial Officer, in form and substance satisfactory to the Administrative Agent, setting forth as
of the last Business Day of such fiscal quarter or fiscal year, a true and complete list of all
Swap Agreements of each Loan Party, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark-to-market value therefor, any
new credit support agreements relating thereto not listed on Schedule 7.20, any margin required or
supplied under any credit support document, and the counterparty to each such agreement.


          (e) Certificate of Financial Officer — Consolidating Information. If, at any time,
all of the consolidated Subsidiaries of the Parent are not Consolidated Subsidiaries, then
concurrently with any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer setting forth consolidating spreadsheets that show all
Unrestricted Subsidiaries and the eliminating entries, in such form as would be presentable to the
auditors of the Parent.


          (f) Certificate of Insurer — Insurance Coverage. Concurrently with any delivery of
financial statements under Section 8.01(a), a certificate of insurance coverage with respect to the
insurance required by Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the applicable policies.


          (g) Other Accounting Reports. Promptly upon receipt thereof, a copy of each other
report or letter submitted to any Loan Party by independent accountants in connection with any
annual, interim or special audit made by them of the books of any such Person, and a copy of any
response by such Person, or the board of directors or other appropriate governing body of such
Person, to such letter or report.


          (h) SEC and Other Filings; Reports to Shareholders. Promptly after the same become
publicly available, copies of all periodic and other reports, proxy statements and other materials
filed by the Parent with the SEC, or with any national securities exchange, or distributed by the
Parent or the Borrower to its shareholders generally, as the case may be. Documents required to be
delivered pursuant to Section 8.01 may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date on which the Parent posts such documents to EDGAR (or
such other free, publicly-accessible internet database that may be established and maintained by
the SEC as a substitute for or successor to EDGAR).


          (i) Notices Under Material Instruments. Promptly after the furnishing thereof, copies
of any financial statement, report or notice furnished to or by any Person pursuant to the terms of
any preferred stock designation, indenture, loan or credit or other similar agreement, other than
this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.


          (j) Lists of Purchasers. Concurrently with the delivery of any Reserve Report to the
Administrative Agent pursuant to Section 8.12, a list of all Persons purchasing Hydrocarbons from
the Borrower or any Restricted Subsidiary.



54









 







          (k) Notice of Sales of Oil and Gas Properties. In the event the Borrower or any
Restricted Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil or Gas
Properties or any Equity Interests in any Restricted Subsidiary with a fair market value in excess
of $5,000,000 in accordance with Section 9.11, prior written notice of such disposition, the price
thereof and the anticipated date of closing and any other details thereof reasonably requested by
the Administrative Agent or any Lender.


          (l) Notice of Casualty Events. Prompt written notice, and in any event within three
Business Days, of the occurrence of any Casualty Event or the commencement of any legal action or
proceeding that could reasonably be expected to result in a Casualty Event, in each case, of any
Property of any Loan Party having a fair market value in excess of $10,000,000.


          (m) Information Regarding Borrower and Guarantors. Prompt written notice of (and in
any event at least ten (10) Business Days following) any change (i) in the Borrower or any
Guarantor’s corporate name or in any trade name used to identify such Person in the conduct of its
business or in the ownership of its Properties, (ii) in the location of the Borrower or any
Guarantor’s chief executive office or principal place of business, (iii) in the Borrower or any
Guarantor’s identity or corporate structure or in the jurisdiction in which such Person is
incorporated or formed, (iv) in the Borrower or any Guarantor’s jurisdiction of organization or
such Person’s organizational identification number in such jurisdiction of organization, and (v) in
the Borrower or any Guarantor’s federal taxpayer identification number.


          (n) Production Report and Lease Operating Statements. In connection with each Reserve
Report delivered pursuant to Section 8.12(a), a report setting forth, for each month during the
then current fiscal year to date, the volume of production and sales attributable to production
(and the prices at which such sales were made and the revenues derived from such sales) for each
such calendar month during such period from the Oil and Gas Properties, and setting forth the
related ad valorem, severance and production taxes and lease operating expenses attributable
thereto and incurred for each such calendar month.


          (o) Notices Relating to the P&A Escrow Agreement. In the event that after the
Effective Date, the Borrower furnishes Newfield with any notices or reports under the P&A Escrow
Agreement, then the Borrower shall promptly give the Administrative Agent notice in reasonable
detail of such circumstances.


          (p) Patriot Act. Promptly upon request, all documentation and other information
required by regulatory authorities under applicable “know your customer” and anti-money laundering
rules and regulations, including the USA Patriot Act.


          (q) Other Requested Information. Promptly following any request therefor, such other
information regarding the operations, business affairs and financial condition of the Parent or any
Subsidiary (including, without limitation, any Plan or Multiemployer Plan and any reports or other
information required to be filed under ERISA), or compliance with the terms of this Agreement or
any other Loan Document, as the Administrative Agent or any Lender may reasonably request.



     Section 8.02 Notices of Material Events. The Parent and the Borrower will furnish to the Administrative
Agent and each Lender prompt written notice of the following:


          (a) the occurrence of any Default;


          (b) the filing or commencement of, or the threat in writing of, any action, suit, proceeding,
investigation or arbitration by or before any arbitrator or Governmental Authority against or





55









 







affecting the Parent or any Restricted Subsidiary thereof not previously disclosed in writing to
the Lenders or any material adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders) that, in either case, if adversely
determined, could reasonably be expected to result in a Material Adverse Effect;


          (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that
have occurred, could reasonably be expected to result in liability of the Parent or any Restricted
Subsidiary in an aggregate amount exceeding $5,000,000; and


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


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



     Section 8.03 Existence; Conduct of Business. The Parent will, and will cause each Restricted Subsidiary
to, do or cause to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence and the rights, licenses, permits, privileges and franchises material to
the conduct of its business and maintain, if necessary, its qualification to do business in each
other jurisdiction in which its Oil and Gas Properties is located or the ownership of its
Properties requires such qualification, except where the failure to so qualify could not reasonably
be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any
merger, consolidation, liquidation or dissolution permitted under Section 9.10.



     Section 8.04 Payment of Obligations. The Parent will, and will cause each Restricted Subsidiary to, pay
its obligations, including tax liabilities of the Borrower and all of its Restricted Subsidiaries
before the same shall become delinquent or in default, except where (a) the validity or amount
thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such
Restricted Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably
be expected to result in a Material Adverse Effect.



     Section 8.05 Performance of Obligations under Loan Documents. The Borrower will pay the Loans according
to the reading, tenor and effect thereof, and the Parent and the Borrower will, and will cause each
Restricted Subsidiary to, do and perform every act and discharge all of the obligations to be
performed and discharged by them under the Loan Documents, including, without limitation, this
Agreement, at the time or times and in the manner specified.



     Section 8.06 Operation and Maintenance of Properties. The Borrower, at its own expense, will, and will
cause each Restricted Subsidiary to:


          (a) operate its Oil and Gas Properties and other material Properties or cause such Oil
and Gas Properties and other material Properties to be operated in a careful and efficient manner
in accordance with the customary practices of the industry and in compliance with all applicable
contracts and agreements and in compliance with all Governmental Requirements, including, without
limitation, applicable pro ration requirements and Environmental Laws, and all applicable laws,
rules and regulations of every other Governmental Authority from time to time constituted to
regulate the development and operation of its Oil and Gas Properties and the production and sale of
Hydrocarbons and other minerals therefrom, except, in each case, where the failure to comply could
not reasonably be expected to have a Material Adverse Effect.




56












 





          (b) keep and maintain in good repair, working order and condition (ordinary wear and tear
excepted) all of its material Oil and Gas Properties and other Properties material to the conduct
of its business, including, without limitation, all equipment, machinery and facilities, except to
the extent any such Property is no longer capable of producing Hydrocarbons in economically
reasonable amounts.




          (c) promptly pay and discharge, or make commercially reasonable efforts to cause to be paid
and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases
or other agreements affecting or pertaining to its Oil and Gas Properties.




          (d) promptly perform or make commercially reasonable efforts to cause to be performed, in
accordance with industry standards, the obligations required by each and all of the assignments,
deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties.




          (e) to the extent the Borrower is not the operator of any Property, the Borrower shall use
commercially reasonable efforts to cause the operator to comply with this Section 8.06.




     Section 8.07 Insurance. The Borrower will, and will cause each Restricted Subsidiary to, maintain, with
financially sound and reputable insurance companies, insurance, or self-insurance, in such amounts
and against such risks as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations. The loss payable clauses or provisions in
said insurance policy or policies insuring any
of the collateral for the Loans shall be endorsed in favor of and made payable to the
Administrative Agent as its interests may appear and such liability policies shall name the
Administrative Agent and the Lenders as “additional insureds” and provide that the insurer will
endeavor to give at least 30 days prior notice of any cancellation to the Administrative Agent.



     Section 8.08 Books and Records; Inspection Rights. The Parent will, and will cause each Restricted
Subsidiary to, keep proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and activities. The Parent will,
and will cause each Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, and to discuss its affairs,
finances and condition with its officers and independent accountants, all at such reasonable times
and as often as reasonably requested.



     Section 8.09 Compliance with Laws. The Parent will, and will cause each Restricted Subsidiary to,
comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it
or its Property, except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.



     Section 8.10 Environmental Matters.



          (a) The Borrower shall at its sole expense: (i) comply, and shall cause its Properties and
operations and each Restricted Subsidiary and each Restricted Subsidiary’s Properties and
operations to comply, with all applicable Environmental Laws, the breach of which Environmental
Laws could be reasonably expected to have a Material Adverse Effect; (ii) not dispose of or
otherwise release, and shall cause each Restricted Subsidiary not to dispose of or otherwise
release, any oil, oil and gas waste, hazardous substance, or solid waste on, under, about or from
any of the Borrower’s or its Restricted Subsidiaries’ Properties or any other Property to the
extent caused by the Borrower’s or any of its Restricted Subsidiaries’ operations except in
compliance with applicable Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and shall cause each
Restricted Subsidiary to timely obtain or file, all notices, permits,




57









 







licenses, exemptions,
approvals, registrations or other authorizations, if any, required under applicable Environmental
Laws to be obtained or filed in connection with the operation or use of the Borrower’s or its
Restricted Subsidiaries’ Properties, which failure to obtain or file could reasonably be expected
to have a Material Adverse Effect; (iv) promptly commence and diligently prosecute to completion,
and shall cause each Restricted Subsidiary to promptly commence and diligently prosecute to
completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal,
repair, restoration, remediation or other remedial obligations (collectively, the “Remedial
Work”) in the event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected past, present or future
disposal or other release of any oil, oil and gas waste, hazardous substance or solid waste on,
under, about or from any of the Borrower’s or its Restricted Subsidiaries’ Properties, which
failure to commence and diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; and (v) establish and implement, and shall cause each Restricted
Subsidiary to establish and implement, such policies of environmental audit and compliance as may
be necessary to continuously determine and assure that the Borrower’s and its
Restricted Subsidiaries’ obligations under this Section 8.10(a) are timely and fully
satisfied, which failure to establish and implement could reasonably be expected to have a Material
Adverse Effect.




          (b) The Borrower will promptly, but in no event later than five days of the occurrence of a
triggering event, notify the Administrative Agent and the Lenders in writing of any threatened
action, investigation or inquiry by any Governmental Authority or any threatened demand or lawsuit
by any landowner or other third party against the Borrower or its Restricted Subsidiaries or their
Properties of which the Borrower has knowledge in connection with any Environmental Laws (excluding
routine testing and corrective action) if the Borrower reasonably anticipates that such action will
result in liability (whether individually or in the aggregate) in excess of $10,000,000, not fully
covered by insurance, subject to normal deductibles.




          (c) If an Event of Default has occurred and is continuing, the Administrative Agent may (but
shall not be obligated to), at the expense of the Borrower, conduct such Remedial Work as it deems
appropriate to determine the nature and extent of any noncompliance with applicable Environmental
Laws, the nature and extent of the presence of any oil, oil and gas waste, hazardous substance or
solid waste and the nature and extent of any other environmental conditions that may exist at or
affect any of the Mortgaged Properties, and the Loan Parties shall cooperate with the
Administrative Agent in conducting such Remedial Work. Such Remedial Work may include, without
limitation, a detailed visual inspection of the Mortgaged Properties, including all storage areas,
storage tanks, drains and dry wells and other structures and locations, as well as the taking of
soil samples, surface water samples, and ground water samples and such other investigations or
analyses as the Administrative Agent deems appropriate. The Administrative Agent and its officers,
employees, agents and contractors shall have and are hereby granted the right to enter upon the
Mortgaged Properties for the foregoing purposes.




     Section 8.11 Further Assurances.



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




58









 








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




     Section 8.12 Reserve Reports.



          (a) On or before March 1st and September 1st of each year (and on October 1, 2011 for the
purposes of the initial November 1, 2011 Scheduled Redetermination), the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report evaluating the Oil and Gas Properties of
the Borrower and its Restricted Subsidiaries as of the immediately preceding January 1 and July 1.
The Reserve Report as of January 1 of each year shall be prepared by one or more Approved Petroleum
Engineers (and such report delivered in conjunction with the initial November 1, 2011 Scheduled
Redetermination shall be prepared primarily by one or more Approved Petroleum Engineers), and the
July 1 Reserve Report of each year may be prepared by one or more Approved Petroleum Engineers or
under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report
to be true and accurate and to have been prepared in accordance with the procedures used in the
immediately preceding January 1 Reserve Report.




          (b) In the event of an Interim Redetermination, the Borrower shall furnish to the
Administrative Agent and the Lenders a Reserve Report prepared by or under the supervision of the
chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the immediately preceding January 1
Reserve Report. For any Interim Redetermination requested by the Administrative Agent or the
Borrower pursuant to Section 2.07(b), the Borrower shall provide such Reserve Report with an “as
of” date as required by the Administrative Agent as soon as possible, but in any event no later
than forty-five (45) days following the receipt of such request.




          (c) With the delivery of each Reserve Report, the Borrower shall provide to the Administrative
Agent and the Lenders a certificate from a Responsible Officer certifying that in all material
respects: (i) the information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct (it being understood that projections concerning
volumes attributable to the Oil and Gas Properties and production and cost estimates contained in
each Reserve Report are necessarily based upon professional opinions, estimates and projections and
that neither the Parent, the Borrower, Restricted the Subsidiaries nor such Responsible Officer
warrants that such opinions, estimates and projections will ultimately prove to have been
accurate), (ii) the Borrower or its Restricted Subsidiaries owns good and defensible title (subject
to the title deficiencies set forth on Schedule 7.16) to the Oil and Gas Properties evaluated in
such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section
9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments in excess of the volume specified in Section 7.18 with
respect to its Oil and Gas Properties evaluated in such Reserve Report which would require the
Parent or any Restricted Subsidiary to deliver Hydrocarbons either generally or produced from such
Oil and Gas Properties at some future time without then or thereafter receiving full payment
therefor, (iv) none of their Oil and Gas Properties have been sold since the date of the last
Borrowing Base determination except as set forth on an exhibit to the certificate, which exhibit
shall list all of its Oil and Gas Properties sold and in such detail as reasonably required by the
Administrative Agent, (v) attached to the certificate is a list of all marketing agreements entered
into subsequent to the later of the date hereof or the most recently delivered Reserve Report which
the Borrower could reasonably be expected to have been obligated to list on Schedule 7.19 had such





59









 







agreement been in effect on the date hereof and (vi) attached thereto is a schedule of the Oil and
Gas Properties evaluated by such Reserve Report that are Mortgaged Properties and demonstrating
compliance with Section 8.14(a).




     Section 8.13 Title Information.



          (a) On or before the delivery to the Administrative Agent and the Lenders of each Reserve
Report required by Section 8.12(a), the Borrower will deliver title information in form and
substance acceptable to the Administrative Agent covering enough of the Oil and Gas Properties
evaluated by such Reserve Report that were not included in the immediately preceding Reserve
Report, so that the Administrative Agent shall have received together with title information
previously delivered to the Administrative Agent, satisfactory title information on at least 85% of
the total value of the Oil and Gas Properties evaluated by such Reserve Report.




          (b) If the Borrower has provided title information for additional Properties under Section
8.13(a), the Borrower shall, within 90 days of notice from the Administrative Agent that title
defects or exceptions exist with respect to such additional Properties, either (i) cure any such
title defects or exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Excepted Liens (other than Excepted Liens
described in clauses (e), (g) and (h) of such definition) having an equivalent value or (iii)
deliver title information in form and substance acceptable to the Administrative Agent so that the
Administrative Agent shall have received, together with title information previously delivered to
the Administrative Agent, satisfactory title information on at least 85% of the value of the Oil
and Gas Properties evaluated by such Reserve Report.




          (c) If the Borrower is unable to cure any title defect requested by the Administrative Agent
or the Lenders to be cured within the 90-day period or the Borrower does not comply with the
requirements to provide acceptable title information covering 85% of the value of the Oil and Gas
Properties evaluated in the most recent Reserve Report, such default shall not be a Default, but
instead the Administrative Agent and/or the Majority Lenders shall have the right to exercise the
following remedy in their sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative
Agent or the Lenders. To the extent that the Administrative Agent or the Majority Lenders are not
satisfied with title to any Mortgaged Property after the 90-day period has elapsed, such
unacceptable Mortgaged Property shall not count towards the 85% requirement, and the Administrative
Agent may send a notice to the Borrower and the Lenders that the then outstanding Borrowing Base
shall be reduced by an amount as determined by the Required Lenders to cause the Borrower to be in
compliance with the requirement to provide acceptable title information on 85% of the value of the
Oil and Gas Properties. This new Borrowing Base shall become effective immediately after receipt
of such notice.




     Section 8.14 Additional Collateral; Additional Guarantors.



          (a) In connection with each redetermination of the Borrowing Base, the Borrower shall review
the Reserve Report and the list of current Mortgaged Properties (as described in Section
8.12(c)(vi)) to ascertain whether the Mortgaged Properties represent at least 85% of the total
value of the Oil and Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions, dispositions and production.
In the event that the Mortgaged Properties do not represent at least 85% of such total value, then
the Borrower shall, and shall cause its Restricted Subsidiaries to, grant, within thirty (30) days
of delivery of the certificate required under Section 8.12(c), to the Administrative Agent as
security for the Indebtedness a first-priority Lien interest (provided that Excepted Liens of the
type described in clauses (a) to (d) and (f) of the definition





60









 







thereof may exist, but subject to
the provisos at the end of such definition) on additional Oil and Gas Properties not already
subject to a Lien of the Security Instruments such that after giving effect thereto, the Mortgaged
Properties will represent at least 85% of such total value. All such Liens will be created and
perfected by and in accordance with the provisions of deeds of trust, security agreements and
financing
statements or other Security Instruments, all in form and substance reasonably satisfactory to
the Administrative Agent and in sufficient executed (and acknowledged where necessary or
appropriate) counterparts for recording purposes.




          (b) The Parent shall promptly cause each newly created or acquired Domestic Subsidiary that is
a Wholly-Owned Subsidiary (other than the Borrower) to guarantee the Indebtedness pursuant to the
Guaranty Agreement. In connection with any such guaranty, the Parent shall, or shall cause such
Domestic Subsidiary to: (A) execute and deliver a supplement to the Guaranty Agreement executed by
such Subsidiary, (B) pledge all of the Equity Interests of such new Subsidiary (including, without
limitation, delivery (if applicable) of original certificates evidencing the Equity Interests of
such Subsidiary, together with an appropriate undated stock powers for each certificate duly
executed in blank by the registered owner thereof) and (C) execute and deliver such other
additional closing documents, certificates and legal opinions as shall reasonably be requested by
the Administrative Agent.




          (c) In the event that any Loan Party becomes the owner of a Foreign Subsidiary, then the
Borrower shall, or shall promptly cause such Domestic Subsidiary to, (1) pledge 65% of all the
Equity Interests of such Foreign Subsidiary (including, without limitation, delivery of original
stock certificates evidencing such Equity Interests of such Foreign Subsidiary, together with
appropriate stock powers for each certificate duly executed in blank by the registered owner
thereof) and (2) execute and deliver such other additional closing documents, certificates and
legal opinions as shall reasonably be requested by the Administrative Agent.




     Section 8.15 ERISA Compliance. The Parent will promptly furnish and will cause each Subsidiary and any
ERISA Affiliate to promptly furnish to the Administrative Agent (i) immediately upon becoming aware
of the occurrence of any ERISA Event or of any Prohibited Transaction, in connection with any Plan
or any trust created thereunder, a written notice of the Parent or such other Loan Party or ERISA
Affiliate, as the case may be, specifying the nature thereof, what action such Person is taking or
proposes to take with respect thereto, and, when known, any action taken or proposed by the
Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (ii)
immediately upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to
have a trustee appointed to administer any Plan. With respect to each Plan (other than a
Multiemployer Plan), the Parent will, and will cause each Subsidiary and ERISA Affiliate to, (i)
satisfy in full and in a timely manner, without incurring any late payment or underpayment charge
or penalty and without giving rise to any lien, all of the contribution and funding requirements of
section 412 of the Code and of section 302 of ERISA, and (ii) pay, or cause to be paid, to the PBGC
in a timely manner, without incurring any late payment or underpayment charge or penalty, all
premiums required pursuant to sections 4006 and 4007 of ERISA. Promptly following receipt thereof,
the Parent will promptly furnish and will cause each Subsidiary and any ERISA Affiliate to promptly
furnish to the Administrative Agent copies of any documents described in Sections 101(k) or 101(l)
of ERISA that any Loan Party or any ERISA Affiliate may request with respect to any Multiemployer
Plan; provided, that if the Loan Parties or any of their ERISA Affiliates have not requested such
documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, then,
upon reasonable request of the Administrative Agent, the Loan Parties and/or their ERISA Affiliates
shall promptly make a request for such documents or notices from such administrator or sponsor and
the Borrower shall provide copies of such documents and notices to the Administrative Agent
promptly after receipt thereof.




61









 





     Section 8.16 Unrestricted Subsidiaries. The Parent:




          (a) will cause the management, business and affairs of each of the Parent, the Borrower and

each Restricted Subsidiary to be conducted in such a manner (including, without limitation, by
keeping separate books of account, furnishing separate financial statements of the Unrestricted
Subsidiaries to creditors and potential creditors thereof and by not permitting Properties of the
Parent, the Borrower and each Restricted Subsidiary to be commingled) so that each Unrestricted
Subsidiary will be treated as a corporate entity separate and distinct from Borrower and the
Restricted Subsidiaries.




          (b) will not, and will not permit any of the Restricted Subsidiaries to, incur, assume,
guarantee or be or become liable for any Debt of any of the Unrestricted Subsidiaries except that
the Parent may guarantee or otherwise give credit support for Debt (other than Debt in respect of
borrowed money) of the Unrestricted Subsidiaries to the extent it could make an Investment in such
Unrestricted Subsidiary under Section 9.05(l).




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




     Section 8.17 Marketing Activities. The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, engage in marketing activities for any Hydrocarbons or enter into any contracts
related thereto other than (i) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from their proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from proved Oil and Gas Properties of third parties during the period of such contract
associated with the Oil and Gas Properties of the Borrower and its Restricted Subsidiaries that the
Borrower or one of its Restricted Subsidiaries has the right to market pursuant to joint operating
agreements, unitization agreements or other similar contracts that are usual and customary in the
oil and gas business and (iii) other contracts for the purchase and/or sale of Hydrocarbons of
third parties (A) which have generally offsetting provisions (i.e. corresponding pricing mechanics,
delivery dates and points and volumes) such that no “position” is taken and (B) for which
appropriate credit support has been taken to alleviate the material credit risks of the
counterparty thereto.



ARTICLE IX

Negative Covenants




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



     Section 9.01 Financial Covenants.



          (a) Ratio of Total Debt to EBITDAX. The Parent will not, at any time, permit its
ratio of Total Debt as of such time to EBITDAX for the four fiscal quarters ending on the last day
of the fiscal quarter immediately preceding the date of determination for which financial
statements are available to be greater than 3.0 to 1.0.



          (b) Current Ratio. The Parent will not permit, as of the last day of any fiscal
quarter, its ratio of (i) consolidated current assets (including the unused amount of the total
Commitments, but excluding non-cash assets under FAS 133) to (ii) consolidated current liabilities
(excluding non-cash
obligations under FAS 133, reclamation obligations to the extent classified as current
liabilities under GAAP, current maturities under Existing Convertible Notes and current maturities
under this Agreement) to be less than 1.0 to 1.0.



62









 





     Section 9.02 Debt. The Parent will not, and will not permit any Restricted Subsidiary to, incur,
create, assume or suffer to exist any Debt, except:



          (a) the Loans or other Indebtedness arising under the Loan Documents or any guaranty of or
suretyship arrangement for the Loans or other Indebtedness arising under the Loan Documents.




          (b) Debt of the Loan Parties and their Restricted Subsidiaries existing on the date hereof
that is reflected in the Financial Statements and set forth on Schedule 9.02, including without
limitation the Existing Convertible Notes, the Existing 2014 Notes and any Permitted Refinancing
Debt in respect thereof (plus, in the case of the Existing Convertible Notes or the Existing 2014
Notes, any Debt incurred for the purpose of reimbursing the Parent for amounts spent to Redeem the
Existing Convertible Notes or the Existing 2014 Notes to the extent such Redemption is permitted
under Section 9.04(b)).




          (c) accounts payable and accrued expenses, liabilities or other obligations to pay the
deferred purchase price of Property or services, from time to time incurred in the ordinary course
of business which are not greater than ninety (90) days past the date of invoice or which are being
contested in good faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP.




          (d) Debt of any Loan Party incurred to finance the acquisition, construction or improvement of
any Property, including fixed or capital assets, including obligations under Capital Leases and any
Debt assumed in connection with the acquisition of any such Property or secured by a Lien on any
such asset prior to the acquisition thereof, and extensions, renewals and replacements of any such
Debt that do not increase the outstanding principal amount thereof; provided that (i) such Debt is
incurred prior to or within 90 days after such acquisition or the completion of such construction
or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this clause (d)
shall not exceed $20,000,000.




          (e) Debt in respect of (i) letters of credit, bank or completion guarantees, surety,
performance, warranty, bid, appeal or other bonds or guarantees and similar instruments, in each
case to the extent (x) required by Governmental Requirements or any third Person and (y) provided
in the ordinary course of business in connection with the operation of the Oil and Gas Properties;
and (ii) the P&A Escrow Agreement.




          (f) Debt (i) between the Borrower and the Parent; (ii) between the Borrower and any Restricted
Subsidiary or between Restricted Subsidiaries to the extent permitted by Section 9.05(g); provided
that (1) such Debt is not held, assigned, transferred, negotiated or pledged to any Person other
than a Loan Party, and (2) any such Debt owed by either the Borrower or a Guarantor shall be
subordinated to the Indebtedness on terms set forth in the Guaranty Agreement and (iii) of Loan
Parties permitted by Section 9.05.




          (g) endorsements of negotiable instruments for collection in the ordinary course of business.




          (h) Debt (other than for borrowed money) incurred in the ordinary course of business in
connection with Hydrocarbon transportation, Hydrocarbon purchasing or other similar arrangements,
provided that such arrangements are disclosed to the Administrative Agent.




          (i) Debt incurred in connection with vendor financing provided by Midland Pipe Corporation and
its affiliates or other similar arrangements not to exceed $15,000,000 in the aggregate at any one
time outstanding.





63









 








          (j) Debt
in respect of Permitted Additional Debt; provided that (i) the aggregate
principal amount of Debt outstanding at any time under this clause (j) shall not exceed
$300,000,000, and (ii) after giving pro forma effect thereto, the Parent would be compliant with
Section 9.01(a). Upon such issuance or incurrence (other than Permitted Additional Debt
constituting Permitted Refinancing Debt incurred to refinance such Debt, but only to the extent
that the aggregate principal amount of Permitted Refinancing Debt incurred to refinance such Debt
does not result in an increase in the principal amount thereof above the principal amount
originally incurred or issued up to the original principal amount of the Refinanced Debt), the
Borrowing Base then in effect shall be reduced by an amount equal to the product of 0.25
multiplied by the stated principal amount of such Permitted Additional Debt (without regard
to any original issue discount), and the Borrowing Base as so reduced shall become the new
Borrowing Base immediately upon the date of such issuance or incurrence, effective on such date
until the next redetermination or modification thereof hereunder




          (k) Debt incurred to finance insurance premiums.




          (l) Debt in connection with trade payables owed to FM Services, Inc. arising in the ordinary
course of business.




          (m) other Debt not to exceed $15,000,000 in the aggregate at any one time outstanding.




          (n) any guarantee of any other Debt permitted to be incurred hereunder.




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



          (a) Liens securing the payment of any Indebtedness.




          (b) Liens existing on the Effective Date and disclosed on Schedule 9.03 and Excepted Liens.




          (c) Liens securing the purchase price of Property, including fixed or capital assets acquired,
constructed or improved by any Loan Party; provided that (i) such Liens secure Indebtedness
permitted by Section 9.02(d), (ii) such Liens and the Debt secured thereby are incurred prior to or
within 90 days after such acquisition or the completion of such construction or improvement, (iii)
the Debt secured thereby does not exceed 100% of the cost of acquiring, constructing or improving
such fixed or capital assets and (iv) such security interests shall not apply to any other property
or assets of such Person or any other Loan Party.




          (d) Liens on amounts not to exceed the sum of up to three years of regularly scheduled
interest payments in respect of any convertible Debt issued by the Parent permitted hereby,
which amounts shall have been placed in interest reserve accounts in connection with the
issuance of such convertible Debt to secure the obligations under, such convertible Debt.




          (e) other Liens on Property not constituting collateral for the Indebtedness not to exceed
$15,000,000 in the aggregate at any one time outstanding.




64









 








     Section 9.04 Dividends, Distributions and Redemptions.



          (a) The Parent will not, and will not permit any of its Restricted Subsidiaries to, declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment, return any capital
or make any distribution of its Property to its Equity Interest holders, except (i) the Parent may
make Restricted Payments with respect to its Equity Interests with or by issuing additional shares
of its Equity Interests (other than Disqualified Capital Stock), (ii) the Borrower may make
Restricted Payments to the Parent and each other Restricted Subsidiary may make Restricted Payments
to the Borrower, the Parent or any other Restricted Subsidiary (which, in the case of Restricted
Subsidiaries that are not Wholly-Owned Subsidiaries, shall be made to the Parent, to the Borrower
or to any Restricted Subsidiary that is the direct or indirect parent of such Restricted Subsidiary
and to each other owner of Equity Interests of such Restricted Subsidiary ratably, based on the
relative ownership interests in such Restricted Subsidiary), (iii) the Parent may pay cash
dividends on preferred Equity Interests, provided, however, to the extent the cash proceeds of such
Equity Issuance were used to make an Investment under Section 9.05(l), such dividends may be paid
only to the extent of cash actually received by the Parent as dividends, interest or a return of
capital in respect of such Investment, (iv) the Parent may make Restricted Payments pursuant to and
in accordance with stock option plans or other benefit plans for its Restricted Subsidiaries
respective management or employees, (v) the Parent may make aggregate cash payments on or prior to
the applicable maturity date to the holders of preferred Equity Interests to induce such holders to
convert such preferred Equity Interests into common Equity Interests of the Parent, provided that
before and after giving effect to each such payment, no Default or Event of Default existed or
would result and the Borrower will have (after giving effect to such payment) unused availability
under this Agreement of not less than 15% of the then current Borrowing Base, and (vi) the Parent
may make customary payments in cash in an aggregate amount not to exceed $10,000,000 in lieu of
fractional shares in connection with the conversion to or exchange for Equity Interests.




          (b) The Parent and the Borrower will not, and will not permit any Restricted Subsidiary to:
(1) prior to the date that is ninety-one (91) days after the Maturity Date, call, make or offer to
make any optional or voluntary Redemption of or otherwise optionally or voluntarily Redeem (whether
in whole or in part) the Existing Convertible Notes, the Existing 2014 Notes or any Permitted
Additional Debt except (i) the Existing Convertible Notes or any other convertible Debt instrument
may be converted into Equity Interests (other than Disqualified Capital Stock) of the Parent, (ii)
the Parent may make cash payments to the holders of the Existing Convertible Notes to induce such
holders to convert the Existing Convertible Notes into Equity Interests of the Parent, (iii) with
the proceeds of an Equity Issuance (other than Disqualified Capital Stock) or with Permitted
Refinancing Debt or (iv), with respect to the Existing 2014 Notes, with cash of the Parent,
provided that following such call or Redemption pursuant to subclause (iv), the Parent
shall have cash or cash equivalents permitted by Section 9.05 of not less than $175,000,000 (such
cash or cash equivalents not subject to any Lien) if such Redemption occurs prior to October 6,
2011 or (B) $100,000,000 (such cash or cash equivalents not subject to any Lien) thereafter, or (2)
amend, modify, waive or otherwise change, consent or agree to any amendment, modification, waiver
or other change to, any of the terms of any instrument or agreement evidencing or governing the
Existing 2014 Notes or any Permitted Additional Debt if (A) the effect thereof would be to shorten
the maturity of such Existing 2014 Notes or any Permitted Additional Debt or shorten the average
life or increase the
amount of any scheduled repayment or mandatory prepayment of principal or increase the
interest rate or increase any call, put or prepayment premiums or shorten any period for payment of
interest thereon or (B) such action adds any covenants or defaults without this Agreement being
contemporaneously amended to add substantially similar covenants or defaults, provided that the
foregoing shall not prohibit the execution of supplemental agreements to add guarantors if required
by the terms thereof provided that any such guarantor also guarantees the Indebtedness pursuant to
the Guaranty Agreement and each of the Borrower and such guarantor otherwise complies with Section
8.14(b).





65












 





     Section 9.05 Investments, Loans and Advances. The Parent will not, and will not permit any
Restricted Subsidiary to, make or permit to remain outstanding any Investments in or to any Person,
except that the foregoing restriction shall not apply to:



          (a) Investments reflected in the Financial Statements or which are disclosed to the Lenders in
Schedule 9.05.




          (b) accounts receivable arising in the ordinary course of business or under Section 9.11.




          (c) direct obligations of the United States or any agency thereof, or obligations guaranteed
by the United States or any agency thereof, in each case maturing within one year from the date of
creation thereof.




          (d) commercial paper maturing within one year from the date of creation thereof rated in the
highest grade by S&P or Moody’s.




          (e) deposits maturing within one year from the date of creation thereof with, including
certificates of deposit issued by, any Lender or any office located in the United States of any
other bank or trust company which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least $100,000,000 (as of the
date of such bank or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time, by S&P or Moody’s,
respectively.




          (f) Investments in money market or similar funds with assets of at least $1,000,000,000 and
rated Aaa by Moody’s and AAA by S&P.




          (g) Investments (i) made by the Parent in the Borrower, (ii) made by the Borrower in or to the
Subsidiary Guarantors, (iii) made by any Domestic Subsidiary in or to the Borrower or any
Guarantor, and (iv) made by the Borrower or any Guarantor in or to Restricted Subsidiaries which
are not Guarantors in an aggregate amount at any one time outstanding not to exceed $5,000,000.




          (h) subject to the limits in Section 9.06, Investments (including, without limitation, capital
contributions) in general or limited partnerships or other types of entities (each a
“venture”) entered into by the Borrower or a Restricted Subsidiary with others in the
ordinary course of business; provided that (i) any such venture is engaged exclusively in oil and
gas exploration, development, production, processing and related activities, including
transportation and marketing, (ii) the interest in such venture is acquired in the ordinary course
of business and on fair and reasonable terms and (iii) such venture interests acquired and capital
contributions made (valued as of the date such interest was acquired or the contribution made) do
not exceed, in the aggregate at any time outstanding an amount equal to $10,000,000.




          (i) Investments in ownership interests in additional Oil and Gas Properties and gas gathering
systems related thereto or related to farm-out, farm-in, joint operating, joint venture or area of
mutual interest agreements, gathering systems, pipelines or other similar arrangements all of which
are usual and customary in the oil and gas exploration and production business located within the
geographic boundaries of the United States of America or Canada.




          (j) loans or advances to employees, officers or directors in the ordinary course of business
of the Borrower or any of its Restricted Subsidiaries, in each case only as permitted by applicable





66









 







law, including Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to exceed
$500,000 in the aggregate at any time.




          (k) Investments in stock, obligations or securities received in settlement of debts arising
from Investments permitted under this Section 9.05 owing to the Borrower or any Restricted
Subsidiary as a result of a bankruptcy or other insolvency proceeding of the obligor in respect of
such debts or upon the enforcement of any Lien in favor of the Borrower or any of its Restricted
Subsidiaries.




          (l) Investments in Unrestricted Subsidiaries, provided that the aggregate amount of all such
Investments shall not exceed (i) $20,000,000 in any fiscal year; plus (ii) an amount equal to the
net cash proceeds of any Equity Issuance (other than Disqualified Capital Stock); provided that
such net proceeds are so invested within 120 days following such issuance; plus (iii) any amounts
or dividends distributed from an Unrestricted Subsidiary to any Loan Party (with such amounts
carrying over for succeeding fiscal years to the extent not used).




          (m) Investments pursuant to Swap Agreements or hedging agreements otherwise permitted under
this Agreement.




          (n) other Investments not to exceed $5,000,000 in the aggregate at any time.




     Section 9.06 Nature of Business; International Operations. The Borrower will not, and will not permit
any Restricted Subsidiary to, allow any material change to be made in the character of its business
as an independent oil and gas exploration and production company. Except as permitted by Section
9.05(g) or otherwise in an amount not to exceed an amount of $5,000,000 per year, the Borrower and
its Restricted Subsidiaries will not acquire or make any other expenditures (whether such
expenditure is capital, operating or otherwise) in or related to, any Oil and Gas Properties not
located within the geographical boundaries of the United States or Canada.



     Section 9.07 Proceeds of Notes. The Borrower will not permit the proceeds of the Notes to be used for
any purpose other than those permitted by Section 7.21. No Loan Party nor any Person acting on
behalf of the Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case
as now in effect or as the same may hereinafter be in effect. If requested by the Administrative
Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the
foregoing effect in conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.


Section 9.08 ERISA Compliance. The Parent will not, and will not permit any Subsidiary to, at any time:




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




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




67









 








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




          (d) fail to satisfy, or allow any ERISA Affiliate to fail to satisfy, the minimum funding
standards (within the meaning of Section 412 of the Code or Section 302 of ERISA), in any case
whether or not waived, with respect to any Plan.




          (e) except as set forth in Schedule 7.10(f), permit, or allow any ERISA Affiliate to permit,
the actuarial present value of the benefit liabilities under any Plan maintained by any Loan Party
or any ERISA Affiliate which is regulated under Title IV of ERISA to exceed the current value of
the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities. The term “actuarial present value of the benefit
liabilities” shall have the meaning specified in section 4041 of ERISA.




          (f) contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to, any Multiemployer Plan.




          (g) acquire, or permit any ERISA Affiliate to acquire, an interest in any Person that causes
such Person to become an ERISA Affiliate with respect to any Subsidiary or with respect to any
ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the
six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan exceeds the current value of the
assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities.




          (h) incur, or permit any ERISA Affiliate to incur, a liability to or on account of a Plan
under sections 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA.




          (i) contribute to or assume an obligation to contribute to, or permit any ERISA Affiliate to
contribute to or assume an obligation to contribute to, any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to
provide benefits to former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability.




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




     Section 9.09 Sale or Discount of Receivables. Except for receivables obtained by the Borrower or any
Restricted Subsidiary out of the ordinary course of business or the settlement of joint interest
billing accounts in the ordinary course of business or discounts granted to settle collection of
accounts receivable or the sale of defaulted accounts arising in the ordinary course of business in
connection with the compromise or collection thereof and not in connection with any financing
transaction, the Parent will not, and will not permit any Restricted
Subsidiary to, discount or sell (with or without recourse) any of its notes receivable or accounts
receivable.



     Section 9.10 Mergers, Etc. Neither the Parent nor any Restricted Subsidiary will merge into or with or
consolidate with any other Person, or sell, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its Property to any other
Person, except that (i) any Subsidiary Guarantor may



68









 




merge with any other Subsidiary Guarantor, (ii) the Borrower may merge with any Wholly-Owned
Subsidiary so long as the Borrower is the survivor and (iii) any Subsidiary Guarantor may merge
with any Wholly-Owned Subsidiary; provided that the survivor is a Subsidiary Guarantor or promptly
thereafter becomes a Subsidiary Guarantor.




     Section 9.11 Sale of Properties. The Borrower will not, and will not permit any Restricted Subsidiary
to, sell, assign, farm-out, convey or otherwise transfer any Property except for (a) the sale of
Hydrocarbons in the ordinary course of business; (b) farmouts in the ordinary course of business of
undeveloped acreage or undrilled depths and assignments in connection with such farmouts; (c) the
sale or transfer of properties or equipment that are no longer necessary for the business of the
Borrower or such Restricted Subsidiary or are no longer desirable or are replaced by equipment of
at least comparable value and use; (d) the sale or other disposition (including Casualty Events) of
any Oil and Gas Property or any interest therein or any Restricted Subsidiary; provided that (i)
75% of the consideration received in respect of such sale or other disposition shall be cash, (ii)
(other than in respect of Casualty Events) the consideration received in respect of such sale or
other disposition shall be equal to or greater than the fair market value of the Oil and Gas
Property, interest therein or Restricted Subsidiary subject of such sale or other disposition and
if requested by the Administrative Agent, the Borrower shall deliver a certificate of a Responsible
Officer of the Borrower certifying to that effect), (iii) if such sale or other disposition of Oil
and Gas Property or Restricted Subsidiary owning Oil and Gas Properties (including farm-outs under
Section 9.11(a)) included in the most recently delivered Reserve Report during any period between
two successive Scheduled Redetermination Dates has a fair market value in excess of five percent
(5%) of the Borrowing Base as then in effect (as determined by the Administrative Agent),
individually or in the aggregate, the Borrowing Base shall be reduced, effective immediately upon
such sale or disposition, by an amount equal to the value, if any, attributed to such Property in
the Borrowing Base based on the most recently delivered Reserve Report and (iv) if any such sale or
other disposition is of a Restricted Subsidiary owning Oil and Gas Properties, such sale or other
disposition shall include all the Equity Interests of such Restricted Subsidiary; (e) sales and
other dispositions of Properties having a fair market value not to exceed $5,000,000 during any
12-month period; (f) transfers of Properties to the Borrower or any Guarantor (including any
Subsidiary that becomes a Guarantor after the Effective Date pursuant to Section 9.14); (g)
Casualty Events of Properties which are not Oil and Gas Properties; (h) the sale or transfer of Oil
and Gas Property that is no longer used or useful or near the end of its useful life for
consideration other than cash, such as assumption of reclamation liability; and (i) that certain
transaction where Enterprise Field Services, LLC and Flextrend Development Company, L.L.C. will
agree to take ownership of the Garden Banks Block 72 platform and in exchange will transfer to the
Borrower all of its interests in the remaining reserves in the Garden Banks 72 and Garden Banks 117
fields.



     Section 9.12 Environmental Matters. The Parent will not, and will not permit any Restricted Subsidiary
to, (i) cause or knowingly permit any of its Property to be in violation of, or (ii) do anything or
knowingly permit anything to be done which will subject any such Property to any Remedial Work
(other than Remedial Work done in the ordinary
course of business) under, any Environmental Laws that could reasonably be expected to have a
Material Adverse Effect; it being understood that clause (ii) above will not be deemed as limiting
or otherwise restricting any obligation to disclose any relevant facts, conditions and
circumstances pertaining to such Property to the appropriate Governmental Authority.



     Section 9.13 Transactions with Affiliates. The Parent will not, and will not permit any Restricted
Subsidiary to, enter into any transaction, including, without limitation, any purchase, sale, lease
or exchange of Property or the rendering of any service, with any Affiliate (other than with
Wholly-Owned Subsidiaries of the Parent and FM Services, Inc.) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms no less favorable
to it than it would obtain in a comparable arm’s length transaction with a Person not an Affiliate.



69









 





     Section 9.14 Subsidiaries. The Parent will not, and will not permit any Restricted Subsidiary to, create or acquire any
additional Subsidiaries unless the Borrower gives written notice to the Administrative Agent of
such creation or acquisition and complies with Section 8.14(b) and Section 8.14(c). The Parent
shall not, and shall not permit any Restricted Subsidiary to, sell, assign or otherwise dispose of
any Equity Interests in any Restricted Subsidiary except in compliance with Section 9.11(d).



     Section 9.15 Negative Pledge Agreements; Dividend Restrictions. The Parent will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist any contract,
agreement or understanding which in any way prohibits or restricts (a) the granting, conveying,
creation or imposition of any Lien on any of its Property to secure the Indebtedness or which
requires the consent of or notice to other Persons in connection therewith or (b) the Borrower or
any Restricted Subsidiary from paying dividends or making distributions to any Loan Party, or which
requires the consent of or notice to other Persons in connection therewith; provided that (i) the
foregoing shall not apply to restrictions and conditions (A) imposed by applicable laws, rules or
regulations and (B) under the Loan Documents) or under any instrument or agreement evidencing or
governing the Existing 2014 Notes, (ii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of any asset or a Restricted Subsidiary
pending such sale; provided such restrictions and conditions apply only to the asset or Restricted
Subsidiary that is to be sold and such sale is permitted hereunder, (iii) the foregoing shall not
apply to restrictions and conditions imposed by any joint venture, partnership or similar
arrangement to which any Restricted Subsidiary is a party to the extent applicable to such joint
venture, partnership or similar agreement or direct or indirect interests therein, (iv) clause (a)
of the foregoing shall not apply to (A) restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (B) customary provisions in
leases restricting the assignment thereof.



     Section 9.16 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will not, and will not
permit any Restricted Subsidiary to, allow gas imbalances, take-or-pay or other prepayments with
respect to the Oil and Gas Properties of the Borrower or any Restricted Subsidiary that would
require the Borrower or such Restricted Subsidiary to deliver Hydrocarbons at some future time
without then or thereafter receiving full payment therefor to exceed two and one-half percent
(2.5%) of the aggregate total remaining volumes of Hydrocarbons (on an Mcf equivalent basis) listed
in the most recent Reserve Report.



     Section 9.17 Swap Agreements.



          (a) The Parent will not, and will not permit any Restricted Subsidiary to, enter into any Swap
Agreements with any Person other than (b) Swap Agreements in respect of commodities (i) with an
Approved Counterparty and (ii) the notional volumes for which (when aggregated with other commodity
Swap Agreements then in effect other than puts, floors and basis differential swaps on volumes
already hedged pursuant to other Swap Agreements) do not exceed, as of the date such Swap Agreement
is executed, for all months other than July, August, September and October, 80% of the reasonably
anticipated projected production from proved, developed, producing Oil and Gas Properties,
excluding Main Pass 299 (and for the months of July, August, September and October, such Swap
Agreements shall be in the form of puts and floors) for each month during the period during which
such Swap Agreement is in effect for each of crude oil and natural gas, calculated separately, and
(c) Swap Agreements in respect of interest rates with an Approved Counterparty which effectively
convert interest rates from (i) floating to fixed, the notional amounts of which (when aggregated
with all other Swap Agreements of the Parent and its Restricted Subsidiaries then in effect
effectively converting interest rates from floating to fixed) do not exceed 75% of the then
outstanding principal amount of the Parent’s Debt for borrowed money which bears interest at a
floating rate and (ii) fixed to floating, the notional amounts




70









 







of which (when aggregated with all other Swap Agreements of the Parent and its Restricted
Subsidiaries then in effect effectively converting interest rates from fixed to floating) do not
exceed 75% of the then outstanding principal amount of the Parent’s Debt for borrowed money which
bears interest at a fixed rate; provided that at all times no such Swap Agreement fixes a
price for a period later than 48 months after such Swap Agreement is entered into. Except for any
Swap Agreement entered into with a Lender or an Affiliate of a Lender in connection herewith, in no
event shall any Swap Agreement contain any requirement, agreement or covenant for the Parent or any
Restricted Subsidiary to post collateral or margin to secure their obligations under such Swap
Agreement or to cover market exposures.




          (b) If the Parent or its Restricted Subsidiaries shall terminate or create any off-setting
positions in respect of any commodity hedge positions upon which (i) the Lenders relied in
determining the Borrowing Base and (ii) the Swap PV (as calculated at the time of any such
termination or creation of off-setting positions) of such terminated and/or offsetting positions
(after taking into account any other Swap Agreement, executed contemporaneously with the taking of
such actions) exceeds 5% of the then effective Borrowing Base, then the Required Lenders shall have
the right to adjust the Borrowing Base in an amount equal to the Borrowing Base value, if any,
attributable to such terminated or off-setting hedge positions in the calculation of the
then-effective Borrowing Base and (if the Required Lenders in fact make any such adjustment) the
Administrative Agent shall promptly notify the Borrower in writing of the Borrowing Base value, if
any, attributable to such hedge positions in the calculation of the then-effective Borrowing Base
and upon receipt of such notice, the Borrowing Base shall be simultaneously reduced by such amount.
For the avoidance of doubt, the parties acknowledge that the Borrowing Base value of a Swap
Agreement may be more or less than the mark-to-market or termination value of such Swap Agreement.




     Section 9.18 P&A Escrow Agreement. The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, amend, modify, supplement or fail to enforce the provisions of the P&A Escrow
Agreement if the effect thereof could reasonably be expected to be material and adverse to the
interests of the Lenders (and provided that the Borrower promptly furnishes to the Administrative
Agent a copy of such amendment, modification or supplement).



     Section 9.19 Unrestricted Subsidiaries. The Parent will not permit its Unrestricted Subsidiaries to incur or suffer to exist any Debt
for borrowed money except Non-Recourse Debt. No Unrestricted Subsidiary will be redesignated as a
Restricted Subsidiary and no Restricted Subsidiary will be redesignated as an Unrestricted
Subsidiary.



ARTICLE X

Events of Default; Remedies




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



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




          (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount referred to in Section 10.01(a)) payable under any Loan Document, when and as
the same shall become due and payable, and such failure shall continue unremedied for a period of
three (3) Business Days.




71









 








          (c) any representation or warranty made or deemed made by or on behalf of the Parent, the
Borrower or any Restricted Subsidiary in or in connection with any Loan Document or any amendment
or modification of any Loan Document or waiver under such Loan Document, or in any report,
certificate, financial statement or other document furnished pursuant to or in connection with any
Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have
been incorrect when made or deemed made.




          (d) the Parent, the Borrower or any Restricted Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in Section 8.01(j), Section 8.01(m), Section 8.02,
Section 8.03, Section 8.14 or in ARTICLE IX.




          (e) the Parent, the Borrower or any Restricted Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other than those specified in Section
10.01(a), Section 10.01(b), Section 10.01(c) or Section 10.01(d)) or any other Loan Document, and
such failure shall continue unremedied for a period of 30 days after the earlier to occur of (A)
notice thereof from the Administrative Agent to the Borrower (which notice will be given at the
request of any Lender) or (B) a Responsible Officer of the Borrower or such Restricted Subsidiary
otherwise becoming aware of such default.




          (f) (i) the Borrower or any Guarantor shall fail to make any payment (whether of principal or
interest and regardless of amount) in respect of any Material Indebtedness, when and as the same
shall become due and payable or (ii) so long as any Existing Convertible Notes remain outstanding,
(A) any Significant Subsidiary fails to make any payment by the end of the applicable grace period,
if any, after the final scheduled payment date for such payment with respect to any indebtedness
for borrowed money in an aggregate amount in excess of $10,000,000 or (B) indebtedness for borrowed
money of any Significant Subsidiary in an aggregate amount in excess of $10,000,000 shall have been
accelerated or otherwise declared due and payable, or required to be prepaid or repurchased (other
than by regularly scheduled required prepayment) prior to the scheduled maturity thereof as a
result of a default with respect to such indebtedness, in either case without such indebtedness
referred to in subclause (A) or (B) above having been discharged, cured, waived, rescinded or
annulled, for a period of 30 days after receipt by the Borrower of a notice of default.




          (g) any event or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits (following any applicable grace period and
notice) the holder or holders of any Material Indebtedness or any trustee or agent on its or their
behalf to cause any Material Indebtedness to become due, or to require the Redemption thereof or
any offer to Redeem to be made in respect thereof, prior to its scheduled maturity or require the
Parent, the Borrower or any Restricted Subsidiary to make an offer in respect thereof.




          (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed
seeking (i) liquidation, reorganization or other relief in respect of the Parent, the Borrower or
any Restricted Subsidiary or, so long as any Existing Convertible Notes remain outstanding, any
Significant Subsidiary or any Aggregated Subsidiaries, or its or their debts, or of a substantial
part of its or their assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the Parent, the Borrower, any
Restricted Subsidiary or, so long as any Existing Convertible Notes remain outstanding, any
Significant Subsidiary or any Aggregated Subsidiaries or for a substantial part of its or their
assets, and, in any such case, such proceeding or petition shall continue undismissed for thirty
(30) days or an order or decree approving or ordering any of the foregoing shall be entered.




72









 








          (i) the Parent, the Borrower, any Restricted Subsidiary or, so long as any Existing
Convertible Notes remain outstanding, any Significant Subsidiary or any Aggregated Subsidiaries,
shall (i) voluntarily commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail
to contest in a timely and appropriate manner, any proceeding or petition described in Section
10.01(h), (iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower, any Restricted Subsidiary or, so
long as any Existing Convertible Notes remain outstanding, any Significant Subsidiary or any
Aggregated Subsidiaries, or for a substantial part of its or their assets, (iv) file an answer
admitting the material allegations of a petition filed against it or them in any such proceeding,
(v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose
of effecting any of the foregoing; or any stockholder of the Parent shall make any request or take
any action for the purpose of calling a meeting of the stockholders of the Parent to consider a
resolution to dissolve and wind up the Parent’s affairs.




          (j) (i) one or more judgments for the payment of money in an aggregate amount in excess of
$25,000,000 (to the extent not covered by independent third party insurance provided by insurers of
the highest claims paying rating or financial strength as to which the insurer does not dispute
coverage and is not subject to an insolvency proceeding) or (ii) any one or more non-monetary
judgments that have, or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, shall be rendered against any Loan Party or any combination thereof and
the same shall remain undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any assets of any Loan Party to enforce any such judgment.




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




          (l) an ERISA Event shall have occurred that, in the opinion of the Majority Lenders, when
taken together with all other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Parent and its Subsidiaries in an aggregate amount exceeding $25,000,000
in any year.




          (m) a Change in Control shall occur.




     Section 10.02 Remedies.



          (a) In the case of an Event of Default other than one described in Section 10.01(h), or
Section 10.01(i) at any time thereafter during the continuance of such Event of Default, the
Majority Lenders shall, by notice to the Borrower, take either or both of the following actions, at
the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole
(or in part, in which case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other obligations of the Loan
Parties accrued hereunder and under the Loans and the other Loan Documents (including, without
limitation, the payment of cash collateral to secure the LC Exposure as provided in Section
2.08(j)), shall become due and payable immediately,




73









 







without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or
other notice of any kind, all of which are hereby waived by each Loan Party; and in case of an
Event of Default described in Section 10.01(h) or Section 10.01(i), the Commitments shall
automatically terminate and the Notes and the principal of the Loans then outstanding, together
with accrued interest thereon and all fees and the other obligations of the Borrower and the
Guarantors accrued hereunder and under the Notes and the other Loan Documents (including, without
limitation, the payment of cash collateral to secure the LC Exposure as provided in Section
2.08(j)), shall automatically become due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Loan Party.




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




          (c) All proceeds realized from the liquidation or other disposition of collateral or otherwise
received after maturity of the Notes, whether by acceleration or otherwise, shall be applied:




               (i) first, to payment or reimbursement of that portion of the Indebtedness constituting fees,
expenses and indemnities payable to the Administrative Agent in its capacity as such;



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



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



               (iv) fourth, pro rata to payment of principal outstanding on the Loans and Indebtedness
referred to in Clause (b) of the definition of Indebtedness owing to a Lender or an Affiliate of a
Lender;



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



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



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



ARTICLE XI

The Administrative Agent




     Section 11.01 Appointment; Powers. Each of the Lenders and the Issuing Bank hereby irrevocably appoints
the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms
hereof and the other Loan Documents, together with such actions and powers as are reasonably
incidental thereto.



     Section 11.02 Duties and Obligations of Administrative Agent. The Administrative Agent shall not have
any duties or obligations except those expressly set forth in the Loan Documents. Without limiting
the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary
or other implied duties, regardless of whether a Default has occurred and is continuing (the use of
the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent
is not



74









 




intended to connote any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and
is intended to create or reflect only an administrative relationship between independent
contracting parties), (b) the Administrative Agent shall have no duty to take any discretionary
action or exercise any discretionary powers, except as provided in Section 11.03, and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall
not be liable for the failure to disclose, any information relating to the Parent or any Loan Party
that is communicated to or obtained by the bank serving as Administrative Agent or any of its
Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any
Default unless and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or conditions set
forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in ARTICLE VI or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the Administrative Agent or
as to those conditions precedent expressly required to be to the Administrative Agent’s
satisfaction, (vi) the existence, value, perfection or priority of any collateral security or the
financial or other condition of the Parent and the Loan Parties or any other obligor or guarantor,
or (vii) any failure by the Borrower or any other Person (other than itself) to perform any of its
obligations hereunder or under any other Loan Document or the performance or observance of any
covenants, agreements or other terms or conditions set forth herein or therein. For purposes of
determining compliance with the conditions specified in ARTICLE VI, each Lender shall be deemed to
have consented to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender
unless the Administrative Agent shall have received written notice from such Lender prior to the
proposed closing
date specifying its objection thereto. The Administrative Agent shall take commercially reasonable
steps to make available copies of each Loan Document to the Lenders promptly upon request.




     Section 11.03
Action by Administrative Agent. The Administrative Agent shall have no duty to take any
discretionary action or exercise any discretionary powers, except discretionary rights and powers
expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is
required to exercise in writing as directed by the Majority Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as provided in Section
12.02) and in all cases the Administrative Agent shall be fully justified in failing or refusing to
act hereunder or under any other Loan Documents unless it shall (a) receive written instructions
from the Majority Lenders or the Lenders, as applicable, (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section 12.02) specifying the
action to be taken and (b) be indemnified to its satisfaction by the Lenders against any and all
liability and expenses which may be incurred by it by reason of taking or continuing to take any
such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto
by the Administrative Agent shall be binding on all of the Lenders. If a Default has occurred and
is continuing, then the Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with indemnities) described
in this Section 11.03, provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default as it shall deem advisable in the
best interests of the Lenders. In no event, however, shall the Administrative Agent be required to
take any action which exposes the Administrative Agent to personal liability or which is contrary
to this Agreement, the Loan Documents or applicable law. If a Default has occurred and is
continuing, the Syndication Agent and the Documentation Agent shall have no obligation to perform
any act in respect thereof. No Agent



75









 




shall be liable for any action taken or not taken by it with the consent or at the request of the
Majority Lenders or the Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 12.02), and otherwise no Agent shall be
liable for any action taken or not taken by it hereunder or under any other Loan Document or under
any other document or instrument referred to or provided for herein or therein or in connection
herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own gross negligence or
willful misconduct.




     Section 11.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine and to have been
signed or sent by the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon and each of the Parent, the Borrower, the Lenders and the
Issuing Bank hereby waives the right to dispute the Administrative Agent’s record of such
statement, except in the case of gross negligence or willful misconduct by the Administrative
Agent. The Administrative Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall not be liable for
any action taken or not taken by it in accordance with the advice of any such counsel, accountants
or experts. The Administrative Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a written notice of the assignment or transfer
thereof permitted hereunder shall have been filed with the Administrative Agent.



     Section 11.05 Subagents. The Administrative Agent may perform any and all its duties and exercise its rights and powers
by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative
Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the preceding Sections of
this ARTICLE XI shall apply to any such sub-agent and to the Related Parties of the Administrative
Agent and any such sub-agent, and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities as Administrative
Agent.



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



     Section 11.07 Agents as Lenders. Each bank serving as an Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same as though it were
not an Agent, and such bank and its Affiliates may accept deposits from, lend money to



76









 




and generally engage in any kind of business with the Parent or any Loan Party or other Affiliate
thereof as if it were not an Agent hereunder.




     Section 11.08 No Reliance. Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent, any other Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement and each other Loan Document to which it is a party. Each Lender also acknowledges
that it will, independently and without reliance upon the Administrative Agent, any other Agent or
any other Lender and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action under or based upon
this Agreement, any other Loan Document, any related agreement or any document furnished hereunder
or thereunder. The Agents shall not be required to keep themselves informed as to the performance
or observance by the Parent, the Borrower or any of its Restricted Subsidiaries of this Agreement,
the Loan Documents or any other document referred to or provided for herein or to inspect the
Properties or books of any such Person. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, no Agent or the Arrangers shall have any duty or responsibility to provide any Lender
with any credit or other information concerning the affairs, financial condition or business of the
Parent or any Loan Party (or any of their Affiliates) which may come into the possession of such
Agent or any of its Affiliates. In this regard, each Lender acknowledges that Simpson Thacher &
Bartlett LLP is acting in this transaction as special counsel to the Administrative Agent only,
except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each
other party hereto will consult with its own legal counsel to the extent that it deems necessary in
connection with the Loan Documents and the matters contemplated therein.



     Section 11.09 Administrative Agent May File Proofs of Claim.


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




          (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans and all other Indebtedness that are owing and unpaid and to file
such other documents as may be necessary or advisable in order to have the claims of the Lenders
and the Administrative Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their respective agents
and counsel and all other amounts due the Lenders and the Administrative Agent under Section 12.03)
allowed in such judicial proceeding; and




          (b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;



and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such payments to the
Administrative Agent and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent under Section 12.03.





77












 




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



Section 11.10 Authority of Administrative Agent to Release Collateral and Liens.




          (a) Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents.
Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to execute and deliver
to the Borrower, at the Borrower’s sole cost and expense, any and all releases of Liens,
termination statements, assignments or other documents reasonably requested by the Borrower in
connection with any sale or other disposition of Property to the extent such sale or other
disposition is permitted by the terms of Section 9.11 or is otherwise authorized by the terms of
the Loan Documents.



          (b) Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to release any
Lien on any Mortgaged Property granted to or held by the Agent under the Mortgages, so long as (i)
after giving effect to such release, the value of the Mortgaged Property shall not be less than 85%
of the total value of the Oil and Gas Properties as set forth in the most recent Reserve Report,
(ii) the Borrower shall deliver to the Administrative Agent a certificate in the form of Exhibit K
hereto, which sets forth the calculation of the value of the Mortgaged Property and demonstrates
and certifies that such value of the Mortgaged Property equals or exceeds 85% of the total value of
the Oil and Gas Properties, after giving effect to such release of such Mortgaged Property, and
(iii) the Borrower identifies in writing on such certificate the Mortgaged Properties to be
released and sets forth the value attributed thereto in the most recent Reserve Report.



          (c) Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to subordinate
any Lien on any property granted to or held by the Administrative Agent under any of the Loan
Document to the holder of any Lien on such property that is permitted by Section 9.02(d).



          (d) Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to release any
Guarantor from its obligations under any Guaranty Agreement if such Person ceases to be a
Subsidiary as a result of a transaction permitted hereunder.



     Upon request by the Administrative Agent at any time, the Majority Banks will confirm in
writing the Agent’s authority to release or subordinate its interest in particular types or items
of property, or to release any Guarantor from its obligations under any Guaranty Agreement pursuant
to this Section 11.10.


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




ARTICLE XII

Miscellaneous




     Section 12.01 Notices.



          (a) Except in the case of notices and other communications expressly permitted to be given by
telephone (and subject to Section 12.01(b)), all notices and other communications provided for



78









 







herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:



               (i) if to the Borrower, to it at 1615 Poydras Street, New Orleans, Louisiana 70112, Attention
of Kathleen Quirk (Telecopy No. (504) 582-4511);



               (ii) if to the Administrative Agent, to it at: 1 Chase Tower, 10 South Dearborn, IL1-0010,
Chicago, Illinois 60603 Attention: Leonida Mischke, Phone No. (312) 385-7055, Fax No. (312)
385-7096, and for all other correspondence other than borrowings, continuation, conversion and
Letter of Credit requests 712 Main, 12th Floor, Houston, Texas 77002, Attention of Ronald Dierker
(Fax No. (713) 216-7794);



               (iii) if to any other Lender, to it at its address (or telecopy number) set forth in its
Administrative Questionnaire.



          (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative Agent; provided
that the foregoing shall not apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and
ARTICLE V unless otherwise agreed by the Administrative Agent and the applicable Lender. The
Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to procedures approved by it;
provided that approval of such procedures may be limited to particular notices or communications.



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



     Section 12.02 Waivers; Amendments.



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



          (b) Except as provided in Section 2.09, neither this Agreement nor any provision hereof nor
any Security Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Parent, the Borrower and the
Majority Lenders or by the Parent, the Borrower and the Administrative Agent with the consent of
the Majority Lenders; provided that no such agreement shall (i) increase the Maximum Credit Amount
of any Lender without the written consent of such Lender, (ii) increase the Borrowing Base without
the written



79









 







consent of each Lender, decrease or maintain the Borrowing Base without the consent of
the Required Lenders, (iii) reduce the principal amount of any Loan or LC Disbursement or reduce
the rate of interest thereon, or reduce any fees payable hereunder, or reduce any other
Indebtedness hereunder or under any other Loan Document, without the written consent of each Lender
affected thereby, (iv) postpone the scheduled date of payment or prepayment of the principal amount
of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or any
other Indebtedness hereunder or under any other Loan Document, or reduce the amount of, waive or
excuse any such payment, or postpone or extend the date of any scheduled reduction of the Maximum
Aggregate Credit Amounts under Section 2.06(c) or the Termination Date without the written consent
of each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a manner that
would alter the pro rata sharing of payments required thereby, without the written consent of each
Lender, (vi) waive or amend Section 10.02(c) without the written consent of each Lender, (vii)
release any Guarantor (except as set forth in the Guaranty Agreement), release any of the
collateral (other than as provided in Section 11.10), or reduce the percentage set forth in Section
8.14(a) to less than 85%, without the written consent of each Lender, or (viii) change any of the
provisions of this Section 12.02(b) or the definitions of “Majority Lenders” or “Required Lenders”
or any other provision hereof specifying the number or percentage of Lenders required to waive,
amend or modify any rights hereunder or under any other Loan Documents or make any determination or
grant any consent hereunder or any other Loan Documents, without the written consent of each
Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights
or duties of the Administrative Agent, any other Agent or the Issuing Bank hereunder or under any
other Loan Document without the prior written consent of the Administrative Agent, other such Agent
or the Issuing Bank, as the case may be. Notwithstanding the foregoing, any supplement to Schedule
7.14 (Subsidiaries) shall be effective simply by delivering to the Administrative Agent a
supplemental schedule clearly marked as such and, upon receipt, the Administrative Agent will
promptly deliver a copy thereof to the Lenders. Notwithstanding the foregoing, the Borrower and
the Administrative Agent may amend this Agreement or any other Loan Document without the consent of
the Lenders to add covenants or other provisions in order to permit the Loan Parties to comply with
Section 9.04(b)(ii)(B).



     Section 12.03 Expenses, Indemnity; Damage Waiver.



          (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates, including, without limitation, the reasonable fees,
charges and disbursements of counsel and other outside consultants for the Administrative Agent,
the reasonable travel, photocopy, mailing, courier, telephone and other similar expenses, and the
cost of environmental audits and surveys and appraisals, in connection with the syndication of the
credit facilities provided for herein, the preparation, negotiation, execution, delivery and
administration (both before and after the execution hereof and including advice of counsel to the
Administrative Agent as to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan
Documents and any amendments, modifications or waivers of or consents related to the
provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall
be consummated), (ii) all costs, expenses, taxes, assessments and other charges incurred by the any
Agent or any Lender in connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement or any Security Instrument or any other document
referred to therein, (iii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in
connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder, (iv) all out-of-pocket expenses incurred by any Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for any Agent, the Issuing
Bank or any Lender, in connection with the enforcement or protection of its rights in connection
with this Agreement or any other Loan Document, including its rights under this Section 12.03, or
in connection with the Loans made or Letters of Credit issued hereunder, including, without
limitation, all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.



80









 





          (b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, THE ISSUING BANK AND EACH LENDER,
AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON BEING CALLED AN
“INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS,
DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY
COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, (ii) THE PERFORMANCE
BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS
HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER
LOAN DOCUMENT, (iii) THE FAILURE OF THE PARENT OR ANY LOAN PARTY TO COMPLY WITH THE TERMS OF ANY
LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iv) ANY INACCURACY
OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF THE PARENT OR ANY LOAN PARTY SET
FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN
CONNECTION THEREWITH, (v) ANY LOAN OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM,
INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT
UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY
COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF
CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE
DOCUMENTS PRESENTED IN CONNECTION THEREWITH, (vi) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vii) THE
OPERATIONS OF THE BUSINESS OF THE PARENT OR ANY LOAN PARTY BY SUCH PERSONS, (viii) ANY ASSERTION
THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY
INSTRUMENTS, (ix) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY RESTRICTED SUBSIDIARY OR
ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE,
THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND
GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (x) THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY RESTRICTED SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE
TO THE BORROWER OR ANY RESTRICTED SUBSIDIARY, (xi) THE PAST OWNERSHIP BY THE BORROWER OR ANY
RESTRICTED
SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH,
THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (xii) THE
PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT,
ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY
RESTRICTED SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR
FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS RESTRICTED SUBSIDIARIES, (xiii)
ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS RESTRICTED
SUBSIDIARIES, (xiv) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN
DOCUMENTS, OR (xv) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING
RELATING TO ANY OF THE FOREGOING, WHETHER



81









 







BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER
BROUGHT BY A THIRD PARTY OR BY THE ANY LOAN PARTY, AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A
PARTY THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR
CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN
AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF
STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH
INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY
FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH INDEMNITEE.



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



          (d) To the extent permitted by applicable law, no Loan Party shall assert, and hereby waives,
any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential
or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated
hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds
thereof.



          (e) All amounts due under this Section 12.03 shall be payable not later than 10 days after
written demand therefor.



     Section 12.04 Successors and Assigns.



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



          (b) (i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender may assign to
one or more assignees (each an “Assignee”) all or a portion of its rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans at the time owing
to it) with the prior written consent of:



82









 





                    (A) the Borrower, provided that no consent of the Borrower shall be required for an assignment
to a Lender, an Affiliate of a Lender, an Approved Fund (as defined below), or, if an Event of
Default under Section 10.01(a), (h) or (i) has occurred and is continuing, to any assignee; and



                    (B) the Administrative Agent and each Issuing Bank (such consent not to be unreasonably
withheld).



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



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



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



                    (C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire.



     For the purposes of this Section 12.04, “Approved Fund” means any Person (other than a
natural person) that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) Person or an Affiliate of a Person
that administers or manages a Lender.



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



               (iv) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall
maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the Maximum Credit
Amount of, and principal amount (and stated interest) of the Loans and LC Disbursements owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”). The entries
in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Bank
and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available



83









 







for inspection by the Borrower, the Issuing Bank and any
Lender, at any reasonable time and from time to time upon reasonable prior notice.



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



               (vi) Notwithstanding the foregoing, no assignment or participation shall be made to
any Loan Party or any Affiliate of a Loan Party.



          (c) (i) Any Lender may, without the consent of the Borrower, the Administrative Agent or the
Issuing Bank, sell participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this Agreement (including all or
a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations
under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (C) the Borrower, the Administrative
Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this Agreement and (D) such
Lender shall continue to give prompt attention to and process (including, if required, through
discussions with Participants) requests for waivers or amendments hereunder. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide that such Lender
shall retain the sole right to enforce this Agreement and to approve any amendment, modification or
waiver of any provision of this Agreement; provided that such agreement or instrument may provide
that such Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the proviso to Section 12.02 that affects such Participant. In
addition such agreement must provide that the Participant be bound by the provisions of Section
12.03. Subject to Section 12.04(c)(ii), the Borrower agrees that each Participant shall be
entitled to the benefits of Section 5.01, Section 5.02 and Section 5.03 to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to Section 12.04(b). To
the extent permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender, provided such Participant agrees to be subject to Section
4.01(c) as though it were a Lender. Each Lender that sells a participation, acting solely for this
purpose as an agent of the Borrower, shall maintain a register on which it enters the name and
address of each Participant and the principal amounts (and stated interest) of each Participant’s
interest in the Loans or other obligations under this Agreement (the “Participant
Register”); provided that no Lender shall have any obligation to disclose all or any portion of
the Participant Register to any Person other than the Borrower (including the identity of any
Participant or any information relating to a Participant’s interest in any Commitments, Loans,
Letters of Credit or its other obligations under any Loan Document) except to the extent that such
disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other
obligation is in registered form under Section 5f.103-19(c) of the United States Treasury
Regulations. The entries in the Participant Register shall be conclusive, and such Lender, each
Loan Party and the Administrative Agent shall treat each person whose name is recorded in the
Participant Register pursuant to the terms hereof as the owner of such participation for all
purposes of this Agreement, notwithstanding notice to the contrary.



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



84









 







with the Borrower’s prior written consent. No Participant shall be entitled to the benefits
of Section 5.03 unless the Borrower is notified of the participation sold to such Participant and
such Participant agrees, for the benefit of the Borrower, to comply with Section 5.03(e) and (f) as
though it were a Lender.



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



          (e) Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it
may have funded hereunder to its designating Lender without the consent of the Borrower or the
Administrative Agent and without regard to the limitations set forth in Section 12.04(b). Each of
the Parent, the Borrower, each Lender and the Administrative Agent hereby confirms that it will not
institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender
any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state
bankruptcy or similar law, for one year and one day after the payment in full of the latest
maturing commercial paper note issued by such Conduit Lender; provided, however,
that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless
each other party hereto for any loss, cost, damage or expense arising out of its inability to
institute such a proceeding against such Conduit Lender during such period of forbearance.



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



     Section 12.05 Survival; Revival; Reinstatement.



          (a) All covenants, agreements, representations and warranties made by the Loan Parties herein
and in the certificates or other instruments delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of this Agreement and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent, any other Agent, the
Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and shall continue in full
force and effect as long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is
outstanding and so long as the Commitments have not expired or terminated. The provisions of
Section 5.01, Section 5.02, Section 5.03 and Section 12.03 and ARTICLE XI shall survive and remain
in full force and effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement, any other Loan Document or any provision hereof
or thereof.



          (b) To the extent that any payments on the Indebtedness or proceeds of any collateral are
subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be
repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law,
common law or equitable cause, then to such extent, the Indebtedness so satisfied shall be revived
and continue as if such payment or proceeds had not been received and the Administrative Agent’s
and the Lenders’ Liens,



85









 







security interests, rights, powers and remedies under this Agreement and
each Loan Document shall continue in full force and effect. In such event, each Loan Document
shall be automatically reinstated and the Parent and the Borrower shall, and shall cause each other
Loan Party to, take such action as may be reasonably requested by the Administrative Agent and the
Lenders to effect such reinstatement.



     Section 12.06 Counterparts; Integration; Effectiveness.



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



          (b) This Agreement, the other Loan Documents and any separate letter agreements with respect
to fees payable to the Administrative Agent constitute the entire contract among the parties
relating to the subject matter hereof and thereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof and thereof. This Agreement
and the other Loan Documents represent the final agreement among the parties hereto and thereto and
may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the
parties. There are no unwritten oral agreements between the parties.



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



     Section 12.07 Severability. Any provision of this Agreement or any other Loan Document held to be invalid, illegal or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity of a particular
provision in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.



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



     Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.



          (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER
TO CONTRACT FOR,



86









 







CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE
STATE WHERE SUCH LENDER IS LOCATED.



     CHAPTER 346 OF THE TEXAS FINANCE CODE (RELATING TO REVOLVING LOAN AND REVOLVING TRIPARTY
ACCOUNTS), SHALL NOT APPLY TO THIS AGREEMENT OR ANY LOANS OR THE TRANSACTIONS CONTEMPLATED HEREBY.



          (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE
COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR
PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND
DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE
HAVING JURISDICTION.



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



          (d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR
ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS
BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION 12.09.



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



87









 





     Section 12.11 Confidentiality. Each of the Administrative Agent and each Lender agrees to keep
confidential all non-public information provided to it by the Parent, the Borrower or any of their
Subsidiaries, the Administrative Agent or any Lender pursuant to or in connection with this
Agreement that is designated by the provider thereof as confidential; provided that nothing herein
shall prevent the Administrative Agent or any Lender from disclosing any such information (a) to
the Administrative Agent, any other Lender or any affiliate thereof, (b) subject to an agreement to
comply with the provisions of this Section, to any actual or prospective Transferee or any direct
or indirect counterparty to any Swap Agreement (or any professional advisor to such counterparty)
relating to the Borrower and its obligations, (c) to its employees, directors, agents, attorneys,
accountants and other professional advisors or those of any of its affiliates, (d) upon the request
or demand of any Governmental Authority, (e) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any Governmental Requirement,
(f) if requested or required to do so in connection with any litigation or similar proceeding, (g)
that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any
similar organization or any nationally recognized rating agency that requires access to information
about a Lender’s investment portfolio in connection with ratings issued with respect to such
Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan
Document.



     Each Lender acknowledges that information furnished to it pursuant to this Agreement or the
other Loan Documents may include material non-public information concerning the Borrower and its
Affiliates and their related parties or their respective securities, and confirms that it has
developed compliance procedures regarding the use of material non-public information and that it
will handle such material non-public information in accordance with those procedures and applicable
law, including Federal and state securities laws.



     All information, including requests for waivers and amendments, furnished by the Borrower or
the Administrative Agent pursuant to, or in the course of administering, this Agreement or the
other Loan Documents will be syndicate-level information, which may contain material non-public
information about the Borrower and its Affiliates and their related parties or their respective
securities. Accordingly, each Lender represents to the Borrower and the Administrative Agent that
it has identified in its Administrative Questionnaire a credit contact who may receive information
that may contain material non-public information in accordance with its compliance procedures and
applicable law, including Federal and state securities laws.



     Section 12.12 Interest Rate Limitation. Each provision in this Agreement and each other Loan Document is
expressly limited so that in no event whatsoever shall the amount paid, or otherwise agreed to be
paid, by the Borrower for the use, forbearance or detention of the money to be loaned under this
Agreement or any other Loan Document or otherwise (including any sums paid as required by any
covenant or obligation contained herein or in any other Loan Document which is for the use,
forbearance or detention of such money), exceed that amount of money which would cause the
effective rate of interest to exceed the Highest Lawful Rate, and all amounts owed under this
Agreement and each other Loan Document shall be held to be subject to reduction to the effect that
such amounts so paid or agreed to be paid which are for the use, forbearance or detention of money
under this Agreement or such Loan Document shall in no event exceed that amount of money which
would cause the effective rate of interest to exceed the Highest Lawful Rate. To the extent that
the Highest Lawful Rate applicable to a Lender is at any time determined by Texas law, such rate
shall be the weekly ceiling provided for in Chapter 303 of the Texas Finance Code, as amended;
provided, to the extent permitted by such Article, the Lenders from time to time by notice
from the Administrative Agent to the Borrower may revise the aforesaid election of such interest
rate ceiling as such ceiling affects the then-current or future balances of the Loans.
Notwithstanding any provision in this Agreement or any other Loan Document to the contrary, if the
maturity of the Loans or the obligations in respect of the other Loan Documents are accelerated for
any



88









 







reason, or in the event of prepayment of all or any portion of the Loans or the obligations in
respect of the other Loan Documents by the Borrower or in any other event, earned interest on the
Loans and such other obligations of the Borrower may never exceed the maximum amount permitted by
applicable law, and any unearned interest otherwise payable on the Loans or the obligations in
respect of the other Loan Documents that is in excess of the maximum amount permitted by applicable
law shall be canceled automatically as of the date of such acceleration or prepayment or other such
event and, if theretofore paid, shall be credited on the principal of the Loans or, if the
principal of the Loans has been paid in full, held as collateral for any
contingent or unmatured
obligation of the Borrower, or, if there are no contingent or unmatured obligations of the Borrower
then outstanding, refunded to the Borrower. In determining whether or not the interest paid or
payable, under any specific contingency, exceeds the Highest Lawful Rate, the Borrower and the
Lenders shall, to the maximum extent permitted by applicable law, amortize, prorate, allocate and
spread, in equal parts during the period of the actual term of this Agreement, all interest at any
time contracted for, charged, received or reserved in connection with this Agreement.



     Section 12.13 Collateral Matters; Swap Agreements. The benefit of the Security Instruments and of the
provisions of this Agreement relating to any collateral securing the Indebtedness shall also extend
to and be available to those Lenders or their
Affiliates which are counterparties to any Swap Agreement with the Borrower or any of its
Restricted Subsidiaries on a pro rata basis in respect of any obligations of the Borrower or any of
its Restricted Subsidiaries which arise under any such Swap Agreement while such Person or its
Affiliate is a Lender, but only while such Person or its Affiliate is a Lender, including any Swap
Agreements between such Persons in existence prior to the date hereof. No Lender or any Affiliate
of a Lender shall have any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Swap Agreements.



     Section 12.14 No Third Party Beneficiaries. This Agreement, the other Loan Documents, and the agreement
of the Lenders to make Loans and the Issuing Bank to issue, amend, renew or extend Letters of
Credit hereunder are solely for the benefit of the Borrower, and no other Person (including,
without limitation, any Restricted Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies or privileges
hereunder or under any other Loan Document against the Administrative Agent, any other Agent, the
Issuing Bank or any Lender for any reason whatsoever. There are no third party beneficiaries.



     Section 12.15 Acknowledgements. Each of the Parent and the Borrower hereby acknowledges that:



          (a) it has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents;



          (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or
duty to the Parent or the Borrower arising out of or in connection with this Agreement or any of
the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one
hand, and the Parent and the Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders
or among the Parent, the Borrower and the Lenders.



     Section 12.16 EXCULPATION PROVISIONS



     EACH OF THE PARTIES HERETO SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS AND AGREES THAT



89









 







IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY
INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT;
THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS
PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE
OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT
RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE
PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER
PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT
WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR
KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”



     Section 12.17 USA Patriot Act Notice. Each Lender hereby notifies the Borrower that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”), it is required to obtain, verify and record information that identifies
the Parent and the Borrower, which information includes the name and address of the Parent and the
Borrower and other information that will allow such Lender to identify the Parent and the Borrower
in accordance with the Act.



[SIGNATURES BEGIN NEXT PAGE]



90









 





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



	 	 	 	 	 
	BORROWER: 	MCMORAN OIL & GAS LLC

 	 
	 	By:  	/s/ Kathleen L. Quirk
 	 
	 	 	Kathleen L. Quirk, Vice President 	 
	 	 	 	 
	 
	PARENT: 	MCMORAN EXPLORATION CO.

 	 
	 	By:  	/s/ Kathleen L. Quirk
 	 
	 	 	Kathleen L. Quirk, Senior Vice 	 
	 	 	President & Treasurer 	 
	 



Signature Page

Credit Agreement



 









 





	 	 	 	 	 
	ADMINISTRATIVE AGENT: 	JPMORGAN CHASE BANK, N.A.,
 as Administrative Agent and as a Lender

 	 
	 	By:  	/s/ Ronald Dierker
 	 
	 	 	Name:  	Ronald Dierker 	 
	 	 	Title:  	Managing Director 	 
	 



Signature Page

Credit Agreement



 









 





	 	 	 	 	 
	SYNDICATION AGENT: 	TORONTO DOMINION (NEW YORK) LLC,
 as Syndication Agent and as a Lender

 	 
	 	By:  	/s/ Debbi L. Brito
 	 
	 	 	Name:  	Debbi L. Brito 	 
	 	 	Title:  	Authorized Signatory 	 
	 



Signature Page

Credit Agreement



 









 





	 	 	 	 	 
	DOCUMENTATION AGENTS: 	BNP PARIBAS, as Documentation Agent and
 as a Lender

 	 
	 	By:  	/s/ Doug Liftman
 	 
	 	 	Name:  	Doug Liftman 	 
	 	 	Title:  	Managing Director 	 
	 
	 	By:  	             /s/ Rick Hawthorne
 	 
	 	 	Name:  	Rick Hawthorne 	 
	 	 	Title:  	 	 
	 



Signature Page

Credit Agreement



 









 





	 	 	 	 	 
	LENDER: 	CAPITAL ONE, N.A., as a Lender

 	 
	 	By:  	/s/ Matthew L. Molero
 	 
	 	 	Name:  	Matthew L. Molero 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page

Credit Agreement



 









 





	 	 	 	 	 
	LENDER: 	U.S. BANK NATIONAL ASSOCIATION,
 as a Lender

 	 
	 	By:  	/s/ Daria Mahoney
 	 
	 	 	Name:  	Daria Mahoney 	 
	 	 	Title:  	Vice President 	 
	 



Signature Page

Credit Agreement