Document:

Exhibit 10.3

 

HOSPITALITY PROPERTIES TRUST

 

RESTRICTED SHARE AGREEMENT

 

 

This Restricted
Share Agreement (this “Agreement”) is made as of
                           
between                                         
(the “Employee”) and Hospitality Properties Trust  (the “Company”).

 

In consideration
of the mutual promises and covenants contained in this Agreement, and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.                                       Grant of Shares. 
The Company hereby grants to the Employee, effective as of the date of
this Agreement,
                 
shares of its common shares.  The shares
so granted are hereinafter referred to as the “Shares,” which term shall also
include any shares of the Company issued to the Employee by virtue of his or
her ownership of the Shares, by share dividend, share split, recapitalization
or otherwise.

 

2.                                       Vesting; Repurchase of Shares.

 

(a)                                  The Shares shall vest one-third as of the
date hereof, a further one-third on
                           
of the year first following the date of this Agreement, and the final one-third
on
                           
of the second year following the date of this Agreement.  Any Shares not vested as of any date are
herein referred to as “Unvested Shares.”

 

(b)                                 In the event the Employee ceases to
render significant services, whether as an employee or otherwise, to the
Company, an affiliate of the Company, or to the advisor to the Company, the
Company shall have the right and option to purchase from the Employee, for an
amount equal to $.01 per share (as adjusted for any share split or combination,
share dividend, recapitalization or similar event) all or any portion of the
Unvested Shares as of the date the Employee ceases to render such
services.  The Company may exercise such
purchase option by delivering or mailing to the Employee (or his estate), at
any time after the Employee has ceased to render such services, a written
notice of exercise of such option.  Such
notice shall specify the number of Unvested Shares to be purchased.  The price to be paid for the Unvested Shares
to be repurchased may be payable, at the option of the Company, by wire
transfer of immediately available funds or in cash (by check) or any other reasonable
method.

 

3.                                       Legends.  Each
certificate shall prominently bear a legend in substantially the following
terms:

 

“THE SHARES
REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO AN INCENTIVE SHARE
AWARD PLAN MAINTAINED BY THE ISSUER. 
THESE SHARES MAY BE SUBJECT TO TRANSFER AND/OR VESTING RESTRICTIONS, AND
UNVESTED SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO REPURCHASE
RIGHTS, CONTAINED IN THE

 

 

PLAN, THE RELATED
SHARE GRANT OR AN AGREEMENT BETWEEN THE ISSUER AND THE INITIAL HOLDER OF THESE
SHARES.  A COPY OF APPLICABLE
RESTRICTIONS AND SUCH REPURCHASE RIGHTS WILL BE FURNISHED TO THE HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY OF THE ISSUER
AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER.

 

THE SHARES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH
REGISTRATION IS NOT REQUIRED.”

 

4.                                       Tax Withholding 
To the extent required by law, the Company shall withhold or cause to be
withheld income and other taxes incurred by the Employee by reason of a grant
of Shares, and the Employee agrees that he or she shall upon request of the
Company pay to the Company an amount sufficient to satisfy its tax withholding
obligations from time to time (including as Shares become vested) as the
Company may request.

 

5.                                       Termination. 
This Agreement shall continue in full force and effect until the
earliest to occur of the following, at which time except as otherwise specified
below this Agreement shall terminate: 
(a) the date on which all repurchase rights referred to in Section 2
hereof have terminated; or (b) except to the extent specified in such notice,
upon notice of termination by the Company to the Employee pursuant to action
taken by the Company’s Board of Trustees.

 

6.                                       Miscellaneous.

 

(a)                                  Amendments.  Neither this
Agreement nor any provision hereof may be changed or modified except by an
agreement in writing executed by the Employee and the Company.

 

(b)                                 Binding Effect of the Agreement. 
This Agreement shall inure to the benefit of, and be binding upon , the
Company, the Employee and their respective estates, heirs, executors,
transferees, successors, assigns and legal representatives.

 

(c)                                  Provisions Separable. 
In the event that any of the terms of this Agreement shall be or become
or is declared to be illegal or unenforceable by any court or other authority
of competent jurisdiction, such terms shall be null and void and shall be
deemed deleted from this Agreement, and all the remaining terms of this
Agreement shall remain in full force and effect.

 

(d)                                 Notices.  Any notice
in connection with this Agreement shall be deemed to have been properly
delivered if it is in writing and is delivered by hand or by facsimile or sent
by registered certified mail, postage prepaid, to the party addressed as
follows, unless another address has been substituted by notice so given:

 

2

 

	
  To the Employee:

  	
   

  	
  To his address as set forth on the
  signature page hereof.

  
	
   

  	
   

  	
   

  
	
  To the Company:

  	
   

  	
  Hospitality Properties Trust

  
	
   

  	
   

  	
  400 Centre Street

  
	
   

  	
   

  	
  Newton, 
  MA  02458

  
	
   

  	
   

  	
  Attn: Secretary

  

 

(e)                                  Construction. 
The headings and subheadings of this Agreement have been inserted for
convenience only, and shall not affect the construction of the provisions
hereof.  All references to sections of
this Agreement shall be deemed to refer as well to all subsections which form a
part of such section.

 

(f)                                    Employment Agreement. 
This Agreement shall not be construed as an agreement by the Company,
any affiliate or advisor of the Company to employ the Employee, nor is the
Company, any affiliate or advisor of the Company obligated to continue
employing the Employee by reason of this Agreement or the grant of shares to
the Employee hereunder.

 

(g)                                 Applicable Law. 
This Agreement shall be construed and enforced in accordance with the
laws of The Commonwealth of Massachusetts.

 

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

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  HOSPITALITY PROPERTIES
  TRUST

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  EMPLOYEE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name (print):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Home Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
												

 

3Exhibit 10.1

 

[EXECUTION COPY]

 

[U.S. REVOLVING CREDIT AGREEMENT]

 

 

 

 

CREDIT AGREEMENT

 

dated
as of June 27, 2003

 

among

 

TOM BROWN, INC.,

 

THE LENDERS PARTY HERETO,

 

THE OTHER AGENTS PARTY HERETO,

 

BNP PARIBAS,

WACHOVIA BANK, NATIONAL ASSOCIATION,

and

THE BANK OF NOVA SCOTIA,

as Global Syndication Agents,

 

U.S. BANK NATIONAL ASSOCIATION,

as U.S. Documentation Agent,

 

and

 

JPMORGAN CHASE BANK,

as Global
Administrative Agent

 

 

J.P. MORGAN SECURITIES INC.,

as
Sole Lead Arranger and Bookrunner

 

 

 

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT, dated
as of June 27, 2003, is among TOM BROWN, INC.,
a Delaware corporation (the “Borrower”), the LENDERS
party hereto, the other Agents party hereto, BNP
PARIBAS, WACHOVIA BANK, NATIONAL
ASSOCIATION and THE BANK OF NOVA SCOTIA,
as Global Syndication Agents, U.S. BANK
NATIONAL ASSOCIATION, as U.S. Documentation Agent, and JPMORGAN CHASE BANK, as Global
Administrative Agent.

 

The parties hereto agree as
follows:

 

ARTICLE I

Definitions

 

SECTION 1.1                          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.

 

“Acquisition” means
the acquisition by the Borrower or one of its Subsidiaries of Matador as a
result of a merger effected pursuant to the terms and conditions of the
Acquisition Documents.

 

“Acquisition Documents”
means (i) the Merger Agreement; (ii) the Disclosure Letter, dated May 13, 2003,
among the Borrower, Maverick and Matador; and (iii) each other agreement,
document or instrument executed in connection with the foregoing.

 

“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 1/16 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 Global Administrative Agent.

 

“Affiliate” of any
Person means (i) any Person directly or indirectly controlled by, controlling
or under common control with such first Person, (ii) any director or officer of
such first Person or of any Person referred to in clause (i) above and (iii) if
any Person in clause (i) above is an individual, any member of the
immediate family (including parents, spouse and children) of such individual
and any trust whose principal beneficiary is such individual or one or more
members of such immediate family and any Person who is controlled by any such
member or trust.  For purposes of this
definition, any Person which owns directly or indirectly 10% or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or 10% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of
such other Person) will be deemed to “control” (including, with its
correlative meanings, “controlled by” and “under common control with”)
such corporation or other Person.

 

 

“Agents” means each
of the Global Administrative Agent, the Global Syndication Agents and the U.S.
Documentation Agent.

 

“Agreed Currency” is
defined in Section 2.20(a).

 

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

 

“Alternate Base Rate”
means, for any day, a rate per annum equal to the greater of (a) the Prime Rate
in effect on such day, and (b) the Federal Funds Effective Rate in effect on
such day plus 1⁄2 of 1%.  Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate,
respectively.  If for any reason the
Global Administrative Agent shall have determined (which determination shall be
conclusive and binding, absent manifest error) that it is unable to ascertain
the Federal Funds Effective Rate for any reason, including, without limitation,
the inability or failure of the Global Administrative Agent to obtain
sufficient bids or publications in accordance with the terms hereof, the
Alternate Base Rate shall be the Prime Rate until the circumstances giving rise
to such inability no longer exist.

 

“Applicable Lending
Office” means, for each Lender and for each Type of Loan, such office of
such Lender (or of an Affiliate of such Lender) as such Lender may from time to
time specify in writing to the Global Administrative Agent and the Borrower as
the office by which its Loans of such Type are to be made and/or issued and
maintained.

 

“Applicable Percentage”
means, with respect to any Lender, the percentage of the total Commitments
represented by such Lender’s Commitment. 
If the Commitments have terminated or expired, the Applicable
Percentages shall be determined based upon the Commitments most recently set
forth in the Register, giving effect to any assignments made in accordance with
Section 10.4 or any increases or decreases in Commitments made in
accordance with this Agreement.

 

“Applicable Rate”
means, for any day and with respect to any Eurodollar Loans, any ABR Loans or
any Commitment Fees payable hereunder, as the case may be, the applicable rate
per annum set forth below under the caption “Eurodollar Loans”, “ABR Loans” or
“Commitment Fees”, as the case may be, based on the Global Borrowing Base
Utilization on such date.

 

	
  Global
  Borrowing Base Utilization:

  	
   

  	
  Eurodollar Loans

  (in basis points)

  	
   

  	
  ABR Loans

  (in basis points)

  	
   

  	
  Commitment Fees

  (in basis points)

  	
   

  
	
  Less than 25%

  	
   

  	
  137.5

  	
   

  	
  12.5

  	
   

  	
  37.5

  	
   

  
	
  25% or greater and less
  than 50%

  	
   

  	
  150.0

  	
   

  	
  25.0

  	
   

  	
  37.5

  	
   

  
	
  50% or greater and less
  than 75%

  	
   

  	
  162.5

  	
   

  	
  37.5

  	
   

  	
  50.0

  	
   

  
	
  75% or greater

  	
   

  	
  175.0

  	
   

  	
  50.0

  	
   

  	
  50.0

  	
   

  

 

2

 

For purposes of the
foregoing, any change in the Applicable Rate will occur automatically without
prior notice upon any change in the Global Borrowing Base Utilization.  Each change in the Applicable Rate shall
apply during the period commencing on the effective date of such change and
ending on the date immediately preceding the effective date of the next such
change.

 

“Approved Engineer”
means (a) Ryder Scott Company or (b) such other firm of independent petroleum
engineers expert in the matters required to be performed in connection with the
preparation and delivery or auditing of a Reserve Report and reasonably satisfactory
to the Global Administrative Agent.

 

“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) a Lender Affiliate or (c) a Person or an Affiliate of a Person that
administers or manages a Lender.

 

“Arranger” means J.P.
Morgan Securities Inc., in its capacity as Sole Lead Arranger and Bookrunner.

 

“Assignment and
Acceptance” means an assignment and acceptance entered into by a Lender and
an assignee (with the consent of any party whose consent is required by Section
10.4), and accepted by the Global Administrative Agent, in substantially
the form of Exhibit D or any other form approved by the Global
Administrative Agent.

 

“Authorized Officer”
means, as to the Borrower, the Chairman, the President, any Executive Vice
President, any Vice President, the Treasurer or any other officer specified as such
to the Global Administrative Agent in writing by any of the aforementioned
officers of the Borrower or by resolution from the board of directors of the
Borrower.

 

“Availability Period”
means the period from and including the Global Effective Date to but excluding
the earlier of the Maturity Date and the date of termination of the
Commitments.

 

“Board” means the
Board of Governors of the Federal Reserve System of the United States of
America.

 

“Borrower” has the
meaning given to such term in the preamble.

 

“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
Properties” means those Oil and Gas Properties owned by the Borrower or its
Subsidiaries that are given value in the determination of the then current
Global Borrowing Base.

 

“Borrowing Request”
means a request by the Borrower for a Borrowing in accordance with Section
2.3, in substantially the form of Exhibit E-1 or any other form
approved by the Global Administrative Agent.

 

3

 

“Bridge Loan” means
those certain loan advances made pursuant to that certain Senior Subordinated
Credit Agreement of even date herewith among the Borrower, JPMorgan Chase Bank,
as administrative agent, and the lenders party thereto, as it may be amended,
supplemented, restated, replaced, refinanced or otherwise modified and in
effect from time to time, whether pursuant to a loan agreement, credit
agreement or otherwise.

 

“Business Day” means
any day that is not a Saturday, Sunday or other day on which commercial banks
in New York City are authorized or required by law to remain closed; provided
that, when used in connection with a Eurodollar Loan, the term “Business Day”
shall also exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.

 

“Canadian Administrative
Agent” means JPMorgan Chase Bank, Toronto Branch, in its capacity as
Canadian administrative agent for the lenders party to each of the Canadian
Revolving Credit Agreement and the Canadian Term Credit Agreement, and any
successor thereto.

 

“Canadian Borrowers”
means (i) the Canadian Revolving Borrowers and (ii) the Canadian Term Borrower.

 

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

 

“Canadian Revolving
Borrowers” means TBRL and TBF, as borrowers under the Canadian Revolving
Credit Agreement.

 

“Canadian Revolving
Borrowing Base” is defined in Section 2.7(d)(ii).

 

“Canadian Revolving
Commitment” means, with respect to each Canadian Revolving Lender, the
“Commitment” of such Canadian Revolving Lender (as defined in the Canadian
Revolving Credit Agreement).  The
initial aggregate amount of the Canadian Revolving Commitments is
U.S.$25,000,000.

 

“Canadian Revolving
Credit Agreement” means that certain Credit Agreement of even date herewith
among the Canadian Revolving Borrowers, the Canadian Revolving Lenders, the
other agents party thereto, the Global Administrative Agent and the Canadian
Administrative Agent, as it may be amended, supplemented, restated or otherwise
modified and in effect from time to time.

 

“Canadian Revolving
Lenders” means the financial institutions from time to time party to the
Canadian Revolving Credit Agreement and their respective successors and
permitted assigns.

 

“Canadian Revolving Loan
Documents” means the Canadian Revolving Credit Agreement and the Canadian
Revolving Security Documents, together with all exhibits, schedules and
attachments thereto, and all other agreements, documents, certificates,
financing statements and instruments from time to time executed and delivered
pursuant to or in connection with any of the foregoing.

 

4

 

“Canadian Revolving
Obligations” means, at any time, the Equivalent Amount in U.S. Dollars of
the sum of (a) the aggregate “Credit Exposure” (as defined in the Canadian
Revolving Credit Agreement) of the Canadian Revolving Lenders under the
Canadian Revolving Loan Documents plus (b) all accrued and unpaid
interest and fees owing to the Canadian Revolving Lenders under the Canadian
Revolving Loan Documents plus (c) all other obligations (monetary or
otherwise) of the Canadian Revolving Borrowers to any Canadian Revolving Lender
or the “Agents” (as defined in the Canadian Revolving Credit Agreement) under
the Canadian Revolving Credit Agreement, whether or not contingent, arising
under or in connection with any of the Canadian Revolving Loan Documents.

 

“Canadian Revolving Security
Documents” means the “Security Documents” as defined under the Canadian
Revolving Credit Agreement.

 

“Canadian Term Borrower”
means TBF, as borrower under the Canadian Term Credit Agreement.

 

“Canadian Term Credit
Agreement” means the Original Canadian Term Loan Credit Agreement, as
amended by that certain First Amendment to Credit Agreement of even date
herewith among the Canadian Term Borrower, the Canadian Term Lenders, the other
agents party thereto, the Global Administrative Agent and the Canadian
Administrative Agent, as it may be amended, supplemented, restated or otherwise
modified and in effect from time to time.

 

“Canadian Term Lenders”
means the U.S. domiciled financial institutions from time to time party to the
Canadian Term Credit Agreement and their respective successors and permitted
assigns.

 

“Canadian Term Loan
Documents” means the Canadian Term Credit Agreement, any guaranties and the
Canadian Term Security Documents, together with all exhibits, schedules and
attachments thereto, and all other agreements, documents, certificates,
financing statements and instruments from time to time executed and delivered
pursuant to or in connection with any of the foregoing.

 

“Canadian Term
Obligations” means, at any time, the Equivalent Amount in U.S. Dollars of
the sum of (a) the “Loans” (as defined in the Canadian Term Credit Agreement)
of the Canadian Term Lenders under the Canadian Term Loan Documents plus
(b) all accrued and unpaid interest and fees owing to the Canadian Term Lenders
under the Canadian Term Loan Documents plus (c) all other obligations
(monetary or otherwise) of the Canadian Term Borrower to any Canadian Term
Lender or the “Agents” (as defined in the Canadian Term Credit Agreement) under
the Canadian Term Credit Agreement, whether or not contingent, arising under or
in connection with any of the Canadian Term Loan Documents.

 

“Canadian Term Security
Documents” means the “Security Documents” as defined under the Canadian
Term Credit Agreement.

 

“Capital Lease
Obligations” means, for any Person, all obligations of such Person to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) Property to the extent such obligations are required to be classified
and accounted for as a capital lease on a

 

5

 

balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

 

“Casualty Event” means
any loss, casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of, any Property or
asset of the Borrower or any of its Subsidiaries having a fair market value in
excess of U.S.$25,000,000 (or its equivalent in other currencies).

 

“CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. § 9601, et. seq., as amended from time to time.

 

“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 any Issuing Bank (or,
for purposes of Section 2.15(b), by any Applicable Lending Office of
such Lender or any Issuing Bank or by such Lender’s or any 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.

 

“Change of Control”  means the occurrence of any of the following
events: (a) any Person or “group” (within the meaning of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended) (i) shall have acquired
beneficial ownership of 35% or more of any outstanding class of Equity
Interests having ordinary voting power in the election of directors of the
Borrower, (ii) (A) shall obtain the power (whether or not exercised) to elect a
majority of the Borrower’s directors or (B) the Board of Directors of the
Borrower shall not consist of a majority of Continuing Directors, or (b) except
as permitted by Section 7.8 or Section 7.12, the Borrower shall
cease to own, directly or indirectly, 100% of the issued and outstanding Equity
Interests of each of its Wholly-Owned Subsidiaries.  For purposes of this definition, “Continuing Directors”
means the directors of the Borrower on the Closing Date and each other
director, if such other director’s nomination for election to the Board of
Directors of the Borrower is recommended by a majority of the then Continuing
Directors.

 

“Closing Date” means
the date of this Agreement.

 

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

 

“Collateral” means
any and all “Collateral” and “Mortgaged Property”, as defined in the Security
Documents, the Canadian Revolving Security Documents and the Canadian Term
Security Documents.

 

“Combined Credit
Agreements” means this Agreement, the Canadian Revolving Credit Agreement
and the Canadian Term Credit Agreement.

 

“Combined Credit Exposure”
means the sum of (i) the aggregate Credit Exposure of the Lenders hereunder,
(ii) the Equivalent Amount in U.S. Dollars of the aggregate “Credit Exposure”
(as defined in the Canadian Revolving Credit Agreement) of the Canadian
Revolving

 

6

 

Lenders, and (iii) the Equivalent Amount in U.S. Dollars of the “Loans”
(as defined in the Canadian Term Credit Agreement).

 

“Combined Lenders”
means the Lenders hereunder, the Canadian Revolving Lenders and the Canadian
Term Lenders.

 

“Combined Loan Documents”
means the Loan Documents, the Canadian Revolving Loan Documents and the
Canadian Term Loan Documents.

 

“Combined Loans”
means the loans made by the Combined Lenders to the Borrower and the Canadian
Borrowers pursuant to the Combined Loan Documents.

 

“Combined Obligations”
means the aggregate of the Obligations, the Canadian Revolving Obligations and
the Canadian Term Obligations (without duplication of any Hedging Obligations).

 

“Combined Revolving
Commitments” means the aggregate of (i) the Commitments of the Lenders
hereunder and (ii) the Canadian Revolving Commitments. The initial aggregate
amount of the Combined Revolving Commitments is U.S.$315,000,000.

 

“Combined Revolving
Credit Exposure” means the sum of (i) the aggregate Credit Exposure of the
Lenders hereunder and (ii) the Equivalent Amount in U.S. Dollars of the
aggregate “Credit Exposure” (as defined in the Canadian Revolving Credit
Agreement) of the Canadian Revolving Lenders.

 

“Combined Revolving
Lenders” means (i) the Lenders hereunder and (ii) the Canadian Revolving
Lenders.

 

“Combined Revolving
Obligations” means the aggregate of the Obligations and the Canadian
Revolving Obligations (without duplication of any Hedging Obligations).

 

“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 Credit Exposure
hereunder, as such commitment may be (a) reduced from time to time pursuant to Section
2.8, (b) reduced or increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 10.4, and (c) terminated pursuant
to Sections 8.2 or 8.3. 
The initial amount of each Lender’s Commitment is set forth on Schedule
2.1, or in the Register following any Assignment and Acceptance to which
such Lender is a party.  The initial
aggregate amount of the Commitments of the Lenders is U.S.$290,000,000.

 

“Commitment Fee” is
defined in Section 2.11(a).

 

“Consolidated Net Income”
means with respect to the Borrower and its Consolidated Subsidiaries, for any
period, the aggregate of the net income (or loss) of the Borrower and its
Consolidated Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP; provided that there shall be excluded from such
net income (to the extent otherwise included therein) the following: (i) the
net income of any Person in which the Borrower or any

 

7

 

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

 

“Consolidated
Subsidiaries” means each Subsidiary of a Person (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 such Person in
accordance with GAAP.  Unless otherwise
indicated, each reference to the term “Consolidated Subsidiary” means a
Subsidiary consolidated with the Borrower.

 

“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 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.

 

“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.

 

“Deficiency Notification
Date” is defined in Section 2.7(f).

 

“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 and exploration expense, determined on a consolidated basis in
accordance with GAAP.

 

“Environmental Laws”
means any and all applicable Governmental Rules pertaining to health (with
respect to exposure to Hazardous Materials) or the environment in effect in any
and all jurisdictions in which the Borrower or any Subsidiary is conducting or
at any time has conducted business, or where any Property of the Borrower or
any Subsidiary is located, including, without limitation, OPA, the Clean Air Act,
as amended, CERCLA, the Federal Water Pollution Control Act, as amended, the
Occupational Safety and Health Act of 1970, as amended, the Resource  Conservation and Recovery Act of 1976 (“RCRA”),
as amended, the

 

8

 

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, the
Environmental Protection and Enhancement Act (Alberta), as amended, the
Canadian Environmental Protection Act, as amended, and other environmental
conservation or protection laws.  The
term “oil” shall have the meaning specified in OPA, the term “release” (or
“threatened release”) shall have the meaning specified in CERCLA, and the term
“disposal” (or “disposed”) shall have the meaning specified in RCRA; provided,
however, that (i) in the event either OPA, CERCLA or RCRA is amended so
as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment and (ii) to the
extent the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for “oil”, “release”, or “disposal”
which is broader than that specified in either OPA, CERCLA or RCRA, such
broader meaning shall apply.

 

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

 

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

 

“Equivalent Amount”
means as at any date the amount of Canadian Dollars into which an amount of
U.S. Dollars may be converted, or the amount of U.S. Dollars into which an
amount of Canadian Dollars may be converted, in either case at The Bank of
Canada mid-point noon spot rate of exchange for such date in Toronto at
approximately 12:00 noon, Toronto time on such date.

 

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

 

“ERISA Affiliate”
means all members of a controlled group of corporations and all members of a
controlled group of trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under section 414 (b) or 414 (c) of the Code or section 4001(b)(1) of
ERISA.

 

“ERISA Event” means
(i) the occurrence of a “reportable event” described in section 4043 of ERISA
and the regulations issues thereunder, (ii) the withdrawal of the Borrower, any
Subsidiary 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, (iii)
the filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of

 

9

 

ERISA, (iv) the institution of proceedings to terminate a Plan by the
PBGC or (v) 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.

 

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

 

“Event of Default”
has the meaning assigned to such term in Section 8.1.

 

“Excepted Liens”
means: (i) Liens for taxes, assessments or other governmental charges or levies
not yet due or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
(ii) Liens in connection with workmen’s compensation, unemployment insurance or
other social security, old age pension or public liability obligations not yet
due or which are being contested in good faith by appropriate action and for
which adequate reserves have been maintained in accordance with GAAP, (iii)
operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’,
workmen’s, 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 Properties or statutory
landlord’s liens, each of which is in respect of obligations that are not more
than 90 days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been maintained in accordance
with GAAP, (iv) any Liens reserved in leases or farmout agreements for rent or
royalties and for compliance with the terms of the farmout agreements or leases
in the case of leasehold estates, to the extent 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 Subsidiary or materially impair the value of such Property subject thereto,
(v) encumbrances (other than to secure the payment of borrowed money or the
deferred purchase price of Property or services), rights of first refusal,
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any rights of way or other Property of the Borrower or any
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, and defects,
irregularities, zoning restrictions and deficiencies in title of any rights of
way or other Property which in the aggregate do not materially impair the use
of such rights of way or other Property for the purposes of which such rights
of way and other Property are held by the Borrower or any Subsidiary or
materially impair the value of such Property subject thereto, (vi) deposits to
secure the performance of bids, trade contracts, surety and appeal bonds, and
performance bonds leases, statutory obligations and other obligations of a like
nature incurred in the ordinary course of business, (vii) reservations in
original grants from any Governmental Authority, (viii) Liens associated with
judgments not prohibited by Section 8.1(h), (ix) rights of any
Governmental Authority to terminate a lease and (x) Liens to secure
intercompany Investments permitted by Sections 7.3(h) or (i),
provided that such a Lien does not encumber any Oil and Gas Properties.

 

“Excluded Taxes”
means, with respect to any Agent, any Lender, any Issuing Bank or any other
recipient of any payment to be made by or on account of any obligation of the

 

10

 

Borrower hereunder, (a) income or franchise taxes imposed on (or
measured by) its net income by the United States of America, or by the
jurisdiction under the laws of which such recipient is organized or in which
its principal office is located or, in the case of any Lender, in which its
Applicable Lending Office is located, (b) any branch profits taxes imposed by
the United States of America or any similar tax imposed by any other
jurisdiction in which the recipient is located and (c) in the case of a Foreign
Lender (other than an assignee pursuant to a request by the Borrower under Section
2.19(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement (or designates a new Applicable Lending Office) or is attributable to
such Foreign Lender’s failure to comply with Section 2.17(e), except to
the extent that such Foreign Lender (or its assignor, if any) was entitled, at
the time of designation of a new Applicable Lending Office (or assignment), to
receive additional amounts from the Borrower with respect to such withholding
tax pursuant to Section 2.17(a).

 

“Existing Credit
Facilities” means (i) that certain Credit Agreement [U.S. Revolving Credit
Agreement], dated as of March 20, 2001, among the Borrower, JPMorgan Chase
Bank, formerly known as The Chase Manhattan Bank, as global administrative
agent, and the other agents and lenders party thereto, (ii) that certain Credit
Agreement [Canadian Revolving Credit Agreement], dated as of March 20, 2001,
among TBF, TBRL, JPMorgan Chase Bank, formerly known as The Chase Manhattan
Bank, as global administrative agent, JPMorgan Chase Bank, Toronto Branch,
formerly known as The Chase Manhattan Bank of Canada, as Canadian
administrative agent, and the other agents and lenders party thereto, and (iii)
the Matador Credit Facility.

 

“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 Global Administrative Agent from three Federal funds brokers of recognized
standing selected by it.

 

“Fee Letter” means
(i) that certain Fee Letter dated as of May 2, 2003, by and among the Borrower
and BNP Paribas, Wachovia Bank, National Association, and The Bank of Nova
Scotia, and (ii) that certain Fee Letter dated as of May 2, 2003, by and among
the Borrower, the Global Administrative Agent, the Canadian Administrative
Agent and the Arranger, as such letters may be amended, supplemented, restated
or otherwise modified from time to time in accordance with the Loan Documents.

 

“Financial Statements”
means the financial statement or statements of the Borrower and its
Consolidated Subsidiaries described or referred to in Section 3.2.

 

“Financing Transactions”
means the execution, delivery and performance by each Loan Party of the Loan
Documents to which it is to be a party, the borrowing of the Loans, the use of
the proceeds thereof and the issuance of Letters of Credit hereunder.

 

11

 

“Foreign Lender”
means any Lender that is organized under the laws of a jurisdiction other than
that in which the Borrower is located. 
For purposes of this definition, the United States of America, each
State thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

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

 

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

 

“Gas Marketing Policy”
has the meaning set forth in Section 4.1(w).

 

“Global Administrative
Agent” means JPMorgan Chase Bank, in its capacity as global administrative
agent for the Combined Lenders, and its successors.

 

“Global Borrowing Base”
means the “Global Borrowing Base” as determined from time to time pursuant to Section
2.7.

 

“Global Borrowing Base
Deficiency” means the amount by which (a) the Combined Credit Exposure
exceeds (b) the then current Global Borrowing Base.

 

“Global Borrowing Base
Designation Notice” is defined in Section 2.7(b).

 

“Global Borrowing Base
Utilization” means, at the time of determination, an amount (expressed as a
percentage) equal to the quotient of (i) the Equivalent Amount in U.S. Dollars
of the Combined Credit Exposure divided by (ii) the Global Borrowing
Base.

 

“Global Effective Date”
means a date agreed upon by the Borrower and the Global Administrative Agent as
the date on which the conditions specified in Section 4.1 of each
Combined Credit Agreement are satisfied (or waived in accordance with Section
10.2 of each Combined Credit Agreement).

 

“Global Effectiveness
Notice” means a notice and certificate of the Borrower properly executed by
an Authorized Officer of the Borrower addressed to the Combined Lenders and
delivered to the Global Administrative Agent whereby the Borrower certifies
satisfaction or waiver of all the conditions precedent to the effectiveness
under Section 4.1 of each Combined Credit Agreement.

 

“Global Syndication
Agents” means BNP Paribas, Wachovia Bank, National Association and The Bank
of Nova Scotia, in their capacity as global syndication agents and co-arrangers
for the Lenders hereunder and the lenders party to the Canadian Term Credit
Agreement, and their successors.

 

“Governmental Approval”
means (a) any authorization, consent, approval, license, ruling, permit,
tariff, rate, certification, waiver, exemption, filing, variance, claim, order,
judgment or

 

12

 

decree of, or with, (b) any required notice to, (c) any declaration of
or with, or (d) any registration by or with, any Governmental Authority.

 

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

 

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

 

“Guarantee” means a
guarantee, an endorsement, a contingent agreement to purchase or to furnish
funds for the payment or maintenance of, or otherwise to be or become
contingently liable under or with respect to, the Indebtedness, net worth,
working capital or earnings of any Person or any production or revenues
generated by (or any capital or other expenditures incurred in connection with
the acquisition and exploitation of, exploration for, development of or
production from) any Hydrocarbons, or a guarantee of the payment of dividends
or other distributions upon the Equity Interests of any Person, or an agreement
to purchase, sell or lease (as lessee or lessor) Property, products, materials,
supplies or services primarily for the purpose of enabling a debtor to make
payment of such debtor’s obligations or an agreement to assure a creditor
against loss, and including, without limitation, causing a bank, surety company
or other financial institution or similar entity to issue a letter of credit,
surety bond or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business.  The terms “Guarantee”
and “Guaranteed” used as a verb shall have a correlative meaning.

 

“Guarantor” means
each Subsidiary listed on Exhibit H (except TBRL) and each Subsidiary
that is required to execute a Guaranty pursuant to Section 5.10.

 

“Guaranty” means a
Guaranty made pursuant to Section 4.1(a) or Section 5.10 by a
Guarantor in favor of the Global Administrative Agent, substantially in the
form of Exhibit G, as amended, supplemented, restated or otherwise
modified from time to time in accordance with the terms of this Agreement and
the other Loan Documents.  The term
“Guaranties” shall include each and every Guaranty executed and delivered by a
Guarantor hereunder.

 

“Hazardous Material”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law, and any petroleum, petroleum products or petroleum
distillates and associated oil or natural gas exploration, production and
development wastes that are not exempted or excluded from being defined as
“hazardous substances”, “hazardous materials”, “hazardous wastes” and “toxic
substances” under such Environmental Laws.

 

13

 

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

 

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

 

“Highest Lawful Rate”
is defined in Section 10.13.

 

“Hydrocarbon Interests”
means all rights, titles and interests in and to oil and gas leases, oil, gas
and mineral leases, other Hydrocarbon leases, mineral interests, mineral
servitudes, overriding royalty interests, royalty interests, net profits
interests, Production Payments, and other similar interests.

 

“Hydrocarbons” means,
collectively, oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate and all other liquid or gaseous hydrocarbons and related
minerals and all products therefrom, in each case whether in a natural or a
processed state.

 

“Indebtedness” means,
for any Person the sum of the following (without duplication): (i) all
obligations of such Person for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments, (ii) all obligations of such
Person (whether contingent or otherwise) in respect of bankers’ acceptances,
letters of credit, surety or other bonds and similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of Property or
services (other than (A) for borrowed money and (B) for trade accounts payable
incurred in the ordinary course of business which are outstanding for not more
than 90 days), (iv) all Capital Lease Obligations, (v) all obligations under
operating leases which require such Person or its Affiliate to make payments
over the term of such lease, including payments at termination, based on the
purchase price or appraisal value of the Property subject to such lease plus a
marginal interest rate, and used primarily as a financing vehicle for, or to
monetize, such Property, (vi) all Indebtedness (as described in the other
clauses of this definition) and other obligations of others secured by a Lien
on any asset of such Person, whether or not such Indebtedness is assumed by
such Person, (vii) all Indebtedness (as described in the other clauses of this
definition) and other obligations of others Guaranteed by such Person or in
which such Person otherwise assures a creditor against loss of the debtor or obligations
of others, (viii) 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 Indebtedness or Property of others, (ix) obligations to deliver
goods or services, including, without limitation, Hydrocarbons and the forward
sale of Hydrocarbons, in consideration of advance payments, (x) obligations to
pay for goods or services whether or not such goods or services are actually
received or utilized by such Person which are more than 90 days past due and
(xi) the undischarged balance of any Production Payment created by such Person
or for the creation of which such Person directly or indirectly received
payment, to the extent such Production Payment would be reflected on a
consolidated balance sheet of such Person; provided, however, that, with
respect to determining the amount of Indebtedness under clause (i) above, any
application of Financial Accounting Standard No. 133 that would have increase
or decrease the principal amount of any obligation for borrowed money shall be

 

14

 

disregarded.  The Indebtedness
of any Person shall include the Indebtedness of any other Person (including any
partnership in which such Person is a general partner) to the extent such
Person is liable therefor as a result of such Person’s ownership interest in or
other relationship with such Person, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

 

“Indemnified Taxes”
means Taxes other than Excluded Taxes.

 

“Indemnitee” is
defined in Section 10.3(b).

 

“Index Debt” means
any senior, unsecured, long-term indebtedness for borrowed money of the
Borrower that is not guaranteed by any other Person or subject to any other
credit enhancement.

 

“Initial Reserve Report”
means (i) that certain reserve report prepared by the Borrower and audited by
Ryder Scott Company which was delivered to the Global Administrative Agent
dated as of February 17, 2003, evaluating the Oil and Gas Properties of the
Borrower and its Subsidiaries as of December 31, 2002, located in the United
States and (ii) that certain SEC reserve report prepared by DeGolyer and
MacNaughton which was delivered to the Global Administrative Agent dated as of
February 13, 2003, evaluating the Oil and Gas Properties of Matador and its
Subsidiaries as of December 31, 2002, in each case which has been audited by an
Approved Engineer and a true and correct copy of each which has been delivered
to the Global Administrative Agent and the Lenders.

 

“Intercreditor Agreement”
means that certain Intercreditor Agreement dated as of even date herewith by
and among the Global Administrative Agent, the Global Syndication Agents, the
Canadian Administrative Agent, the other agents party thereto and the Combined
Lenders, as amended, supplemented, restated or otherwise modified from time to
time in accordance with the Combined Loan Documents.

 

“Interest Election
Request” means a request by the Borrower to convert or continue a Borrowing
in accordance with Section 2.6, in substantially the form of Exhibit
E-2 or any other form approved by the Global Administrative Agent.

 

“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 (3) months’ duration, each day prior to the last day of such Interest
Period that occurs at intervals of three (3) 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, or,
with the consent of the Global Administrative Agent, such other day, in the
calendar month that is one, two, three or six months (or, with the consent of
each Lender, 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,

 

15

 

in which case such Interest Period shall end on the next preceding
Business Day, (b) 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, and (c) no Interest Period may end later than the last
day of the Availability 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.

 

“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
deposit with, or advance, loan or other extension of credit to, any other
Person (including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding 90 days representing the purchase price of inventory or
supplies sold by such Person in the ordinary course of business), or (c) the
entering into of any Guarantee of, or other contingent obligation with respect
to, Indebtedness of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person.

 

“Issuing Bank” means
(i) the Global Administrative Agent, (ii) Comerica Bank – Texas and (iii) any
other Lender agreed to among the Borrower and the Global Administrative Agent
to issue Letters of Credit.  An Issuing
Bank may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of such Issuing Bank, in which case the term “Issuing
Bank” shall include any such Affiliate with respect to Letters of Credit issued
by such Affiliate.

 

“Judgment Currency”
is defined in Section 2.20(b).

 

“LC Disbursement”
means a payment made by any 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.

 

“Lender Affiliate”
means, with respect to any Lender, (i) an Affiliate of such Lender or (ii) any
entity (whether a corporation, partnership, trust or otherwise) that is engaged
in making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business and is administered
or managed by a Lender or an Affiliate of such Lender and with respect to any
Lender that is a fund which invests in bank loans and similar extensions of
credit, any other fund that invests in bank loans and similar extensions of
credit and is managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.

 

16

 

“Lenders” means the
Persons listed on Schedule 2.1 and any other Person that shall have
become a party to this Agreement pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance.

 

“Letter of Credit”
means (i) any letter of credit issued pursuant to this Agreement and (ii) each
letter of credit listed on Exhibit B outstanding on the Closing Date,
which letters of credit will be deemed to be issued and outstanding as of the
Closing Date under this Agreement.

 

“LIBO Rate” means,
with respect to any Eurodollar Borrowing for any Interest Period, the rate
appearing on Page 3750 of the Telerate Service (or on any successor or
substitute page of such Service, or any successor to or substitute for such
Service, providing rate quotations comparable to those currently provided on
such page of such Service, as determined by the Global Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to Dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate for Dollar deposits with a maturity comparable to
such Interest Period.  In the event that
such rate is not available at such time for any reason, then the “LIBO Rate”
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which Dollar deposits of U.S.$5,000,000 and for a maturity comparable
to such Interest Period are offered by the principal London office of the
Global Administrative Agent in immediately available funds in the London
interbank market at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period.

 

“Lien” means any
interest in Property securing an obligation owed to, or a claim by, a Person
other than the owner of the Property, whether such interest is based on the
common law, statute or contract, and whether such obligation or claim is fixed
or contingent, and including but not limited to (i) the lien, charge or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment, bailment
or margin account for security purposes or (ii) Production Payments and the
like which constitute Indebtedness, payable out of Oil and Gas Properties.  The term “Lien” shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property.  For the purposes of
this Agreement, the Borrower or any Subsidiary shall be deemed to be the owner
of any Property 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 (a) this Agreement, the Security Documents, the Fee Letter, the
Intercreditor Agreement, the Senior Debt Intercreditor Agreement, if any, the
Hedging Agreements between the Borrower or any of its Subsidiaries and any
Lender or any Affiliate of a Lender, any Borrowing Request and any Interest
Election Request, any Assignment and Acceptance, and (b) each other agreement,
document or instrument delivered by the Borrower or any other Person in
connection with this Agreement, as such may be amended from time to time.

 

“Loan Parties” means
the Borrower, the Guarantors, TBF and TBRL, and, after the date of this
Agreement, any other Affiliate or Subsidiary of the Borrower that executes a
Loan Document, for so long as such Loan Document is in effect.

 

17

 

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

 

“Majority Lenders”
means the Combined Lenders holding “Loans” (as defined in the Canadian Term
Credit Agreement) and Combined Revolving Commitments (or Combined Revolving
Credit Exposure, as applicable) in the aggregate greater than 50% of the sum of
(i) the aggregate unpaid principal amount of the Equivalent Amount in U.S.
Dollars of the “Loans” (as defined in the Canadian Term Credit Agreement) and
(ii) the aggregate Combined Revolving Commitments under the Combined Loan
Documents, or, if the Combined Revolving Commitments have been terminated, the
aggregate Combined Revolving Credit Exposure under the Combined Loan Documents.

 

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

 

“Marketing Agreements”
means any agreement with respect to the marketing, sale or other exchange of
Hydrocarbons (other than with respect to the Borrower’s and its Subsidiaries’
Hydrocarbons).

 

“Matador” means
Matador Petroleum Corporation, a corporation organized under the laws of the
State of Texas.

 

“Matador Credit Facility”
means that certain Second Amended and Restated Loan Agreement dated as of June
5, 1998 among Matador E&P Company, Inc., as borrower, Matador Petroleum
Corporation, as parent, Comerica Bank – Texas, as agent and issuing lender, and
other financial institutions party thereto, as lenders, as amended by Amendment
One dated June 24, 1999; Amendment Two dated as of March 1, 2000; Amendment
Three dated as of August 18, 2000; Amendment Four dated as of March 30, 2001;
Amendment Five dated as of September 30, 2001; Amendment Six dated as of
December 31, 2001; Amendment Seven dated as of April 30, 2002; Amendment Eight
dated as of August 31, 2002; and Amendment Nine dated as of March 31, 2003.

 

“Matador E&P”
means Matador E&P Company, a corporation organized under the laws of the
State of Texas.

 

“Material Adverse Effect”
means any material and adverse effect on (i) the assets, liabilities, financial
condition, business, operations or affairs of the Borrower and its
Subsidiaries, taken as a whole different from those reflected in the Financial
Statements or from the facts represented or warranted in any Combined Loan
Document, or (ii) the ability of the Borrower and its Subsidiaries taken as a
whole to carry out their business as at the Global Effective Date or as
proposed as of the Global Effective Date to be conducted or meet their
obligations under the Combined Loan Documents on a timely basis.

 

“Material Subsidiary”
means (a) any Subsidiary of the Borrower listed on Exhibit H, and (b)
any Subsidiary of the Borrower that, as of the date of its formation or its
acquisition, or at any time thereafter (i) has a total asset value in excess of
U.S.$25,000,000 (or its equivalent in other currencies) or (ii) owns Mortgaged
Properties.

 

“Maturity Date” means
June 27, 2007.

 

18

 

“Maverick” means
Maverick Acquisition Corporation, a corporation organized under the laws of the
State of Texas.

 

“Merger Agreement”
means that certain Agreement and Plan of Merger, dated as of May 13, 2003,
among the Borrower, Maverick and Matador, as amended, supplemented, restated or
otherwise modified from time to time.

 

“Moody’s” means
Moody’s Investors Service, Inc.

 

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

 

“Mortgage” means the
Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement
and Fixture Filing delivered pursuant to Section 5.14 in form and
substance reasonably satisfactory to the Global Administrative Agent, executed
and delivered by the Borrower or any Loan Party (other than Foreign
Subsidiaries), as the case may be, as amended, supplemented, restated or
otherwise modified from time to time in accordance with the terms of this
Agreement and the other Loan Documents. 
The term “Mortgage” shall include each mortgage supplement after
execution and delivery of such mortgage supplement.  The term “Mortgages” shall include each and every Mortgage
executed and delivered by each of the Borrower and its Material Subsidiaries
hereunder.

 

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

 

“Net Cash Proceeds”
means, with respect to any sale or other disposition (including a Casualty
Event), the cash proceeds (including cash equivalents and any cash payments
received by way of deferred payment of principal pursuant to a note or installment
receivable or purchase price adjustment receivable or otherwise, but only as
and when received) of such sale or other disposition (including a Casualty
Event) received by the Borrower or any of its Subsidiaries, net of all
attorneys’ fees, accountants’ fees, investment banking fees and other customary
expenses, fees and commissions actually incurred by the Borrower or any of its
Subsidiaries and documented in connection therewith.

 

“Net Liabilities”
means, with respect to any Person, the net mark-to-market value determined in
accordance with GAAP.

 

“New York City” means
New York, New York.

 

“Non-Recourse Debt”
means any Indebtedness of any Subsidiary which does not own Borrowing Base
Properties, in each case in respect of which (i) the holder or holders thereof
(a) shall have recourse only to, and shall have the right to require the
obligations of such Subsidiary to be performed, satisfied, and paid only out
of, the assets and Property of such Subsidiary and/or one or more of its
Subsidiaries which does not own Borrowing Base Properties and/or any other
Person (other than the Borrower or any Subsidiary owning Borrowing Base
Properties), and (b) shall have no direct or indirect recourse (including by
way of guaranty or indemnity) to the Borrower or any Subsidiary owning
Borrowing Base Properties or to any of the assets or Property of the Borrower
or any Subsidiary owning Borrowing Base Properties,

 

19

 

whether for principal, interest, fees, expenses or otherwise and (ii)
the terms and conditions of such Indebtedness are in form and substance
reasonably acceptable to the Required Lenders.

 

“Obligations” means
(without duplication), at any time, the sum of (a) the Credit Exposure of the
Lenders under the Loan Documents plus (b) all accrued and unpaid
interest and fees owing to the Lenders under the Loan Documents plus (c)
all Hedging Obligations in connection with all Hedging Agreements between the
Borrower or any of its Subsidiaries and any Lender or any Affiliate of a Lender
plus (d) all other obligations (monetary or otherwise) of the Borrower
or any Subsidiary to any Lender or any Agent, whether or not contingent,
arising under or in connection with any of the Loan Documents.

 

“Oil and Gas Properties”
means the Hydrocarbon Interests; the Properties now or hereafter pooled or
unitized with the Hydrocarbon Interests; all presently existing or future
unitization, pooling agreements and declarations of pooled units and the units
created thereby (including without limitation all units created under orders,
regulations and rules of any Governmental Authority having jurisdiction) which
may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, joint venture agreements, contracts and other agreements which
relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, the lands covered thereby and all
oil in tanks and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to the Hydrocarbon Interests; all tenements,
profits á prendre, hereditaments, appurtenances and Properties in anywise
appertaining, belonging, affixed or incidental to the Hydrocarbon Interests,
Properties, rights, titles, interests and estates described or referred to
above, including any and all Property, real or personal, now owned or
hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such
Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal Property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil wells, gas wells, water wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and  rods,
surface leases, rights-of-way, easements and servitudes together with all
additions, substitutions, replacements, accessions and attachments to any and
all of the foregoing.

 

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

 

“Organic Documents”
means, relative to any Person, its articles of organization, association,
formation or incorporation (or comparable document), its by-laws, memorandum of
association or operating agreement and all partnership agreements, limited
liability company or operating agreements and similar arrangements applicable
to ownership.

 

“Original Canadian Term
Loan Credit Agreement” means that certain Credit Agreement [Canadian Term
Credit Agreement], dated as of March 20, 2001, among the Canadian Term
Borrower, JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank, as
global

 

20

 

administrative agent, JPMorgan Chase Bank, Toronto Branch, formerly
known as The Chase Manhattan Bank of Canada, as Canadian administrative agent,
and the other agents and lenders party thereto, as it may be amended,
supplemented, restated or otherwise modified and in effect from time to time.

 

“Other Currency” is
defined in Section 2.20(a).

 

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

 

“Overdraft Facility”
is defined in Section 7.1(k).

 

“Participant” is
defined in Section 10.4(e).

 

“PBGC” means the
Pension Benefit Guaranty Corporation referred to and defined in ERISA and any
successor entity performing similar functions.

 

“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 (i)
is currently or hereafter sponsored, maintained or contributed to by the
Borrower, any Subsidiary or an ERISA Affiliate or (ii) was at any time during
the preceding six calendar years sponsored, maintained or contributed to, by
the Borrower, any Subsidiary or an ERISA Affiliate.

 

“Pledge Agreements”
means, collectively, (i) the Pledge Agreement, dated as of the Global Effective
Date delivered by the Parent in substantially the form of Exhibit F-1,
and (ii) the Pledge Agreement, dated as of the Global Effective Date delivered
by Matador in substantially the form of Exhibit F-2, each as amended,
supplemented, restated or otherwise modified from time to time in accordance
with the Loan Documents.  The term
“Pledge Agreements” shall include each and every Pledge Agreement executed and
delivered pursuant to the Loan Documents.

 

“Prime Rate” means
the rate of interest per annum publicly announced from time to time by the
Global Administrative Agent as its prime rate in effect at its principal office
in New York City.  Without notice to the
Borrower or any other Person, the Prime Rate shall change automatically from
time to time as and in the amount by which said prime rate shall fluctuate.  The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer.  The Global Administrative
Agent may make commercial loans and other loans at rates of interest at, above
or below the Prime Rate.  For purposes
of this Agreement, any change in the Alternate Base Rate due to a change in the
Prime Rate shall be effective on the date such change in the Prime Rate is
announced.

 

“Production Payments”
means a production payment obligation (whether volumetric or dollar
denominated) of the Borrower or any of its Subsidiaries which are payable from
a

 

21

 

specified share of proceeds received from production from specified Oil
and Gas Properties, together with all undertakings and obligations in connection
therewith.

 

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

 

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

 

“Register” has the
meaning set forth in Section 10.4(c).

 

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

 

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

 

“Required Lenders”
means the Combined Lenders holding “Loans” (as defined in the Canadian Term
Credit Agreement) and Combined Revolving Commitments (or Combined Revolving
Credit Exposure, as applicable) in the aggregate greater than or equal to 66
2/3% of the sum of (i) the aggregate unpaid principal amount of the Equivalent
Amount in U.S. Dollars of the “Loans” (as defined in the Canadian Term Credit
Agreement) and (ii) the aggregate Combined Revolving Commitments under the
Combined Loan Documents, or, if the Combined Revolving Commitments have been
terminated, the aggregate Combined Revolving Credit Exposure under the Combined
Loan Documents.

 

“Reserve Report”
means the Initial Reserve Report and any other Reserve Report(s) delivered
pursuant to Sections 2.7 or 5.7, in form and substance reasonably
satisfactory to the Global Administrative Agent, prepared at the sole cost and
expense of the Borrower by (i) an Approved Engineer or (ii) the Borrower’s
chief petroleum engineer and reviewed by an Approved Engineer, in each case,
for which the Approved Engineer shall certify, in writing, that such Reserve
Report was prepared in accordance with the normal and customary methods and
procedures used by such Approved Engineer for evaluating oil and gas
reserves.  Each Reserve Report shall
evaluate the Proven Reserves and probable reserves attributable to the Oil and
Gas Properties owned directly by the Borrower and/or its Subsidiaries, as of
the immediately preceding December 31 or the date requested by the Global
Administrative Agent as provided in Section 5.7(b).  Each Reserve Report shall set forth volumes,
projections of the future rate of production, Hydrocarbons prices, escalation
rates, discount rate assumptions, and net proceeds of production, present value
of the net proceeds of production, operating expenses and capital

 

22

 

expenditures, in each case based upon updated economic assumptions
reasonably acceptable to the Global Administrative Agent.

 

“Retex” means Retex,
Inc., a corporation organized under the laws of the State of Wyoming.

 

“Revolving Borrowing Base”
means, as of the date of any Global Borrowing Base redetermination, an amount
equal to the Global Borrowing Base less the aggregate amount of the
“Loans” (as defined in the Canadian Term Credit Agreement) outstanding pursuant
to the Canadian Term Credit Agreement, as such amount may thereafter be
adjusted pursuant to Sections 2.7(g) or (h) until the date of the
next Global Borrowing Base redetermination.

 

“Revolving Borrowing Base
Allocation Notice” is defined in Section 2.7(d)(iii).

 

“Revolving Borrowing Base
Deficiency” means the amount by which (a) the Combined Revolving Credit
Exposure exceeds (b) the then current Revolving Borrowing Base.

 

“S&P” means
Standard & Poor’s and any successor thereto that is a nationally-recognized
rating agency.

 

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

 

“Security Agreement”
means a Security Agreement executed and delivered pursuant to the Loan
Documents, between the Global Administrative Agent and the Borrower or a
Material Subsidiary (other than a Foreign Subsidiary), in form and substance
reasonably satisfactory to the Global Administrative Agent, as amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms of this Agreement and the other Loan Documents. The term
“Security Agreements” shall include each and every Security Agreement executed
and delivered pursuant to the Loan Documents.

 

“Security Documents”
means the Pledge Agreements, the Guaranties, the Mortgages (if any), the
Security Agreements (if any) and each other security agreement or other
instrument or document executed and delivered pursuant to Sections  4.1
and 5.13 or pursuant to the Loan Documents to secure any of the
Obligations.

 

“Senior Debt” means
all Indebtedness of a Person which is not Subordinated Debt.

 

“Senior Debt
Intercreditor Agreement” means any Intercreditor Agreement by and among the
Global Administrative Agent on behalf of the Combined Lenders and the holders
of the Senior Notes, in form and substance reasonably acceptable to the Global
Administrative Agent, as amended, supplemented, restated or otherwise modified
from time to time.

 

“Senior Notes” means
any senior notes or other Senior Debt of the Borrower, any Subsidiary or a
Canadian Borrower, together with any guaranties of such notes or other Senior
Debt, as may be amended, supplemented, restated or otherwise modified and in
effect from time to time.

 

23

 

“Solvent” means, with
respect to any Person at any time, a condition under which (a) the fair
saleable value of such Person’s assets is, on the date of determination,
greater than the total amount of such Person’s liabilities (including
contingent and unliquidated liabilities) at such time; and (b) such Person is
able to pay all of its liabilities as such liabilities mature.  For purposes of this definition (i) the
amount of a Person’s contingent or unliquidated liabilities at any time shall
be that amount which, in light of all the facts and circumstances then
existing, represents the amount which can reasonably be expected to become an
actual or matured liability, (ii) the “fair saleable value” of an asset shall
be the amount which may be realized within a reasonable time either through
collection or sale of such asset at its regular market value, and (iii) the
“regular market value” of an asset shall be the amount which a capable and
diligent business person could obtain for such asset from an interested buyer
who is willing to purchase such asset under ordinary selling conditions.

 

“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
applicable maximum reserve percentages (including any basic, marginal, special,
emergency or supplemental reserves) expressed as a decimal established by the
Board to which the Global 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 Regulation D. 
Eurodollar Loans shall be deemed to constitute eurocurrency fundings 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.

 

“Subordinated Debt”
means any Indebtedness incurred or assumed after the date of this Agreement by
the Borrower or any of its Subsidiaries that (a) is subordinated in right of
security and payment to the payment in full in cash and cash equivalents of all
Combined Obligations of the Borrower or the relevant Subsidiary, as the case
may be, substantially on the terms applicable to the Bridge Loan and the
Guarantees thereof as in effect on the Global Effective Date, or on such other
terms and conditions as are reasonably satisfactory to the Global
Administrative Agent and the Majority Lenders, (b) has a maturity date at least
six (6) months after the Maturity Date, and (c) contains other terms and
conditions (including interest, amortization, covenants and events of default)
determined in compliance with Section 5.8(a) of the Senior Subordinated Credit
Agreement referred to in the definition of “Bridge Loan,” as in effect on the
Global Effective Date, or such other terms and conditions as are reasonably
satisfactory to the Agents.

 

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

 

24

 

“Super Majority Lenders”
means the Combined Lenders holding “Loans” (as defined in the Canadian Term
Credit Agreement) and Combined Revolving Commitments (or Combined Revolving
Credit Exposure, as applicable) in the aggregate greater than or equal to 75%
of the sum of (i) the aggregate unpaid principal amount of the Equivalent
Amount in U.S. Dollars of the “Loans” (as defined in the Canadian Term Credit
Agreement) and (ii) the aggregate Combined Revolving Commitments under the
Combined Loan Documents, or, if the Combined Revolving Commitments have been
terminated, the aggregate Combined Revolving Credit Exposure under the Combined
Loan Documents.

 

“Tangible Net Worth”
means, as at any date, the sum of the following for the Borrower and its
Consolidated Subsidiaries determined (without duplication) in accordance with
GAAP:

 

(i)                                     all items which would be included under
shareholders’ equity on the consolidated balance sheet of the Borrower, minus

 

(ii)                                  the sum of the following: the book value of
all assets of the Borrower and its Consolidated Subsidiaries which should be
classified as intangibles (other than oil and gas leasehold interests that
would be classified as “intangibles” under GAAP) (without duplication of
deductions in respect of items already deducted in arriving at surplus and
retained earnings) but in any event including as such intangibles the
following: goodwill (excluding the writeup of goodwill in connection with the
Acquisition), research and development costs, trademarks, trade names,
copyrights, patents and franchises, unamortized debt discount and expense, all
reserves and any writeup in the book value of assets resulting from a
revaluation thereof or resulting from any changes in GAAP subsequent to
December 31, 2002.

 

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

 

“TBF” means Tom Brown
Resources Funding Corp., an unlimited liability company organized under the
laws of the Province of Nova Scotia, Canada.

 

“TBRL” means Tom
Brown Resources Ltd., a corporation organized under the laws of the Province of
Alberta, Canada.

 

“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 Adjusted LIBO Rate or the Alternate Base Rate.

 

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

 

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

 

25

 

“Unutilized Commitment”
means, at the time of determination, the amount by which (a) the lesser of (i)
the amount of the Commitment and (ii) the amount of the U.S. Revolving
Borrowing Base as then in effect at such time, exceeds (b) the amount of the
aggregate Credit Exposure of the Lenders at such time.

 

“Upfront Fee” is
defined in Section 2.11(c).

 

“U.S. Borrowing Base
Deficiency” means the amount by which (a) the aggregate Credit Exposure of
the Lenders exceeds (b) the then current U.S. Revolving Borrowing Base.

 

“U.S. Documentation Agent”
means U.S. Bank National Association, in its capacity as U.S. documentation
agent for the Lenders and its successors.

 

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

 

“U.S.
Revolving Borrowing Base” is defined in Section 2.7(d)(i).

 

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

 

SECTION 1.2                          Classification of Loans and Borrowings.  For
purposes of this Agreement, Loans and Borrowings may be classified and referred
to by Type (e.g., a “Eurodollar Loan” or “Eurodollar Borrowing”).

 

SECTION 1.3                          Terms Generally.  The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”.  The word
“will” shall be construed to have the same meaning and effect as the word
“shall”.  Unless the context requires
otherwise (a) any definition of or reference to any agreement, instrument or
other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein), (b) any reference herein to any Person
shall be construed to include such Person’s successors and assigns, provided
such successors and assigns are permitted by the Loan Documents, (c) the words
“herein”, “hereof” 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, and (d) all references herein to Articles, Sections, Exhibits
and Schedules shall be construed to refer to Articles and Sections of, and
Exhibits and Schedules to, this Agreement.

 

SECTION 1.4                          Accounting Terms; GAAP. 
Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with

 

26

 

GAAP, as in effect from time
to time; provided that, if the Borrower notifies the Global
Administrative Agent that the Borrower requests an amendment to any provision
hereof to eliminate the effect of any change occurring after the date of this
Agreement in GAAP or in the application thereof on the operation of such
provision (or if the Global Administrative Agent notifies the Borrower 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 2.1                          Commitments.  Subject to the terms and
conditions set forth herein, each Lender agrees to make Loans in U.S. Dollars
to the Borrower from time to time during the Availability Period in an
aggregate principal amount that will not result in (a) the Credit Exposure of
any Lender exceeding the Commitment of such Lender, or (b) the aggregate amount
of the Credit Exposure of all Lenders exceeding the lesser of (i) the aggregate
amount of the U.S. Revolving Borrowing Base then in effect and (ii) the
aggregate amount of the Commitments of the Lenders.  Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow
Loans.

 

SECTION 2.2                          Loans and Borrowings.

 

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

 

(b)                                 Subject to Sections 2.13 and 2.14,
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.

 

(c)                                  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 U.S.$1,000,000 and not less than U.S.$5,000,000
(including any continuation or conversion of existing Loans made in connection
therewith).  At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of U.S.$500,000 and not less than U.S.$500,000 (including any
continuation or conversion of existing Loans made in connection therewith); provided
that an ABR Borrowing may be in an aggregate amount that is equal to the entire
Unutilized Commitment, if less. 
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 seven (7) Eurodollar
Borrowings outstanding.

 

27

 

(d)                                 Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to
convert or continue, any Eurodollar Borrowing if the Interest Period requested
with respect thereto would end after the Maturity Date.

 

SECTION 2.3                          Requests for Borrowings.  To
request a Borrowing, the Borrower shall notify the Global Administrative Agent
of such request by telephone (a) in the case of a Eurodollar Borrowing, not
later than 2:00 p.m., New York City time, three (3) Business Days before the
date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later
than 11:00 a.m., New York City time, on the date of the proposed
Borrowing.  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Global Administrative Agent of a written Borrowing
Request executed by an Authorized Officer of the Borrower, substantially in the
form of Exhibit E-1 or otherwise in a form approved by the Global
Administrative Agent.  Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.2:

 

(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; and

 

(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”.

 

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.  Promptly following receipt of a Borrowing
Request in accordance with this Section, the Global 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 2.4                          Letters of Credit.

 

(a)                                  General.  Subject to the terms and
conditions set forth herein, the Borrower may request the issuance of Letters
of Credit for its own account or the account of any Subsidiary, in a form
reasonably acceptable to the Global Administrative Agent and the Issuing Bank,
at any time and from time to time during the Availability Period.  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

 

28

 

Bank) to an Issuing Bank and
the Global Administrative Agent (reasonably in advance of the requested date of
issuance, amendment, renewal or extension) a notice requesting the issuance of
a Letter of Credit, or identifying the Letter of Credit to be amended, renewed
or extended, and specifying the date of issuance, amendment, renewal or
extension (which shall be a Business Day), the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) of this
Section), the amount of such Letter of Credit, 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.  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.  A Letter of Credit shall be issued, amended,
renewed or extended only if (and upon issuance, amendment, renewal or extension
of each Letter of Credit the Borrower shall be deemed to represent and warrant
that), after giving effect to such issuance, amendment, renewal or extension
(i) the LC Exposure shall not exceed U.S.$25,000,000 and (ii) the total Credit
Exposure shall not exceed the lesser of (x) the aggregate Commitments of the
Lenders or (y) the U.S. Revolving Borrowing Base then in effect.

 

(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, provided such date is not beyond the date in
clause (ii)) and (ii) five (5) 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 Global Administrative Agent, for the account of the Issuing Bank, such
Lender’s Applicable Percentage of each LC Disbursement made by such Issuing
Bank and not reimbursed by the Borrower on the date due as provided in paragraph
(e) of this Section, 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 paragraph 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 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
an 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
Global Administrative Agent an amount equal to such LC Disbursement not later
than 12:00 noon, New York City time, on the date that such LC Disbursement is
made, if the Borrower shall have received notice of such LC Disbursement prior
to 10:00 a.m., New York City time, on such date, or, if such notice has not
been received by the Borrower prior to such time on such date, then not later than
12:00 noon, New York City time, on the Business Day immediately following the
day that the Borrower receives such notice; provided that, unless such
LC Disbursement is

 

29

 

less than U.S.$500,000, the
Borrower may, subject to the conditions to Borrowing set forth herein, request
in accordance with Section 2.3 that such payment be financed with a
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 Borrowing.  If the
Borrower fails to make such payment when due, the Global 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 Global Administrative
Agent its Applicable Percentage of the payment then due from the Borrower, in
the same manner as provided in Section 2.5 with respect to Loans made by
such Lender (and Section 2.5 shall apply, mutatis  mutandis,
to the payment obligations of the Lenders), and the Global Administrative Agent
shall promptly pay to the Issuing Bank the amounts so received by it from the
Lenders. Promptly following receipt by the Global Administrative Agent of any
payment from the Borrower pursuant to this paragraph, the Global Administrative
Agent shall distribute such payment to the Issuing Bank or, to the extent that
Lenders have made payments pursuant to this paragraph 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 paragraph to reimburse the Issuing Bank for any LC Disbursement
(other than the funding of ABR Loans as contemplated above) 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 paragraph
(e) of this Section 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 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 proving to be untrue or inaccurate in any respect, (iii)
payment by an 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 (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, constitute a legal or equitable discharge of, or provide a right of
setoff against, the Borrower’s obligations hereunder.  Neither the Agents, the Lenders or any Issuing Bank nor any of
their Related Parties shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of
such Issuing Bank; provided that the foregoing shall not be construed to
excuse such Issuing Bank from liability to the Borrower to the extent of any
direct or actual damages (as opposed to special, indirect, consequential or
punitive damages, claims in respect of which are hereby waived by the Borrower
to the extent permitted by applicable law) suffered by the Borrower that are
caused by such Issuing Bank’s failure to exercise care when determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof.  The parties hereto
expressly agree that, in the absence of gross negligence or willful misconduct
on the part of the Issuing Bank (as finally determined by a court of competent
jurisdiction), the Issuing Bank shall be deemed to have

 

30

 

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

 

(h)                                 Interim Interest.  If
an Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall
reimburse such LC Disbursement in full on the date such LC Disbursement is
made, 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; provided that, if the Borrower fails to
reimburse such LC Disbursement within two (2) Business Days after such reimbursement
is due pursuant to paragraph (e) of this Section, then Section
2.12(c) shall apply.  Interest
accrued pursuant to this paragraph 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 paragraph (e) of this Section to reimburse the Issuing Bank
shall be for the account of such Lender to the extent of such payment.

 

(i)                                     Cash Collateralization.  If
any Event of Default shall occur and be continuing, on the Business Day that the
Borrower receives notice from the Global Administrative Agent or the Majority
Lenders demanding the deposit of cash collateral pursuant to this paragraph,
the Borrower shall deposit in an account with the Global Administrative Agent,
in the name of the Global Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure 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 described in Section 8.1(g).  The Borrower also shall deposit cash collateral pursuant to this
paragraph as and to the extent required by Section 2.10, and any such
cash collateral so deposited and held by the Global Administrative Agent
hereunder shall constitute part of the Global Borrowing Base for purposes of
determining compliance with Section 2.10. Each such deposit shall be
held by the Global Administrative Agent as collateral for the payment and
performance of the obligations of the Borrower under this Agreement.  The Global 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 Global Administrative Agent and
at the Borrower’s risk and expense, such deposits shall not bear interest.  Interest or profits, if any, on such
investments

 

31

 

shall accumulate in such
account.  Moneys in such account shall
be applied by the Global 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 (but subject to the consent of Lenders with LC Exposure
representing greater than 50% of the total LC Exposure), be applied to satisfy
other obligations of the Borrower under this Agreement.  If the Borrower is required to provide an
amount of cash collateral hereunder as a result of the occurrence of an Event
of Default, such amount (to the extent not applied as aforesaid) shall be
returned to the Borrower within three (3) Business Days after all Events of
Default have been cured or waived. If the Borrower is required to provide an
amount of cash collateral hereunder pursuant to Section 2.10, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower as and to the extent that, after giving effect to such return, the
Borrower would remain in compliance with Section 2.10 and no Default
shall have occurred and be continuing.

 

SECTION 2.5                          Funding of Borrowings.

 

(a)                                  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 12:00 noon, New York City time, to the account of the Global
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders.  The Global
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 Global Administrative Agent in New York City; provided
that ABR Loans made to finance the reimbursement of an LC Disbursement as
provided in Section 2.4(e) shall be remitted by the Global
Administrative Agent to the applicable Issuing Bank.

 

(b)                                 Unless the Global 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 Global Administrative Agent
such Lender’s share of such Borrowing, the Global Administrative Agent may
assume that such Lender has made such share available on such date in
accordance with paragraph (a) of this Section 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 Global
Administrative Agent, then the applicable Lender and the Borrower severally
agree to pay to the Global 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 Global Administrative Agent, at (i) in the case of such Lender,
the greater of (A) the Federal Funds Effective Rate or (B) a rate determined by
the Global Administrative Agent in accordance with banking industry rules on
interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to Loans made in such Borrowing. 
If such Lender pays such amount to the Global Administrative Agent, then
such amount shall constitute such Lender’s Loan included in such Borrowing.

 

32

 

SECTION 2.6                          Interest Elections.

 

(a)                                  Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request (or an ABR Borrowing if no Type
is specified) and, in the case of a Eurodollar Borrowing, shall have an initial
Interest Period as specified in such Borrowing Request (or one month if no
Interest Period is specified). 
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.  The Borrower may, subject to
the requirements of Section 2.2(c), 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)                                 To make an election pursuant to this Section,
the Borrower shall notify the Global Administrative Agent of such election by
telephone by the time that a Borrowing Request would be required under Section
2.3 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 Global Administrative Agent of a written Interest Election
Request executed by an Authorized Officer of the Borrower, substantially in the
form of Exhibit E-2 or otherwise in a form approved by the Global
Administrative Agent.

 

(c)                                  Each telephonic and written Interest Election
Request shall specify the following information in compliance with Section
2.2:

 

(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 clauses
(iii) and (iv) below 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.

 

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

 

33

 

(e)                                  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
has occurred and is continuing and the Global Administrative Agent, at the
request of the Required Lenders, so notifies the Borrower, then, so long as
such Event of Default is continuing, (i) no outstanding Borrowing may be
converted to or continued as a Eurodollar Borrowing and (ii) unless the Obligations
have been accelerated pursuant to Section 8.3, each Eurodollar Borrowing
shall be converted to an ABR Borrowing at the end of the Interest Period
applicable thereto.

 

SECTION 2.7                          Global Borrowing Base.

 

(a)                                  Initial Global Borrowing Base. 
During the period from the date hereof to the date of the first
redetermination of the Global Borrowing Base pursuant to the provisions of this
Section, the initial amount of the Global Borrowing Base has been determined by
the Global Administrative Agent and acknowledged by the Borrower and its
Subsidiaries (including the Canadian Borrowers) and agreed to by the Combined
Lenders to be U.S.$425,000,000; provided, however, that in the
event that the Borrower or any of its Subsidiaries incurs Senior Debt or Subordinated
Debt (other than the Bridge Loan) prior to the date of the Initial Borrowing,
the Global Borrowing Base and the initial U.S. Revolving Borrowing Base will be
reduced as provided for in Section 2.7(g).

 

(b)                                 Annual Scheduled Determinations of the Global
Borrowing Base. Promptly
after January 1st of each calendar year (commencing January 1, 2004), and in
any event prior to March 1st of each calendar year, the Borrower shall furnish
to the Global Administrative Agent and the Combined Lenders a Reserve Report in
form and substance reasonably satisfactory to the Global Administrative Agent,
which report shall evaluate as of December 31st of the immediately preceding
calendar year the Proven Reserves attributable to the Oil and Gas Properties
which the Borrower wishes to include in the Global Borrowing Base, and a
projection of the rate of production and net operating income with respect
thereto, as of such date, together with additional data concerning pricing,
hedging, operating costs and quantities of production, and other information
and engineering and geological data as the Global Administrative Agent or any
Combined Lender may reasonably request. Within 30 days after receipt of such
report and information, the Global Administrative Agent shall make an initial
determination of the amount of credit to be made available to the Borrower
hereunder, and shall promptly notify the Combined Lenders in writing of the
Global Administrative Agent’s initial determination of the Global Borrowing
Base.  The Global Administrative Agent
shall make such determination in accordance with its customary practices and
standards for oil and gas loans and in the exercise of its sole discretion.
Within fifteen (15) days following their receipt of the proposed amount for the
redetermined Global Borrowing Base, (x) the Super Majority Lenders if the
proposed amount is an increase or (y) the Required Lenders if the proposed
amount is a decrease or maintenance, shall approve or reject the Global
Administrative Agent’s initial determination of the Global Borrowing Base by
written notice to the Global Administrative Agent; provided, however
that failure by any Combined Lender to reject in writing the Global
Administrative Agent’s determination of the Global Borrowing Base within said
fifteen (15) day period shall be deemed an acceptance of such determination by
such Combined Lender.  If the Super
Majority Lenders

 

34

 

or the Required Lenders, as
applicable, fail to approve any such determination of the Global Borrowing Base
made by the Global Administrative Agent hereunder, then the Global
Administrative Agent shall poll the Combined Lenders and the Global Borrowing
Base shall be set at the highest amount on which the Super Majority Lenders if
such number would result in an increase in the Global Borrowing Base or
otherwise, the Required Lenders, can agree, it being understood that a Combined
Lender is deemed to have agreed to any and all amounts that are lower than the
amount actually determined by such Combined Lender to be the appropriate value
of the Global Borrowing Base.  Upon
approval or deemed approval by the Super Majority Lenders or the Required
Lenders, as applicable, of the Global Borrowing Base, the Global Administrative
Agent upon notice thereof shall, by written notice to the Borrower, and the
Combined Lenders, designate the new Global Borrowing Base available to the
Borrower, the Canadian Revolving Borrowers and the Canadian Term Borrower (each
such notice in this Section 2.7(b), a “Global Borrowing Base
Designation Notice”).  The Global
Borrowing Base Designation Notice shall also set forth the then applicable
Revolving Borrowing Base as determined by the Global Administrative Agent.  If the Combined Revolving Commitments are in
effect and/or any Combined Revolving Obligations are outstanding, then upon
receipt of such Global Borrowing Base Designation Notice, the Borrower shall
designate the U.S. Revolving Borrowing Base and the Canadian Revolving
Borrowing Base to the Global Administrative Agent in accordance with Section
2.7(d).

 

(c)                                  [Intentionally blank].

 

(d)                                 Allocation of the Revolving Borrowing Base.  For
so long as any of the Combined Revolving Commitments are in effect and/or any
Combined Revolving Obligations are outstanding, the Revolving Borrowing Base
shall be comprised of the U.S. Revolving Borrowing Base and the Canadian
Revolving Borrowing Base, and allocations between the U.S. Revolving Borrowing
Base and Canadian Revolving Borrowing Base shall be made in accordance with
this Section 2.7(d).

 

(i)                                     The “U.S. Revolving Borrowing Base”
means, as of any date, the amount in U.S. Dollars designated or determined as
such from time to time (A) by the Borrower pursuant to a Revolving Borrowing
Base Allocation Notice delivered in accordance with Section 2.7(d)(iii)
of this Agreement or (B) in accordance with the other provisions of this
Agreement.  The U.S. Revolving Borrowing
Base shall represent the maximum amount of credit in the form of Loans and
Letters of Credit (subject to the aggregate Commitments and subject to the
other provisions thereof) that the Lenders will extend to the Borrower at any
one time prior to the Maturity Date.  On
the date of this Agreement, the initial U.S. Revolving Borrowing Base shall be
U.S.$290,000,000.

 

(ii)                                  The “Canadian Revolving Borrowing Base”
means, as of any date, the Equivalent Amount in U.S. Dollars designated as such
from time to time (A) by the Borrower pursuant to a Revolving Borrowing Base
Allocation Notice delivered in accordance with Section 2.7(d)(iii) of
this Agreement or (B) in accordance with the other provisions of this
Agreement.  The Canadian Revolving
Borrowing Base shall represent the maximum amount of credit in the form of
“Loans”, “Letters of Credit” and “Bankers’ Acceptances” in each case as defined
in the Canadian Revolving Credit Agreement (subject to the aggregate
“Commitments” as defined in the Canadian Revolving Credit

 

35

 

Agreement
and subject to the other provisions thereof) that the Canadian Revolving
Lenders will extend to the Canadian Revolving Borrowers at any one time prior
to the “Maturity Date” as defined in the Canadian Revolving Credit
Agreement.  On the date of this Agreement,
the initial Canadian Revolving Borrowing Base shall be U.S.$25,000,000.

 

(iii)                               Upon receipt of the Global Borrowing Base
Designation Notice and the Revolving Borrowing Base set forth therein, the
Borrower shall specify within ten (10) days of its receipt thereof the
allocation of the Revolving Borrowing Base between the U.S. Revolving Borrowing
Base and the Canadian Revolving Borrowing Base by providing a written notice to
the Global Administrative Agent of such allocation (each such notice herein a “Revolving
Borrowing Base Allocation Notice”); provided that the sum of the
U.S. Revolving Borrowing Base and the Canadian Revolving Borrowing Base shall
at all times be equal to the Revolving Borrowing Base.  In the event that the Borrower fails to
provide the Global Administrative Agent with a Revolving Borrowing Base
Allocation Notice within the period required by this Section 2.7(d)(iii),
the Revolving Borrowing Base will be allocated in same proportion as existed
prior to such redetermination.  Promptly
upon the allocation of the Revolving Borrowing Base between the U.S. Revolving
Borrowing Base and the Canadian Revolving Borrowing Base in accordance with the
procedures set forth above, the Global Administrative Agent shall provide a
written notice to the Combined Revolving Lenders and the Borrower, which
written notice shall set forth the U.S. Revolving Borrowing Base and the
Canadian Revolving Borrowing Base to be in effect.  Any designation of the U.S. Revolving Borrowing Base or the
Canadian Revolving Borrowing Base effected pursuant to this Section
2.7(d)(iii) in connection with a determination or redetermination of the
Global Borrowing Base shall be effective as of the date of the Global Borrowing
Base Designation Notice.

 

(e)                                  Discretionary Determination of the Global
Borrowing Base.  Each of (i) the Global Administrative Agent
or the Majority Lenders in the event that Global Borrowing Base Utilization
exceeds 50% at any time for a period of greater than fifteen (15) consecutive
Business Days or (ii) (A) the Borrower or (B) the Global Administrative Agent,
at the request of the Required Lenders, shall have the right to request in
writing a redetermination of the Global Borrowing Base, in its sole discretion
at any time and from time to time, provided, that clause (i) and clause
(ii) may each be the basis of an unscheduled redetermination not more often
than one (1) time during any calendar year. If any Person shall request
discretionary redetermination of the Global Borrowing Base pursuant to the
provisions of this Section 2.7(e), the Borrower shall within 30 days of
receipt of a request therefor from the Global Administrative Agent, deliver to
the Global Administrative Agent a Reserve Report dated as of the date requested
in such notice and such updated engineering, production, operating and other
data as the Global Administrative Agent or any other Combined Lender may
reasonably request.  The Super Majority
Lenders if such number would result in an increase in the Global Borrowing Base
or otherwise, the Required Lenders, shall approve and designate the new Global
Borrowing Base in accordance with the procedures and standards described in Section
2.7(b) and the Borrower shall provide a Revolving Borrowing Base Allocation
Notice to the Global Administrative Agent in accordance with Section 2.7(d)(iii);
provided that in the event that the Borrower fails to provide such
Revolving Borrowing Base Allocation Notice, the Revolving Borrowing Base shall
be allocated

 

36

 

between the U.S. Revolving
Borrowing Base and  Canadian Revolving
Borrowing Base in accordance with Section 2.7(d)(iii).

 

(f)                                    General Provisions With Respect to the Global
Borrowing Base. The
determination of the Global Borrowing Base shall be made by the Global
Administrative Agent and the Super Majority Lenders or Required Lenders, as
applicable, taking into consideration the estimated value of the Oil and Gas
Properties owned by the Borrower and its Subsidiaries as reflected in the most
recent Reserve Report delivered hereunder and any other relevant information
obtained by or delivered to the Global Administrative Agent or any other
Combined Lender, all in accordance with the other provisions of this Section
2.7 in accordance with their customary practices for oil and gas loans as
in effect from time to time.  It is
understood by the parties hereto that the Combined Lenders shall have no
commitment or obligation whatsoever to increase the Global Borrowing Base to
any amount in excess of U.S.$425,000,000, and nothing herein contained shall be
construed to be a commitment by the Combined Lenders to so increase the Global
Borrowing Base.  The Global Borrowing
Base may be redetermined pursuant to Section 2.7(b) (annual) and Section
2.7(e) (unscheduled) and may be adjusted from time to time to give effect
to issuances of Senior Debt or Subordinated Debt under Section 2.7(g)
and the occurrence of Casualty Events under Section 2.7(h).  In connection with any redetermination or
adjustment pursuant to any of the foregoing, if the Global Administrative Agent
determines that either a Global Borrowing Base Deficiency, Revolving Borrowing
Base Deficiency or a U.S. Borrowing Base Deficiency exists, the Global
Administrative Agent shall give written notice thereof to the Borrower and the
date such notice is received shall be the “Deficiency Notification Date”.

 

(g)                                 Issuance of Senior Debt and Subordinated Debt.  In
the event that the Borrower or any of its Subsidiaries incurs any Senior Debt
(other than Non-Recourse Debt) on the date of or after the Initial Borrowing,
then the Global Borrowing Base and the U.S. Revolving Borrowing Base shall each
be reduced immediately by an amount equal to 100% of the stated principal
amount of such Senior Debt; provided, however, that no reduction
in the U.S. Revolving Borrowing Base pursuant to this Section 2.7(g)
attributable to the issuance of Senior Debt shall be effected to the extent
that the proceeds of the issuance of such Senior Debt are used to repay or
prepay, as the case may be, the “Loans” under the Canadian Term Credit
Agreement; and provided, further, that if thereafter the U.S.
Revolving Borrowing Base is, or is reduced to, $0, the Canadian Revolving
Borrowing Base shall be reduced immediately by an amount equal to (A) 100% of
the stated principal amount of such Senior Debt less (B) the amount by
which the U.S. Revolving Borrowing Base was reduced pursuant to this Section
2.7(g) as a result of the issuance of such Senior Debt.  In the event that the Borrower or any of its
Subsidiaries incurs any Subordinated Debt (other than Non-Recourse Debt) on the
date of or after the Initial Borrowing, then the Global Borrowing Base and the
U.S. Revolving Borrowing Base shall each be reduced immediately by an amount
equal to 30% of the stated principal amount of such Subordinated Debt; provided,
however, that no reduction in the U.S. Revolving Borrowing Base pursuant
to this Section 2.7(g) attributable to the issuance of Subordinated Debt
shall be effected to the extent that the proceeds of the issuance of such
Subordinated Debt are used to repay or prepay, as the case may be, the “Loans”
under the Canadian Term Credit Agreement; and provided, further,
that the Indebtedness evidenced by the Bridge Loan shall not be included in the
foregoing calculations until after the date of the first scheduled
redetermination of the Global Borrowing Base; and provided, further,
that if the U.S. Revolving Borrowing Base is, or is

 

37

 

reduced to, $0, the Canadian
Revolving Borrowing Base shall be reduced immediately by an amount equal to (A)
30% of the stated principal amount of such Subordinated Debt less (B)
the amount by which the U.S. Revolving Borrowing Base was reduced pursuant to
this Section 2.7(g) as a result of the issuance of such Subordinated
Debt.

 

(h)                                 Casualty Event. In the event that a Casualty Event has
occurred related to any Borrowing Base Property, to the extent that the Net
Cash Proceeds received by the Borrower or any of its Subsidiaries with respect
to such Casualty Event have not been applied or budgeted to be applied to
repair, restore or replace the Property affected by such Casualty Event within
90 days after the occurrence thereof, the Global Administrative Agent, at the
request of the Required Lenders, shall have the right to reduce the U.S.
Revolving Borrowing Base and, if applicable, the Canadian Revolving Borrowing
Base, in its sole discretion based on its review of such Casualty Event, in the
manner set forth in this Section 2.7(h); provided that the U.S.
Revolving Borrowing Base and the Canadian Revolving Borrowing Base shall not
together be reduced by an amount greater than 100% of such Net Cash
Proceeds.  The Global Administrative
Agent shall provide notice to the Borrower and the Combined Lenders and the
other Agents of the reduction, first, in the U.S. Revolving Borrowing Base
resulting from such Casualty Event, which reduction shall be effective as of
the date of such notice; provided that once the U.S. Revolving Borrowing
Base is reduced to $0, then any additional required reduction shall be made to
the Canadian Revolving Borrowing Base.

 

SECTION 2.8                          Termination and Reduction of Commitments.

 

(a)                                  Unless previously terminated, the Commitments
shall terminate on the Maturity Date.

 

(b)                                 The Borrower may at any time terminate, or
from time to time reduce, the Commitments; provided that (i) each
reduction of the Commitments shall be in an amount that is an integral multiple
of U.S.$1,000,000 and not less than U.S.$5,000,000 and (ii) the Borrower shall
not terminate or reduce the Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.10, the
aggregate Credit Exposure of the Lenders would exceed the aggregate  Commitments of the Lenders.

 

(c)                                  The Borrower shall notify the Global
Administrative Agent of any election to terminate or reduce the Commitments
under paragraph (b) of this Section at least two (2) 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 Global Administrative
Agent shall advise the Lenders of the contents thereof.  Each notice delivered by the Borrower
pursuant to this Section shall be irrevocable; provided that a notice of
termination of the Commitments delivered by the Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the Global
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied.  Any
termination or reduction of the Commitments shall be permanent.  Each reduction of the Commitments shall be
made ratably among the Lenders in accordance with their Applicable Percentage
of the Commitments.

 

38

 

(d)                                 The Borrower will not terminate, or permit to
expire, all of the Commitments under this Agreement prior to (i) the expiration
or termination of the Canadian Revolving Commitments and (ii) the payment and
performance in full of all Canadian Revolving Obligations.

 

SECTION 2.9                          Repayment of Loans; Evidence of Indebtedness.

 

(a)                                  The Borrower hereby unconditionally promises
to pay to the Global Administrative Agent for the account of each Lender the
then unpaid principal amount of each Loan and Borrowing of such Lender on the
Maturity Date.

 

(b)                                 Each Lender shall maintain in accordance with
its usual practice an account or accounts evidencing the Obligations of the
Borrower to such Lender resulting from each Loan made by such Lender, including
the amounts of principal and interest payable and paid to such Lender from time
to time hereunder.

 

(c)                                  The Global Administrative Agent shall
maintain accounts in which it shall record (i) the amount of each Loan made
hereunder, the Type thereof and the Interest Period applicable thereto, (ii)
the amount of any principal or interest due and payable or to become due and
payable from the Borrower to each Lender hereunder and (iii) the amount of any
sum received by the Global Administrative Agent hereunder for the account of
the Lenders and each Lender’s share thereof.

 

(d)                                 The entries made in the accounts maintained
pursuant to paragraphs (b) or (c) of this Section shall be prima
facie evidence of the existence and amounts of the obligations recorded
therein; provided that the failure of any Lender or the Global
Administrative Agent to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

 

(e)                                  Any Lender may request that Loans made by it
be evidenced by one or more promissory notes. 
In such event, the Borrower shall prepare, execute and deliver to such
Lender promissory notes payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns and in a form
approved by the Global Administrative Agent). 
Thereafter, the Loans evidenced by such promissory notes and interest
thereon shall at all times (including after assignment pursuant to Section
10.4) be represented by one or more promissory notes in such form payable
to the order of the payee named therein (or, if any such promissory note is a
registered note, to such payee and its registered assigns).

 

SECTION 2.10                    Prepayment of Loans.

 

(a)                                  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
the requirements of Section 2.10(c).

 

(b)                                 If, (i) either the Global Borrowing Base,
Revolving Borrowing Base or the U.S. Revolving Borrowing Base is (A)
redetermined or reallocated under Section 2.7, (B) reallocated pursuant
to Section 2.7(d), or (C) reduced pursuant to any other provision of
this Agreement, and (ii) as a result thereof, either a Global Borrowing Base
Deficiency, Revolving Borrowing Base

 

39

 

Deficiency or a U.S.
Borrowing Base Deficiency occurs, then the Borrower shall take the following
actions:

 

(1)                                  in the case of a Global Borrowing Base
Deficiency or a Revolving Borrowing Base Deficiency resulting from a
redetermination or reduction of the Global Borrowing Base, prepay, or cause to
be prepaid, Loans and “Loans” under the Canadian Revolving Credit Agreement in an
aggregate principal amount equal to such deficiency, together, in each case,
with interest on the principal amount paid accrued to the date of such
prepayment and, if after prepaying all of such Loans and “Loans” under the
Canadian Revolving Credit Agreement, a Global Borrowing Base Deficiency or a
Revolving Borrowing Base Deficiency remains as a result of an LC Exposure, pay
to the Global Administrative Agent an amount equal to such remaining Global
Borrowing Base Deficiency or Revolving Borrowing Base Deficiency to be held as
cash collateral as provided in Section 2.4(i); provided that the
Borrower shall be obligated to make (or cause to be made) any such prepayment
and/or deposit of cash collateral within 180 days following the Deficiency
Notification Date with respect to such deficiency, and provided  further
that within 90 days following the Deficiency Notification Date, the Borrower
shall have prepaid (or caused to be prepaid), or deposited cash in an amount
equal to, one-half of such Global Borrowing Base Deficiency or Revolving
Borrowing Base Deficiency;

 

(2)                                  in the case of a U.S. Borrowing Base
Deficiency resulting from a redetermination or reduction of the Global
Borrowing Base, take the action described under clause (1) above (except
that prepayments shall be made in respect of Loans made pursuant to this
Agreement);

 

(3)                                  in the case of a U.S. Borrowing Base
Deficiency resulting from a reallocation of the Revolving Borrowing Base
pursuant to Section 2.7(d), prepay Loans in an aggregate principal amount
equal to such deficiency, together with interest on the principal amount paid
accrued to the date of such prepayment, and if a U.S. Borrowing Base Deficiency
remains after prepaying all of the Loans as a result of an LC Exposure, pay to
the Global Administrative Agent an amount equal to such remaining U.S.
Borrowing Base Deficiency to be held as cash collateral as provided in Section
2.4(i); it being understood that the Borrower shall be obligated to make
such prepayment and/or deposit of cash collateral on the effective date of such
reallocation;

 

(4)                                  in the case of a U.S. Borrowing Base
Deficiency resulting from an incurrence of Senior Debt or Subordinated Debt
pursuant to Section 2.7(g), utilize the proceeds of such Senior Debt or
Subordinated Debt, as applicable, to take the action required under clause
(1) above (except that (i) the Borrower shall not be obligated to make any
prepayments in respect of “Loans” under the Canadian Term Credit Agreement and
(ii) prepayments shall first be made in respect of Loans made pursuant to this
Agreement); provided that if a prepayment or deposit is required under
this clause (4), then the Borrower shall be obligated to make (or cause
to be made) such prepayment and/or deposit of cash collateral

 

40

 

contemporaneously with the incurrence of such Senior Debt or
Subordinated Debt;

 

(5)                                  notwithstanding anything in this Section
2.10 to the contrary, in the event that a U.S. Borrowing Base Deficiency
exists at a time when no Revolving Borrowing Base Deficiency exists, then, to
the extent that such action would cure (in whole or in part) such U.S.
Borrowing Base Deficiency, the Borrower may reallocate the Revolving Borrowing
Base between the U.S. Revolving Borrowing Base and the Canadian Revolving
Borrowing Base by providing the Global Administrative Agent with its election
to do so (which election will designate the relevant reallocations) on the
Business Day on which such U.S. Borrowing Base Deficiency occurs; provided,
however, that no reallocation shall be permitted to the extent such
reallocation would cause the aggregate “Credit Exposure” of the Canadian
Revolving Lenders under the Canadian Revolving Credit Agreement to be greater
than the lesser of the aggregate “Commitments” thereunder and the Canadian
Revolving Borrowing Base; and

 

(6)                                  in the case of a U.S. Borrowing Base
Deficiency resulting from a Casualty Event pursuant to Section 2.7(h),
utilize the Net Cash Proceeds of such Casualty Event to take the action described
under clause (1) above (except that (i) the Borrower shall not be
obligated to make any prepayments in respect of “Loans” under the Canadian Term
Credit Agreement and (ii) prepayments shall first be made in respect of Loans
made pursuant to this Agreement); provided that if a prepayment or
deposit is required under this clause (6), then the Borrower shall be
obligated to make (or cause to be made) such prepayment and/or deposit of cash
collateral on the Business Day immediately following the Deficiency Notification
Date with respect to such deficiency.

 

(c)                                  The Borrower shall notify the Global
Administrative Agent by telephone (confirmed by telecopy) of any prepayment
hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later
than 1:00 p.m., New York City time, two (2) Business Days before the date of
prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later
than 11:00 a.m., New York City time, on 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 (which amount shall be in a minimum principal
amount of U.S.$1,000,000 and in U.S.$1,000,000 increments in excess thereof); provided
that, if a notice of prepayment is given in connection with a conditional
notice of termination of the Commitments as contemplated by Section 2.8,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.8. 
Promptly following receipt of any such notice relating to a Borrowing,
the Global 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 2.2.  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 2.12 and by any other amounts
then due under this Agreement (including all amounts due under Section 2.16).

 

41

 

SECTION 2.11                    Fees.

 

(a)                                  The Borrower agrees to pay to the Global
Administrative Agent for the account of each Lender a commitment fee (the “Commitment
Fee”), which shall accrue at the Applicable Rate on the daily amount equal
to the Applicable Percentage of such Lender of the Unutilized Commitment during
the period from and including the Global Effective Date to but excluding the
date on which the Commitments terminate. 
Accrued Commitment Fees shall be payable in arrears on the last day of
March, June, September and December of each year and on the date on which the
Commitments terminate, commencing on the first such date to occur after the
date of this Agreement; provided that any Commitment Fees accruing after
the date on which the Commitments terminate shall be payable on demand.  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)                                 The Borrower agrees to pay (i) to the Global
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 Rate as interest on Eurodollar Loans on the average daily
amount of such Lender’s Applicable Percentage 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 on which the Commitments terminate and the date on which  the Lenders cease to have any LC Exposure,
and (ii) to the Issuing Bank a fronting fee equal to the greater of (A)
U.S.$500 and (B) the rate of 0.125% 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, as well as the Issuing
Bank’s standard fees with respect to the administration, issuance, amendment,
renewal or extension of any Letter of Credit or processing of drawings
thereunder.  Participation fees and
fronting fees shall be payable in arrears on the last day of each March, June,
September and December of each year, commencing on the first such date to occur
after the date of this Agreement; provided that all such fees shall be
payable on the date on which the Commitments terminate and any such fees
accruing after the date on which the Commitments terminate shall be payable on
demand.  Any other fees payable to the
Issuing Bank pursuant to this paragraph shall be payable within ten (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)                                  The Borrower agrees to pay to the Global
Administrative Agent, for its own account, the account of the Agents and for
the account of each Lender, as applicable, fees, including, without limitation,
an upfront fee (the “Upfront Fee”), in the amounts and at the times
separately agreed upon between the Borrower, the Global Administrative Agent
and the Global Syndication Agents, including, without limitation, the amounts
agreed upon in the Fee Letter.

 

(d)                                 All fees payable hereunder shall be paid on
the dates due, in immediately available funds, to the Global Administrative
Agent (or the Issuing Bank, in the case of fees payable to it) for
distribution, in the case of Commitment Fees and participation fees, to the
Lenders entitled thereto.  Fees paid
shall not be refundable under any circumstances.

 

42

 

SECTION 2.12                    Interest.

 

(a)                                  Subject to Section 10.13, the Loans
comprising each ABR Borrowing shall bear interest at the Alternate Base Rate
plus the Applicable Rate for ABR Loans.

 

(b)                                 Subject to Section 10.13, 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
Rate for Eurodollar Loans.

 

(c)                                  Notwithstanding the foregoing, but subject to
Section 10.13, if any principal of or interest on any Loan or any fee or
other amount payable by the Borrower hereunder is not paid when due, whether at
stated maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of overdue principal of any Loan, the rate otherwise applicable to
such Loan as provided in the preceding paragraphs of this Section plus,
to the extent permitted by applicable law, 2% or (ii) in the case of any other
amount, the rate applicable to ABR Loans as provided in paragraph (a) of this
Section plus, to the extent permitted by applicable law, 2%.

 

(d)                                 Subject to Section 10.13, accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan and upon termination of the Commitments; provided that (i)
interest accrued pursuant to paragraph (c) of this Section shall be
payable on demand of the Global Administrative Agent or the Majority Lenders
(through the Global Administrative Agent), (ii) in the event of any repayment
or prepayment of any Loan, 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)                                  Subject to Section 10.13, all interest
hereunder shall be computed on the basis of a year of 360 days, 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).  Promptly after
the determination of any interest rate provided for herein or any change
therein, the Global Administrative Agent shall notify the Lenders to which such
interest is payable and the Borrower thereof. 
Each determination by the Global Administrative Agent of an interest
rate or fee hereunder shall, except in cases of manifest error, be final,
conclusive and binding on the parties.

 

SECTION 2.13                    Alternate Rate of Interest.  If
prior to the commencement of any Interest Period for a Eurodollar Borrowing:

 

(a)                                  the Global 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, as applicable, for such Interest Period;

 

(b)                                 the Global Administrative Agent is advised by
the Majority Lenders that the Adjusted LIBO Rate for such Interest Period will
not adequately and fairly reflect the cost to

 

43

 

such Lenders of making or
maintaining their Loans included in such Borrowing for such Interest Period; or

 

(c)                                  the Global Administrative Agent determines in
good faith (which determination shall be conclusive) that by reason of
circumstances affecting the interbank dollar market generally, deposits in U.S.
Dollars in the London interbank dollar market are not being offered for the
applicable Interest Period and in an amount equal to the amount of the
Eurodollar Loan requested by the Borrower,

 

then the Global
Administrative Agent shall give notice thereof to the Borrower and the Lenders
by telephone or telecopy as promptly as practicable thereafter and, until the
Global 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 for the affected
Interest Period shall be ineffective, and (ii) if any Borrowing Request
requests a Eurodollar Borrowing, such Borrowing shall be made as a Eurodollar
Loan having the shortest Interest Period which is not unavailable under clauses
(a) through (c) of this Section, and if no Interest Period is
available, as an ABR Borrowing.

 

SECTION 2.14                    Illegality.

 

(a)                                  Notwithstanding any other provision of this
Agreement to the contrary, if (i) by reason of the adoption of any applicable
Governmental Rule or any change in any applicable Governmental Rule or in the
interpretation or administration thereof by any Governmental Authority or
compliance by any Lender with any request or directive (whether or not having
the force of law) of any central bank or other Governmental Authority or (ii)
circumstances affecting the London interbank dollar market or the position of a
Lender therein shall at any time make it unlawful or impracticable in the sole
discretion of a Lender exercised in good faith for such Lender or its
Applicable Lending Office to (A) honor its obligation to make Eurodollar Loans
either generally or for a particular Interest Period provided for hereunder, or
(B) maintain Eurodollar Loans either generally or for a particular Interest
Period provided for hereunder, then such Lender shall promptly notify the
Borrower thereof through the Global Administrative Agent and such Lender’s
obligation to make or maintain Eurodollar Loans having an affected Interest
Period hereunder shall be suspended until such time as such Lender may again
make and maintain Eurodollar Loans having an affected Interest Period (in which
case the provisions of Section 2.14(b) hereof shall be applicable).  Before giving such notice pursuant to this Section
2.14, such Lender will designate a different available Applicable Lending
Office for the affected Eurodollar Loans of such Lender or take such other action
as the Borrower may request if such designation or action will avoid the need
to suspend such Lender’s obligation to make Eurodollar Loans hereunder and will
not, in the sole opinion of such Lender exercised in good faith, be
disadvantageous to such Lender (provided, that such Lender shall have no
obligation so to designate an Applicable Lending Office for Eurodollar Loans
located in the United States of America).

 

(b)                                 If the obligation of any Lender to make or
maintain any Eurodollar Loans shall be suspended pursuant to Section 2.14(a)
hereof, all Loans having an affected Interest Period which would otherwise be
made by such Lender as Eurodollar Loans shall be made instead as ABR

 

44

 

Loans (and, if such Lender
so requests by notice to the Borrower with a copy to the Global Administrative
Agent, each Eurodollar Loan having an affected Interest Period of such Lender
then outstanding shall be automatically converted into an ABR Loan on the last
day of the Interest Period for such Eurodollar Loans unless earlier conversion
is required by applicable law) and, to the extent that Eurodollar Loans are so
made as (or converted into) ABR Loans, all payments of principal which would
otherwise be applied to such Eurodollar Loans shall be applied instead to such
ABR Loans.

 

SECTION 2.15                    Increased Costs.

 

(a)                                  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 any Issuing Bank;
or

 

(ii)                                  impose on any Lender or any Issuing Bank or
the London interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or participation
therein;

 

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 increase the cost to such Lender or such Issuing Bank of participating in,
issuing or maintaining any Letter of Credit or to reduce the amount of any sum
received or receivable by such Lender or such Issuing Bank hereunder (whether
of principal, interest or otherwise), then the Borrower will pay to such Lender
or such Issuing Bank such additional amount or amounts as will compensate such
Lender or such Issuing Bank, as the case may be, for such additional costs
incurred or reduction suffered.

 

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

 

(c)                                  A certificate of a Lender or an Issuing Bank
setting forth the amount or amounts necessary to compensate such Lender or such
Issuing Bank or such Lender’s or such Issuing Bank’s holding company, as the
case may be, as specified in paragraph (a) or (b) of this Section
shall be delivered to the Borrower and shall be conclusive absent manifest
error.  The Borrower

 

45

 

shall pay such Lender or
such Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

 

(d)                                 Failure or delay on the part of any Lender or
any Issuing Bank to demand compensation pursuant to this Section shall not
constitute a waiver of such Lender’s or such Issuing Bank’s right to demand
such compensation; provided that the Borrower shall not be required to
compensate a Lender or an Issuing Bank pursuant to this Section for any
increased costs or reductions incurred more than 270 days prior to the date
that such Lender or such Issuing Bank, as the case may be, notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender’s or such Issuing Bank’s intention to claim compensation
therefor; provided  further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 270-day period
referred to above shall be extended to include the period of retroactive effect
thereof.

 

SECTION 2.16                    Break Funding Payments.  In
the event of (a) the payment (including prepayment) 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 other than on the last day of the Interest Period
applicable thereto, (c) the failure to borrow, convert, continue or prepay any
Loan on the date specified in any notice delivered pursuant hereto (regardless
of whether such notice may be revoked under Section 2.10(b) and is
revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan
other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to  Section 2.19 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 London interbank market.  A certificate of any Lender setting forth
any amount or amounts that such Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and the Global Administrative Agent
and shall be conclusive absent manifest error. 
The Borrower shall pay such Lender the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

 

SECTION 2.17                    Taxes.

 

(a)                                  Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower shall be required to deduct any
Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section), the Global Administrative Agent, each Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it

 

46

 

would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law; provided that
if a Lender is in breach of its obligations under Section 2.17(e), then
the Borrower shall only be obligated to comply with clauses (ii) and (iii)
of this Section 2.17(a) with respect to payments to be made to such
Lender.

 

(b)                                 In addition, the Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.

 

(c)                                  The Borrower shall indemnify the Global
Administrative Agent, each Lender and each Issuing Bank, within ten (10) days
after written demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes paid by the Global Administrative Agent, such Lender or such
Issuing Bank, as the case may be, on or with respect to any payment by or on
account of any obligation of the Borrower hereunder or under any other Loan
Document (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority; provided that if a Lender is
in breach of its obligations under Section 2.17(e), then the Borrower
shall have no obligations under this Section 2.17(c) with respect to any
payments or liabilities described herein made or owed by such Lender.  A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or an Issuing Bank,
or by the Global Administrative Agent on its own behalf or on behalf of a
Lender or an Issuing Bank, shall be conclusive absent manifest error.

 

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

 

(e)                                  Each Lender that is not organized under the
laws of the United States of America or a state thereof agrees that such Lender
will deliver to the Borrower and the Global Administrative Agent two (2) duly
completed copies of United States Internal Revenue Service Form W-8 BEN or W-8
ECI (or if such forms are no longer required, a representation by such Lender)
certifying in either case that such Lender is entitled to receive payments from
the Loan Parties under the Loan Documents without deduction or withholding of
any United States federal income taxes. 
Each Lender which so delivers a Form W-8 BEN or W-8 ECI further
undertakes to deliver to the Borrower and the Global Administrative Agent two
(2) additional copies of such form (or a successor form) on or before such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form so delivered by it and such amendments thereto
or extensions or renewals thereof as may be reasonably requested by the
Borrower or the Global Administrative Agent, in each case, certifying that such
Lender is entitled to receive payments from the Borrower under the Loan Documents
without deduction or withholding of any United States federal income taxes,
unless (i) an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which

 

47

 

would prevent such Lender
from duly completing and delivering any such form with respect to it and (ii)
such Lender advises the Borrower and the Global Administrative Agent that it is
not capable of receiving such payments without any deduction or withholding of
United States federal income tax.

 

(f)                                    If the Borrower at any time pays an amount
under Section 2.17(a), (b) or (c) to any Lender, the
Global Administrative Agent or any Issuing Bank, and such payee receives a
refund of or credit for any part of any Indemnified Taxes or Other Taxes which
such payee determines in its sole judgment is made with respect to such amount
paid by the Borrower, such Lender, the Global Administrative Agent or any
Issuing Bank, as the case may be, shall pay to the Borrower the amount of such
refund or credit promptly, and in any event within 60 days, following the
receipt of such refund or credit by such payee.

 

SECTION 2.18                    Payments Generally; Pro Rata Treatment;
Sharing of Set-offs.

 

(a)                                  The Borrower shall make each payment required
to be made by it hereunder or under any other Loan Document (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 2.15, 2.16 or 2.17, or otherwise)
prior to the time expressly required hereunder or under such other Loan
Document for such payment (or, if no such time is expressly required, prior to
12:00 noon, New York City time), on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of the Global 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 Global Administrative Agent c/o JPMorgan Chase
Bank, Loan and Agency Services, 1111 Fannin, 8th floor, Houston, TX 77002,
Attention:  James DeLeon, Telephone:
713-750-2366, Fax: 713-427-6307, except payments to be made directly to an
Issuing Bank as expressly provided herein and payments pursuant to Sections
2.15, 2.16, 2.17(c) and 10.3 shall be made directly to
the Persons entitled thereto and payments pursuant to other Loan Documents
shall be made to the Persons specified therein. The Global 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.  Except as set forth in clause (a) of
the definition of “Interest Period”, if any payment under any Loan Document
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 under each Loan
Document shall be made in U.S. Dollars.

 

(b)                                 If at any time insufficient funds are
received by and available to the Global Administrative Agent to pay fully all
amounts of principal, unreimbursed LC Disbursements, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of interest and fees then due to such parties, and
(ii) second, towards payment of principal and unreimbursed LC Disbursements
then due hereunder, ratably among the parties entitled thereto in accordance
with the amounts of principal and unreimbursed LC Disbursements then due to
such parties.

 

48

 

(c)                                  If any Lender shall, by exercising any right
of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Loans and participations in LC
Disbursements and accrued interest thereon than the proportion received by any
other Lender, then the Lender receiving such greater proportion shall purchase
(for cash at face value) participations in the Loans and participations in LC
Disbursements of other Lenders to the extent necessary so that the benefit of
all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans
and participations in LC Disbursements; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph 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 Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph 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.

 

(d)                                 Unless the Global Administrative Agent shall
have received notice from the Borrower prior to the date on which any payment
is due to the Global Administrative Agent for the account of the Lenders or an
Issuing Bank hereunder that the Borrower will not make such payment, the Global
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 an 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 each of the Issuing
Banks, as the case may be, severally agrees to repay to the Global
Administrative Agent forthwith on demand the amount so distributed to such
Lender or such Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date
of payment to the Global Administrative Agent, at the greater of the Federal
Funds Effective Rate and a rate determined by the Global Administrative Agent
in accordance with banking industry rules on interbank compensation.

 

(e)                                  If any Lender shall fail to make any payment
required to be made by it pursuant to Section 2.4(d) or (e), 2.5(b),
2.18(d) or 10.3(c) then the Global Administrative Agent may, in
its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Global 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 2.19                    Mitigation Obligations; Replacement of
Lenders.

 

(a)                                  If any Lender requests compensation under Section
2.15, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the

 

49

 

account of any Lender
pursuant to Section 2.17, then such Lender shall use reasonable efforts
to designate a different Applicable 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 2.15 or 2.17, 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.

 

(b)                                 If (i) any Lender asserts that events have
occurred suspending its obligation to make or maintain Eurodollar Loans under
Section 2.14 when substantially all other Lenders have not also done so, (ii)
any Lender requests compensation under Section 2.15, (iii) 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 2.17, or
(iv) any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and
the Global Administrative Agent, require such Lender to assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 10.4), 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
(1) the Borrower shall have received the prior written consent of the Global
Administrative Agent, which consent shall not unreasonably be withheld or delayed,
(2) 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),
(3) the assignee and assignor shall have entered into an Assignment and
Acceptance, and (4) in the case of any such assignment resulting from a claim
for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in
such compensation or payments.

 

SECTION 2.20                    Currency Conversion and Currency Indemnity.

 

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

 

(b)                                 Conversion of Agreed Currency into Judgment
Currency.  If, for the purpose of obtaining or
enforcing judgment in any court in any jurisdiction, it becomes necessary to
convert into a particular currency (the “Judgment Currency”) any amount
due in the Agreed Currency

 

50

 

then the conversion shall be
made on the basis of the rate of exchange prevailing on the next Business Day
following the date such judgment is given and in any event the Borrower shall
be obligated to pay the Agents and the Lenders any deficiency in accordance
with Section 2.20(c).  For the
foregoing purposes “rate of exchange” means the rate at which the relevant
Lender or Agent, as applicable, in accordance with its normal banking
procedures is able on the relevant date to purchase the Agreed Currency with the
Judgment Currency after deducting any premium and costs of exchange.

 

(c)                                  Circumstances Giving Rise to Indemnity.  To
the fullest extent permitted by applicable law, if (i) any Lender or any Agent
receives any payment or payments on account of the liability of the Borrower
hereunder pursuant to any judgment or order in any Other Currency, and (ii) the
amount of the Agreed Currency which the relevant Lender or Agent, as
applicable, is able to purchase on the Business Day next following such receipt
with the proceeds of such payment or payments in accordance with its normal
procedures and after deducting any premiums and costs of exchange is less than
the amount of the Agreed Currency due in respect of such liability immediately
prior to such judgment or order, then the Borrower on demand shall, and the
Borrower hereby agrees to, indemnify the Lenders and the Agents from and
against any loss, cost or expense arising out of or in connection with such
deficiency.

 

(d)                                 Indemnity Separate Obligation.  To
the fullest extent permitted by applicable law, the agreement of indemnity
provided for in Section 2.20(c) shall constitute an obligation separate
and independent from all other obligations contained in this Agreement, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by the Lenders or Agents or any of them
from time to time, and shall continue in full force and effect notwithstanding
any judgment or order for a liquidated sum in respect of an amount due
hereunder or under any judgment or order.

 

ARTICLE III

Representations
and Warranties

 

In order to induce  the Global Administrative Agent, the other
Agents, any Issuing Bank and the Lenders to enter into this Agreement and to
make Loans hereunder, the Borrower represents and warrants to the Global
Administrative Agent, the other Agents, any Issuing Bank and the Lenders as set
forth in this Article.

 

SECTION 3.1                          Corporate Existence. 
Each of the Borrower and its Subsidiaries: (i) is an organization duly
organized, legally existing and in good standing under the laws of the
jurisdiction of its organization; (ii) has all requisite power, and has all
material Government Approvals necessary to own its assets and carry on its
business as now being or as proposed to be conducted; and (iii) is qualified to
do business in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure so to qualify could
reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.2                          Financial Condition.  The
audited consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at December 31, 2002 and the related consolidated statement of
income, stockholders’ equity and cash flow of the Borrower and its Consolidated
Subsidiaries for the fiscal year ended on said date, with the opinion thereon
of KPMG LLP

 

51

 

heretofore furnished to each
of the Lenders and the unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as at March 31, 2003 and their related
consolidated statements of income, stockholders’ equity and cash flow of the
Borrower and its Consolidated Subsidiaries for the three month period ended on
such date heretofore furnished to the Global Administrative Agent, are complete
and correct and fairly present, in all material respects, the consolidated
financial condition of the Borrower and its Consolidated Subsidiaries as at
said dates and the results of its operations for the fiscal year and the nine
month period on said dates, all in accordance with GAAP, as applied on a
consistent basis (subject, in the case of the interim financial statements, to
normal year-end adjustments).  The pro
forma balance sheet of the Borrower as of March 31, 2003 delivered to the
Global Administrative Agent and prepared giving effect to the Acquisition (i)
has been prepared in good faith in accordance with GAAP, (ii) is based upon
assumptions believed to be reasonable and (iii) presents fairly, in all
material respects, the unaudited, pro forma financial position of the Borrower
and its Subsidiaries as of March 31, 2003. 
Neither the Borrower nor any Consolidated Subsidiary has on the Closing
Date or the Global Effective Date any material Indebtedness, contingent
liabilities, 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.  Since March 31, 2003, there has been no
change or event which could reasonably be expected to have a Material Adverse
Effect.  Since the date of the Financial
Statements, neither the business nor the Properties of the Borrower or any
Subsidiary have been materially and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or other
labor disturbance, embargo, requisition or taking of Property or cancellation
of contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy.

 

SECTION 3.3                          Litigation.  At the Global Effective Date,
there is no litigation, legal, administrative 
or arbitral proceeding, investigation or other action of any nature
pending or, to the knowledge of the Borrower threatened against or affecting
the Borrower or any Subsidiary which involves the possibility of any judgment
or liability against the Borrower or any Subsidiary not fully covered by
insurance (except for normal deductibles), and which could reasonably be
expected to have a Material Adverse Effect.

 

SECTION 3.4                          No Breach.  Neither the execution and
delivery of the Combined Loan Documents, nor compliance with the terms and
provisions hereof will conflict with or result in a breach of, or require any
consent which has not been obtained as of the Closing Date under, the
respective Organic Documents of the Borrower or any Subsidiary, or any
Governmental Rule or any material agreement or instrument to which the Borrower
or any Subsidiary is a party or by which it is bound or to which it or its
Properties are subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of the Borrower or any Subsidiary pursuant to the terms of
any such agreement or instrument other than the Liens created by the Combined
Loan Documents.

 

SECTION 3.5                          Authority.  Each Loan Party has all
necessary power and authority to execute, deliver and perform its obligations
under the Combined Loan Documents to which it is a party; and the execution,
delivery and performance by each Loan Party of the Combined Loan Documents to
which it is a party, have been duly authorized by all necessary action on its
part; and the Combined Loan Documents constitute the legal, valid and binding
obligations of each

 

52

 

Loan Party thereto,
enforceable in accordance with their terms, except to the extent that enforcement
may be subject to any applicable bankruptcy, insolvency or similar laws
generally affecting the enforcement of creditors’ rights.

 

SECTION 3.6                          Approvals.  Except for filings necessary
to perfect Liens created under the Combined Loan Documents, no authorizations,
approvals or consents of, and no filings or registrations with, any
Governmental Authority are necessary for the execution, delivery or performance
by any Loan Party of the Combined Loan Documents or for the validity or
enforceability thereof.

 

SECTION 3.7                          Use of Proceeds and Letters of Credit.  The
Borrower will, and will cause each Subsidiary to, use the proceeds of the Loans
(a) to refinance existing Indebtedness of the Borrower and its Subsidiaries,
(b) to reimburse each Issuing Bank for LC Disbursements in accordance with Section
2.4(e), (c) to pay a portion of the purchase price for the Acquisition, or
(d) for the Borrower’s and its Subsidiaries’ general corporate purposes,
including intercompany Investments.  No
part of the proceeds of any Loan will be used, whether directly or indirectly,
for any purpose that entails a violation of any of the regulations of the
Board, including Regulation U.  Letters
of Credit will be issued only to support normal and customary oil and gas
operations undertaken by the Borrower or any of its Subsidiaries in the
ordinary course of its business.

 

SECTION 3.8                          ERISA.  Except as could not
reasonably be expected to have a Material Adverse Effect (or with respect to
clauses (a), (b) or (e) where the failure to take such actions could not
reasonably be expected to have a Material Adverse Effect):

 

(a)                                  The Borrower, each Subsidiary and each ERISA
Affiliate have complied with ERISA and, where applicable, the Code regarding
each Plan.

 

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

 

(c)                                  No act, omission or transaction has occurred
which could result in imposition on the Borrower, any Subsidiary or any ERISA
Affiliate (whether directly or indirectly) of (i) either a civil penalty
assessed pursuant to section 502(c), (i) or (l) 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)                                 No Plan (other than a defined contribution
plan) or any trust created under any such Plan has been terminated within the
last six (6) calendar years.  No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been
or is expected by the Borrower, any Subsidiary 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 the Borrower, any Subsidiary or any ERISA Affiliate is required
under the terms of each Plan or applicable law to have paid as contributions to
such Plan, and no accumulated funding deficiency (as defined in

 

53

 

section 302 of ERISA and
section 412 of the Code), whether or not waived, exists with respect to any
Plan.

 

(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.  The term “actuarial
present value of the benefit liabilities” shall have the meaning specified in
section 4041 of ERISA.

 

(g)                                 None of the Borrower, any Subsidiary or 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 Borrower, a Subsidiary or any
ERISA Affiliate in its sole discretion at any time without any material liability.

 

(h)                                 None of the Borrower, any Subsidiary or any
ERISA Affiliate sponsors, maintains or contributes to, or has at any time in
the preceding six calendar years, sponsored, maintained or contributed to, any
Multiemployer Plan.

 

(i)                                     None of the Borrower, any Subsidiary or 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 3.9                          Taxes.  Each of the Borrower and its
Subsidiaries has filed all U.S. Federal income tax returns, Canadian income tax
returns and all other tax returns which are required to be filed by them and
have paid all material taxes due pursuant to such returns or pursuant to any
assessment received by the Borrower or any Subsidiary.  The charges, accruals and reserves on the
books of the Borrower and its Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of the Borrower, adequate.  No tax lien has been filed and, to the
knowledge of the Borrower, no claim is being asserted with respect to any such
tax, fee or other charge.

 

SECTION 3.10                    Properties, etc.

 

(a)                                  Each of the Borrower and each of its
Subsidiaries has good and defensible title to (i) those Mortgaged Properties,
if any, used in calculating compliance with the collateral coverage
requirements set forth in Section 5.13 and (ii) its and their other
material (individually or in the aggregate) Properties, in each case free and
clear of all Liens, except Liens permitted by Section 7.2.  Except as set forth in Schedule 3.10,
after giving full effect to the Excepted Liens, the Borrower or its
Subsidiaries owns the net interests in production attributable to the
Hydrocarbon Interests reflected in the most recently delivered Reserve Report
and the ownership of such Properties shall not in any material respect obligate
the Borrower or any 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.  All
information contained in the most recently delivered Reserve Report is true and
correct in all material respects as of the date thereof.

 

54

 

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

 

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

 

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

 

SECTION 3.11                    No Material Misstatements.  No
written information, statement, exhibit, certificate, document or report
furnished to the Global Administrative Agent, the other Agents and the Lenders
(or any of them) by the Borrower or any Subsidiary in connection with the
negotiation of the Combined Loan Documents contained any material misstatement
of fact or omitted to state a material fact or any fact necessary to make the
statement contained therein not materially misleading in the light of the
circumstances in which made and with respect to the Borrower and its
Subsidiaries taken as a whole.  There is
no fact existing with respect to the Borrower or any Subsidiary which could
reasonably be expected to have a Material Adverse Effect or in the future could
reasonably be likely to have (so far as the Borrower can now foresee) a
Material Adverse Effect and which has not been set forth in this Agreement or
the other documents, certificates and statements furnished to the Global
Administrative Agent by or on behalf of the Borrower or any Subsidiary prior
to, or on, the Global Effective Date in connection with the transactions
contemplated hereby.

 

SECTION 3.12                    Investment Company Act. 
Neither the Borrower nor any Subsidiary is an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended.

 

SECTION 3.13                    Public Utility Holding Company Act. 
Neither the Borrower nor any Subsidiary is a “holding company,” or a
“subsidiary company” of a “holding company,” or an “affiliate” of a “holding
company” or of a “subsidiary company” of a “holding company,” or a  “public utility” within the meaning of the
Public Utility Holding Company Act of 1935, as amended.

 

SECTION 3.14                    Subsidiaries. 
Except as set forth on Schedule 3.14 or as otherwise disclosed in
writing to the Global Administrative Agent, the Borrower has no Subsidiaries or
Material Subsidiaries.

 

SECTION 3.15                                            Location of Business and Offices.  The
Borrower’s principal place of business and chief executive offices are located
at the address stated on the signature page of this Agreement or as otherwise
disclosed in writing to the Global Administrative Agent and the

 

55

 

Organizational Number of the
Borrower is 2118742.  The principal
place of business, chief executive office and Organizational Number of each
Subsidiary are described on Schedule 3.14 or as otherwise disclosed in
writing to the Global Administrative Agent.

 

SECTION 3.16                    Defaults.  Neither the Borrower nor any
Subsidiary is in default nor has any event or circumstance occurred which, but
for the expiration of any applicable grace period or the giving of notice, or
both, would constitute a default under any material agreement or instrument to
which the Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary is bound which default could reasonably be expected to have a
Material Adverse Effect.  No Default
hereunder has occurred and is continuing.

 

SECTION 3.17                    Environmental Matters. 
Except as could not reasonably be expected to have a Material Adverse
Effect (or with respect to clauses (c), (d) and (e) below,
where the failure to take such actions would not have a Material Adverse
Effect):

 

(a)                                  Neither any Property of the Borrower or any
Subsidiary nor the operations conducted thereon violate any order or
requirement of any court or Governmental Authority or any Environmental Laws;

 

(b)                                 Without limitation of clause (a) above, no
Property of the Borrower or any Subsidiary nor the operations currently
conducted thereon or, to the best knowledge of the Borrower, by any prior owner
or operator of such Property or operation, are in violation of or subject to
any existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Authority or to any remedial
obligations under Environmental Laws;

 

(c)                                  All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Borrower and each Subsidiary,
including without limitation past or present treatment, storage, disposal or
release of a Hazardous Material into the environment, have been duly obtained
or filed, and the Borrower and each Subsidiary are in compliance with the terms
and conditions of all such notices, permits, licenses and similar
authorizations;

 

(d)                                 All Hazardous Materials, if any, generated at
any and all Property of the Borrower or any Subsidiary have 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 welfare or
the environment, and, to the best knowledge of the Borrower with respect to the
transport and disposal of the Borrower’s or any Subsidiary’s Hazardous
Materials, 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 welfare or
the environment, and are not the subject of any existing, pending or threatened
action, investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws;

 

(e)                                  The Borrower has taken all steps reasonably
necessary to determine and has determined that no Hazardous Materials, have
been disposed of or otherwise released and there has been no threatened release
of any Hazardous Materials on or to any Property of the Borrower

 

56

 

or any Subsidiary except in
compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment;

 

(f)                                    To the extent applicable, all Property of the
Borrower and each Subsidiary currently satisfies all design, operation, and
equipment requirements imposed by the OPA or scheduled as of the Global
Effective Date to be imposed by OPA during the term of this Agreement,  and the Borrower does not have any reason to
believe that such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this
Agreement; and

 

(g)                                 Neither the Borrower nor any Subsidiary has
any known contingent liability in 
connection with any release or threatened release of any Hazardous
Material into the environment.

 

SECTION 3.18                    Compliance with the Law. 
Neither the Borrower nor any Subsidiary has violated any Governmental
Rule or failed to obtain any Governmental Approval necessary for the ownership
of any of its Properties or the conduct of its business, which violation or
failure could reasonably be expected to have (in the event such violation or
failure were asserted by any Person through appropriate action) a Material
Adverse Effect.  Except for such acts or
failures to act as could not reasonably be expected to have a Material Adverse
Effect, the Oil and Gas Properties (and properties unitized therewith) have
been maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable Governmental Rules of all Governmental
Authorities having jurisdiction and in conformity with the provisions of all
leases, subleases or other contracts comprising a part of the Hydrocarbon
Interests and other contracts and agreements forming a part of the Oil and Gas
Properties.

 

SECTION 3.19                    Insurance.  Schedule 3.19 attached
hereto contains an accurate and complete description of all material policies
of fire, liability, workmen’s compensation and other forms of insurance owned
or held by the Borrower and each Subsidiary. 
All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of the
closing and through the respective dates set forth in Schedule 3.19 have
been paid, and no notice of cancellation or termination has been received with
respect to any such policy.  Such
policies are sufficient for compliance with all requirements of law and of all
agreements to which the Borrower or any Subsidiary is a party; are valid,
outstanding and enforceable policies; provide adequate insurance coverage in at
least such amounts and against at least such risks (but including in any event
public liability) as are usually insured against in the same general area by
companies engaged in the same or a similar business for the assets and
operations of the Borrower and each Subsidiary.

 

SECTION 3.20                    Hedging Agreements.  Schedule
3.20 sets forth, as of the Closing Date, a true and complete list of all
Hedging Agreements (including commodity price swap agreements) and all forward
agreements or contracts of sale which provide for prepayment for deferred
shipment or delivery of oil, gas or other commodities) of the Borrower and each
Subsidiary, 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 counter party to each such agreement.

 

57

 

SECTION 3.21                    Restriction on Liens. 
Except for any industrial development bonds, purchase money mortgages or
Capital Lease Obligations permitted by Section 7.1 (in which cases, any
prohibition or limitation shall only be effective against the assets finance
thereby), neither the Borrower nor any of its Subsidiaries is a party to any
agreement or arrangement (other than this Agreement), or subject to any order,
judgment, writ or decree, which either restricts or purports to restrict its
ability to grant Liens to the Global Administrative Agent and the Lenders on or
in respect of their respective assets or Properties.

 

SECTION 3.22                    Material Agreements. 
Except for the Loan Documents, the Senior Subordinated Credit Agreement,
the subsidiary guaranties executed in connection therewith, and the indenture
contemplated thereby, and the Hedging Agreements, neither the Borrower nor any
of its Subsidiaries are parties to any material agreements, leases, indentures,
purchase agreements, obligations in respect of letters of credit, Guarantees,
joint venture agreements, and other instruments in effect or to be in effect as
of the Closing Date providing for, evidencing, securing or otherwise relating
to any Indebtedness of the Borrower or any of its Subsidiaries.

 

SECTION 3.23                    Solvency.  Immediately after the
consummation of the Financing Transactions to occur on the Global Effective
Date and immediately following the making of each Loan made on the Global
Effective Date and after giving effect to the application of the proceeds of
such Loans, (a) each Loan Party will not have unreasonably small capital with
which to conduct the business in which such Loan Party is engaged as such
business is now conducted and is proposed to be conducted following the Global
Effective Date; and (b) the Borrower, each Loan Party and the Borrower and its
Subsidiaries, on a consolidated basis, will be Solvent.

 

SECTION 3.24                    Priority; Security Matters.  The
Combined Obligations are and shall be at all times secured by Liens on all
Equity Interests pledged pursuant to the Pledge Agreements delivered pursuant
to Sections 4.1(e), (f) and (g), or otherwise delivered
pursuant to this Agreement or the other Loan Documents, to the extent
perfection has or will occur, by the filing of a UCC financing statement, the
filing of an instrument to perfect a floating charge under the laws of any
applicable province, or by possession, and, except for Liens permitted by Section
7.2, all such Liens shall be first-priority Liens.

 

ARTICLE IV

Conditions

 

SECTION 4.1                          Initial Loan.  The
obligations of the Lenders to make Loans or for any 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
10.2):

 

(a)                                  Certain Loan Documents.  The
Global Administrative Agent (or its counsel) shall have received from each
party thereto either a counterpart of each of the following documents duly
executed on behalf of such party or written evidence satisfactory to the Global
Administrative Agent (which may include telecopy transmission of a signed
signature page of such document) that each such party has duly executed for
delivery to the Global Administrative Agent a counterpart of each of the
following documents which documents must be acceptable to the Global
Administrative Agent in its sole and absolute discretion: this Agreement, the
Intercreditor Agreement, the Fee Letter, a Guaranty from each Guarantor, the
Pledge

 

58

 

Agreements required by Sections
4.1(e), (f) and (g),and all related financing statements and
other filings, and the other Loan Documents.

 

(b)                                 Canadian Revolving Loan Documents and
Canadian Term Loan Documents.  The Global Administrative Agent shall have
received copies of the executed Canadian Revolving Loan Documents and Canadian
Term Loan Documents.

 

(c)                                  Opinions of Counsel.  The
Global Administrative Agent shall have received opinions, dated the Global
Effective Date, addressed to the Global Administrative Agent, the Canadian
Administrative Agent and all Lenders, from (i) Vinson & Elkins L.L.P.,
counsel to the Borrower, in substantially the form attached hereto as Exhibit
A-1 and (ii) LeBoeuf, Lamb, Greene & MacRae L.L.P., special Wyoming
counsel to Retex, Inc., in substantially the form attached hereto as Exhibit
A-2.

 

(d)                                 Organizational Documents.  The
Global Administrative Agent shall have received a certificate of an Authorized
Officer of each Loan Party dated as of the Global Effective Date, certifying:

 

(i)                                     that attached to each such certificate are
(A) a true and complete copy of the Organic Documents of such Loan Party, as
the case may be, as in effect on the date of such certificate, (B) a true and
complete copy of a certificate from the Governmental Authority of the state of
such entity’s organization certifying that such entity is duly organized and
validly existing in such jurisdiction, and (C) a true and complete copy of a
certificate from the appropriate Governmental Authority of each state (without
duplication) certifying that such entity is duly qualified and in good standing
to transact business in such jurisdiction as a foreign corporation, if the
failure to be so qualified or in good standing could reasonably be expected to
have a Material Adverse Effect;

 

(ii)                                  that attached to such certificate is a true
and complete copy of resolutions duly adopted by the board of directors or
management committee of such Loan Party, as applicable, authorizing the
execution, delivery and performance of such of the Combined Loan Documents to which
such Loan Party is or is intended to be a party;

 

(iii)                               that attached thereto is a copy of the
certificate of incorporation or formation, as the case may be, of such Loan
Party, and a certificate as to the good standing of and payment of franchise
taxes by the Borrower or each such Loan Party, if applicable, dated as of a
recent date; and that such certificate of incorporation or certificate of
formation, as the case may be, has not been amended since the date of such
certified copy; and

 

(iv)                              as to the incumbency and specimen signature
of each officer of such Loan Party executing such of the Combined Loan
Documents to which such Loan Party is or is intended to be a party.

 

(e)                                  Pledge Agreement – U.S. Subsidiaries.  The
Global Administrative Agent shall have received counterparts of a Pledge
Agreement, dated as of the Global Effective Date, duly executed and delivered
by the Borrower, together with the following:

 

59

 

(i)                                     stock certificates representing 100% of the
outstanding shares of common stock of all Material Subsidiaries, including,
without limitation, all Subsidiaries listed in Exhibit H hereto, and
stock powers and instruments of transfer, endorsed in blank, with respect to
such stock certificates; and

 

(ii)                                  all documents and instruments, including
Uniform Commercial Code Financing Statements (Form UCC-1), required by law or
reasonably requested by the Global Administrative Agent to be filed, registered
or recorded to create or perfect the Liens intended to be created under the
Pledge Agreement.

 

(f)                                    Pledge Agreement – Matador E&P.  The
Global Administrative Agent shall have received counterparts of a Pledge
Agreement, dated as of the Global Effective Date, duly executed and delivered
by Matador, together with the following:

 

(i)                                     stock certificates representing 100% of the
outstanding shares of common stock of Matador E&P, and stock powers and
instruments of transfer, endorsed in blank, with respect to such stock
certificates; and

 

(ii)                                  all documents and instruments, including
Uniform Commercial Code Financing Statements (Form UCC-1), required by law or
reasonably requested by the Global Administrative Agent to be filed, registered
or recorded to create or perfect the Liens intended to be created under the
Pledge Agreement.

 

(g)                                 Pledge Agreement – Canadian Subsidiaries.  The
Global Administrative Agent shall have received counterparts of a Pledge
Agreement, dated as of the Global Effective Date, duly executed and delivered
by the Borrower, together with the following:

 

(i)                                     stock certificates representing (x) 100% of
the outstanding shares of common stock of TBF and (y) 65% of the outstanding
shares of common stock TBRL, and stock powers and instruments of transfer,
endorsed in blank, with respect to such stock certificates; and

 

(ii)                                  all documents and instruments, including
Uniform Commercial Code Financing Statements (Form UCC-1), required by law or
reasonably requested by the Global Administrative Agent to be filed, registered
or recorded to create or perfect the Liens intended to be created under the
Pledge Agreement.

 

(h)                                 UCC and Lien Searches.  The
Global Administrative Agent shall have received (i) the UCC Searches, all dated
reasonably close to the Closing Date, in the discretion of the Global Administrative
Agent and in form and substance satisfactory to the Global Administrative
Agent, (ii) evidence reasonably satisfactory to the Global Administrative Agent
that the Liens indicated by the financing statements (or similar documents) in
such UCC Searches are permitted by Section 7.2 or have been released,
and (iii) evidence in form and substance satisfactory to the Global
Administrative Agent of the ownership by the Borrower and its Subsidiaries of
the Oil and Gas Properties.

 

(i)                                     Priority; Security Interest.  The
Collateral and Borrowing Base Properties shall be free and clear of all Liens,
except Liens permitted by Section 7.2. 
All filings, notices, recordings

 

60

 

and other action necessary
to perfect the Liens in the Collateral shall have been made, given or
accomplished or arrangements for the completion thereof satisfactory to the
Global Administrative Agent and its counsel shall have been made and all filing
fees and other expenses related to such actions either have been paid in full
or arrangements have been made for their payment in full which are satisfactory
to the Global Administrative Agent.

 

(j)                                     Approvals and Consents.  The
Global Administrative Agent shall have received copies of all Governmental
Approvals and third party consents and approvals necessary or, advisable in
connection with the Financing Transactions and the Acquisition, and all
applicable waiting periods and appeal periods shall have expired, in each case
without the imposition of any burdensome conditions.  There shall be no actual government or judicial action
restraining, preventing or imposing burdensome conditions on the Financing
Transactions or the Acquisition.

 

(k)                                  Insurance.  The Global Administrative
Agent and the Lenders shall have received certificates, dated within fifteen
(15) days of the Closing Date, from the Borrower’s insurers reflecting (i)
compliance with all of the insurance required by Section 5.3 and by the
Security Documents and (ii) that such insurance is in full force and effect.

 

(l)                                     Pro Forma Balance Sheet and Income Statement.  The
Global Administrative Agent shall have received the pro forma consolidated
balance sheet and income statement of the Borrower and its Subsidiaries
described in Section 3.2, and such pro forma consolidated balance sheet
shall be consistent in all material respects with the forecasts and other
information previously provided to the Lenders.

 

(m)                               Initial Reserve Report.  The
Global Administrative Agent and the Lenders shall have received and shall be
satisfied with the contents, results and scope of the Initial Reserve Report.

 

(n)                                 Hedging Agreements.  The
Global Administrative Agent shall have received a list of any Hedging
Agreements currently in existence with respect to the Borrower or any of its
Subsidiaries.

 

(o)                                 Existing Facilities.  The
Global Administrative Agent shall have received a certificate, signed by an
Authorized Officer of the Borrower, stating that the Borrower or its
Subsidiaries have repaid in full and terminated the Existing Credit Facilities
contemporaneously with the initial Combined Loans under the Combined Credit
Agreements.  The Global Administrative
Agent shall have received evidence satisfactory to it that all Liens associated
with the Existing Credit Facilities have been released or terminated
contemporaneously with the making of such payments and that arrangements
satisfactory to the Global Administrative Agent have been made for recording
and filing such releases.

 

(p)                                 Acquisition Documents; Consummation of
Acquisition.  The Global Administrative Agent shall have
received copies of the Acquisition Documents, which Acquisition Documents shall
be certified by an Authorized Officer of the Borrower as complete and correct.  The Acquisition shall have been, or
contemporaneously with the initial funding of Loans on the Global Effective
Date shall be, consummated as contemplated by and pursuant to the Acquisition
Documents and applicable law (without any amendment to or waiver of any

 

61

 

material terms or conditions
of the Acquisition Documents not approved by the Majority Lenders), and
evidence therefor shall have been provided to the Global Administrative Agent.

 

(q)                                 Financial Statements.  The
Global Administrative Agent shall have received (i) the financial statements
described in Section 3.2 hereof and (ii) copies of all financial
statements (including pro forma financial statements), reports, notices and
proxy statements sent by the Borrower or Matador to their respective
stockholders during the period after May 1, 2003, and all SEC filings relating
to the Acquisition or to any shelf registration for the issuance of Senior
Debt.

 

(r)                                    Environmental Warranties.  The
Borrower has adopted and implemented procedures and guidelines as the Borrower
has determined are reasonably appropriate to continuously assure compliance
with applicable Environmental Laws and to identify and evaluate events or
conditions which would result in any Environmental Liability.  On the basis of these procedures and
guidelines, the Global Administrative Agent shall have received a certificate,
signed by an Authorized Officer of the Borrower, stating that after such review
the Borrower has reasonably concluded that no Environmental Liabilities exist
or violations of Environmental Laws have occurred, which, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

(s)                                  Global Effectiveness Notice.  The
Global Administrative Agent shall have received the Global Effectiveness
Notice.

 

(t)                                    No Material Adverse Effect; Litigation.  The
Global Administrative Agent shall have received a certificate, signed by an
Authorized Officer of the Borrower, stating that (i) no event or condition has
occurred since March 31, 2003, which could reasonably be expected to have a
Material Adverse Effect and (ii) no litigation, arbitration, governmental
proceeding, claim for Taxes, dispute or administrative or other proceeding
shall be pending or, to the knowledge of the Borrower, threatened against the
Borrower or Matador or any of their respective Subsidiaries which could
reasonably be expected to have a Material Adverse Effect or which purports to
affect the legality, validity or enforceability of this Agreement or any other
Combined Loan Document.

 

(u)                                 Bridge Loan.  The Global Administrative
Agent shall have received evidence that the Borrower has borrowed funds
pursuant to the Bridge Loan in an amount not less than $155,000,000.

 

(v)                                 Matador Due Diligence. The Global Administrative Agent shall be
satisfied, in its reasonable discretion, with its due diligence in connection
with the assets of Matador.

 

(w)                               Gas Marketing Policy.  The
Global Administrative Agent shall have received a copy of the Borrower’s gas
marketing policy (“Gas Marketing Policy”), in form and substance
satisfactory to the Global Administrative Agent, in its reasonable discretion.

 

(x)                                   Other Documents.  The
Global Administrative Agent shall have received such other legal opinions,
instruments and documents as any of the Agents or their counsel may have
reasonably requested.

 

62

 

(y)                                 Satisfactory Legal Form.  All
documents executed or submitted pursuant hereto by and on behalf of the
Borrower or any other Loan Party shall be in form and substance reasonably
satisfactory to the Global Administrative Agent and its counsel.  The Global Administrative Agent and its
counsel shall have received all information, approvals, documents or
instruments as the Global Administrative Agent or its counsel may reasonably
request.

 

(z)                                   Fees and Expenses. The Global Administrative Agent, the
Canadian Administrative Agent, the Arranger, the other Agents and the Lenders
shall have received all fees, including the Upfront Fee, and other amounts due
and payable pursuant to this Agreement or any other Combined Loan Document on
or prior to the date hereof, including, to the extent invoiced, reimbursement
or payment of all reasonable out-of-pocket expenses (including fees, charges
and disbursements of counsel) required to be reimbursed or paid by any Loan
Party hereunder or under any other Combined Loan Document.

 

The Global Administrative
Agent shall notify the Borrower, the other Agents and the Lenders of the Global
Effective Date, and such notice shall be conclusive and binding.  Notwithstanding the foregoing, the
obligations of the Lenders to make Loans and of the Issuing Banks to issue
Letters of Credit hereunder shall not become effective unless each of the
foregoing conditions is satisfied (or waived pursuant to Section 10.2)
at or prior to 3:00 p.m., New York City time, on June 30, 2003 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).

 

SECTION 4.2                          Each Credit Event.  The
obligation of each Lender to make a Loan on the occasion of any Borrowing, and
of the Issuing Banks to issue, amend, renew or extend any Letter of Credit, is
subject to receipt of the request therefor in accordance herewith and to the
satisfaction of the following conditions:

 

(a)                                  Representations and Warranties.  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, the representations and warranties of each Loan Party set forth in
the Combined Loan Documents to which it is a party shall be true and correct on
and as of such date after giving effect to such funding and to the intended use
thereof in all material respects as if made on and as of such date (or, if
stated to have been made expressly as of an earlier date, were true and correct
in all material respects as of such date).

 

(b)                                 No Defaults.  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 and the Borrower shall be in compliance with
the financial covenants set forth in Article VI.

 

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

 

(d)                                 Borrowing Request.  The
Global Administrative Agent shall have received a Borrowing Request for any
Borrowing.  Each Borrowing and each
issuance, amendment,

 

63

 

renewal or extension of a
Letter of Credit shall be deemed to constitute a representation and warranty by
the Borrower on the date thereof as to the matters specified in paragraphs
(a), (b) and (c) of this Section.

 

ARTICLE V

Affirmative
Covenants

 

The Borrower agrees with the
Global Administrative Agent, the other Agents, any Issuing Bank and each Lender
that, until the Commitments have expired or been terminated and Obligations
shall have been paid and performed in full and all Letters of Credit shall have
expired or terminated and all LC Disbursements shall have been reimbursed, the
Borrower will perform the obligations set forth in this Article.

 

SECTION 5.1                          Reporting Requirements.  The
Borrower shall deliver, or shall cause to be delivered, to the Global
Administrative Agent and each Lender:

 

(a)                                  Annual Financial Statements.  As
soon as available and in any event within 90 days after the end of each fiscal
year of the Borrower, the audited consolidated statements of income,
stockholders’ equity, changes in financial position and cash flows of the
Borrower and its Consolidated Subsidiaries for such fiscal year, and the
related consolidated balance sheets of the Borrower and its Consolidated
Subsidiaries as at the end of such fiscal year, and setting forth in each case
in comparative form the corresponding figures for the preceding fiscal year,
and accompanied by the related opinion of independent public accountants of
recognized national standing reasonably acceptable to the Global Administrative
Agent which opinion shall state that said financial statements fairly present,
in all material respects, the consolidated financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries as at the end of,
and for, such fiscal year and that such financial statements have been prepared
in accordance with GAAP, except for such changes in such principles with which
the independent public accountants shall have concurred and such opinion shall
not contain a “going concern” or like qualification or exception.

 

(b)                                 Quarterly Financial Statements.  As
soon as available and in any event within 60 days after the end of each of the
first three fiscal quarterly periods of each fiscal year of the Borrower,
consolidated statements of income, stockholders’ equity, changes in financial
position and cash flows of the Borrower and its Consolidated Subsidiaries for
such period and for the period from the beginning of the respective fiscal year
to the end of such period, and the related consolidated balance sheets as at
the end of such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding fiscal
year, accompanied by the certificate of an Authorized Officer, which
certificate shall state that said financial statements fairly present, in all
material respects, the consolidated financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries in accordance with
GAAP, as at the end of, and for, such period (subject to normal year-end audit
adjustments).

 

(c)                                  Notice of Default, Etc. 
Promptly after the Borrower knows that any Default or any Material
Adverse Effect has occurred, a notice of such Default or Material Adverse
Effect,

 

64

 

describing the same in
reasonable detail and the action the Borrower proposes to take with respect
thereto.

 

(d)                                 Other Accounting Reports. 
Promptly upon receipt thereof, a copy of each other report or letter
submitted to the Borrower or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of the books
of the Borrower and its Subsidiaries, and a copy of any response by the
Borrower or any Subsidiary of the Borrower, or the Board of Directors of the
Borrower or any Subsidiary of the Borrower, to such letter or report.

 

(e)                                  SEC Filings, Etc. 
Promptly upon its becoming available, each financial statement, report,
notice or proxy statement sent by the Borrower to stockholders generally and
each regular or periodic report and any registration statement, prospectus or
written communication (other than transmittal letters) in respect thereof filed
by the Borrower with or received by the Borrower in connection therewith from
any securities exchange or the SEC.

 

(f)                                    Notices Under Other Loan Agreements. 
Promptly after the furnishing thereof, copies of any statement, report
or notice furnished to any Person pursuant to the terms of any 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 5.1.

 

(g)                                 Gas Imbalances. 
Concurrently with the delivery of the financial statements required to
be delivered pursuant to Sections 5.1(a) and (b), a report in form
and substance satisfactory to the Global Administrative Agent setting forth, on
a net basis, all gas imbalances, take or pay or other prepayments with respect
to the Borrower’s and any Subsidiaries’ Oil and Gas Properties which would
require the Borrower or any Subsidiary to deliver Hydrocarbons produced from
such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor.

 

(h)                                 [Intentionally omitted].

 

(i)                                     Notices of Asset Disposition.  In
connection with the disposition of any Property or Equity Interest pursuant to Section
7.12(iv) which produces either (i) net proceeds in excess of $20,000,000 or
(ii) net proceeds which, when aggregated with the net proceeds generated by all
other prior dispositions of Property or Equity Interests since the later to
occur of (A) the previous notice received by the Global Administrative Agent
pursuant to this Section 5.1(i) or (B) the last redetermination of the
Global Borrowing Base, are in excess of $20,000,000, and in any event within
ten (10) Business Days of such disposition, the Borrower shall provide the
Global Administrative Agent with written notice of such disposition, which
notice shall set forth a description of the Properties or Equity Interests so
disposed of.  Additionally, concurrently
with the delivery of the financial statements required to be delivered pursuant
to Sections 5.1(a) and (b), the Borrower shall provide the Global
Administrative Agent with a written report in form and substance satisfactory
to the Global Administrative Agent setting forth all dispositions of any
Property or Equity Interest pursuant to Section 7.12(iv), which together
produce either (i) net proceeds in excess of $5,000,000 or (ii) net proceeds
which, when aggregated with the net proceeds generated by all other prior
dispositions of Property or Equity Interests since the later to occur of (A)
the previous notice received by the Global Administrative Agent pursuant to
this 

 

65

 

Section 5.1(i)
or (B) the last redetermination of the Global Borrowing Base, are in excess of
$5,000,000.

 

(j)                                     Notices.  Promptly after the Borrower
or any of its Material Subsidiaries becomes aware of the following events, the
Borrower will furnish to the Global Administrative Agent written notice of the
following:

 

(1)                                  an announcement by Moody’s or S&P of a
change in (A) the rating, whether actual or implied, of the Index Debt or (B)
any other rating of the Borrower or any of its Subsidiaries;

 

(2)                                  the incurrence, or any proposed incurrence,
of Senior Notes or Subordinated Indebtedness by the Borrower or any of its
Subsidiaries;

 

(3)                                  any change in the schedule of payment or
delivery of any Production Payment to which the Borrower or such Subsidiary is
a party;

 

(4)                                  any default under one or more Hedging
Agreements within a one month period which results in an obligation of the
Borrower or any of its Subsidiaries to make one or more payments in an
aggregate amount in excess of U.S.$10,000,000; and

 

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

 

(k)                                  Other Matters. 
From time to time such other information regarding the business, affairs
or financial condition of the Borrower or any Subsidiary (including, without
limitation, any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA) as any Lender or the Global Administrative
Agent may reasonably request.

 

The Borrower will furnish to
the Global Administrative Agent, at the time it furnishes each set of financial
statements pursuant to paragraph (a) or (b) above, a compliance
certificate substantially in the form of Exhibit C executed by an
Authorized Officer (i) certifying as to the matters set forth therein and stating
that no Default has occurred and is continuing (or, if any Default has occurred
and is continuing, describing the same in reasonable detail), and (ii) setting
forth in reasonable detail the computations necessary to determine whether the
Borrower is in compliance with Sections 6.1, and 6.2 as of the
end of the respective fiscal quarter or fiscal year.

 

SECTION 5.2                          Litigation.  The Borrower shall promptly
give to the Global Administrative Agent notice of: (i) all legal or arbitral
proceedings, and of all proceedings before any Governmental Authority affecting
the Borrower or any Subsidiary, except proceedings which, if adversely
determined, could not reasonably be expected to have a Material Adverse Effect,
(ii) any litigation or proceeding against or adversely affecting the Borrower
or any Subsidiary in which injunctive or similar relief is sought and (iii) the
occurrence of any development with respect to any action, suit or proceeding
previously disclosed to the Global Administrative Agent or the Lenders pursuant
to this Agreement if such action, suit or proceeding could reasonably be
expected to result in a Material Adverse Effect.  The Borrower will, and will cause each of its Subsidiaries to,
promptly notify the Global Administrative Agent and each of the Lenders of any
claim, judgment, Lien or other encumbrance affecting any

 

66

 

Property of the Borrower or
any Subsidiary if the value of the claim, judgment, Lien, or other encumbrance
when aggregated with all other existing claims, judgment or Liens affecting
such Property shall exceed U.S.$10,000,000.

 

SECTION 5.3                          Maintenance, Etc.

 

(a)                                  Generally.  The Borrower shall and shall
cause each Subsidiary to: preserve and maintain its corporate existence and all
of its material rights, privileges and franchises; keep books of record and
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with all
Governmental Rules if failure to comply with any such requirements could
reasonably be expected to have a Material Adverse Effect; pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or on its
income or profits or on any of its Property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or levy
the payment of which is being contested in good faith and by proper proceedings
and against which adequate reserves are being maintained; upon reasonable
notice, permit representatives of the Global Administrative Agent or any
Lender, during normal business hours, to examine, copy, and make extracts from
its books and records, to inspect its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by such
Lender or the Global Administrative Agent (as the case may be); and keep, or
cause to be kept, insured by financially sound and reputable insurers all
Property of a character usually insured by Persons engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such Persons and carry such other
insurance as is usually carried by such Persons including, without limitation,
environmental risk insurance to the extent reasonably available.

 

(b)                                 Proof of Insurance. 
Contemporaneously with the delivery of the financial statements required
by Section 5.1(a) to be delivered for each year, upon the request of the
Global Administrative Agent, the Borrower will furnish or cause to be furnished
to the Global Administrative Agent and the Lenders a certificate of insurance
coverage from the insurer in form and substance satisfactory to the Global
Administrative Agent and, if requested, will furnish the Global Administrative
Agent and the Lenders copies of the applicable policies.

 

(c)                                  Oil and Gas Properties.  The
Borrower will and will cause each Subsidiary to, at its own expense, (i) do or
cause to be done all things reasonably necessary to preserve and keep in good
repair, working order and efficiency all of its Oil and Gas Properties and
other material Properties, including, without limitation, all equipment,
machinery and facilities, and (ii) from time to time, make all the reasonably
necessary repairs, renewals and replacements so that at all times the state and
condition of its Oil and Gas Properties and other material Properties will be
fully preserved and maintained in all material respects, except, in either case
of clauses (i) or (ii), to the extent a portion of such
Properties is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Borrower will and will cause each Subsidiary to, in all
material respects, promptly: (i) pay and discharge, or make reasonable and
customary efforts to cause to be paid and discharged, all delay rentals,
royalties and expenses accruing under the leases or other agreements affecting
or pertaining to its Oil and Gas Properties, (ii) perform or make reasonable
and customary efforts to cause to be performed, in accordance with industry
standards, the obligations required by each and all of the assignments, deeds,
leases, sub-leases,

 

67

 

contracts and agreements
affecting its interests in its Oil and Gas Properties and other material
Properties, (iii) do all other things necessary to keep unimpaired, except for
Liens permitted in Section 7.2, its rights with respect to its Oil and
Gas Properties and other material Properties and prevent any forfeiture thereof
or a default thereunder, except to the extent a portion of such Properties is
no longer capable of producing Hydrocarbons in economically reasonable amounts
and except for dispositions permitted by Section 7.12.  The Borrower will and will cause each
Subsidiary to operate its Oil and Gas Properties and other material Properties
or cause or make reasonable and customary efforts to cause such Oil and Gas
Properties and other material Properties to be operated in a careful and efficient
manner in accordance with the practices of the industry and in compliance with
all applicable contracts and agreements and in compliance with all Governmental
Rules, except where the failure to comply would not reasonably be expected to
have a Material Adverse Effect.

 

SECTION 5.4                          Environmental Matters.

 

(a)                                  Establishment of Procedures.  The
Borrower will and will cause each Subsidiary to establish and implement such
procedures as may be reasonably necessary to continuously determine and assure
that any failure of the following could not reasonably be expected to have a
Material Adverse Effect: (i) all Property of the Borrower and its Subsidiaries
and the operations conducted thereon and other activities of the Borrower and
its Subsidiaries are in compliance with and do not violate any Environmental
Laws, (ii) no Hazardous Materials are disposed of or otherwise released on or
to any Property owned by any such party except in compliance with Environmental
Laws, (iii) no Hazardous Material will be released on or to any such Property
in a quantity equal to or exceeding that quantity which requires reporting
pursuant to Section 103 of CERCLA, and (iv) no Hazardous Material is released
on or to any such Property so as to pose an imminent and substantial endangerment
to public health or welfare or the environment.

 

(b)                                 Notice of Action.  The
Borrower will promptly notify the Global Administrative Agent and the Lenders
in writing of any threatened action, investigation or inquiry by any
Governmental Authority of which the Borrower has knowledge in connection with
any Environmental Laws, excluding routine testing and corrective action.

 

SECTION 5.5                          Casualty and Condemnation.  The
Borrower (a) will furnish to the Global Administrative Agent promptly, and in
any event within three (3) Business Days of the occurrence, written notice of
any Casualty Event to any Collateral or the commencement of any action or
proceeding for the taking of any material portion of the Collateral or any part
thereof or interest therein under power of eminent domain or by condemnation or
similar proceeding and (b) will ensure that the Net Cash Proceeds of any such
event (whether in the form of insurance proceeds, condemnation awards or
otherwise) are collected and applied in accordance with the applicable
provisions of the Combined Loan Documents.

 

SECTION 5.6                          Performance of Obligations.  The
Borrower will and will cause each Loan Party to do and perform every act and
discharge all of the Obligations at the time or times and in the manner specified.

 

68

 

SECTION 5.7                          Reserve Reports.

 

(a)                                  On or before March 1 of each year, commencing
March 1, 2004, the Borrower shall furnish to the Global Administrative Agent
and the Lenders a Reserve Report.

 

(b)                                 In the event of a discretionary
redetermination or a redetermination pursuant to clause (i) of Section
2.7(e), the Borrower shall furnish to the Global Administrative Agent and
the Lenders a Reserve Report with an “as of” date as required by the Global Administrative
Agent and 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 Reserve Report.  The Borrower
shall provide such Reserve Reports required by this Section 5.7(b) as
soon as possible, but in any event no later than 30 days following the receipt
of the request by the Global Administrative Agent.

 

(c)                                  With the delivery of each Reserve Report, the
Borrower shall provide to the Global Administrative Agent and the Lenders, a
certificate from an Authorized Officer certifying that, to the best of his
knowledge and in all material respects: (i) the information contained in the Reserve
Report and any other information delivered in connection therewith is true and
correct, (ii) the Borrower owns good and defensible title to the Oil and Gas
Properties evaluated in such Reserve Report and such Properties are free of all
Liens except for Liens permitted by Section 7.2 and (iii) the report, in
form and substance satisfactory to the Global Administrative Agent, attached as
an exhibit to the certificate, sets forth on a net basis all gas imbalances,
take or pay or other prepayments with respect to the Borrower’s and any
Subsidiaries’ Oil and Gas Properties evaluated in such Reserve Report which
would require the Borrower or any Subsidiary to deliver Hydrocarbons produced
from such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor.

 

SECTION 5.8                                                  Title to Oil and Gas Properties.  The
Borrower shall, and shall cause each Subsidiary to, maintain good and
defensible title to (i) those Mortgaged Properties, if any, used in calculating
compliance with the collateral coverage requirements set forth in Section
5.13 and (ii) its and their material (individually or in the aggregate) Oil
and Gas Properties, and to do all things reasonably necessary to cure any
material title defects which are not Liens permitted by Section 7.2 of
which the Borrower or any Subsidiary has knowledge or has been provided notice.

 

SECTION 5.9                          ERISA Information and Compliance.  The
Borrower will promptly furnish and will cause the Subsidiaries and any ERISA
Affiliate to promptly furnish to the Global Administrative Agent with
sufficient copies to the Lenders (i) upon request of the Global Administrative
Agent, copies of each annual and other report filed with the United States
Secretary of Labor, the Internal Revenue Service or the PBGC, with respect to
each Plan or any trust created thereunder, (ii) immediately upon becoming aware
of the occurrence of any ERISA Event (other than an ERISA Event that could not
reasonably be expected to have a Material Adverse Effect) or of any “prohibited
transaction,” as  described in section
406 of ERISA or in section 4975 of the Code (other than a “prohibited
transaction” that could not reasonably be expected to have a Material Adverse
Effect), in connection with any Plan or any trust created thereunder, a written
notice signed by an Authorized Officer specifying the nature thereof, what
action the Borrower, the Subsidiary or the ERISA Affiliate is taking or
proposes to take with

 

69

 

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 (iii) 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 Borrower 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 (determined without regard to subsections (d), (e), (f) and (k)
thereof) and of section 302 of ERISA (determined without regard to sections
303, 304 and 306 of  ERISA), and (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.

 

SECTION 5.10                    Additional Subsidiaries.  If
any additional Subsidiary of the Borrower is formed or acquired after the
Global Effective Date, the Borrower will notify the Global Administrative Agent
and the Lenders thereof.  The Borrower
will (i) cause any Material Subsidiary (unless such Subsidiary is a Foreign
Subsidiary) to execute a Guaranty within 30 days after such Subsidiary is
formed or acquired or it is determined to have the requisite total asset value
to be a Material Subsidiary and (b) pledge, or cause any Subsidiary to pledge,
all Equity Interests in such newly determined Material Subsidiary pursuant to a
Pledge Agreement (except that, if such Material Subsidiary is a Foreign
Subsidiary, shares of common stock of such Subsidiary to be pledged pursuant to
such Pledge Agreement may be limited to 65% of the outstanding shares of common
stock of such Material Subsidiary).

 

SECTION 5.11                    Gas Marketing.

 

(a)                                  After its delivery in compliance with Section
5.1(j), (i) the Borrower shall not modify the Gas Marketing Policy without
the prior written consent of the Global Administrative Agent and the Required
Lenders and (ii) unless otherwise consented to in writing by the Global
Administrative Agent and the Required Lenders, the Borrower shall, and shall
cause each Subsidiary to, comply with the Gas Marketing Policy.

 

(b)                                 Except for hedged positions that are closed
out with contracts with the Borrower or one of its Subsidiaries regarding the
physical delivery of Hydrocarbons, the Borrower will not permit the Net
Liabilities for all Hedging Agreements and Marketing Agreements relating to
natural gas marketing for third Persons entered into by Retex to be greater
than U.S.$500,000 at any time.  The
Borrower  will caused all Hedging
Agreements and Marketing Agreements relating to natural gas marketing to be
placed through Retex, and the Borrower and its other Subsidiaries will not
enter into such arrangements.

 

SECTION 5.12                    Information Regarding Collateral.  The
Borrower will furnish to the Global Administrative Agent promptly, and in any
event within thirty (30) days upon becoming aware of the following changes,
written notice of any change (i) in any Subsidiary’s corporate name or in any
trade name used to identify such Subsidiary in the conduct of its business or
in the ownership of its Properties, (ii) in the location of any Subsidiary’s
chief executive office or its principal place of business, (iii) in any
Subsidiary’s identity or corporate structure, and (iv) in any Loan Party’s
Organizational Number, and (v) in the location of the Collateral to any

 

70

 

jurisdiction in which any
registration of, or in respect of, the Security Documents may not be effective
to protect the Lien created thereunder, including, without limitation,
information regarding the time of such relocation, the items being relocated
and the intended new locality of such items.

 

SECTION 5.13                    Further Assurances.

 

(a)                                  The Borrower will, and will cause each Loan
Party to, at the Borrower’s expense, to cure promptly any defects in the
execution and delivery of this Agreement and any other Loan Document to which
it is a party.  The Borrower, at its
expense, will and will cause each Subsidiary to, promptly execute and deliver
to the Global Administrative Agent all such other documents, agreements and
instruments reasonably requested by the Global Administrative Agent to comply
with or accomplish the covenants and agreements of the Borrower or any
Subsidiary, as the case may be, in this Agreement and any other Loan Document,
or to file any notices or obtain any consents, all as may be reasonably
necessary or appropriate in connection therewith.

 

(b)                                 If at any time (i) the rating, actual or
implied, of the Index Debt by S&P is “BB-” or lower or (ii) the rating,
actual or implied, of the Index Debt by Moody’s is “Ba3” or lower, then, within
30 days of such event, the Borrower shall, and shall cause its Subsidiaries to,
execute and deliver to the Global Administrative Agent Security Documents in
form and substance reasonably satisfactory to the Global Administrative Agent
and its counsel, covering (A) Oil and Gas Properties of the Borrower and its
Subsidiaries reasonably acceptable to the Global Administrative Agent such that
the Global Administrative Agent shall have received currently effective duly
executed Security Documents encumbering Oil and Gas Properties of the Borrower
and its Subsidiaries constituting 80% or more of the present value of the
Borrowing Base Properties set forth in the then current Global Borrowing Base
and (B) all other material tangible and intangible assets relating to such Oil
and Gas Properties; provided, however, that if there is no actual
or implied rating of the Index Debt, then the rating of the Index Debt will be
deemed to be equal to a rating that is one grade lower than that of any secured
long-term indebtedness for borrowed money, if any, of the Borrower.

 

(c)                                  If within three (3) months of the Closing
Date, (i) at least $125,000,000 in Net Cash Proceeds are not raised by the
Borrower through at least one issuance of Equity Interests of the Borrower and
(ii) Indebtedness is outstanding under the Bridge Loan, then, within 30 days of
such event, the Borrower shall, and shall cause its Subsidiaries to, execute
and deliver to the Global Administrative Agent Security Documents, in form and
substance reasonably satisfactory to the Global Administrative Agent and its
counsel, covering (A) Oil and Gas Properties of the Borrower and its
Subsidiaries reasonably acceptable to the Global Administrative Agent such that
the Global Administrative Agent shall have received currently effective duly
executed Security Documents encumbering Oil and Gas Properties of the Borrower
and its Subsidiaries constituting 80% or more of the present value of the
Borrowing Base Properties set forth in the then current Global Borrowing Base
and (B) all other material tangible and intangible assets relating to such Oil
and Gas Properties.

 

(d)                                 If any Security Documents are delivered
pursuant to either Section 5.13(b) or (c), then the Borrower
agrees that it will, and will cause each Loan Party to, at the Borrower’s

 

71

 

expense, (i) cure promptly
any defects in the execution and delivery of such Security Documents, and (ii)
execute any and all further documents, financing statements, agreements and
instruments and take all such further actions (including the filing and
recording of financing statements, fixture filings, mortgages, deeds of trust
and other documents) that may be required under any applicable law or which the
Global Administrative Agent may reasonably request, to effect the transactions
contemplated by either Section 5.13(b) or (c) or such Security
Documents, or to grant, preserve, protect or perfect the Liens created or
intended to be created thereby or the validity or priority of any such Lien,
all at the expense of the Loan Parties.

 

(e)                                  If, at any time when any condition in Section
5.13(b) or (c) exists after the delivery of any Security Documents
pursuant to either Section 5.13(b) or (c), (i) the Global
Administrative Agent shall determine that, as of the date of any Global
Borrowing Base redetermination, the Security Documents encumber Oil and Gas
Properties of the Borrower and its Material Subsidiaries constituting less than
80% of the present value of the Borrowing Base Properties set forth in the then
current Global Borrowing Base, then the Global Administrative Agent may notify
the Borrower in writing of such failure and, within 30 days from and after
receipt of such written notice by the Borrower, or (ii) the Borrower determines
that the Global Administrative Agent shall not have received currently
effective, duly executed Loan Documents encumbering Oil and Gas Properties of
the Borrower and its Subsidiaries constituting 80% or more of the present value
of the Borrowing Base Properties set forth in the then current Global Borrowing
Base, then, for so long as any condition in Section 5.13(b) or (c)
exists, the Borrower shall, or shall cause its Material Subsidiaries to,
execute and deliver to the Global Administrative Agent supplemental or
additional Security Documents, in form and substance reasonably satisfactory to
the Global Administrative Agent and its counsel, covering additional Oil and Gas
Properties of the Borrower and its Material Subsidiaries not then encumbered by
any Combined Loan Documents such that the Global Administrative Agent shall
have received currently effective duly executed Security Documents encumbering
(i) Oil and Gas Properties of the Borrower and its Material Subsidiaries
constituting 80% or more of the present value of the Borrowing Base Properties
set forth in the then current Global Borrowing Base and (ii) all other material
tangible and intangible assets relating to such Oil and Gas Properties.

 

(f)                                    The Borrower agrees to provide to the Global
Administrative Agent, from time to time upon reasonable request of the Global
Administrative Agent, information that is in the possession of the Borrower or
its Subsidiaries or otherwise reasonably obtainable by any of them, reasonably
satisfactory to the Global Administrative Agent as to the perfection and
priority of the Liens created or intended to be created by the Security
Documents. The Security Documents shall remain in effect at all times unless
otherwise released pursuant to the terms of this Agreement.

 

(g)                                 In connection with the foregoing, the
Borrower hereby authorizes the Global Administrative Agent and the Lenders to
file one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Collateral without the signature of the
Borrower or any other Loan Party where permitted by law.  A carbon, photographic or other reproduction
of the Security Documents or any financing statement covering the Collateral or
any part thereof shall be sufficient as a financing statement where permitted
by law.  The Global Administrative Agent
will promptly send Borrower any financing or continuation statements it files
without the signature of the Borrower or any other Loan Party and the Global

 

72

 

Administrative Agent will
promptly send Borrower the filing or recordation information with respect
thereto.

 

ARTICLE VI

Financial
Covenants

 

The Borrower agrees with the
Global Administrative Agent, the other Agents, any Issuing Bank, and each
Lender that, until the Commitments have expired or been terminated and
Obligations shall have been paid and performed in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have
been reimbursed, the Borrower will perform the obligations set forth in this
Article.

 

SECTION 6.1                          Tangible Net Worth.  The
Borrower will not permit Tangible Net Worth at any time to be less than the sum
(without duplication) of (i) U.S.$450,000,000, plus (ii) 50% of
Consolidated Net Income for each fiscal quarter of the Borrower ending after
June 30, 2003 (to the extent for any such fiscal quarter Consolidated Net
Income is positive), plus (iii) 80% of the Net Cash Proceeds of any
primary offering (public or private) of Equity Interests consummated by the
Borrower after the Global Effective Date (including any equity securities
contemplated by the Acquisition).

 

SECTION 6.2                          Indebtedness to EBITDAX Ratio.  The
Borrower will not permit its ratio of Indebtedness to EBITDAX as of the end of
any fiscal quarter of the Borrower (calculated quarterly at the end of each
fiscal quarter on a rolling four quarter basis) to be more than 3.0 to 1.0; provided,
however, that for periods of calculation ending on or before March 31,
2004, any calculation undertaken pursuant to this Section shall be made using
an EBITDAX calculated on a pro forma basis (inclusive of any acquisitions,
including the Acquisition, and/or divestitures, if any, made during the
relevant calculation period as if such acquisition or divestiture had occurred
on the first day of such four-quarter period); and provided  further
that, for the purposes of this calculation, various non-cash events, including,
without limitation, FASB 133, 142, 143 and 144 non-cash events, shall not
contribute to or be deducted from such calculation.

 

ARTICLE VII

Negative
Covenants

 

The Borrower agrees with the
Global Administrative Agent, the other Agents, any Issuing Bank, and each
Lender that, until the Commitments have expired or been terminated and
Obligations shall have been paid and performed in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have
been reimbursed, the Borrower will perform the obligations set forth in this
Article.

 

SECTION 7.1                          Indebtedness. 
Neither the Borrower nor any Subsidiary will incur, create, assume or
permit to exist any Indebtedness, except:

 

(a)                                  the Combined Obligations or any Guaranty of
or suretyship arrangement for the Combined Obligations;

 

(b)                                 Indebtedness of the Borrower existing on the
Closing Date which is disclosed in Schedule 7.1, and any renewals,
extensions, refinancings or replacements (but not increases)

 

73

 

thereof, provided
that all such Indebtedness has terms and conditions not more adverse to the
Lenders than the terms and conditions of Indebtedness being renewed, extended,
refinanced or replaced, other than increases in the coupon if such increased
coupon is market;

 

(c)                                  Senior Debt of the Borrower or TBF and
guarantees thereof by the Borrower or any Guarantor, and any renewals,
extensions, refinancings or replacements (but not increases) thereof, provided
that upon the incurrence of such Senior Debt, the Global Borrowing Base is
adjusted as contemplated by Section 2.7(g);

 

(d)                                 Subordinated Debt of the Borrower or TBF and
guarantees thereof by the Borrower or any Guarantor (but only if such
guarantees contain the same subordination terms as the Subordinated Debt) with
an aggregate principal amount outstanding not to exceed the sum of
U.S.$300,000,000, and any renewals, extensions, refinancings or replacements
(but not increases) thereof; provided that upon the incurrence of such Subordinated
Debt, the Global Borrowing Base is adjusted as contemplated by Section
2.7(g);

 

(e)                                  accounts payable and Guarantees thereof (for
the deferred purchase price of Property or services) from time to time incurred
in the ordinary course of business which, if greater than 90 days past due, are
being contested in good faith by appropriate proceedings and for which reserves
adequate under GAAP shall have been established therefor;

 

(f)                                    Capital Lease Obligations (as required to be
reported on the financial statements of the Borrower pursuant to GAAP) not to
exceed U.S.$5,000,000;

 

(g)                                 Indebtedness associated with bonds or surety
obligations required by Governmental Rules in connection with the operation of
Oil and Gas Properties;

 

(h)                                 Indebtedness permitted by Section 7.3;

 

(i)                                     Indebtedness of any Subsidiary so long as
such Indebtedness is (i) Non-Recourse Debt and (ii) does not exceed
U.S.$40,000,000 in the aggregate outstanding at any one time;

 

(j)                                     Hedging Obligations to the extent permitted
by Sections 5.11 and 7.17;

 

(k)                                  Indebtedness associated with accounts payable
overdraft facilities for TBRL and its Subsidiaries (the “Overdraft Facility”)
not to exceed U.S.$5,000,000 at any time and Guarantees thereof by the
Borrower; and

 

(l)                                     Indebtedness of the Borrower or TBRL not
otherwise allowed under this Section 7.1 not to exceed U.S.$25,000,000
outstanding at any one time.

 

SECTION 7.2                          Liens.  Neither the Borrower nor any
Subsidiary will 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 of the
Combined Obligations;

 

74

 

(b)                                 Liens securing the payment of any Senior Debt
incurred by the Borrower or any of its Subsidiaries, including, without
limitation, the Senior Notes; provided that (i) the Combined Obligations
owed by such Persons are secured equally and ratably by such permitted Liens
and (ii) the holders of such Senior Debt have entered into a Senior Debt
Intercreditor Agreement with the Global Administrative Agent regarding the
exercise of such permitted Liens;

 

(c)                                  Excepted Liens;

 

(d)                                 Liens disclosed on Schedule 7.2;

 

(e)                                  Liens securing Capital Lease Obligations
allowed under Section 7.1(f), but only on the Property under lease;

 

(f)                                    Liens on the Equity Interests or Properties
of any Subsidiary securing Indebtedness permitted by Section 7.1(i);

 

(g)                                 Liens permitted by any of the Combined Loan
Documents;

 

(h)                                 other Liens securing obligations not in excess
of U.S.$5,000,000 in the aggregate; and

 

(i)                                     any Liens created pursuant to any Hedging
Agreements (A) with any Lender or any Affiliate of such Lender, or (B) with any
other Person, provided that the aggregate value of the obligation
secured by all such Liens permitted by this Section 7.2(i) shall not
exceed U.S.$10,000,000 in the aggregate at any one time outstanding and no such
Liens shall extend to any Hydrocarbon Interests.

 

SECTION 7.3                          Investments.  Neither the Borrower nor any
Subsidiary will make or permit to remain outstanding any Investment in any
Person, except that the foregoing restriction shall not apply to:

 

(a)                                  Investments which are disclosed in the
Financial Statements;

 

(b)                                 accounts receivable arising in the ordinary
course of business;

 

(c)                                  direct obligations of the United States or
Canada or any province of Canada or any agency thereof, or obligations
Guaranteed by the United States or Canada or any province of Canada or any
agency thereof, in each case maturing within one year from the date of
acquisition thereof;

 

(d)                                 commercial paper maturing within one year
from the date of creation thereof rated at least “A-2”, “P-2”, “R-1 low” or
“A-1” by S&P, Moody’s, Dominion Bond Rating Service Limited or Canada Bond
Rating Service, respectively;

 

(e)                                  deposits maturing within one year from the
date of acquisition thereof with, including certificates of deposit issued by,
any Lender or any office located in the United States or Canada of any other
bank or trust company which is organized under the laws of the United States or
Canada or any state or province thereof, has capital and surplus aggregating at
least

 

75

 

U.S.$500,000,000 (as of the
date of such Lender’s or bank or trust company’s most recent financial reports)
and has a short term deposit rating of no lower than “A-2”, “P-2”, “R-1 low” or
“A-1”, as such rating is set forth from time to time, by S&P, Moody’s,
Dominion Bond Rating Service Limited or Canada Bond Rating Service, respectively;

 

(f)                                    deposits in money market or similar funds
investing exclusively in Investments described in Section 7.3(c), 7.3(d)
or 7.3(e);

 

(g)                                 (i) repurchase obligations of any Lender or
of any commercial bank satisfying the requirements of Section 7.3(e);
(ii) securities with maturities of one year or less from the date of
acquisition issued or fully Guaranteed by any state, commonwealth, province or
territory of the United States or Canada, by any political subdivision or
taxing authority of any such state, commonwealth, province or territory or by
any foreign government, the securities of which state, commonwealth, province,
territory, political subdivision, taxing authority or foreign government (as
the case may be) are rated at least “A”, “P-1”, or “R-1 low” by S&P,
Moody’s, Dominion Bond Rating Service Limited or Canada Bond Rating Service,
respectively; (iii) securities with effective maturities of one year or less
from the date of acquisition backed by an “Aaa/AAA” insurer or standby letters
of credit issued by any Lender or any commercial bank satisfying the
requirements of Section 7.3(e); and (iv) securities with maturities of
six months or less from the date of acquisition overcollateralized with
government obligations of the United States or Canada as collateral;

 

(h)                                 Investments made by the Borrower in or to its
Subsidiaries (other than Subsidiaries which are obligated with respect to any
Non-Recourse Debt) or by any Subsidiary in and to the Borrower or any other
Subsidiary (other than Subsidiaries which are obligated with respect to any
Non-Recourse Debt);

 

(i)                                     Investments made by any Subsidiary liable in
respect of Non-Recourse Debt in any of its Subsidiaries which are not to exceed
U.S.$10,000,000 in the aggregate at any time;

 

(j)                                     Investments by the Borrower or any Subsidiary
in direct ownership interests in additional Oil and Gas Properties and gas
gathering systems related thereto or in Persons owning Oil and Gas Properties
provided that after giving effect thereto such Person is a Wholly-Owned Subsidiary;
and

 

(k)                                  other Investments by the Borrower or any
Subsidiary in or to any other Persons not to exceed U.S.$25,000,000 in the
aggregate at any time; provided, however, that Investments to Persons who are
not Subsidiaries shall not exceed U.S.$10,000,000 in the aggregate at any time
outstanding, net of dividends or other returns of capital or return on
Investments.

 

SECTION 7.4                          Dividends, Distributions and Redemptions.  The
Borrower will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return any
capital to its stockholders or make any distribution of its assets to its
stockholders, except that so long as no Default exists or would result
therefrom, the Borrower may pay (i) dividends in shares of Equity Interests of
the Borrower and (ii) the Borrower may repurchase Equity Interests of the
Borrower or make cash dividends in an aggregate principal amount not to exceed
U.S.$40,000,000.

 

76

 

SECTION 7.5                          Sales and Leasebacks. 
Neither the Borrower nor any Subsidiary will enter into any arrangement,
directly or indirectly, with any Person whereby the Borrower or any Subsidiary
shall sell or transfer any of its Property, whether now owned or hereafter
acquired, and whereby the Borrower or any Subsidiary shall then or thereafter
rent or lease as lessee such Property or any part thereof or other Property
which the Borrower or any Subsidiary intends to use for substantially the same
purpose or purposes as the Property sold or transferred.

 

SECTION 7.6                          Nature of Business. 
Neither the Borrower nor any Subsidiary will allow any material change
to be made in the character of its business as an independent oil and gas
exploration and production, gas gathering and processing or marketing company.

 

SECTION 7.7                          Limitation on Leases. 
Neither the Borrower nor any Subsidiary will create, incur, assume or
permit to exist any obligation for the payment of rent or hire of Property of
any kind whatsoever (real or personal, but excluding leases of Hydrocarbon
Interests, oil and gas operating agreements and Capital Lease Obligations),
under leases or lease agreements which would cause the aggregate amount of all
payments made by the Borrower and its Subsidiaries pursuant to all such leases
or lease agreements to exceed U.S.$10,000,000 in any period of twelve
consecutive calendar months during the life of such leases.

 

SECTION 7.8                          Mergers, Etc. 
Neither the Borrower nor any 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 or assets to any other Person, except (i) any Subsidiary of the
Borrower may be merged or consolidated with or into the Borrower (provided that
the Borrower shall be the continuing or surviving corporation) or with or into
any one or more Wholly-Owned Subsidiaries of the Borrower (provided that the
Wholly-Owned Subsidiary or Subsidiaries shall be the continuing or surviving
corporation), and (ii) any Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or otherwise)
to the Borrower or any Wholly-Owned Subsidiary of the Borrower.

 

SECTION 7.9                          Proceeds of Loans and Letters of Credit.  The
Borrower will not permit the proceeds of the Loans or Letters of Credit to be
used for any purpose other than those permitted by Section 3.7.  Neither the Borrower 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 Regulation U 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.

 

SECTION 7.10                    ERISA Compliance.  The
Borrower will not at any time do any of the following if such action or
inaction could reasonably be expected to have a Material Adverse Effect:

 

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

 

77

 

(b)                                 Terminate, or permit any Subsidiary or 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 to the Borrower, any
Subsidiary or any ERISA Affiliate to the PBGC;

 

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

 

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

 

(e)                                  Permit, or allow any Subsidiary or ERISA
Affiliate to permit, the actuarial present value of the benefit liabilities
under any Plan maintained by the Borrower, any Subsidiary 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 Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any Multiemployer Plan;

 

(g)                                 Acquire, or permit any Subsidiary or ERISA
Affiliate to acquire, an interest in any Person that causes such Person to
become an ERISA Affiliate with respect to the Borrower, any Subsidiary or 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 Subsidiary or ERISA
Affiliate to incur, a liability to or on account of a Plan under sections 515,
4062, 4063, 4064, 4201 or 4204 of ERISA;

 

(i)                                     Contribute to or assume an obligation to
contribute to, or permit any Subsidiary or 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; or

 

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

 

78

 

SECTION 7.11                    Sale or Discount of Receivables. 
Neither the Borrower nor any Subsidiary will discount or sell (with or
without recourse) any of its notes receivable or accounts receivable.

 

SECTION 7.12                    Sale of Oil and Gas Properties.  The
Borrower will not, and will not permit any Subsidiary to, sell, assign,
farm-out, convey or otherwise transfer any Oil and Gas Property or any interest
in any Oil and Gas Property, except for (i) the sale of Hydrocarbons in the
ordinary course of business; (ii) the sale or transfer of equipment that is
obsolete, worn out, depleted or uneconomic and disposed of in the ordinary
course of business; (iii) the sale, assignment, farm-out, conveyance or other
transfer of any undeveloped acreage for which no Global Borrowing Base value
was given in the most recent determination of the Global Borrowing Base; (iv)
during any 12 consecutive month period, sales of Oil and Gas Properties or all
of the Equity Interests of any Subsidiary owning Oil and Gas Properties, provided
such sales shall not exceed in the aggregate $40,000,000  and provided, further, that
the Borrower shall provide the Global Administrative Agent with notice of such
sales in accordance with Section 5.1(i); (v) the sale of gas gathering
and processing systems assets; and (vi) dispositions permitted by Section
7.8.

 

SECTION 7.13                    Environmental Matters. 
Neither the Borrower nor any Subsidiary will cause or permit any of its
Property to be in violation of, or do anything or permit anything to be done
which will subject any such Property to any remedial obligations under any
applicable Environmental Laws, assuming disclosure to the applicable
Governmental Authority of all relevant facts, conditions and circumstances, if
any, pertaining to such Property where such violations or remedial obligations
could reasonably be expected to have a Material Adverse Effect.

 

SECTION 7.14                    Transactions with Affiliates. 
Neither the Borrower nor any Subsidiary will enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of
Property or the rendering of any service, with any Affiliate (other than a
Subsidiary) unless such transactions are otherwise permitted under this
Agreement or the other Combined Loan Documents, are in the ordinary course of
its business and are upon fair and reasonable terms no less favorable to it
than it would obtain in a comparable arm’s length transaction with a Person not
an Affiliate.

 

SECTION 7.15                    Subsidiaries.  The
Borrower shall not, and shall not permit any Subsidiary to, create any
additional Subsidiaries except in accordance with Section 5.10.

 

SECTION 7.16                    Negative Pledge Agreements. 
Except for customary restrictions contained in (i) any Capital Lease
Obligations permitted by Section 7.1(f), (ii) agreements pursuant to
which Indebtedness permitted by Section 7.1(i) is incurred (in which
cases, any prohibition or limitation shall only be effective against the assets
finance thereby) and (iii) agreements pursuant to which Investments permitted
by Sections 7.3(h) or (i) are made, neither the Borrower nor any
Subsidiary will create, incur, assume or permit to exist any contract,
agreement or understanding (other than this Agreement and the other Combined
Loan Documents) which in any way prohibits or restricts the granting,
conveying, creation or imposition of any Lien on any of its Property in favor
of the Global Administrative Agent and

 

79

 

the Lenders or restricts any
Subsidiary from paying dividends to the Borrower, or which requires the consent
of or notice to other Persons in connection therewith.

 

SECTION 7.17                    Hedging Agreements.

 

(a)                                  Except as provided in Section 5.11,
neither the Borrower nor any Subsidiary will enter into any Hedging Agreements,
except where such agreements are entered into in the ordinary course of
business (and not for speculative purposes) and designed to protect the
Borrower or any of its Subsidiaries against fluctuations in Hydrocarbon prices,
currency exchange rates and interest rates; provided, that (i) with
respect to Hedging Agreements relating to crude oil in place that the aggregate
amount of volumes of Hydrocarbons subject to such Hedging Agreements shall not
exceed 80% of the anticipated production from the Borrower’s and its
Subsidiaries’ Hydrocarbons constituting “proved developed producing oil and gas
reserves” (as defined in the standards and guidelines of the SEC) for the
period covered by such Hedging Agreements and (ii) with respect to Hedging
Agreements relating to natural gas in place that the aggregate amount of
volumes of Hydrocarbons subject to such Hedging Agreements shall not exceed 80%
of the anticipated production from the Borrower’s and its Subsidiaries’
Hydrocarbons constituting “proved developed producing oil and gas reserves” (as
defined in the standards and guidelines of the SEC) for the period covered by
such Hedging Agreements; and provided, further, if the Borrower
or any of its Subsidiaries enters into a Hedging Agreement with a Combined
Lender, or an Affiliate thereof, the Hedging Obligations of the Borrower or
such Subsidiary under such Hedging Agreement will rank pari  passu
with the obligations of such Person under the Combined Loan Documents,
including the Obligations, to the extent applicable.

 

(b)                                 Except as provided in Section 5.11, the
Borrower will not, and will not permit any of its Subsidiaries, to enter into a
Hedging Agreement (i) which creates any Lien other than pursuant to any
Combined Loan Document or as permitted by Section 7.2(h) or (ii) with a
counterparty with a rating of its senior, unsecured, long-term indebtedness for
borrowed money that is not guaranteed by any other Person or subject to any
other credit enhancement of lower than “BBB-” or Baa3” by S&P and Moody’s,
respectively.

 

ARTICLE VIII

Events
of Default

 

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

 

(a)                                  any Loan Party shall default in the payment
or prepayment when due of any principal of or interest on any Loan, or any
reimbursement obligation for a disbursement made under any Letter of Credit, or
any fees or other amount payable by it hereunder or under any other Loan
Document and such default, other than a default of a payment or prepayment of
principal (which shall have no cure period), shall continue unremedied for a
period of five days; or

 

(b)                                 any Loan Party shall default in the payment
when due of any principal of or interest on any of its other Indebtedness
(other than Non-Recourse Debt) aggregating U.S.$10,000,000 or more, or any
event specified in any note, agreement, indenture or other

 

80

 

document evidencing or
relating to any such Indebtedness shall occur if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both) to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause after giving effect to all
applicable grace periods, such Indebtedness to become due prior to its stated
maturity; or

 

(c)                                  any representation, warranty or certification
made or deemed made herein or in any other Combined Loan Document by any Loan
Party, or any certificate furnished to any Lender or the Global Administrative
Agent pursuant to the provisions hereof or any other Combined Loan Document,
shall prove to have been false or misleading as of the time made, deemed made
or furnished in any material respect; or

 

(d)                                 the Borrower shall default in the performance
of any of its obligations under Article VII, any other Article of this
Agreement other than under Article V, or the Borrower shall default in
the performance of any of its obligations under Article V or any Loan
Party shall default in the performance of its obligations under any other Loan
Document (other than the payment of amounts due which shall be governed by Section
8.1(a)) and such default shall continue unremedied for a period of thirty
(30) days after the earlier to occur of (i) notice thereof to the Borrower by
the Global Administrative Agent or any Lender (through the Global
Administrative Agent), or (ii) the Borrower otherwise becoming aware of such
default; or

 

(e)                                  the Borrower shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or

 

(f)                                    the Borrower shall (i) apply for or consent
to the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the Federal Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up,
liquidation or composition or readjustment of debts, (v) fail to controvert in
a timely and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code, or (vi)
take any corporate action for the purpose of effecting any of the foregoing; or

 

(g)                                 a proceeding or case shall be commenced,
without the application or consent of the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Borrower of all or any substantial part of its assets, or (iii) similar relief
in respect of the Borrower under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of 60 days; or (iv) an order for relief
against the Borrower shall be entered in an involuntary case under the Federal
Bankruptcy Code; or

 

(h)                                 a judgment or judgments for the payment of
money in excess of U.S.$10,000,000 in the aggregate shall be rendered by a
court against any Loan Party and the same shall not be

 

81

 

discharged (or provision
shall not be made for such discharge), or a stay of execution thereof shall not
be procured, within 60 days from the date of entry thereof and such Loan Party
shall not, within said period of 60 days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal; or

 

(i)                                     any Loan Party takes, suffers or permits to
exist any of the events or conditions referred to in paragraphs (e), (f) or (g)
or if any Loan Party shall so state in writing; or

 

(j)                                     a Change of Control shall occur; or

 

(k)                                  the Liens created by the Security Documents
shall at any time not constitute a valid and perfected Lien on the Collateral
intended to be covered thereby (to the extent perfection by filing,
registration, recordation or possession is required herein or therein) in favor
of the Global Administrative Agent or, except for expiration in accordance with
its terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Loan Party; or

 

(l)                                     any “Default” or “Event of Default” as
defined in either the Canadian Revolving Loan Documents or the Canadian Term
Loan Documents shall occur; provided that if such “Default” or “Event of
Default” is cured or waived under the Canadian Revolving Loan Documents or the
Canadian Term Loan Documents, as applicable, then such “Default” or ‘Event of
Default” shall no longer constitute a Default or an Event of Default,
respectively, under this Agreement.

 

SECTION 8.2                          Action if Bankruptcy.  If
any Event of Default described in Section 8.1(f) or (g) with
respect to the Borrower shall occur, the Commitments (if not theretofore
terminated) shall automatically terminate and the outstanding principal amount
of all outstanding Loans and all other obligations hereunder shall
automatically be and become immediately due and payable, without demand,
protest or presentment or notice of any kind, all of which are hereby expressly
waived by the Borrower and its Subsidiaries. 
Without limiting the foregoing, the Agents and the Lenders shall be
entitled to exercise any and all other remedies available to them under the
Loan Documents and applicable law.

 

SECTION 8.3                          Action if Other Event of Default.  If
any Event of Default (other than any Event of Default described in Section
8.1(f) or (g)) shall occur for any reason, whether voluntary or
involuntary, and be continuing, the Majority Lenders may, by notice to the
Borrower, declare (a) the Commitments (if not theretofore terminated) to be
terminated and/or (b) all of the outstanding principal amount of the Loans and
all other obligations hereunder to be due and payable, whereupon the
Commitments shall terminate and the full unpaid amount of such Loans and other
obligations shall be and become immediately due and payable, without demand,
protest or presentment or notice of any kind, all of which are hereby waived by
the Borrower and its Subsidiaries. 
Without limiting the foregoing, the Agents and the Lenders shall be
entitled to exercise any and all other remedies available to them under the
Loan Documents and applicable law.

 

82

 

ARTICLE IX

Agents

 

Each of the Lenders, the
Issuing Banks and the other Agents hereby irrevocably appoints JPMorgan Chase
Bank as the Global Administrative Agent, BNP Paribas, Wachovia Bank, National
Association and The Bank of Nova Scotia, as Global Syndication Agents, and U.S.
Bank National Association, as U.S. Documentation Agent, and authorizes each
such Agent to take such actions on its behalf and to exercise such powers as
are delegated to such Agent by the terms of the Loan Documents, together with
such actions and powers as are reasonably incidental thereto.

 

Any bank serving as an Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not an Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent hereunder.

 

The Agents 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 Agents shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) each Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that such Agent
is required to exercise following its receipt of written instructions from the
Majority Lenders (or such other number or percentage of the Combined Lenders as
shall be necessary under the circumstances as provided in Section 10.2),
and (c) except as expressly set forth in the Loan Documents, the Agents shall
not have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its Subsidiaries
that is communicated to or obtained by the bank serving as such Agent or any of
its Related Parties in any capacity. 
Each Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Majority Lenders (or such other
number or percentage of the Combined Lenders as shall be necessary under the
circumstances as provided in Section 10.2) or in the absence of its own
gross negligence or willful misconduct; PROVIDED,
HOWEVER, THAT IT IS THE INTENTION OF THE PARTIES HERETO THAT EACH OF THE AGENTS
BE INDEMNIFIED IN THE CASE OF ITS OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE),
REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR
PASSIVE, IMPUTED, JOINT OR TECHNICAL.  Each Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to such Agent by the Borrower
or a Lender, and such Agent 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 any Loan Document, (ii) the contents of any certificate,
report or other document delivered thereunder or in connection therewith, (iii)
the performance or observance of any of the covenants, agreements or other
terms or conditions set forth in any Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Loan Document or any other
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article IV or elsewhere in any Loan Document, other than to
confirm receipt of items expressly required to be delivered to such Agent.

 

83

 

The Global Administrative
Agent and the other Agents 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 Global Administrative Agent and the other Agents 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.  The Global Administrative
Agent and the other Agents 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.

 

Any 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 such Agent. 
Any 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
paragraphs shall apply to any such sub-agent and to the Related Parties of such
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 an Agent.

 

Subject to the appointment
and acceptance of a successor Global Administrative Agent as provided in this
paragraph, the Global Administrative Agent may resign at any time by notifying
the Combined Lenders and the Borrower. 
Upon any such resignation, the Majority Lenders shall have the right, in
consultation with the Borrower, to appoint a successor.  If no successor shall have been so appointed
by the Majority Lenders and shall have accepted such appointment within 30 days
after the retiring Global Administrative Agent gives notice of its resignation,
then the retiring Global Administrative Agent may, on behalf of the Combined
Lenders and the Issuing Banks, appoint a successor Global Administrative Agent
which shall be a bank with an office in New York City, or an Affiliate of any
such bank.  Upon the acceptance of its
appointment as Global Administrative Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Global Administrative Agent, and the
retiring Global Administrative Agent shall be discharged from its duties and
obligations hereunder (other than its obligations under Section 10.12).  The fees payable by the Borrower to a
successor Global Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such
successor.  After the Global
Administrative Agent’s resignation hereunder, the provisions of this Article
and Section 10.3 shall continue in effect for the benefit of such
retiring Global Administrative 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 Global Administrative Agent.

 

Each Lender acknowledges
that it has, independently and without reliance upon any 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, the Intercreditor Agreement, and, when applicable, the Senior Debt
Intercreditor Agreement.  Each Lender
also acknowledges that it will, independently and without reliance upon any
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

 

84

 

upon this Agreement, any other Loan Document or any related agreement
or any document furnished hereunder or thereunder.

 

Each of the Lenders, for
itself and on behalf of any of its Affiliates, and the Issuing Banks hereby
irrevocably appoints the Global Administrative Agent to act as its agent under
the Intercreditor Agreement and the Senior Debt Intercreditor Agreement and
authorizes the Global Administrative Agent to execute the Intercreditor
Agreement and the Senior Debt Intercreditor Agreement on its behalf and to take
such actions on its behalf and to exercise such powers as are delegated to the
Global Administrative Agent by the terms hereof and thereof, together with such
actions and powers as are reasonably incidental thereto.

 

ARTICLE X

Miscellaneous

 

SECTION 10.1                    Notices.

 

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

 

(1)                                  if to the Borrower, to:

 

	
  Tom Brown, Inc.

  	
   

  
	
  555 17th Street, Suite
  1850

  	
   

  
	
  Denver, Colorado
  80202-3918

  	
   

  
	
  Attention:

  	
  Daniel G. Blanchard,
  Executive Vice President,

  Chief Financial Officer and Treasurer

  
	
  Telephone:

  	
  303-260-5039

  
	
  Facsimile:

  	
  303-260-5095

  
	
  e-mail:

  	
  dblanchard@tombrown.com

  
			

 

with
a copy to:

 

	
  Tom Brown, Inc.

  
	
  555 17th Street, Suite 1850

  
	
  Denver, Colorado
  80202-3918

  
	
  Attention:

  	
  Mark Burford, Director of
  Investor Relations

  and Assistant Treasurer

  
	
  Telephone:

  	
  303-260-5146

  
	
  Facsimile:

  	
  303-260-5161

  
	
  e-mail:

  	
  mburford@tombrown.com

  

 

(2)                                  if to the Global Administrative Agent, to:

 

	
  JPMorgan Chase Bank

  
	
  Loan and Agency Services

  
	
  1111 Fannin, 8th floor

  

 

85

 

	
  Houston, TX 77002

  
	
  Attention:

  	
  James DeLeon

  
	
  Telephone:

  	
  713-750-2366

  
	
  Facsimile:

  	
  713-427-6307

  

 

and,
with respect to non-Borrowing related matters, with a copy to:

 

	
  JPMorgan Chase Bank

  
	
  Global Oil & Gas Group

  
	
  600 Travis, 20th Floor

  
	
  Houston, Texas 77002

  
	
  Attention:

  	
  Robert C. Mertensotto

  
	
  Telephone:

  	
  713-216-4147

  
	
  Facsimile:

  	
  713-216-8870

  

 

(3)                                  if to any other Agent or Lender, to it at its
address (or telecopy number) provided to the Global Administrative Agent and
the Borrower or as set forth in its Administrative Questionnaire; and

 

(4)                                  if to any Canadian Revolving Lender or
Canadian Term Lender, to it at its address (or telecopy number) provided to the
Canadian Administrative Agent and the Canadian Borrowers or as set forth in its
“Administrative Questionnaire” as defined in the Canadian Revolving Credit
Agreement or Canadian Term Credit Agreement, as applicable.

 

(b)                                 Notices and other communications to the
Lenders hereunder may be delivered or furnished by electronic communications
pursuant to procedures approved by the Global Administrative Agent; provided
that the foregoing shall not apply to notices pursuant to Article II
unless otherwise agreed by the Global Administrative Agent and the applicable
Lender.  The Global 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 10.2                    Waivers; Amendments.

 

(a)                                  No failure or delay by the Global Administrative
Agent, any Issuing Bank or any Lender in exercising any right or power
hereunder or under any other Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power.  The rights and remedies
of the Global Administrative Agent, the Issuing Banks and the Lenders hereunder
and under the

 

86

 

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 any 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
paragraph (b) of this Section, 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 Global
Administrative Agent, any Lender or any Issuing Bank may have had notice or
knowledge of such Default at the time.

 

(b)                                 Neither this Agreement nor any of the
Combined Loan Documents nor any provision hereof or thereof may be waived,
amended or modified except, in the case of this Agreement, pursuant to an
agreement or agreements in writing entered into by the Borrower and the
Majority Lenders or by the Borrower and the Global Administrative Agent with
the consent of the Majority Lenders, or, in the case of any other Combined Loan
Document, pursuant to an agreement or agreements in writing entered into by the
relevant Loan Parties thereto and the Majority Lenders or by the relevant Loan
Parties thereto and the Global Administrative Agent with the consent of the
Majority Lenders, provided that no such agreement shall (i) increase the
Commitment of any Lender without the written consent of such Lender, (ii)
reduce the principal amount of any Loan or LC Disbursement or reduce the rate
of interest thereon, or reduce any fees payable hereunder, without the written
consent of each Lender affected thereby, (iii) postpone the scheduled date of
payment of the principal amount of any Loan or LC Disbursement, or any interest
thereon, or any fees payable hereunder, or reduce the amount of, waive or
excuse any such payment, or postpone the scheduled date of expiration of any
Commitment, without the written consent of each Lender affected thereby, (iv)
change Section 2.18(b) or (c) in a manner that would alter the
pro rata sharing of payments required thereby, without the written consent of
each Lender, (v) change any of the provisions of this Section 10.2, or Sections
2.7 or 2.10, or the definition of “Combined Lenders,” “Combined
Revolving Lenders,” “Required Lenders,” “Majority Lenders” or “Super Majority
Lenders” or any other provision of any Combined Loan Document specifying the
number or percentage of Lenders, Canadian Revolving Lenders, Canadian Term
Lenders, Combined Lenders or Combined Revolving Lenders required to determine
or redetermine the Global Borrowing Base or the Revolving Borrowing Base or
required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Combined Lender, (vi) release any Loan Party from its Guaranty (except as
expressly provided in such Guaranty), or limit its liability in respect of such
Guaranty, without the written consent of each Combined Lender, or (vii) except
as expressly provided herein, in the Intercreditor Agreement, the Senior Debt
Intercreditor Agreement or in the Security Documents (as defined herein and in
each other Combined Credit Agreement), release all or any part of the
Collateral from the Liens of the Security Documents (as defined herein and in
each other Combined Credit Agreement), without the written consent of each
Combined Lender; provided further that no such agreement shall amend,
waive, modify or otherwise affect the rights or duties of any Agent (as defined
herein and in each other Combined Credit Agreement) or any Issuing Bank (as
defined herein and in each other Combined Credit Agreement) without the prior
written consent of such Agent (as defined herein and in each other Combined
Credit Agreement) or any Issuing Bank (as defined herein and in each other
Combined Credit Agreement), as the case may be; provided further that
the Global Administrative Agent shall have the right to execute and deliver any
release of Lien (or other similar instrument) without the consent of any Lender
to the extent such

 

87

 

release is required to
permit the Borrower or a Subsidiary to consummate a transaction permitted by
this Agreement or the other Combined Loan Documents.

 

SECTION 10.3                    Expenses; Indemnity; Damage Waiver.

 

(a)                                  The Borrower shall pay (i) all legal,
printing, recording, syndication, travel, advertising and other reasonable
out-of-pocket expenses incurred by the Agents, the Arranger and their
Affiliates, including the reasonable fees, charges and disbursements of counsel
for the Agents and the Arranger, in connection with the syndication of the
credit facilities provided for herein, the preparation, execution, delivery and
administration of this Agreement, the Loan Documents and each other document or
instrument relevant to this Agreement or the Loan Documents and any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not
the transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by an Issuing Bank in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder, (iii) the filing, recording, refiling or
rerecording of the Pledge Agreements and any other Security Documents and/or
any Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to, and all releases and terminations
of, any thereof and any and all other documents or instruments of further
assurance required to be filed or recorded or refiled or rerecorded by the
terms hereof or of the Pledge Agreements and any other Security Documents, and
(iv) all reasonable out-of-pocket expenses incurred by the Agents, any Issuing
Bank or any Lender, including the fees, charges and disbursements of any
counsel for the Agents, any Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with the Loan Documents,
including its rights under this Section, or in connection with the Loans made
or Letters of Credit issued hereunder, including all such reasonable
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

 

(b)                                 The Borrower shall indemnify the Agents, each
Issuing Bank, the Arranger 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 reasonable out-of-pocket
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 any Loan Document or any other
agreement or instrument contemplated hereby, the performance by the parties to
the Loan Documents of their respective obligations thereunder or the
consummation of the Financing Transactions or any other transactions
contemplated hereby, (ii) any Loan or Letter of Credit or the use of the
proceeds therefrom (including any refusal by an 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),
(iii) any actual or alleged presence or release of Hazardous Materials on or
from any property currently or formerly owned or operated by the Borrower or
any of its Subsidiaries, or any Environmental Liability related in any way to
the Borrower or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory and regardless
of whether any Indemnitee is a party thereto; provided that such
indemnity and release shall not, as to any Indemnitee, be available to the
extent that such losses, claims, damages, liabilities or related

 

88

 

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 (IT BEING UNDERSTOOD THAT IT IS THE INTENTION OF THE
PARTIES HERETO THAT EACH OF THE INDEMNITEES BE INDEMNIFIED IN THE CASE OF ITS
OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH
NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR
TECHNICAL).

 

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

 

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

 

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

 

SECTION 10.4                    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
an Issuing Bank that issues any Letter of Credit), except that the Borrower may
not assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of the Global Administrative Agent, each
Issuing Bank and each Combined Lender (and any attempted assignment or transfer
by the Borrower without such consent shall be null and void).  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 an Issuing Bank that issues any Letter of Credit) and, to the
extent expressly contemplated hereby, the Related Parties of each of the Global
Administrative Agent, the Issuing Banks and the Lenders) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

 

(b)                                 Any Lender may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans at the time owing
to it); provided  that (i) except
in the case of an assignment to a Lender, a Lender Affiliate or an Approved
Fund, each of the Borrower and the Global Administrative Agent (and, in the
case of an assignment of all or a portion of a Commitment or any Lender’s
obligations in

 

89

 

respect of its LC Exposure,
the Issuing Banks) must give their prior written consent to such assignment
(which consents shall not be unreasonably withheld), (ii) except in the case of
an assignment to a Lender, a Lender Affiliate 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 Acceptance
with respect to such assignment is delivered to the Global Administrative
Agent) shall be in increments of U.S.$1,000,000 and not less than
U.S.$10,000,000 unless each of the Borrower and the Global Administrative Agent
otherwise consent, (iii) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender’s rights and obligations
under this Agreement, except that this clause (iii) shall not be construed to
prohibit the assignment of a proportionate part of all the assigning Lender’s
rights and obligations in respect of its Commitments or Loans in conformity
with the Intercreditor Agreement and the Senior Debt Intercreditor Agreement,
(iv) the parties to each assignment shall execute and deliver to the Global Administrative
Agent an Assignment and Acceptance, together with a processing and recordation
fee of U.S.$3,500, (v) the assignee, if it shall not be a Lender, shall deliver
to the Global Administrative Agent an Administrative Questionnaire, and (vi)
after giving effect to any assignment hereunder, the assigning Lender shall
have a Commitment of at least U.S.$10,000,000 unless each of the Borrower and
the Global Administrative Agent otherwise consents; and provided further
that any consent of the Borrower otherwise required under this paragraph shall
not be required if an Event of Default under Section 8.1 has occurred
and is continuing.  Subject to
acceptance and recording thereof pursuant to paragraph (d) of this
Section, from and after the effective date specified in each Assignment and
Acceptance, the assignee thereunder shall be a party hereto and to the other
Loan Documents and, to the extent of the interest assigned by such Assignment
and Acceptance, 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 Acceptance, be released from its
obligations under this Agreement and the other Loan Documents (and, in the case
of an Assignment and Acceptance 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 Sections 2.15,
2.16, 2.17, 2.18, 2.20 and 10.3 and be
subject to the terms of Section 10.12). 
Any assignment or transfer by a Lender of rights or obligations under
this Agreement that does not comply with this paragraph 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 paragraph (e) of this Section.

 

(c)                                  The Global Administrative Agent, acting for
this purpose as an agent of the Borrower, shall maintain at one of its offices
in New York City a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and the
Commitment of, and principal amount of the Loans and LC Disbursements owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, and the Borrower, the Global Administrative Agent, the Issuing
Banks 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 and the other Loan Documents, notwithstanding notice to the
contrary.  The Register shall be
available for inspection by the Borrower, any Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

 

90

 

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

 

(e)                                  Any Lender may, without the consent of the
Borrower, the Global Administrative Agent or any Issuing Bank, sell
participations to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans owing to
it); provided that (i) such Lender’s obligations under this Agreement
shall remain unchanged, (ii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, and (iii) the
Borrower, the Global Administrative Agent, the Issuing Banks and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce the Loan Documents and to approve any
amendment, modification or waiver of any provision of the Loan Documents; 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 second proviso to Section 10.2(b) that affects
such Participant.  Subject to paragraph
(f) of this Section, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.15, 2.16 and 2.17
to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section.  To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.8 and 10.12 as though it
were a Lender, provided such Participant agrees to be subject to Section
2.18(c) as though it were a Lender.

 

(f)                                    A Participant shall not be entitled to
receive any greater payment under Section 2.15, 2.16 or 2.17
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant. 
A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 2.17 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 2.17(e)
as though it were a Lender.

 

(g)                                 Any Lender may at any time pledge or assign a
Lien in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank or, in the case of a Lender organized in a jurisdiction
outside of the United States, a comparable Person, and this Section 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.

 

91

 

SECTION 10.5                    Survival.  All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
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 the Loan Documents 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 any Agent, any
Issuing Bank, the Arranger 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 Sections
2.15, 2.16, 2.17, 2.18, 2.20, 10.3 and 10.12
and Article IX 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 or any provision
hereof.

 

SECTION 10.6                    Counterparts; Effectiveness. 
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.  Except as provided in Section 4.1, this
Agreement shall become effective when it shall have been executed by the Global
Administrative Agent and when the Global 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 10.7                    Severability.  Any
provision of this Agreement 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; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

 

SECTION 10.8                    Right of Setoff.  If
an Event of Default shall have occurred and be continuing, each of the Agents,
the Issuing Banks, the Lenders and their 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 at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
of its Subsidiaries (other than a Foreign Subsidiary) against any and all the
obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured; provided,
however, that any such set-off and application shall be subject to the
provisions of Section 2.18.  As
security for such obligations, the Borrower hereby grants to the Agents, each
Issuing Bank and each Lender a continuing security interest in any and all
balances, credits, deposits, accounts or moneys of the Borrower and its
Subsidiaries (other than a Foreign Subsidiary) then or thereafter maintained

 

92

 

with any of the Agents, such
Issuing Bank and such Lenders.  The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.

 

SECTION 10.9                    GOVERNING LAW; JURISDICTION;
CONSENT TO SERVICE OF PROCESS.

 

(a)                                  THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW
PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.

 

(b)                                 THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING
IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT
OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENT,
OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING IN THIS AGREEMENT SHALL
AFFECT ANY RIGHT THAT THE AGENTS OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST THE BORROWER OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)                                  THE BORROWER HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY
AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

(d)                                 EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID,
OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.

 

93

 

NOTHING IN
THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

 

SECTION 10.10              WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN  ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 10.11              Headings.  Article and Section headings
and the Table of Contents used herein are for convenience of reference only,
are not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.

 

SECTION 10.12              Confidentiality.  In
the event that the Borrower provides to the Global Administrative Agent or the
Lenders confidential information belonging to the Borrower or any of its
Subsidiaries, then the Global Administrative Agent and the Lenders shall
thereafter maintain such information in confidence in accordance with the
standards of care and diligence that each utilizes in maintaining its own
confidential information.  This
obligation of confidence shall not apply to such portions of the information
which (i) are in the public domain, (ii) hereafter become part of the public
domain without the Global Administrative Agent or the Lenders breaching their
obligation of confidence to the Borrower, (iii) are previously known by the
Global Administrative Agent or the Lenders from some source other than the
Borrower, (iv) are hereafter developed by the Global Administrative Agent or
the Lenders without using the Borrower’s information, (v) are hereafter
obtained by or available to the Global Administrative Agent or the Lenders from
a third party who owes no obligation of confidence to the Borrower with respect
to such information or through any other means other than through disclosure by
the Borrower, (vi) are disclosed with the Borrower’s consent, (vii) must be
disclosed either pursuant to any Governmental Rule or to Persons regulating the
activities of the Global Administrative Agent or the Lenders, or (viii) as may
be required by law or regulation or order of any Governmental Authority in any
judicial, arbitration or governmental proceeding.  Further, the Global Administrative Agent or a Lender may disclose
any such information to any other Lender, any independent petroleum engineers
or consultants, any independent certified public or chartered accountants, any
legal counsel employed by such Person in connection with this Agreement or any
other Combined Loan Document, including without limitation, the enforcement or
exercise of all rights and remedies thereunder, or any assignee or participant
(including prospective assignees and participants) in the Loans; provided,
however, that the Global Administrative Agent or the Lenders shall receive a
confidentiality agreement from the

 

94

 

Person to whom such
information is disclosed such that said Person shall have the same obligation
to maintain the confidentiality of such information as is imposed upon the Global
Administrative Agent or the Lenders hereunder. 
Furthermore, this obligation of confidence shall not apply to, and each
of the Agents and the Lenders (and each Person employed or retained by such
Agents or Lenders who are or are expected to become engaged in evaluating,
approving, structuring or administering the Loans) may disclose to any Person,
without limitation of any kind, the “tax treatment” and “tax structure” (in
each case, within the meaning of Treasury Regulation Section 1.6011-4) of the
Loan transactions contemplated by this Agreement and the other  Combined Loan Documents, and all materials
of any kind (including opinions or other tax analyses) related thereto that are
or have been provided to such Agent or Lender relating to such tax treatment or
tax structure; provided that with respect to any document or similar item that
in either case contains confidential information concerning such tax treatment
or tax structure of the Loan transactions contemplated by this Agreement and
the other the Combined Loan Documents as well as other information, this
sentence shall only apply to such portions of the documents or similar item
that relate to such tax treatment or tax structure. Notwithstanding anything to
the contrary provided herein, this obligation of confidence shall cease three
(3) years from the date the information was furnished, unless the Borrower
requests in writing at least thirty (30) days prior to the expiration of such
three year period, to maintain the confidentiality of such information for an
additional three year period.  The
Borrower waives any and all other rights it may have to confidentiality as
against the Global Administrative Agent and the Lenders arising by contract,
agreement, statute or law except as expressly stated in this Section 10.12.

 

SECTION 10.13              Interest Rate Limitation.  It
is the intention of the parties hereto to conform strictly to applicable
interest, usury and criminal laws and, anything herein to the contrary
notwithstanding, the obligations of the Borrower and the Guarantors to a
Lender, any Issuing Bank or any Agent under this Agreement or any Combined Loan
Document shall be subject to the limitation that payments of interest shall not
be required to the extent that receipt thereof would be contrary to provisions
of law applicable to such Lender, such Issuing Bank or Agent limiting rates of
interest which may be charged or collected by such Lender, such Issuing Bank or
Agent.  Accordingly, if the transactions
contemplated hereby or thereby would be illegal, unenforceable, usurious or
criminal under laws applicable to a Lender, any Issuing Bank or any Agent
(including the laws of any jurisdiction whose laws may be mandatorily
applicable to such Lender or Agent notwithstanding anything to the contrary in
this Agreement or any other Combined Loan Document then, in that event,
notwithstanding anything to the contrary in this Agreement or any other
Combined Loan Document, it is agreed as follows:

 

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

 

(ii)                                  the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, taken,
reserved, charged or received under this Agreement or any Combined Loan
Document or otherwise in connection with this Agreement or any Combined Loan
Document by such Lender, such Issuing Bank or such Agent shall under no
circumstances exceed the maximum amount of interest allowed by applicable law
(such maximum lawful interest rate, if any, with respect to each Lender, each
Issuing Bank and the Agents herein called the “Highest Lawful Rate”),
and any excess shall be cancelled automatically and if theretofore paid shall
be credited to the

 

95

 

Borrower
by such Lender, such Issuing Bank or such Agent (or, if such consideration
shall have been paid in full, such excess refunded to the Borrower);

 

(iii)                               all sums paid, or agreed to be paid, to such
Lender, such Issuing Bank or such Agent for the use, forbearance and detention
of the indebtedness of the Borrower to such Lender, such Issuing Bank or such
Agent hereunder or under any Combined Loan Document shall, to the extent
permitted by laws applicable to such Lender, such Issuing Bank or such Agent,
as the case may be, be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the actual rate of
interest is uniform throughout the full term thereof;

 

(iv)                              if at any time the interest provided pursuant
to this Section or any other clause of this Agreement or any other Combined
Loan Document, together with any other fees or compensation payable pursuant to
this Agreement or any other Combined Loan Document and deemed interest under
laws applicable to such Lender, such Issuing Bank or such Agent, exceeds that
amount which would have accrued at the Highest Lawful Rate, the amount of
interest and any such fees or compensation to accrue to such Lender, such
Issuing Bank or such Agent pursuant to this Agreement or such other Combined
Loan Document shall be limited, notwithstanding anything to the contrary in
this Agreement or any other Combined Loan Document, to that amount which would
have accrued at the Highest Lawful Rate, but any subsequent reductions, as
applicable, shall not reduce the interest to accrue to such Lender, such
Issuing Bank or such Agent pursuant to this Agreement or such other Combined
Loan Document below the Highest Lawful Rate until the total amount of interest
accrued pursuant to this Agreement or such other Combined Loan Document, as the
case may be, and such fees or compensation deemed to be interest equals the
amount of interest which would have accrued to such Lender or Agent if a
varying rate per  annum equal to the interest provided pursuant to
any other relevant Section hereof (other than this Section) or thereof, as
applicable, had at all times been in effect, plus the amount of fees
which would have been received but for the effect of this Section; and

 

(v)                                 with the intent that the rate of interest
herein shall at all times be lawful, and if the receipt of any funds owing
hereunder or under any other agreement related hereto (including any of the
other Combined Loan Documents) by such Lender, such Issuing Bank or such Agent
would cause such Lender to charge the Borrower a criminal rate of interest, the
Lenders, the Issuing Banks and the Agents agree that they will not require the
payment or receipt thereof or a portion thereof which would cause a criminal
rate of interest to be charged by such Lender, such Issuing Bank or such Agent,
as applicable, and if received such affected Lender, such Issuing Bank or Agent
will return such funds to the Borrower so that the rate of interest paid by the
Borrower shall not exceed a criminal rate of interest from the date this
Agreement was entered into.

 

SECTION 10.14              Collateral Matters; Hedging Agreements;
Overdraft Facility.  The benefit of the Security Documents and of
the provisions of this Agreement relating to the Collateral shall also extend
to and be available to (i) those Lenders or their Affiliates that are
counterparties to the Hedging Agreements on a pro rata basis in respect of any
Hedging Obligations of the Borrower or any of its Subsidiaries that are in
effect at such time as such

 

96

 

Person (or its Affiliate) is
a Lender, but only while such Person or its Affiliate is a Lender and (ii)
those Lenders which are parties to the Overdraft Facility on a pro rata basis
in respect of any Obligations of the Borrower or any of its Subsidiaries under
such Overdraft Facility up to a maximum of $5,000,000 that are in effect at
such time as such Person is a Lender, but only while such Person is a
Lender.  It is the intention of the
parties hereto that the Hedging Obligations of the Borrower and its
Subsidiaries under any Hedging Agreement with a Combined Lender, or any
Affiliate of a Combined Lender, will rank pari passu with the
obligations of such Person under the Combined Loan Documents, including the
Obligations, to the extent applicable.

 

SECTION 10.15              Arranger; U.S. Documentation Agent; Global
Syndication Agents; Other Agents.  None of the Persons
identified on the facing page or the signature pages of this Agreement as the
“Sole Lead Arranger and Bookrunner” or “U.S. Documentation Agent” or “Global
Syndication Agents” or any other Agent (other than the Global Administrative
Agent) shall have any right, power, obligation, liability, responsibility or
duty under this Agreement or any other Combined Loan Document other than,
except in the case of the Arranger, those applicable to all Lenders as
such.  Without limiting the foregoing,
none of the Arranger, the U.S. Documentation Agent, the Global Syndication
Agents or any other Agent (other than the Global Administrative Agent) shall
have or be deemed to have any fiduciary relationship with any Lender or the
Borrower or any of its Subsidiaries. 
The Borrower and each Lender acknowledges that it has not relied, and
will not rely, on any of the Arranger, the U.S. Documentation Agent, the Global
Syndication Agents or any other Agent (other than the Global Administrative
Agent) in deciding to enter into this Agreement or in taking or not taking any
action hereunder or under the Combined Loan Documents.

 

SECTION 10.16                                      Intercreditor Agreement; Senior Debt Intercreditor
Agreement; Security Documents.  For so long as the Intercreditor Agreement
shall be in effect, the terms and conditions of this Agreement and the other
Loan Documents are subject to the terms of the Intercreditor Agreement.  In the event of any inconsistency between
this Agreement or any other Loan Document and the terms of the Intercreditor
Agreement, the Intercreditor Agreement shall control.  For so long as any Senior Debt Intercreditor Agreement shall be
in effect, the terms and conditions of this Agreement and the other Loan
Documents are subject to the terms of such Senior Debt Intercreditor
Agreement.  In the event of any
inconsistency between this Agreement or any other Loan Document and the terms
of any Senior Debt Intercreditor Agreement, the Senior Debt Intercreditor
Agreement shall control.  In the event
of any inconsistency between this Agreement and the terms of any other Loan
Document, this Agreement shall control.

 

SECTION 10.17                                      NO ORAL AGREEMENTS.  THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. 
THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

[SIGNATURES BEGIN ON FOLLOWING PAGE]

 

97

 

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

 

	
   

  	
  TOM
  BROWN, INC., as
  Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Daniel G. Blanchard

  
	
   

  	
  Title:

  	
  Executive Vice President,
  Chief

  Financial Officer and Treasurer

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-1

 

	
   

  	
  JPMORGAN
  CHASE BANK, as
  Global

  Administrative Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-2

 

	
   

  	
  BNP
  PARIBAS, as a
  Global Syndication Agent

  and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-3

 

	
   

  	
  WACHOVIA
  BANK, NATIONAL

  ASSOCIATION, as a
  Global Syndication Agent

  and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-4

 

	
   

  	
  THE BANK
  OF NOVA SCOTIA, as
  a Global

  Syndication Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-5

 

	
   

  	
  U.S. BANK
  NATIONAL ASSOCIATION,
  as the

  U.S. Documentation Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-6

 

	
   

  	
  WELLS
  FARGO BANK, N.A.,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-7

 

	
   

  	
  COMERICA
  BANK - TEXAS, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-8

 

	
   

  	
  BANK OF
  SCOTLAND, as a
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-9

 

	
   

  	
  UFJ BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Clyde L. Redford

  
	
   

  	
  Title:

  	
  Senior Vice President

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-10

 

	
   

  	
  WASHINGTON
  MUTUAL BANK, FA, as
  a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-11

 

	
   

  	
  BANK OF
  OKLAHOMA, N.A., as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

[SIGNATURE PAGE TO U.S. REVOLVING CREDIT AGREEMENT]

 

S-12

 

EXHIBIT A-1

 

FORM OF LEGAL OPINION OF VINSON & ELKINS L.L.P.

 

A-1

 

EXHIBIT A-2

 

FORM OF LEGAL OPINION OF LEBOEUF, LAMB, GREENE & MACRAE L.L.P.

 

A-2

 

EXHIBIT B

 

CONTINUING LETTERS OF CREDIT

 

	
  1.

  	
   

  	
  Issuer:

  	
  Comerica Bank – Texas

  
	
   

  	
   

  	
  Beneficiary:

  	
  Railroad Commission of
  Texas

  
	
   

  	
   

  	
  L/C No.:

  	
  4130

  
	
   

  	
   

  	
  Amount:

  	
  $250,000.00

  
	
   

  	
   

  	
  Date of Issue:

  	
  September 5, 2002

  
	
   

  	
   

  	
  Expiration:

  	
  May 1, 2004

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Issuer:

  	
  Comerica Bank – Texas

  
	
   

  	
   

  	
  Beneficiary:

  	
  JPMorgan Chase Bank (as
  successor in interest to Texas Commerce Bank National Association)

  
	
   

  	
   

  	
  L/C No.:

  	
  2310

  
	
   

  	
   

  	
  Amount:

  	
  $1,105,743.00

  
	
   

  	
   

  	
  Date of Issue:

  	
  January 16, 1997

  
	
   

  	
   

  	
  Expiration:

  	
  January 15, 2004

  

 

1

 

EXHIBIT C

 

FORM OF COMPLIANCE CERTIFICATE

 

The undersigned hereby
certifies that he is the
                                
of Tom Brown, Inc., a Delaware corporation (“Borrower”), and that as
such he is authorized to execute this certificate on behalf of the Borrower.
With reference to the Credit Agreement dated as of June 27, 2003 among the
Borrower, JPMorgan Chase Bank, as Global Administrative Agent, the other Agents
party thereto, and such Lenders which are or become a party thereto (together
with all amendments or supplements thereto being the “Credit Agreement”),
the undersigned represents and warrants as follows (each capitalized term used
herein having the same meaning given to it in the Credit Agreement unless
otherwise specified):

 

(a)                                  The representations and warranties of the Borrower
contained in Article VIII of the Credit Agreement and of the Borrower and its
Subsidiaries in any other Combined Loan Document and otherwise made in writing
by or on behalf of the Borrower pursuant to the Credit Agreement and the
Borrower or any Subsidiary pursuant to the other Combined Loan Documents were
true and correct when made, and are repeated at and as of the time of delivery
hereof and are true and correct at and as of the time of delivery hereof,
except as such representations and warranties are modified to give effect to
the transactions expressly permitted by the Credit Agreement or are limited to
an earlier date.

 

(b)                                 The Borrower and each Subsidiary has
performed and complied with all agreements and conditions contained in the
Combined Loan Documents to which it is a party required to be performed or
complied with by it prior to or at the time of delivery hereof.

 

(c)                                  Neither the Borrower nor any Subsidiary has
incurred any material liabilities, direct or contingent, since December 31, 2002
except those set forth in Schedule 7.1 to the Credit Agreement and
except those allowed by the terms of the Combined Credit Agreements or
consented to by the Lenders in writing.

 

(d)                                 Since December 31, 2002, no change has
occurred, either in any case or in the aggregate, in the condition, financial
or otherwise, of the Borrower or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect.

 

(e)                                  There exists, and, after giving effect to the
Loan or Loans with respect to which this certificate is being delivered, will
exist, no Default under the Combined Credit Agreements or any event or
circumstance which constitutes, or with notice or lapse of time (or both) would
constitute, an event of default under any loan or credit agreement, indenture,
deed of trust, security agreement or other agreement or instrument evidencing
or pertaining to any Indebtedness of the Borrower or any Subsidiary, including,
without limitation, the Combined Loan Documents, or under any material
agreement or instrument to which the Borrower or any Subsidiary is a party or
by which the Borrower or any Subsidiary is bound.

 

(f)                                    The financial statements furnished to the
Global Administrative Agent with this certificate fairly present, in all
material respects, the consolidated financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries as at the end of,
and for, the

 

1

 

[fiscal quarter] [fiscal
year] ending
                                                  
and such financial statements have been approved in accordance with the accounting
procedures specified in the Credit Agreement.

 

(g)                                 Attached hereto are the detailed computations
necessary to determine whether the Borrower and its Consolidated Subsidiaries
are in compliance with Sections 6.1 and 6.2 of the Credit
Agreement as of the end of the [fiscal quarter] [fiscal year] ending
                                    .

 

EXECUTED AND DELIVERED this
         day of
                            ,
200    .

 

	
   

  	
  TOM
  BROWN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

2

 

EXHIBIT D

 

FORM OF ASSIGNMENT AND ACCEPTANCE

 

Reference is made to that
certain Credit Agreement, dated as of June 27, 2003 (together with all
amendments, if any, from time to time made thereto, the “Credit Agreement”),
among Tom Brown, Inc., a Delaware corporation (the “Borrower”), JPMorgan
Chase Bank, as Global Administrative Agent (the “Global Administrative Agent”),
the other Agents party thereto, and such Lenders which are or become a party
thereto.  Terms defined in the Credit
Agreement are used herein with the same meanings.

 

The Assignor named below
hereby sells and assigns, without recourse, to the Assignee named below, and
the Assignee hereby purchases and assumes, without recourse, from the Assignor,
effective as of the Assignment Date set forth below, the interests set forth
below in the Assignor’s rights and obligations under the Credit Agreement and
the other Loan Documents, including, without limitation, the interests set
forth herein in the Commitment of the Assignor on the Assignment Date and Loans
owing to the Assignor which are outstanding on the Assignment Date, but
excluding accrued interest and fees to and excluding the Assignment Date (the “Assigned
Interest”), including, without limitation, the interests set forth below in
the Commitment of the Assignor on the Assignment Date.  The Assignee hereby acknowledges receipt of
a copy of the Credit Agreement and the other Loan Documents.  From and after the Assignment Date (i) the
Assignee shall be a party to and be bound by the provisions of the Credit
Agreement and the other Loan Documents, including, without limitation, the Intercreditor
Agreement and the Senior Debt Intercreditor Agreement, and, to the extent of
the Assigned Interest, have the rights and obligations of a Lender thereunder
and (ii) the Assignor shall, to the extent of the Assigned Interest, relinquish
its rights and be released from its obligations under the Credit Agreement and
the other Loan Documents (other than those set forth in Sections 10.4 and 10.12
thereof).

 

This Assignment and
Acceptance is being delivered to the Global Administrative Agent together with
(i) if the Assignee is a Foreign Lender, any documentation required to be
delivered by the Assignee pursuant to Section 2.17(e) of the Credit
Agreement, duly completed and executed by the Assignee, and (ii) if the
Assignee is not already a Lender under the Credit Agreement, an Administrative
Questionnaire in the form supplied by the Global Administrative Agent, duly
completed by the Assignee.  The
[Assignee/Assignor] shall pay the fee payable to the Global Administrative
Agent pursuant to Section 10.4(b) of the Credit Agreement.

 

THIS ASSIGNMENT AND
ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.

 

	
  Date of Assignment:

  	
   

  
	
   

  	
   

  
	
  Legal Name of Assignor:

  	
   

  
	
   

  	
   

  
	
  Legal Name of Assignee:

  	
   

  
	
   

  	
   

  
	
  Assignee’s Address for Notices:

  	
   

  
	
   

  	
   

  
	
  Effective Date of Assignment (“Assignment Date”):

  	
   

  

 

1

 

	
  Facility

  	
   

  	
  Principal Amount

  Assigned

  	
   

  	
  Percentage Assigned of

  Facility/Commitment (set forth, to

  at least 8 decimals, as a percentage

  of the Facility and the aggregate

  Commitments of all Lenders

  thereunder)

  
	
  Commitment Assigned:

  	
   

  	
  U.S
  $              

  	
   

  	
                %

  
	
  Loans:

  	
   

  	
  U.S
  $              

  	
   

  	
                %

  
	
  Credit Exposure:

  	
   

  	
  U.S
  $              

  	
   

  	
                %

  

 

The terms set forth above
are hereby agreed to:

 

	
   

  	
  [Name of Assignor]   , as Assignor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Name of Assignee]   , as Assignee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

2

 

The undersigned hereby
consent to the within assignment:(1)

 

	
   

  	
  TOM BROWN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, as
  Global

  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

(1)                                  Consents to be included to the extent
required by Section 10.4(b) of the Credit Agreement.

 

3

 

EXHIBIT E-1

 

FORM OF BORROWING REQUEST

 

                                ,
200      

 

JPMorgan Chase Bank

as Global Administrative
Agent

for the Lenders referred to
below

Loan and Agency Services

1111 Fannin, 8th floor

Houston, TX 77002

	
  Attention:

  	
  James DeLeon

  
	
  Telephone:

  	
  713-750-2366

  
	
  Facsimile:

  	
  713-427-6307

  

 

Re:                               Tom Brown, Inc. - U.S. Revolving Credit
Agreement

 

Dear Sirs:

 

Reference is made to that
certain Credit Agreement, dated as of June 27, 2003 (together with all amendments,
if any, from time to time made thereto, the “Credit Agreement”), among
Tom Brown, Inc, a Delaware corporation (the “Borrower”), JPMorgan Chase
Bank, as Global Administrative Agent (the “Global Administrative Agent”),
the other Agents party thereto, and such Lenders which are or become a party
thereto.  Terms defined in the Credit
Agreement are used herein with the same meanings.  This notice constitutes a Borrowing Request and the Borrower
hereby requests a Borrowing under the Credit Agreement, and in that connection
the Borrower specifies the following information with respect to the Borrowing
requested hereby:

 

(A)                              Principal amount of Borrowing(2):
                                                                    

 

(B)                                Interest rate basis(3):
                                                                                          

 

(C)                                Effective date (which is a Business
Day):                                                        

 

(D)                               Date of maturity (which is a Business
Day):                                                    

 

(E)                                 Interest
Period(4):                                                                                                

 

(2)                                  Not less than (i) U.S.$5,000,000 and an
integral multiple of U.S.$1,000,000 with respect to Eurodollar Loans (ii)
U.S.$500,000 and an integral multiple of U.S.$500,000 with respect to an ABR
Borrowing (or the aggregate unused balance of the Commitments in the case of an
ABR Borrowing).

 

(3)                                  Eurodollar Borrowing or ABR Borrowing.  Eurodollar Borrowing or ABR Borrowing

 

1

 

If the Borrowing results in
an increase in the aggregate outstanding principal amount of the Loans, the
Borrower hereby represents and warrants that the conditions specified in paragraphs
(a), (b) and (c) of Section 4.2 of the Credit Agreement are satisfied.

 

The Borrower has caused this
Borrowing Request to be executed and delivered by its Authorized Officer
this                         
day of
                                                       ,
200     .

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  TOM BROWN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

(4)                                  If applicable, selected period must comply
with the definition of “Interest Period” and end not later than the Maturity
Date.  If applicable, selected period
must comply with the definition of “Interest Period” and end not later than the
Maturity Date.

 

2

 

EXHIBIT E-2

 

FORM OF INTEREST ELECTION REQUEST

 

                                ,
200      

 

JPMorgan Chase Bank

as Global Administrative
Agent

for the Lenders referred to
below

Loan and Agency Services

1111 Fannin, 8th floor

Houston, TX 77002

 

	
  Attention:

  	
  James DeLeon

  
	
  Telephone:

  	
  713-750-2366

  
	
  Facsimile:

  	
  713-427-6307

  

 

Re:                               Tom Brown, Inc. - U.S. Revolving Credit
Agreement

 

Dear Sirs:

 

Reference is made to that
certain Credit Agreement, dated as of June 27, 2003 (together with all
amendments, if any, from time to time made thereto, the “Credit Agreement”),
among Tom Brown, Inc., a Delaware corporation (the “Borrower”), JPMorgan
Chase Bank, as Global Administrative Agent (the “Global Administrative Agent”),
the other Agents party thereto, and such Lenders which are or become a party
thereto.  Terms defined in the Credit
Agreement are used herein with the same meanings.  This notice constitutes an Interest Election Request and the
Borrower hereby requests the conversion or continuation of a Borrowing under
the Credit Agreement, and in that connection the Borrower specifies the
following information with respect to the Borrowing to be converted or
continued as requested hereby:

 

(A)                              Borrowing to which this request
applies(5):                                                              

 

(B)                                Principal amount of Borrowing to be
converted/continued(6):                                

 

(C)                                Effective date of election (which is a
Business
Day):                                                

 

(D)                               Interest rate basis of resulting
Borrowing(7):
                                                            

 

(5)                                  Specify existing Type and last day of current
Interest Period.  Specify existing Type
and last day of current Interest Period.

 

(6)                                  Not less than (i) U.S.$5,000,000 and an
integral multiple of U.S.$1,000,000 with respect to Eurodollar Loans (ii)
U.S.$500,000 and an integral multiple of U.S.$500,000 with respect to an ABR
Borrowing (or the aggregate unused balance of the Commitments in the case of an
ABR Borrowing).

 

1

 

(E)                                 Interest Period of resulting Borrowing(8):                                                                

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  TOM BROWN, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

(7)                                  Eurodollar Borrowing or ABR Borrowing.  Eurodollar Borrowing or ABR Borrowing.

 

(8)                                  Which must comply with the definition of
“Interest Period” and end not later than the Maturity Date.

 

2

 

EXHIBIT F-1

 

FORM OF PARENT PLEDGE AGREEMENT

 

PLEDGE AGREEMENT AND IRREVOCABLE PROXY

 

THIS PLEDGE AGREEMENT AND
IRREVOCABLE PROXY (this “Pledge Agreement”), dated as of June 27, 2003,
is made by TOM BROWN, INC., a
Delaware corporation (the “Pledgor”), in favor of JPMORGAN CHASE BANK, as Global
Administrative Agent (together with any successor(s) and assign(s) thereto, the
“Global Administrative Agent”) for the Lender Parties (as defined
below).

 

W  I  T
N  E  S  S  E  T  H:

 

WHEREAS, pursuant to a
Credit Agreement, dated as of June 27, 2003 (together with all amendments and
other modifications, if any, from time to time thereafter made thereto, the “U.S.
Credit Agreement”), among the Pledgor, as borrower, the various financial
institutions that are, or may from time to time become, parties to the U.S.
Credit Agreement (the “U.S. Lenders”), the various financial
institutions that are or may from time to time become Agents under the U.S.
Credit Agreement (the “U.S. Agents”), and the Global Administrative
Agent, the U.S. Lenders have extended Commitments to make Loans to, and the
Issuing Banks have agreed to issue Letters of Credit for the benefit of, the
Pledgor;

 

WHEREAS, pursuant to a
Credit Agreement, dated as of June 27, 2003 (together with all amendments and
other modifications, if any, from time to time thereafter made thereto, the “Canadian
Revolving Credit Agreement”), among Tom Brown Resources Funding Corp., an
unlimited liability company organized under the laws of the Province of Nova
Scotia, Canada (“TBF”), and Tom Brown Resources Ltd., a corporation
organized under the laws of the Province of Alberta, Canada (“TBRL”), as
borrowers (TBF and TBRL, in their capacities as borrowers, collectively
the  “Canadian Revolving Borrowers”),
the various financial institutions that are, or may from time to time become,
parties to the Canadian Revolving Credit Agreement (the “Canadian Revolving
Lenders”), the various financial institutions that are or may from time to
time become Agents under the Canadian Revolving Credit Agreement (as defined in
the Canadian Revolving Credit Agreement, the “Canadian Revolving Agents”),
and the Global Administrative Agent, the Canadian Revolving Lenders have agreed
to extend Canadian Revolving Commitments to make Loans (as defined in the
Canadian Revolving Credit Agreement, the “Canadian Revolving Loans”) to,
the Accepting Lenders (as defined in the Canadian Revolving Credit Agreement,
the “Canadian Accepting Lenders”) have agreed to accept Bankers’
Acceptances (as defined in the Canadian Revolving Credit Agreement, the “Bankers’
Acceptances”), and the Issuing Banks (as defined in the Canadian Revolving
Credit Agreement, the “Canadian Issuing Banks”) have agreed to issue
Letters of Credit (as defined in the Canadian Revolving Credit Agreement, the “Canadian
Letters of Credit”)  for the benefit
of, the Canadian Revolving Borrowers;

 

WHEREAS, in connection with
the Canadian Revolving Credit Agreement, Pledgor has agreed to deliver a
certain Guaranty dated as of June 27, 2003 (the “Canadian Revolving

 

1

 

Guaranty”)
pursuant to which Pledgor shall guaranty for the benefit of the Canadian
Revolving Lenders and their Affiliates the full and punctual payment when due
of all Canadian Revolving Obligations;

 

WHEREAS, pursuant to a
Credit Agreement, dated as of March 20, 2001 (together with all amendments
(including but not limited to that certain First Amendment to Credit Agreement
dated as of even date herewith (the “First Amendment to Term Credit
Agreement”)) and other modifications, if any, from time to time thereafter
made thereto, the “Canadian Term Credit Agreement”), among TBF, as
borrower (TBF, in its capacity as borrower the “Canadian Term Borrower”),
the various financial institutions that are, or may from time to time become,
parties to the Canadian Term Credit Agreement (the “Canadian Term Lenders”),
the various financial institutions that are or may from time to time become
Agents under the Canadian Term Credit Agreement (as defined in the Canadian
Term Credit Agreement, the “Canadian Term Agents” and together with the
Canadian Revolving Agents, the “Canadian Agents”), and the Global
Administrative Agent,  the Canadian Term
Lenders have agreed to make a term loan (the “Canadian Term Loans”) to
the Canadian Term Borrower;

 

WHEREAS, in connection with
the Canadian Term Credit Agreement, Pledgor has agreed to deliver a certain
Guaranty dated as of June 27, 2003 (the “Canadian Term Guaranty”)
pursuant to which Pledgor shall guaranty for the benefit of the Canadian Term
Lenders and their Affiliates the full and prompt payment when due of all
Canadian Term Obligations;

 

WHEREAS, the Pledgor and its
Subsidiaries (including the Canadian Borrowers) have entered into or may enter
into certain Hedging Agreements with one or more Lender Parties;

 

WHEREAS, as a condition
precedent to the making of the initial Loans to the Pledgor and the issuance of
the initial Letter of Credit for the benefit of the Pledgor under the U.S.
Credit Agreement and to the U.S. Lenders’ or their Affiliates’ obligations
under the Hedging Agreements referred to above, the Pledgor is required to
execute and deliver this Pledge Agreement;

 

WHEREAS, as a condition
precedent to the making of the initial Canadian Revolving Loans to the Canadian
Revolving Borrowers and the issuance of the initial Canadian Letter of Credit
for the benefit of the Canadian Revolving Borrowers under the Canadian
Revolving Credit Agreement, and to the execution and delivery of the First
Amendment to Term Credit Agreement, and to the Canadian Lenders’ or their
Affiliates’ obligations under the Hedging Agreements referred to above, the Pledgor
is required to execute and deliver this Pledge Agreement; and

 

WHEREAS, the Pledgor has
duly authorized the execution, delivery and performance of this Pledge
Agreement;

 

NOW THEREFORE, for good and
valuable consideration the receipt of which is hereby acknowledged, and in
order to induce the Combined Lenders to make Combined Loans (including the
initial Combined Loans) to, and to induce the Issuing Banks to issue the
Letters of Credit (including the initial Letter of Credit) for the benefit of,
the Pledgor and its Subsidiaries pursuant to the U.S. Credit Agreement, and to
induce the Canadian Issuing Banks to issue the

 

2

 

Canadian Letters of Credit (including the initial Canadian Letter of
Credit) for the benefit of, the Canadian Borrowers and their Subsidiaries, and
to induce certain Lender Parties to extend financial accommodations pursuant to
the Hedging Agreements, the Pledgor agrees, for the benefit of each Lender
Party, as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1                          Certain Terms.  The
following terms (whether or not underscored) when used in this Pledge
Agreement, including its preamble and recitals, shall have the following
meanings or the meanings set forth in the preamble or recital (such definitions
to be equally applicable to the singular and plural forms thereof):

 

“Canadian Collateral”
means the Canadian Revolving Collateral and the Canadian Term Collateral.

 

“Canadian Issuing Bank”
is defined in the second recital.

 

“Canadian Letters of Credit”
is defined in the second recital.

 

“Canadian Loan Party”
means any Loan Party as defined in the Canadian Revolving Credit Agreement or
the Canadian Term Credit Agreement.

 

“Canadian Revolving
Borrowers” is defined in the second recital.

 

“Canadian Revolving
Collateral” is defined in Section 2.1(b).

 

“Canadian Revolving
Credit Agreement” is defined in the second recital.

 

“Canadian Revolving
Guaranty” is defined in the third recital.

 

“Canadian Revolving
Lender Parties” means, as the context may require, any Canadian Revolving
Agent, any Canadian Issuing Bank, any Canadian Accepting Bank, any Canadian
Revolving Lender, or any Affiliate of a then current Canadian Revolving Lender
that is a party to a Hedging Agreement and each of its respective successors,
transferees and assigns.

 

“Canadian Revolving Loan
Pledged Property” means all Canadian Revolving Loan Pledged Shares and all
other pledged shares of common capital stock, and all proceeds of any of the
foregoing.

 

“Canadian Revolving Loan
Pledged Shares” means all shares of common capital stock of any Issuer
identified under Item B of Attachment I which are delivered by
the Pledgor to the Global Administrative Agent as Canadian Revolving Loan
Pledged Property hereunder.

 

“Canadian Revolving Loan
Secured Obligations” is defined in Section 2.2(b).

 

“Canadian Term Borrower”
is defined in the fourth recital.

 

“Canadian Term Collateral”
is defined in Section 2.1(c).

 

3

 

“Canadian Term Credit
Agreement” is defined in the fourth recital.

 

“Canadian Term Guaranty”
is defined in the fifth recital.

 

“Canadian Term Lender
Parties” means, as the context may require, any Canadian Term Agent, any
Canadian Term Lender and each of its respective successors, transferees and
assigns.

 

“Canadian Term Loan
Pledged Property” means all Canadian Term Loan Pledged Shares and all other
pledged shares of common capital stock, and all proceeds of any of the
foregoing.

 

“Canadian Term Loan
Pledged Shares” means all shares of common capital stock of any Issuer
identified under Item C of Attachment I which are delivered by
the Pledgor to the Global Administrative Agent as Canadian Term Loan Pledged
Property hereunder.

 

“Canadian Term Loan
Secured Obligations” is defined in Section 2.2(c).

 

“Collateral” means
the Canadian Revolving Loan Collateral, the Canadian Term Loan Collateral and
the U.S. Collateral.

 

“Distributions” means
all cash and stock dividends, other distributions, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral.

 

“Global Administrative
Agent” is defined in the preamble.

 

“Issuer” means each
Person identified in Attachment 1 hereto as the issuer of the Pledged
Shares identified opposite the name of such Person.

 

“Lender Party” means
any Canadian Revolving Lender Party, and Canadian Term Lender Party and any
U.S. Lender Party.

 

“Pledge Agreement” is
defined in the preamble.

 

“Pledged Property”
means all Canadian Pledged Property and all U.S. Pledged Property.

 

“Pledged Shares”
means all Canadian Revolving Loan Pledged Shares, all Canadian Term Loan
Pledged Shares and all U.S. Pledged Shares.

 

“Pledgor” is defined
in the preamble.

 

“Secured Obligations”
is defined in Section 2.2(b).

 

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

 

“U.S. Collateral” is
defined in Section 2.1(a).

 

4

 

“U.S. Credit Agreement”
is defined in the first recital.

 

“U.S. Lender Parties”
means, as the context may require, any U.S. Agent, any Issuing Bank, any  U.S. Lender, or any Affiliate of a then
current U.S. Lender that is a party to a Hedging Agreement and each of its
respective successors, transferees and assigns.

 

“U.S. Pledged Property”
means all U.S. Pledged Shares and all other pledged shares of capital stock,
and all proceeds of any of the foregoing.

 

“U.S. Pledged Shares”
means all shares of capital stock of any Issuer identified under Item A of
Attachment I which are delivered by the Pledgor to the Global
Administrative Agent as U.S. Pledged Property hereunder.

 

“U.S. Secured Obligations”
is defined in Section 2.2(a).

 

SECTION 1.2                          Credit Agreement Definitions. 
Unless otherwise defined herein or the context otherwise requires, terms
used in this Pledge Agreement, including its preamble and recitals, have the
meanings provided in the U.S. Credit Agreement (or if the U.S. Credit Agreement
shall have been terminated or shall have expired, the meanings provided in the
U.S. Credit Agreement immediately prior to its termination or expiration).

 

SECTION 1.3                          U.C.C. Definitions. 
Unless otherwise defined herein or the context otherwise requires, terms
for which meanings are provided in the U.C.C. are used in this Pledge
Agreement, including its preamble and recitals, with such meanings.

 

ARTICLE II

PLEDGE

 

SECTION 2.1                          Grant of Security Interest.

 

(a)                             The Pledgor hereby pledges, hypothecates,
assigns, charges, mortgages, delivers, and transfers to the Global
Administrative Agent, for its benefit and the ratable benefit of each of the
U.S. Lender Parties, and hereby grants to the Global Administrative Agent, for
its benefit and the ratable benefit of the U.S. Lender Parties, a continuing
security interest in, all of the following property (the “U.S. Collateral”):

 

(i)                                     the U.S. Pledged Shares;

 

(ii)                                  all other U.S. Pledged Property, whether now
or hereafter delivered to the Global Administrative Agent in connection with
this Pledge Agreement;

 

(iii)                               all Distributions, interest, and other
payments and rights with respect to any U.S. Pledged Property; and

 

(iv)                              all proceeds of any of the foregoing.

 

(b)                            The Pledgor hereby pledges, hypothecates,
assigns, charges, mortgages, delivers, and transfers to the Global
Administrative Agent, for its benefit and the ratable benefit of each of

 

5

 

the Canadian Revolving
Lender Parties, and hereby grants to the Global Administrative Agent, for its
benefit and the ratable benefit of the Canadian Revolving Lender Parties, a continuing
security interest in, all of the following property (the “Canadian Revolving
Collateral”):

 

(i)                                     the Canadian Revolving Loan Pledged Shares;

 

(ii)                                  all other Canadian Revolving Loan Pledged
Property, whether now or hereafter delivered to the Global Administrative Agent
in connection with this Pledge Agreement;

 

(iii)                               all Distributions, interest, and other
payments and rights with respect to any Canadian Revolving Loan Pledged
Property; and

 

(iv)                              all proceeds of any of the foregoing.

 

(c)                             The Pledgor hereby pledges, hypothecates,
assigns, charges, mortgages, delivers, and transfers to the Global
Administrative Agent, for its benefit and the ratable benefit of each of the
Canadian Term Lender Parties, and hereby grants to the Global Administrative Agent,
for its benefit and the ratable benefit of the Canadian Term Lender Parties, a
continuing security interest in, all of the following property (the “Canadian
Term Collateral”):

 

(i)                                     the Canadian Term Loan Pledged Shares;

 

(ii)                                  all other Canadian Term Loan Pledged
Property, whether now or hereafter delivered to the Global Administrative Agent
in connection with this Pledge Agreement;

 

(iii)                               all Distributions, interest, and other
payments and rights with respect to any Canadian Term Loan Pledged Property; and

 

(iv)                              all proceeds of any of the foregoing.

 

SECTION 2.2                          Security for Obligations.

 

(a)                             This Pledge Agreement and the U.S. Collateral
secures the payment in full of all Obligations now or hereafter existing under
the U.S. Credit Agreement and each other Loan Document, whether for principal,
interest, costs, fees, expenses, or otherwise, and all obligations of the
Pledgor or any other Loan Party now or hereafter existing, whether direct or
indirect, primary or secondary, fixed or absolute or contingent, joint or
several, regardless of how evidenced or arising, under this Pledge Agreement
and each other Loan Document to which it is or may become a party (all such
Obligations and other obligations being the “U.S. Secured Obligations”),
and

 

(b)                            This Pledge Agreement and the Canadian
Revolving Collateral secures the payment in full of all obligations now or
hereafter existing under the Canadian Revolving Guaranty and each other
Canadian Revolving Loan Document, whether for principal, interest, costs, fees,
expenses, or otherwise, and however created and whether direct or indirect,
primary

 

6

 

or secondary, fixed or
absolute or contingent, joint or several (all such Obligations and other
obligations being the “Canadian Revolving Loan Secured Obligations”).

 

(c)                             This Pledge Agreement and the Canadian Term
Collateral secures the payment in full of all obligations now or hereafter
existing under the Canadian Term Guaranty and each other Canadian Term Loan
Document, whether for principal, interest, costs, fees, expenses, or otherwise,
and however created and whether direct or indirect, primary or secondary, fixed
or absolute or contingent, joint or several (all such Obligations and other
obligations being the “Canadian Term Loan Secured Obligations” and
together with the U.S. Secured Obligations and the Canadian Revolving Loan
Secured Obligations, the “Secured Obligations”).

 

SECTION 2.3                          Delivery of Pledged Property.

 

(a)                             All certificates or instruments representing
or evidencing any Collateral, if any, including all Pledged Shares, shall be
delivered to and held by or on behalf of the Global Administrative Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary endorsements or instruments of transfer or
assignment, duly executed in blank.

 

(b)                            To the extent any of the Collateral
constitutes an “uncertificated security” (as defined in Section 8-102(a)(18) of
the U.C.C.) or a “security entitlement” (as defined in Section 8-102(a)(17) of
the U.C.C.), the Pledgor shall take and cause the appropriate Person (including
any issuer thereof) to take all actions necessary to grant “control” (as
defined in 8-106 of the U.C.C.) to the Global Administrative Agent over such Collateral.

 

SECTION 2.4                          [Intentionally omitted].

 

SECTION 2.5                          Continuing Security Interest; Transfer of
Loans.  This Pledge Agreement shall create a
continuing security interest in the Collateral and shall

 

(a)                             remain in full force and effect until payment
in full in cash of all Secured Obligations, the termination of all Commitments,
Canadian Revolving Commitments, the termination or expiration of all Letters of
Credit and all Canadian Letters of Credit and the termination or payment of all
outstanding Bankers’ Acceptances,

 

(b)                            be binding upon the Pledgor and its
successors, transferees and assigns, and

 

(c)                             inure, together with the rights and remedies
of the Global Administrative Agent hereunder, to the benefit of the Global
Administrative Agent and each other Lender Party.

 

Without limiting the
foregoing clause (c), if any Combined Lender assigns (whether in whole
or in part) its Combined Loans in accordance with Section 10.4 of the U.S.
Credit Agreement, Section 10.4 of the Canadian Revolving Credit Agreement, or
Section 10.4 of the Canadian Term Credit Agreement, as applicable, such
assignee, as a Combined Lender, shall thereupon become vested with all the
rights and benefits in respect thereof granted to such Combined Lender
hereunder.  Upon the payment in full of
all Secured Obligations and the termination or expiration of all Commitments,
Canadian Revolving Commitments, Letters of Credit and Canadian Letters of
Credit and the termination or payment of all outstanding Bankers’

 

7

 

Acceptances, the security
interest granted herein shall terminate and all rights to the Collateral shall
revert to the Pledgor.  Upon any such
payment and termination or expiration, the Global Administrative Agent will, at
the Pledgor’s sole expense, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all
certificates and instruments representing or evidencing all Pledged Shares,
together with all other Collateral held by the Global Administrative Agent
hereunder, and execute and deliver to the Pledgor such documents as the Pledgor
shall reasonably request to evidence such termination.

 

SECTION 2.6                          Security Interest Absolute.  All
rights of the Global Administrative Agent and the security interests granted to
the Global Administrative Agent hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional, irrespective of

 

(a)                             any lack of validity or enforceability of the
Canadian Revolving Credit Agreement, any other Canadian Revolving Loan
Document, the Canadian Term Credit Agreement, or any other Canadian Term Loan
Document,

 

(b)                            the failure of any Canadian Lender Party:

 

(i)                                     to assert any claim or demand or to enforce
any right or remedy against the Canadian Borrowers, any other Canadian Loan
Party or any other Person under the provisions of the Canadian Revolving Credit
Agreement, any other Canadian Revolving Loan Document, the Canadian Term Credit
Agreement, any other Canadian Term Loan Document or otherwise, or

 

(ii)                                  to exercise any right or remedy against any
other guarantor of, or Canadian Collateral securing, any Canadian Revolving
Obligations of the Canadian Revolving Borrowers or any other Canadian Loan
Party, or any Canadian Term Obligations of the Canadian Term Borrower or any
other Canadian Loan Party,

 

(c)                             any change in the time, manner or place of
payment of, or in any other term of, all or any of the Canadian Revolving
Obligations or the Canadian Term Obligations, any other extension, compromise or
renewal of any Canadian Revolving Obligation of the Canadian Revolving
Borrowers or any other Canadian Loan Party, or any other extension, compromise
or renewal of any Canadian Term Obligation of the Canadian Term Borrower or any
other Canadian Loan Party,

 

(d)                            any reduction, limitation, impairment or
termination of any Canadian Revolving Obligations of the Canadian Revolving
Borrowers or any other Canadian Loan Party for any reason (other than the
indefeasible payment in full in cash of the Canadian Secured Obligations),
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to (and the Pledgor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or occurrence
affecting, any Canadian Revolving Obligations of the Canadian Revolving
Borrower or other Canadian Loan Party, or any Canadian Term Obligations of the
Canadian Term Borrower or other Canadian Loan Party,

 

8

 

(e)                             any amendment to, rescission, waiver, or
other modification of, or any consent to departure from, any of the terms of
the Canadian Revolving Credit Agreement or any other Canadian Revolving Loan
Document, or any of the terms of the Canadian Term Credit Agreement or any
other Canadian Term Loan Document,

 

(f)                               any addition, exchange, release, surrender or
non-perfection of any Canadian Collateral, or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for any of
the Canadian Revolving Obligations or the Canadian Term Obligations, or

 

(g)                            any other circumstances (other than the
indefeasible payment in full in cash of the Canadian Secured Obligations) which
might otherwise constitute a defense available to, or a legal or equitable
discharge of, any Canadian Borrowers, any other Canadian Loan Party, or any
surety or any guarantor.

 

SECTION 2.7                          Waiver of Subrogation. 
Until the indefeasible payment in full in cash of all Canadian Secured
Obligations and the termination or expiration of all Canadian Revolving
Commitments and Canadian Letters of Credit and the termination or payment of
all outstanding Bankers’ Acceptances, the Pledgor hereby irrevocably waives any
claim or other rights which it may now or hereafter acquire against any
Canadian Borrower or any other Canadian Loan Party that arise from the
existence, payment, performance or enforcement of the Pledgor’s obligations
under this Pledge Agreement or any other Canadian Revolving Loan Document or
Canadian Term Loan Document, including any right of subrogation, reimbursement,
exoneration, or indemnification, any right to participate in any claim or
remedy of the Canadian Lender Parties against any Canadian Borrower or any
other Canadian Loan Party or any Canadian Collateral which the Global
Administrative Agent now has or hereafter acquires, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including the right to take or receive from any Canadian Borrower or any other
Canadian Loan Party, directly or indirectly, in cash or other Property or by
set-off or in any manner, payment or security on account of such claim or other
rights.  If any amount shall be paid to
the Pledgor in violation of the preceding sentence, such amount shall be deemed
to have been paid to the Pledgor for the benefit of, and held in trust for, the
Canadian Lender Parties, and shall forthwith be paid to the Global
Administrative Agent for the benefit of the Canadian Lender Parties to be
credited and applied upon the Canadian Revolving Obligations and the Canadian
Term Obligations, whether matured or unmatured.  The Pledgor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the Canadian Revolving
Credit Agreement and the Canadian Term Credit Agreement and that the waiver set
forth in this Section is knowingly made in contemplation of such benefits.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

SECTION 3.1                          Warranties, etc.  The
Pledgor represents and warrants unto each Lender Party, as at the date of each
pledge and delivery hereunder (including each pledge and delivery of Pledged
Shares) by the Pledgor to the Global Administrative Agent of any Collateral, as
set forth in this Article.

 

9

 

SECTION 3.1.1                 Ownership, No Liens, etc.  The
Pledgor is the legal and beneficial owner of, and has good and defensible title
to (and has full right and authority to pledge and assign) such Collateral,
free and clear of all Liens or options, except any Lien granted pursuant hereto
in favor of the Global Administrative Agent and Liens permitted by Section 7.2
of the U.S. Credit Agreement.

 

SECTION 3.1.2                 Valid Security Interest.  (a)
The delivery of the U.S. Collateral to the Global Administrative Agent is
effective to create a valid, perfected, first priority security interest in
such U.S. Collateral and all proceeds thereof, securing the U.S. Secured
Obligations; (b) the delivery of the Canadian Revolving Collateral to the
Global Administrative Agent is effective to create a valid, perfected, first
priority security interest in such Canadian Revolving Collateral and all
proceeds thereof, securing the Canadian Revolving Loan Secured Obligations; and
(c) the delivery of the Canadian Term Collateral to the Global Administrative
Agent is effective to create a valid, perfected, first priority security
interest in such Canadian Term Collateral and all proceeds thereof, securing
the Canadian Term Loan Secured Obligations. 
No filing or other action will be necessary to perfect or protect such
security interest.

 

SECTION 3.1.3                 As to Pledged Shares.

 

(a)                             In the case of any U.S. Pledged Shares, all
of such U.S. Pledged Shares are duly authorized and validly issued, fully paid,
and non-assessable, and constitute at least sixty-five percent (65%), of the
issued and outstanding shares of common capital stock of each Issuer set forth
across from the name of such Issuer on Item A of Attachment 1
hereto.

 

(b)                            In the case of any Canadian Revolving Loan
Pledged Shares, all of such Canadian Revolving Loan Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and constitute
all of the issued and outstanding shares of common capital stock of each Issuer
set forth across from the name of such Issuer on Item B of Attachment
1 hereto.

 

(c)                             In the case of any Canadian Term Loan Pledged
Shares, all of such Canadian Term Loan Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute at least
sixty-five percent (65%), of the issued and outstanding shares of common
capital stock of each Issuer set forth across from the name of such Issuer on Item
C of Attachment 1 hereto.

 

SECTION 3.1.4                 Authorization, Approval, etc. 
Except as contemplated by Section 2.3(b), no authorization,
approval, or other action by, and no notice to or filing with, any Governmental
Authority or any other Person is required for (a) the pledge by the Pledgor of
any Collateral pursuant to this Pledge Agreement or for the execution,
delivery, and performance of this Pledge Agreement by the Pledgor, or (b) for
the exercise by the Global Administrative Agent of the voting or other rights
provided for in this Pledge Agreement, or, except with respect to any Pledged
Shares, as may be required in connection with a disposition of such Pledged
Shares by laws affecting the offering and sale of securities generally and the
remedies in respect of the Collateral pursuant to this Pledge Agreement.

 

SECTION 3.1.5                 Location of Pledgor and Records; Name; State
of Incorporation, etc.  The Pledgor’s chief executive office and
principal place of business and the office where the

 

10

 

records concerning the
Collateral are kept is located at the address set forth on its signature page
to the U.S. Credit Agreement or such other address for the Pledgor as the
Global Administrative Agent has been notified pursuant to Section 7.3 of
this Pledge Agreement.  The true legal
name of the Pledgor as registered in the jurisdiction in which the Pledgor is
organized or incorporated, state of incorporation or organization, and
organization identification number as designated by the state of its
incorporation or organization are as set forth on its signature page to the
U.S. Credit Agreement or such other true legal name or organization
identification number for the Pledgor as the Agent has been notified pursuant
to Section 7.3 of this Pledge Agreement, and the Pledgor is not now
known by any trade name.

 

SECTION 3.1.6                 Compliance with Laws.  The
Pledgor is in compliance with the requirements of all applicable laws
(including, without limitation, the provisions of the Fair Labor Standards
Act), rules, regulations and orders of every Governmental Authority, the
non-compliance with which might materially adversely affect the value of the
Collateral or the worth of the Collateral as collateral security.

 

ARTICLE IV

COVENANTS

 

SECTION 4.1                          Protect Collateral; Further Assurances, etc.  The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other
manner the Collateral (except in favor of the Agent hereunder).  The Pledgor will warrant and defend the
right and title herein granted unto the Global Administrative Agent in and to
the Collateral (and all right, title and interest represented by the
Collateral) against the claims and demands of all Persons whomsoever.  The Pledgor agrees that at any time, and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments, and take all further action, that
may be necessary or desirable, or that the Global Administrative Agent may
reasonably request, in order to perfect, preserve and protect any security
interest granted or purported to be granted hereby or to enable the Global
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral.

 

SECTION 4.2                          Stock Powers, etc.  The
Pledgor agrees that all Pledged Shares (and all other certificated shares of
stock constituting Collateral) delivered by the Pledgor pursuant to this Pledge
Agreement will be accompanied by duly indorsed undated blank stock powers, or
other equivalent instruments of transfer acceptable to the Global
Administrative Agent.  The Pledgor will,
from time to time upon the request of the Global Administrative Agent, promptly
deliver to the Global Administrative Agent such stock powers, instruments and
similar documents, satisfactory in form and substance to the Global
Administrative Agent, with respect to the Collateral as the Global
Administrative Agent may reasonably request and will, from time to time upon
the request of the Global Administrative Agent after the occurrence of any
Event of Default, promptly transfer any Pledged Shares or other shares of stock
constituting Collateral into the name of any nominee designated by the Global
Administrative Agent.

 

SECTION 4.3                          Continuous Pledge. 
Subject to Section 2.5, the Pledgor will, at all times, keep
pledged to the Global Administrative Agent pursuant hereto all Pledged Shares,
all other shares of stock constituting Collateral, and all securities constituting
Collateral, and all

 

11

 

other Collateral and rights
from time to time received by or distributable to the Pledgor in respect of any
Collateral.

 

SECTION 4.4                          Voting Rights; Distributions, etc.  The
Pledgor agrees:

 

(a)                             if an Event of Default shall have occurred
and be continuing, promptly upon receipt thereof by the Pledgor and without any
request therefor by the Global Administrative Agent, to deliver (properly
endorsed where required hereby or requested by the Global Administrative Agent)
to the Global Administrative Agent all Distributions, and all proceeds of the
Collateral, all of which shall be held by the Global Administrative Agent as
additional Collateral for use in accordance with Section 6.3; and

 

(b)                            if any Event of Default shall have occurred
and be continuing and the Global Administrative Agent has notified the Pledgor
of the Global Administrative Agent’s intention to exercise its voting power
under this Section 4.4(b)

 

(i)                                     the Global Administrative Agent may exercise
(to the exclusion of the Pledgor) the voting power and all other incidental
rights of ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants the Global
Administrative Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral; and

 

(ii)                                  promptly to deliver to the Global
Administrative Agent such additional proxies and other documents as may be necessary
to allow the Global Administrative Agent to exercise such voting power.

 

All Distributions and
proceeds which may at any time and from time to time be held by the Pledgor but
which the Pledgor is then obligated to deliver to the Global Administrative
Agent, shall, until delivery to the Global Administrative Agent, be held by the
Pledgor separate and apart from its other property in trust for the Global
Administrative Agent.  THE GLOBAL ADMINISTRATIVE AGENT AGREES THAT UNLESS AN
EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING AND THE GLOBAL
ADMINISTRATIVE AGENT SHALL HAVE GIVEN THE NOTICE REFERRED TO IN SECTION
4.4(B), THE PLEDGOR SHALL HAVE THE
EXCLUSIVE VOTING POWER, AND IS GRANTED AN IRREVOCABLE PROXY, WITH RESPECT TO
ANY SHARES OF STOCK (INCLUDING ANY OF THE PLEDGED SHARES) CONSTITUTING
COLLATERAL.  THE GLOBAL ADMINISTRATIVE
AGENT SHALL, UPON THE WRITTEN REQUEST OF THE PLEDGOR, PROMPTLY DELIVER SUCH
PROXIES AND OTHER DOCUMENTS, IF ANY, AS SHALL BE REASONABLY REQUESTED BY THE
PLEDGOR WHICH ARE NECESSARY TO ALLOW THE PLEDGOR TO EXERCISE VOTING POWER WITH
RESPECT TO ANY SUCH SHARE OF STOCK (INCLUDING ANY OF THE PLEDGED SHARES)
CONSTITUTING COLLATERAL; PROVIDED, HOWEVER, THAT NO
VOTE SHALL BE CAST, OR CONSENT, WAIVER, OR RATIFICATION GIVEN, OR ACTION TAKEN
BY THE PLEDGOR THAT WOULD IMPAIR ANY COLLATERAL OR BE INCONSISTENT WITH OR
VIOLATE ANY PROVISION OF THE U.S. CREDIT AGREEMENT, THE CANADIAN

 

12

 

REVOLVING CREDIT AGREEMENT, OR THE CANADIAN TERM CREDIT
AGREEMENT, OR ANY OTHER LOAN DOCUMENT, CANADIAN REVOLVING LOAN DOCUMENT OR
CANADIAN TERM LOAN DOCUMENT (INCLUDING THIS PLEDGE AGREEMENT).  THE IRREVOCABLE PROXY GRANTED HEREIN SHALL
SURVIVE UNTIL SUCH TIME AS THIS PLEDGE AGREEMENT IS TERMINATED.

 

SECTION 4.5                          Notice of Changes Affecting Collateral.  The
Pledgor will furnish to the Global Administrative Agent promptly, and in any
event within thirty (30) days of becoming aware of the following changes,
written notice of any change (i) in the Pledgor’s corporate name or in any
trade name used to identify the Pledgor in the conduct of its business or its
ownership of the Collateral, (ii) in the location of the Pledgor’s chief
executive office, principal place of business or jurisdiction of incorporation,
(iii) in the Pledgor’s identity or corporate structure, or (iv) in the
Pledgor’s Federal Taxpayer Identification Number.

 

SECTION 4.6                          Disposition of Collateral; Issuance of
Additional Stock or Equity Interests.  Except as permitted by the
U.S. Credit Agreement, the Pledgor shall not sell, assign, exchange, pledge or
otherwise transfer, encumber or grant any option, warrant or other right to
purchase the Collateral (except in favor of the Global Administrative Agent
hereunder).  The Pledgor (a) shall not
permit any Issuer to issue any additional stock, other securities, membership
interests, partnership interests, or other equity interests in addition to or
in substitution for the Pledged Property issued by such Issuer unless such
interests are promptly pledged to the Global Administrative Agent under this
Pledge Agreement, and shall not permit any Issuer to issue any warrants,
options, contracts or other commitments or other securities that are
convertible to any of the foregoing or that entitle any Person to purchase any
of the foregoing and (b) except for this Pledge Agreement, shall not, and shall
not permit any Issuer to, enter into any agreement creating any restriction or
condition upon the transfer, voting or control of any Pledged Property.

 

ARTICLE V

THE GLOBAL ADMINISTRATIVE AGENT

 

SECTION 5.1                          Global Administrative Agent Appointed
Attorney-in-Fact.  The Pledgor hereby irrevocably appoints the
Global Administrative Agent as the Pledgor’s attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Global Administrative Agent’s
discretion, to take any action and to execute any writing or paper which the
Global Administrative Agent may deem necessary or advisable following the
occurrence and while there is continuing an Event of Default to accomplish the
purposes of this Pledge Agreement, including without limitation:

 

(a)                             to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;

 

(b)                            to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with clause
(a) above; and

 

(c)                             to file any claims or take any action or
institute any proceedings which the Global Administrative Agent may deem
necessary or desirable for the collection of any of the Collateral

 

13

 

or otherwise to enforce the
rights of the Global Administrative Agent with respect to any of the
Collateral.

 

The Pledgor hereby
acknowledges, consents and agrees that the power of attorney granted pursuant
to this Section is irrevocable and coupled with an interest.

 

SECTION 5.2                          Global Administrative Agent May Perform. 
After the occurrence and during the continuance of any Event of Default,
if the Pledgor fails to perform any agreement contained herein, the Global
Administrative Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Global Administrative Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to Section
6.4.

 

SECTION 5.3                          Global Administrative Agent Has No Duty.  The
powers conferred on the Global Administrative Agent hereunder are solely to
protect its interest (on behalf of the Lender Parties) in the Collateral and
shall not impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Global Administrative Agent shall have no duty as to any
Collateral or responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Property, whether or not the Global Administrative Agent has or
is deemed to have knowledge of such matters or (b) taking any necessary steps
to preserve rights against prior parties or any other rights pertaining to any
Collateral.

 

SECTION 5.4                          Reasonable Care.  The
Global Administrative Agent is required to exercise reasonable care in the
custody and preservation of any of the Collateral in its possession; provided,
however, the Global Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Global Administrative
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.

 

ARTICLE VI

REMEDIES

 

SECTION 6.1                          Certain Remedies.  If
any Event of Default shall have occurred and be continuing:

 

(a)                             The Global Administrative Agent may exercise
in respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Global Administrative Agent’s offices or
elsewhere, for cash, and upon such other terms as the Global Administrative
Agent may deem commercially reasonable. 
The Pledgor agrees that, to the extent notice of sale shall be required
by law, at least ten days’ prior notice to the Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall

 

14

 

constitute reasonable
notification.  The Global Administrative
Agent shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given.  The
Global Administrative Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned.

 

(b)                            The Global Administrative Agent may

 

(i)                                     transfer all or any part of the Collateral
into the name of the Global Administrative Agent or its nominee, with or
without disclosing that such Collateral is subject to the Lien hereunder,

 

(ii)                                  notify the parties obligated on any of the
Collateral to make payment to the Global Administrative Agent of any amount due
or to become due thereunder,

 

(iii)          enforce collection of any of the Collateral
by suit or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party with
respect thereto,

 

(iv)                              endorse any checks, drafts, or other writings
in the Pledgor’s name to allow collection of the Collateral,

 

(v)                                 take control of any proceeds of the
Collateral, and

 

(vi)                              execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.

 

SECTION 6.2                          Compliance with Restrictions.  The
Pledgor agrees that in any sale of any of the Collateral whenever an Event of
Default shall have occurred and be continuing, the Global Administrative Agent
is hereby authorized to comply with any limitation or restriction in connection
with such sale as it may be advised by counsel is necessary in order to avoid
any violation of applicable law (including compliance with such procedures as
may restrict the number of prospective bidders and purchasers, require that
such prospective bidders and purchasers have certain qualifications, and
restrict such prospective bidders and purchasers to persons who will represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or resale of such Collateral), or in order to
obtain any required approval of the sale or of the purchaser by any
Governmental Authority, and the Pledgor further agrees that such compliance
shall not result in such sale being considered or deemed not to have been made
in a commercially reasonable manner, nor shall the Global Administrative Agent
be liable nor accountable to the Pledgor for any discount allowed by the reason
of the fact that such Collateral is sold in compliance with any such limitation
or restriction.

 

15

 

SECTION 6.3                          Application of Proceeds.

 

(a)                             Except as may be otherwise set forth in the
Intercreditor Agreement, all cash proceeds received by the Global
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the U.S. Collateral may, in the discretion
of the Global Administrative Agent, be held by the Global Administrative Agent
as additional collateral security for, or then or at any time thereafter be
applied (after payment of any amounts payable to the Global Administrative
Agent pursuant to the U.S. Credit Agreement and Section 6.4) in whole or
in part by the Global Administrative Agent for the ratable benefit of the U.S.
Lender Parties against, all or any part of the U.S. Secured Obligations in such
order as the Global Administrative Agent shall elect.

 

(b)                            Except as may be otherwise set forth in the
Intercreditor Agreement, all cash proceeds received by the Global
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Canadian Collateral may, in the
discretion of the Global Administrative Agent, be held by the Global
Administrative Agent as additional collateral security for, or then or at any
time thereafter be applied (after payment of any amounts payable to the Global
Administrative Agent pursuant to the Canadian Revolving Credit Agreement,
Canadian Term Credit Agreement and Section 6.4) in whole or in part by
the Global Administrative Agent for the ratable benefit of the Canadian Lender
Parties against, all or any part of the Canadian Secured Obligations in such
order as the Global Administrative Agent shall elect.

 

(c)                             Except as may be otherwise set forth in the
Intercreditor Agreement, any surplus of such cash or cash proceeds held by the
Global Administrative Agent and remaining after payment in full of all the
Secured Obligations and the termination of all Commitments and all Canadian
Revolving Commitments shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.

 

SECTION 6.4                          Indemnity and Expenses.  The
Pledgor hereby indemnifies and holds harmless the Global Administrative Agent
from and against any and all claims, losses, and liabilities arising out of or
resulting from this Pledge Agreement (including enforcement of this Pledge
Agreement), except claims, losses, or liabilities resulting from the Global
Administrative Agent’s gross negligence or wilful misconduct; PROVIDED, HOWEVER, THAT IT IS THE INTENTION OF THE
PARTIES HERETO THAT THE GLOBAL ADMINISTRATIVE AGENT BE INDEMNIFIED IN THE CASE
OF ITS OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH
NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR
TECHNICAL.  Pledgor shall pay
(i) all legal and other reasonable out-of-pocket expenses incurred by the
Global Administrative Agent, including the reasonable fees, charges and
disbursements of counsel for the Global Administrative Agent, in connection
with the preparation, execution, delivery and administration of this Pledge
Agreement and any amendments, modifications or waivers of the provisions hereof
or thereof, (ii) all legal and other reasonable out-of-pocket expenses incurred
by the Global Administrative Agent in connection with the custody,
preservation, use, or operation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the filing, recording, refiling
or rerecording of the Pledge Agreements and/or any Uniform Commercial Code
financing statements relating thereto

 

16

 

and all amendments,
supplements and modifications to, and all releases and terminations of, any
thereof and any and all other documents or instruments of further assurance
required to be filed or recorded or refiled or rerecorded by the terms hereof,
and (iv) all out-of-pocket expenses incurred by the Global Administrative
Agent, including the fees, charges and disbursements of any counsel for the
Global Administrative Agent, in connection with the enforcement or protection
of its rights in connection with this Pledge Agreement.

 

ARTICLE VII

MISCELLANEOUS PROVISIONS

 

SECTION 7.1                          Loan Document. 
This Pledge Agreement is a Combined Loan Document executed pursuant to
the Combined Credit Agreements and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.

 

SECTION 7.2                          Amendments, etc.  No
amendment to or waiver of any provision of this Pledge Agreement nor consent to
any departure by the Pledgor herefrom shall in any event be effective unless
the same shall be in writing and signed by the Global Administrative Agent in
accordance with Section 10.2(b) of the Combined Credit Agreements, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it is given.

 

SECTION 7.3                          Addresses for Notices.  All
notices and other communications provided for hereunder shall be in writing
(including telecopy communication) and, if to the Pledgor, mailed or telecopied
or delivered to it at the address set forth below its signature hereto, if to
the Global Administrative Agent, mailed or delivered to it, addressed to it at
the address of the Global Administrative Agent specified in the Credit
Agreement or, as to either party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section.  All
such notices and other communications shall be effective as provided in Section
10.1 of the U.S. Credit Agreement.

 

SECTION 7.4                          Headings.  Article and Section headings
used herein are for convenience of reference only, are not part of this Pledge
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Pledge Agreement.

 

SECTION 7.5                          Severability. Any provision of this Pledge Agreement 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; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

SECTION 7.6                          Filing as a Financing Statement.  At
the option of the Global Administrative Agent, this Pledge Agreement, or a
carbon, photographic or other reproduction of this Pledge Agreement or of any
Uniform Commercial Code financing statement, and amendments thereto, covering
all of the Collateral or any portion thereof shall be sufficient as a Uniform
Commercial Code financing statement and may be filed as such without the
signature of the Pledgor where and to the full extent permitted by applicable
law, and the Pledgor hereby

 

17

 

authorizes the Global
Administrative Agent to file U.C.C. financing statements, continuations and
amendments with respect to the Collateral describing the collateral property as
“all property” or words of similar import, and to file U.C.C. financing
statements, and continuations and amendments thereto, and similar documents
with respect to the Collateral without its signature (to the extent permitted
by applicable law).

 

SECTION 7.7                          GOVERNING LAWS.  THIS PLEDGE AGREEMENT AND THE OTHER COMBINED LOAN DOCUMENTS
(OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

 

SECTION 7.8                          NO ORAL AGREEMENTS.  THIS WRITTEN PLEDGE AGREEMENT AND THE OTHER COMBINED LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

 

THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

[SIGNATURES BEGIN ON FOLLOWING PAGE]

 

18

 

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

 

	
   

  	
  TOM BROWN,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Daniel G. Blanchard

  
	
   

  	
  Title:

  	
  Executive Vice President,
  Treasurer

  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
  Tom Brown. Inc.

  
	
   

  	
   

  	
   

  	
  555 17th
  Street, Suite 1850

  
	
   

  	
   

  	
   

  	
  Denver, Colorado
  80202-3918

  
	
   

  	
  Attention:

  	
   

  	
  Daniel G. Blanchard,

  
	
   

  	
   

  	
   

  	
  Executive Vice President,
  Treasurer

  and Chief Financial Officer

  
	
   

  	
  Telephone:

  	
   

  	
  (303) 260-5095

  
	
   

  	
  Facsimile:

  	
   

  	
  (303) 260-5039

  
							

 

19

 

	
   

  	
  JPMORGAN
  CHASE BANK, as
  Global

  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  JPMorgan Chase Bank

  
	
   

  	
   

  	
  Loan and Agency Services

  
	
   

  	
   

  	
  1111 Fannin, 8th
  Floor

  
	
   

  	
   

  	
  Houston, Texas 77002

  
	
   

  	
  Attention:

  	
  James DeLeon

  
	
   

  	
  Telephone:

  	
  713-750-2366

  
	
   

  	
  Facsimile:

  	
  713-427-6307

  
	
   

  	
   

  
	
   

  	
  and, with respect to
  non-Borrowing related matters,

  with a copy to:

  
	
   

  	
   

  
	
   

  	
  JPMorgan Chase Bank

  
	
   

  	
  Global Oil & Gas Group

  
	
   

  	
  600 Travis, 20th Floor

  
	
   

  	
  Houston, Texas 77002

  
	
   

  	
  Attention:

  	
  Robert Mertensotto

  
	
   

  	
  Telephone:

  	
  713-216-4147

  
	
   

  	
  Facsimile:

  	
  713-216-8870

  
					

 

20

 

ATTACHMENT 1

to Pledge Agreement

 

Item A

U.S.
Pledged Shares

 

	
  Issuer

  	
   

  	
  Common Stock

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Outstanding

  Shares

  	
   

  	
  % of
  Shares

  Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Matador Petroleum
  Corporation., a Texas corporation

  	
   

  	
  [      ]

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Retex Inc., a Wyoming
  corporation

  	
   

  	
  1,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TBI West Virginia, Inc., a
  Delaware corporation

  	
   

  	
  1,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tom Brown Resources
  Funding Corp., a Nova Scotia unlimited liability company

  	
   

  	
  100

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tom Brown Resources Ltd.,
  an Alberta corporation

  	
   

  	
  100

  	
   

  	
  65

  	
  %

  

 

21

 

Item B

Canadian
Revolving Loan Pledged Shares

 

	
  Issuer

  	
   

  	
  Common
  Stock

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Outstanding

  Shares

  	
   

  	
  % of
  Shares

  Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tom Brown Resources
  Funding Corp., a Nova Scotia unlimited liability company

  	
   

  	
  100

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tom Brown Resources Ltd.,
  an Alberta corporation

  	
   

  	
  100

  	
   

  	
  100

  	
  %

  

 

22

 

Item C

Canadian
Term Loan Pledged Shares

 

	
  Issuer

  	
   

  	
  Common
  Stock

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Matador Petroleum
  Corporation., a Texas corporation

  	
   

  	
  [      ]

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Retex Inc., a Wyoming
  corporation

  	
   

  	
  1,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TBI West Virginia, Inc., a
  Delaware corporation

  	
   

  	
  1,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tom Brown Resources
  Funding Corp., a Nova Scotia unlimited liability company

  	
   

  	
  100

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tom Brown Resources Ltd.,
  an Alberta corporation

  	
   

  	
  100

  	
   

  	
  65

  	
  %

  

 

23

 

EXHIBIT F-2

 

FORM OF MATADOR PLEDGE AGREEMENT

 

PLEDGE AGREEMENT AND IRREVOCABLE PROXY

 

THIS PLEDGE AGREEMENT AND
IRREVOCABLE PROXY (this “Pledge Agreement”), dated as of June 27, 2003,
is made by MATADOR PETROLEUM CORPORATION,
a Texas corporation (the “Pledgor”), in favor of JPMORGAN CHASE BANK, as Global
Administrative Agent (together with any successor(s) and assign(s) thereto, the
“Global Administrative Agent”) for the Lender Parties (as defined
below).

 

W  I  T
N  E  S  S  E  T  H:

 

WHEREAS, pursuant to a
Credit Agreement, dated as of June 27, 2003 (together with all amendments and
other modifications, if any, from time to time thereafter made thereto, the “U.S.
Credit Agreement”), among Tom Brown, Inc., a Delaware corporation (the “U.S.
Borrower”) , as borrower, the various financial institutions that are, or
may from time to time become, parties to the U.S. Credit Agreement (the “U.S.
Lenders”), the various financial institutions that are or may from time to
time become Agents under the U.S. Credit Agreement (the “U.S. Agents”),
and the Global Administrative Agent, the U.S. Lenders have extended Commitments
to make Loans to, and the Issuing Banks have agreed to issue Letters of Credit
for the benefit of, the U.S. Borrower;

 

WHEREAS, in connection with
the U.S. Credit Agreement, Pledgor has agreed to deliver a certain Guaranty
dated as of June 27, 2003 (the “U.S. Guaranty”) pursuant to which
Pledgor shall guaranty for the benefit of the U.S. Lenders and their Affiliates
the full and punctual payment when due of all Obligations under the U.S. Credit
Agreement;

 

WHEREAS, pursuant to a
Credit Agreement, dated as of June 27, 2003 (together with all amendments and
other modifications, if any, from time to time thereafter made thereto, the “Canadian
Revolving Credit Agreement”), among Tom Brown Resources Funding Corp., an
unlimited liability company organized under the laws of the Province of Nova
Scotia, Canada (“TBF”), and Tom Brown Resources Ltd., a corporation
organized under the laws of the Province of Alberta, Canada (“TBRL”), as
borrowers (TBF and TBRL, in their capacities as borrowers, collectively
the  “Canadian Revolving Borrowers”),
the various financial institutions that are, or may from time to time become,
parties to the Canadian Revolving Credit Agreement (the “Canadian Revolving
Lenders”), the various financial institutions that are or may from time to
time become Agents under the Canadian Revolving Credit Agreement (as defined in
the Canadian Revolving Credit Agreement, the “Canadian Revolving Agents”),
and the Global Administrative Agent, the Canadian Revolving Lenders have agreed
to extend Canadian Revolving Commitments to make Loans (as defined in the
Canadian Revolving Credit Agreement, the “Canadian Revolving Loans”) to,
the Accepting Lenders (as defined in the Canadian Revolving Credit Agreement,
the “Canadian Accepting Lenders”) have agreed to accept Bankers’
Acceptances (as defined in the Canadian Revolving Credit Agreement, the “Bankers’
Acceptances”), and the Issuing Banks (as defined in the Canadian Revolving
Credit Agreement, the “Canadian Issuing Banks”) have agreed to issue
Letters of Credit (as defined in

 

1

 

the Canadian Revolving Credit
Agreement, the “Canadian Letters of Credit”)  for the benefit of, the Canadian Revolving Borrowers;

 

WHEREAS, in connection with
the Canadian Revolving Credit Agreement, Pledgor has agreed to deliver a
certain Guaranty dated as of June 27, 2003 (the “Canadian Revolving Guaranty”)
pursuant to which Pledgor shall guaranty for the benefit of the Canadian
Revolving Lenders and their Affiliates the full and punctual payment when due
of all Canadian Revolving Obligations;

 

WHEREAS, pursuant to a
Credit Agreement, dated as of March 20, 2001 (together with all amendments
(including but not limited to that certain First Amendment to Credit Agreement
dated as of even date herewith (the “First Amendment to Term Credit
Agreement”)) and other modifications, if any, from time to time thereafter
made thereto, the “Canadian Term Credit Agreement”), among TBF, as
borrower (TBF, in its capacity as borrower the “Canadian Term Borrower”),
the various financial institutions that are, or may from time to time become,
parties to the Canadian Term Credit Agreement (the “Canadian Term Lenders”),
the various financial institutions that are or may from time to time become
Agents under the Canadian Term Credit Agreement (as defined in the Canadian
Term Credit Agreement, the “Canadian Term Agents” and together with the
Canadian Revolving Agents, the “Canadian Agents”), and the Global
Administrative Agent,  the Canadian Term
Lenders have agreed to make a term loan (the “Canadian Term Loans”) to
the Canadian Term Borrower;

 

WHEREAS, in connection with
the Canadian Term Credit Agreement, Pledgor has agreed to deliver a certain
Guaranty dated as of June 27, 2003 (the “Canadian Term Guaranty”)
pursuant to which Pledgor shall guaranty for the benefit of the Canadian Term
Lenders and their Affiliates the full and prompt payment when due of all
Canadian Term Obligations;

 

WHEREAS, the U.S. Borrower
and its Subsidiaries (including the Canadian Borrowers) have entered into or
may enter into certain Hedging Agreements with one or more Lender Parties;

 

WHEREAS, as a condition
precedent to the making of the initial Loans to the U.S. Borrower and the
issuance of the initial Letter of Credit for the benefit of the U.S. Borrower
under the U.S. Credit Agreement and to the U.S. Lenders’ or their Affiliates’
obligations under the Hedging Agreements referred to above, the Pledgor is
required to execute and deliver this Pledge Agreement;

 

WHEREAS, as a condition
precedent to the making of the initial Canadian Revolving Loans to the Canadian
Revolving Borrowers and the issuance of the initial Canadian Letter of Credit
for the benefit of the Canadian Revolving Borrowers under the Canadian
Revolving Credit Agreement, and to the execution and delivery of the First
Amendment to Term Credit Agreement, and to the Canadian Lenders’ or their
Affiliates’ obligations under the Hedging Agreements referred to above, the
Pledgor is required to execute and deliver this Pledge Agreement; and

 

WHEREAS, the Pledgor has
duly authorized the execution, delivery and performance of this Pledge
Agreement;

 

2

 

NOW THEREFORE, for good and
valuable consideration the receipt of which is hereby acknowledged, and in
order to induce the Combined Lenders to make Combined Loans (including the
initial Combined Loans) to, and to induce the Issuing Banks to issue the
Letters of Credit (including the initial Letter of Credit) for the benefit of,
the U.S. Borrower and its Subsidiaries pursuant to the U.S. Credit Agreement,
and to induce the Canadian Issuing Banks to issue the Canadian Letters of
Credit (including the initial Canadian Letter of Credit) for the benefit of,
the Canadian Borrowers and their Subsidiaries, and to induce certain Lender Parties
to extend financial accommodations pursuant to the Hedging Agreements, the
Pledgor agrees, for the benefit of each Lender Party, as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1                          Certain Terms.  The
following terms (whether or not underscored) when used in this Pledge
Agreement, including its preamble and recitals, shall have the following
meanings or the meanings set forth in the preamble or recital (such definitions
to be equally applicable to the singular and plural forms thereof):

 

“Canadian Collateral”
means the Canadian Revolving Collateral and the Canadian Term Collateral.

 

“Canadian Issuing Bank”
is defined in the third recital.

 

“Canadian Letters of
Credit” is defined in the third recital.

 

“Canadian Loan Party”
means any Loan Party as defined in the Canadian Revolving Credit Agreement or
the Canadian Term Credit Agreement.

 

“Canadian Revolving
Borrowers” is defined in the third recital.

 

“Canadian Revolving
Collateral” is defined in Section 2.1(b).

 

“Canadian Revolving
Credit Agreement” is defined in the third recital.

 

“Canadian Revolving
Guaranty” is defined in the fourth recital.

 

“Canadian Revolving
Lender Parties” means, as the context may require, any Canadian Revolving
Agent, any Canadian Issuing Bank, any Canadian Accepting Bank, any Canadian
Revolving Lender, or any Affiliate of a then current Canadian Revolving Lender
that is a party to a Hedging Agreement and each of its respective successors,
transferees and assigns.

 

“Canadian Revolving Loan
Pledged Property” means all Canadian Revolving Loan Pledged Shares and all
other pledged shares of common capital stock, and all proceeds of any of the
foregoing.

 

“Canadian Revolving Loan
Pledged Shares” means all shares of common capital stock of any Issuer
identified under Item B of Attachment I which are delivered by
the Pledgor to the Global Administrative Agent as Canadian Revolving Loan
Pledged Property hereunder.

 

3

 

“Canadian Revolving Loan
Secured Obligations” is defined in Section 2.2(b).

 

“Canadian Term Borrower”
is defined in the fifth recital.

 

“Canadian Term Collateral”
is defined in Section 2.1(c).

 

“Canadian Term Credit
Agreement” is defined in the fifth recital.

 

“Canadian Term Guaranty”
is defined in the sixth recital.

 

“Canadian Term Lender
Parties” means, as the context may require, any Canadian Term Agent, any
Canadian Term Lender and each of its respective successors, transferees and
assigns.

 

“Canadian Term Loan
Pledged Property” means all Canadian Term Loan Pledged Shares and all other
pledged shares of common capital stock, and all proceeds of any of the
foregoing.

 

“Canadian Term Loan
Pledged Shares” means all shares of common capital stock of any Issuer
identified under Item C of Attachment I which are delivered by
the Pledgor to the Global Administrative Agent as Canadian Term Loan Pledged
Property hereunder.

 

“Canadian Term Loan
Secured Obligations” is defined in Section 2.2(c).

 

“Collateral” means
the Canadian Revolving Loan Collateral, the Canadian Term Loan Collateral and the
U.S. Collateral.

 

“Distributions” means
all cash and stock dividends, other distributions, liquidating dividends,
shares of stock resulting from (or in connection with the exercise of) stock
splits, reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any Pledged Shares or other shares of
capital stock constituting Collateral.

 

“Global Administrative
Agent” is defined in the preamble.

 

“Issuer” means each
Person identified in Attachment 1 hereto as the issuer of the Pledged
Shares identified opposite the name of such Person.

 

“Lender Party” means
any Canadian Revolving Lender Party, and Canadian Term Lender Party and any
U.S. Lender Party.

 

“Pledge Agreement” is
defined in the preamble.

 

“Pledged Property”
means all Canadian Pledged Property and all U.S. Pledged Property.

 

“Pledged Shares”
means all Canadian Revolving Loan Pledged Shares, all Canadian Term Loan
Pledged Shares and all U.S. Pledged Shares.

 

“Pledgor” is defined
in the preamble.

 

“Secured Obligations”
is defined in Section 2.2(b).

 

4

 

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

 

“U.S. Agents” is
defined in the first recital.

 

“U.S. Borrower” is
defined in the first recital.

 

“U.S. Collateral” is
defined in Section 2.1(a).

 

“U.S. Credit Agreement”
is defined in the first recital.

 

“U.S. Guaranty” is
defined in the second recital.

 

“U.S. Lenders” is
defined in the first recital.

 

“U.S. Lender Parties”
means, as the context may require, any U.S. Agent, any Issuing Bank, any  U.S. Lender, or any Affiliate of a then
current U.S. Lender that is a party to a Hedging Agreement and each of its
respective successors, transferees and assigns.

 

“U.S. Pledged Property”
means all U.S. Pledged Shares and all other pledged shares of capital stock,
and all proceeds of any of the foregoing.

 

“U.S. Pledged Shares”
means all shares of capital stock of any Issuer identified under Item A of
Attachment I which are delivered by the Pledgor to the Global
Administrative Agent as U.S. Pledged Property hereunder.

 

“U.S. Secured Obligations”
is defined in Section 2.2(a).

 

SECTION 1.2                          Credit Agreement Definitions. 
Unless otherwise defined herein or the context otherwise requires, terms
used in this Pledge Agreement, including its preamble and recitals, have the
meanings provided in the U.S. Credit Agreement (or if the U.S. Credit Agreement
shall have been terminated or shall have expired, the meanings provided in the
U.S. Credit Agreement immediately prior to its termination or expiration).

 

SECTION 1.3                          U.C.C. Definitions. 
Unless otherwise defined herein or the context otherwise requires, terms
for which meanings are provided in the U.C.C. are used in this Pledge
Agreement, including its preamble and recitals, with such meanings.

 

ARTICLE II

PLEDGE

 

SECTION 2.1                          Grant of Security Interest.

 

(a)                             The Pledgor hereby pledges, hypothecates,
assigns, charges, mortgages, delivers, and transfers to the Global
Administrative Agent, for its benefit and the ratable benefit of each of the
U.S. Lender Parties, and hereby grants to the Global Administrative Agent, for
its benefit and the ratable benefit of the U.S. Lender Parties, a continuing
security interest in, all of the following property (the “U.S. Collateral”):

 

5

 

(i)                                     the U.S. Pledged Shares;

 

(ii)                                  all other U.S. Pledged Property, whether now
or hereafter delivered to the Global Administrative Agent in connection with
this Pledge Agreement;

 

(iii)                               all Distributions, interest, and other
payments and rights with respect to any U.S. Pledged Property; and

 

(iv)                              all proceeds of any of the foregoing.

 

(b)                            The Pledgor hereby pledges, hypothecates,
assigns, charges, mortgages, delivers, and transfers to the Global
Administrative Agent, for its benefit and the ratable benefit of each of the
Canadian Revolving Lender Parties, and hereby grants to the Global Administrative
Agent, for its benefit and the ratable benefit of the Canadian Revolving Lender
Parties, a continuing security interest in, all of the following property (the
“Canadian Revolving Collateral”):

 

(i)                                     the Canadian Revolving Loan Pledged Shares;

 

(ii)                                  all other Canadian Revolving Loan Pledged
Property, whether now or hereafter delivered to the Global Administrative Agent
in connection with this Pledge Agreement;

 

(iii)                               all Distributions, interest, and other
payments and rights with respect to any Canadian Revolving Loan Pledged
Property; and

 

(iv)                              all proceeds of any of the foregoing.

 

(c)                             The Pledgor hereby pledges, hypothecates,
assigns, charges, mortgages, delivers, and transfers to the Global
Administrative Agent, for its benefit and the ratable benefit of each of the
Canadian Term Lender Parties, and hereby grants to the Global Administrative
Agent, for its benefit and the ratable benefit of the Canadian Term Lender
Parties, a continuing security interest in, all of the following property (the
“Canadian Term Collateral”):

 

(i)                                     the Canadian Term Loan Pledged Shares;

 

(ii)                                  all other Canadian Term Loan Pledged
Property, whether now or hereafter delivered to the Global Administrative Agent
in connection with this Pledge Agreement;

 

(iii)                               all Distributions, interest, and other
payments and rights with respect to any Canadian Term Loan Pledged Property;
and

 

(iv)                              all proceeds of any of the foregoing.

 

SECTION 2.2                          Security for Obligations.

 

(a)                             This Pledge Agreement and the U.S. Collateral
secures the payment in full of all Obligations now or hereafter existing under
the U.S. Credit Agreement, the U.S. Guaranty and

 

6

 

each other Loan Document,
whether for principal, interest, costs, fees, expenses, or otherwise, and all
obligations of the Pledgor or any other Loan Party now or hereafter existing,
whether direct or indirect, primary or secondary, fixed or absolute or
contingent, joint or several, regardless of how evidenced or arising, under
this Pledge Agreement and each other Loan Document to which it is or may become
a party (all such Obligations and other obligations being the “U.S. Secured
Obligations”), and

 

(b)                            This Pledge Agreement and the Canadian
Revolving Collateral secures the payment in full of all obligations now or
hereafter existing under the Canadian Revolving Guaranty and each other
Canadian Revolving Loan Document, whether for principal, interest, costs, fees,
expenses, or otherwise, and however created and whether direct or indirect,
primary or secondary, fixed or absolute or contingent, joint or several (all
such Obligations and other obligations being the “Canadian Revolving Loan
Secured Obligations”).

 

(c)                             This Pledge Agreement and the Canadian Term
Collateral secures the payment in full of all obligations now or hereafter
existing under the Canadian Term Guaranty and each other Canadian Term Loan
Document, whether for principal, interest, costs, fees, expenses, or otherwise,
and however created and whether direct or indirect, primary or secondary, fixed
or absolute or contingent, joint or several (all such Obligations and other
obligations being the “Canadian Term Loan Secured Obligations” and
together with the U.S. Secured Obligations and the Canadian Revolving Loan
Secured Obligations, the “Secured Obligations”).

 

SECTION 2.3                          Delivery of Pledged Property.

 

(a)                             All certificates or instruments representing
or evidencing any Collateral, if any, including all Pledged Shares, shall be
delivered to and held by or on behalf of the Global Administrative Agent
pursuant hereto, shall be in suitable form for transfer by delivery, and shall
be accompanied by all necessary endorsements or instruments of transfer or
assignment, duly executed in blank.

 

(b)                            To the extent any of the Collateral
constitutes an “uncertificated security” (as defined in Section 8-102(a)(18) of
the U.C.C.) or a “security entitlement” (as defined in Section 8-102(a)(17) of
the U.C.C.), the Pledgor shall take and cause the appropriate Person (including
any issuer, entitlement holder or securities intermediary thereof) to take all
actions necessary to grant “control” (as defined in 8-106 of the U.C.C.) to the
Global Administrative Agent over such Collateral.

 

SECTION 2.4                          [Intentionally omitted].

 

SECTION 2.5                          Continuing Security Interest; Transfer of
Loans.  This Pledge Agreement shall create a
continuing security interest in the Collateral and shall

 

(a)                             remain in full force and effect until payment
in full in cash of all Secured Obligations, the termination of all Commitments,
Canadian Revolving Commitments, the termination or expiration of all Letters of
Credit and all Canadian Letters of Credit and the termination or payment of all
outstanding Bankers’ Acceptances,

 

(b)                            be binding upon the Pledgor and its
successors, transferees and assigns, and

 

7

 

(c)                             inure, together with the rights and remedies
of the Global Administrative Agent hereunder, to the benefit of the Global
Administrative Agent and each other Lender Party.

 

Without limiting the foregoing
clause (c), if any Combined Lender assigns (whether in whole or in part)
its Combined Loans in accordance with Section 10.4 of the U.S. Credit
Agreement, Section 10.4 of the Canadian Revolving Credit Agreement, or Section
10.4 of the Canadian Term Credit Agreement, as applicable, such assignee, as a
Combined Lender, shall thereupon become vested with all the rights and benefits
in respect thereof granted to such Combined Lender hereunder.  Upon the payment in full of all Secured
Obligations and the termination or expiration of all Commitments, Canadian
Revolving Commitments, Letters of Credit and Canadian Letters of Credit and the
termination or payment of all outstanding Bankers’ Acceptances, the security
interest granted herein shall terminate and all rights to the Collateral shall
revert to the Pledgor.  Upon any such
payment and termination or expiration, the Global Administrative Agent will, at
the Pledgor’s sole expense, deliver to the Pledgor, without any
representations, warranties or recourse of any kind whatsoever, all
certificates and instruments representing or evidencing all Pledged Shares,
together with all other Collateral held by the Global Administrative Agent
hereunder, and execute and deliver to the Pledgor such documents as the Pledgor
shall reasonably request to evidence such termination.

 

SECTION 2.6                          Security Interest Absolute.  All
rights of the Global Administrative Agent and the security interests granted to
the Global Administrative Agent hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional, irrespective of

 

(a)                             any lack of validity or enforceability of the
Canadian Revolving Credit Agreement, any other Canadian Revolving Loan
Document, the Canadian Term Credit Agreement, or any other Canadian Term Loan
Document,

 

(b)                            the failure of any Canadian Lender Party:

 

(i)                                     to assert any claim or demand or to enforce
any right or remedy against the Canadian Borrowers, any other Canadian Loan
Party or any other Person under the provisions of the Canadian Revolving Credit
Agreement, any other Canadian Revolving Loan Document, the Canadian Term Credit
Agreement, any other Canadian Term Loan Document or otherwise, or

 

(ii)                                  to exercise any right or remedy against any
other guarantor of, or Canadian Collateral securing, any Canadian Revolving
Obligations of the Canadian Revolving Borrowers or any other Canadian Loan
Party, or any Canadian Term Obligations of the Canadian Term Borrower or any
other Canadian Loan Party,

 

(c)                             any change in the time, manner or place of
payment of, or in any other term of, all or any of the Canadian Revolving
Obligations or the Canadian Term Obligations, any other extension, compromise
or renewal of any Canadian Revolving Obligation of the Canadian Revolving
Borrowers or any other Canadian Loan Party, or any other extension, compromise
or renewal of any Canadian Term Obligation of the Canadian Term Borrower or any
other Canadian Loan Party,

 

8

 

(d)                            any reduction, limitation, impairment or
termination of any Canadian Revolving Obligations of the Canadian Revolving
Borrowers or any other Canadian Loan Party for any reason (other than the
indefeasible payment in full in cash of the Canadian Secured Obligations),
including any claim of waiver, release, surrender, alteration or compromise,
and shall not be subject to (and the Pledgor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or occurrence
affecting, any Canadian Revolving Obligations of the Canadian Revolving
Borrower or other Canadian Loan Party, or any Canadian Term Obligations of the
Canadian Term Borrower or other Canadian Loan Party,

 

(e)                             any amendment to, rescission, waiver, or
other modification of, or any consent to departure from, any of the terms of
the Canadian Revolving Credit Agreement or any other Canadian Revolving Loan
Document, or any of the terms of the Canadian Term Credit Agreement or any
other Canadian Term Loan Document,

 

(f)                               any addition, exchange, release, surrender or
non-perfection of any Canadian Collateral, or any amendment to or waiver or
release of or addition to or consent to departure from any guaranty, for any of
the Canadian Revolving Obligations or the Canadian Term Obligations, or

 

(g)                            any other circumstances (other than the
indefeasible payment in full in cash of the Canadian Secured Obligations) which
might otherwise constitute a defense available to, or a legal or equitable
discharge of, any Canadian Borrowers, any other Canadian Loan Party, or any
surety or any guarantor.

 

SECTION 2.7                          Waiver of Subrogation. 
Until the indefeasible payment in full in cash of all Canadian Secured
Obligations and the termination or expiration of all Canadian Revolving
Commitments and Canadian Letters of Credit and the termination or payment of
all outstanding Bankers’ Acceptances, the Pledgor hereby irrevocably waives any
claim or other rights which it may now or hereafter acquire against any
Canadian Borrower or any other Canadian Loan Party that arise from the
existence, payment, performance or enforcement of the Pledgor’s obligations
under this Pledge Agreement or any other Canadian Revolving Loan Document or
Canadian Term Loan Document, including any right of subrogation, reimbursement,
exoneration, or indemnification, any right to participate in any claim or
remedy of the Canadian Lender Parties against any Canadian Borrower or any
other Canadian Loan Party or any Canadian Collateral which the Global
Administrative Agent now has or hereafter acquires, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including the right to take or receive from any Canadian Borrower or any other
Canadian Loan Party, directly or indirectly, in cash or other Property or by
set-off or in any manner, payment or security on account of such claim or other
rights.  If any amount shall be paid to
the Pledgor in violation of the preceding sentence, such amount shall be deemed
to have been paid to the Pledgor for the benefit of, and held in trust for, the
Canadian Lender Parties, and shall forthwith be paid to the Global
Administrative Agent for the benefit of the Canadian Lender Parties to be
credited and applied upon the Canadian Revolving Obligations and the Canadian
Term Obligations, whether matured or unmatured.  The Pledgor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by the Canadian Revolving
Credit Agreement

 

9

 

and the Canadian Term Credit
Agreement and that the waiver set forth in this Section is knowingly made in
contemplation of such benefits.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

SECTION 3.1                          Warranties, etc.  The
Pledgor represents and warrants unto each Lender Party, as at the date of each
pledge and delivery hereunder (including each pledge and delivery of Pledged
Shares) by the Pledgor to the Global Administrative Agent of any Collateral, as
set forth in this Article.

 

SECTION 3.1.1                 Ownership, No Liens, etc.  The
Pledgor is the legal and beneficial owner of, and has good and defensible title
to (and has full right and authority to pledge and assign) such Collateral,
free and clear of all Liens or options, except any Lien granted pursuant hereto
in favor of the Global Administrative Agent and Liens permitted by Section 7.2
of the U.S. Credit Agreement.

 

SECTION 3.1.2                 Valid Security Interest.  (a)
The delivery of the U.S. Collateral to the Global Administrative Agent is
effective to create a valid, perfected, first priority security interest in
such U.S. Collateral and all proceeds thereof, securing the U.S. Secured
Obligations; (b) the delivery of the Canadian Revolving Collateral to the
Global Administrative Agent is effective to create a valid, perfected, first
priority security interest in such Canadian Revolving Collateral and all
proceeds thereof, securing the Canadian Revolving Loan Secured Obligations; and
(c) the delivery of the Canadian Term Collateral to the Global Administrative
Agent is effective to create a valid, perfected, first priority security
interest in such Canadian Term Collateral and all proceeds thereof, securing
the Canadian Term Loan Secured Obligations. 
No filing or other action will be necessary to perfect or protect such
security interest.

 

SECTION 3.1.3                 As to Pledged Shares.

 

(a)                             In the case of any U.S. Pledged Shares, all
of such U.S. Pledged Shares are duly authorized and validly issued, fully paid,
and non-assessable, and constitute at least sixty-five percent (65%), of the
issued and outstanding shares of common capital stock of each Issuer set forth
across from the name of such Issuer on Item A of Attachment 1
hereto.

 

(b)                            In the case of any Canadian Revolving Loan
Pledged Shares, all of such Canadian Revolving Loan Pledged Shares are duly
authorized and validly issued, fully paid, and non-assessable, and constitute
all of the issued and outstanding shares of common capital stock of each Issuer
set forth across from the name of such Issuer on Item B of Attachment
1 hereto.

 

(c)                             In the case of any Canadian Term Loan Pledged
Shares, all of such Canadian Term Loan Pledged Shares are duly authorized and
validly issued, fully paid, and non-assessable, and constitute at least
sixty-five percent (65%), of the issued and outstanding shares of common
capital stock of each Issuer set forth across from the name of such Issuer on Item
C of Attachment 1 hereto.

 

SECTION 3.1.4                 Authorization, Approval, etc. 
Except as contemplated by Section 2.3(b), no authorization,
approval, or other action by, and no notice to or filing with, any

 

10

 

Governmental Authority or any
other Person is required for (a) the pledge by the Pledgor of any Collateral
pursuant to this Pledge Agreement or for the execution, delivery, and
performance of this Pledge Agreement by the Pledgor, or (b) for the exercise by
the Global Administrative Agent of the voting or other rights provided for in
this Pledge Agreement, or, except with respect to any Pledged Shares, as may be
required in connection with a disposition of such Pledged Shares by laws
affecting the offering and sale of securities generally and the remedies in
respect of the Collateral pursuant to this Pledge Agreement.

 

SECTION 3.1.5                 Location of Pledgor and Records; Name; State
of Incorporation, etc.  The Pledgor’s chief executive office and
principal place of business and the office where the records concerning the
Collateral are kept is located at the address set forth on its signature page
to the U.S. Credit Agreement or such other address for the Pledgor as the
Global Administrative Agent has been notified pursuant to Section 7.3 of
this Pledge Agreement.  The true legal
name of the Pledgor as registered in the jurisdiction in which the Pledgor is
organized or incorporated, state of incorporation or organization, and
organization identification number as designated by the state of its incorporation
or organization are as set forth on its signature page to the U.S. Credit
Agreement or such other true legal name or organization identification number
for the Pledgor as the Agent has been notified pursuant to Section 7.3
of this Pledge Agreement, and the Pledgor is not now known by any trade name

 

SECTION 3.1.6                 Compliance with Laws.  The
Pledgor is in compliance with the requirements of all applicable laws
(including, without limitation, the provisions of the Fair Labor Standards
Act), rules, regulations and orders of every Governmental Authority, the
non-compliance with which might materially adversely affect the business,
properties, assets, operations, condition (financial or otherwise) or prospects
of the Pledgor or the value of the Collateral or the worth of the Collateral as
collateral security.

 

ARTICLE IV

COVENANTS

 

SECTION 4.1                          Protect Collateral; Further Assurances, etc.  The
Pledgor will not sell, assign, transfer, pledge, or encumber in any other
manner the Collateral (except in favor of the Agent hereunder).  The Pledgor will warrant and defend the
right and title herein granted unto the Global Administrative Agent in and to
the Collateral (and all right, title and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever.  The Pledgor agrees that at any time, and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments, and take all further action, that
may be necessary or desirable, or that the Global Administrative Agent may
reasonably request, in order to perfect, preserve and protect any security
interest granted or purported to be granted hereby or to enable the Global
Administrative Agent to exercise and enforce its rights and remedies hereunder
with respect to any Collateral.  The
Pledgor shall provide the Agent with copies of all written information received
from any securities intermediary of the Pledgor with respect to any Collateral.

 

SECTION 4.2                          Stock Powers, etc.  The
Pledgor agrees that all Pledged Shares (and all other certificated shares of
stock constituting Collateral) delivered by the Pledgor pursuant to this Pledge
Agreement will be accompanied by duly indorsed undated blank stock powers, or
other

 

11

 

equivalent instruments of
transfer acceptable to the Global Administrative Agent.  The Pledgor will, from time to time upon the
request of the Global Administrative Agent, promptly deliver to the Global
Administrative Agent such stock powers, instruments and similar documents,
satisfactory in form and substance to the Global Administrative Agent, with
respect to the Collateral as the Global Administrative Agent may reasonably
request and will, from time to time upon the request of the Global
Administrative Agent after the occurrence of any Event of Default, promptly
transfer any Pledged Shares or other shares of stock constituting Collateral
into the name of any nominee designated by the Global Administrative Agent.

 

SECTION 4.3                          Continuous Pledge. 
Subject to Section 2.5, the Pledgor will, at all times, keep
pledged to the Global Administrative Agent pursuant hereto all Pledged Shares,
all other shares of stock constituting Collateral, and all securities, security
entitlements and securities accounts constituting Collateral, and all other
Collateral and rights from time to time received by or distributable to the
Pledgor in respect of any Collateral.

 

SECTION 4.4                          Voting Rights; Distributions, etc.  The
Pledgor agrees:

 

(a)                             if an Event of Default shall have occurred
and be continuing, promptly upon receipt thereof by the Pledgor and without any
request therefor by the Global Administrative Agent, to deliver (properly
endorsed where required hereby or requested by the Global Administrative Agent)
to the Global Administrative Agent all Distributions, and all proceeds of the
Collateral, all of which shall be held by the Global Administrative Agent as
additional Collateral for use in accordance with Section 6.3; and

 

(b)                            if any Event of Default shall have occurred
and be continuing and the Global Administrative Agent has notified the Pledgor
of the Global Administrative Agent’s intention to exercise its voting power
under this Section 4.4(b)

 

(i)                                     the Global Administrative Agent may exercise
(to the exclusion of the Pledgor) the voting power and all other incidental
rights of ownership with respect to any Pledged Shares or other shares of
capital stock constituting Collateral and the Pledgor hereby grants the Global
Administrative Agent an irrevocable proxy, exercisable under such
circumstances, to vote the Pledged Shares and such other Collateral; and

 

(ii)                                  promptly to deliver to the Global
Administrative Agent such additional proxies and other documents as may be
necessary to allow the Global Administrative Agent to exercise such voting
power.

 

All Distributions and
proceeds which may at any time and from time to time be held by the Pledgor but
which the Pledgor is then obligated to deliver to the Global Administrative
Agent, shall, until delivery to the Global Administrative Agent, be held by the
Pledgor separate and apart from its other property in trust for the Global
Administrative Agent.  THE GLOBAL ADMINISTRATIVE AGENT AGREES THAT UNLESS AN
EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING AND THE GLOBAL
ADMINISTRATIVE AGENT SHALL HAVE GIVEN THE NOTICE REFERRED TO IN SECTION
4.4(B), THE PLEDGOR SHALL HAVE THE
EXCLUSIVE VOTING POWER,

 

12

 

AND IS
GRANTED AN IRREVOCABLE PROXY, WITH RESPECT TO ANY SHARES OF STOCK (INCLUDING
ANY OF THE PLEDGED SHARES) CONSTITUTING COLLATERAL.  THE GLOBAL ADMINISTRATIVE AGENT SHALL, UPON THE WRITTEN REQUEST
OF THE PLEDGOR, PROMPTLY DELIVER SUCH PROXIES AND OTHER DOCUMENTS, IF ANY, AS
SHALL BE REASONABLY REQUESTED BY THE PLEDGOR WHICH ARE NECESSARY TO ALLOW THE
PLEDGOR TO EXERCISE VOTING POWER WITH RESPECT TO ANY SUCH SHARE OF STOCK
(INCLUDING ANY OF THE PLEDGED SHARES) CONSTITUTING COLLATERAL; PROVIDED, HOWEVER, THAT NO VOTE SHALL BE
CAST, OR CONSENT, WAIVER, OR RATIFICATION GIVEN, OR ACTION TAKEN BY THE PLEDGOR
THAT WOULD IMPAIR ANY COLLATERAL OR BE INCONSISTENT WITH OR VIOLATE ANY
PROVISION OF THE U.S. CREDIT AGREEMENT, THE CANADIAN REVOLVING CREDIT
AGREEMENT, OR THE CANADIAN TERM CREDIT AGREEMENT, OR ANY OTHER LOAN DOCUMENT,
CANADIAN REVOLVING LOAN DOCUMENT OR CANADIAN TERM LOAN DOCUMENT (INCLUDING THIS
PLEDGE AGREEMENT).  THE IRREVOCABLE
PROXY GRANTED HEREIN SHALL SURVIVE UNTIL SUCH TIME AS THIS PLEDGE AGREEMENT IS
TERMINATED.

 

SECTION 4.5                          Notice of Changes Affecting Collateral.  The
Pledgor will furnish to the Global Administrative Agent promptly, and in any
event within thirty (30) days of becoming aware of the following changes,
written notice of any change (i) in the Pledgor’s corporate name or in any trade
name used to identify the Pledgor in the conduct of its business or its
ownership of the Collateral, (ii) in the location of the Pledgor’s chief
executive office, principal place of business or jurisdiction of incorporation,
(iii) in the Pledgor’s identity or corporate structure, or (iv) in the
Pledgor’s Federal Taxpayer Identification Number.

 

SECTION 4.6                          Disposition of Collateral; Issuance of
Additional Stock or Equity Interests.  Except as permitted by the
U.S. Credit Agreement, the Pledgor shall not sell, assign, exchange, pledge or
otherwise transfer, encumber or grant any option, warrant or other right to
purchase the Collateral (except in favor of the Global Administrative Agent
hereunder).  The Pledgor (a) shall not
permit any Issuer to issue any additional stock, other securities, membership
interests, partnership interests, or other equity interests in addition to or
in substitution for the Pledged Property issued by such Issuer unless such
interests are promptly pledged to the Global Administrative Agent under this
Pledge Agreement, and shall not permit any Issuer to issue any warrants,
options, contracts or other commitments or other securities that are
convertible to any of the foregoing or that entitle any Person to purchase any
of the foregoing and (b) except for this Pledge Agreement, shall not, and shall
not permit any Issuer to, enter into any agreement creating any restriction or
condition upon the transfer, voting or control of any Pledged Property.

 

ARTICLE V

THE GLOBAL ADMINISTRATIVE AGENT

 

SECTION 5.1                          Global Administrative Agent Appointed
Attorney-in-Fact.  The Pledgor hereby irrevocably appoints the
Global Administrative Agent as the Pledgor’s attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time in the Global Administrative Agent’s
discretion, to take any action and to execute any writing or paper which the
Global Administrative Agent may deem necessary

 

13

 

or advisable following the
occurrence and while there is continuing an Event of Default to accomplish the
purposes of this Pledge Agreement, including without limitation:

 

(a)                             to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Collateral;

 

(b)                            to receive, endorse, and collect any drafts
or other instruments, documents and chattel paper, in connection with clause
(a) above; and

 

(c)                             to file any claims or take any action or
institute any proceedings which the Global Administrative Agent may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of the Global Administrative Agent with respect to any of
the Collateral.

 

The Pledgor hereby
acknowledges, consents and agrees that the power of attorney granted pursuant
to this Section is irrevocable and coupled with an interest.

 

SECTION 5.2                          Global Administrative Agent May Perform. 
After the occurrence and during the continuance of any Event of Default,
if the Pledgor fails to perform any agreement contained herein, the Global
Administrative Agent may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Global Administrative Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to Section
6.4.

 

SECTION 5.3                          Global Administrative Agent Has No Duty.  The
powers conferred on the Global Administrative Agent hereunder are solely to
protect its interest (on behalf of the Lender Parties) in the Collateral and
shall not impose any duty on it to exercise any such powers.  Except for reasonable care of any Collateral
in its possession and the accounting for moneys actually received by it
hereunder, the Global Administrative Agent shall have no duty as to any
Collateral or responsibility for (a) ascertaining or taking action with respect
to calls, conversions, exchanges, maturities, tenders or other matters relative
to any Pledged Property, whether or not the Global Administrative Agent has or
is deemed to have knowledge of such matters or (b) taking any necessary steps
to preserve rights against prior parties or any other rights pertaining to any
Collateral.

 

SECTION 5.4                          Reasonable Care.  The
Global Administrative Agent is required to exercise reasonable care in the
custody and preservation of any of the Collateral in its possession; provided,
however, the Global Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral, if it takes such action for that purpose as the Pledgor reasonably
requests in writing at times other than upon the occurrence and during the
continuance of any Event of Default, but failure of the Global Administrative
Agent to comply with any such request at any time shall not in itself be deemed
a failure to exercise reasonable care.

 

ARTICLE VI

REMEDIES

 

SECTION 6.1                          Certain Remedies.  If
any Event of Default shall have occurred and be continuing:

 

14

 

(a)                             The Global Administrative Agent may exercise
in respect of the Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of a
secured party on default under the U.C.C. (whether or not the U.C.C. applies to
the affected Collateral) and also may, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Global Administrative Agent’s offices or
elsewhere, for cash, and upon such other terms as the Global Administrative
Agent may deem commercially reasonable. 
The Pledgor agrees that, to the extent notice of sale shall be required
by law, at least ten days’ prior notice to the Pledgor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  The
Global Administrative Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given.  The Global Administrative Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.

 

(b)                            The Global Administrative Agent may

 

(i)                                     transfer all or any part of the Collateral
into the name of the Global Administrative Agent or its nominee, with or
without disclosing that such Collateral is subject to the Lien hereunder,

 

(ii)                                  notify the parties obligated on any of the
Collateral to make payment to the Global Administrative Agent of any amount due
or to become due thereunder,

 

(iii)                               enforce collection of any of the Collateral
by suit or otherwise, and surrender, release or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any obligations of any nature of any party with
respect thereto,

 

(iv)                              endorse any checks, drafts, or other writings
in the Pledgor’s name to allow collection of the Collateral,

 

(v)                                 take control of any proceeds of the
Collateral, and

 

(vi)                              execute (in the name, place and stead of the
Pledgor) endorsements, assignments, stock powers and other instruments of
conveyance or transfer with respect to all or any of the Collateral.

 

SECTION 6.2                          Compliance with Restrictions.  The
Pledgor agrees that in any sale of any of the Collateral whenever an Event of
Default shall have occurred and be continuing, the Global Administrative Agent
is hereby authorized to comply with any limitation or restriction in connection
with such sale as it may be advised by counsel is necessary in order to avoid
any violation of applicable law (including compliance with such procedures as
may restrict the number of prospective bidders and purchasers, require that
such prospective bidders and purchasers have certain qualifications, and
restrict such prospective bidders and purchasers to persons who will represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or resale of such Collateral), or in order to

 

15

 

obtain any required approval of
the sale or of the purchaser by any Governmental Authority, and the Pledgor
further agrees that such compliance shall not result in such sale being
considered or deemed not to have been made in a commercially reasonable manner,
nor shall the Global Administrative Agent be liable nor accountable to the Pledgor
for any discount allowed by the reason of the fact that such Collateral is sold
in compliance with any such limitation or restriction.

 

SECTION 6.3                          Application of Proceeds.

 

(a)                             Except as may be otherwise set forth in the
Intercreditor Agreement, all cash proceeds received by the Global
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the U.S. Collateral may, in the discretion
of the Global Administrative Agent, be held by the Global Administrative Agent
as additional collateral security for, or then or at any time thereafter be
applied (after payment of any amounts payable to the Global Administrative
Agent pursuant to the U.S. Credit Agreement and Section 6.4) in whole or
in part by the Global Administrative Agent for the ratable benefit of the U.S.
Lender Parties against, all or any part of the U.S. Secured Obligations in such
order as the Global Administrative Agent shall elect.

 

(b)                            Except as may be otherwise set forth in the
Intercreditor Agreement, all cash proceeds received by the Global
Administrative Agent in respect of any sale of, collection from, or other
realization upon all or any part of the Canadian Collateral may, in the
discretion of the Global Administrative Agent, be held by the Global
Administrative Agent as additional collateral security for, or then or at any
time thereafter be applied (after payment of any amounts payable to the Global
Administrative Agent pursuant to the Canadian Revolving Credit Agreement,
Canadian Term Credit Agreement and Section 6.4) in whole or in part by
the Global Administrative Agent for the ratable benefit of the Canadian Lender
Parties against, all or any part of the Canadian Secured Obligations in such
order as the Global Administrative Agent shall elect.

 

(c)                             Except as may be otherwise set forth in the
Intercreditor Agreement, any surplus of such cash or cash proceeds held by the
Global Administrative Agent and remaining after payment in full of all the
Secured Obligations and the termination of all Commitments and all Canadian
Revolving Commitments shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.

 

SECTION 6.4                          Indemnity and Expenses.  The
Pledgor hereby indemnifies and holds harmless the Global Administrative Agent
from and against any and all claims, losses, and liabilities arising out of or
resulting from this Pledge Agreement (including enforcement of this Pledge
Agreement), except claims, losses, or liabilities resulting from the Global
Administrative Agent’s gross negligence or wilful misconduct; PROVIDED, HOWEVER, THAT IT IS THE INTENTION OF THE
PARTIES HERETO THAT THE GLOBAL ADMINISTRATIVE AGENT BE INDEMNIFIED IN THE CASE
OF ITS OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH
NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR
TECHNICAL.  Pledgor shall pay
(i) all legal and other reasonable out-of-pocket expenses incurred by the
Global Administrative Agent, including the reasonable fees, charges and

 

16

 

disbursements of counsel for
the Global Administrative Agent, in connection with the preparation, execution,
delivery and administration of this Pledge Agreement and any amendments,
modifications or waivers of the provisions hereof or thereof, (ii) all legal
and other reasonable out-of-pocket expenses incurred by the Global
Administrative Agent in connection with the custody, preservation, use, or
operation of, or the sale of, collection from, or other realization upon, any
of the Collateral, (iii) the filing, recording, refiling or rerecording of the
Pledge Agreements and/or any Uniform Commercial Code financing statements
relating thereto and all amendments, supplements and modifications to, and all
releases and terminations of, any thereof and any and all other documents or
instruments of further assurance required to be filed or recorded or refiled or
rerecorded by the terms hereof, and (iv) all out-of-pocket expenses incurred by
the Global Administrative Agent, including the fees, charges and disbursements
of any counsel for the Global Administrative Agent, in connection with the
enforcement or protection of its rights in connection with this Pledge
Agreement.

 

ARTICLE VII

MISCELLANEOUS PROVISIONS

 

SECTION 7.1                          Loan Document. 
This Pledge Agreement is a Combined Loan Document executed pursuant to
the Combined Credit Agreements and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.

 

SECTION 7.2                          Amendments, etc.  No
amendment to or waiver of any provision of this Pledge Agreement nor consent to
any departure by the Pledgor herefrom shall in any event be effective unless
the same shall be in writing and signed by the Global Administrative Agent in
accordance with Section 10.2(b) of the Combined Credit Agreements, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it is given.

 

SECTION 7.3                          Addresses for Notices.  All
notices and other communications provided for hereunder shall be in writing
(including telecopy communication) and, if to the Pledgor, mailed or telecopied
or delivered to it at the address set forth below its signature hereto, if to
the Global Administrative Agent, mailed or delivered to it, addressed to it at
the address of the Global Administrative Agent specified in the Credit
Agreement or, as to either party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section.  All
such notices and other communications shall be effective as provided in Section
10.1 of the U.S. Credit Agreement.

 

SECTION 7.4                          Headings.  Article and Section headings
used herein are for convenience of reference only, are not part of this Pledge
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Pledge Agreement.

 

SECTION 7.5                          Severability. Any provision of this Pledge Agreement 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; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

17

 

SECTION 7.6                          Filing as a Financing Statement.  At
the option of the Global Administrative Agent, this Pledge Agreement, or a
carbon, photographic or other reproduction of this Pledge Agreement or of any
Uniform Commercial Code financing statement, and amendments thereto, covering
all of the Collateral or any portion thereof shall be sufficient as a Uniform
Commercial Code financing statement and may be filed as such without the
signature of the Pledgor where and to the full extent permitted by applicable
law, and the Pledgor hereby authorizes the Global Administrative Agent to file
U.C.C. financing statements, continuations and amendments with respect to the
Collateral describing the collateral property as “all property” or words of
similar import, and to file U.C.C. financing statements, and continuations and
amendments thereto, and similar documents with respect to the Collateral
without its signature (to the extent permitted by applicable law).

 

SECTION 7.7                          GOVERNING LAWS.  THIS PLEDGE AGREEMENT AND THE OTHER COMBINED LOAN DOCUMENTS
(OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.

 

SECTION 7.8                          NO ORAL AGREEMENTS.  THIS WRITTEN PLEDGE AGREEMENT AND THE OTHER COMBINED LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.

 

THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

[SIGNATURES BEGIN ON FOLLOWING PAGE]

 

18

 

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

 

	
   

  	
  MATADOR
  PETROLEUM CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Daniel G. Blanchard

  	
   

  
	
   

  	
  Title:

  	
  President and Treasurer

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  Matador Petroleum
  Corporation

  
	
   

  	
   

  	
  c/o Tom Brown. Inc.

  
	
   

  	
   

  	
  555 17th
  Street, Suite 1850

  
	
   

  	
   

  	
  Denver, Colorado
  80202-3918

  
	
   

  	
  Attention:

  	
  Daniel G. Blanchard

  	
   

  
	
   

  	
  Telephone:

  	
  (303) 260-5095

  	
   

  
	
   

  	
  Facsimile:

  	
  (303) 260-5039

  	
   

  
						

 

19

 

	
   

  	
  JPMORGAN
  CHASE BANK, as
  Global

  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  JPMorgan Chase Bank

  	
   

  
	
   

  	
   

  	
  Loan and Agency Services

  	
   

  
	
   

  	
   

  	
  1111 Fannin, 8th
  Floor

  	
   

  
	
   

  	
   

  	
  Houston, Texas 77002

  	
   

  
	
   

  	
  Attention:

  	
  James DeLeon

  	
   

  
	
   

  	
  Telephone:

  	
  713-750-2366

  	
   

  
	
   

  	
  Facsimile:

  	
  713-427-6307

  	
   

  
	
   

  	
   

  
	
   

  	
  and, with respect to
  non-Borrowing related matters,

  with a copy to:

  
	
   

  	
   

  
	
   

  	
  JPMorgan Chase Bank

  	
   

  
	
   

  	
  Global Oil & Gas Group

  	
   

  
	
   

  	
  600 Travis, 20th Floor

  	
   

  
	
   

  	
  Houston, Texas 77002

  	
   

  
	
   

  	
  Attention:

  	
  Robert Mertensotto

  	
   

  
	
   

  	
  Telephone:

  	
  713-216-4147

  	
   

  
	
   

  	
  Facsimile:

  	
  713-216-8870

  	
   

  
							

 

20

 

ATTACHMENT 1

to Pledge Agreement

 

Item A

U.S. Pledged Shares

 

	
  Issuer

  	
   

  	
  Common Stock

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Outstanding Shares

  	
   

  	
  % of Shares Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Matador E&P Company, a
  Texas corporation

  	
   

  	
  1000

  	
   

  	
  100

  	
  %

  

 

 

Item B

Canadian Revolving Loan
Pledged Shares

 

	
  Issuer

  	
   

  	
  Common Stock

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Outstanding Shares

  	
   

  	
  % of Shares Pledged

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Matador E&P Company, a
  Texas corporation

  	
   

  	
  1000

  	
   

  	
  100

  	
  %

  

 

 

Item C

Canadian Term Loan Pledged
Shares

 

	
  Issuer

  	
   

  	
  Common Stock

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Matador E&P Company, a
  Texas corporation

  	
   

  	
  1000

  	
   

  	
  100

  	
  %

  

 

21

 

EXHIBIT G

 

FORM OF GUARANTY

 

GUARANTY

 

THIS
GUARANTY (this “Guaranty”),
dated as of June 27, 2003, is made by MATADOR
PETROLEUM CORPORATION, a Texas corporation, RETEX INC., a Wyoming corporation, TBI WEST VIRGINIA, INC., a Delaware
corporation, MATADOR E&P COMPANY,
a Texas corporation, and each of the Persons hereafter party hereto pursuant to
Section 5.6 hereof (each a “Guarantor” and collectively, the “Guarantors”),
in favor of JPMORGAN CHASE BANK,
as Global Administrative Agent (together with all successors and assigns
thereto, the “Global Administrative Agent”) for each of the Lender
Parties.

 

W  I  T
N  E  S  S  E  T  H:

 

WHEREAS, pursuant to a Credit Agreement, dated as of
June 27, 2003 (together with all amendments, supplements, restatements and
other modifications, if any, including, without limitation, any written
consents and waivers, from time to time thereafter made thereto, the “Credit
Agreement”), among Tom Brown, Inc., a Delaware corporation (the “Borrower”),
the various financial institutions as are, or may from time to time become,
parties to the Credit Agreement (the “Lenders”), the various financial
institutions as are or may from time to time become Agents under the Credit
Agreement and the Global Administrative Agent, the Lenders have agreed to
extend Commitments to make Loans to the Borrower, and the Issuing Banks have
agreed to issue Letters of Credit for the account of the Borrower and its
respective Subsidiaries; and

 

WHEREAS, the Borrower has entered or may enter into
Hedging Agreements with one or more Lender Parties pursuant to the terms of the
Credit Agreement; and

 

WHEREAS, the Guarantors are each directly or
indirectly wholly-owned Subsidiaries of Guarantor; and

 

WHEREAS, as a condition precedent to the making of
the initial Loans, the issuance of the initial Letter of Credit under the
Credit Agreement, and to the Lender Parties’ obligations under the Hedging
Agreements referred to above, the Guarantors are required to execute and
deliver this Guaranty; and

 

WHEREAS, the Guarantors have duly authorized the
execution, delivery and performance of this Guaranty; and

 

WHEREAS, it is in the best interests of the
Guarantors to execute this Guaranty inasmuch as the Guarantors will derive
substantial direct and indirect benefits from the Loans made to, and the Letters
of Credit issued from time to time for the account of, the Borrower and its
Subsidiaries by the Lenders and the Issuing Banks, as the case may be, pursuant
to the Credit Agreement and the financial accommodations extended from time to
time to the Borrower and its Subsidiaries by the Lender Parties pursuant to the
Hedging Agreements;

 

1

 

NOW
THEREFORE, for good
and valuable consideration the receipt of which is hereby acknowledged, and in
order to induce the Lenders to make Loans (including the initial Loans) to the
Borrower, and to induce the Issuing Banks to issue the Letters of Credit
(including the initial Letter of Credit) for the account of, the Borrower and
its Subsidiaries pursuant to the Credit Agreement and the Lender Parties to
extend financial accommodations, the Guarantors agree, for the benefit of each
Lender Party, as follows:

 

ARTICLE
1

General
Terms

 

Section
1.1                                      Certain Terms.  The
following terms (whether or not underscored) when used in this Guaranty,
including its preamble and recitals, shall have the following meanings (such
definitions to be equally applicable to the singular and plural forms thereof):

 

“Borrower” is defined
in the first recital.

 

“Contribution Obligation”
means an amount, at any time and from time to time and for each respective
Guarantor, equal to the product of (i) its Contribution Percentage multiplied
by (ii) the sum of all payments made previous to or at the time of such
calculation by all Guarantors in respect of the Obligations, as a Guarantor
(less the amount of any such payments previously returned to any Guarantor by
operation of law or otherwise, but not including payments received by any
Guarantor by way of its rights of subrogation and contribution under Section
2.9 of this Guaranty); provided, however, such Contribution
Obligation for any Guarantor shall in no event exceed such Guarantor’s Maximum
Guaranteed Amount.

 

“Contribution Percentage”
means for any Guarantor for any applicable date as of which such percentage is
being determined, an amount equal to the quotient of (i) the Net Worth of such
Guarantor as of such date, divided by (ii) the aggregate Net Worth of all the
Guarantors as of such date.

 

“Credit Agreement” is
defined in the first recital.

 

“Global Administrative
Agent” is defined in the preamble.

 

“Guarantor” and “Guarantors”
are defined in the preamble.

 

“Guarantor Claims”
shall have the meaning indicated in Section 4.1 hereof.

 

“Guaranty” is defined
in the preamble.

 

“Lender Party” means,
as the context may require, any Lender, any Agent, any Issuing Bank, and any
Affiliate of a then current Lender that is a party to a Hedging Agreement and
each of its respective successors, transferees and assigns.

 

“Lenders” is defined
in the first recital.

 

“Maximum Guaranteed
Amount” means, for each Guarantor, the greater of (i) the “reasonably
equivalent value” or “fair consideration” (or equivalent concept) received by
such

 

2

 

Guarantor in exchange for the
obligation incurred hereunder, within the meaning of any applicable state or
federal fraudulent conveyance or transfer laws; or (ii) the lesser of (A) the
maximum amount that will not render such Guarantor insolvent, or (B) the
maximum amount that will not leave such Guarantor with any property deemed
unreasonably small capital.  Clauses (A)
and (B) are and shall be determined pursuant to and as of the appropriate date
mandated by such applicable state or federal fraudulent conveyance or transfer
laws and to the extent allowed by law take into account the rights to
contribution and subrogation under Section 2.9 of this Guaranty so as to
provide for the largest Maximum Guaranteed Amount possible.

 

“Net Payments” means
an amount, at any time and from time to time and for each respective Guarantor,
equal to the difference of (i) the sum of all payments made previous to or at
the time of calculation by such Guarantor in respect of the Obligations, as a
Guarantor, and in respect of its obligations contained in this Guaranty, less
(ii) the sum of all such payments previously returned to such Guarantor by
operation of law or otherwise and including payments received by such Guarantor
by way of its rights of subrogation and contribution under Section 2.9
of this Guaranty.

 

“Net Worth” means for
any Guarantor, all items which would be included under shareholder’s equity on
the balance sheet of such Guarantor pursuant to GAAP, provided, the
calculation of a Guarantor’s Net Worth shall not include any amounts owed pursuant
to this Guaranty.

 

“Obligations” means
(without duplication), at any time, the sum of (a) the Credit Exposure of the
Lenders under the Loan Documents plus (b) all accrued and unpaid
interest and fees owing to the Lenders under the Loan Documents plus (c)
all Hedging Obligations in connection with all Hedging Agreements between the
Borrower or any of its Subsidiaries and any Lender or any Affiliate of a Lender
plus (d) all other obligations (monetary or otherwise) of the Borrower
or any Subsidiary to any Lender Party, whether or not contingent, arising under
or in connection with any of the Loan Documents.

 

Section
1.2                                      Credit Agreement Definitions. 
Unless otherwise defined herein, all terms beginning with a capital
letter which are defined in the Credit Agreement shall have the same meanings
herein as therein.

 

ARTICLE
2

The
Guaranty

 

Section
2.1                                      Obligations Guaranteed. 
Each Guarantor hereby irrevocably, unconditionally and jointly and
severally guarantees in favor of the Global Administrative Agent for the
benefit of the Lender Parties the prompt payment of the Obligations when due,
whether at maturity or otherwise; provided, however, that,
notwithstanding anything herein or in any other Loan Document to the contrary,
the maximum liability of each Guarantor hereunder shall in no event exceed the
Maximum Guaranteed Amount.

 

Section
2.2                                      Nature of Guaranty. 
This Guaranty is an absolute, irrevocable, completed and continuing
guaranty of payment and not a guaranty of collection, and no notice of the
Obligations or any extension of credit already or hereafter contracted by or
extended to Borrower

 

3

 

need be given to any
Guarantor.  This Guaranty may not be
revoked by any Guarantor and shall continue to be effective with respect to the
Obligations arising or created after any attempted revocation by any Guarantor
and shall remain in full force and effect until the Obligations are paid in
full and the Commitments of the Lenders are terminated notwithstanding that
from time to time prior thereto no Obligations may be outstanding.  The Borrower and the Lender Parties may
modify, alter, rearrange, extend for any period and/or renew from time to time
the Obligations, and the Lenders may waive any Default or Events of Default
without notice to any Guarantor and in such event each Guarantor will remain
fully bound hereunder on the Obligations. 
This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of the Obligations is rescinded or must
otherwise be returned by any of the Lender Parties upon the insolvency,
bankruptcy or reorganization of Borrower or otherwise, all as though such
payment had not been made. This Guaranty may be enforced by the Global
Administrative Agent and any subsequent holder of any of the Obligations and
shall not be discharged by the assignment or negotiation of all or part of the
Obligations.  Each Guarantor hereby
expressly waives presentment, demand, notice of non-payment, protest and notice
of protest and dishonor, notice of Default or Event of Default, notice of
intent to accelerate the maturity and notice of acceleration of the maturity
and any other notice in connection with the Obligations other than the notice
required by the second sentence of Section 2.5 hereof, and also notice
of acceptance of this Guaranty, acceptance on the part of the Lender Parties
being conclusively presumed by the request of the Lender Parties for this
Guaranty and delivery of the same to the Global Administrative Agent.

 

Section
2.3                                      Global Administrative Agent’s Rights. 
Each Guarantor authorizes the Global Administrative Agent, without
notice or demand and without affecting any Guarantor’s liability hereunder, to
take and hold security for the payment of this Guaranty and/or the Obligations,
and exchange, enforce, waive and release any such security; and to apply such
security and direct the order or manner of sale thereof as the Global
Administrative Agent in its discretion may determine; and to obtain a guaranty
of the Obligations from any one or more Persons and at any time or times to
enforce, waive, rearrange, modify, limit or release any of such other Persons
from their obligations under such guaranties.

 

Section
2.4                                      Guarantor’s Waivers.

 

(a)                                  General.    Each Guarantor waives any right to require any
of the Lender Parties to (i) proceed against Borrower or any other Person
liable on the Obligations, (ii) enforce any of their rights against any other
guarantor of the Obligations, (iii) proceed or enforce any of their rights
against or exhaust any security given to secure the Obligations, (iv) have
Borrower joined with any Guarantor in any suit arising out of this Guaranty
and/or the Obligations, or (v) pursue any other remedy in the Lender Parties’
powers, at law or in equity, whatsoever. 
The Lender Parties shall not be required to mitigate damages or take any
action to reduce, collect or enforce the Obligations.  Each Guarantor waives any defense arising by reason of any
disability, lack of corporate authority or power, or other defense of Borrower
or any other guarantor of the Obligations, and shall remain liable hereon
regardless of whether Borrower or any other guarantor be found not liable
thereon for any reason.  Whether and
when to exercise any of the remedies of the Lender Parties under any of the
Loan Documents shall be in the sole and absolute discretion of the Global
Administrative Agent, and no delay by the Global Administrative Agent in
enforcing any remedy, including delay in conducting a foreclosure sale,

 

4

 

shall be a defense to any
Guarantor’s liability under this Guaranty. 
To the extent allowed by applicable law, each Guarantor hereby waives
any good faith duty on the part of the Global Administrative Agent in
exercising any remedies provided in the Loan Documents.

 

(b)                                 Subrogation.  Until the Obligations have
been paid in full and the Commitments of the Lender Parties are terminated,
each Guarantor waives all rights of subrogation or reimbursement against the
Borrower, whether arising by contract or operation of law (including, without
limitation, any such right arising under any federal or state bankruptcy or
insolvency laws) and waives any right to enforce any remedy which the
Guarantors now have or may hereafter have against the Borrower, and waives any
benefit or any right to participate in any security now or hereafter held by
the Global Administrative Agent or any Lender Party.

 

Section
2.5                                      Maturity of Obligations; Payment. 
Each Guarantor agrees that if the maturity of any of the Obligations is
accelerated by bankruptcy or otherwise, such maturity shall also be deemed
accelerated for the purpose of this Guaranty without demand or notice to any
Guarantor.  Each Guarantor will,
forthwith upon notice from the Global Administrative Agent, pay to the Global
Administrative Agent the amount due and unpaid of the Obligations by Borrower
and Guaranteed hereby up to such Guarantor’s Maximum Guaranteed Amount.  The failure of the Global Administrative Agent
to give this notice shall not in any way release or reduce the liability of any
Guarantor hereunder.

 

Section
2.6                                      Global Administrative Agent’s Expenses.  If
any Guarantor fails to pay the Obligations after notice from the Global
Administrative Agent of Borrower’s failure to pay any Obligations when due, and
if the Global Administrative Agent or any of the Lender Parties: obtain the
services of attorneys for collection of amounts owing by any Guarantor
hereunder; obtain advice of counsel in respect of any of their rights under
this Guaranty; file suit to enforce this Guaranty or participate in proceedings
in any bankruptcy, probate, receivership or other judicial proceeding for the
establishment or collection of any amount owing by any Guarantor hereunder; or
if any amount owing by any Guarantor hereunder is collected through any such
proceedings, each Guarantor agrees to pay to the Global Administrative Agent
the Global Administrative Agent’s reasonable attorneys’ fees in connection with
each of the foregoing events.

 

Section
2.7                                      Liability.  It is expressly agreed that
the liability of each Guarantor for the payment of the Obligations guaranteed
hereby shall be primary and not secondary.

 

Section
2.8                                      Events and Circumstances Not Reducing or
Discharging Guarantors’ Obligations.  To the fullest extent
permitted by law, each Guarantor hereby consents and agrees to each of the
following, agrees that no Guarantor’s obligations under this Guaranty shall be
released, diminished, impaired, reduced or adversely affected by any of the
following and waives any rights (including without limitation rights to notice)
which such Guarantor might otherwise have as a result of or in connection with
any of the following:

 

(a)                                  Modifications, etc.  Any
renewal, extension, modification, increase, decrease, alteration or
rearrangement of all or any part of the Obligations, the Credit Agreement, the
Loan Documents or any instrument executed in connection therewith, or any
contract or

 

5

 

understanding between Borrower
and any of the Lender Parties, or any other Person, pertaining to the
Obligations.

 

(b)                                 Adjustment, etc.  Any
adjustment, indulgence, forbearance or compromise that might be granted or
given by any of the Lender Parties to Borrower, any Guarantor or any Person
liable on the Obligations.

 

(c)                                  Condition of Borrower or Guarantor.  The
insolvency, bankruptcy arrangement, adjustment, composition, liquidation,
disability, dissolution, or lack of power of Borrower, any Guarantor or any
other Person at any time liable for the payment of all or part of the
Obligations; any dissolution of Borrower or any Guarantor; any sale, lease or
transfer of any or all of the assets of Borrower or any Guarantor; any changes
in the shareholders, partners, or members of Borrower or any Guarantor; or any
reorganization of Borrower or any Guarantor.

 

(d)                                 Invalidity of Obligations.  The
invalidity, illegality or unenforceability of all or any part of the
Obligations, or any document or agreement executed in connection with the
Obligations, for any reason whatsoever, including without limitation the fact
that the Obligations, or any part thereof, exceed the amount permitted by law,
the act of creating the Obligations or any part thereof is ultra  vires,
the officers or representatives executing the documents or otherwise creating
the Obligations acted in excess of their authority, the Obligations violate
applicable usury laws, the Borrower has valid defenses, claims or offsets
(whether at law, in equity or by agreement) which render the Obligations wholly
or partially uncollectible from Borrower, the creation, performance or
repayment of the Obligations (or the execution, delivery and performance of any
document or instrument representing part of the Obligations or executed in
connection with the Obligations, or given to secure the repayment of the
Obligations) is illegal, uncollectible, legally impossible or unenforceable, or
the Credit Agreement or other documents or instruments pertaining to the Obligations
have been forged or otherwise are irregular or not genuine or authentic.

 

(e)                                  Release of Obligors.  Any
full or partial release of the liability of Borrower on the Obligations or any
part thereof, of any other Guarantor, or any other Person now or hereafter
liable, whether directly or indirectly, jointly, severally, or jointly and
severally, to pay, perform, Guarantee or assure the payment of the Obligations
or any part thereof, it being recognized, acknowledged and agreed by each
Guarantor that, subject to the terms of Section 2.1 and Section 2.9,
each Guarantor may be required to pay the Obligations in full without
assistance or support of any other Person, and that such Guarantor has not been
induced to enter into this Guaranty on the basis of a contemplation, belief,
understanding or agreement that any party other than the Borrower will be
liable to perform the Obligations, or that the Lender Parties will look to any
other party to perform the Obligations.

 

(f)                                    Other Security.  The
taking or accepting of any other security, Collateral or guaranty, or other
assurance of payment, for all or any part of the Obligations.

 

(g)                                 Release of Collateral, etc.  Any
release, surrender, exchange, subordination, deterioration, waste, loss or
impairment (including without limitation negligent, willful, unreasonable or
unjustifiable impairment) of any Collateral, Property or security, at any

 

6

 

time existing in connection
with, or assuring or securing payment of, all or any part of the Obligations.

 

(h)                                 Care and Diligence.  The
failure of the Global Administrative Agent, the Lender Parties or any other
Person to exercise diligence or reasonable care in the preservation,
protection, enforcement, sale or other handling or treatment of all or any part
of such Collateral, property or security.

 

(i)                                     Status of Liens.  The
fact that any Collateral, security or Lien contemplated or intended to be
given, created or granted as security for the repayment of the Obligations
shall not be properly perfected or created, or shall prove to be unenforceable
or subordinate to any other Lien, it being recognized and agreed by each
Guarantor that such Guarantor is not entering into this Guaranty in reliance
on, or in contemplation of the benefits of, the validity, enforceability,
collectibility or value of any of the Collateral for the Obligations;

 

(j)                                     Payments Rescinded.  Any
payment by Borrower to the Lender Parties is held to constitute a preference
under the bankruptcy laws, or for any reason the Lender Parties are required to
refund such payment or pay such amount to Borrower or any other Person; or

 

(k)                                  Other Actions Taken or Omitted.  Any
other action taken or omitted to be taken with respect to the Credit Agreement,
the Obligations, or the security and Collateral therefor, whether or not such
action or omission prejudices any Guarantor or increases the likelihood that
any Guarantor will be required to pay the Obligations pursuant to the terms
hereof; it being the unambiguous and unequivocal intention of each Guarantor
that such Guarantor shall be obligated to pay the Obligations when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether contemplated or uncontemplated, and whether or not otherwise
or particularly described herein, except for the full and final payment and
satisfaction of the Obligations.

 

Section
2.9                                      Right of Subrogation and Contribution.  If
any Guarantor makes a payment in respect of the Obligations, it shall be
subrogated to the rights of the Lender Parties against the Borrower with
respect to such payment and shall have the rights of contribution against the
other Guarantors as set forth in this Section 2.9; provided that
such Guarantor shall not enforce its rights to any payment by way of
subrogation or by exercising its rights of contribution or reimbursement or the
right to participate in any security or Collateral now or hereafter held by or
for the benefit of the Lender Parties until the Obligations have been
unconditionally and irrevocably paid in full and are not subject to
disgorgement in bankruptcy or otherwise. 
Each Guarantor agrees that if after all the Obligations have been paid
in full its then current Net Payments are less than the amount of its then
current Contribution Obligation, such Guarantor shall pay to the other
Guarantors an amount (together with any payments required of the other
Guarantors by this Section 2.9) such that the Net Payments made by all
Guarantors in respect of the Obligations shall be shared among all of the
Guarantors in proportion to their respective Contribution Percentage.

 

7

 

ARTICLE
3

Representations
and Warranties

 

Section
3.1                                      By Guarantors.  In
order to induce the Lender Parties to accept this Guaranty, each Guarantor
represents and warrants to the Lender Parties (which representations and
warranties will survive the creation of the Obligations and any extension of
credit thereunder) that:

 

(a)                                  Benefit to Guarantor. 
Such Guarantor’s Guarantee pursuant to this Guaranty reasonably may be
expected to benefit, directly or indirectly, such Guarantor and that such
Guarantee and other obligations are necessary and convenient to the conduct,
promotion and attainment of the business of such Guarantor.

 

(b)                                 Existence.  Such Guarantor is duly
organized, legally existing and in good standing under the laws of the state of
its formation and is duly qualified in all jurisdictions wherein the property
owned or the business transacted by it makes such qualification necessary and
where failure so to qualify could reasonably be expected to have a Material
Adverse Effect.

 

(c)                                  Power and Authorization. 
Such Guarantor has all necessary power and authority to execute, deliver
and perform its obligations under this Guaranty, and the execution, delivery
and performance by such Guarantor of this Guaranty has been duly authorized by
all necessary action on its part.

 

(d)                                 Binding Obligations. 
This Guaranty constitutes valid and binding obligations of such
Guarantor, enforceable in accordance with its terms (except as enforcement may
be subject to any applicable bankruptcy, insolvency or similar laws generally
affecting the enforcement of creditors’ rights and general principles of
equity).

 

(e)                                  No Legal Bar or Resultant Lien. 
This Guaranty will not violate any provisions of such Guarantor’s
Organic Documents, any Governmental Rule or any material agreement or
instrument to which such Guarantor is bound or to which its Properties are subject,
or result in the creation or imposition of any Lien upon any Properties of such
Guarantor.

 

(f)                                    No Consent.  Such Guarantor’s execution,
delivery and performance of this Guaranty does not require the consent or
approval of any other Person, including without limitation any Governmental
Authority of the United States or any state thereof or any political
subdivision of the United States or any state thereof.

 

(g)                                 Solvency.  Such Guarantor (i) is Solvent
as of the date hereof and will not be rendered insolvent as a result of this
Guaranty, (ii) is not engaged in a business or a transaction, or about to
engage in a business or a transaction, for which any property or assets
remaining with such Guarantor would be unreasonably small capital, and (iii)
does not intend to incur, or believe it will incur, debts that will be beyond
its ability to pay as such debts mature.

 

Section
3.2                                      No Representation by Lender Parties. 
Neither the Global Administrative Agent, the Lender Parties nor any
other Person has made any representation, warranty or statement to any
Guarantor in order to induce that Guarantor to execute this Guaranty.

 

8

 

Section
3.3                                      Incorporation of Credit Agreement
Representations, Warranties and Covenants.  Each Guarantor hereby represents
and warrants that the matters contained in each of the applicable
representations and warranties contained in Article III of the Credit Agreement
pertaining to such Guarantor (as a Guarantor or as a Subsidiary) or its
Properties are true and correct, and covenants and agrees, so long as any of
the Obligations or Commitments of the Lender Parties remain outstanding, to
comply with the applicable covenants contained in Articles V and VII of the
Credit Agreement pertaining to the Guarantor (as a Guarantor or as a
Subsidiary) or its Properties. Each Guarantor hereby acknowledges that it has
been furnished a copy of the Credit Agreement and that it is thoroughly
familiar with the representations, warranties and covenants which are
incorporated herein by virtue of this Section 3.3.

 

ARTICLE
4

Subordination
of Indebtedness

 

Section
4.1                                      Subordination of All Guarantor Claims.  As
used herein, the term “Guarantor Claims” means all debts and liabilities
of Borrower to any Guarantor, whether such debts and liabilities now exist or
are hereafter incurred or arise, or whether the obligation of Borrower thereon
be direct, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of whether such debts or liabilities be evidenced
by note, contract, open account, or otherwise, and irrespective of the Person
or Persons in whose favor such debts or liabilities may, at their inception,
have been, or may hereafter be created, or the manner in which they have been
or may hereafter be acquired by any Guarantor. 
The Guarantor Claims shall include without limitation all rights and
claims of any Guarantor against Borrower arising as a result of subrogation or
otherwise as a result of such Guarantor’s payment of all or a portion of the
Obligations.  If an Event of Default has
occurred and is continuing, then no Guarantor shall receive or collect,
directly or indirectly, from Borrower or any other party any amount upon the
Guarantor Claims.

 

Section
4.2                                      Claims in Bankruptcy.  In
the event of receivership, bankruptcy, reorganization, arrangement, debtor’s
relief, or other insolvency proceedings involving Borrower as debtor, the
Lender Parties shall have the right to prove their claim in any proceeding, so
as to establish their rights hereunder and receive directly from the receiver,
trustee or other court custodian, dividends and payments which would otherwise
be payable upon Guarantor Claims.  Each
Guarantor hereby assigns such dividends and payments to the Lender
Parties.  Should the Global Administrative
Agent or any Lender receive, for application upon the Obligations, any such
dividend or payment which is otherwise payable to any Guarantor, and which, as
between Borrower and such Guarantor, shall constitute a credit upon the
Guarantor Claims, then upon payment in full of the Obligations, such Guarantor
shall become subrogated to the rights of the Lender Parties to the extent that
such payments to the Lender Parties on the Guarantor Claims have contributed
toward the liquidation of the Obligations, and such subrogation shall be with
respect to that proportion of the Obligations which would have been unpaid if
the Global Administrative Agent or a Lender had not received dividends or
payments upon the Guarantor Claims.

 

Section
4.3                                      Payments Held in Trust.  In
the event that, notwithstanding Sections 4.1 and 4.2 above, any
Guarantor should receive any funds, payments, claims or distributions which are
prohibited by such Sections, such Guarantor agrees to hold in trust for the
Lender Parties an

 

9

 

amount equal to the amount of
all funds, payments, claims or distributions so received, and agrees that it
shall have absolutely no dominion over such funds, payments, claims or
distributions except to pay them promptly to the Global Administrative Agent,
and each Guarantor covenants promptly to pay the same to the Global
Administrative Agent.

 

Section
4.4                                      Liens Subordinate. 
Each Guarantor agrees that any Liens, security interests, judgment
liens, charges or other encumbrances upon Borrower’s assets securing payment of
the Guarantor Claims shall be and remain inferior and subordinate to any Liens,
security interests, judgment liens, charges or other encumbrances upon
Borrower’s assets securing payment of the Obligations, regardless of whether
such encumbrances in favor of such Guarantor, the Global Administrative Agent
or the Lender Parties presently exist or are hereafter created or attach.  Without the prior written consent of the
Required Lenders, no Guarantor shall (a) exercise or enforce any creditor’s
right it may have against the Borrower, or (b) foreclose, repossess, sequester
or otherwise take steps or institute any action or proceeding (judicial or
otherwise, including without limitation the commencement of or joinder in any
liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency
proceeding) to enforce any Lien, mortgages, deeds of trust, security interest,
collateral rights, judgments or other encumbrances on assets of Borrower held
by any Guarantor.

 

Section
4.5                                      Notation of Records.  All
promissory notes, accounts receivable ledgers or other evidence of the
Guarantor Claims accepted by or held by any Guarantor shall contain a specific
written notice thereon that the indebtedness evidenced thereby is subordinated
to the Obligations pursuant to the terms of this Guaranty.

 

ARTICLE
5

Miscellaneous

 

Section
5.1                                      Successors and Assigns. 
This Guaranty is and shall be in every particular available to the
successors and assigns of the Lender Parties and is and shall always be fully
binding upon the legal representatives, successors and assigns of each
Guarantor, notwithstanding that some or all of the monies, the repayment of
which this Guaranty applies, may be actually advanced after any bankruptcy, receivership,
reorganization, or other event affecting any Guarantor.

 

Section
5.2                                      Notices.  Any notice or demand to any
Guarantor under or in connection with this Guaranty may be given at the address
for the Guarantors set forth on the signature page hereto and shall
conclusively be deemed and considered to have been given and received in
accordance with Section 10.1 of the Credit Agreement.

 

Section
5.3                                      Business and Financial Information. 
Each Guarantor will promptly furnish to the Global Administrative Agent
and the Lender Parties from time to time upon request such information
regarding the business and affairs and financial condition of such Guarantor
and its subsidiaries as the Global Administrative Agent and the Lender Parties
may reasonably request.

 

10

 

Section
5.4                                      GOVERNING LAW; JURISDICTION;
CONSENT TO SERVICE OR PROCESS; WAIVER OF JURY TRIAL.

 

(a)                                  THIS GUARANTY SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

(b)                                 EACH GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING
IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY LOAN DOCUMENT,
OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT
OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK
STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING IN THIS AGREEMENT SHALL
AFFECT ANY RIGHT THAT THE AGENTS OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST A GUARANTOR OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)                                  EACH GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY
AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION.  EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

 

(d)                                 EACH PARTY TO THIS AGREEMENT
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID,
OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.

 

(e)                                  EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A

 

11

 

TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO
THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR THE FINANCING TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS GUARANTY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

Section
5.5                                      Invalidity.  In the event that any one or
more of the provisions contained in this Guaranty shall, for any reason, be
held invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this Guaranty.

 

Section
5.6                                      Additional Guarantors. 
Each Subsidiary of the Borrower that is required to become a party to
this Guaranty shall become a Guarantor for all purposes of this Guaranty upon
execution and delivery by such Subsidiary of an Assumption Agreement in the
form of Annex 1 hereto.

 

Section
5.7                                      Releases of Guarantors.  In
the event of a sale or other disposition of all of the Equity Interests of a
Guarantor to a third party in a transaction that is not otherwise prohibited
under the Credit Agreement or this Guaranty, such Guarantor shall be
automatically released and relieved of its obligations under this
Guaranty.  Upon delivery by the Borrower
to the Global Administrative Agent of an officers’ certificate to the effect
that such sale or other disposition was made by the Borrower in accordance with
the provisions of the Credit Agreement and this Guaranty, the Global
Administrative Agent shall execute any documents reasonably required in order
to evidence the release of such Guarantor from its obligations under this
Guaranty.  This Guaranty shall remain in
full force and effect with respect to each Guarantor not released herefrom
pursuant to the preceding sentence.

 

Section
5.8                                      ENTIRE AGREEMENT.  THIS WRITTEN GUARANTY EMBODIES THE ENTIRE AGREEMENT
AND UNDERSTANDING BETWEEN THE LENDER PARTIES AND THE GUARANTORS AND SUPERSEDES
ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF.  THIS
WRITTEN GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

[SIGNATURES BEGIN ON NEXT PAGE]

 

12

 

WITNESS THE EXECUTION
HEREOF, as of the date first above written.

 

	
   

  	
  MATADOR PETROLEUM
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Daniel G. Blanchard

  
	
   

  	
  Title:

  	
  President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  RETEX INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Daniel G. Blanchard

  
	
   

  	
  Title:

  	
  President and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  TBI WEST VIRGINIA, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Daniel G. Blanchard

  
	
   

  	
  Title:

  	
  Vice President and
  Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
  MATADOR E&P COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Daniel G. Blanchard

  
	
   

  	
  Title:

  	
  Vice President and
  Treasurer

  
						

 

13

 

	
   

  	
  Address for Notices to all
  Guarantors:

  
	
   

  	
   

  	
   

  
	
   

  	
  c/o Tom Brown, Inc.

  
	
   

  	
  555 Seventeenth Street

  
	
   

  	
  Suite 1800

  
	
   

  	
  Denver, CO  80202-3918

  
	
   

  	
  Telecopier No.:
  303-260-5095

  
	
   

  	
  Telephone No.:
  303-260-5039

  
	
   

  	
  Attention: Daniel G.
  Blanchard

  

 

14

 

ANNEX 1 to Guaranty

 

THIS
ASSUMPTION AGREEMENT
(this “Assumption Agreement”), dated as of
             ,
200  , is made by                                       ,
a
                                          
corporation (the “Additional Guarantor”), in favor of JPMORGAN CHASE BANK, as Global
Administrative Agent (together with all successors and assigns thereto, the “Global
Administrative Agent”) for each of the Lender Parties.  All capitalized terms not defined herein
shall have the meaning ascribed to them in such Credit Agreement.

 

W  I  T
N  E  S  S  E  T  H:

 

WHEREAS, pursuant to a Credit Agreement, dated as of
June 27, 2003 (together with all amendments, supplements, restatements and
other modifications, if any, including, without limitation, any written
consents and waivers, from time to time thereafter made thereto, the “Credit
Agreement”), among Tom Brown, Inc., a Delaware corporation (the “Borrower”),
the various financial institutions as are, or may from time to time become,
parties to the Credit Agreement (the “Lenders”), the various financial
institutions as are or may from time to time become Agents under the Credit Agreement
and the Global Administrative Agent, the Lenders have agreed to extend
Commitments to make Loans to, and the Issuing Banks have agreed to issue
Letters of Credit for the account of the Borrower and its respective
Subsidiaries; and

 

WHEREAS, the Borrower has entered or may enter into
Hedging Agreements with one or more Lender Parties pursuant to the terms of the
Credit Agreement; and

 

WHEREAS, in connection with the Credit Agreement,
certain of the Borrower’s Subsidiaries (other than the Additional Guarantor)
have entered into a Guaranty, dated as of June 27, 2003 (as amended,
supplemented or otherwise modified from time to time, the “Guaranty”) in
favor of the Global Administrative Agent for the benefit of the Lender Parties;

 

WHEREAS, the Additional Guarantor is a directly or
indirectly wholly-owned Subsidiary of the Borrower; and

 

WHEREAS, the Credit Agreement requires that the
Additional Guarantor become a party to the Guaranty; and

 

WHEREAS, the Additional Guarantor has agreed to
execute and deliver this Assumption Agreement in order to become a party to the
Guaranty;

 

WHEREAS, it is in the best interests of the
Additional Guarantor to execute this Assumption Agreement inasmuch as the
Additional Guarantor will derive substantial direct and indirect benefits from
the Loans made to, and the Letters of Credit issued from time to time for the
account of, the Borrower and its Subsidiaries by the Lenders and the Issuing
Banks, as the case may be, pursuant to the Credit Agreement and the financial
accommodations extended from time to time to the Borrower and its Subsidiaries
by the Lender Parties pursuant to the Hedging Agreements;

 

NOW
THEREFORE, for good
and valuable consideration the receipt of which is hereby acknowledged, and in
order to induce the Lenders to make Loans to the Borrower, and to

 

15

 

induce the Issuing Banks to
issue the Letters of Credit for the account of, the Borrower and its
Subsidiaries pursuant to the Credit Agreement and the Lender Parties to extend
financial accommodations, the Additional Guarantor agrees, for the benefit of
each Lender Party, as follows:

 

1.                                       Guaranty.  By executing and delivering
this Assumption Agreement, the Additional Guarantor, as provided in Section 5.6
of the Guaranty, hereby becomes a party to the Guaranty as a Guarantor
thereunder with the same force and effect as if originally named therein as a
Guarantor and, without limiting the generality of the foregoing, hereby
expressly assumes all obligations and liabilities of a Guarantor
thereunder.  Without limitation of the
foregoing, the Additional Guarantor, as a primary obligor and not as a surety,
irrevocably and unconditionally and jointly and severally Guarantees unto the
Global Administrative Agent the prompt payment of the Obligations when due,
whether at maturity or otherwise, provided, however, that,
notwithstanding anything herein or in any other Loan Document to the contrary,
the maximum liability of the Additional Guarantor under the Guaranty shall in no
event exceed its Maximum Guaranteed Amount.

 

2.                                       Representations and Warranties.  The
Additional Guarantor hereby represents and warrants that each of the
representations and warranties contained in Article 3 of the Guaranty is true
and correct with respect to such Additional Guarantor as if made on and as of
such date.

 

3.                                       Conditions.  This Assumption Agreement
shall not become effective until the Additional Guarantor shall have delivered
to the Global Administrative Agent a certificate of the Secretary or any
Assistant Secretary of the Additional Guarantor (or other officer or director
of  the Additional Guarantor which is
duly authorized to keep the minute book or similar record of the Additional
Guarantor), in form and substance satisfactory to the Global Administrative
Agent, dated as of the date hereof, certifying as to (i) the resolutions of the
Board of Directors (or similar governing body) of the Additional Guarantor
authorizing the execution, delivery and performance of this Assumption
Agreement and of all instruments contemplated herein to be executed and
delivered by the Additional Guarantor in connection herewith (a copy of such
resolutions to be incorporated into or attached as an exhibit to such
certificate), such certificate to state that said copy is a true and correct
copy of such resolutions and that such resolutions were duly adopted and have
not been amended, superseded, revoked or modified in any respect and remain in
full force and effect as of the date of such certificate, (ii) the election,
incumbency and signatures of the officer or officers (or other official) of the
Additional Guarantor executing and delivering this Assumption Agreement and
each other instrument or document furnished in connection herewith, (iii) the
Additional Guarantor’s certificate or articles of incorporation and bylaws (or
other organizational and governance documents) with a copy of such documents to
be attached to the certificate, and (iv) such other documents and information
as the Global Administrative Agent or any Lender shall reasonably request.

 

4.                                       Governing Law.  THIS ASSUMPTION AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

 

IN WITNESS WHEREOF, the
undersigned has caused this Assumption Agreement to be duly executed and
delivered as of the date first above written.

 

16

 

	
   

  	
  [ADDITIONAL GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

17

 

EXHIBIT H

 

MATERIAL SUBSIDIARIES

 

Retex, Inc., a Wyoming
corporation

 

TBI West Virginia, Inc., a
Delaware corporation

 

Matador Petroleum
Corporation, a Texas corporation

 

Matador E&P Company, a
Texas corporation

 

Tom Brown Resources Ltd., a
corporation organized under the laws of the Province of Alberta, Canada.

 

1

 

SCHEDULE 2.1

 

COMMITMENTS

 

	
  Lender

  	
   

  	
  Commitments

  
	
  JPMorgan Chase Bank

  	
   

  	
  U.S.$28,000,000

  
	
   

  	
   

  	
   

  
	
  BNP Paribas

  	
   

  	
  U.S.$28,000,000

  
	
   

  	
   

  	
   

  
	
  Wachovia Bank, National Association

  	
   

  	
  U.S.$28,000,000

  
	
   

  	
   

  	
   

  
	
  The Bank of Nova Scotia

  	
   

  	
  U.S.$28,000,000

  
	
   

  	
   

  	
   

  
	
  U.S. Bank National Association

  	
   

  	
  U.S.$28,000,000

  
	
   

  	
   

  	
   

  
	
  Wells Fargo Bank, N.A.

  	
   

  	
  U.S.$28,000,000

  
	
   

  	
   

  	
   

  
	
  Bank of Scotland

  	
   

  	
  U.S.$26,000,000

  
	
   

  	
   

  	
   

  
	
  Comerica Bank – Texas

  	
   

  	
  U.S.$26,000,000

  
	
   

  	
   

  	
   

  
	
  UFJ Bank

  	
   

  	
  U.S.$25,000,000

  
	
   

  	
   

  	
   

  
	
  Washington Mutual Bank, FA

  	
   

  	
  U.S.$25,000,000

  
	
   

  	
   

  	
   

  
	
  Bank of Oklahoma, N.A.

  	
   

  	
  U.S.$20,000,000

  
	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  U.S.$290,000,000

  

 

1

 

SCHEDULE 3.10

 

NET INTERESTS NOT OWNED

 

NONE

 

1

 

SCHEDULE 3.14

 

SUBSIDIARIES AND PARTNERSHIPS; LOCATIONS

 

Principal place of business
and chief executive office of each Subsidiary:

 

Wholly owned Subsidiaries of
Tom Brown, Inc.:

 

Matador
Petroleum Corporation

555
Seventeenth Street, Suite 1850

Denver,
CO 80202-3918

Organizational
Number and State of Organization: Texas - 0147435500

 

Subsidiaries of Matador
Petroleum Corporation

 

NZX
Corporation

555
Seventeenth Street, Suite 1850

Denver,
CO 80202-3918

Organizational
Number and State of Organization: Delaware - 2178742

 

Matador
E&P Company

555
Seventeenth Street, Suite 1850

Denver,
CO 80202-3918

Organizational
Number and State of Organization: Texas - 016446000

 

Subsidiaries of Matador
E&P Company

 

Matador Operating Company

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Texas - 071003100

 

Matador Royalty Corporation

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Texas - 079991400

 

Serenity Petroleum, Incorporated

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: New Jersey-0100648825

 

Pilot Production Company

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Texas - 079501200

 

1

 

Retex Inc.

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Wyoming - 91-265360

 

Rocno Corporation

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Texas - 0042785700

 

Sauer Drilling Company

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Delaware - 2822630

 

TBI Field Services, Inc.

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Delaware - 3305869

 

Tom Brown Resources Funding Corp.

736 8th Avenue SW, 7th Floor

Calgary, Alberta T2P 1H4

 

TBI Pipeline Company

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Delaware - 3056630

 

TBI West Virginia, Inc.

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Delaware - 2318966

 

TCP Gathering Co.

555 Seventeenth Street, Suite 1850

Denver, CO 80202-3918

Organizational Number and State of Organization: Colorado - 19871362083

 

Tom Brown Resources Ltd.

736 8th Avenue SW, 7th Floor

Calgary, Alberta T2P 1H4

 

Subsidiary of Tom Brown Resources Ltd.:

 

2

 

Stellarton
Energy International Corporation (Barbados) 100% owned

736
8th Avenue SW, 7th Floor

Calgary,
Alberta T2P 1H4

 

Subsidiary
of Stellarton Energy International Corporation (Barbados)

 

Stellarton
de Venezuela C.A. (Venezuela) 100% owned

736
8th Avenue SW, 7th Floor

Calgary,
Alberta T2P 1H4

 

3

 

SCHEDULE 3.19

 

INSURANCE

 

 

[insurance certificate to be attached]

 

1

 

SCHEDULE 3.20

 

HEDGING AGREEMENTS

 

I.  Tom Brown, Inc. hedges prior to Matador acquisition:

 

	
   

  	
   

  	
  Natural
  Gas Collars

  	
   

  	
  Natural
  Gas Swaps

  	
   

  
	
  Period

  	
   

  	
  Volume

  Mmbtu/d

  	
   

  	
  Weighted

  Average

  Floor/Ceiling

  	
   

  	
  Volume

  Mmbtu/d

  	
   

  	
  Weighted

  Average

  Swap

  Price

  	
   

  
	
  Second Quarter 2003

  	
   

  	
  40,000

  	
   

  	
  $

  	
  3.37/4.65

  	
   

  	
  57,500

  	
   

  	
  $

  	
  3.02

  	
   

  
	
  Third Quarter 2003

  	
   

  	
  40,000

  	
   

  	
  $

  	
  3.37/4.65

  	
   

  	
  55,800

  	
   

  	
  $

  	
  3.04

  	
   

  
	
  Fourth Quarter 2003

  	
   

  	
  23,500

  	
   

  	
  $

  	
  3.27/4.61

  	
   

  	
  19,000

  	
   

  	
  $

  	
  3.04

  	
   

  

 

The net mark to market value
for the above natural gas collars and natural gas swaps totals a loss of
$28,585,957 as of May 30, 2003.

 

II.  Tom Brown, Inc. hedges entered into for
Matador acquisition production:

 

	
   

  	
   

  	
  Natural
  Gas Collars

  	
   

  
	
  Period

  	
   

  	
  Volume

  Mmbtu/d

  	
   

  	
  Weighted

  Average

  Floor/Ceiling

  	
   

  
	
  Summer (June 2003 - Oct.
  2003)

  	
   

  	
  40,000

  	
   

  	
  $

  	
  4.68/9.24

  	
   

  
	
  Winter (Nov. 2003 – Mar.
  2004)

  	
   

  	
  32,500

  	
   

  	
  $

  	
  4.78/10.08

  	
   

  
	
  Summer (Apr. 2004 - Oct.
  2004)

  	
   

  	
  27,500

  	
   

  	
  $

  	
  4.08/6.30

  	
   

  
	
  Winter (Nov. 2004 - Dec.
  2004)

  	
   

  	
  25,000

  	
   

  	
  $

  	
  4.07/6.70

  	
   

  

 

The net mark to market value
for the above natural gas collars totals a loss of $444,795 as of May 30, 2003.

 

1

 

SCHEDULE 7.1

 

INDEBTEDNESS

 

1.                                       Indebtedness in connection with the Bridge Loan

 

1

 

SCHEDULE 7.2

 

LIENS

 

NONE

 

1

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  Definitions

  
	
   

  
	
  Section 1.1

  	
  Defined Terms

  
	
   

  	
   

  
	
  Section 1.2

  	
  Classification of Loans
  and Borrowings

  
	
   

  	
   

  
	
  Section 1.3

  	
  Terms Generally

  
	
   

  	
   

  
	
  Section 1.4

  	
  Accounting Terms; GAAP

  
	
   

  
	
  ARTICLE II

  	
  The Credits

  
	
   

  
	
  Section 2.1

  	
  Commitments

  
	
   

  	
   

  
	
  Section 2.2

  	
  Loans and Borrowings

  
	
   

  	
   

  
	
  Section 2.3

  	
  Requests for Borrowings

  
	
   

  	
   

  
	
  Section 2.4

  	
  Letters of Credit

  
	
   

  	
   

  
	
  Section 2.5

  	
  Funding of Borrowings

  
	
   

  	
   

  
	
  Section 2.6

  	
  Interest Elections

  
	
   

  	
   

  
	
  Section 2.7

  	
  Global Borrowing Base

  
	
   

  	
   

  
	
  Section 2.8

  	
  Termination and
  Reduction of Commitments

  
	
   

  	
   

  
	
  Section 2.9

  	
  Repayment of Loans;
  Evidence of Indebtedness

  
	
   

  	
   

  
	
  Section 2.10

  	
  Prepayment of Loans

  
	
   

  	
   

  
	
  Section 2.11

  	
  Fees

  
	
   

  	
   

  
	
  Section 2.12

  	
  Interest

  
	
   

  	
   

  
	
  Section 2.13

  	
  Alternate Rate of
  Interest

  
	
   

  	
   

  
	
  Section 2.14

  	
  Illegality

  
	
   

  	
   

  
	
  Section 2.15

  	
  Increased Costs

  
	
   

  	
   

  
	
  Section 2.16

  	
  Break Funding Payments

  
	
   

  	
   

  
	
  Section 2.17

  	
  Taxes

  
	
   

  	
   

  
	
  Section 2.18

  	
  Payments Generally;
  Pro Rata Treatment; Sharing of Set-offs

  
	
   

  	
   

  
	
  Section 2.19

  	
  Mitigation Obligations;
  Replacement of Lenders

  
	
   

  	
   

  
	
  Section 2.20

  	
  Currency Conversion
  and Currency Indemnity

  
	
   

  
	
  ARTICLE III

  	
  Representations and
  Warranties

  
	
   

  
	
  Section 3.1

  	
  Corporate Existence

  
	
   

  	
   

  
	
  Section 3.2

  	
  Financial Condition

  
	
   

  	
   

  
	
  Section 3.3

  	
  Litigation

  
				

 

i

 

	
  Section 3.4

  	
  No Breach

  
	
   

  	
   

  
	
  Section 3.5

  	
  Authority

  
	
   

  	
   

  
	
  Section 3.6

  	
  Approvals

  
	
   

  	
   

  
	
  Section 3.7

  	
  Use of Proceeds and
  Letters of Credit

  
	
   

  	
   

  
	
  Section 3.8

  	
  ERISA

  
	
   

  	
   

  
	
  Section 3.9

  	
  Taxes

  
	
   

  	
   

  
	
  Section 3.10

  	
  Properties, etc

  
	
   

  	
   

  
	
  Section 3.11

  	
  No Material
  Misstatements

  
	
   

  	
   

  
	
  Section 3.12

  	
  Investment Company Act

  
	
   

  	
   

  
	
  Section 3.13

  	
  Public Utility Holding
  Company Act

  
	
   

  	
   

  
	
  Section 3.14

  	
  Subsidiaries

  
	
   

  	
   

  
	
  Section 3.15

  	
  Location of Business
  and Offices

  
	
   

  	
   

  
	
  Section 3.16

  	
  Defaults

  
	
   

  	
   

  
	
  Section 3.17

  	
  Environmental Matters

  
	
   

  	
   

  
	
  Section 3.18

  	
  Compliance with the
  Law

  
	
   

  	
   

  
	
  Section 3.19

  	
  Insurance

  
	
   

  	
   

  
	
  Section 3.20

  	
  Hedging Agreements

  
	
   

  	
   

  
	
  Section 3.21

  	
  Restriction on Liens

  
	
   

  	
   

  
	
  Section 3.22

  	
  Material Agreements

  
	
   

  	
   

  
	
  Section 3.23

  	
  Solvency

  
	
   

  	
   

  
	
  Section 3.24

  	
  Priority; Security
  Matters

  
	
   

  
	
  ARTICLE IV

  	
  Conditions

  
	
   

  
	
  Section 4.1

  	
  Initial Loan

  
	
   

  	
   

  
	
  Section 4.2

  	
  Each Credit Event

  
	
   

  
	
  ARTICLE V

  	
  Affirmative Covenants

  
	
   

  
	
  Section 5.1

  	
  Reporting Requirements

  
	
   

  	
   

  
	
  Section 5.2

  	
  Litigation

  
	
   

  	
   

  
	
  Section 5.3

  	
  Maintenance, Etc

  
	
   

  	
   

  
	
  Section 5.4

  	
  Environmental Matters

  
	
   

  	
   

  
	
  Section 5.5

  	
  Casualty and
  Condemnation

  
			

 

ii

 

	
  Section 5.6

  	
  Performance of
  Obligations

  
	
   

  	
   

  
	
  Section 5.7

  	
  Reserve Reports

  
	
   

  	
   

  
	
  Section 5.8

  	
  Title to Oil and Gas
  Properties

  
	
   

  	
   

  
	
  Section 5.9

  	
  ERISA Information and
  Compliance

  
	
   

  	
   

  
	
  Section 5.10

  	
  Additional
  Subsidiaries

  
	
   

  	
   

  
	
  Section 5.11

  	
  Gas Marketing

  
	
   

  	
   

  
	
  Section 5.12

  	
  Information Regarding
  Collateral

  
	
   

  	
   

  
	
  Section 5.13

  	
  Further Assurances.

  
	
   

  
	
  ARTICLE VI

  	
  Financial Covenants

  
	
   

  
	
  Section 6.1

  	
  Tangible Net Worth

  
	
   

  	
   

  
	
  Section 6.2

  	
  Indebtedness to EBITDAX
  Ratio

  
	
   

  
	
  ARTICLE VII

  	
  Negative Covenants

  
	
   

  
	
  Section 7.1

  	
  Indebtedness

  
	
   

  	
   

  
	
  Section 7.2

  	
  Liens

  
	
   

  	
   

  
	
  Section 7.3

  	
  Investments

  
	
   

  	
   

  
	
  Section 7.4

  	
  Dividends, Distributions
  and Redemptions

  
	
   

  	
   

  
	
  Section 7.5

  	
  Sales and Leasebacks

  
	
   

  	
   

  
	
  Section 7.6

  	
  Nature of Business

  
	
   

  	
   

  
	
  Section 7.7

  	
  Limitation on Leases

  
	
   

  	
   

  
	
  Section 7.8

  	
  Mergers, Etc

  
	
   

  	
   

  
	
  Section 7.9

  	
  Proceeds of Loans and
  Letters of Credit

  
	
   

  	
   

  
	
  Section 7.10

  	
  ERISA Compliance

  
	
   

  	
   

  
	
  Section 7.11

  	
  Sale or Discount of
  Receivables

  
	
   

  	
   

  
	
  Section 7.12

  	
  Sale of Oil and Gas
  Properties

  
	
   

  	
   

  
	
  Section 7.13

  	
  Environmental Matters

  
	
   

  	
   

  
	
  Section 7.14

  	
  Transactions with
  Affiliates

  
	
   

  	
   

  
	
  Section 7.15

  	
  Subsidiaries

  
	
   

  	
   

  
	
  Section 7.16

  	
  Negative Pledge
  Agreements

  
	
   

  	
   

  
	
  Section 7.17

  	
  Hedging Agreements

  
			

 

iii

 

	
  ARTICLE VIII

  	
  Events of Default

  
	
   

  
	
  Section 8.1

  	
  Listing of Events of
  Default

  
	
   

  	
   

  
	
  Section 8.2

  	
  Action if Bankruptcy

  
	
   

  	
   

  
	
  Section 8.3

  	
  Action if Other Event of
  Default

  
	
   

  
	
  ARTICLE IX

  	
  Agents

  
	
   

  
	
  ARTICLE X

  	
  Miscellaneous

  
	
   

  
	
  Section 10.1

  	
  Notices

  
	
   

  	
   

  
	
  Section 10.2

  	
  Waivers; Amendments

  
	
   

  	
   

  
	
  Section 10.3

  	
  Expenses; Indemnity;
  Damage Waiver

  
	
   

  	
   

  
	
  Section 10.4

  	
  Successors and Assigns

  
	
   

  	
   

  
	
  Section 10.5

  	
  Survival

  
	
   

  	
   

  
	
  Section 10.6

  	
  Counterparts;
  Effectiveness

  
	
   

  	
   

  
	
  Section 10.7

  	
  Severability

  
	
   

  	
   

  
	
  Section 10.8

  	
  Right of Setoff

  
	
   

  	
   

  
	
  Section 10.9

  	
  GOVERNING LAW;
  JURISDICTION; CONSENT TO SERVICE OF PROCESS

  
	
   

  	
   

  
	
  Section 10.10

  	
  WAIVER OF JURY TRIAL

  
	
   

  	
   

  
	
  Section 10.11

  	
  Headings

  
	
   

  	
   

  
	
  Section 10.12

  	
  Confidentiality

  
	
   

  	
   

  
	
  Section 10.13

  	
  Interest Rate Limitation

  
	
   

  	
   

  
	
  Section 10.14

  	
  Collateral Matters;
  Hedging Agreements; Overdraft Facility

  
	
   

  	
   

  
	
  Section 10.15

  	
  Arranger; U.S.
  Documentation Agent; Global Syndication Agents; Other Agents

  
	
   

  	
   

  
	
  Section 10.16

  	
  Intercreditor Agreement;
  Senior Debt Intercreditor Agreement; Security Documents

  
	
   

  	
   

  
	
  Section 10.17

  	
  NO ORAL AGREEMENTS

  
				

 

iv

 

EXHIBITS AND SCHEDULES

 

EXHIBITS:

 

	
  Exhibit A-1

  	
   

  	
  Form of Legal Opinion of Vinson &
  Elkins L.L.P.

  
	
  Exhibit A-2

  	
   

  	
  Form of Legal Opinion of LeBoeuf, Lamb, Greene
  & MacRae L.L.P.

  
	
  Exhibit B

  	
   

  	
  Continuing Letters of Credit

  
	
  Exhibit C

  	
   

  	
  Form of Compliance Certificate

  
	
  Exhibit D

  	
   

  	
  Form of Assignment and Acceptance

  
	
  Exhibit E-1

  	
   

  	
  Form of Borrowing Request

  
	
  Exhibit E-2

  	
   

  	
  Form of Interest Election Request

  
	
  Exhibit F-1

  	
   

  	
  Form of Parent Pledge Agreement

  
	
  Exhibit F-2

  	
   

  	
  Form of Matador Pledge Agreement

  
	
  Exhibit G

  	
   

  	
  Form of Guaranty

  
	
  Exhibit H

  	
   

  	
  Material Subsidiaries

  

 

SCHEDULES:

 

	
  Schedule 2.1

  	
   

  	
  Commitments

  
	
  Schedule 3.10

  	
   

  	
  Net interests not owned

  
	
  Schedule 3.14

  	
   

  	
  Subsidiaries and Partnerships

  
	
  Schedule 3.19

  	
   

  	
  Insurance

  
	
  Schedule 3.20

  	
   

  	
  Hedging Agreements

  
	
  Schedule 7.1

  	
   

  	
  Indebtedness

  
	
  Schedule 7.2

  	
   

  	
  Liens

  

 

v

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