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Exhibit 10.1  

 

FORM

OF

CREDIT AGREEMENT  

AMONG 

BREITBURN OPERATING L.P.  

AND 

ALAMITOS COMPANY,

BREITBURN ENERGY PARTNERS L.P.,

BREITBURN OPERATING GP LLC

PHOENIX PRODUCTION COMPANY, AND

PREVENTIVE MAINTENANCE SERVICES, LLC
  AS GUARANTORS 

WELLS FARGO BANK, NATIONAL ASSOCIATION,
  AS LEAD ARRANGER, ADMINISTRATIVE AGENT, AND ISSUING LENDER 

CITIBANK TEXAS, NATIONAL ASSOCIATION,
  AS SYNDICATION AGENT 

UNION BANK OF CALIFORNIA, N.A.,
  AS DOCUMENTATION AGENT 

AND THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
  AS LENDERS 

 

DATED AS OF SEPTEMBER    , 2006  

   TABLE OF CONTENTS 

	 
	 	 
	 	Page

	ARTICLE I.    DEFINITIONS	 	1
	

1.01	
 	

Certain Defined Terms	
 	

1
	

1.02	
 	

Other Interpretive Provisions	
 	

15
	

1.03	
 	

Accounting Principles	
 	

15
	
ARTICLE II.    THE CREDIT	
 	

15
	

2.01	
 	

Amounts and Terms of the Commitments	
 	

15
	

2.02	
 	

Procedure for Borrowings	
 	

16
	

2.03	
 	

Conversion and Continuation Elections	
 	

17
	

2.04	
 	

Optional Prepayments	
 	

17
	

2.05	
 	

Borrowing Base Determinations, Mandatory Prepayments of Loans	
 	

18
	

2.06	
 	

Repayment	
 	

19
	

2.07	
 	

Fees	
 	

19
	

2.08	
 	

Computation of Fees and Interest	
 	

20
	

2.09	
 	

Payments by the Company; Borrowings Pro Rata	
 	

20
	

2.10	
 	

Issuing the Letters of Credit	
 	

21
	

2.11	
 	

Payments by the Lenders to the Administrative Agent	
 	

24
	

2.12	
 	

Sharing of Payments, Etc.	
 	

24
	
ARTICLE III.    TAXES, YIELD PROTECTION AND ILLEGALITY	
 	

25
	

3.01	
 	

Taxes	
 	

25
	

3.02	
 	

Illegality	
 	

25
	

3.03	
 	

Increased Costs and Reduction of Return	
 	

26
	

3.04	
 	

Funding Losses	
 	

27
	

3.05	
 	

Inability to Determine Rates	
 	

27
	

3.06	
 	

Certificates of Lenders	
 	

27
	

3.07	
 	

Substitution of Lenders	
 	

27
	

3.08	
 	

Survival	
 	

28
	
ARTICLE IV.    SECURITY	
 	

28
	

4.01	
 	

The Security	
 	

28
	

4.02	
 	

Agreement to Deliver Security Documents	
 	

28
	

4.03	
 	

Perfection and Protection of Security Interests and Liens	
 	

28
	

4.04	
 	

Offset	
 	

28
	

4.05	
 	

Subsidiary Guaranty	
 	

29
	 	 	 	 	 

i

 

	
ARTICLE V.    CONDITIONS PRECEDENT	
 	

29
	

5.01	
 	

Conditions of Initial Credit Extensions	
 	

29
	

5.02	
 	

Conditions to All Loans	
 	

31
	
ARTICLE VI.    REPRESENTATIONS AND WARRANTIES	
 	

32
	

6.01	
 	

Organization, Existence and Power	
 	

32
	

6.02	
 	

Corporate Authorization; No Contravention	
 	

32
	

6.03	
 	

Governmental Authorization	
 	

32
	

6.04	
 	

Binding Effect	
 	

32
	

6.05	
 	

Litigation	
 	

32
	

6.06	
 	

No Default	
 	

33
	

6.07	
 	

ERISA Compliance	
 	

33
	

6.08	
 	

Margin Regulations	
 	

33
	

6.09	
 	

Title to Properties	
 	

33
	

6.10	
 	

Oil and Gas Reserves	
 	

34
	

6.11	
 	

Initial Reserve Report	
 	

34
	

6.12	
 	

Gas Imbalances	
 	

34
	

6.13	
 	

Taxes	
 	

34
	

6.14	
 	

Financial Condition	
 	

35
	

6.15	
 	

Environmental Matters	
 	

35
	

6.16	
 	

Regulated Entities	
 	

36
	

6.17	
 	

No Burdensome Restrictions	
 	

36
	

6.18	
 	

Copyrights, Patents, Trademarks and Licenses, etc.	
 	

36
	

6.19	
 	

Subsidiary	
 	

36
	

6.20	
 	

Insurance	
 	

36
	

6.21	
 	

Derivative Contracts	
 	

36
	

6.22	
 	

Full Disclosure	
 	

36
	

6.23	
 	

Solvency	
 	

37
	
ARTICLE VII.    AFFIRMATIVE COVENANTS	
 	

37
	

7.01	
 	

Financial Statements	
 	

37
	

7.02	
 	

Certificates; Other Production and Reserve Information	
 	

38
	

7.03	
 	

Notices	
 	

40
	

7.04	
 	

Preservation of Company Existence, Etc.	
 	

40
	

7.05	
 	

Maintenance of Property	
 	

40
	 	 	 	 	 

ii

 

	

7.06	
 	

Title Information	
 	

41
	

7.07	
 	

Additional Collateral	
 	

41
	

7.08	
 	

Insurance	
 	

42
	

7.09	
 	

Payment of Obligations	
 	

42
	

7.10	
 	

Compliance with Laws	
 	

42
	

7.11	
 	

Compliance with ERISA	
 	

42
	

7.12	
 	

Inspection of Property and Books and Records	
 	

42
	

7.13	
 	

Environmental Laws	
 	

43
	

7.14	
 	

New Subsidiary/Unrestricted Subsidiary	
 	

43
	

7.15	
 	

New Subsidiary Guarantors	
 	

43
	

7.16	
 	

Use of Proceeds	
 	

43
	

7.17	
 	

Operating Accounts	
 	

44
	

7.18	
 	

Phase I Reports	
 	

44
	

7.19	
 	

Further Assurances	
 	

44
	
ARTICLE VIII.    NEGATIVE COVENANTS	
 	

44
	

8.01	
 	

Limitation on Liens	
 	

44
	

8.02	
 	

Disposition of Assets	
 	

45
	

8.03	
 	

Consolidations and Mergers	
 	

46
	

8.04	
 	

Loans and Investments	
 	

46
	

8.05	
 	

Limitation on Indebtedness	
 	

47
	

8.06	
 	

Transactions with Affiliates	
 	

47
	

8.07	
 	

Margin Stock	
 	

47
	

8.08	
 	

Contingent Obligations	
 	

47
	

8.09	
 	

Restricted Payments	
 	

47
	

8.10	
 	

Derivative Contracts	
 	

48
	

8.11	
 	

Change in Business and Corporate Structure	
 	

49
	

8.12	
 	

Accounting Changes	
 	

49
	

8.13	
 	

ERISA Compliance	
 	

49
	

8.14	
 	

Interest Coverage Ratio	
 	

50
	

8.15	
 	

Leverage Ratio	
 	

50
	

8.16	
 	

Current Ratio	
 	

50
	
ARTICLE IX.    EVENTS OF DEFAULT	
 	

50
	

9.01	
 	

Event of Default	
 	

50
	 	 	 	 	 

iii

 

	

9.02	
 	

Remedies	
 	

52
	

9.03	
 	

Rights Not Exclusive	
 	

53
	
ARTICLE X.    ADMINISTRATIVE AGENT	
 	

53
	

10.01	
 	

Appointment and Authorization	
 	

53
	

10.02	
 	

Duties and Obligations of Administrative Agent	
 	

53
	

10.03	
 	

Action by Administrative Agent	
 	

54
	

10.04	
 	

Reliance by Administrative Agent	
 	

54
	

10.05	
 	

Sub-agents	
 	

55
	

10.06	
 	

Administrative Agent as Lender	
 	

55
	

10.07	
 	

No Reliance	
 	

55
	

10.08	
 	

Administrative Agent May File Proofs of Claim	
 	

55
	

10.09	
 	

Authority of Administrative Agent to Release Collateral and Liens	
 	

56
	

10.10	
 	

The Arrangers, the Syndication Agent and the Documentation Agent	
 	

56
	

10.11	
 	

Successor Administrative Agent	
 	

56
	

10.12	
 	

Withholding Tax	
 	

57
	
ARTICLE XI.    MISCELLANEOUS	
 	

58
	

11.01	
 	

Amendments and Waivers	
 	

58
	

11.02	
 	

Notices	
 	

59
	

11.03	
 	

No Waiver; Cumulative Remedies	
 	

60
	

11.04	
 	

Costs and Expenses	
 	

60
	

11.05	
 	

Indemnity	
 	

60
	

11.06	
 	

Payments Set Aside	
 	

61
	

11.07	
 	

Successors and Assigns	
 	

61
	

11.08	
 	

Assignments, Participations, etc.	
 	

61
	

11.09	
 	

Interest	
 	

63
	

11.10	
 	

Indemnity and Subrogation	
 	

64
	

11.11	
 	

Collateral Matters; Derivative Contracts	
 	

64
	

11.12	
 	

USA Patriot Act Notice	
 	

64
	

11.13	
 	

Automatic Debits of Fees	
 	

65
	

11.14	
 	

Notification of Addresses, Lending Offices, Etc.	
 	

65
	

11.15	
 	

Counterparts	
 	

65
	

11.16	
 	

Severability	
 	

65
	

11.17	
 	

No Third Parties Benefited	
 	

65
	 	 	 	 	 

iv

 

	

11.18	
 	

Governing Law, Jurisdiction and Waiver of Jury Trial	
 	

65
	

11.19	
 	

ARBITRATION	
 	

66
	

11.20	
 	

Entire Agreement	
 	

68
	

11.21	
 	

NO ORAL AGREEMENTS	
 	

68

	

SCHEDULES	
 	

 
	

Schedule 2.01	
 	

Commitments
	

Schedule 4.01	
 	

Security Documents
	

Schedule 6.05	
 	

Litigation
	

Schedule 6.07	
 	

ERISA Compliance
	

Schedule 6.15	
 	

Environmental Matters
	

Schedule 6.19	
 	

Subsidiaries
	

Schedule 6.21	
 	

Existing Derivative Contracts
	

Schedule 8.01	
 	

Liens
	

Schedule 8.05	
 	

Indebtedness
	

Schedule 8.08	
 	

Contingent Obligations
	

Schedule 11.02	
 	

Lending Offices; Addresses for Notices
	

EXHIBITS	
 	

 
	

Exhibit A	
 	

Form of Notice of Borrowing
	

Exhibit B	
 	

Form of Notice of Conversion/Continuation
	

Exhibit C	
 	

Form of Compliance Certificate
	

Exhibit D	
 	

Form of Assignment and Acceptance Agreement
	

Exhibit E	
 	

Form of Note
	

Exhibit F	
 	

Form of Pricing Grid Certificate
	

Exhibit G	
 	

Form of Continuing Guaranty Agreement
	

Exhibit H	
 	

Form of Company Security Agreement and Pledge

v

  

        THIS CREDIT AGREEMENT is dated as of September    , 2006, among  BREITBURN OPERATING L.P., a Delaware limited partnership (the "Company"),  ALAMITOS COMPANY, a California
corporation, BREITBURN ENERGY PARTNERS, L.P., a Delaware limited
partnership, BREITBURN OPERATING GP LLC, a Delaware limited liability company, PHOENIX PRODUCTION
COMPANY, a Wyoming corporation, and PREVENTIVE MAINTENANCE SERVICES, LLC, a Colorado limited liability company (collectively
"Guarantors"), each of the financial institutions from time to time party hereto (individually, a
"Lender" and collectively, the "Lenders"), WELLS FARGO BANK, NATIONAL
ASSOCIATION, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the "Administrative
Agent"), as lead arranger for the Lenders (in such capacity, "Lead Arranger"), and as Issuing Lender (in such capacity,
"Issuing Lender"), CITIBANK TEXAS, NATIONAL ASSOCIATION, as syndication agent for the Lenders
("Syndication Agent") and UNION BANK OF CALIFORNIA, N.A., as documentation agent for the Lenders
("Documentation Agent"). 

        In
consideration of the representations, warranties, covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company, Guarantors, Administrative Agent, Issuing Lender and the Lenders hereby agree as follows: 

 
 

ARTICLE I.    
    
    DEFINITIONS    
    

        1.01    Certain Defined Terms.    The following terms have the following meanings: 

        "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in
(a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock of a
corporation (or similar entity), which stock has ordinary voting power for the election of the members of such entity's board of directors or persons exercising similar functions (other than stock
having such power only by reason of the happening of a contingency), or the acquisition of in excess of 50% of the partnership interests or equity of any Person not a corporation which acquisition
gives the acquiring Person the power to direct or cause the direction of the management and policies of such Person, or
(c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Company
or a Subsidiary of the Company is the surviving entity. 

        "Administrative Agent" has the meaning specified in the introductory clause hereto. 

        "Administrative Agent's Payment Office" means the address for payments as the Administrative Agent may from time to time specify. 

        "Affected Lender" has the meaning specified in Section 3.07. 

        "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses the power to direct or cause the direction of the management and policies of
the other Person, whether through the ownership of voting securities, by contract, or otherwise. 

        "Agent-Related Persons" as to the Administrative Agent, means the Administrative Agent, its Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of the Administrative Agent and its Affiliates. 

        "Agreement" means this Credit Agreement. 

1

 

        "Applicable Margin" means, with respect to Base Rate Loans and LIBOR Loans, the respective margins therefor as determined under the
Pricing Grid. 

        "Assignee" has the meaning specified in Subsection 11.08(a). 

        "Assignment and Acceptance" has the meaning specified in Subsection 11.08(a). 

        "Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel, the allocated cost of
internal legal services and all disbursements of internal counsel. 

        "Availability Period" has the meaning specified in Subsection 2.01(b). 

        "Available Borrowing Base" means, at the particular time in question, the Borrowing Base then in effect  minus the Effective Amount at such time. 

        "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. §101, et
seq.), as amended, and regulations promulgated thereunder. 

        "Base Rate" means, for any day, the fluctuating rate of interest in effect for such day which rate per annum shall be equal to the higher
of (a) the rate of interest as publicly announced from time to time by Administrative Agent as its "reference rate," and
(b) one-half of one percent (0.50%) per annum above the Federal Funds Rate in effect from time to time. (The "reference rate" is a
rate set by Administrative Agent based upon various factors including costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans,
which may be priced at, above, or below such announced rate.) Any change in the reference rate announced by Administrative Agent shall take effect at the opening of business on the day specified in
the public announcement of such change. 

        "Base Rate Loan" means a Loan that bears interest based at the Base Rate plus the
Applicable Margin. 

        "BEC Credit Agreement" means that certain Credit Agreement of even date herewith, by and among BreitBurn Energy Company, L.P., a Delaware
limited partnership, its subsidiaries as guarantors, Administrative Agent as administrative agent and the lenders party thereto. 

        "Borrowing" means a borrowing hereunder consisting of Loans of the same Interest Rate Type made to the Company on the same day by the
Lenders under Article II, and, other than in the case of Base Rate Loans, having the same Interest Period. 

        "Borrowing Base" means at the particular time in question, the amount provided for in  Section 2.05 provided, however, in no event shall the Borrowing
Base ever exceed the Maximum Loan Amount. 

        "Borrowing Base Deficiency" means at any time, the Effective Amount exceeds the Borrowing Base then in effect. 

        "Borrowing Base Period" means the period from Closing to the initial Scheduled Borrowing Base Determination Date, and thereafter, each
six-month period between Scheduled Borrowing Base Determination Dates. 

        "Borrowing Date" means any date on which a Borrowing occurs under Section 2.02. 

        "BreitBurn Energy Corporation" means BreitBurn Energy Corporation, a California
corporation and member of the Company. 

        "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in Houston, Texas or San Francisco,
California are authorized or required by law to close and, if the applicable Business Day relates to any LIBOR Loan, means such a day on which dealings are carried on in the applicable offshore dollar
interbank market. 

2

 

        "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other
law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any Lender or of any corporation controlling a Lender. 

        "Capital Lease" means, when used with respect to any Person, any lease in respect of which the obligations of such Person constitute
Capitalized Lease Obligations. 

        "Capitalized Lease Obligations" means, when used with respect to any Person, without duplication, all obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations shall have been or should be, in
accordance with GAAP, capitalized on the books of such Person. 

        "Cash Equivalents" means: (a) securities issued or fully guaranteed or insured by the United States Government or any agency
thereof and backed by the full faith and credit of the United States and having maturities of not more than twelve (12) months from the date of acquisition; (b) certificates of deposit,
time deposits, Eurodollar time deposits, or bankers' acceptances having in each case a tenor of not more than twelve (12) months from the date of acquisition issued by, and demand deposits
with, any U.S. commercial bank or any branch or agency of a non-U.S. commercial bank licensed to conduct business in the U.S. having combined capital and surplus of not less than
$500,000,000, whose long term securities are rated at least A (or then equivalent grade) by S&P and A2 (or then equivalent grade) by Moody's at the time of acquisition; (c) commercial paper of
an issuer rated at least A-1 by S&P or P-1 by Moody's at the time of acquisition, and in either case having a tenor of not more than twelve (12) months; (d) debt
securities which are registered under the Securities Act of 1933, as amended (the "Securities Act") (and not "restricted
securities" in the Company's hands as defined in Rule 144 under the Securities Act), or adjustable rate preferred stock traded on a national securities exchange and
issued by a corporation duly incorporated under the laws of a state of the United States, or issued by any state, county or municipality located in the United States of America, provided, however,
that such debt securities are rated A2 by Moody's and A or better by S&P at the time of acquisition, and such debt securities have a maturity not in excess of twelve (12) months from the date
of creation thereof; (e) repurchase agreements with a term of not more than seven (7) days for underlying securities of the types described in clauses (a) and (b) above;
and (f) money market mutual or similar funds having assets in excess of $100,000,000. 

        "Casualty Event" means any loss, casualty or other insured damage to, or any nationalization, taking under power of eminent domain or by
condemnation or similar proceeding of, any Property of the Company or any of its Subsidiaries having a fair market value in excess of $1,000,000. 

        "Change of Control" means (a) Provident Energy Trust shall cease to own, directly or indirectly, the majority of the issued and
outstanding voting shares of either General Partner or BreitBurn GP LLC on a fully diluted basis assuming the conversion and exercise of all outstanding convertible securities (whether or not such
securities are then currently convertible or exercisable); (b) General Partner shall cease to own, directly or indirectly, all of the general partner interest (including without limitation, all
outstanding securities convertible to general partner interests) of the Company; or (c) Parent shall cease to own, directly or indirectly, all of the limited partnership interest of the
Company; or (d) a sale of all or substantially all of the assets of the Loan Parties taken as a whole to any Person or group of Persons; or (e) the liquidation or dissolution of Parent
or the Company; or (f) the first day on which a majority of the Board of Directors of either General Partner or BreitBurn GP LLC are not Continuing Directors.
"Continuing Directors" means any member of the board of directors (or managers, in the case of a limited liability company) of General Partner or
BreitBurn GP LLC, as applicable, who (A) is a member of such board of directors or managers as of the date of this Agreement or (B) was nominated for election or elected to such board of
directors or managers with the affirmative vote of two-thirds of the Continuing Directors who were members of such board of directors or managers at the time of such nomination or election
(not including as board nominees any directors which the 

3

 

board
is obligated to nominate pursuant to shareholders' agreements, voting trust arrangements or similar arrangements). 

        "Code" means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder. 

        "Collateral" means all property of any kind which is subject to a Lien in favor of Administrative Agent or which under the terms of any
Security Document is purported to be subject to such Lien. 

        "Commitment" means, as to each Lender, such Lender's Pro Rata Share of the lesser of (a) the current Borrowing Base or
(b) the Maximum Loan Amount, as such commitment may be terminated and/or reduced from time to time in accordance with the provisions hereof. 

        "Commitment Fee" means the variable fee as determined by the Pricing Grid payable pursuant to Subsection
2.07(a). 

        "Company" has the meaning specified in the introductory paragraph hereto. 

        "Compliance Certificate" means a certificate substantially in the form of  Exhibit C. 

        "Consolidated Interest Expense" means, with respect to the Loan Parties, for any fiscal period, the aggregate amount of all costs, fees
and expenses paid by the Loan Parties in such fiscal period which are classified as interest expense on the consolidated financial statements of the Loan Parties, all as determined in conformity with
GAAP. 

        "Consolidated Net Income" means, for any period, the net income (or net loss) of the Loan Parties for such period determined in accordance
with GAAP; provided, the effect, if any, resulting from the application of FAS 133 shall be excluded from the calculation of net income (or net loss. 

        "Contingent Obligation" means, as to any Person without duplication, any direct or indirect liability of that Person with or without
recourse, (a) with respect to any Indebtedness, dividend, letter of credit or other similar obligation (the "primary obligations") of another
Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations
or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or
hold harmless the holder of any such primary obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect to any
Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or
other property from, or to obtain the services of, another Person, other than in the ordinary course of business, if the relevant contract or other related document or obligation requires that payment
for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such
services are ever performed or
tendered, or (d) in respect of any Derivative Contract. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the lesser of (a) the
stated maximum amount, if any, of such Contingent Obligation and (b) the maximum stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or,
if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be equal to the lesser of (a) the
stated maximum amount, if any, of such Contingent Obligation and (b) the maximum reasonably anticipated liability in respect thereof. 

        "Continuing Directors" has the meaning specified in the definition of "Change of Control." 

4

 

        "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. 

        "Conversion/Continuation Date" means any date on which, under Section 2.03, the
Company (a) converts Loans of one Interest Rate Type to another Interest Rate Type, or (b) continues as Loans of the same Interest Rate Type, but with a new Interest Period, Loans having
Interest Periods expiring on such date. 

        "Credit Extension" means and includes the making of any Loans or issuance of any Letter of Credit (including the continuation of any
existing Letter of Credit) hereunder. 

        "Current Assets" means, at any time, the current assets of the Loan Parties at such time,  plus, the Available Borrowing Base at such time, less, for purposes of this definition, any
non-cash gains for any Derivative Contract resulting from the requirements of FAS 133 at such time. 

        "Current Liabilities" means, at any time, the current liabilities of the Loan Parties at such time,  less the sum of (a) current maturities of the Company's
Obligations to the extent such payments are not past due and
(b) non-cash losses or charges on any Derivative Contract resulting from the requirements of FAS 133 at such time. 

        "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default. 

        "Default Rate" has the meaning specified in Subsection 2.06(b)(iii). 

        "Derivative Contract" means all futures contracts, forward contracts, swap, cap or collar contracts, option contracts, hedging contracts
or other derivative contracts or similar agreements covering oil and gas commodities or prices or financial, monetary or interest rate instruments. 

        "Dispositions" has the meaning specified in Section 8.02. 

        "Documentation Agent" has the meaning specified in the introductory clause hereto. 

        "Dollars", "dollars" and "$" each mean
lawful money of the United States. 

        "EBITDA" means, for any period, the sum of Consolidated Net Income for the preceding twelve months (or for any period ending prior to
September 30, 2007, the pro forma Consolidated Net Income for the preceding twelve months) plus, without duplication, the following expenses or charges to the extent deducted from Consolidated
Net Income in such twelve month period (or pro forma Consolidated Net Income for any period ending prior to September 30, 2007, as applicable): exploration expense, interest expense, depletion,
depreciation, amortization, unrealized loss on Derivative Contracts which relate to hedging, loss on sale of assets, cumulative effect of accounting change, and income taxes  minus, without duplication,
the following gains or credits to the extent added to Consolidated Net Income in such twelve month period (or pro forma
Consolidated Net Income for any period ending prior to September 30, 2007, as applicable): unrealized gain on Derivative Contracts which relate to hedging, gain on sale of assets, and
cumulative effect of accounting changes. Provided that all calculations of EBITDA, for any applicable period during which a permitted acquisition or disposition is consummated, shall be determined on
a pro forma basis (such calculation to be acceptable to, and approved by, Administrative Agent) as if such acquisition or disposition was consummated on the first day of such applicable period. 

        "Effective Amount" means on any date, the aggregate outstanding principal amount of all Loans thereof after giving effect to any
prepayments or repayments of Loans occurring on such date plus the LC Obligation. 

5

 

        "Effective Date" means the date on which all conditions precedent set forth in Sections 5.01 and
5.02 are satisfied or waived by Administrative Agent. 

        "Eligible Assignee" means (a) a commercial bank organized under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch or agency located in the United States; (c) a Person with a combined capital and surplus of at least $100,000,000 that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a bank, (ii) a Subsidiary of a Person of which a bank is a Subsidiary, or (iii) a Person of which a bank is a Subsidiary;
(d) a finance company, insurance company or other financial institution or fund (whether a corporation, partnership, trust or other entity) that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having total assets in excess of $100,000,000; and (e) any other Person approved by the Administrative Agent. 

        "Environmental Claims" means all material claims by any Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury to the environment. 

        "Environmental Laws" means all material federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and
codes, together with all material administrative orders, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental,
health, and safety matters. 

        "Equity" means all shares, options, warrants, general or limited partnership interests, participations or other equivalents (regardless of
how designated) of or in a corporation, limited liability company, partnership or equivalent entity whether voting or nonvoting, including, without limitation, common stock, preferred stock, or any
other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended). 

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and regulations promulgated thereunder. 

        "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Company within the meaning of
Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). 

        "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by Loan Party or any ERISA
Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of
operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or
partial withdrawal by the Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to
terminate (other than pursuant to Section 4041(b) of ERISA), the treatment of a Plan amendment as a termination under Section 4041(c) or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Company or any ERISA Affiliate. 

        "Event of Default" means any of the events or circumstances specified in  Section 9.01. 

6

 

        "Exchange Act" means the Securities and Exchange Act of 1934, and regulations promulgated thereunder. 

        "FAS 133" means Statement No. 133 of the Financial Accounting Standards Board to Derivative Contracts. 

        "FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions. 

        "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the
caption "Federal Funds (Effective)"; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day
will be the arithmetic mean as determined by the Administrative Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York, New York time) on
that day by each of three leading brokers of Federal funds transactions in New York, New York selected by the Administrative Agent. 

        "Fee Letter" shall have the meaning specified in Subsection 2.07(c) hereof. 

        "FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal
functions. 

        "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. 

        "General Partner" means BreitBurn Operating GP, LLC, a Delaware limited liability company. 

        "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other
entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. 

        "Guarantors" means, collectively, the entities identified in the preamble hereto as Guarantors, together with any Subsidiary of a Loan
Party which is required to execute a Guaranty under Section 7.15. "Guarantor" means,
individually, any one of the Guarantors. 

        "Guaranties" means, collectively, each Continuing Guaranty Agreement, substantially in the form of  Exhibit G hereto, executed by the Guarantors in
favor of Administrative Agent, as same may be amended, supplemented or otherwise modified from
time to time. "Guaranty" means, individually, any one of the Guaranties. 

        "Guaranty Obligation" has the meaning specified in the definition of "Contingent
Obligation." 

        "Highest Lawful Rate" means, as of a particular date, the maximum nonusurious interest rate that under applicable federal and Texas law
may then be contracted for, charged or received by the Lenders in connection with the Obligations. 

        "Hydrocarbon Interests" means leasehold and other interests in or under oil, gas and other liquid or gaseous hydrocarbon leases wherever
located, mineral fee interests, overriding royalty and royalty interests, net profit interests, production payment interests relating to oil, gas or other liquid or gaseous hydrocarbons wherever
located including any reserved or residual interest of whatever nature. 

7

 

        "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations
issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all
non-contingent reimbursement or payment obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or Lender under such agreement in the
event of default are limited to repossession or sale of such property) including, without limitation, production payments, net profit interests and other Hydrocarbon Interests subject to repayment out
of future Oil and Gas production; (f) all obligations with respect to Capital Leases; (g) all net obligations with respect to Derivative Contracts; (h) all indebtedness referred
to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in
property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Guaranty
Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. 

        "Indemnified Liabilities" has the meaning specified in Section 11.05. 

        "Indemnified Person" has the meaning specified in Section 11.05. 

        "Independent Auditor" has the meaning specified in Subsection 7.01(a). 

        "Independent Engineer" has the meaning specified in Section 6.11. 

        "Initial Reserve Report" has the meaning specified in Section 6.11. 

        "Insolvency Proceeding" means (a) any case, action or proceeding relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. federal, state or foreign law, including the Bankruptcy Code. 

        "Interest Payment Date" (a) as to any Base Rate Loan, means the last Business Day of each month prior to the Termination Date, and
(b) as to any LIBOR Loan, the last day of each Interest Period applicable to such Loan, provided,  however, that if any Interest Period for a LIBOR
Loan exceeds three months, the date that falls three months after the beginning of such Interest
Period, and the date that falls
three months after each Interest Payment Date thereafter for such Interest Period, is also an Interest Payment Date. 

        "Interest Period" means, as to any LIBOR Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation
Date on which the Loan is converted into or continued as LIBOR Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation; provided that: (a) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period
shall be extended to the following Business Day unless, in the case of a LIBOR Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day; (b) any Interest Period pertaining to an LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and
(c) no Interest Period for any Loan shall extend beyond the Termination Date. 

8

 

        "Interest Rate Type" means, with respect to any Loan, the interest rate, being either the Base Rate or the LIBOR forming the basis upon
which interest is charged against such Loan hereunder. 

        "IPO" means the initial public offering of the Parent, as more fully described in the S-1 Filing. 

        "IPO Date" means the date on which the IPO occurs. 

        "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code. 

        "Issue" means with respect to any Letter of Credit, to issue or extend the expiry of, or to renew or increase the amount of, such Letter
of Credit; and the terms "Issued," "Issuing" and
"Issuance" have corresponding meanings. 

        "Issuing Lender" has the meaning specified in the introductory clause hereto. 

        "LC Application" means an application or agreement for a standby Letter of Credit in such form as shall be acceptable to the Issuing
Lender in its sole discretion, and duly executed by the Company pursuant to Section 2.10(a). 

        "LC Collateral" means any amounts held by the Administrative Agent as security for LC Obligations of the Company. 

        "LC Collateral Account" means a blocked deposit account held by the Administrative Agent. 

        "LC Obligation" means, at the time in question, the sum of the Matured LC Obligations plus
the aggregate amount outstanding under all Letters of Credit then outstanding. 

        "LC Related Document" means the Letters of Credit, LC Applications and any other document relating to any Letter of Credit including any
of the Issuing Lender's standard form documents for Letter of Credit issuances. 

        "Lead Arranger" has the meaning specified in the introductory clause hereto. 

        "Lenders" has the meaning specified in the introductory clause hereto. 

        "Lending Office" means, as to any Lender, the office or offices of such Lender specified as its "Lending
Office" or "Domestic Lending Office" or "Offshore Lending Office", as the case
may be, on Schedule 11.02, or such other office or offices as such Lender may from time to time notify the Company and the Administrative Agent. 

        "Letter of Credit" means any stand-by letter of credit issued by the Issuing Lender pursuant to this Agreement and upon an LC
Application. 

        "Letter of Credit Fee" means the fee specified in Subsection 2.07(b). 

        "LIBOR" means a per annum rate of interest (rounded upwards, if necessary, to the nearest 1/100th%) equal to the rate at which
Administrative Agent is offered deposits by major banks in dollars in the aggregate amount of the relevant Loans and for a period comparable to the applicable Interest Period in the London interbank
market at approximately 11:00 a.m. (London time), three (3) Business Days
prior to the beginning of the relevant Interest Period. The determination and calculation of the LIBOR and each component thereof by Administrative Agent shall be conclusive and binding, absent
manifest error. 

        "LIBOR Loan" means a Loan that bears interest based on LIBOR plus the Applicable Margin. 

        "Lien" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement and the interest of a lessor under a 

9

 

Capital
Lease), any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien
relates as debtor, under the Uniform Commercial Code or any comparable law and any contingent or other agreement to provide any of the foregoing, but not including (a) the interest of a lessor
under a lease on Oil and Gas Properties and (b) the interest of a lessor under an Operating Lease. 

        "Loan" means an extension of credit by a Lender to the Company under Article II. 

        "Loan Documents" means this Agreement, the Notes, each Guaranty, the Security Documents, each LC Application and Letter of Credit and all
other documents delivered to the Administrative Agent or any Lender in connection herewith, including without limitation, the Fee Letter and any commitment letters. 

        "Loan Parties" means collectively the Company, the General Partner and each of the Guarantors. "Loan
Party" means individually, any of the Company or a Guarantor. 

        "Majority Lenders" means, at any time, the Administrative Agent and the Lenders holding at least fifty percent (50%) of the sum of the
Effective Amount or, if there is no Effective Amount, the Administrative Agent and the Lenders holding at least fifty percent (50%) of the sum of the Commitments of all of the Lenders. 

        "Margin Stock" means "margin stock" as such term is defined in Regulation T, U or X
of the FRB. 

        "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business,
properties or financial condition of the Loan Parties taken as a whole, or as to the Company, including without limitation, any material adverse change in commodity prices or reserve estimates of the
Oil and Gas Properties of the Loan Parties taken as a whole; (b) a material impairment of the ability of any Loan Party to perform under any material Loan Document and to avoid any Default; or
(c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any material Loan Document. 

        "Matured LC Obligation" means the aggregate amount of payments theretofore made by the Issuing Lender in respect to Letters of Credit and
not theretofore reimbursed by the Company to the Issuing Lender or deemed Loans pursuant to Subsection 2.10(d). 

        "Maximum Loan Amount" means the amount of $400,000,000.00. 

        "Monthly Status Report" means a status report prepared monthly by the Company in form, scope and content acceptable to the Administrative
Agent, setting forth as of such month then ended (a) detailing production from the Oil and Gas Properties, the volumes of Oil and Gas produced and saved, the volumes of Oil and Gas sold, gross
revenue, net income, related leasehold operating expenses, severance taxes, other taxes, capital costs and any production imbalances incurred during such period and (b) information concerning
any Derivative Contracts entered into by the Company or its Subsidiaries, and (c) such additional information with respect to any of the Oil and Gas Properties as may be reasonably requested by
Administrative Agent. 

        "Mortgages" means the mortgages from the Loan Parties, as applicable, in favor of Administrative Agent, for the benefit of the Lenders
described on Schedule 4.01 hereto, and all supplements, assignments, amendments and restatements thereto (or any agreement in substitution
therefor) as same may be released in whole or in part from time to time which are executed and delivered to Administrative Agent for benefit of the Lenders pursuant to  Article IV of this
Agreement. 

        "Mortgaged Properties" means such Oil and Gas Properties upon which the Loan Parties have granted the Administrative Agent for the benefit
of the Lenders a Lien pursuant to the Mortgages. 

10

  

        "Multiemployer Plan" means a "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA, to which a Loan Party or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or
been obligated to make, contributions. 

        "Notes" means the promissory notes, whether one or more, specified in Section 2.01,
substantially in the same form as Exhibit E including any amendments, modifications, renewals or replacements of such promissory notes. 

        "Notice of Borrowing" means a notice in substantially the form of Exhibit A. 

        "Notice of Conversion/Continuation" means a notice in substantially the form of  Exhibit B. 

        "Obligations" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the
Company to any Lender, the Administrative Agent, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now
existing or hereafter arising, including all net Indebtedness owed to the Lenders or their Affiliates with respect to Derivative Contracts (except to the extent excluded under  Section 11.11). 

        "Oil and Gas" means petroleum, natural gas and other related hydrocarbons or minerals or any of them and all other substances produced or
extracted in association therewith. 

        "Oil and Gas Liens" means liens reserved under oil and gas leases, overriding royalty agreements, net profits agreements, royalty trust
agreements, farm-out agreements, division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of oil, gas or other hydrocarbons, unitizations and
pooling designations, declarations, orders and agreements, development agreements, Operating Agreements, production sales contracts, area of mutual interest agreements, gas balancing or deferred
production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements that are customary
in the oil and gas business and are entered into by any Loan Party in the ordinary course of business, provided in all instances that such Liens are limited to the assets that are the subject of the
relevant agreement. 

        "Oil and Gas Properties" means Hydrocarbon Interests now owned by the Loan Parties and contracts executed in connection therewith and all
tenements, hereditaments, appurtenances, and properties belonging, affixed or incidental to such Hydrocarbon Interests, including, without limitation, any and all property, real or personal, now owned
by the Loan Parties and situated upon or to be situated upon, and used, built for use, or useful in connection with the operating, working or developing of such Hydrocarbon Interests, including,
without limitation, any and all petroleum and/or natural gas wells, buildings, structures, field separators, liquid extractors, plant compressors, pumps, pumping units, field gathering systems, tank
and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, liters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, taping, tubing and rods,
surface leases, rights-of-way, easements and servitudes, and all additions, substitutions, replacements for, fixtures and attachments to any and all of the foregoing owned
directly or indirectly by the Loan Parties. 

        "Operating Agreements" mean those agreements now or hereafter executed by any Loan Party and other working interest owners of the Oil and
Gas Properties in connection with the operation of the Oil and Gas Properties. 

        "Operating Lease" means an operating lease determined in accordance with GAAP. 

        "Organization Documents" means (a) for any corporation: the articles of incorporation, the bylaws, any certificate of determination
or instrument relating to the rights of the shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors 

11

 

(or
any committee thereof) of such corporation; (b) for any limited liability company: the articles of organization, the regulations or operating agreement, certificate of organization and all
applicable resolutions of the members of such company; and (c) for any limited partnership: the limited partnership agreement and all Organization Documents for its general partner, as any of
the foregoing have been amended or supplemented from time to time. 

        "Other Taxes" means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents. 

        "Parent" means BreitBurn Energy Partners, L.P., a Delaware limited partnership. 

        "Participant" has the meaning specified in Subsection 11.08(d). 

        "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under
ERISA. 

        "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, other than a Multiemployer
Plan, which a Loan Party or any of its Subsidiaries sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as
described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years. 

        "Permitted Liens" has the meaning specified in Section 8.01. 

        "Person" means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority. 

        "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to ERISA, other than a Multiemployer
Plan, which any Loan Party sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in
Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years. 

        "Pricing Grid" means the annualized variable rates (stated in terms of basis points
("bps")) set forth below for the Applicable Margin, Commitment Fee and Letter of Credit Fee, based upon the ratio of Effective Amount to the Borrowing
Base Amount, as follows: 

	 
	 	Applicable Margin
	 	 
	 	 

	Effective Amount/

Borrowing Base Amount
 
	 	LIBOR Rate
	 	Base Rate
	 	Commitment

Fee
	 	Letter of Credit Fee

	 
	 	(bps)
 
	 	(bps)
 
	 	(bps)
 
	 	(bps)
 

	385%	 	187.50	 	87.50	 	50.00	 	187.50
	<85%366%	 	175.00	 	75.00	 	37.50	 	175.00
	<66%333%	 	150.00	 	50.00	 	37.50	 	150.00
	<33%	 	125.00	 	25.00	 	30.00	 	125.00

The Pricing Grid for any date shall be determined by reference to the ratio of the Effective Amount and Borrowing Base as of the last day of the fiscal quarter most recently
ended and any change (a) shall become effective upon the delivery to the Administrative Agent of a Pricing Grid Certificate of a Responsible Officer of the Company (which certificate shall be
delivered simultaneously with (i) the delivery of each Notice of Borrowing, any notice required under Section 2.04, Notice of
Conversion/Continuation or a request for issuance of a Letter of Credit and (ii) any change in the amount of the Borrowing Base), and (b) shall apply (i) in the case of the Base
Rate Loans, to Base Rate Loans outstanding on such delivery date or made on and after such delivery date and (ii) in the case of the LIBOR Loans, to LIBOR Loans made, continued or converted on
and after such delivery 

12

 

date.
Notwithstanding the foregoing, at any time during which the Company has failed to deliver the Pricing Grid Certificate when due, the ratio of Effective Amount to the Borrowing Base shall be
deemed, solely for the purposes of this definition, to be greater than 85% until such time as the Company shall deliver such certificate. 

        "Pricing Grid Certificate" means a Pricing Grid Certificate substantially in the form of  Exhibit F hereto. 

        "Principal Business" means the business of (a) the exploration for, and development, acquisition, production, and upstream
marketing and transportation of Oil and Gas; (b) the business of participating in the Unrestricted Subsidiary for the processing of Oil and Gas from the Seal Beach Field, Orange County,
California; and (c) the business of providing services in connection with the production of Oil and Gas. 

        "Production Sales Contracts" mean those agreements now or hereafter executed in connection with the sale of Oil and Gas attributable to
the Oil and Gas Properties. 

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

        "Pro Rata Share" means, as to any Lender at any time, the percentage set forth opposite its name on  Schedule 2.01 hereto, as modified by any
Assignment and Acceptance. 

        "Reference Lender" means Wells Fargo Bank, National Association. 

        "Regulation U" and "Regulation X" means Regulation U and
Regulation X, respectively, of the FRB from time to time in effect and shall include any successor or other regulations or official interpretations of the FRB relating to the subject matter
addressed therein. 

        "Remedial Work" has the meaning assigned to such term in Section 7.13. 

        "Replacement Lender" has the meaning specified in Section 3.07. 

        "Reportable Event" means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any
such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. 

        "Required Lenders" means, at any time, the Administrative Agent and the Lenders holding at least sixty-six and
two-thirds percent (662/3%) of the sum of the Effective Amount or, if there is no Effective Amount, the Administrative Agent and the Lenders holding at least
sixty-six and two-thirds percent (662/3%) of the sum of the Commitments of all of the Lenders. 

        "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. 

        "Reserve Report" means a report, in form, scope and content acceptable to the Lenders, covering proved developed and proved undeveloped
Oil and Gas reserves attributable to the Oil and Gas Properties owned by the Company and its Subsidiaries and setting forth with respect thereto, (a) the total quantity of proved developed and
proved undeveloped reserves (separately classified as to producing, shut-in, behind pipe, and undeveloped), (b) the estimated future net revenues and cumulative estimated future net
revenues, (c) the present discounted value of future net revenues, and (d) such other information and data with respect to such Oil and Gas Properties as the Administrative Agent may
reasonably request. 

        "Responsible Officer" means any CEO or Co-CEO, president, chief financial officer or treasurer of a Person that is a corporate entity. 

13

 

        "S-1 Filing" means the Parent's certain SEC Form S-1 filing dated May 12, 2006, as same my be
amended or supplemented subject to the satisfaction of the Lenders. 

        "Scheduled Borrowing Base Determination" means a redetermination of the Borrowing Base in accordance with  Subsection 2.05(a) on each Scheduled Borrowing
Base Determination Date. 

        "Scheduled Borrowing Base Determination Date" means December 1 and June 1 of each calendar year, commencing on
December 1, 2006. 

        "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. 

        "Security Agreements" means collectively, each agreement in substantially the form of  Exhibit H executed by a Loan Party in favor of Administrative
Agent for the benefit of the Lenders. 

        "Security Documents" means the Mortgages, the Security Agreements and related financing statements as same may be amended from time to
time and any and all other instruments now or hereafter executed in connection with or as security for the payment of the Indebtedness. 

        "Solvent" means, as to any Person at any time, that (a) the fair value of all of the property of such Person is greater than the
amount of such Person's liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the
Bankruptcy Code; (b) the present fair salable value of all of the property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such debts
and liabilities mature; and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person's property would
constitute unreasonably small capital. 

        "Special Borrowing Base Determination" has the meaning specified in Subsection 2.05(b). 

        "Subsidiary" of a Person means any corporation, limited liability company, association, partnership, joint venture or other business
entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or
more of the Subsidiaries of the Person, or a combination thereof, but such term shall not include an Unrestricted Subsidiary. Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a subsidiary of the Company or Parent as applicable. 

        "Surety Instruments" means all letters of credit (including standby), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments. 

        "Syndication Agent" has the meaning specified in the introductory clause hereto. 

        "Taxes" means any and all present or future taxes, levies, imposts, deductions, charges or withholdings thereto imposed upon or related to
the transactions under this Agreement, and all liabilities with respect to this transaction, excluding, in the case of each Lender and the Administrative Agent, (a) such taxes (including income
taxes or franchise taxes) as are imposed on or measured by each Lender's net income, gross receipts or capital by the jurisdiction (or any political subdivision thereof) under the laws of any
applicable jurisdiction, (b) such withholding taxes as are in effect and would apply to a payment to such Lender or Administrative Agent at the time such person becomes a party to this
Agreement, for the avoidance of doubt whether as an original Lender or as an Assignee (or designated a new Lending Office), and (c) such taxes as would not have been imposed but for the failure
of such Lender to comply with the certification requirements described in Section 10.12 hereof. 

        "Termination Date" means the earlier of (a) September    , 2010, or
(b) the date on which the Lenders' Commitments terminate in accordance with the provisions of this Agreement. 

14

 

        "Total Indebtedness" means, at any date, all Indebtedness of the Loan Parties on a consolidated basis, excluding; however, all net
obligations with respect to Derivative Contracts entered into in accordance with Section 8.10. 

        "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current
value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. 

        "United States" and "U.S." each means the United States of America. 

        "Unrestricted Subsidiary" means Seal Beach Gas Processing Joint Venture, a California joint venture between Alamitos Company, a California
corporation and Hellman Properties, a California partnership. 

        "Wells Fargo Bank" means Wells Fargo Bank, National Association, and any Lender successor in interest thereto. 

        1.02    Other Interpretive Provisions.    The meanings of defined terms are equally applicable to the singular and
plural forms of the defined terms. Unless otherwise specified or the context clearly requires otherwise, the words "hereof,"
"herein," "hereunder" and similar words refer to this Agreement as a whole and not to any particular
provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement. The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. The term "including" is not limiting and
means "including without limitation." In the computation of periods of time from a specified date to a later specified date, the word
"from" means "from and including," the words "to" and
"until" each mean "to but excluding," and the word
"through" means "to and including." Unless otherwise expressly provided herein, (a) references to
agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and
other modifications are not prohibited by the terms of any Loan Document, and (b) references to any statute or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. The captions and headings of this Agreement are for convenience of reference only and shall not
affect the interpretation of this Agreement. This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. This Agreement and the other Loan Documents are the result of negotiations among and have
been reviewed by counsel to the Administrative Agent, the Company and the other parties, and are the products of all parties. Accordingly, they shall not be construed against the Lenders or the
Administrative Agent merely because of the Administrative Agent's or Lenders' involvement in their preparation. 

        1.03    Accounting Principles.    Unless the context otherwise clearly requires, all accounting terms not expressly
defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. References to
"consolidated," when it precedes any accounting term, means such term as it would apply to the Loan Parties on a consolidated basis, determined in
accordance with GAAP. 

 
 

ARTICLE II.    
    
    THE CREDIT    
    

        2.01    Amounts and Terms of the Commitments.    

        (a)   Each
Lender severally agrees, on the terms and conditions set forth herein, to make loans to the Company (each such loan, a
"Loan") from time to time on any Business Day during the 

15

 

period
from the Effective Date to the Termination Date, so long as (a) with respect to any Lender, such Loans then requested to be made by such Lender do not exceed such Lender's Pro Rata Share
of the aggregate amount of all Loans then requested from the Lenders, and (b) the aggregate amount of all the Lenders' Loans and the LC Obligation outstanding at any time does not exceed the
Borrowing Base in effect at such time. The obligation of the Company to repay to each Lender the aggregate amount of all Loans made by such Lender, together with interest accruing in connection
therewith, shall be evidenced by a promissory note from the Company payable to the order of such Lender (herein called such Lender's "Note" and
collectively, the "Notes"). The amount of principal owing on any Lender's Note at any given time shall be the aggregate amount of all Loans theretofore
made by such Lender minus all payments of principal theretofore received by such Lender on such Note. Interest on each Note shall accrue and be due and
payable as provided herein and therein. Subject to the terms and conditions hereof, until the Termination Date, Company may borrow, repay, and reborrow hereunder. 

        (b)   Subject
to the terms and conditions of Section 2.10 below and relying upon the representations and warranties
herein set forth, the Issuing Lender for the account of the Lenders agrees to issue Letters of Credit as support for Derivative Contracts covering Oil and Gas commodities and other purposes approved
by the Administrative Agent upon the request of the Company at any time and from time to time on and after the Effective Date and up to, but excluding, the Termination Date (the
"Availability Period"). No Letter of Credit will be issued in a face amount which, after giving effect to the issuance of such Letter of Credit, would
cause either the LC Obligation to exceed $5,000,000 or the Effective Amount to exceed the Borrowing Base then in effect. If any Letter of Credit has been drawn upon and the amount so drawn has not
been reimbursed to the Issuing Lender, the Commitment of each Lender shall be deemed to be utilized for all purposes hereof in an amount equal to such Lender's Pro Rata Share of the LC Obligations. 

        2.02    Procedure for Borrowings.    

        (a)   Each
Borrowing of Loans shall be made upon the Company's irrevocable written notice delivered to the Administrative Agent in the form of a Notice of Borrowing duly
completed; which notice must be received by the Administrative Agent prior to 10:00 a.m. (San Francisco, California time) (i) three (3) Business Days prior to the requested
Borrowing Date, in the case of LIBOR Loans; and (ii) one (1) Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans. 

        (b)   Each
Notice of Borrowing shall specify (i) the amount of the Borrowing, which shall be in an aggregate minimum amount (A) for Base Rate Loans equal to the
lesser of (y) $500,000 or any multiple integrals of $100,000 in excess thereof or (z) the unadvanced portion of the Available Borrowing Base and (B) for LIBOR Loans $3,000,000 or
any multiple integrals of $1,000,000 in excess thereof (if the Available Borrowing Base as of such Borrowing Date will be less than $3,000,000, then the Company may not request a LIBOR Loan);
(ii) the requested Borrowing Date, which shall be a Business Day;
(iii) the Interest Rate Type of Loans comprising the Borrowing; and (iv) for LIBOR Loans the duration of the Interest Period applicable to such Loans. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing comprised of LIBOR Loans, such Interest Period shall be three months. 

        (c)   The
number of tranches outstanding of Base Rate Loans and LIBOR Loans, whether under a Borrowing, conversion or continuation, shall not exceed five (5) at any one
time. 

        (d)   The
Administrative Agent will promptly notify each Lender of its receipt of any Notice of Borrowing and of the amount of such Lender's Pro Rata Share of that Borrowing. 

        (e)   Provided
the applicable conditions in Article V are met, each Lender will make the amount of its Pro Rata Share of
each Borrowing available to the Administrative Agent for the 

16

 

account
of the Company at the Administrative Agent's Payment Office by 9:00 a.m. (San Francisco, California time) on the Borrowing Date requested by the Company in funds immediately available
to the Administrative Agent. The proceeds of all such Loans will then be made available to the Company by the Administrative Agent to the Company's operating account with the Administrative Agent or
by wire transfer in accordance with written instructions provided to the Administrative Agent by the Company of like funds as received by the Administrative Agent. 

        2.03    Conversion and Continuation Elections.    

        (a)   During
the period from the Effective Date to the Termination Date, the Company may, upon irrevocable written notice to the Administrative Agent in accordance with  Subsection 2.03(b): (i) elect, as
of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period,
in the case of LIBOR Loans, to convert any such Loans into Loans of any other Interest Rate Type; or (ii) elect as of the last day of the applicable Interest Period, to continue any Loans
having Interest Periods expiring on such day; provided, that if at any time a LIBOR Loan in respect of any Borrowing is reduced, by payment, prepayment,
or conversion of part thereof to less than $3,000,000, such LIBOR Loan shall automatically convert into a Base Rate Loan. 

        (b)   The
Company shall deliver a Notice of Conversion/Continuation to be received by the Administrative Agent not later than 10:00 a.m. (San Francisco, California
time) at least (i) three (3) Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as LIBOR Loans; and (ii) one
(1) Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued; (C) the Interest Rate Type of Loans resulting from the proposed conversion or continuation;
and (D) other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period. 

        (c)   If
upon the expiration of any Interest Period applicable to LIBOR Loans, the Company has failed to select timely a new Interest Period to be applicable to LIBOR Loans,
or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such LIBOR Loans into Base Rate Loans effective as of the expiration date of such Interest
Period. 

        (d)   The
Administrative Agent will promptly notify each Lender of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by the Company, the
Administrative Agent will promptly notify each Lender of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective Lender's Pro Rata
Share of outstanding principal amounts of the Loans with respect to which the notice was given. 

        2.04    Optional Prepayments.    Subject to Section 3.04, the
Company may, at any time or from time to time, 

        (a)   prepay
Base Rate Loans, without premium or penalty, upon irrevocable notice to the Administrative Agent of not less than one (1) Business Day, ratably as to each
Lender, in whole or in part, in aggregate minimum principal amounts of $1,000,000 or multiple integrals thereof (unless the outstanding principal amount of all Base Rate Loans is less than $1,000,000,
then such prepayments shall be equal to such outstanding principal amount) and 

        (b)   prepay
LIBOR Loans, without premium or penalty (but subject to Section 3.04) upon irrevocable notice to the
Administrative Agent not less than three (3) Business Days, ratably as to each Lender, prepay Loans, in whole or in part, in aggregate minimum principal amounts of $1,000,000 or multiple
integrals thereof plus all interest and expenses then outstanding. Such notice 

17

 

of
prepayment shall specify the date and amount of such prepayment and the Interest Rate Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of any
such notice, and of such Lender's Pro Rata Share of such prepayment. The payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest
to each such date on the amount prepaid and any amounts required pursuant to Section 3.04. 

        2.05    Borrowing Base Determinations, Mandatory Prepayments of Loans.    

        (a)   Scheduled Borrowing Base Determinations. At all times prior to the Termination Date the Effective Amount shall not exceed
the Borrowing Base then in effect. From and after the Effective Date, the
initial Borrowing Base hereunder shall be $90,000,000.00, until redetermined pursuant to the terms of this Section 2.05. Upon notice to The
Company, the Borrowing Base shall be redetermined for each Borrowing Base Period on each Scheduled Borrowing Base Determination Date, and each such redetermination shall be effective as of the date
set forth in such notice of redetermination. The Borrowing Base shall be determined based upon the loan collateral value assigned to the Oil and Gas Properties owned by the Company and its
Subsidiaries and such other credit factors (including without limitation the assets, liabilities, cash flow, business, properties, prospects, management and ownership of the Loan Parties) which the
Lenders deem significant. The Lenders' determination of the Borrowing Base shall be in their sole discretion and shall not be subject to review or challenge under Sections
11.18 and 11.19 hereof. Upon each redetermination of the Borrowing Base, the Administrative Agent shall recommend to the Lenders
a new Borrowing Base and the Lenders in accordance with their customary policies and procedures for extending credit to Oil and Gas reserve-based customers shall (by unanimous agreement in the case of
Borrowing Base increases and by agreement of the Required Lenders in the case of Borrowing Base decreases or affirmations) establish the redetermined Borrowing Base. If the Company does not furnish
the Reserve Reports or all such other information and data by the date required, the Lenders may nonetheless determine a new Borrowing Base. It is expressly understood that the Lenders shall have no
obligation to determine the Borrowing Base at any particular amount, either in relation to the Maximum Loan Amount or otherwise. 

        (b)   Special Borrowing Base Determinations. In addition to Scheduled Borrowing Base Determinations pursuant to  Subsection 2.05(a), the Company and the Lenders may
each request one (1) additional redetermination of the Borrowing Base during each Borrowing
Base Period ("Special Borrowing Base Determination"). In the event the Company requests a Special Borrowing Base Determination pursuant to this  Subsection
2.05(b), the Company shall deliver written notice of such request to the Lenders which shall include: (i) Reserve Report(s) prepared
as of a date not more than thirty (30) calendar days prior to the date of such request, for the benefit of the Lenders, and (ii) such other information as the Lenders shall request
prepared as of a date not more than thirty (30) calendar days prior to the date of such request. Likewise, in the event the Lenders exercise their option for a Special Borrowing Base
Determination, the Administrative Agent shall give the Company notice of the redetermined Borrowing Base. 

        (c)   Mandatory Prepayment of Loans. If on any date a Borrowing Base Deficiency shall exist at the time of a Borrowing Base
redetermination, then the Company shall, within thirty (30) days notice from Administrative Agent to the Company, exercise any one or combination of the following: (i) make a mandatory
principal prepayment in an amount equal to the amount of the Borrowing Base Deficiency, after giving effect to any action taken under (ii) hereof; or (ii) pledge, or cause its
Subsidiaries to pledge, additional unencumbered collateral of sufficient value and character (as determined by the Lenders in their sole discretion) that when added to the existing Collateral shall
cause the Borrowing Base to equal or exceed the Effective Amount, after giving effect to any action taken under (i) hereof. 

18

 

        2.06    Repayment.    

        (a)   Principal. The Company shall repay to the Administrative Agent (for the Lenders in their respective Pro Rata Shares) the
Effective Amount outstanding on the Termination Date on which date all principal amounts outstanding, plus all accrued but unpaid interest and
outstanding expenses hereunder or under the Loan Documents, if not sooner paid, shall be due and payable in full. 

        (b)   Interest.

        (i)    Each
Loan shall bear interest on the aggregate outstanding principal amount thereof from the applicable Borrowing Date or date of conversion or continuation pursuant to  Section 2.03, as the case
may be, at a rate per annum equal to the lesser of (A) the LIBOR or the Base Rate, as the case may be,  plus the Applicable Margin, or (B) the Highest Lawful Rate.
 

        (ii)   Interest
on each Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under  Subsection 2.04(b) or 2.05
(c) (except in the case of Base Rate Loans) for the portion of the Loans so
prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Administrative Agent. 

        (iii)  Notwithstanding
Subsection 2.06(b)(i), while any Event of Default exists, the Company shall pay interest (after, as
well as before, entry of judgment thereon, to the extent permitted by law) on the principal amount of all outstanding Loans, at a rate per annum equal to the lesser of (A) the Highest Lawful
Rate and (B) the Base Rate plus three percent (3%) (the "Default Rate"). 

        2.07    Fees.    

        (a)   Commitment Fee. The Company shall pay to the Administrative Agent, for the account of the Lenders, an aggregate
commitment fee calculated on the average daily amount of the Available Borrowing Base at a per annum rate equal to the amount set forth on the Pricing Grid. Such commitment fee shall accrue from the
Effective Date to the Termination Date and shall be due and payable quarterly in arrears on the first Business Day of the first month of each quarter commencing on October 1, 2006, through the
Termination Date, with the final payment to be made on the Termination Date; provided that, in connection with any reduction or termination of
Commitments, the accrued commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date to the following quarterly payment date. The commitment fee provided in this subsection shall accrue at all times after
the Effective Date up to the Termination Date, including at any time during which one or more conditions in Section 5.02 are not met. 

        (b)   Letter of Credit Fee. The Company agrees to pay (i) to Issuing Lender (for the ratable account of the Lenders in
their respective Pro Rata Shares), a fee for each Letter of Credit, to be paid quarterly in arrears following the Issuance of such Letter of Credit (including the initial Issuance and any renewal,
extension or increase in the amount thereof) in the amount equal to the greater of (A) $500.00 and (B) the product equal to the Letter of Credit rate set forth on the Pricing Grid  multiplied by the undrawn amount available under such Letter of Credit (such fee shall be deemed to be fully earned and owing upon the Issuance of such
Letter of Credit, and no refund shall be due in the event such Letter of Credit is terminated prior to its expiry date), and (ii) to the Issuing Lender for its account a fee for the issuance of
each Letter of Credit (including the initial Issuance and any renewal, extension or increase in the amount thereof), at the Issuance of such Letter of Credit, in an amount equal to the greater of
(A) $500.00 and (B) one-eighth of one percent (0.125%) multiplied by the aggregate amount available under each Letter of
Credit 

19

 

(such
fees shall be prorated for any period less than a full year but shall not be refunded in the event any such Letter of Credit is terminated prior to its expiry date) and (iii) Issuing
Lender's usual and customary fees for amendment to transfer of or negotiation of the terms of each Letter of Credit. The Administrative Agent shall pay to each Lender its Pro Rata Share of the Letter
of Credit Fee paid pursuant to Subsection 2.07(b)(i). The Administrative Agent shall pay to the Issuing Lender the Letter of Credit fees paid pursuant
to Subsection 2.07(b)(ii) and (iii). 

        (c)   Agency Fees. The Company shall pay fees to the Administrative Agent for the Administrative Agent's own account, as
required by that certain letter agreement ("Fee Letter") between the Company and the Administrative Agent dated as of June 12, 2006, relating
hereto. 

        2.08    Computation of Fees and Interest.    

        (a)   All
computations of interest for Base Rate Loans shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other
computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a
365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. 

        (b)   Each
determination of an interest rate by the Administrative Agent shall be conclusive and binding on the Company and the Lenders in the absence of manifest error. 

        2.09    Payments by the Company; Borrowings Pro Rata.    

        (a)   All
payments to be made by the Company shall be made without set-off, recoupment or counterclaim. All payments by the Company shall be made in immediately
available funds to the
Administrative Agent by credit to the Company's operating account at the Administrative Agent's Payment Office for the account of the Administrative Agent or the Lender to whom such payment is owed,
and shall be made in dollars and in immediately available funds, no later than 10:00 a.m. (San Francisco, California time) on the date specified herein. Except to the extent otherwise provided
herein, (i) each payment by the Company of fees shall be made pro rata in accordance with their respective Pro Rata Shares, (ii) each payment of principal of Loans shall be made for the
account of the Lenders pro rata in accordance with their respective outstanding principal amount of Loans, and (iii) each payment of interest on Loans shall be made for the account of the
Lenders pro rata in accordance with their respective shares of the aggregate amount of interest due and payable to the Lenders. Notwithstanding the foregoing, to the extent money is received by the
Administrative Agent pursuant to the exercise of remedies under the Security Documents such money shall be applied to the pro rata payment of obligations secured by such Security Document. 

        (b)   The
Administrative Agent will promptly distribute to each Lender its applicable share of such payment in like funds as received. Any payment received by the
Administrative Agent later than 10:00 a.m. (San Francisco, California time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue
to accrue. When the Administrative Agent collects or receives money on account of the Obligations or otherwise pursuant to the Security Documents if such money is insufficient to pay all such
Obligations, such money shall be applied first to any reimbursements due Administrative Agent under Section 11.05 or  11.06. 

        (c)   Subject
to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day
other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may
be. 

        (d)   Unless
the Administrative Agent receives notice from the Company prior to the date on which any payment is due to the Lenders that the Company will not make such payment
in full as 

20

 

and
when required, the Administrative Agent may assume that the Company has made such payment in full to the Administrative Agent on such date in immediately available funds and the Administrative
Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent the
Company has not made such payment in full to the Administrative Agent, each Lender shall repay to the Administrative Agent on demand such amount distributed to such Lender, together with interest
thereon for each day from the date such amount is distributed to such Lender until two days following demand by the Administrative Agent and for each day thereafter until the date repaid at the Base
Rate. 

        (e)   Except
to the extent otherwise expressly provided herein, each borrowing hereunder shall be from the Lenders pro rata in accordance with their respective Pro Rata
Shares. 

        2.10    Issuing the Letters of Credit.    

        (a)   Subject
to the terms and conditions set forth herein, the Company may request the Issuing Lender to issue Letters of Credit for its own account or for any of its
Subsidiaries, in a form reasonably acceptable to the Administrative Agent and the Issuing Lender, at any time and from time to time during the Availability Period; provided
that the Company may not request the issuance, amendment, renewal or extension of Letters of Credit hereunder if the Effective Amount exceeds the Borrowing Base at such time or
would exceed the Borrowing Base as a result thereof. 

        (b)   In
order to effect the issuance of a Letter of Credit, the Company shall submit a Notice of Borrowing and a LC Application in writing by telecopy to the Administrative
Agent (who shall promptly notify the Issuing Lender) not later than 1:00 p.m., Houston, Texas time, three (3) Business Days before the requested date of issuance of such Letter of
Credit. Each such Notice of Borrowing and LC Application shall be (i) signed by the Company, (ii) specify the Business Day on which such Letter of Credit is to be issued,
(iii) specify the purpose for the requested Letter of Credit, (iv) specify the availability for Letters of Credit under (A) the Borrowing Base and (B) the $5,000,000
aggregate LC Obligation limitation, as of the date of issuance of such Letter of Credit, and (v) specify the expiry date thereof, which shall not be later than the earlier of (A) twelve
(12) months from the date of issuance of such Letter of Credit and (B) seven (7) Business Days prior to the Termination Date. 

        (c)   Upon
satisfaction of the applicable terms and conditions set forth in Article V, the Issuing Lender shall issue
such Letter of Credit to the specified beneficiary not later than the close of business, Houston, Texas time, on the date so specified. The Administrative Agent shall provide the Company and each
Lender with a copy of each Letter of Credit so issued. Each such Letter of Credit shall (i) provide for the payment of drafts, presented for honor thereunder by the beneficiary in accordance
with the terms thereon, at sight when accompanied by the documents described therein and (ii) unless otherwise expressly agreed by the Issuing Lender and the Company at the time such Letter of
Credit is issued, be subject to the rules of the "International Standby Practices 1998" or such later version as may be published by the Institute of
International Banking Law and Practice (the "ISP 1998"), or any successor entity, and shall, as to matters not governed by the ISP 1998, be governed by,
and construed and interpreted in accordance with, the laws of the State of Texas. 

        (d)   Upon
the issuance date of each Letter of Credit, the Issuing Lender shall be deemed, without further action by any party hereto, to have sold to each other Lender, and
each other Lender shall be deemed, without further action by any party hereto, to have purchased from the Issuing Lender, a participation, to the extent of such Lender's Pro Rata Share, in such Letter
of Credit, the obligations thereunder and in the reimbursement obligations of the Company due in respect of drawings made under such Letter of Credit. If requested by the Issuing Lender, the 

21

 

other
Lenders will execute any other documents reasonably requested by the Issuing Lender to evidence the purchase of such participation. 

        (e)   Upon
the presentment of any draft for honor under any Letter of Credit by the beneficiary thereof which the Issuing Lender determines is in compliance with the
conditions for payment thereunder, the Issuing Lender shall promptly notify the Company, the Administrative Agent and each Lender of the intended date of honor of such draft and the Company hereby
promises and agrees, at the Company's option, to either (i) pay to the Administrative Agent for the account of the Issuing Lender, by 2:00 p.m., Houston, Texas time, on the date payment
is due as specified in such notice, the full amount of such draft in immediately available funds or (ii) request a Loan pursuant to the provisions of Subsection
2.01(a) and Section 2.02 of this Agreement in the full amount of such draft, which request shall specify that the
Borrowing Date is to be the date payment is due under the Letter of Credit as specified in the Issuing Lender's notice. If the Company fails timely to make such payment because a Loan cannot be made
pursuant to Subsection 2.01(a) and/or Section 5.02, each Lender shall, notwithstanding any other
provision of this Agreement (including the occurrence and continuance of a Default or an Event of Default), make available to the Administrative Agent for the benefit of the Issuing Lender an amount
equal to its Pro Rata Share of the presented draft on the day the Issuing Lender is required to honor such draft. If such amount is not in fact made available to the Administrative Agent by such
Lender on such date, such Lender shall pay to the Administrative Agent for the account of the Issuing Lender, on demand made by the Issuing Lender, in addition to such amount, interest thereon at the
Federal Funds Rate for the first two days following demand and thereafter until paid at the Base Rate. Upon receipt by the Administrative Agent from the Lenders of the full amount of such draft,
notwithstanding any other provision of this Agreement (including the occurrence and continuance of a Default or an Event of Default) the full amount of such draft shall automatically and without any
action by the Company, be deemed to have been a Base Rate Loan as of the date of payment of such draft. Nothing in this Subsection 2.05(d) or
elsewhere in this Agreement shall diminish the Company's obligation under this Agreement to provide the funds for the payment of, or on demand to reimburse the Issuing Lender for payment of, any draft
presented to, and duly honored by, the Issuing Lender under any Letter of Credit, and the automatic funding of a Loan as in this paragraph provided shall not constitute a cure or waiver of the Event
of Default for failure to provide timely such funds as in this paragraph agreed. 

        (f)    In
order to induce the issuance of Letters of Credit by the Issuing Lender and the purchase of participations therein by the other Lenders, the Company agrees with
Administrative Agent, Issuing Lender and the other Lenders that neither Administrative Agent nor any Lender (including Issuing Lender) shall be responsible or liable (except as provided in the
following sentence) for amounts paid by Issuing Lender, as provided in Subsection 2.10(e), on account of drafts so honored under the Letters of Credit,
and the Company's unconditional obligation to reimburse the Issuing Lender through the Administrative Agent for such amounts shall not be affected by, any circumstance, act or omission whatsoever
(whether or not known to the Administrative Agent or any Lender (including the Issuing Lender) other than a circumstance, act or omission resulting from the gross negligence or willful misconduct of
the Administrative Agent or any Lender, including the Issuing Lender. The Company agrees that any action taken or omitted to be taken by the Administrative Agent or any Lender (including the Issuing
Lender) under or in connection with any Letter of Credit or any related draft, document or Property shall be binding on the Company and shall not put the Administrative Agent or any Lender (including
the Issuing Lender) under any resulting liability to the Company, unless such action or omission is the result of the gross negligence or willful misconduct of the Administrative Agent or any such
Lender (including the Issuing Lender). The Company hereby waives presentment for payment (except the presentment required by the terms of any Letter of Credit) and notice of dishonor, protest and
notice of protest with respect to drafts honored under the Letters of Credit. The 

22

 

Issuing
Lender agrees promptly to notify the Company whenever a draft is presented under any Letter of Credit, but failure to so notify the Company shall not in any way affect the Company's
obligations hereunder. Subject to Section 3.07, if while any Letter of Credit is outstanding, any law, executive order or regulation is enforced,
adopted or interpreted by any public body, governmental agency or court of competent jurisdiction so as to affect any of the Company's obligations or the compensation to any Lender in respect of the
Letters of Credit or the cost to such Lender of establishing and/or maintaining the Letters of Credit (or any participation therein), such Lender shall promptly notify the Company thereof in writing
and within ten (10) Business Days after receipt by the Company of such Lender's request (through the Administrative Agent) for reimbursement or indemnification or within thirty (30) days
after receipt of a notice in respect of Taxes or Other Taxes, the Company shall reimburse or indemnify such Lender, as the case may be, with respect thereto so that such Lender shall be in the same
position as if there had been no such enforcement, adoption or interpretation, unless the Company notifies the Administrative Agent of its good faith contest to, and dispute of, the requested amount.
The foregoing agreement of the Company to reimburse or indemnify the Lenders shall apply in (but shall not be limited to) the following situations: an imposition of or change in reserve, capital
maintenance or other similar requirements or in excise or similar taxes or monetary restraints, except a change in franchise taxes imposed on such Lender or in tax on the net income of such Lender. 

        (g)   In
the event that any provision of a LC Application is inconsistent with, or in conflict of, any provision of this Agreement, including provisions for the rate of
interest applicable to drawings thereunder or rights of setoff or any representations, warranties, covenants or any events of default set forth therein, the provisions of this Agreement shall govern. 

        (h)   If
the Obligations, or any part thereof, are declared or otherwise become immediately due and payable pursuant to  Article IX of this Agreement (for the purposes of this paragraph, the
"Matured Obligations"),
then all LC Obligations shall become immediately due and payable without regard for
actual drawings or payments on the Letters of Credit, and the Company shall be obligated to pay to the Administrative Agent immediately an amount equal to the LC Obligations. All amounts made due and
payable by the Company under this Subsection 2.10(h) may be applied as the Issuing Lender and the Lenders elect to any of the various LC Obligations;  provided, however, that such amounts applied by the Issuing Lender and the Lenders to the LC Obligations
shall be (i) first applied to the Matured LC Obligations, and (ii) second held by the Administrative Agent for the benefit of the Issuing Lender and the Lenders as LC Collateral in the
LC Collateral Account until all remaining Matured Obligations have been satisfied. This Subsection 2.10(h) shall not limit or impair any rights which
the Administrative Agent, the Issuing Lender or any of the Lenders may have under any other document or agreement relating to any Letter of Credit or LC Obligation, including without limitation, any
LC Application. The Company hereby grants a security interest in and lien on the LC Collateral Account to the Administrative Agent for and on behalf of the Lenders as security for the Obligations. The
Company agrees to execute and deliver from time to time such documentation as the Administrative Agent may reasonably request to further assure such security interest. 

23

  

        2.11    Payments by the Lenders to the Administrative Agent.    

        (a)   Unless
the Administrative Agent receives notice from a Lender on or prior to the Effective Date or, with respect to any Borrowing after the Effective Date, at least one
(1) Business Day prior to the date of such Borrowing, that such Lender will not make available as and when required hereunder to the Administrative Agent for the account of the Company the
amount of that Lender's Pro Rata Share of the Borrowing, the Administrative Agent may assume that each Lender has made such amount available to the Administrative Agent in immediately available funds
on the Borrowing Date and the Administrative Agent may (but shall not be so required), in reliance upon such assumption, make available to the Company on such date a corresponding amount. If and to
the extent any Lender shall not have made its full amount available to the Administrative Agent in immediately available funds and the Administrative Agent in such circumstances has made available to
the Company such amount, that Lender shall on the Business Day following such Borrowing Date make such amount available to the Administrative Agent, together with interest at the Federal Funds Rate
for the first two days during such period and thereafter at the Base Rate. A notice of the Administrative Agent submitted to any Lender with respect to amounts owing under this  Subsection 2.11(a)
shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Administrative Agent shall
constitute such Lender's Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to the Administrative Agent on the Business Day following the Borrowing
Date, the Administrative Agent will notify the Company of such failure to fund and, upon demand by the Administrative Agent, the Company shall pay such amount to the Administrative Agent for the
Administrative Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing. 

        (b)   The
failure of any Lender to make any Loan on any Borrowing Date shall not relieve any other Lender of any obligation hereunder to make a Loan on such Borrowing Date,
but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on any Borrowing Date. 

        2.12    Sharing of Payments, Etc.    If any Lender shall obtain on account of the Obligations made by it any payment
(whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) or receive any collateral in respect thereof in excess of the amount such Lender was entitled
to receive pursuant to the terms hereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in
the Loans made by them as shall be necessary to cause such purchasing Lender to share the excess payment according to the terms hereof; provided,  however,
that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender, such purchase shall to that extent be
rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender's ratable share (according to the proportion
of (i) the amount of such paying Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Company agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off, but subject to Section 11.09) with respect to such participation
as fully as if such Lender were the direct creditor of the Company in the amount of such participation. The Administrative Agent will keep records (which shall be conclusive and binding in the absence
of manifest error) of participations purchased under this Section and will in each case notify the Lenders following any such purchases or repayments. 

24

 
 
 

ARTICLE III.    
    
    TAXES, YIELD PROTECTION AND ILLEGALITY    
    

        3.01    Taxes.    

        (a)   Any
and all payments by the Company to each Lender or the Administrative Agent under this Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for any Taxes. In addition, the Company shall pay all Other Taxes. 

        (b)   The
Company agrees to indemnify and hold harmless each Lender and the Administrative Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other
Taxes imposed by any jurisdiction on amounts payable under this Section) paid by the Lender or the Administrative Agent and any liability (including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. Payment
under this indemnification shall be made within thirty (30) days after the date the Lender or the Administrative Agent makes written demand therefor. 

        (c)   If
the Company shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Lender or the
Administrative Agent, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable
to additional sums payable under this Section) such Lender or the Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or
withholdings been made; (ii) the Company shall make such deductions and withholdings; and (iii) the Company shall pay the full amount deducted or withheld to the relevant taxing
authority or other authority in accordance with applicable law. 

        (d)   Upon
request of the Administrative Agent, the Company shall furnish the Administrative Agent the original or a certified copy of a receipt evidencing payment by the
Company of Taxes or Other Taxes under Subsection 3.01(c), or other evidence of payment satisfactory to the Administrative Agent. 

        (e)   If
the Company is required to pay additional amounts to any Lender or the Administrative Agent pursuant to this  Section 3.01, then upon written request of the Company such Lender shall use
reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office and take such other steps, in each case, so as to eliminate any such additional payment by the Company which may thereafter accrue, if
such change or step, as applicable, in the judgment of such Lender is not otherwise disadvantageous to such Lender. 

        (f)    If
the Company pays any additional amounts under this Section 3.01 to a Lender and such Lender determines that it
has actually received or realized in connection therewith any refund or reduction of, or credit against, its tax liability in or with respect to the taxable year in which the additional amount is paid
(a "Tax Benefit"), such Lender shall pay to the Company an amount that such Lender shall determine is equal to the net benefit after tax, which was
obtained by such Lender in such year as a consequences of such Tax Benefit. If the Company determines in good faith that a reasonable basis exists for contesting any Taxes or Other Taxes with respect
to which the Company has paid any additional amounts under this Section 3.01 or for which indemnification has been demanded hereunder, the
relevant Lender or Administrative Agent, as applicable, may, in its discretion, not to be unreasonably withheld, cooperate with the Company in challenging such Taxes or Other Taxes at the Company's
expense if so requested by the Company in writing. 

        3.02    Illegality.    

        (a)   If
any Lender determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any
Requirement 

25

 

of
Law, has, since the Effective Date, made it unlawful, or that, since the Effective Date, any central bank or other Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make LIBOR Loans, then, on notice thereof by the Lender to the Company through the Administrative Agent, any obligation of that Lender to make LIBOR Loans shall be
suspended until the Lender notifies the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exist; such notice to be promptly given upon the
determination that such circumstances no longer exist. 

        (b)   If
a Lender determines that it is unlawful to maintain any LIBOR Loan, the Company shall, upon its receipt of notice of such fact and demand from such Lender (with a
copy to the Administrative Agent), convert such LIBOR Loans of that Lender then outstanding, together with interest accrued thereon and amounts required under  Section 3.04 into a Base Rate
Loan without regard to conditions precedent described in Subsection
5.02(b), either on the last day of the Interest Period thereof, if the Lender may lawfully continue to maintain such LIBOR Loans to such day, or immediately, if the Lender may
not lawfully continue to maintain such LIBOR Loan. If the Company is required to so prepay any LIBOR Loan, then concurrently with such prepayment, the Company shall borrow from the affected Lender, in
the amount of such repayment, a Base Rate Loan. 

        (c)   If
the obligation of any Lender to make or maintain LIBOR Loans has been so terminated or suspended, all Loans which would otherwise be made by the Lender as LIBOR Loans
shall be instead Base Rate Loans. 

        (d)   Before
giving any notice to the Administrative Agent under this Section, the affected Lender shall designate a different Lending Office with respect to its LIBOR Loans
if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Lender, be illegal or otherwise disadvantageous to the Lender. 

        3.03    Increased Costs and Reduction of Return.    

        (a)   If
any Lender determines, after the Effective Date, that, due to either (i) the introduction of or any change (other than any change by way of imposition of or
increase in reserve requirements included in the calculation of the LIBOR) in or in the interpretation of any law or regulation or (ii) the compliance by that Lender with any guideline or
request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to such Lender of agreeing to make or making, funding or
maintaining any LIBOR Loans, (except for any such increased cost resulting from taxes of any kind, including Taxes and Other Taxes, as to which  Section 3.01 shall govern) then the Company
shall be liable for, and shall from time to time, upon demand (with a copy
of such demand to be sent to the Administrative Agent), pay to the Administrative Agent for the account of such Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs. 

        (b)   If
any Lender shall have determined, after the Effective Date, that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital
Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Lender (or its Lending Office) or any corporation controlling the Lender with any Capital Adequacy Regulation, affects or
would affect the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender and (taking into consideration such Lender's or such corporation's
policies with respect to capital adequacy and such Lender's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitments, loans, credits or
obligations under this Agreement, then, upon demand of such Lender to the Company through the Administrative 

26

 

Agent,
the Company shall pay to the Lender, from time to time as specified by the Lender, additional amounts sufficient to compensate the Lender for such increase. 

        3.04    Funding Losses.    The Company shall reimburse each Lender and hold each Lender harmless from any loss or
expense excluding consequential losses which the Lender may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment of principal of any LIBOR
Loan; (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation
(including by reason of the failure to satisfy any condition precedent thereto); (c) the failure of the Company to make any prepayment in accordance with any notice delivered under  Section 2.04; (d) the prepayment (including pursuant to Section 2.05 or  2.06) or other payment (including after acceleration thereof) of
an LIBOR Loan on a day that is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.03 of any LIBOR Loan to a Base Rate Loan on a day that is not the last day of the relevant
Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBOR Loans or from fees payable to terminate the deposits from
which such funds were obtained. For purposes of calculating amounts payable by the Company to the Lenders under this Section and under Subsection
3.03(a), each LIBOR Loan made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR used
in determining the LIBOR for such LIBOR Loan by a matching deposit or other borrowing in the interbank Eurodollar market for a comparable amount and for a comparable period, whether or not such LIBOR
Loan is in fact so funded. 

        3.05    Inability to Determine Rates.    If Administrative Agent determines that for any reason adequate and
reasonable means do not exist for determining the LIBOR for any requested Interest Period with respect to a proposed LIBOR Loan, or that the LIBOR applicable pursuant to  Subsection 2.06(b) for
any requested Interest Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to the Lender
of funding such Loan, the Administrative Agent will promptly so notify
the Company and each Lender. Thereafter, the obligation of the Lenders to make or maintain LIBOR Loans hereunder shall be suspended until the Administrative Agent upon the instruction of the Lenders
revokes such notice in writing; such written revocation to be promptly given up determination that such circumstances no longer exist. Upon receipt of such notice, the Company may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Lenders shall make, convert or continue the Loans, as proposed by the Company, in
the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBOR Loans. 

        3.06    Certificates of Lenders.    Any Lender claiming reimbursement or compensation under this  Article III shall
deliver to the Company (with a copy to the Administrative Agent) a certificate setting forth in reasonable detail the amount
payable to the Lender hereunder and such certificate shall be conclusive and binding on the Company in the absence of manifest error provided, however, that such Lender shall only be entitled to
collect amounts incurred within 180 days of such notice. 

        3.07    Substitution of Lenders.    Upon the receipt by the Company from any Lender (an
"Affected Lender") of a claim for compensation under this Article III, the Company may:
(a) obtain a replacement Lender or financial institution satisfactory to the Administrative Agent (a "Replacement Lender") to acquire and assume
all or a ratable part of all of such Affected Lender's Loans and Commitment; or (b) request one more of the other Lenders to acquire and assume all or part of such Affected Lender's Loans and
Commitment but none of the Lenders shall have any obligation to do so. Any such designation of a Replacement Lender under (a) shall be subject to the prior written consent of the Administrative
Agent which consent shall not be unreasonably withheld or delayed. 

27

 

        3.08    Survival.    The agreements and obligations of the Company in this  Article III shall survive the payment of all
other Obligations. 

 
 

ARTICLE IV.    
    
    SECURITY    
    

        4.01    The Security.    The Obligations will be secured by the Security Documents described in  Schedule 4.01 and any
additional Security Documents hereafter delivered by the Loan Parties and accepted by the Administrative Agent. 

        4.02    Agreement to Deliver Security Documents.    The Loan Parties agree to deliver to further secure the
Obligations whenever requested by the Administrative Agent in its sole and absolute discretion, deeds of trust, mortgages, chattel mortgages, security agreements, financing statements and other
Security Documents in form and substance reasonably satisfactory to the Administrative Agent for the purpose of granting, confirming, and perfecting first and prior liens or security interests in all
Oil and Gas Properties now owned or hereafter acquired by the Loan Parties, as applicable, subject to Permitted Liens. The Loan Parties also agree to deliver where applicable, to deliver whenever
requested by the Lenders, title opinions from legal counsel acceptable to the Lenders or such other evidence of title satisfactory to the Lenders with respect to the Mortgaged Properties designated by
the Lenders, based upon abstract or record examinations to dates acceptable to the Lenders and (a) stating that the Loan Party, as applicable, has good and defensible title to such properties
and interests, free and clear of all Liens except Permitted Liens, (b) confirming that such Oil and Gas Properties are subject to Security Documents securing the Obligations that constitute and
create legal, valid and duly perfected deed of trust or mortgage liens in such Oil and Gas Properties and assignments of and security interests in the Oil and Gas attributable to such Oil and Gas
Properties and the proceeds thereof, in each case subject only to Permitted Liens, and (c) covering such other matters as the Lenders may reasonably request. 

        4.03    Perfection and Protection of Security Interests and Liens.    The Loan Parties will from time to time deliver
to the Administrative Agent any financing statements, amendment, assignment and continuation statements, extension agreements and other documents, properly completed and executed (and acknowledged
when required) by each Loan Party, as applicable, in form and substance reasonably satisfactory to the Administrative Agent, which the Administrative Agent reasonably requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral securing any Obligations. 

        4.04    Offset.    To secure the repayment of the Obligations the Company hereby grants the Administrative Agent and
each Lender a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of the Administrative Agent at common law, under the Loan
Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other property (and the proceeds therefrom) of the Company now or hereafter held or
received by or in transit to the Administrative Agent or any Lender from or for the account of the Company, whether for safekeeping, custody, pledge, transmission, collection or otherwise,
(b) any and all deposits (general or special, time or demand, provisional or final) of the Company with the Administrative Agent or any Lender, and (c) any other credits and claims of
the Company at any time existing against the Administrative Agent or any Lender, including claims under certificates of deposit. During the existence of any Event of Default, the Administrative Agent
or any Lender is hereby authorized to foreclose upon, offset, appropriate, and apply, at any time and from time to time, without notice to the Company, any and all items hereinabove referred to
against the Obligations then due and payable. 

28

 

        4.05    Subsidiary Guaranty.    

        (a)   Each
Subsidiary of a Loan Party now existing or created, acquired or coming into existence after the date hereof, including without limitation, each of the Guarantors,
shall pursuant to Section 7.15, promptly upon request by the Administrative Agent, execute and deliver to the Administrative Agent an absolute
and unconditional guaranty of the timely repayment, and the due and punctual performance, of the Obligations of the Company hereunder, which Guaranty shall be substantially in the form and substance
of Exhibit G. The Company and its Subsidiaries will cause each of their Subsidiaries to deliver to the Administrative
Agent, simultaneously with its delivery of such a Guaranty, written evidence satisfactory to the Administrative Agent and its counsel that such Subsidiary has taken all organizational action necessary
to duly approve and authorize its execution, delivery and performance of such Guaranty and any other documents which it is required to execute. 

        (b)   Each
Loan Parties is mutually dependent on each other in the conduct of their respective businesses, with the credit needed from time to time by each often being
provided by another or by means of financing obtained by one such Affiliate with the support of the other for their mutual benefit and the ability of each to obtain such financing is dependent on the
successful operations of the other. The board of directors, managers or general partner, where applicable, of each Guarantor has determined that such Guarantor's execution, delivery and performance of
this Agreement may reasonably be expected to directly or indirectly benefit such Guarantor and is in the best interests of such Guarantor. 

        (c)   The
direct or indirect value of the consideration received and to be received by such Guarantor in connection herewith is reasonably worth at least as much as the
liability and obligations of each Guarantor hereunder, and the incurrence of such liability and obligations in return for such consideration may reasonably be expected to benefit such Guarantor,
directly or indirectly. 

        (d)   Neither
the Company nor any Guarantor is insolvent on the date hereof (that is, the sum of each Person's absolute and contingent liabilities, including the Obligations,
does not exceed the fair market value of such Person's assets, including any rights of contribution, reimbursement or indemnity). Each Loan Party has capital which is adequate for the businesses in
which such Person is engaged and intends to be engaged. None of the Company nor any Guarantor has incurred (whether hereby or otherwise), nor does the Company or Guarantor intend to incur or believe
that it will incur, liabilities which will be beyond its ability to pay as such liabilities mature. 

 
 

ARTICLE V.    
    
    CONDITIONS PRECEDENT    
    

        5.01    Conditions of Initial Credit Extensions.    The effectiveness of this Agreement and the obligation of each
Lender to make its initial Loan hereunder and the obligation of the Issuing Lender to issue Letters of Credit hereunder, are subject to the condition that the Administrative Agent shall have received
all of the following, in form and substance satisfactory to the Administrative Agent, and in sufficient copies for each Lender: 

        (a)    Credit Agreement and Notes.    This Agreement, the Notes, the Guaranties, the Security Documents and the other
Loan Documents executed by each party thereto; 

        (b)    Resolutions; Incumbency; Organization Documents, Good Standing.    A certificate of the Secretary or Assistant
Secretary of each Loan Party, or in the event that such Loan Party is a limited partnership, such Person's general partner, certifying as of the Effective Date: (i) Resolutions of its board of
directors or members, authorizing the transactions contemplated hereby; (ii) the names and genuine signatures of the Responsible Officers of such Person, 

29

 

authorized
to execute, deliver and perform, as applicable, this Agreement, the Notes, the Guaranties, the Security Documents, and all other Loan Documents to be delivered by such Person;
(iii) the Organization Documents of such Person as in effect as of the Effective Date; (iv) the good standing certificate for such Person, from its state of incorporation, formation or
organization, as applicable, evidencing its qualification to do business in such state as of a date no more than thirty (30) days prior to the Effective Date; and (v) as applicable,
certificate(s) of authority for such Person from foreign states wherein such Person conducts business, evidencing such Person's qualification to do business in such state as of a date no more than
thirty (30) days prior to the Effective Date; 

        (c)    Payment of Fees.    Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses owed
pursuant to this Agreement to the extent then due and payable on the Effective Date, including any such costs, fees and expenses arising under or referenced in Sections
2.07 and 11.04; 

        (d)    Certificate.    A certificate signed by a Responsible Officer, dated as of the Effective Date, stating that
(i) the representations and warranties contained in Article VI are true and correct in all material respects on and as of such date, as
though made on and as of such date; (ii) no litigation is pending or threatened against any of the Loan Parties in which there is a reasonable probability of an adverse decision which would
result in a Material Adverse Effect; and (iii) there has occurred no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; 

        (e)    Insurance Certificates.    Insurance certificates in form and substance reasonably satisfactory to the
Administrative Agent, from the Company's insurance carriers reflecting the current insurance policies required under Section 7.08 including any
necessary endorsements to reflect the Administrative Agent as additional insured and loss payee for the ratable benefit of the Lender; 

        (f)    Corporate Due Diligence.    Due diligence review satisfactory to the Administrative Agent including but not
limited to review of and satisfaction with the legal structure of the Loan Parties, and consolidated pro-forma financial statements; 

        (g)    Reserve Engineering.    The Lenders shall have completed, to their satisfaction, an independent engineering
review of the Oil and Gas Properties; 

        (h)    Environmental.    Copies of all environmental assessments, reports and other information in the possession or
control of the Loan Parties, with contents and findings satisfactory to Administrative Agent and the Lenders with respect to the Mortgaged Properties; 

        (i)    Title.    The Loan Parties shall have good and defensible title, on at least 80% of the net present value of
the Oil and Gas Properties (the net present value of which has been determined by a discount factor of 10%) subject to no other liens, other than Permitted Liens, evidenced by current opinions of
title or other title information satisfactory to the Administrative Agent and the Lenders and substantially all of such Oil and Gas Properties shall be covered by the Mortgages; 

        (j)    Material Contracts.    Copies of all material contracts entered into by the Loan Parties to the extent
requested by Administrative Agent or the Lenders; 

        (k)    Equity Pledge.    To the extent certificated, the Loan Parties shall have delivered to Administrative Agent
original certificates for all Equity held by such Loan Party, pledged under the Security Documents, together with undated, blank stock powers for each certificate, representing all issued and
outstanding Equity of each such Person; 

        (l)    Opinion of Counsel.    Opinions of Latham & Watkins LLP
and Bright and Brown, as counsel for the Loan Parties, an opinion of Tom Throne, as local Wyoming
counsel for the 

30

 

Company
and Phoenix Production Company, and an opinion of Ballard, Spahr, Andrews & Ingersoll, LLP, as local Colorado counsel for the Company and
Preventative Maintenance Service LLC, covering such matters as Administrative Agent may require and in form and substance satisfactory to Administrative Agent dated as of the Effective Date and a
reliance letter from Vinson & Elkins LLP, [as securities counsel for the Parent,] allowing Administrative Agent and
Lenders to rely on the opinion from Vinson & Elkins LLP issued to Parent's underwriter in connection with the IPO, in form and substance satisfactory to Administrative Agent dated as of the
Effective Date; 

        (m)    Assumption.    The Company shall have consummated (i) the assumption of a portion of BreitBurn Energy
Company L.P.'s principal obligations under the "Prior Credit Agreement" as defined in the BEC Credit Agreement and (ii) the assumption of certain
of BreitBurn Energy Company L.P.'s "Existing Lender Derivative Contracts" as defined in the BEC Credit Agreement, each on terms reasonably satisfactory
to Administrative Agent. 

        (n)    IPO.    Parent shall have consummated its IPO on or before September 30, 2006, on terms and conditions
substantially in conformity with the S-1 Filing, with no material change in the pro forma financial statements as of December 31, 2005, and with at least $100,000,000 in net
proceeds resulting from such IPO. 

        (o)    BEC Credit Agreement.    Evidence satisfactory to Administrative Agent that all conditions precedent under the
BEC Credit Agreement have been satisfied and the transactions contemplated therein are capable of consummation simultaneously with the consummation of the transactions hereunder. 

        (p)    Operating Accounts.    The Loan Parties shall maintain all of their principal depository and operating accounts
with the Administration Agent. 

        (q)    Other Documents.    Such other approvals, opinions, documents or materials as the Administrative Agent or any
Lender may reasonably request. 

        5.02    Conditions to All Loans.    The obligation of each Lender to make any Loan (including its initial Loan) or to
continue or convert any Loan under Section 2.03 (but specifically excluding the conversion of LIBOR Loans on the last day of the Interest Period
therefor into Base Rate Loans or the continuation of Base Rate Loans) is subject to the satisfaction of the following conditions precedent on
the relevant Borrowing Date or Conversion/Continuation Date and immediately after giving effect to such Borrowing or Conversion/Continuation: 

        (a)    Notice.    The Administrative Agent shall have received a Notice of Borrowing or a Notice of
Conversion/Continuation, as applicable; 

        (b)    Continuation of Representations and Warranties.    The representations and warranties in  Article VI shall be
true and correct in all material respects on and as of such Borrowing Date or Conversion/Continuation Date with the same
effect as if made on and as of such Borrowing Date or Conversion/Continuation Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they
shall be true and correct as of such earlier date); 

        (c)    Continuation of Covenants.    Each Loan Party shall be in compliance with the covenants in  Articles VII and
VIII; 

        (d)    No Material Adverse Effect.    No Material Adverse Effect shall have occurred or shall exist from such
Borrowing or continuation or conversion; and 

        (e)    No Existing Default.    No Default or Event of Default shall exist or shall result from such Borrowing or
continuation or conversion. 

31

 

Each
Notice of Borrowing or Notice of Conversion/Continuation submitted by the Company hereunder shall constitute a representation and warranty by Each Loan Party, as of the date of each such notice
and as of each Borrowing Date or Conversion/Continuation Date, as applicable, that the conditions in Section 5.02 are satisfied. 

 
 

ARTICLE VI.    
    
    REPRESENTATIONS AND WARRANTIES    
    

        Each of the Loan Parties represent and warrant to the Administrative Agent and each Lender that: 

        6.01    Organization, Existence and Power.    Each Loan Party: (a) is duly organized, validly existing and in
good standing under the laws of the jurisdiction of its formation; (b) has the power and authority and all material governmental licenses, authorizations, consents and approvals to own its
assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation and is licensed and in good standing
under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license, except where failure to do so would not
reasonably be expected to have a Material Adverse Effect; and (d) is in compliance in all material respects with all Requirements of Law. 

        6.02    Corporate Authorization; No Contravention.    The execution, delivery and performance by each Loan Party of
this Agreement and each other Loan Document to which such Person is a party, have been duly authorized by all necessary organizational action, and do not and will not: (a) contravene the terms
of any of that Person's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual
Obligation to which such Person is a party that would be prior to the Liens granted to the Administrative Agent for the benefit of the Lenders or otherwise that would constitute a Material Adverse
Effect or any order, injunction, writ or decree of any Governmental Authority to which such Person or its property is subject; or (c) violate any Requirement of Law, that would constitute a
Material Adverse Effect, including, without limitation, any California Requirement of Law promulgated with respect to preparedness and damage prevention associated with earthquakes. 

        6.03    Governmental Authorization.    No approval, consent, exemption, authorization, or other action by, or notice
to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any
other Loan Document to which it is a party, except for filings necessary to obtain and maintain perfection of Liens; routine filings related to the Loan Parties and the operation of their business;
and such filings as may be necessary in connection with Lenders' exercise of its remedies hereunder. 

        6.04    Binding Effect.    This Agreement and each other Loan Document to which any Loan Party is a party constitute
the legal, valid and binding obligations of such Person to the extent it is a party thereto, enforceable against such Person in accordance with their respective terms, except as enforceability may be
limited by applicable Bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 

        6.05    Litigation.    Unless specifically disclosed in  Schedule 6.05 attached hereto, there are no actions, suits,
proceedings, claims or disputes pending, or to the knowledge of the Loan Parties,
threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against any Loan Party, or any of their respective Properties which: (a) purport to affect or
pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) if determined adversely to such Loan Party would reasonably be expected
to have a 

32

 

Material
Adverse Effect. To the knowledge of each Loan Party, no injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority
purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided. 

        6.06    No Default.    No Default or Event of Default exists or would be reasonably expected to result from the
incurring of any Obligations by the Loan Parties. As of the Effective Date, no Loan Party is in default under or with respect to any Contractual Obligation in any respect which, individually or
together with all such defaults, would reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Effective Date, create an Event of Default under  Subsection
9.01(e). Each Loan Party is in compliance with all requirements of any Governmental Authority applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses all licenses, permits, franchises, exemptions, approvals and other authorizations granted by Governmental Authorities
necessary for the ownership of its Property and the present conduct of its business, except in each case where the failure to do so, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect. 

        6.07    ERISA Compliance.    Except as specifically disclosed in  Schedule 6.07: 

        (a)   Each
Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the knowledge of the Company, nothing has occurred which would cause the loss of such
qualification. Each Loan Party and each ERISA Affiliate has made all required contributions to any Plan subject to Section 412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. 

        (b)   There
are no pending or, to the knowledge of any Loan Party, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan
which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. 

        (c)   (i) No
ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) no Loan Party nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under
Section 4007 of ERISA); (iv) no Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) no Loan Party nor any ERISA
Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) or ERISA. 

        6.08    Margin Regulations.    The proceeds of the Loans shall be used solely for the purposes set forth in and
permitted by Section 7.16. No Loan Party is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock. 

        6.09    Title to Properties.    Subject to Permitted Liens, the Loan Parties shall each have good and defensible title
to all of their respective Oil and Gas Properties evaluated in the most recently delivered Reserve Report, and except for such defects in title as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, and each Loan Party shall have good title to 

33

 

all
other Oil and Gas Properties necessary or used in the ordinary conduct of their respective businesses. After giving full effect to the Permitted Liens, any Loan Party specified as the owner under
the most recently delivered Reserve Report owns the net interests in production attributable to the Oil and Gas Properties as reflected in the most recently delivered Reserve Report, and the ownership
of such Properties shall not in any material respect obligate such Loan Party to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount
in excess of the working interest of each Property set forth in the most recently delivered Reserve Report that is not offset by a corresponding proportionate increase in such Loan Party's net revenue
interest in such Property. No consents or rights of first refusal exist or remain outstanding with respect to such Loan Party's interest in the Mortgaged Properties assigned to it pursuant to any
Acquisition of Oil and Gas Properties other than Permitted Liens. As of the Effective Date, the property of the Loan Parties is subject to no Liens, other than Permitted Liens. 

        6.10    Oil and Gas Reserves.    Each Loan Party is and will hereafter be, in all material respects, the owner of the
Oil and Gas that it purports to own from time to time in and under its Oil and Gas Properties, together with the right to produce the same. The Oil and Gas Properties are not subject to any Lien other
than as set forth in the financial statements referred to in Section 6.14, as disclosed to the Lenders in writing prior to the date of this
Agreement and Permitted Liens. All Oil and Gas have been and will hereafter be produced, sold and delivered in accordance in all material respects with all applicable laws and regulations of
governmental authority; each of the Loan Parties has complied in all material respects and will hereafter use commercially reasonable efforts to comply with all material terms of each oil, gas and
mineral lease and any other agreement comprising its Oil and Gas Properties; and all such oil, gas and mineral leases and other agreements have been and will hereafter be maintained in full force and
effect. Provided, however that nothing in this Section 6.10 shall prevent any Loan Party
from abandoning any well or forfeiting, surrendering, releasing or defaulting under any lease in the ordinary course of business which is not disadvantageous in any way to the Lenders and which, in
the opinion of such Loan Party, is in its best interest, and such Loan Party is and will hereafter be in compliance with all obligations hereunder. All of the Loan Party's Operating Agreements and
Operating Leases with respect to its Oil and Gas Properties are and will hereafter be enforceable in all material respects in accordance with their terms except as such may be modified by applicable
bankruptcy law or an order of a court in equity. 

        6.11    Initial Reserve Report.    The Company has heretofore delivered to the Lenders a true and complete copy of a
report, dated effective as of December 21, 2005, prepared by Netherland, Sewell and Associates, Inc. (the "Initial Reserve Report")
relating to an evaluation of the Oil and Gas attributable to certain of the Mortgaged Properties described therein. To the knowledge of the Company, (a) the assumptions stated or used in the
preparation of the Initial Reserve Report are reasonable, (b) all information furnished by the Company to Netherland, Sewell and Associates, Inc. (the
"Independent Engineer") for use in the preparation of the Initial Reserve Report was accurate in all material respects, (c) there has been no
material adverse change in the amount of the estimated Oil and Gas shown in the Initial Reserve Report since the date thereof, except for changes which have occurred as a result of production in the
ordinary course of business, and (d) the Initial Reserve Report does not omit any material statement or information necessary to cause the same not to be misleading to the Lenders. 

        6.12    Gas Imbalances.    There are no gas imbalances, take or pay or other prepayments with respect to any of the
Oil and Gas Properties which would require the Loan Parties to deliver Oil and Gas produced from any of the Oil and Gas Properties at some future time without then or thereafter receiving full payment
therefor exceeding 50,000 Mcf of gas (on an Mcf equivalent basis) in the aggregate. 

        6.13    Taxes.    The Loan Parties have filed all federal tax returns and reports required to be filed, and have paid
all federal taxes, assessments, fees and other governmental charges levied or imposed 

34

 

upon
them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. The Loan Parties have filed all state and other non-federal tax returns and reports required to be filed, and have paid all state and other
non-federal taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets prior to delinquency thereof, except those which are
being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. To the knowledge of the Loan Parties, there is no proposed tax
assessment against any Loan Party that would, if made, reasonably be expected to have a Material Adverse Effect. 

        6.14    Financial Condition.    

        (a)   The
Company has heretofore furnished to the Lenders the pro forma financial statements set forth in the S-1 Filing. Such financial statements present fairly,
in all material respects, the financial position and results of operations and cash flows of the Parent, the Company and its Subsidiaries and Unrestricted Subsidiaries as of such dates and for such
periods in accordance with GAAP subject to year-end audit adjustments and the absence of footnotes in the case of the unaudited quarterly financial statements. 

        (b)   Since
March 31, 2006, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect and the
business of the Parent and the Loan Parties have been conducted only in the ordinary course consistent with past business practices. 

        6.15    Environmental Matters.    Except as described on  Schedule 6.15 hereto or as could not be reasonably expected to
have a Material Adverse Effect (or with respect to (c) and
(d) below, where the failure to take such actions could not be reasonably expected to have a Material Adverse Effect): 

        (a)   neither
any Property of any Loan Party, nor the operations conducted thereon, violate Environmental Laws. 

        (b)   no
Property of any Loan Party, nor the operations currently conducted thereon by any Loan Party, or, to the knowledge of such Loan Party, no operations conducted thereon
by any prior owner or operator of such Property, are in violation of or subject to any existing, or to the knowledge of such Loan Party, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority under Environmental Laws. 

        (c)   all
notices, permits, licenses, exemptions, and approvals, if any, required to be obtained or filed under any Environmental Law in connection with the operation or use
of any and all Property by each Loan Party, including, without limitation, past or present treatment, storage, disposal or release of a hazardous substance, oil and gas waste or hazardous waste into
the environment, have been duly obtained or filed or requested, and each Loan Party is in compliance with the material terms and conditions of all such notices, permits, licenses, exemptions and
approvals. 

        (d)   all
hazardous substances, hazardous waste and oil and gas waste, if any, generated by the Company or any of its Subsidiaries at any and all Property of any Loan Party
have in the past been transported, treated and disposed of in compliance with Environmental Laws then in effect, and, to the knowledge of such Loan Party, transport carriers and treatment and disposal
facilities known by such Loan Party to have been used by it are not the subject of any existing action, investigation or inquiry by any Governmental Authority under any Environmental Laws. 

        (e)   no
hazardous substances, hazardous waste or oil and gas waste, have been disposed of or otherwise released by any Loan Party on or to any Property of such Loan Party
except in compliance with Environmental Laws. 

35

 

        (f)    no
Loan Party has any known pending assessment, investigation, monitoring, removal or remedial obligations under applicable Environmental Laws in connection with any
release or threatened release of any hazardous substance, hazardous waste or oil and gas waste into the environment by any Loan Party. 

        6.16    Regulated Entities.    None of the Loan Parties, or any Person controlling the Company or the Guarantors, is
an "Investment Company" within the meaning of the Investment Company Act of 1940. None of the Loan Parties, or any Person controlling the Company or the
Guarantors, is subject to regulation under the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability
to incur Indebtedness. 

        6.17    No Burdensome Restrictions.    No Loan Party is a party to or bound by any Contractual Obligation, or subject
to any restriction in any Organization Document, or any Requirement of Law, which would reasonably be expected to have a Material Adverse Effect. 

        6.18    Copyrights, Patents, Trademarks and Licenses, etc.    Each Loan Party owns or is licensed or otherwise have
the right to use all of the material patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the
operation of their respective businesses, without material conflict with the rights of any other Person. To the knowledge of any Loan Party, no slogan or other advertising device, product, process,
method, substance, part or other material now employed, or now contemplated to be employed, by any Loan Party infringes in a material respect upon any rights held by any other Person. Except as
specifically disclosed in Schedule 6.05, no claim or litigation regarding any of the foregoing is pending or threatened, and no patent,
invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of any Loan Party, proposed, which, in either case, could reasonably
be expected to have a Material Adverse Effect. 

        6.19    Subsidiary.    The Company has no Subsidiary, Unrestricted Subsidiary or other material equity investment
other than those specifically disclosed in Schedule 6.19 hereto. The Company owns the percentage interest of all issued and outstanding Equity in
each Subsidiary, Unrestricted Subsidiary or other material equity investment described on Schedule 6.19. Parent owns one hundred percent (100%)
of the issued and outstanding equity in the Company. The Company may update and replace Schedule 6.19 from time to time to reflect changes
resulting from transactions or other events permitted hereunder. 

        6.20    Insurance.    The Properties of each Loan Party is insured with financially sound and reputable insurance
companies not Affiliates of the Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar
properties in localities where the Company or such Guarantor operates. 

        6.21    Derivative Contracts.    As of the date hereof  Schedule 6.21 sets forth, a true and complete list of all
Derivative Contracts of the Loan Parties, the material terms thereof (including the
type, term, effective date, termination date and notional amounts or volumes), the net mark-to-market value thereof, all credit support agreements relating thereto (including
any margin required or supplied) and the counterparty to each such agreement. 

        6.22    Full Disclosure.    None of the representations or warranties made by any Loan Party in the Loan Documents as
of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, written statement or certificate furnished by or on behalf of any
Loan Party in connection with the Loan Documents, taken as whole, contains any untrue statement of a material fact known to any Loan Party, or omits any material fact known to any Loan Party, required
to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. 

36

  

        6.23    Solvency.    The Loan Parties, taken as a whole, and individually, are Solvent. 

 
 

ARTICLE VII.    
    
    AFFIRMATIVE COVENANTS    
    

        So long as the Issuing Lender or any Lender shall have any Commitment hereunder, or any Loan, Letter of Credit or other Obligation shall remain unpaid or
unsatisfied, unless the Lenders waive compliance in writing: 

        7.01    Financial Statements.    Each of the Loan Parties shall maintain, for itself and each of its Subsidiaries, on
a consolidated basis, a system of accounting established and administered in accordance with GAAP and deliver, or cause to be delivered, to Administrative Agent, with sufficient copies for each
Lender: 

        (a)   no
later than fifteen (15) days following the date required by applicable SEC rules (without giving effect to any extensions available thereunder) for the filing
of such financial statements after the end of each fiscal year of Parent: 

        (i)    the
audited consolidated balance sheet and related statements of income, partners equity and cash flows of Parent as of the end of and for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, all (A) reported on by a nationally recognized independent public accounting firm (the
"Independent Auditor") (without a "going concern" or like qualification or exception and without any
qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition, results of
operations and cash flows of Parent and its consolidated Subsidiaries (including each Unrestricted Subsidiary) on a consolidated basis in accordance with GAAP consistently applied, and
(B) certified by a Responsible Officer as fairly presenting in all material respects, the financial condition, results of operations and cash flows of Parent and its consolidated Subsidiaries
(including each Unrestricted Subsidiary) on a consolidated basis in accordance with GAAP consistently applied; 

        (ii)   unaudited
annual consolidating balance sheet and consolidating statement of income for Parent and its consolidated Subsidiaries (including each Unrestricted Subsidiary)
as of the end of such year, certified by a Responsible Officer as fairly presenting in all material respects, the financial condition, results of operations of Parent and its consolidated Subsidiaries
(including each Unrestricted Subsidiary) on a consolidated basis in accordance with GAAP consistently applied; and 

        (iii)  the
unaudited consolidated balance sheet and related statements of income, partners equity and cash flows of the Company as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous final year, and unaudited consolidating balance sheets and statements of income, all certified by a Responsible Officer as fairly
presenting in all material respects, the financial condition, results of operations and cash flows of the Company and its consolidated Subsidiaries (including each Unrestricted Subsidiary) on a
consolidated basis in accordance with GAAP consistently applied, subject to the absence of footnotes. 

        (b)   no
later than fifteen (15) days following the date required by applicable SEC rules (without giving effect to any extensions available thereunder) for the filing
of such financial statements after the end of each of the first three fiscal quarters of each fiscal year of Parent: 

        (i)    the
unaudited consolidated balance sheet and related statements of income, partners equity and cash flows of Parent as of the end of and for such fiscal quarter and the
then 

37

 

elapsed
portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of), the
previous fiscal year, all certified by a Responsible Officer as fairly presenting in all material respects, the financial condition, results of operations and cash flows of Parent and its consolidated
Subsidiaries (including each Unrestricted Subsidiary) on a consolidated basis in accordance with GAAP consistently applied, subject to the absence of footnotes; and 

        (ii)   the
unaudited consolidated balance sheet and related statements of income, partners equity and cash flows of the Company as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the
end of) the previous fiscal year, all certified by a Responsible Officer as fairly presenting in all material respects, the financial condition, results of operations and cash flows of the Company and
its consolidated Subsidiaries (including each Unrestricted Subsidiary) on a consolidated basis in accordance with GAAP consistently applied, subject to the absence of footnotes. 

        7.02    Certificates; Other Production and Reserve Information.    The Company shall furnish to the Administrative
Agent, with sufficient copies for each Lender: 

        (a)   As
soon as available, but not later than 45 days after the close of each month, a Monthly Status Report in a form reasonably acceptable to the Lenders, as of the
last day of the immediately preceding month; 

        (b)   Concurrently
with any delivery of financial statements under Subsections 7.01(a) and  (b), a certificate of a Responsible Officer, in form and substance
satisfactory to the Administrative Agent, setting forth as of the last Business Day
of such fiscal quarter or fiscal year, a true and complete list of all Derivative Contracts of each Loan Party, the material terms thereof (including the type, term, effective date, termination date
and notional amounts or volumes), the net mark-to-market value therefor, any new credit support agreements relating thereto not listed on  Schedule 8.05, any margin required or supplied under
any credit support document, and the counterparty to each such agreement; 

        (b)   Concurrently
with the delivery of the statements referred to in Subsection 7.01(b) and within sixty (60) days
following the end of the Company's fiscal year, a Pricing Grid Certificate executed by a Responsible Officer; 

        (c)   Concurrently
with the delivery of the statements and reports referred to in Subsections 7.01(a)and  (b), and 7.02(a)
 a Compliance Certificate executed by a Responsible Officer; 

        (d)   Annually
commencing April 15, 2007, dated as of January 1st of such year, a Reserve Report prepared by the Independent Engineer or other
independent petroleum engineer reasonably acceptable to Administrative Agent and the Company, and annually, commencing October 15, 2006, dated as of July 1st of such year,
a Reserve Report prepared by personnel of the Company and certified by a Responsible Officer of the Company as true and correct in all material respects. Each Reserve Report shall be in form and
substance reasonably satisfactory to the Lenders. With the delivery of each Reserve Report, the Company shall provide to the Administrative Agent and the Lenders a certificate from a Responsible
Officer certifying that in all material respects: (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct,
(ii) the Loan Parties own 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 8.01, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other
prepayments in excess of the volume specified in Section 6.12 with respect to their Oil and Gas 

38

 

Properties
evaluated in such Reserve Report that would require any Loan Party to deliver Oil and Gas either generally or produced from such Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor, (iv) none of their proved Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an
exhibit to the certificate, which certificate shall list all of its proved Oil and Gas Properties sold and in such detail as reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent to the most recently delivered Reserve Report and (vi) attached thereto is a schedule of the Oil and Gas Properties
evaluated by such Reserve Report that are Mortgaged Properties and demonstrating the percentage of the present value that such Mortgaged Properties represent; 

        (e)   Promptly
after the furnishing thereof, copies of all periodic and other financial reports and other financial materials (not otherwise required to be delivered within a
specific timeframe pursuant to the terms hereof) distributed by Parent to Provident Energy Trust or any of its Subsidiaries; 

        (f)    Promptly
after the furnishing thereof, copies of any financial statement, report or notice furnished to or by any Person pursuant to the terms of any preferred stock
designation, indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this  Section 7.02; 

        (g)   Promptly
within 15 days after filing with the SEC copies of each report or Form 8-K (or any successors substitute forms that the Parent is
required to file with the SEC). 

        (h)   Concurrently
with the delivery of any Reserve Report to the Administrative Agent pursuant to Subsection 7.02(e), or after
an Event of Default, upon request, a list of all Persons purchasing Oil and Gas from any of the Loan Parties; 

        (i)    Prompt
written notice, and in any event within three (3) Business Days, of the occurrence of any Casualty Event; 

        (j)    Prompt
written notice (and in any event within thirty (30) days prior thereto) of any change (i) in any Loan Party's organizational name or in any trade
name used to identify such Person in the conduct of its business or in the ownership of its Properties, (ii) in the location of any Loan Party's chief executive office or principal place of
business, (iii) in any Loan Party's identity or organizational structure or in the jurisdiction in which such Person is incorporated or formed, (iv) in any Loan Party's jurisdiction of
organization or such Person's organizational identification number in such jurisdiction of organization, and (v) in any Loan Party's federal taxpayer identification number, if any; 

        (k)   Promptly
upon the request of the Administrative Agent, such copies of all geological, engineering and related data contained in any of Loan Parties' files or readily
accessible to the Loan Party relating to the Oil and Gas Properties as may reasonably be requested; 

        (l)    On
request by the Administrative Agent, based upon the Administrative Agent's or Lenders' good faith belief that any Loan Party's title to the Mortgaged Properties or
the Administrative Agent's lien thereon is subject to claims of third parties, or if required by regulations to which the Administrative Agent or any of the Lenders is subject, title and mortgage lien
evidence satisfactory to the Administrative Agent covering such Mortgaged Property as may be designated by the Administrative Agent, covering such Loan Party's title thereto and evidencing that the
Obligations are secured by liens and security interests as provided in this Agreement and the Security Documents; 

        (m)  As
soon as available, and in any event within 90 days after the end of each fiscal year, a business and financial plan for Parent (in form reasonably satisfactory
to the Administrative 

39

 

Agent),
prepared by a Responsible Officer, setting forth for the fiscal year most recently ended, quarterly financial projections and budgets for the Parent, and for four fiscal years thereafter
yearly financial projections and budgets; and 

        (n)   Promptly,
such additional information regarding the business, financial or corporate affairs of the Loan Parties as the Administrative Agent, at the reasonable request
of any Lender, may from time to time request. 

        7.03    Notices.    The Company shall promptly notify the Administrative Agent: 

        (a)   of
the occurrence of any Default or Event of Default or any event or circumstance that would reasonably be expected to become a Default or Event of Default; 

        (b)   of
any matter that has resulted or may reasonably be expected to result in a Material Adverse Effect, including (i) breach or non-performance of, or
any default under, a Contractual Obligation of Parent, the Company or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between Parent, the Company or any
Subsidiary and any Governmental Authority; (iii) the commencement of, or any material development in, any litigation, proposed legislation, ordinance or regulation of a Governmental Authority,
or proceeding affecting Parent, the Company or any Subsidiary; including pursuant to any applicable Environmental Laws; or (iv) revocation, cancellation or failure to renew any license, permit
or franchise where such revocation, failure or loss could reasonably be expected to have a Material Adverse Effect; 

        (c)   of
any material change in accounting policies or financial reporting practices by Parent, the Company or any of its Subsidiaries; or 

        (d)   of
the formation or acquisition of any Subsidiary. 

Each
notice under this Section 7.03 shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action such Loan Party proposes to take with respect thereto and at what time. Each notice under Subsection
7.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or
violated. 

        7.04    Preservation of Company Existence, Etc.    Each Loan Party shall: 

        (a)   preserve
and maintain in full force and effect its legal existence, and maintain its good standing under the laws of its state or jurisdiction of formation, provided
however, that the wind-up of any Subsidiary shall be permitted either to the extent assets of such Subsidiary are not transferred to any party other than the Company or another Subsidiary; 

        (b)   preserve
and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal
conduct of its business except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; 

        (c)   use
reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect; and 

        (d)   preserve
or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to
have a Material Adverse Effect. 

        7.05    Maintenance of Property.    Each Loan Party shall maintain and preserve all its Property which is used or
useful in its business in good working order and condition, ordinary wear and tear excepted and to use the standard of care typical in the industry in the operation and maintenance of its 

40

 

facilities
except where the failure to do so would not reasonably be expected to have a Material Adverse Effect provided, however, that nothing in this  Section 7.05 shall prevent such Loan Party from
abandoning any well or forfeiting, surrendering, releasing or defaulting under any lease in the
ordinary course of business which is not materially disadvantageous in any way to the Lenders and which, in its opinion, is in the best interest of such Loan Party, and each such Loan Party is and
will hereafter be in compliance with all obligations hereunder. 

        7.06    Title Information.    

        (a)   On
or before the delivery to the Administrative Agent and the Lenders of each Reserve Report required by Subsection
7.02(e), the Company will deliver title information in form and substance acceptable to the Administrative Agent covering enough of the Oil and Gas Properties evaluated by such
Reserve Report that were not included in the immediately preceding Reserve Report, so that the Administrative Agent shall have received together with title information previously delivered to the
Administrative Agent, satisfactory title information on at least 80% of the total net present value (determined by a discount factor of 10%) of the proved Oil and Gas Properties evaluated by such
Reserve Report. 

        (b)   If
the Company has provided title information for additional Properties under Subsection 7.06(a), the Company shall,
within 60 days of notice from the Administrative Agent that title defects or exceptions exist with respect to such additional Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not permitted by Section 8.01 raised by such information,
(ii) substitute acceptable Mortgaged Properties with no title defects or exceptions except for Permitted Liens having an equivalent value or (iii) deliver title information in form and
substance reasonably acceptable to the Administrative Agent so that the Administrative Agent shall have received, together with title information previously delivered to the Administrative Agent,
satisfactory title information on at least 80% of the net present value (determined by a discount factor of 10%) of the Oil and Gas Properties evaluated by such Reserve Report. 

        (c)   If
the Company is unable to cure any title defect requested by the Administrative Agent or the Lenders to be cured within the 60-day period or the Company
does not comply with the requirements to provide acceptable title information covering 80% of the net present value (determined by a discount factor of 10%) of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default, but instead the Administrative Agent and/or the Majority Lenders shall have the right to exercise the following remedy in their
sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of the remedy by the Administrative Agent or the Lenders. To the
extent that the Administrative Agent or the Majority Lenders are not reasonably satisfied with title to any Mortgaged Property after the 60-day period has elapsed, such unacceptable
Mortgaged Property shall not count towards "the 80% requirement", and the Administrative Agent may send a notice to the Company and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by the Majority Lenders to cause the Company to be in compliance with the requirement to provide acceptable title information on 80% of the net present value
(determined by a discount factor of 10%) of the Oil and Gas Properties. This new Borrowing Base shall become effective immediately after receipt of such notice. 

        7.07    Additional Collateral.    In connection with each redetermination of the Borrowing Base, the Company shall
review the Reserve Report and the list of current Mortgaged Properties (as described in Subsection 7.02(e)) to ascertain whether the Mortgaged
Properties represent at least 80% of the total net present value (determined by a discount factor of 10%) of the Oil and Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions, dispositions and production. In the event that the Mortgaged Properties do not represent at least 80% of such total net present
value, then the Company shall, and shall cause each Loan Party 

41

 

to,
grant, within thirty (30) days of delivery of the certificate required under Subsection 7.02(e), to the Administrative Agent or its designee
as security for the Obligations a first-priority Lien interest on additional Oil and Gas Properties not already subject to a Lien of the Security Documents such that after giving effect thereto, the
Mortgaged Properties will represent at least 80% of such total net present value. All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, security
agreements and financing statements or other Security Documents, all in form and substance reasonably satisfactory to the Administrative Agent or its designee and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording purposes. 

        7.08    Insurance.    Each Loan Party shall maintain, with financially sound and reputable independent insurers,
insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such
amounts as are customarily carried under similar circumstances by such other Persons except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. The loss
payable clauses or provisions in said insurance policy or policies insuring any of the Collateral for the Loan shall be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and the Lenders as "additional insured" and provide that the insurer will
give at least 30 days prior notice of any cancellation to the Administrative Agent. 

        7.09    Payment of Obligations.    Each Loan Party shall pay and discharge prior to delinquency, all their respective
obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good
faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by such Loan Party; (b) all lawful claims which, if unpaid, would by law become a Lien upon
its Property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness; except in
each of (a), (b) and (c), where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 

        7.10    Compliance with Laws.    Each Loan Party shall comply in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business (including Environmental Laws, the Federal Fair Labor Standards Act and any California Requirement of Law promulgated with
respect to earthquakes), except (a) such as may be contested in good faith or as to which a bona fide dispute may exist or (b) where the failure to do so would not reasonably be expected
to have a Material Adverse Effect. 

        7.11    Compliance with ERISA.    Each Loan Party shall, and shall cause each of its ERISA Affiliates to:
(a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 

        7.12    Inspection of Property and Books and Records.    Each Loan Party shall maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of such Loan
Party. Each Loan Party shall permit, representatives and independent contractors of the Administrative Agent or any Lender to visit and inspect any of their respective properties, to examine their
respective company, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective managers,
directors, officers, and independent public accountants, all at the expense of the Loan Parties and at such reasonable times during normal business hours and as often as may be reasonably desired,
upon reasonable advance notice to such Loan Party; provided, however, when an Event of 

42

 

Default
exists the Administrative Agent or any Lender may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice. 

        7.13    Environmental Laws.    

        (a)   Each
Loan Party shall conduct its operations and keep and maintain its property in compliance with all Environmental Laws and maintain all environmental, health and
safety permits, licenses and authorizations necessary for its operations and will maintain such in full force and effect except where the failure to do so would not reasonably be expected to have a
Material Adverse Effect. Each Loan Party shall promptly commence and diligently prosecute to completion, any assessment, evaluation, investigation, monitoring, containment, cleanup, removal, repair,
restoration, remediation or other remedial obligations (collectively, the "Remedial Work") in the event any Remedial Work is required or reasonably
necessary under applicable Environmental Laws because of or in connection with the actual or suspected past, present or future disposal or other release of any oil, oil and gas waste, hazardous
substance or solid waste on, under, about or from any of the Loan Parties' Properties, which failure to commence and diligently prosecute to completion could reasonably be expected to have a Material
Adverse Effect. 

        (b)   Each
Loan Party shall establish and implement, such procedures as may be reasonably necessary to continuously determine and assure that the Loan Party's obligations
under this Section 7.13 are timely and fully satisfied, which failure to establish and implement could reasonably be expected to have a Material
Adverse Effect 

        (c)   Each
Loan Party will promptly furnish to the Administrative Agent all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or
other proceedings received by such Loan Party, or of which it has notice, pending or threatened against such Loan Party, by any Governmental Authority with respect to any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or authorizations in connection with its ownership or use of its Properties or the operation of its business, except
where any such alleged violations or incidents of non-compliance would not, individually or in the aggregate, result in a penalty, assessment, fine or other cost or liability exceeding
$100,000. 

        (d)   Each
Loan Party will promptly furnish to the Administrative Agent all requests for information, notices of claim, demand letters, and other notifications, received by
such Loan Party in connection with its ownership or use of its Properties or the conduct of its business, relating to potential responsibility with respect to any investigation or clean-up
of hazardous materials at any location, except where any such alleged responsibility would not, individually or in the aggregate, result in a penalty, assessment, fine or other cost or liability
exceeding $100,000. 

        7.14    New Subsidiary/Unrestricted Subsidiary.    If, at any time after the date of this Agreement, (a) any
new Subsidiary is acquired or created, or (b) any new Unrestricted Subsidiary is permitted by the Lenders, as to any Loan Party, then such Loan Party shall execute and deliver a Security
Agreement to the Administrative Agent, whereby such Loan Party pledges all of its Equity in such Subsidiary or Unrestricted Subsidiary. 

        7.15    New Subsidiary Guarantors.    If, at any time after the date of this Agreement, there exists any Subsidiary of
a Loan Party that is not a Guarantor hereunder, then such Loan Party shall cause each such Subsidiary to execute and deliver a Guaranty to the Administrative Agent. 

        7.16    Use of Proceeds.    The Company shall use the proceeds of the Loans (a) to refinance a portion of
BreitBurn Energy Company, L.P.'s Indebtedness to the extent secured by Oil and Gas Properties assigned to the Company or its Subsidiaries, as applicable, by BreitBurn Energy Company, L.P.,
(b) for standby letters of credit up to the sub-facility amount of $5,000,000, (c) for working capital purposes (including capital expenditures made for the exploration and
development of Oil and Gas Properties) of the Company, (d) for general company purposes of the Company, and (e) for 

43

 

acquisitions
permitted under Section 8.04 and Restricted Payments permitted under  Section 8.09. The Company shall use the Letters of Credit as
support for Derivative Contracts and for other general company purposes of the
Company and its Subsidiaries. 

        7.17    Operating Accounts.    The Loan Parties shall maintain with Administrative Agent all primary operating and
depository accounts. 

        7.18    Phase I Reports.    As soon as available, and in any case within fifteen (15) days prior to closing any
Acquisition of Oil and Gas Properties by it, such Loan Party shall deliver to the Lenders a Phase I report covering such Oil and Gas Properties to be acquired in form and substance satisfactory to the
Administrative Agent. 

        7.19    Further Assurances.    

        (a)   Each
Loan Party will promptly cure any defects in the creation and issuance of the Notes and the execution and delivery of this Agreement, the Security Documents or any
other instruments referred to or mentioned herein or therein. The Company at its expense will promptly do all acts and things, and will execute and file or record, all instruments reasonably requested
by the Administrative Agent, to establish, perfect, maintain and continue the perfected security interest of the Administrative Agent in or the Lien of the Administrative Agent on the Mortgaged
Properties. Upon request by the Administrative Agent, each Loan Party shall promptly execute such additional Security Documents covering any new Oil and Gas Properties reflected on the Monthly Status
Reports or any new Subsidiaries of the Loan Parties. The Company will pay the reasonable costs and expenses of all filings and recordings and all searches deemed necessary by the Administrative Agent
to establish and determine the validity and the priority of the Liens created or intended to be created by the Security Documents; and such Loan Party will satisfy all other claims and charges which
in the reasonable opinion of the Administrative Agent might prejudice, impair or otherwise affect any of the Mortgaged Properties or any Liens thereon in favor of the Administrative Agent for the
benefit of the Issuing Lender and the Lenders. 

        (b)   Each
Loan Party hereby authorizes the Administrative Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part
of the Mortgaged Property without the signature of such Loan Party where permitted by law. A carbon, photographic or other
reproduction of the Security Documents or any financing statement covering the Mortgaged Property or any part thereof shall be sufficient as a financing statement where permitted by law. The
Administrative Agent will promptly send such Loan Party any financing or continuation statements it files without the signature of such Loan Party and the Administrative Agent will promptly send the
Company the filing or recordation information with respect thereto. 

 
 

ARTICLE VIII.    
    
    NEGATIVE COVENANTS    
    

        So long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, unless the Lenders waive compliance
in writing: 

        8.01    Limitation on Liens.    Each Loan Party agrees that it shall not, directly or indirectly, make, create, incur,
assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted
Liens"): 

        (a)   any
Lien created under any Loan Document; 

        (b)   Liens
for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that
non-payment thereof is permitted by Section 7.09; 

44

 

        (c)   carriers',
warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business (whether by law or by
contract) which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto; 

        (d)   Liens
consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social
security legislation; 

        (e)   Liens
on the Property of such Loan Party securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money),
statutory obligations, (ii) contingent obligations on surety and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the
ordinary course of business; 

        (f)    easements,
rights-of-way, restrictions, defects or other exceptions to title (including, but not limited to, the contractual nature of the
Company's interest in the Brea Oil Field, Orange County, California and the failure of certain Indian Tribes to act on assignment consents in certain Wyoming properties in connection with the
acquisition by the Company of Properties from Nautilus Resources, LLC and Phoenix Production Company) and other similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, are not incurred to secure Indebtedness, and which do not in any case materially detract from the value of the Property subject thereto or interfere with the
ordinary conduct of the businesses of the Loan Parties; 

        (g)   Liens
arising solely by virtue of any statutory or common law provision relating to bankers' liens, rights of set-off or similar rights and remedies as to
deposit accounts or other funds maintained with a creditor depository institution; or under any deposit account agreement entered into in the ordinary course of business;  provided that (i) such
deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Loan
Party, (ii) the Loan Party maintains (subject to such right of set off) dominion and control over such account(s), and (iii) such deposit account is not intended by the Loan Party to
provide cash collateral to the depository institution; and 

        (h)   Oil
and Gas Liens. 

        8.02    Disposition of Assets.    Each Loan Party agrees that it shall not, directly or indirectly, sell, assign,
lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) (collectively, "Dispositions") any Oil and Gas Properties
or any other property used or useful to such Loan Party in connection with such Oil and Gas Properties (including accounts and notes receivable, with or without recourse) or enter into any agreement
to do any of the foregoing, except: 

        (a)   as
permitted under Sections 7.05, 8.03, 8.04, 8.09 or 8.10; 

        (b)   Dispositions
of inventory including produced Oil and Gas in the ordinary course of business; 

        (c)   Dispositions
by the Company's Subsidiaries to the Company; 

        (d)   used,
worn-out or surplus equipment in the ordinary course of business; and 

45

  

        (e)   Dispositions
not otherwise permitted under Subsections 8.02 (a)-(d) above which are made in the ordinary course of
business; provided that, (i) no Event of Default shall exist at the time of such Disposition or result therefrom, and (ii) the aggregate
value (as determined by the value assigned to such properties under the most recent Reserve Report) of all Dispositions of Oil and Gas Properties made by the Loan Parties, together, shall not exceed
in any Borrowing Base Period five percent (5%) of the Borrowing Base then in effect; further provided that, the Borrowing Base shall be automatically
reduced by an amount equal to the aggregate value of such Oil and Gas Properties and to the extent a Borrowing Base Deficiency results from such reduction, up to one-hundred percent (100%)
of the proceeds of such Dispositions, net of usual and customary reasonable fees, expenses and taxes, shall be applied, as necessary, to cure such Borrowing Base Deficiency. 

        8.03    Consolidations and Mergers.    No Loan Party shall merge, consolidate with or into, or convey, transfer, lease
or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person,
except: 

        (a)   any
Subsidiary may merge with any Loan Party, provided that the Company or other Loan Party, as applicable, shall be the
continuing or surviving entity; 

        (b)   any
Subsidiary may sell, convey, transfer, lease or otherwise dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Company
or any other Subsidiary that is a Guarantor; and 

        (c)   Dispositions
permitted under Section 8.02(e). 

        8.04    Loans and Investments.    No Loan Party shall purchase or acquire, or permit any of its Subsidiaries to
purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person (including any Unrestricted
Subsidiary), or make or commit to make any Acquisition, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in (collectively,
"Investments") any Person including any Unrestricted Subsidiary or Affiliate of the Company, except for: 

        (a)   Investments
in Cash Equivalents; 

        (b)   extensions
of credit in the nature of accounts receivable or notes receivable arising from the sale or lease of goods or services in the ordinary course of business; 

        (c)   Investments
in Subsidiaries, provided, however, that no Event of Default exists; 

        (d)   Investments
permitted under Section 8.02(c); 

        (e)   Investments
in Derivative Contracts permitted under Section 8.10; 

        (f)    Investments
with third parties that are (i) customary in the oil and gas business, (ii) made in the ordinary course of the such Person's business, and
(iii) made in the form of or pursuant to Operating Agreements, process agreements, farm-in agreements, farm-out agreements, development agreements, unitization
agreements, pooling agreements, joint bidding agreements, service contracts and other similar agreements; 

        (g)   Investments
by the Company in the Unrestricted Subsidiary approved by the Majority Lenders; 

        (h)   extensions
of credit by the Company to any of its full time employees which do not exceed $500,000 at any time outstanding in the aggregate to all such employees; and 

        (i)    other
Investments not to exceed $500,000 in the aggregate. 

46

 

        8.05    Limitation on Indebtedness.    No Loan Party shall create, incur, assume, suffer to exist, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness, except: 

        (a)   Indebtedness
incurred pursuant to this Agreement or the other Loan Documents; 

        (b)   Indebtedness
consisting of Contingent Obligations permitted pursuant to Section 8.08; 

        (c)   Indebtedness
incurred in connection with the issuance of Derivative Contracts permitted under Section 8.10 hereof; 

        (d)   Specific
Indebtedness outstanding on the date hereof and listed in Schedule 8.05 hereto; and 

        (e)   Indebtedness
not otherwise permitted under Subsections 8.05(a)-(d) above not exceeding $1,000,000 at any time
outstanding. 

        8.06    Transactions with Affiliates.    No Loan Party shall enter into any transaction with or make any payment or
transfer to (collectively, "Transactions") any Affiliate of the Company or such Loan Party, except for Transactions between the Company and a Loan Party
(or any Unrestricted Subsidiary) or between Subsidiaries (or a Subsidiary and any Unrestricted Subsidiary) in the ordinary course of business and upon fair and reasonable terms no less favorable to
the Company or such other Person than would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Company or such other Person or to the extent permitted under  Section 8.09. 

        8.07    Margin Stock.    No Loan Party shall use any portion of the Loan proceeds, directly or indirectly,
(i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend
credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. If
requested by the Administrative Agent, the Company will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR
Form U-1 or such other form referred to in Regulation U, Regulation T or Regulation X of the Board, as the case may be. 

        8.08    Contingent Obligations.    No Loan Party shall create, incur, assume or suffer to exist any Contingent
Obligations except: 

        (a)   endorsements
for collection or deposit in the ordinary course of business; 

        (b)   Derivative
Contracts permitted under Section 8.10 hereof; 

        (c)   Contingent
Obligations of the Loan Parties not to exceed $100,000 annually in the aggregate or as listed in  Schedule 8.08 hereto, the amount thereof certified by an independent certified public
accountant acceptable to the Administrative Agent; 

        (d)   plugging
bonds, performance bonds and fidelity bonds issued for the account of the Company or its Subsidiaries, obligations to indemnify or make whole any surety and
similar agreements incurred in the ordinary course of business, provided that such obligations shall not exceed $5,000,000 in the aggregate; 

        (e)   this
Agreement and the Loan Documents; and 

        (f)    any
other Contingent Obligations of the Loan Parties to the extent not described in Subsections 8.08 (a)-(e) not to
exceed $1,000,000 annually in the aggregate. 

        8.09    Restricted Payments.    No Loan Party shall purchase, redeem or otherwise acquire for value any membership
interests, partnership interests, capital accounts, shares of its capital stock or any warrants, rights or options to acquire such membership interest, partnership interest or shares, now or hereafter
outstanding from its members, partners or stockholders and will not declare or pay any 

47

 

distribution,
dividend or return capital to its members, partners or stockholders, or make any distribution of assets in cash or in kind to its members, partners or stockholders (collectively
"Restricted Payments"); except Restricted Payments to the extent permitted under the Loan Party's Organization Documents,  [including without
limitation Restricted Payments on the IPO Date in the aggregate amount of $71,600,000 to BreitBurn Energy Corporation,
Pro GP Corp. and Pro LP Corp so long as (a) no Event of Default exists or would result therefrom and (b) after giving effect to such Restricted Payment, (i) the Loan Parties
exhibit pro-forma compliance with all terms and conditions of this Agreement, (ii) the Available Borrowing Base equals an amount no less than ten percent (10%) of the Borrowing
Base, (iii) the Company would have the ability to draw at least ten percent (10%) of the Borrowing Base and remain in compliance with all terms and conditions hereof, and (iv) such
Restricted Payment would not impair the ability of the Company to fulfill its obligations hereunder. By making such Restricted Payment, the Company specifically represents and warrants to
Administrative Agent and the Lenders that the conditions for making such Restricted Payment have been satisfied. No Loan Party may make any Restricted Payment to Unrestricted Subsidiaries. 

        8.10    Derivative Contracts.    No Loan Party shall enter into or in any manner be liable on any Derivative Contract
except: 

        (a)   Derivative
Contracts entered into by the Company with the purpose and effect of limiting or reducing the market price risk of Oil and Gas expected to be produced by the
Company and each Subsidiary provided that at all times: (i) the aggregate of all such Derivative Contracts limits or reduces such market price
risk for a term of no more than sixty (60) months; (ii) no such contract, when aggregated with all Derivative Contracts permitted under this Subsection
8.10(a) (but excluding put option contracts that are not related to corresponding calls, collars or swaps) requires the Loan
Parties to deliver more than 85% of the reasonably anticipated production for each month for the total Oil
and Gas classified as either "proved producing" or "proved developed non-producing" (provided however, the "proved developed non-producing" reserves included in such
calculation shall not exceed 20% of the "proved producing" reserves) on the most recent Reserve Report delivered to the Administrative Agent covering the Oil and Gas Properties, and (iii) each
such contract (excluding Derivative Contracts offered by national commodity exchange) shall be between the Company or a Subsidiary and the Administrative Agent, or any of the Lenders or its Affiliate,
or with an unsecured counterparty or have a guarantor of the obligation of the unsecured counterparty who, at the time the contract is made, has long-term obligations rated BBB+ or Baal or
better, respectively, by Standard & Poor's Corporation or Moody's Investors Services, Inc. (or a successor credit rating agency); 

        (b)   Derivative
Contracts entered into by the Company with the purpose and effect of fixing interest rates on a principal amount of Indebtedness of the Company that is
accruing interest at a variable rate, provided that (i) the floating rate index of each such contract generally matches the index used to
determine the floating rates of interest on the corresponding Indebtedness of the Company to be hedged by such contract, (ii) no such contract, except those with a Lender or its Affiliate, when
aggregated with all Derivative Contracts permitted under Subsections 8.10(a) and (b), requires the
Company to put up money, assets, letters of credit, or other security against the event of its non-performance prior to actual default by the Company in performing obligations thereunder,
and (iii) each such contract shall be with a Lender or its Affiliate, or with an unsecured counterparty or have a guarantor of the obligation of an unsecured counterparty who, at the time the
contract is made, has long-term obligations rated A+ or A1 or better, respectively, by Standard & Poor's Corporation or Moody's Investors Services, Inc. (or a successor
credit rating agency); 

        (c)   In
the event of a Derivative Contract between the Company and any of the Lenders, the Contingent Obligation evidenced under such Derivative Contract shall not be applied
against such Lender's Commitment nor against the Effective Amount. Any Indebtedness to any Lender or its 

48

 

Affiliate
incurred under any Derivative Contract shall be treated as an Obligation pari passu and secured pro rata under the Security Documents with all
Obligations otherwise incurred hereunder or under the other Loan Documents as more particularly provided under Section 11.11; and 

        (d)   The
Company shall not modify or terminate any Derivative Contracts to which it is currently a party or subsequently becomes a party without the consent of the Required
Lenders. 

        8.11    Change in Business and Corporate Structure.    

        (a)   The
Loan Parties shall not (i) have any Subsidiaries other than wholly-owned Subsidiaries, (ii) enter into, or allow any Subsidiary to enter into, any
joint ventures, or (iii) have any other material equity investment other than the Unrestricted Subsidiaries. 

        (b)   The
Loan Parties shall not, and shall not permit any Subsidiary to, engage in any business or activity other than its Principal Business. 

        (c)   The
Loan Parties shall not alter, amend or modify in any manner materially adverse to the Lenders any of its Organization Documents. 

        8.12    Accounting Changes.    Except as expressly permitted by the Lenders, no Loan Party shall suffer or permit any
Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of any Loan Party. 

        8.13    ERISA Compliance.    Except as would not reasonably be expected to result in a Material Adverse Effect, No
Loan Party will at any time: 

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

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

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

        (d)   permit
to exist, or allow any 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 ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by any Loan Party or any ERISA Affiliate
which is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities. The term "actuarial present value of the benefit liabilities" shall have the meaning specified in section 4041 of ERISA. 

        (f)    incur,
or permit any ERISA Affiliate to incur, any withdrawal liability pursuant to Section 4201 or 4202 of ERISA. 

        (g)   acquire,
or permit any ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to such Loan Party or with
respect to any ERISA Affiliate of such Loan Party 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, (i) any Multiemployer Plan with respect to which such Person has an outstanding withdrawal 

49

 

liability
under Section 4201 or 4202 of ERISA, or (ii) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities. 

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

        (i)    contribute
to or assume an obligation to contribute to, or permit any ERISA Affiliate to contribute to or assume an obligation to contribute to, any employee welfare
benefit plan, as defined in section 3(1) of ERISA, that provides retiree benefits to former employees of such entities (other than coverage mandated by applicable law), that may not be
terminated by such entities in their sole discretion at any time without any material liability. 

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

        8.14    Interest Coverage Ratio.    Parent shall not permit, as of the last day of each fiscal quarter beginning with
the fiscal quarter ended September 30, 2006, the ratio of EBITDA to Consolidated Interest Expense to be less than 2.75 to 1.00. 

        8.15    Leverage Ratio.    Parent shall not permit, as of the last day of each fiscal quarter beginning with the
fiscal quarter ended September 30, 2006, the ratio of Total Indebtedness (as of the last day of such fiscal quarter, for the twelve months preceding) to EBITDA to be greater than 3.50 to 1.00. 

        8.16    Current Ratio.    Parent shall not permit, as of the last day of each fiscal quarter beginning with the fiscal
quarter ended September 30, 2006, the ratio of Current Assets to Current Liabilities to be less than 1.10 to 1.00. 

 
 

ARTICLE IX.    
    
    EVENTS OF DEFAULT    
    

        9.01    Event of Default.    Any of the following shall constitute an "Event of
Default": 

        (a)   Non-Payment. The Company fails to pay, when and as required to be paid herein, any amount of principal or
interest of any Loan, or fails to pay within five (5) Business Days of when due any fee or other amount payable hereunder or under any other Loan Document; or 

        (b)   Representation or Warranty. Any representation or warranty by any Loan Party made or deemed made herein, in any other
Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any other Loan Party, or any Responsible Officer of such Person, furnished at any time
under this Agreement, or in or under any other Loan Document, is incorrect on or as of the date made or deemed made and causes a Material Adverse Effect; or 

        (c)   Specific Defaults. Any Loan Party fails to perform or observe any term, covenant or agreement contained in  Subsection 7.03(a) or Article VIII (except for such Liens under  Section 8.01 other than arising by consensual action of such Loan Party) or there is a change in the
tax status of any Loan Party; or 

        (d)   Other Defaults. An Event of Default as defined in any Security Document shall occur, or any Loan Party fails to perform
or observe any other term or covenant contained in this Agreement (other than described in this Section 9.01) or any other Loan Document, and
same shall continue unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of such default or
(ii) the date upon 

50

 

which
written notice thereof is given to the Company by the Administrative Agent or any Lender; or 

        (e)   Cross-Default. (i) any Loan Party fails to make any payment in respect of any Indebtedness or Contingent
Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of
more than $1,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure; or (ii) any Loan Party fails after the applicable grace or notice period, if any, specified in the relevant document on the date
of such failure to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or
Contingent Obligation having an aggregate principal amount of more than $1,000,000, if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared
to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (iii) any Indebtedness or Contingent
Obligations of any Loan Party in excess of $1,000,000 shall be declared due and payable prior to its stated maturity or cash collateral is demanded in respect of such Contingent Obligations; or 

        (f)    Insolvency; Voluntary Proceedings. Any Loan Party or BreitBurn GP LLC (i) generally fails to pay, or admits in
writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) commences any Insolvency Proceeding with
respect to itself; or (iii) takes any action to effectuate or authorize any of the foregoing; or 

        (g)   Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against any Loan Party or
BreitBurn GP LLC, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against all or a substantial part of the Company's or any Guarantor's properties, and
any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) any Loan Party or BreitBurn GP LLC admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or
similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) any Loan Party or BreitBurn GP LLC acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or 

        (h)   Change in Management or Control. Either Halbert Washburn or Randall Breitenbach shall cease or fail for any reason to
serve and function as Co-CEO of BreitBurn GP LLC and shall not be succeeded in such position or other comparable position acceptable to the Lenders, within sixty (60) days by a
Person acceptable to the Lenders or there shall occur a Change of Control; or 

        (i)    Monetary Judgments. One or more non-interlocutory judgments, non-interlocutory orders, decrees or
arbitration awards is entered against any Loan Party or General Partner involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer
does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $1,000,000 or more, and the same shall remain unsatisfied, unvacated and unstayed pending
appeal for a period of 30 days after the entry thereof; or 

51

 

        (j)    Loss of Permit. Any Governmental Authority revokes or fails to renew any material license, permit or franchise of any
Loan Party, or any Loan Party for any reason loses any material license, permit or franchise, or any Loan Party suffers the imposition of any restraining order, escrow, suspension or impounding of
funds in connection with any proceeding (judicial or administrative) with respect to any material license, permit or franchise; and, in each case such revocation, failure or loss could reasonably be
expected to have a Material Adverse Effect; and such default remains unremedied for a period of 30 days after the earlier of (i) the date upon which a Responsible Officer knew or
reasonably should have known of such default or (ii) the date upon which written notice thereof is given to the Company by the Administrative Agent or any Lender; or 

        (k)   Adverse Change. There occurs a Material Adverse Effect; or 

        (l)    Guaranty Default. A Guaranty is for any reason partially (including with respect to future advances) or wholly revoked or
invalidated, or otherwise ceases to be in full force and effect, or such Guarantor or any other Person contests in any manner the validity or enforceability thereof or denies that it has any further
liability or obligation thereunder; or 

        (m)  Material Agreements. Any Loan Party shall fail to observe, perform or comply with any material covenant, agreement,
condition or provision of any material Contractual Obligation including without limitation the following: (i) or Derivative Contracts required under  Section 8.10, (ii) material
leases associated with the Mortgaged Properties and (iii) material agreements governing the
transportation of Oil and Gas from the Mortgaged Properties; or 

        (n)   ERISA. The occurrence of any of the following events: (i) the happening of a Reportable Event which has resulted
or could reasonably be expected to result in a Material Adverse Effect (if not waived by the PBGC or by the Majority Lenders, or if such event can be avoided by any corrective action of the Loan Party
affected thereby, such corrective action is not completed within ninety (90) days after the occurrence of such Reportable Event) with respect to any Pension Plan; (ii) the termination of
any Pension Plan in a "distress termination" under the provisions of Section 4041 of ERISA; (iii) the appointment of a trustee by an appropriate United States District Court to
administer
any Pension Plan; and (iv) the institution of any proceedings by the PBGC to terminate any Pension Plan or to appoint a trustee to administer any such plan; or 

        (o)   Environmental Claims. An Environmental Claim shall have been asserted against any Loan Party which could have a Material
Adverse Effect; or 

        9.02    Remedies.    If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request
of, or may, with the consent of, the Majority Lenders: 

        (a)   declare
the Commitment, if any, of each Lender to make Loans and issue Letters of Credit to be terminated, and/or declare all or any part of the unpaid principal of the
Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be immediately due and payable, whereupon the same shall become due and payable, without
presentment, demand, protest, notice of intention to accelerate, notice of acceleration or any other notice of any kind, all of which are hereby expressly waived by each Loan Party. 

52

  

        (b)   exercise
on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law;  provided, however,
that upon the occurrence of any event specified in Subsection
(f) or (g) of Section 9.01 (in the case of clause (i) of  Subsection
(g) upon the expiration of the 60-day period mentioned therein), the obligation of each Lender to make Loans and issue Letters of
Credit shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further
act of the Administrative Agent, or any Lender and without presentment, demand, protest, notice of intention to accelerate, notice of acceleration or any other notice of any kind, all of which are
hereby expressly waived by each Loan Party. 

        (c)   All
proceeds realized from the liquidation or other disposition of collateral or otherwise received after maturity of the Notes, whether by acceleration or otherwise,
shall be applied: first, to reimbursement of expenses and indemnities provided for in this Agreement and the Security Documents;  second, to accrued
interest on the Notes; third, to fees owed to the Administrative Agent or any Lender;  fourth, pro rata to principal outstanding on the Notes and the
Indebtedness referred to in  Clause (g) of the definition of "Indebtedness" owing to a Lender or an Affiliate of a Lender;  fifth, to serve as
cash collateral to be held by the Administrative Agent to secure the LC Obligation;
sixth, to any other Indebtedness; and any excess shall be paid to the Company or as otherwise required by any Governmental Authority. 

        9.03    Rights Not Exclusive.    The rights provided for in this Agreement and the other Loan Documents are cumulative
and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. 

 
 

ARTICLE X.    
    
    ADMINISTRATIVE AGENT    
    

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

        10.02    Duties and Obligations of Administrative Agent.    The Administrative Agent shall not have any duties or
obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing (the use of the term "agent" herein and in the other Loan Documents with reference to the Administrative Agent is not
intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law; rather, such term is used merely as a matter of market custom, and is
intended to create or reflect only an administrative relationship between independent contracting parties), (b) the Administrative Agent shall not have any duty to take any discretionary action
or exercise any discretionary powers, except as provided in Section 10.03, and (c) except as expressly set forth herein, the
Administrative Agent shall have no duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any of its Subsidiaries that is communicated to or
obtained by the Lender serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written
notice thereof is given to the Administrative Agent by the Company or a Lender, and shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan Document, (ii) the 

53

 

contents
of any certificate, report or other document delivered hereunder or under any other Loan Document or in connection herewith or therewith, (iii) the performance or observance of any of
the covenants, agreements or other terms or conditions set forth herein or in any other Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article V or
elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or as to those conditions precedent expressly required to be to the
Administrative Agent's satisfaction, (vi) the existence, value, perfection or priority of any collateral security or the financial or other condition of the Loan Parties or any other obligor or
guarantor, or (vii) any failure by the Company or any other Person (other than itself) to perform any of its obligations hereunder or under any other Loan Document or the performance or
observance of any covenants, agreements or other terms or conditions set forth herein or therein. 

        10.03    Action by Administrative Agent.    The Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing as directed by the
Majority Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 2.05)
and in all cases the Administrative Agent shall be fully justified in failing or refusing to act hereunder or under any other Loan Documents unless it shall (i) receive written instructions
from the Majority Lenders or the Lenders, as applicable, (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in  Section 9.02)
specifying the action to be taken and (ii) be indemnified to its satisfaction by the Lenders against any and all liability
and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions as aforesaid and any action taken or failure to act pursuant thereto by the
Administrative Agent shall be binding on all of the Lenders. If a Default
has occurred and is continuing, then the Administrative Agent shall take such action with respect to such Default as shall be directed by the Majority Lenders in the written instructions (with
indemnities) described in this Section 10.03, provided that, unless and until the Administrative
Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interests of the Lenders. In no event, however, shall the Administrative Agent be required to take any action which exposes the Administrative Agent to personal liability or
which is contrary to this Agreement, the Loan Documents or applicable law. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of
the Majority Lenders or the Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in  Section 2.05), and otherwise the
Administrative Agent shall not be liable for any action taken or not taken by it hereunder or under any other
Loan Document or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own
gross negligence or willful misconduct. 

        10.04    Reliance by Administrative Agent.    The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the
proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for
relying thereon and the Company, the Lenders and the Issuing Lenders hereby waives the right to dispute the Administrative Agent's record of such statement, except in the case of gross negligence or
willful misconduct by the Administrative Agent. The Administrative Agent may consult with legal counsel (who may be counsel for the Company), independent accountants and other experts selected by it,
and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may deem and treat the 

54

 

payee
of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the
Administrative Agent. 

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

        10.06    Administrative Agent as Lender.    Administrative Agent 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 Administrative Agent, and it and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Company or any Subsidiary or other Affiliate thereof as if it were not Administrative Agent hereunder. 

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

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

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

55

 

agents
and counsel and all other amounts due the Lenders and the Administrative Agent under Section 11.04) allowed in such judicial proceeding;
and 

        (b)   to
collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the
Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements
and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 11.04. 

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

        10.09    Authority of Administrative Agent to Release Collateral and Liens.    Each Lender and Issuing Lender hereby
authorizes the Administrative Agent to release any collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents. Each Lender and Issuing Lender hereby authorizes the
Administrative Agent to execute and deliver to the Company, at the Company's sole cost and expense, any and all releases of Liens, termination statements, assignments, or other documents reasonably
requested by the Company in connection with any sale or other disposition of property to the extent such sale or other disposition is permitted by the terms of  Section 8.02 or is otherwise
authorized by the terms of the Loan Documents. 

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

        10.11    Successor Administrative Agent.    The Administrative Agent may resign as the Administrative Agent upon
30 days' notice to the Lenders. If the Administrative Agent resigns under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor administrative agent reasonably
satisfactory to the Company in the same capacity as the retiring Administrative Agent for the Lenders. If no successor administrative agent is appointed prior to the effective date of the resignation
of such retiring Administrative Agent, such retiring Administrative Agent may appoint, after consulting with the Lenders, a successor administrative agent from among the Lenders. Upon the acceptance
of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as the Administrative Agent shall be terminated. After any
retiring Administrative Agent's resignation hereunder as the Administrative Agent, the provisions of this Article X and  Sections 11.04
and 11.05 shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was the Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as the Administrative Agent in the same capacity as the retiring
Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent shall either withdraw its resignation or
may appoint as a successor administrative agent a commercial Lender organized under the laws of the United States of America or of any State thereof having a commercial capital surplus of at least
$500,000,000. 

56

 

        10.12    Withholding Tax.    

        (a)   If
any Lender is a not a "United States person" within the meaning of Section 7701(a)(3) of the Code (a
"Foreign Lender"), such Foreign Lender agrees with and in favor of the Administrative Agent, to deliver to the Administrative Agent prior to receipt of
any payment subject to withholding under the Code (or upon accepting an assignment or participation of an interest herein), two duly signed completed copies of either IRS
Form W-8BEN or any successor thereto (relating to such Foreign Lender and entitling it to a complete exemption from withholding tax on all payments to be made to such Foreign Lender
by the Company pursuant to this Agreement) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Foreign Lender by the Company pursuant to this
Agreement) or such other evidence satisfactory to the Company that such Foreign Lender is entitled to a complete exemption from U.S. withholding tax, including any exemption pursuant to
Section 881(c) of the Code. Thereafter and from time to time, each such Foreign Lender shall (i) promptly submit to the Company such additional duly completed and signed copies of one of
such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and
regulations to avoid, or such evidence as is satisfactory to the Company of any available complete exemption from United States withholding taxes in respect of all payments to be made to such Foreign
Lender by the Company pursuant to this Agreement, and (ii) promptly notify the Administrative Agent and the Company of any change in circumstances which would modify or render invalid any
claimed exemption. 

        (b)   Each
Foreign Lender, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums paid or payable to that Lender under any
of the Loan Documents (for example, in the case of a typical participation by that Lender), shall deliver to the Administrative Agent on the date when such Foreign Lender ceases to act for its own
account with respect to any portion of any such sums paid or payable, and at such other times as may be necessary in the determination of the Administrative Agent (in the reasonable exercise of its
discretion), (i) two duly signed completed copies of the forms or statements required to be provided by that Lender as set forth above, to establish the portion of any such sums paid or payable
with respect to which that Lender acts for its own account that is not subject to U.S. withholding tax, and (ii) two duly signed completed copies of IRS Form W-8IMY (or any
successor thereto), together with any information that is required by the Code and Treasury regulations promulgated thereunder and any additional information that Lender chooses to transmit with such
form, and any other certificate or statement of exemption required under the Code, to establish that that Lender is not acting for its own account with respect to a portion of any such sums payable to
that Lender. 

        (c)   The
Company shall not be required to pay any additional amount to any Foreign Lender under Section 3.01:
(i) with respect to any Taxes or Other Taxes required to be deducted or withheld on the basis of the information, certificates or statements of exemption that Foreign Lender transmits with an
IRS Form W-8IMY pursuant to Subsection 10.12(b) or (ii) if that Foreign Lender shall have failed to satisfy the foregoing
provisions of this Section 10.12. 

        (d)   Each
Lender that is a "United States person" within the meaning of Section 7701(a)(30) of the Code
("Domestic Lender") shall deliver to the Administrative Agent two duly signed completed copies of IRS Form W-9. If that Domestic
Lender fails to deliver such forms, then the Company may withhold from any interest payment to that Domestic Lender an amount equivalent to the applicable back-up withholding tax imposed
by the Code, without reduction. Thereafter and from time to time, each such Domestic Lender shall (i) promptly submit to the Company such additional duly completed and signed copies of one of
such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States laws and
regulations to avoid, or such evidence as is 

57

 

satisfactory
to the Company of any available exemption from United States withholding taxes in respect of all payments to be made to such Domestic Lender by the Company pursuant to this Agreement, and
(ii) promptly notify the Company of any change in circumstances which would modify or render invalid any claimed exemption. 

        (e)   No
Assignee shall be entitled to the benefits of Section 3.01 unless the Company is notified of the assignment and
such Assignee has complied with the requirements of this Section 10.12. 

        (f)    If
any Lender is entitled to a reduction in the applicable withholding tax, the Administrative Agent may withhold from any payment to such Lender an amount equivalent to
the applicable withholding tax after taking into account such reduction. If (i) a Lender does not deliver the forms or other
documentation required this Section 10.12 to the Administrative Agent, or (ii) the Company is required by law to deduct and withhold from
or in respect of any amounts payable under any Loan Document to a Lender but is not required to pay additional amounts under Section 3.01 with
respect to such payment, then the Administrative Agent may deduct from any payment to such Lender an amount equivalent to the applicable withholding tax. 

        (g)   If
the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that the Administrative Agent did not properly withhold tax
from amounts paid to or for the account of any Lender (because the appropriate form was not delivered, was not properly executed, or because such Lender failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Lender shall indemnify the Administrative Agent fully for all
amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to
the Administrative Agent under this Section, together with all costs and expenses (including Attorney Costs). The obligation of the Lenders under this subsection shall survive the payment of all
Obligations and the resignation or replacement of the Administrative Agent. 

 
 

ARTICLE XI.    
    
    MISCELLANEOUS    
    

        11.01    Amendments and Waivers.    No amendment, modification, termination or waiver of any provision of this
Agreement or any other Loan Document, and no consent with respect to any departure by the Company or any applicable Loan Party therefrom, shall be effective unless the same shall be in writing and
signed by the Majority Lenders (or by the Administrative Agent at the written request of the Majority Lenders) and the Company and acknowledged by the Administrative Agent, and then any such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which given; provided,  however, that no such waiver, amendment,
modification, termination or consent shall, unless in writing and signed by all the Lenders and the Company, on
behalf of the Loan Parties, and acknowledged by the Administrative Agent, do any of the following: 

        (a)   increase
or extend the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 9.02),
or increase the maximum amount of Letters of Credit; 

        (b)   postpone
the final maturity date of any Loan, or postpone or delay any date fixed by this Agreement or any other Loan Document for any payment of principal, interest,
fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document; 

        (c)   reduce
the principal of, or the rate of interest specified herein on any Loan, or any fees or other amounts payable hereunder or under any other Loan Document; 

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        (d)   change
the Pro Rata Shares or change in any manner the definition of "Majority Lenders" or
"Required Lenders"; 

        (e)   amend
this Section 11.01 or any provision of this Agreement which, by its terms, expressly requires the approval
or concurrence of all Lenders; 

        (f)    release
all, substantially all, or any material portion of the Collateral (except for releases in connection with dispositions of assets which are permitted hereunder or
under any Loan Document), or release any Subsidiary from any Guaranty; 

        (g)   reduce
the amount or postpone the due date of any amount payable in respect of, or extends the required expiration date of, any Letter of Credit, or change in any manner
the obligations of Lenders relating to the purchase of participations in Letters of Credit; or 

        (h)   increase
the Borrowing Base pursuant to Section 2.05, provided,
the Required Lenders may maintain or decrease the Borrowing Base pursuant to Section 2.05; 

and;
provided further, that (i) any amendment, modification, termination or waiver of any of the provisions contained in  Article V shall be
effective only if evidenced by a writing signed by or on behalf of the Administrative Agent and the Majority Lenders,
(ii) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the Majority Lenders or all the Lenders, as the case may be, affect the rights or
duties of the Issuing Lender under this Agreement or any LC Related Document relating to any Letter of Credit Issued or to be Issued by it, and (iii) no amendment, waiver or consent shall,
unless in writing and signed by the Administrative Agent in addition to the Majority Lenders or all the Lenders, as the case may be, affect the rights or duties of the Administrative Agent under this
Agreement or any other Loan Document. 

        11.02    Notices.    

        (a)   All
notices, requests and other communications shall be in writing and mailed, faxed or delivered, to the address or facsimile number specified for notices on  Schedule 11.02; or, as directed to
the Company or the Administrative Agent, to such other address as shall be designated by such party in a
written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Administrative Agent. 

        (b)   All
such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day)
delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery;
except that notices pursuant to Article II or IX shall not be effective until actually received. 

        (c)   Any
agreement of the Administrative Agent and the Lenders herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of
the Company. The Administrative Agent and the Lenders shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the
Administrative Agent and the Lenders shall not have any liability to the Company or other Person on account of any action taken or not taken by the Administrative Agent or the Lenders in reliance upon
such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Administrative Agent and the Lenders to
receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent and the Lenders of a confirmation which is at variance with the terms understood by the
Administrative Agent and the Lenders to be contained in the telephonic or facsimile notice. 

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        11.03    No Waiver; Cumulative Remedies.    No failure to exercise and no delay in exercising, on the part of the
Administrative Agent or any Lender, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 

        11.04    Costs and Expenses.    The Company shall: 

        (a)   whether
or not the transactions contemplated hereby are consummated, pay or reimburse the Administrative Agent within five (5) Business Days after demand (subject
to Subsection 5.01(c)) for all reasonable costs and expenses incurred by the Administrative Agent in connection with the development, preparation,
delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other
documents prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and thereby, including Attorney Costs incurred by the Administrative Agent with respect thereto except such costs and expenses as may be incurred
by the assignor Lenders or Assignee under Subsection 11.08(c); and 

        (b)   pay
or reimburse the Administrative Agent and each Lender within five (5) Business Days after demand (subject to Subsection
5.01(c)) for all costs and expenses (including Attorney Costs) incurred by each of them in connection with the enforcement, attempted enforcement, or preservation of any rights
or remedies under this Agreement or any other Loan Document during the existence of an Event of Default or after acceleration of the Loans (including in connection with any "workout" or restructuring
regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 

        11.05    Indemnity.    Whether or not the transactions contemplated hereby are consummated, the Company shall
indemnify and hold the Agent-Related Persons, and each Lender and each of their respective officers, directors, employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans, and the termination,
resignation or replacement of the Administrative Agent or replacement of any Lender) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this
Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the
foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans
or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities") WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE OUT OF OR AS A RESULT OF ANY INDEMNIFIED PARTY'S NEGLIGENCE IN WHOLE OR IN PART, INCLUDING, WITHOUT LIMITATION,
THOSE CLAIMS WHICH RESULT FROM THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED PARTY, OR ANY ONE OR MORE OF THEM; provided,
that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities to the extent same arise from (i) the gross negligence or willful
misconduct of any Indemnified Person or (ii) a claim or action asserted by one or more other Indemnified Persons. The agreements in this Section shall survive payment of all other Obligations. 

60

   
        11.06    Payments Set Aside.    To the extent that the Company makes a payment to the Administrative Agent or the
Lenders, or the Administrative Agent or the Lenders exercise their right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be
repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then (a) to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Lender severally
agrees to pay to the Administrative Agent upon demand its pro rata share of any amount so recovered from or repaid by the Administrative Agent. 

        11.07    Successors and Assigns.    Except for all provisions in  Section 11.08, the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent and each
Lender. 

        11.08    Assignments, Participations, etc.    

        (a)   Any
Lender may upon written consent of the Administrative Agent, the Issuing Lender and Borrower, which consent shall not be unreasonably withheld (provided at any time
that an Event of Default has occurred and is continuing, no approval from the Company shall be required), at any time, assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Administrative Agent or the Issuing Lender shall be required in connection with any assignment and delegation
by the Lender to an Eligible Assignee that is an Affiliate of such Lender) (each an "Assignee") all, or any ratable part of all in a minimum commitment
amount at least equal to $5,000,000 or in $1,000,000 increments in excess thereof, of the Loans, the Commitments, and the other rights and obligations of such Lender hereunder;  provided, however, that the Company and the Administrative Agent may continue to deal solely and
directly with such Lender in connection with the interest so assigned to an Assignee until (i) written notice of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to the Company and the Administrative Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall have
delivered to the Company and the Administrative Agent an Assignment and Acceptance in the form of Exhibit D ("Assignment
and Acceptance") together with any Note or Notes subject to such assignment and (iii) the assignor Lender or Assignee has paid to the Administrative Agent a processing
fee in the amount of $3,000.00. 

        (b)   From
and after the date that the Administrative Agent notifies the assignor Lender that it has received an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender under the Loan Documents, and (ii) the assignor Lender shall, to the extent that rights and obligations hereunder
and under the other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under the Loan Documents. 

        (c)   Within
five (5) Business Days after its receipt of notice by the Administrative Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, (and provided that it consents to such assignment in accordance with Subsection
11.08(a)) the Company shall execute and deliver to the Administrative Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and, if the assignor Lender has
retained a portion of its Loans and its Commitment, replacement Notes in the principal amount of the Loans retained by the 

61

 

assignor
Lender (such Notes to be in exchange for, but not in payment of, the Notes held by such Lender, which shall be cancelled upon receipt of the new or replacement Notes). Immediately upon each
Assignee's making its processing fee payment under the Assignment and Acceptance, this Agreement shall be deemed to be amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Commitments arising therefrom. The Commitment allocated to each Assignee shall reduce such Commitments of the assigning Lender  pro tanto. 

        (d)   Any
Lender may at any time sell to one or more commercial Lenders or other Persons not Affiliates of the Company (a
"Participant") participating interests in any Loans, the Commitment of that Lender and the other interests of that Lender (the
"Originating Lender") hereunder and under the other Loan Documents; provided, however, that
(i) the originating Lender's obligations under this Agreement shall remain unchanged, the originating Lender shall remain a Lender for all purposes hereof and the other Loan Documents to which
such originating Lender is a party, and the Participant may not become a Lender for purposes hereof or for any other of the Loan Documents, (ii) the originating Lender shall remain solely
responsible for the performance of such obligations, (iii) the Company and the Administrative Agent shall continue to deal solely and directly with the originating Lender in connection with the
originating Lender's rights and obligations under this Agreement and the other Loan Documents, and (iv) no Lender shall transfer or grant any participating interest under which the Participant
has rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Loan Document, except to the extent such amendment, consent or waiver would require
unanimous consent of the Lenders. In the case of any such participation, the Participant shall not have any rights under this Agreement, or any of the other Loan Documents (the Participant's rights
against the granting Lender in respect of such participation being those set forth in the agreement creating or evidencing such participation with such Lender), and all amounts payable by the Company
hereunder shall be determined as if such Lender had not sold such participation; except that, if amounts outstanding under this Agreement are due and unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. 

        (e)   Each
Lender agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any of its Subsidiaries, or by the Administrative Agent on such Company's or Subsidiary's behalf, under or in connection with this
Agreement or any other Loan Document, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement and the other Loan
Documents; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by any Lender or the Administrative Agent, or
(ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not
bound by a confidentiality agreement with the Company known to the Lender; provided, however, that any
Lender may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Lender is subject or in connection with an examination of such
Lender by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law;
(D) to the extent reasonably required in connection with any litigation or proceeding to which the Administrative Agent, any Lender or their respective Affiliates may be party; (E) to
the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document; (F) to such Lender's independent auditors and other professional
advisors; (G) to any Affiliate of such Lender, or to any Participant 

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or
Assignee, actual or potential, provided that such Affiliate, Participant or Assignee agrees to keep such information confidential to the same extent
required of the Lenders hereunder, and (H) as to any Lender, as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company is party or
is deemed party with such Lender. 

        (f)    Notwithstanding
any other provision in this Agreement, any Lender may at any time create a security interest in, or pledge, all or any portion of its rights under and
interest in this Agreement and the Notes held by it in favor of any Federal Reserve Lender in accordance with Regulation A of the FRB or U.S. Treasury Regulation 31 CFR
§203.14, and such Federal Reserve Lender may enforce such pledge or security interest in any manner permitted under applicable law. 

        11.09    Interest.    

        (a)   It
is the intention of the parties hereto to comply with applicable usury laws, if any; accordingly, notwithstanding any provision to the contrary in this Agreement, the
Notes or in any of the other Loan Documents securing the payment hereof or otherwise relating hereto, in no event shall this Agreement, the Notes or such other Loan Documents require or permit the
payment, taking, reserving, receiving, collection, or charging of any sums constituting interest under applicable laws which exceed the maximum amount permitted by such laws. If any such excess
interest is called for, contracted for,
charged, taken, reserved, or received in connection with the Loans evidenced by the Notes or in any of the Loan Documents securing the payment thereof or otherwise relating thereto, or in any
communication by the Administrative Agent, the Issuing Lender or the Lenders or any other Person to the Company or any other Person, or in the event all or part of the principal or interest thereof
shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved, or received on the
amount of principal actually outstanding from time to time under the Notes or any other Loan Document shall exceed the maximum amount of interest permitted by applicable usury laws, then in any such
event it is agreed as follows: (i) the provisions of this paragraph shall govern and control, (ii) neither any Company nor any other Person now or hereafter liable for the payment of the
Notes or any Obligation shall be obligated to pay the amount of such interest to the extent such interest is in excess of the maximum amount of interest permitted by applicable usury laws,
(iii) any such excess which is or has been received notwithstanding this paragraph shall be credited against the then unpaid principal balance of the Notes or other Obligations, as applicable,
or, if the Notes or other Obligations, as applicable, have been or would be paid in full, refunded to the Company, and (iv) the provisions of this Agreement, the Notes and the other Loan
Documents securing the payment thereof and otherwise relating thereto, and any communication to the Company, shall immediately be deemed reformed and such excess interest reduced, without the
necessity of executing any other document, to the maximum lawful rate allowed under applicable laws as now or hereafter construed by courts having jurisdiction hereof or thereof. Without limiting the
foregoing, all calculations of the rate of the interest contracted for, charged, collected, taken, reserved, or received in connection with the Notes, this Agreement or any other Loan Document which
are made for the purpose of determining whether such rate exceeds the maximum lawful rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading
during the period of the full term of the Loans or other Obligations, as applicable, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged,
taken, collected, reserved, or received. The terms of this paragraph shall be deemed to be incorporated in every document and communication relating to the Notes, the Loans or any other Loan Document. 

        (b)   Texas
Finance Code, Chapter 346 (formerly Tex. Rev. Civ. Stat., Title 79, Chapter 15), which regulates certain revolving loan accounts and revolving
tri-party accounts, shall not apply to 

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any
revolving loan accounts created under the Notes, this Agreement or the other Loan Documents or maintained in connection therewith. 

        (c)   To
the extent that the interest rate laws of the State of Texas are applicable to the Loans or any other Obligations, the applicable interest rate ceiling is the weekly
ceiling (formerly the indicated rate ceiling) determined in accordance with Tex. Rev. Civ. Stat., Title 79, Article 5069-1D.003, also codified at Texas Finance Code,
Section 303.301 (formerly Article 5069-1.01(a)(1)), and, to the extent that this Agreement, the Notes or any other Loan Document is deemed an open end account as such term is
defined in Tex. Rev. Civ. Stat., Title 79, Article 5069-1B.002(14), also codified at Texas Finance Code Section 3.01.001(3) (formerly
Article 5069-1.01(f)), the payee retains the right to modify the interest rate in accordance with applicable law. 

        11.10    Indemnity and Subrogation.    In addition to all such rights of indemnity and subrogation as any Guarantor
may have under applicable law, the Company agrees that in the event a payment shall be made by any Guarantor under a Guaranty in respect of a Loan to the Company the Company shall indemnify such
Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment subject to the
provisions of the Guaranty executed by such Guarantor. Notwithstanding any provision of this Agreement to the contrary, all rights of any Guarantor under this  Section 11.10 and all other
rights of indemnity, contribution or subrogation under applicable law or otherwise shall be fully subordinated to the
indefeasible payment in full of the Obligations, and no payments may be made in respect of such rights of indemnity, contribution or subrogation until all the Obligations have been paid in full and
all Commitments have expired. No failure on the part of the Company to make the payments required by this Section (or any other payments required under applicable law or otherwise) shall in any
respect limited the obligations and liabilities required under applicable law or otherwise) shall in any respect limit the obligations and liability of any Guarantor with respect to any Guaranty, and
Guarantor shall remain liable for the full amount of the obligation of such Guarantor under each such Guaranty in accordance therewith. 

        11.11    Collateral Matters; Derivative Contracts.    The benefit of the Security Documents and of the provisions of
this Agreement relating to any collateral securing the Indebtedness shall also extend to and be available to any Lender or any Affiliate of a Lender that is counterparty to any Derivative Contract
with the Company or any of its Subsidiaries (including any Derivative Contract between such Persons in existence prior to the Effective Date) on a pro
rata basis in respect of any obligations of the Company or any of its Subsidiaries which arise under any such Derivative Contract; provided
that the applicable counterparty must have provided Administrative Agent written notice of the existence thereof (such notice to include a summary of the contract date, price,
volumes and other terms of such Derivative Contracts as Administrative Agent may reasonably request) and such transaction must not otherwise be prohibited under this Agreement at the time it was
entered into and provided further that if such Lender or Affiliate ceases to be a Lender (a) its Derivative Contract obligations shall be secured
pari passu with the Lenders' Obligations but only to the extent such counterparty's obligations arise from transactions entered into at the time such counterparty was a Lender hereunder or an
Affiliate of a Lender hereunder, and (b) such counterparty shall have no voting rights under any Loan Documents as a result of the existence of obligations owed to it under any such Derivative
Contract. For the avoidance of doubt, a Person ceases to be a Lender hereunder if (i) pursuant to an assignment, such Person ceases to have any Commitment, Loans and LC Obligation hereunder or
(ii) the Commitments of all of the Lenders hereunder have been terminated and all principal, interest and other amounts outstanding under this Agreement have been paid in full in cash (whether
as a result of repayment at maturity, prepayment in connection with the refinancing of this Agreement or otherwise). 

        11.12    USA Patriot Act Notice.    Each Lender hereby notifies the Loan Parties that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 

64

 

2001))
(the "Act"), it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and
address of such Loan Party and other information that will allow such Lender to identify the Loan Party, insofar as it is needed to comply with the Act, in accordance with the Act. Each Loan Party
hereby represents and warrants to Administrative Agent and each Lender that such Loan Party is not a country, individual or entity named on the "Specifically Designated
National and Blocked Persons" list issued by the Office of Foreign Asset Control of the Department of the Treasury of the United States of America. 

        11.13    Automatic Debits of Fees.    With respect to any commitment fee, arrangement fee, letter of credit fee or
other fee, or any other cost or expense (including Attorney Costs) due and payable to the Administrative Agent under the Loan Documents, the Company hereby irrevocably authorizes the Administrative
Agent, after giving reasonable prior notice to the Company, to debit any deposit account of the Company with the Administrative Agent in an amount such that the aggregate amount debited from all such
deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in the Administrative Agent's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed
a set-off. 

        11.14    Notification of Addresses, Lending Offices, Etc.    Each Lender shall notify the Administrative Agent in
writing of any changes in the address to which notices to the Lender should be directed, of addresses of any Lending Office, of payment instructions in respect of all payments to be made to it
hereunder and of such other administrative information as the Administrative Agent shall reasonably request. 

        11.15    Counterparts.    This Agreement may be executed in any number of separate counterparts, each of which, when
so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 

        11.16    Severability.    The illegality or unenforceability of any provision of this Agreement or any instrument or
agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 

        11.17    No Third Parties Benefited.    This Agreement is made and entered into for the sole protection and legal
benefit of the Company, the other Loan Parties, the Lenders, the Administrative Agent and the Agent-Related Persons, and their permitted successors and assigns, and no other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 

        11.18    Governing Law, Jurisdiction and Waiver of Jury Trial.    The provisions of  Section 11.19 hereof shall govern the
resolution of any Dispute (as such term is defined in such  Section 11.19). If, however, the provisions of Section 11.19 are not
invoked as therein
provided, the following provisions shall apply: 

        (a)   THIS
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAW; AND THE ADMINISTRATIVE
AGENT AND THE LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. 

        (b)   EACH
LOAN PARTY PARTY HERETO IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SCHEDULE 11.02. SUCH SERVICE TO
BECOME EFFECTIVE 

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TEN
DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. 

        (c)   ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF TEXAS, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH LOAN PARTY CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH LOAN PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH LOAN PARTY WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS, AND CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS FOR
NOTICES SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE TEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW. 

        (d)   THE
LOAN PARTIES, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES
AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE LOAN PARTIES, THE LENDERS AND THE ADMINISTRATIVE
AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 

        11.19    ARBITRATION.    

        (a)    Arbitration.    Upon the demand of any party to any Loan Document, any Dispute shall be resolved by binding
arbitration (except as set forth in (e) below) in accordance with the terms hereof. A "Dispute" shall mean any action, dispute, claim or
controversy of any kind, whether in contract or tort, statutory or common law, legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, any of
the Loan Documents, or any past, present or future extensions of credit and other activities, transactions or obligations of any kind related directly or indirectly to any of the Loan Documents,
including without limitation, any of the foregoing arising in connection with the exercise of any self-help, ancillary or other remedies 

66

 

pursuant
to any of the Loan Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a Dispute. Any party who fails or refuses to submit to arbitration
following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute. 

        (b)    Governing Rules.    Arbitration proceedings shall be administered by the American Arbitration Association
("AAA") or such other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes
submitted to arbitration shall be resolved in accordance with the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the
Loan Documents. The arbitration shall be conducted at a location in Texas selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the
terms and procedures set forth herein shall control. All statutes of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited
to matters directly relevant to the Dispute being arbitrated.
Judgment upon any award rendered in an arbitration may be entered in any court having jurisdiction; provided however, that nothing contained herein shall be deemed to be a waiver by any party that is
a Lender of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law. 

        (c)    No Waiver; Provisional Remedies, Self-Help and Foreclosure.    No provision hereof shall limit the
right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary
remedies, including without limitation injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the
pendency of any arbitration or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration hereunder. 

        (d)    Arbitrator Qualifications and Powers; Awards.    Arbitrators must be active members of the Texas State Bar with
expertise in the substantive laws applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary rulings in response to motions filed prior to the final
arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance with the substantive law of the state of Texas, (ii) may grant any remedy or relief that a court of the
state of Texas could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award, and (iii) shall have the power to award recovery of all costs
and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas rules of civil
procedure, as set forth in the Texas Code of Civil Procedure and the Court Rules or other applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of greater than $5,000,000 (including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or
claim to recover more than $5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided however, that all
three arbitrators must actively participate in all hearings and deliberations. 

        (e)    Judicial Review and Other Exceptions.    Notwithstanding anything herein to the contrary: (i) In any
arbitration in which the amount in controversy exceeds $25,000,000, the arbitrators shall be required to make specific, written findings of fact and conclusions of law. In such arbitrations
(A) the arbitrators shall not have the power to make any award which is not supported by substantial evidence or which is based on legal error, (B) an award shall not be binding upon the
parties unless the findings of fact are supported by substantial evidence and the conclusions of law are not erroneous under the substantive law of the state of Texas, and (C) the parties shall
have in addition to the grounds referred to in the Federal Arbitration Act for vacating, modifying or 

67

 

correcting
an award the right to judicial review of (1) whether the findings of fact rendered by the arbitrators are supported by substantial evidence, and (2) whether the conclusions of
law are erroneous under the substantive law of the state of Texas. Judgment confirming an award in such a proceeding may be entered only if a court determines the award is supported by substantial
evidence and not based on legal error under the substantive law of the state of Texas; and (ii) Determinations of the Borrowing Base pursuant to  Section 2.05 hereof shall not be subject
to review or challenge under this Section 11.19.
 

        (f)    Miscellaneous.    To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all
action required to conclude any arbitration proceeding within 180 days of the filing of the Dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to
exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the parties potentially applies to a Dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the Dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any
relationship between the parties. 

        11.20    Entire Agreement.    This Agreement, together with the other Loan Documents, embodies the entire agreement
and understanding among the Company, its Subsidiaries, the Lenders and the Administrative Agent, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof. 

        11.21    NO ORAL AGREEMENTS.    THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED
IN CONNECTION HEREWITH, 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. 

[THE
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 

68

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

	 	 	THE COMPANY:
	

 	
 	

BREITBURN OPERATING L.P.,

a Delaware limited partnership
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	 	 	GUARANTORS:
	

 	
 	

ALAMITOS COMPANY,

a California corporation
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	

 	
 	

BREITBURN OPERATING GP LLC,

a Delaware limited liability company
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	

 	
 	

BREITBURN ENERGY PARTNERS L.P.,

a Delaware limited partnership
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	

 	
 	

PHOENIX PRODUCTION COMPANY,

a Wyoming corporation
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	

 	
 	

PREVENTIVE MAINATENANCE SERVICES, LLC,

a Colorado limited liability company
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Administrative Agent and a Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	

 	
 	
WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Issuing Lender
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	 	

	 	 	Title:	 
	 	 	 	

	 	 	HARRIS NESBITT FINANCING, INC.,

a Lender
	

 	
 	

By:	

 
	 	 	 	
 James V. Ducote

Vice President

	 	 	CITIBANK TEXAS, NATIONAL

ASSOCIATION, a Lender
	

 	
 	

By:	

 
	 	 	 	
 Larry Holden

Senior Vice President

	 	 	THE BANK OF NOVA SCOTIA, a Lender
	

 	
 	

By:	

 
	 	 	 	
 William E. Zarrett

Managing Director

	 	 	UNION BANK OF CALIFORNIA, N.A.,

a Lender
	

 	
 	

By:	

 
	 	 	 	
 Dustin Gaspari

Vice President

QuickLinks

ARTICLE I. DEFINITIONS

ARTICLE II. THE CREDIT

ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY

ARTICLE IV. SECURITY

ARTICLE V. CONDITIONS PRECEDENT

ARTICLE VI. REPRESENTATIONS AND WARRANTIES

ARTICLE VII. AFFIRMATIVE COVENANTS

ARTICLE VIII. NEGATIVE COVENANTS

ARTICLE IX. EVENTS OF DEFAULT

ARTICLE X. ADMINISTRATIVE AGENT

ARTICLE XI. MISCELLANEOUSQuickLinks
 -- Click here to rapidly navigate through this document
Exhibit 10.2  

 

FORM OF

CONTRIBUTION, CONVEYANCE AND ASSUMPTION

AGREEMENT  

 

   TABLE OF CONTENTS  

	ARTICLE I    DEFINITIONS	 	2
	

Section 1.1	
 	

Terms.	
 	

2
	

 ARTICLE II    CONTRIBUTIONS, ACKNOWLEDGMENTS AND DISTRIBUTIONS	

 	

5
	

Section 2.1	
 	

Contribution of Interests by BreitBurn Energy to Operating LP and Operating GP.	
 	

5
	

Section 2.2	
 	

Distribution and Assignment of Interests in Operating GP and Operating LP by BreitBurn Energy to Pro GP, Pro LP and BEC.	
 	

5
	

Section 2.3	
 	

Contribution of Interests by Pro GP, Pro LP and BEC to the General Partner.	
 	

5
	

Section 2.4	
 	

Contribution of Interests by the General Partner to the Partnership.	
 	

5
	

Section 2.5	
 	

Contribution of Interests in Operating GP and Operating LP by Pro GP, Pro LP and BEC to the Partnership.	
 	

5
	

Section 2.6	
 	

Public Cash Contribution.	
 	

6
	

Section 2.7	
 	

Payment of Transaction Expenses by the Partnership; Distribution to Pro GP, Pro LP and BEC by the Partnership; Cash Contribution by the Partnership to Operating LP.	
 	

6
	

Section 2.8	
 	

Contribution of Interests in the General Partner by Pro GP, Pro LP and BEC to BreitBurn Management.	
 	

6
	

Section 2.9	
 	

Contribution of Interests in the General Partner by Pro GP, Pro LP and BEC to BreitBurn Management.	
 	

6
	

Section 2.10	
 	

Redemption of the Initial Limited Partner Interest.	
 	

6
	

 ARTICLE III    ASSUMPTIONS OF CERTAIN LIABILITIES; INDEMNIFICATION	

 	

6
	

Section 3.1	
 	

Assumption of Indebtedness.	
 	

6
	

Section 3.2	
 	

Environmental Indemnification.	
 	

6
	

Section 3.3	
 	

Limitations Regarding Environmental Indemnification.	
 	

7
	

Section 3.4	
 	

Additional Indemnification.	
 	

7
	

Section 3.5	
 	

Indemnification Procedures.	
 	

8
	

  ARTICLE IV    ADDITIONAL TRANSACTIONS	

 	

9
	

Section 4.1	
 	

Over-Allotment Option.	
 	

9
	

 ARTICLE V    TITLE MATTERS	

 	

9
	

Section 5.1	
 	

Encumbrances.	
 	

9
	

Section 5.2	
 	

Disclaimer of Warranties; Subrogation; Waiver of Bulk Sales Laws.	
 	

9
	

 ARTICLE VI    FURTHER ASSURANCES	

 	

11
	 	 	 	 	 

i

 

	

 ARTICLE VII    EFFECTIVE TIME	

 	

11
	

 ARTICLE VIII    MISCELLANEOUS	

 	

11
	

Section 8.1	
 	

Order of Completion of Transactions.	
 	

11
	

Section 8.2	
 	

Costs.	
 	

11
	

Section 8.3	
 	

Headings; References; Interpretation.	
 	

11
	

Section 8.4	
 	

Successors and Assigns.	
 	

12
	

Section 8.5	
 	

No Third Party Rights.	
 	

12
	

Section 8.6	
 	

Counterparts.	
 	

12
	

Section 8.7	
 	

Governing Law.	
 	

12
	

Section 8.8	
 	

Severability.	
 	

12
	

Section 8.9	
 	

Amendment or Modification.	
 	

12
	

Section 8.10	
 	

Integration.	
 	

12
	

Section 8.11	
 	

Deed; Bill of Sale; Assignment.	
 	

12

Schedule A

Schedule B 

Exhibit A

Exhibit B 

ii

 
 

CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT    
    

        This Contribution, Conveyance and Assumption Agreement, dated as of            , 2006, is entered into by and among Pro GP
Corp., a Delaware corporation ("Pro
GP"), Pro LP Corp., a Delaware corporation ("Pro LP"), BreitBurn Energy Corporation, a California corporation ("BEC"), BreitBurn Energy Company LP, a Delaware limited partnership ("BreitBurn Energy"),
BreitBurn Management Company LLC, a Delaware limited liability company ("BreitBurn Management"), BreitBurn GP, LLC, a Delaware limited liability company (the "General Partner"), BreitBurn Energy
Partners L.P., a Delaware limited partnership (the "Partnership"), BreitBurn Operating GP, LLC, a Delaware limited liability company ("Operating GP") and BreitBurn Operating L.P., a Delaware limited
partnership ("Operating LP"). The above-named entities are sometimes referred to in this Agreement each as a "Party" and collectively as the "Parties."
Capitalized terms used herein shall have the meanings assigned to such terms in Section 1.1. 

 
 

RECITALS:    
    

        WHEREAS, the General Partner, BEC, Pro GP and Pro LP have formed the Partnership pursuant to the Delaware Revised
Uniform Limited Partnership Act (the "Delaware LP Act") for the purpose of engaging in any business activity that is approved by the General Partner and that lawfully may be conducted by a limited
partnership organized pursuant to the Delaware LP Act; 

        WHEREAS, in order to accomplish the objectives and purposes in the preceding recital, each of the following actions has been taken prior
to the date hereof: 

        1.     Pro
GP, Pro LP and BEC formed the General Partner under the terms of the Delaware Limited Liability Company Act (the "Delaware LLC Act") and contributed an aggregate of
$1,000 to the General Partner in exchange for all of the member interests in the General Partner; 

        2.     the
General Partner, BEC, Pro GP and Pro LP formed the Partnership under the terms of the Delaware LP Act and the General Partner contributed $20 to the Partnership in
exchange for a 2% general partner interest in the Partnership and BEC, Pro GP and Pro LP contributed an aggregate of $980 to the Partnership in exchange for a 98% limited partner interest in the
Partnership (the "Initial Limited Partner Interest"); 

        3.     BreitBurn
Energy formed Operating GP under the terms of the Delaware LLC Act and contributed $1,000 to Operating GP in exchange for all of the member interests in
Operating GP; and 

        4.     Operating
GP and BreitBurn Energy formed Operating LP under the terms of the Delaware LP Act and contributed $.01 and $999.99 to Operating LP in exchange for a .001%
general partner interest and a 99.999% limited partner interest in Operating LP, respectively; 

        WHEREAS, concurrently with the consummation of the transactions contemplated hereby, each of the following shall occur: 

        1.     BreitBurn
Energy will convey to Operating LP (.001% on behalf of Operating GP) its interests in the Assets (as defined herein) (provided that with respect to the
Non-Consent Assets (as defined herein) same will only be conveyed to the extent provided herein), and Operating LP will assume the Indebtedness (as defined herein); 

        2.     BreitBurn
Energy will distribute its interest in Operating GP and its limited partner interest in Operating LP to Pro GP, Pro LP and BEC in proportion to their ownership
interests in BreitBurn Energy; 

        3.     Pro
GP, Pro LP and BEC will convey a    %,    % and    %, respectively, interest in Operating LP to the General Partner in exchange for a
    %,    % and    %, respectively, member interest in the General Partner (such interests in Operating LP will have an aggregate value equal to 2% of the equity value
of the Partnership at the closing of the transactions contemplated by this Agreement (as defined herein) and shall be referred to herein as the "Interests"); 

 

        4.     the
General Partner will convey the Interests to the Partnership in exchange for a continuation of its 2% general partner interest in the Partnership; 

        5.     Pro
GP, Pro LP and BEC will convey all of their interests in Operating GP and their remaining interests in Operating LP to the Partnership in exchange for
(a) 15,975,758 common units ("Common Units") representing limited partner interests with a 71.24% interest in the Partnership and (b) the right to receive
$[71.6] million to reimburse them for certain capital expenditures made directly by them or through BreitBurn Energy; 

        6.     in
connection with the Partnership's initial public offering (the "Offering"), the public, through the Underwriters (as defined herein), will contribute $            
million in cash to the Partnership, less the Underwriters' discount of and a structuring fee of $400,000, in exchange for 6,000,000 Common Units representing a 26.76% limited partner interest in the
Partnership; 

        7.     the
Partnership will use the proceeds from the Offering of Common Units to (a) pay transaction expenses, which are estimated to be $3.1 million (exclusive
of the Underwriters' discount and the structuring fee), (b) distribute $[71.6] million to Pro GP, Pro LP and BEC to
reimburse them for certain capital expenditures, and (c) contribute the balance, $[36.5] million, to Operating LP (.001%
on behalf of Operating GP), which will use it to retire the Indebtedness; 

        8.     Pro
GP, Pro LP and BEC will convey their interests in the General Partner to BreitBurn Management as a capital contribution; 

        9.     to
the extent that the Underwriters exercise their over-allotment option to purchase up to 900,000 Common Units (the "Over-Allotment Option"), the
Partnership will use the net proceeds to redeem from Pro GP, Pro LP and BEC a number of Common Units owned by Pro GP, Pro LP and BEC (in proportion to their Common Unit ownership) equal to those sold
pursuant to the Over-Allotment Option and to reimburse Pro GP, Pro LP and BEC for capital expenditures incurred by them or BreitBurn Energy; and 

        10.   the
organizational documents of the Parties will be amended and restated as necessary to reflect the applicable matters set forth above and as contained in this
Agreement; 

        NOW, THEREFORE, in consideration of their mutual undertakings and agreements hereunder, the Parties undertake and agree as follows: 

 
 

ARTICLE I
  DEFINITIONS    
    

Section 1.1    Terms.

        The
following defined terms shall have the meanings given below: 

        "Agreement" means this Contribution, Conveyance and Assumption Agreement. 

        "Affiliates" means, with respect to any Person, any other Person that directly or indirectly through one or more intermediaries controls,
is controlled by or is under common control with, the Person in question. As used herein, the term "control" means the possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. 

        "Assets" means the assets listed on Schedule A hereto and as described in the
Assignment with respect thereto. 

        "Assignment" means one or more Deed, Assignment and Bill of Sale substantially in the form attached as  Exhibit A, but modified as necessary for state-specific
requirements. 

2

 

        "BEC" has the meaning as set forth in the opening paragraph of this Agreement. 

        "BreitBurn Energy" has the meaning as set forth in the opening paragraph of this Agreement. 

        "BreitBurn Management" has the meaning as set forth in the opening paragraph of this Agreement. 

        "Code" means Internal Revenue Code of 1986, as amended. 

        "Common Units" has the meaning as set forth in the Partnership Agreement. 

        "Conflicts Committee" means the Conflicts Committee of the General Partner. 

        "Corporate Subs" means Alamitos Company and Phoenix Production Company. 

        "Covered Environmental Losses" is defined in Section 3.2. 

        "Delaware GCL" has the meaning as set forth in the Recitals of this Agreement. 

        "Delaware LLC Act" has the meaning as set forth in the Recitals of this Agreement. 

        "Delaware LP Act" has the meaning as set forth in the Recitals of this Agreement. 

        "Effective Date" means                        , 2006. 

        "Effective Time" means 12:01 a.m. Eastern Daylight Time on            , 2006. 

        "Environmental Laws" means all federal, state, and local laws, statutes, rules, regulations, orders and ordinances, legally enforceable
requirements and rules of common law, now or hereafter in effect, relating to protection of the environment including, without limitation, the federal Comprehensive Environmental Response,
Compensation, and Liability Act, the Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water Pollution Control Act, the Toxic
Substances Control Act, the Oil Pollution Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act and other environmental conservation and protection laws, each as amended from
time to time. 

        "General Partner" has the meaning as set forth in the opening paragraph of this Agreement. 

        "Hazardous Substance" means (a) any substance that is designated, defined or classified as a hazardous waste, hazardous material,
pollutant, contaminant or toxic or hazardous substance, or that is otherwise regulated under any Environmental Law, including, without limitation, any hazardous substance as such term is defined under
the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, and (b) petroleum, petroleum products, crude oil, gasoline, natural gas, fuel oil, motor oil, waste oil,
diesel fuel, jet fuel and other petroleum hydrocarbons whether refined or unrefined and (c) asbestos, whether in a friable or a non-friable condition, and polychlorinated biphenyls. 

        "Indebtedness" means the indebtedness listed on Schedule B hereto. 

        "Indemnified Party" means either the Partnership Group or BreitBurn Energy, as the case may be, each in its capacity as a party entitled
to indemnification in accordance with Article III. 

        "Indemnifying Party" means either the Partnership Group or BreitBurn Energy, as the case may be, each in its capacity as a party from whom
indemnification may be required in accordance with Article III. 

        "Indemnity Assets" means all assets conveyed, contributed or otherwise Transferred by BreitBurn Energy and its Affiliates to the
Partnership Group prior to or on the Effective Date, including any such assets held by a Person whose ownership interests are Transferred by BreitBurn Energy and its Affiliates thereof to the
Partnership Group prior to or on the Effective Date by means of operation of law or otherwise. 

3

 

        "Interests" has the meaning as set forth in the Recitals of this Agreement. 

        "Offering" has the meaning as set forth in the Recitals of this Agreement. 

        "Operating GP" has the meaning as set forth in the opening paragraph of this Agreement. 

        "Operating LP" has the meaning as set forth in the opening paragraph of this Agreement. 

        "Operating Subsidiaries" means the Corporate Subs and the Partnership Subs. 

        "Operations and Proceeds Agreement" means one or more agreements substantially in the form attached as  Exhibit B hereto. 

        "Other Losses" is defined in 3.4(a). 

        "Over-Allotment Option" has the meaning as set forth in the Recitals of this Agreement. 

        "Party" or "Parties" has the meaning as set forth in the opening paragraph of this
Agreement. 

        "Partnership" has the meaning as set forth in the opening paragraph of this Agreement. 

        "Partnership Agreement" means the First Amended and Restated Agreement of Limited Partnership of the Partnership, as it may be amended,
supplemented or restated from time to time. 

        "Partnership Entities" means the General Partner, the Partnership, Operating GP, Operating LP and the Operating Subsidiaries. 

        "Partnership Group" means the General Partner, the Partnership and all of their respective Subsidiaries. 

        "Partnership Subs" means Preventive Maintenance Services LLC and Alamitos Company LLC. 

        "Person" means an individual or a corporation, limited liability company, partnership, joint venture, trust, unincorporated organization,
association, government agency or political subdivision thereof or other entity. 

        "Pro GP" has the meaning as set forth in the opening paragraph of this Agreement. 

        "Pro LP" has the meaning as set forth in the opening paragraph of this Agreement. 

        "Retained Assets" means the assets and investments owned by BreitBurn Energy and any of its Affiliates that were not conveyed, contributed
or otherwise Transferred to the Partnership Group pursuant to the Contribution Agreement and other documents relating to the transactions referred to in the Contribution Agreement, including, without
limitation, the replacements and natural extensions thereof. 

        "Surface Operating Agreement" means the agreement attached as Exhibit C hereto. 

        "Transfer" including the correlative terms "Transferring" or
"Transferred" means any direct or indirect transfer, assignment, sale, gift, pledge, hypothecation or other encumbrance, or any other disposition
(whether voluntary, involuntary or by operation of law) of any assets, property or rights. 

        "Underwriters" means RBC Capital Markets Corporation, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, A.G.
Edwards & Sons, Inc., Wachovia Capital Markets, LLC, Deutsche Bank Securities Inc. and Canaccord Adams Inc. 

        "Voluntary Cleanup Program" means a program of the United States or a state of the United States enacted pursuant to Environmental Laws
which provides for a mechanism for the written approval of, or authorization to conduct, voluntary remedial action for the clean-up, removal or remediation of contamination that exceeds
actionable levels established pursuant to Environmental Laws. 

4

 

 
 

ARTICLE II
  CONTRIBUTIONS, ACKNOWLEDGMENTS AND DISTRIBUTIONS    
    

Section 2.1    Contribution of Interests by BreitBurn Energy to Operating LP and Operating GP.

        BreitBurn
Energy hereby agrees to contribute, bargain, convey, assign, transfer, set over and deliver to Operating LP (.001% on behalf of Operating GP), its interests in the Assets, as a
capital contribution, pursuant to the Assignment and such other additional instruments and agreements as may be necessary to affect same in exchange for an assumption by Operating LP of the
Indebtedness, and Operating LP hereby accepts such contribution to the capital of Operating LP and assumes the Indebtedness; provided however that the Assets described in Part II of
Schedule A and described in the Assignment with respect to the Assets described in Part II of Schedule A (collectively, the "Non-Consent Assets") shall only be
contributed, if at all, following receipt of all consents deemed necessary to such contribution by BreitBurn Energy; and further provided that, with respect to the property listed as item
    in Part I of Schedule A, it is understood and agreed that the Surface Use Agreement (as defined in the Surface Operating Agreement) related to such property shall only be
contributed, if at all, following receipt of all consents deemed necessary to such contribution by BreitBurn Energy. Concurrently, with such contribution, BreitBurn Energy and Operating LP shall enter
into the Operations and Proceeds Agreement with respect to the Non-Consent Assets and the Surface Operating Agreement. 

Section 2.2    Distribution and Assignment of Interests in Operating GP and Operating LP by BreitBurn Energy to Pro GP, Pro LP and BEC.

        BreitBurn
Energy hereby grants, distributes, contributes, bargains, conveys, assigns, transfers, sets over and delivers to Pro GP, Pro LP and BEC, their respective successors and
assigns, for their own use forever, all of its interest in Operating GP and its limited partner interest in Operating LP in proportion to the ownership of Pro GP, Pro LP and BEC in BreitBurn Energy,
and Pro GP, Pro LP and BEC hereby accept such interests. 

Section 2.3    Contribution of Interests by Pro GP, Pro LP and BEC to the General Partner.

        Pro
GP, Pro LP and BEC hereby grant, contribute, bargain, convey, assign, transfer, set over and deliver to the General Partner, its successors and assigns, for its and their own use
forever, the Interests, which Interests have an aggregate value equal to 2% of the equity value of the Partnership at the closing of the transactions contemplated by this Agreement, in exchange for a
    %,    % and    %, respectively, member interest in the General Partner, and the General Partner hereby accepts the Interests as a contribution to the capital of the
General Partner. 

Section 2.4    Contribution of Interests by the General Partner to the Partnership.

        The
General Partner hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers to the Partnership, its successors and assigns, for its and their own use
forever, the Interests in exchange for a continuation of its 2% general partner interest in the Partnership, and the Partnership hereby accepts the Interests as a contribution to the capital of the
Partnership. 

Section 2.5    Contribution of Interests in Operating GP and Operating LP by Pro GP, Pro LP and BEC to the Partnership.

        Pro
GP, Pro LP and BEC hereby grant, contribute, bargain, convey, assign, transfer, set over and deliver to the Partnership, its successors and assigns, for its and their own use
forever, all their member interests in Operating GP and all of their remaining limited partner interests in Operating LP in exchange for (a) 15,975,758 Common Units, representing limited
partner interests with a 71.24% limited partner interest in the Partnership, and (b) the right to receive $[71.6]million
to reimburse them for certain capital expenditures made directly by them or through BreitBurn Energy, and the 

5

 

Partnership
hereby accepts such member interests in Operating GP and limited partner interests in Operating LP as a contribution to the capital of the Partnership. 

Section 2.6    Public Cash Contribution.

        The
Parties acknowledge a cash contribution by the public through the Underwriters to the Partnership of $            million
($            million after the Underwriters'
discount and the structuring fee of $400,000) in exchange for 6,000,000 Common Units representing a 26.76% limited partner interest in the Partnership. 

Section 2.7    Payment of Transaction Expenses by the Partnership; Distribution to Pro GP, Pro LP and BEC by the Partnership; Cash Contribution by the
Partnership to Operating LP.

        The
Parties acknowledge (a) the payment by the Partnership, in connection with the transactions contemplated hereby, of transaction expenses in the amount of approximately
$                        (exclusive of the Underwriters' discount and the structuring fee), (b) the distribution by the
Partnership of approximately $            million to Pro GP, Pro LP and BEC
to reimburse them for certain capital expenditures and (c) the contribution by the Partnership of its remaining cash of approximately $            million as a capital contribution to
Operating LP (.001% on behalf of Operating GP), which will use it to retire the Indebtedness. 

Section 2.8    Contribution of Interests in the General Partner by Pro GP, Pro LP and BEC to BreitBurn Management.

        Pro
GP, Pro LP and BEC hereby grant, contribute, bargain, convey, assign, transfer, set over and deliver to the BreitBurn Management, its successors and assigns, for its and their own
use forever, their interests in the General Partner, and BreitBurn Management hereby accepts their interests in the General Partner as a contribution to the capital of the BreitBurn Management. 

Section 2.9    Redemption of the Initial Limited Partner Interest.

        The
Partnership hereby agrees to redeem from BEC, Pro GP and Pro LP and agrees to retire the Initial Limited Partner Interest in exchange for an aggregate payment of cash of $980. 

 
 

ARTICLE III
  ASSUMPTIONS OF CERTAIN LIABILITIES; INDEMNIFICATION    
    

Section 3.1    Assumption of Indebtedness.

        In
connection with the contribution and transfer by BreitBurn Energy of interests in the Assets to Operating LP, pursuant to Section 2.5 above, Operating LP hereby assumes and
agrees to duly and timely pay, perform and discharge the Indebtedness, to the full extent that the parties thereto have been heretofore or would have been in the future obligated to pay, perform and
discharge the Indebtedness were it not for the execution and delivery of this Agreement; provided, however, that said assumption and agreement to duly and timely pay, perform and discharge the
Indebtedness shall not (a) increase the obligation of the Partnership with respect to the Indebtedness beyond that of the parties thereto, (b) waive any valid defense that was available
to the parties thereto with respect to the Indebtedness or (c) enlarge any rights or remedies of any third party, if any, under the Indebtedness. 

Section 3.2    Environmental Indemnification.

        (a)   Subject
to Section 3.3, BreitBurn Energy shall indemnify, defend and hold harmless the Partnership Group from and against any environmental claims, losses and
expenses (including, without limitation, court costs and reasonable attorney's and expert's fees) of any and every kind or character, 

6

 

known
or unknown, fixed or contingent, suffered or incurred by the Partnership Group by reason of or arising out of: 

        (i)    any
violation of Environmental Laws associated with the ownership or operation of the Indemnified Assets; or 

        (ii)   any
event or condition associated with ownership or operation of the Indemnified Assets (including, without limitation, the presence of Hazardous Substances on, under,
about or migrating to or from the Indemnified Assets or the disposal or release of Hazardous Substances generated by operation of the Indemnified Assets at non-Indemnified Asset locations)
including, without limitation, (A) the cost and expense of any investigation, assessment, evaluation, monitoring, containment, cleanup, repair, restoration, remediation, or other corrective
action required or necessary under Environmental Laws or to satisfy any applicable Voluntary Cleanup Program, (B) the cost or expense of the preparation and implementation of any closure,
remedial, corrective action or other plans required or necessary under Environmental Laws or to satisfy any applicable Voluntary Cleanup Program and (C) the cost and expense for any
environmental pre-trial, trial, or appellate legal or litigation support work; 

but
only to the extent that such violation complained of under Section 3.2(a)(i) or such events or conditions included under Section 3.2(a)(ii) occurred before the
Effective Date (collectively, "Covered Environmental Losses"). Covered Environmental Losses shall not include any claim, loss or expense arising from or related to the plugging and abandonment of
wells associated with the Indemnified Assets upon the determination that such well or wells have reached its or their useful economic life. The term "plugging and abandonment" as used herein shall
mean all plugging, replugging, and abandonment associated with the Indemnified Assets, or any portion thereof, and including, but not limited to, all plugging and abandonment, associated removal,
disposal or restoration of the surface, site clearance and disposal of the wells, structures and personal property located on or associated with the Indemnified Assets, the removal or capping and
burying of all associated flowlines, the recontouring of the surface in accordance with applicable laws or the terms and conditions of applicable leases, licenses, franchises or contracts, site
clearance and any disposal of related waste materials or Hazardous Substances of the type ordinarily encountered in oil and gas operations, but "plugging and abandonment" shall not include
investigation or remediation of soil, groundwater, or surface water contamination (requiring remediation or response action under applicable Environmental Laws) exceeding the level of site restoration
typically required for normal plugging and abandonment activities. 

        (b)   Except
for claims for Covered Environmental Losses made before the fourth anniversary of the Effective Date, which shall not terminate, all environmental indemnification
obligations in this 3.2 shall terminate on the fourth anniversary of the Effective Date. 

Section 3.3    Limitations Regarding Environmental Indemnification.

        The
aggregate liability of BreitBurn Energy in respect of all Covered Environmental Losses under Section 3.2 shall not exceed $5.0 million and BreitBurn Energy shall not
have any obligation under Section 3.2 until such Covered Environmental Losses exceed $500,000 and then only to the extent such aggregate Covered Environmental Losses exceed $500,000.
Notwithstanding anything herein to the contrary, in no event shall BreitBurn Energy Entities have any indemnification obligations under Section 3.2 for claims made as a result of additions to
or modifications of Environmental Laws promulgated after the Effective Date. 

Section 3.4    Additional Indemnification.

        (a)   In
addition to and not in limitation of the indemnification provided under Section 3.2, BreitBurn Energy shall indemnify, defend and hold harmless the Partnership
Group from and against any claims, losses and expenses (including, without limitation, court costs and reasonable attorney's and 

7

 

expert's
fees) of any and every kind or character, known or unknown, fixed or contingent, suffered or incurred by the Partnership Group ("Other Losses") by reason of or arising out of
(i) failure to convey good and defensible title to the Indemnified Assets to one or more members of the Partnership Group subject only to encumbrances that do not materially adversely affect
the value of the Indemnified Assets or the ability of the Partnership Group to operate the Indemnified Assets in substantially the same manner as they were operated immediately prior to the Effective
Date, (ii) events and conditions associated with the Retained Indemnified Assets whether occurring before or after the Effective Date and (iii) all federal, state and local income tax
liabilities attributable to the operation of the Indemnified Assets prior to the Effective Date, including any such income tax liabilities of BreitBurn Energy that may result from the consummation of
the formation transactions for the Partnership Entities; provided that the Partnership Group shall not be entitled to the indemnity in Section 3.2(a)(ii) for Other Losses to the extent
caused by gross negligence, bad faith or fraud or willful misconduct of any member of the Partnership Group. All title indemnification obligations in Section 3.2(a)(i) shall terminate on
the fourth anniversary of the Effective Date 

        (b)   In
addition to and not in limitation of the indemnification provided under the Partnership Agreement, the Partnership Group shall indemnify, defend and hold harmless
BreitBurn Energy and its Affiliates from and against any claims, losses and expenses (including, without limitation, court costs and reasonable attorney's and expert's fees) of any and every kind or
character, known or unknown, fixed or contingent, suffered or incurred by BreitBurn Energy and its Affiliates by reason of or arising out of events and conditions associated with the operation of the
Indemnified Assets and occurring on or after the Effective Date unless such indemnification would not be permitted under the Partnership Agreement by reason of one of the provisos contained in
Section 7.7(a) of the Partnership Agreement. 

Section 3.5    Indemnification Procedures.

        (a)   The
Indemnified Party agrees that promptly after it becomes aware of facts giving rise to a claim for indemnification under this Article III, it will provide
notice thereof in writing to the Indemnifying Party, specifying the nature of and specific basis for such claim. 

        (b)   The
Indemnifying Party shall have the right to control all aspects of the defense of (and any counterclaims with respect to) any claims brought against the Indemnified
Party that are covered by the indemnification under this Article III, including, without limitation, the selection of counsel, determination of whether to appeal any decision of any court and
the settling of any such matter or any issues relating thereto; provided, however, that no such settlement shall be entered into without the consent of
the Indemnified Party (with the concurrence of the Conflicts Committee in the case of the Partnership Group) unless it includes a full release of the Indemnified Party from such matter or issues, as
the case may be, and does not include the admission of fault, culpability or a failure to act, by or on behalf of such Indemnified Party. 

        (c)   The
Indemnified Party agrees to cooperate fully with the Indemnifying Party, with respect to all aspects of the defense of any claims covered by the indemnification
under this Article III, including, without limitation, the prompt furnishing to the Indemnifying Party of any correspondence or other notice relating thereto that the Indemnified Party may
receive, permitting the name of the Indemnified Party to be utilized in connection with such defense, the making available to the Indemnifying Party of any files, records or other information of the
Indemnified Party that the Indemnifying Party considers relevant to such defense and the making available to the Indemnifying Party, at no cost to the Indemnifying Party, of any employees of the
Indemnified Party; provided, however, that in connection therewith the Indemnifying Party agrees to use reasonable efforts to minimize the impact
thereof on the operations of the Indemnified Party and further agrees to endeavor to maintain the confidentiality of all files, records and other information furnished by the Indemnified Party
pursuant to this Section 3.5. In no event shall the obligation of the Indemnified Party to cooperate with the Indemnifying Party as set forth in the immediately preceding sentence be construed
as imposing upon 

8

 

the
Indemnified Party an obligation to hire and pay for counsel in connection with the defense of any claims covered by the indemnification set forth in this Article III;  provided, however, that the
Indemnified Party may, at its own option, cost and expense, hire and pay for counsel in connection with any such defense.
The Indemnifying Party agrees to keep any such counsel hired by the Indemnified Party informed as to the status of any such defense, but the Indemnifying Party shall have the right to retain sole
control over such defense. 

        (d)   In
determining the amount of any loss, cost, damage or expense for which the Indemnified Party is entitled to indemnification under this Agreement, the gross amount of
the indemnification will be reduced by (i) any insurance proceeds realized by the Indemnified Party and (ii) all amounts recovered by the Indemnified Party under contractual indemnities
from third Persons. 

        (e)   The
date on which the Indemnifying Party receives notification of a claim for indemnification shall determine whether such claim is timely made. 

 
 

ARTICLE IV
  ADDITIONAL TRANSACTIONS    
    

Section 4.1    Over-Allotment Option.

        The
Parties acknowledge that in the event the Underwriters exercise their Over-Allotment Option, the Partnership will use the net proceeds therefrom to redeem from Pro GP,
Pro LP and BEC a pro rata number of Common Units owned by each of Pro GP, Pro LP and BEC equal to the number of Common Units issued upon exercise of the Over-Allotment Option, at a price
per Common Unit equal to the net proceeds per Common Unit received by the Partnership after the Underwriters' discount but before other expenses. 

 
 

ARTICLE V
  TITLE MATTERS    
    

Section 5.1    Encumbrances.

        (a)   Except
to the extent provided in any other document executed in connection with this Agreement or the Offering, the contribution and conveyance (by operation of law or
otherwise) of the Assets pursuant to this Agreement are made expressly subject to all recorded and unrecorded liens (other than consensual liens), encumbrances, agreements, defects, restrictions,
adverse claims and all laws, rules, regulations, ordinances, judgments and orders of governmental authorities or tribunals having or asserting jurisdictions over the Assets and operations conducted
thereon or in connection therewith, in each case to the extent the same are valid and enforceable and affect the Assets, including all matters that a current survey or visual inspection of the Assets
would reflect. 

        (b)   To
the extent that certain jurisdictions in which the Assets are located may require that documents be recorded in order to evidence the transfers of title reflected in
this Agreement, then the provisions set forth in Section 5.1(a) immediately above shall also be applicable to the conveyances under such documents. 

Section 5.2    Disclaimer of Warranties; Subrogation; Waiver of Bulk Sales Laws.

        (a)   EXCEPT
TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, THE PARTIES ACKNOWLEDGE AND AGREE THAT NONE
OF THE PARTIES HAS MADE, DOES NOT MAKE, AND EACH SUCH PARTY SPECIFICALLY NEGATES AND DISCLAIMS, ANY REPRESENTATIONS, WARRANTIES, PROMISES, COVENANTS, AGREEMENTS OR GUARANTIES OF ANY KIND OR CHARACTER
WHATSOEVER, WHETHER EXPRESS, 

9

 

IMPLIED
OR STATUTORY, ORAL OR WRITTEN, PAST OR PRESENT, REGARDING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE ASSETS INCLUDING THE WATER, SOIL, GEOLOGY OR ENVIRONMENTAL CONDITION OF THE
ASSETS GENERALLY OR INCLUDING THE PRESENCE OR LACK OF HAZARDOUS SUBSTANCES OR OTHER MATTERS ON THE ASSETS, (B) THE INCOME TO BE DERIVED FROM THE ASSETS, (C) THE SUITABILITY OF THE ASSETS
FOR ANY AND ALL ACTIVITIES AND USES THAT MAY BE CONDUCTED THEREON, (D) THE COMPLIANCE OF OR BY THE ASSETS OR THEIR OPERATION WITH ANY LAWS (INCLUDING ANY ZONING, ENVIRONMENTAL PROTECTION,
POLLUTION OR LAND USE LAWS, RULES, REGULATIONS, ORDERS OR REQUIREMENTS), OR (E) THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE
ASSETS. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, THE PARTIES ACKNOWLEDGE AND AGREE THAT EACH HAS HAD THE OPPORTUNITY
TO INSPECT THE RESPECTIVE ASSETS, AND EACH IS RELYING SOLELY ON ITS OWN INVESTIGATION OF THE RESPECTIVE ASSETS AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY ANY OF THE PARTIES. EXCEPT TO
THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, NONE OF THE PARTIES IS LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN
STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE ASSETS FURNISHED BY ANY AGENT, EMPLOYEE, SERVANT OR THIRD PARTY. EXCEPT TO THE EXTENT PROVIDED IN ANY OTHER DOCUMENT EXECUTED OR DELIVERED
IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING, EACH OF THE PARTIES ACKNOWLEDGES THAT TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE CONTRIBUTION OF THE ASSETS AS PROVIDED FOR HEREIN IS MADE IN AN "AS
IS", "WHERE IS" CONDITION WITH ALL FAULTS, AND THE ASSETS ARE CONTRIBUTED AND CONVEYED SUBJECT TO ALL OF THE MATTERS CONTAINED IN THIS SECTION. THIS SECTION SHALL SURVIVE SUCH CONTRIBUTION AND
CONVEYANCE OR THE TERMINATION OF THIS AGREEMENT. THE PROVISIONS OF THIS SECTION HAVE BEEN NEGOTIATED BY THE PARTIES AFTER DUE CONSIDERATION AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION OF
ANY REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE ASSETS THAT MAY ARISE PURSUANT TO ANY LAW NOW OR HEREAFTER IN EFFECT, OR OTHERWISE, EXCEPT AS SET FORTH IN
THIS AGREEMENT OR ANY OTHER DOCUMENT EXECUTED OR DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE OFFERING. 

        (b)   The
contributions of the Assets made under this Agreement are made with full rights of substitution and subrogation of the respective Parties receiving such
contributions, and all persons claiming by, through and under such Parties, to the extent assignable, in and to all covenants and warranties by the predecessors-in-title of the
Parties contributing the Assets, and with full subrogation of all rights accruing under applicable statutes of limitation and all rights of action of warranty against all former owners of the Assets. 

        (c)   Each
of the Parties agrees that the disclaimers contained in this Section 5.2 are "conspicuous" disclaimers. Any covenants implied by statute or law by the use of
the words "grant," "contribute," "distribute," "convey," "bargain," "assign," "transfer," "deliver" or "set over" or any of them or any other words used in this Agreement are hereby expressly
disclaimed, waived or negated. 

        (d)   Each
of the Parties hereby waives compliance with any applicable bulk sales law or any similar law in any applicable jurisdiction in respect of the transactions
contemplated by this Agreement. 

10

 

 
 

ARTICLE VI
  FURTHER ASSURANCES    
    

        From time to time after the date hereof, and without any further consideration the Parties agree to execute, acknowledge and deliver all such additional deeds,
assignments, bills of sale, conveyances, instruments, notices, releases, acquittances and other documents, and will do all such other acts and things, all in accordance with applicable law, as may be
necessary or appropriate (a) more fully to assure that the applicable Parties own all of the properties, rights, titles, interests, estates, remedies, powers and privileges granted by this
Agreement, or which are intended to be so granted, or (b) more fully and effectively to vest in the applicable Parties and their respective successors and assigns beneficial and record title to
the interests contributed and assigned by this Agreement or intended so to be and to more fully and effectively carry out the purposes and intent of this Agreement. 

 
 

ARTICLE VII
  EFFECTIVE TIME    
    

        Notwithstanding anything contained in this Agreement to the contrary, none of the provisions of Article II or Article III of this Agreement shall be
operative or have any effect until the Effective Time, at which time all the provisions of Article II or Article III of this Agreement shall be effective and operative in accordance with
Section 8.1 and this Article VII, without further action by any Party. 

 
 

ARTICLE VIII
  MISCELLANEOUS    
    

Section 8.1    Order of Completion of Transactions.

        The
transactions provided for in Article II of this Agreement shall be completed immediately following the Effective Time in the order set forth in Article II of this
Agreement. The transactions provided for in Article III of this Agreement shall be completed simultaneously with the transactions provided for in Article II of this Agreement. The
transactions provided for in Article IV of this Agreement shall be completed after those provided for in Article II and Article III of this Agreement. 

Section 8.2    Costs.

        Except
for the transaction expenses set forth in Section 2.7, the Operating LP shall pay all expenses, fees and costs, including sales, use and similar taxes arising out of the
contributions, conveyances and deliveries to be made hereunder, and shall pay all documentary, filing, recording, transfer, deed and conveyance taxes and fees required in connection therewith. In
addition, the Operating LP shall be responsible for all costs, liabilities and expenses (including court costs and reasonable attorneys' fees) incurred in connection with the implementation of any
conveyance or delivery pursuant to Article VI of this Agreement. 

Section 8.3    Headings; References; Interpretation.

        All
Article and Section headings in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any of the provisions hereof. The
words "hereof," "herein" and "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole, and not to any particular provision of this Agreement. All
references herein to Articles and Sections shall, unless the context requires a different construction, be deemed to be references to the Articles and Sections of this Agreement, respectively. All
personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders, and the singular shall include the plural and vice versa. The terms
"include," "includes," "including" or words of like import shall be deemed to be followed by the words "without limitation." 

11

 

Section 8.4    Successors and Assigns.

        The
Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. 

Section 8.5    No Third Party Rights.

        The
provisions of this Agreement are intended to bind the parties signatory hereto as to each other and are not intended to and do not create rights in any other person or confer upon
any other person any benefits, rights or remedies and no person is or is intended to be a third party beneficiary of any of the provisions of this Agreement. 

Section 8.6    Counterparts.

        This
Agreement may be executed in any number of counterparts, all of which together shall constitute one agreement binding on the Parties. 

Section 8.7    Governing Law.

        This
Agreement shall be governed by, and construed in accordance with, the laws of the State of California applicable to contracts made and to be performed wholly within such state
without giving effect to conflict of law principles thereof. 

Section 8.8    Severability.

        If
any of the provisions of this Agreement are held by any court of competent jurisdiction to contravene, or to be invalid under, the laws of any political body having jurisdiction over
the subject matter hereof, such contravention or invalidity shall not invalidate the entire Agreement. Instead, this Agreement shall be construed as if it did not contain the particular provision or
provisions held to be invalid, and an equitable adjustment shall be made and necessary provision added so as to give effect to the intention of the Parties as expressed in this Agreement at the time
of execution of this Agreement. 

Section 8.9    Amendment or Modification.

        This
Agreement may be amended or modified from time to time only by the written agreement of all the Parties. 

Section 8.10    Integration.

        This
Agreement and the instruments referenced herein supersede all previous understandings or agreements among the Parties, whether oral or written, with respect to its subject matter.
This document and such instruments contain the entire understanding of the Parties. No understanding, representation, promise or agreement, whether oral or written, is intended to be or shall be
included in or form part of this Agreement unless it is contained in a written amendment hereto executed by the Parties after the date of this Agreement. 

Section 8.11    Deed; Bill of Sale; Assignment.

        To
the extent required and permitted by applicable law, this Agreement shall also constitute a "deed," "bill of sale" or "assignment" of the assets and interests referenced herein; (but
specifically excluding the Non-Consent Assets and the Surface Use Agreement); provided that in such event, as regards the Assets, any conflict between this Agreement and the Assignment
shall be construed in favor of the Assignment. 

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]  

12

        IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as of the date first written above. 

	 	 	PRO GP CORP.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	

 	
 	
PRO LP CORP.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	

 	
 	
BREITBURN ENERGY COMPANY LP
	

 	
 	

By:	
 	

Pro GP Corp.,

its General Partner
	

 	
 	

 	
 	

By:	

 
	 	 	 	 	 	

	

 	
 	
BREITBURN MANAGEMENT COMPANY, LLC
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	BREITBURN GP, LLC
	

 	
 	

By:	
 	

 
	 	 	 	 	

	

 	
 	
BREITBURN ENERGY PARTNERS L.P.
	

 	
 	

By:	
 	

Breitburn GP, LLC,

its General Partner
	

 	
 	

 	
 	

By:	

 
	 	 	 	 	 	

	

 	
 	
BREITBURN OPERATING GP, LLC
	

 	
 	

By:	
 	

 
	 	 	 	 	

	

 	
 	
BREITBURN OPERATING L.P.
	

 	
 	

By:	
 	

BreitBurn Operating GP, LLC,

its General Partner
	

 	
 	

 	
 	

By:	

 
	 	 	 	 	 	

 
 

Schedule A    
    

[To come.]

 
 

Schedule B    
    

[To come.]

  

 
 

EXHIBIT A    
    

FORM OF  

 SURFACE OPERATING AGREEMENT

        This
Surface Operating Agreement (this "Agreement") is entered into this    day
of                        , 2006, by and between
BreitBurn Energy Company LP and its predecessor BreitBurn Energy Corporation (collectively "Surface Operator") and BreitBurn Operating L.P.
("Owner"). Surface Operator and Owner are sometimes collectively referred to herein as the "Parties" and individually as a "Party." 

WITNESSETH

        WHEREAS,
reference is made to that certain Contribution, Conveyance and Assumption Agreement dated                        , 2006, in
connection with that certain MLP transaction and related
public offering (the "Transaction"), pursuant to which Surface Operator has assigned that certain oil and gas lease more particularly described in
Exhibit A (the "Lease") to Owner as a capital contribution and in exchange for an assumption by Owner of Surface Operator's debt; and 

        WHEREAS,
reference is made to that certain Agreement between United States of America and Hancock Oil Company dated the 19th day of August, 1954, pursuant to which Surface Operator, as
successor in interest to Hancock Oil Company, has the right to conduct operations on the surface of the lands covered by the Lease (the "Surface Use
Agreement"); and 

        WHEREAS,
assignment of the Surface Use Agreement requires the prior written consent of the government, which consent has not yet been obtained as of the date of the closing of the
Transaction; and 

        WHEREAS,
pending the receipt of such consent, Surface Operator has agreed to continue to conduct all operations with respect to such Lease to the extent requiring access to the surface
of the lands governed by the Surface Use Agreement in consideration for Owner assuming all obligations of Surface Operator thereunder, all in accordance with the terms hereof; and 

        WHEREAS,
entering into this Agreement will further the Transaction for the mutual benefit of the Parties; 

        NOW,
THEREFORE, for and in consideration of the benefits herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows: 

 
 

ARTICLE I
  OPERATIONS    
    

Section 1.1    Operations. 

        During
the term of this Agreement, Surface Operator shall conduct such operations with respect to the Lease and all other assets (including hydrocarbons), contracts and interests held in
connection therewith or produced therefrom (collectively with the Lease, the "Lease Assets") to the extent requiring access to the surface of the lands covered by, or otherwise related to or arising
under, the Surface Use Agreement (such operations being herein referred to as the "Surface Operations"), if any, as instructed by Owner from time to time. 

Section 1.2    Standard of Care. 

        Surface
Operator shall conduct the Surface Operations in a good and workmanlike manner in accordance with all applicable laws and good industry standards for protecting health, safety
and the 

1

 

environment.
If at any time Surface Operator determines that complying with Owner's instructions hereunder would be inconsistent with such standards, Surface Operator shall promptly notify Surface
Operator of its specific concerns and the Parties shall agree on how to proceed, but failing such agreement Surface Operator shall proceed as instructed by Owner; provided that Surface Operator shall
never be obligated to violate any law or any good industry standard for protecting health, safety and the environment and provided that Owner shall fully release, indemnify and hold harmless Surface
Operator from any loss, cost, expense, damage or liability arising from such action(s) (other than to the extent resulting from Surface Operator's gross negligence or willful misconduct in conducting
Surface Operations) regardless of simple negligence or strict liability. 

 
 

ARTICLE II
  ACCOUNTING    
    

Section 2.1    Invoices. 

        The
Parties shall use reasonable efforts to cause all third party invoices for services rendered in connection with the Surface Operations (each, a "Third Party
Invoice") to be delivered directly to Owner for payment. Surface Operator shall promptly forward to Owner all Third Party Invoices it receives, in order for Owner to have
sufficient time to pay same, together with such supporting material as is reasonably necessary to document any Third Party Invoice or as Owner may reasonably request. Surface Operator shall obtain the
consent of Owner for non-recurring expenses or any costs outside the ordinary operations in connection with the Surface Operations in excess of $25,000. 

Section 2.2    Out of Pocket Expenses. 

        Owner
shall reimburse Surface Operator on a monthly basis for all direct and indirect expenses including reasonable overhead and indirect costs, incurred by Surface Operator in
conducting operations on behalf of Owner hereunder. Such reimbursement shall be determined pursuant to the Administrative Services Agreement by and among Owner, Surface Operator and BreitBurn
Management Company, LLC, or its equivalent, as amended from time to time. If Surface Operator reasonably incurs any direct out-of-pocket expenses in connection with conducting
the Surface Operations during a given month, Owner shall reimburse Surface Operator as
follows. With respect to the reimbursement of operating costs or out-of-pocket expenses, Surface Operator shall, within 30 days following the end of such month, prepare
and deliver to Owner an invoice setting forth the amount of such expenses, including such supporting material as is reasonably necessary to document same, or as Owner may reasonably request. Owner
shall pay Surface Operator, within 15 days following receipt of such invoice, all amounts set forth therein other than amounts subject to a good faith dispute among the Parties. All payments to
Surface Operator hereunder shall be to the account it designates in writing from time to time. 

 
 

ARTICLE III
  REPORTING    
    

Section 3.1    Reporting. 

        Surface
Operator shall timely provide Owner such information as it may reasonably need (as determined by Surface Operator acting in good faith), or as Owner may reasonably request from
time to time, in order to (i) be fully and fairly informed as to the Surface Operations, (ii) make reasonably informed decisions with respect to instructions for changes to or additional
Surface Operations, and (iii) fully document Surface Operations, operating fee, Third Party Invoices and Direct Expenses hereunder. Without limiting the generality of the foregoing, Operator
shall, as soon as reasonably 

2

 

practicable
following becoming aware of same in connection with conducting the Surface Operations, notify Owner of: 

        (a)   any
material adverse change to the Lease Assets or any event that, with the passage of time or otherwise, is reasonably likely to result in a material adverse change to
the Lease Assets; 

        (b)   any
violation of law or breach of contract (or assertion alleging same) involving the Lease Assets or Surface Operations; and 

        (c)   any
asserted claim or demand with respect to the Lease Assets or Surface Operations or for which Owner could bear ultimate financial responsibility or liability under
the terms hereof or otherwise. 

 
 

ARTICLE IV
  SURFACE USE ASSIGNMENT    
    

Section 4.1    Consent. 

        Surface
Operator shall take such steps as the Parties shall mutually agree for the purposes of obtaining all necessary consents to assign the Surface Use Agreement to Owner. 

Section 4.2    No-Conveyance. 

        Nothing
in this Agreement shall be construed as conveying the Surface Use Agreement to Owner, which, until such time as all necessary consents have been received, shall remain solely
with Surface Operator. Should any provision of this Agreement be construed as conveying the Surface Use Agreement, where such construction would result in a termination, breach or release of the
Surface Use Agreement, then such provision shall be null and void ab initio and of no force or effect. If any such nullified provision alters the
overall economic effect between the Parties hereunder, the Parties shall use good faith efforts to amend this Agreement to create the economic effect that would have existed but for such
nullification. 

 
 

ARTICLE V
  ASSUMPTION AND INDEMNIFICATION    
    

Section 5.1    Assumed Obligations. 

        Owner
hereby assumes all costs and liabilities of Surface Operator or any predecessors in interest, including costs and liabilities attributable to abandonment, operations, plugging and
remediation, arising under the Surface Use Agreement (the "Assumed Obligations"). 

Section 5.2    Indemnification. 

        Owner
shall release, defend, indemnify and hold harmless Surface Operator from and against any and all loss, cost, expense, damage and liability (including but not limited to reasonable
attorney's fees) arising out of or related to the Surface Operations, the Surface Use Agreement or the ownership of the Lease, including without limitation all Assumed Obligations (other than to the
extent resulting from Surface Operator's material breach of this Agreement, or gross negligence or willful misconduct in conducting Surface Operations), regardless of Surface
Operator's simple negligence or strict liability. 

 
 

ARTICLE VI
  TERMINATION    
    

Section 6.1    Termination. 

3

 

        This
Agreement shall terminate upon the first to occur of: 

        (a)   the
assignment by Surface Operator to Owner of the Surface Use Agreement following the receipt of all consents necessary therefor; 

        (b)   Surface
Operator and Owner ceasing to be Affiliates; and 

        (c)   the
Owner and Surface Operator mutually agree in writing to such termination. 

        For
purposes of this Section, "Affiliate" shall mean, with respect to a given person or entity, any other person or entity (i) that
directly or indirectly (through one or more intermediaries) controls, or is controlled by, or is under common control with, such first mentioned person or entity, (ii) that beneficially owns,
holds or controls 50% or more of the interest of such first mentioned person or entity, or (iii) for which 50% or more of the interest therein is beneficially owned, held or controlled by such
first mentioned person or entity. 

Section 6.2    Survival. 

        Article V
shall survive the termination of this Agreement. 

 
 

ARTICLE VII
  MISCELLANEOUS    
    

Section 7.1    Choice of Law. 

        This
Agreement shall be governed by the laws of the State of California without regard to choice of law principles that would apply the laws of another jurisdiction. 

Section 7.2    Severability. 

        If
any provision of this Agreement contravenes, or is unenforceable under, applicable laws such provision shall be deemed severable and of no force or effect to the extent of such
contravention or unenforceability but all other provisions hereof shall nevertheless remain in full force and effect. If any such severed provision alters the overall economic effect between the
Parties hereunder, the Parties shall use good faith efforts to amend this Agreement to create the economic effect that would have existed but for such severing. 

Section 7.3    Assignments. 

        Neither
Party shall assign this Agreement without the express prior written consent of the other Party. 

Section 7.4    Headings. 

        The
headings of Articles and Sections of this Agreement are used for convenience of reference only and shall not limit or affect the legal construction of any provision hereof. 

4

 

        IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written. 

	 	 	BREITBURN ENERGY COMPANY LP

By                        , its general partner
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

BREITBURN ENERGY CORPORATION
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

BREITBURN OPERATING L.P.

By BreitBurn Operating GP, LLC, its general partner
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

5

EXHIBIT A TO SURFACE OPERATING AGREEMENT

Alamitos Lease Description 

[TO
BE ADDED] 

  

 
 

EXHIBIT B    
    

 
 

FORM OF
  OPERATIONS AND PROCEEDS AGREEMENT

        This
Operations and Proceeds Agreement (this "Agreement") is entered into this    day
of                        , 2006, by and between
BreitBurn Energy Company LP ("Owner-Operator") and BreitBurn Operating L.P. ("Counterparty").
Owner-Operator and Counterparty are sometimes collectively referred to herein as the "Parties" and individually as a "Party." 

WITNESSETH

        WHEREAS,
references is made to that certain Contribution, Conveyance and Assumption Agreement dated                        , 2006 (the
"Contribution
Agreement") in connection with that certain MLP transaction and related public offering (the "Transaction"), pursuant to which
Owner-Operator has agreed to assign certain Non-Consent Assets (as defined in the Contribution Agreement) to Counterparty as a capital contribution, and in exchange for an assumption by
Counterparty of Owner-Operator's debt, only upon the receipt of certain consents with respect thereto; and 

        WHEREAS,
pending the receipt of such consents, Owner-Operator has agreed to continue to hold title and all other interest in and to such Non-Consent Assets and to enter into
this agreement with Counterparty with respect to the conduct of operations and the allocation of income, cost and liability thereunder; and 

        WHEREAS,
entering into this Agreement will further the Transaction for the mutual benefit of the Parties; 

        NOW,
THEREFORE, for and in consideration of the benefits herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereby agree as follows: 

 
 

ARTICLE I
  OPERATIONS    
    

Section
1.1    Operations. 

        During
the term of this Agreement, Owner-Operator shall conduct all operations with respect to the oil and gas leases and other properties more particularly described in Exhibit A
hereto (the "Leases") and all other assets (including hydrocarbons), contracts and interests held in connection therewith or produced therefrom
(collectively with the Leases, the "Lease Assets") (such operations being herein referred to as the "Lease
Operations") as instructed by Counterparty from time to time. 

Section
1.2    Notification. 

        Owner-Operator
shall, as soon as reasonably practicable, notify Counterparty of: 

        (a)   any
material adverse change to the Lease Assets or any event that, with the passage of time or otherwise, is reasonably likely to result in a material adverse change to
the Lease Assets; 

        (b)   Owner-Operator
becoming aware of any violation of law or breach of contract (or assertion alleging same) involving the Lease Assets or Lease Operations; and 

        (c)   any
asserted claim or demand with respect to the Lease Assets or Lease Operations or for which Counterparty could bear ultimate financial responsibility or liability
under the terms hereof or otherwise. 

1

 

Section
1.3    Standard of Care. 

        Owner-Operator
shall conduct the Lease Operations, and maintain the Lease Assets, as would a reasonable and prudent operator. If at any time Owner-Operator determines that complying with
Counterparty's instructions hereunder would be inconsistent with the standards of a reasonable and prudent operator, Owner-Operator shall promptly notify Owner-Operator of its specific concerns and
the Parties shall agree on how to proceed but failing such agreement Owner-Operator shall proceed as instructed by Counterparty; provided that Owner-Operator shall never be obligated to violate any
law or any good industry standard for protecting health, safety and the environment and provided that Counterparty shall fully release, indemnify and hold harmless Owner-Operator from any loss, cost,
expense, damage or liability arising from such action(s) (other than to the extent resulting from Owner-Operator's gross negligence or willful misconduct) regardless of simple negligence or strict
liability. 

 
 

ARTICLE II
  ACCOUNTING    
    

Section
2.1    Accounts. 

        Owner-Operator
shall maintain an accounting, in accordance with prudent and accepted accounting practices and separately for each operating property subject to this Agreement, of all
income actually received ("Lease Income") and all costs actually paid ("Lease Costs"), in each case as
attributable to its interest in the Lease Assets and taking into account any pre-payments by Counterparty under Section 2.5 (the "Lease
Accounting"). 

Section
2.2    Statements. 

        As
requested by Counterparty, but no more often than monthly, during the term of this Agreement Owner-Operator shall prepare and deliver to Counterparty a statement setting forth the
Lease Accounting for such requested period (each, an "Accounting Statement"), including such supporting material as is reasonably necessary to document
same, or as Counterparty may reasonably request, and indicating whether, and the extent to which, Lease Income exceeded Lease Costs for such period (a "Net
Profit") or vice versa (a "Net Loss"). On at least a monthly basis, Owner-Operator shall compute the Net Profit or the Net Loss
attributable to each operating property subject to this Agreement. Owner-Operator shall obtain the consent of Counterparty for any non-recurring expenses or any costs outside normal
operations in connection with the Lease Operations in excess of $25,000. 

Section
2.3    Payment. 

        With
respect to each month for which there is a Net Profit, Owner-Operator shall pay Counterparty, on or before the 25th day of the following month, an amount equal to such Net Profit.
With respect to each month for which there is a Net Loss, Counterparty shall pay Owner-Operator, on or before the 25th day of the following month, an amount equal to such Net Loss. All payments
hereunder shall be to accounts of the Parties as indicated to each other in writing from time to time. 

Section
2.4    Operating/Reserve Accounts. 

        Notwithstanding
the obligation of Owner-Operator to pay to Counterparty the Net Profit for each month, Owner-Operator shall, during the term of this Agreement until the final Accounting
Statement issued in connection with the termination of this Agreement, be entitled to maintain from month to month, an account containing a balance reasonably approximating the following month's
anticipated expenses with respect to the Lease Operations and a reasonable emergency reserve (not exceeding five month's operating expenses with respect to the Lease Operations). 

2

 

Section
2.5    Pre-Payments. 

        If
Owner-Operator determines, acting reasonably, that any Lease Cost anticipated for the following month is likely to result in a Net Loss for such month, it shall promptly notify
Counterparty of same and Counterparty shall use reasonable endeavors to pay such Lease Cost to Owner-Operator in advance of same being paid by Owner-Operator. 

 
 

ARTICLE III
  INFORMATION ACCESS    
    

Section
3.1    Access. 

        Owner-Operator
shall: 

        (a)   permit
Counterparty to observe Lease Operations, have access to the Lease Assets and inspect all files, records and contracts related thereto; and 

        (b)   timely
provide Counterparty such information as it may reasonably need (as determined by Owner-Operator acting in good faith), or as Counterparty may reasonably request
from time to time, in order to (i) be fully and fairly informed as to the state of the Lease Assets and the Lease Operations conducted and to be conducted, (ii) make reasonably informed
decisions with respect to instructions for Lease Operations or disposition of the Lease Assets, and (iii) fully document Lease Operations, Lease Costs and Lease Income hereunder; 

in
each case except to the extent prohibited by applicable confidentiality restrictions or other contractual or legal obligations. Owner-Operator shall reasonably cooperate with Counterparty's access
to and inspection of such information and the Lease Assets and Counterparty shall not unreasonably interfere with the operations and activities of Owner-Operator. 

Section
3.2    Audit. 

        Counterparty
shall have the right, at reasonable intervals and at is own expense, to audit Owner-Operator's books and records to confirm compliance with the terms of this Agreement;
provided that if any such audit conclusively identifies material errors on the part of Owner-Operator, the expense of such audit shall be for the account of Owner-Operator (notwithstanding
Section 5.2). 

 
 

ARTICLE IV
  ASSIGNMENT    
    

Section
4.1    Assignment. 

        Owner-Operator
shall continue to use commercially reasonable efforts to obtain all necessary consents for the contribution of the Lease Assets; provided however that nothing in this
Agreement shall require Owner-Operator to incur or agree to incur any liability or cost, or to make any payment, in conjunction with obtaining such consent. Upon the receipt of all such necessary
consents, the Parties shall execute
the Assignment (as defined in the Contribution Agreement) with respect to the Leases and either Party shall have the right to cause same to be recorded of record, and this Agreement shall terminate in
accordance with Section 6.1(a). 

Section
4.2    Title. 

        Nothing
in this Agreement shall be construed as conveying title to or any interest in the Leases, all of which, until such time as the Assignment executed pursuant to Section 4.1
shall become effective, shall remain solely with Owner-Operator. Should any provision of this Agreement be construed as conveying an interest in the Leases, where such construction would result in a
termination, breach or release of the Leases, then such provision shall be null and void ab initio and of no force or effect. If any such nullified
provision alters the overall economic effect between the Parties hereunder, the 

3

 

Parties
shall use good faith efforts to amend this Agreement to create the economic effect that would have existed but for such nullification. 

 
 

ARTICLE V
  INDEMNIFICATION    
    

Section
5.1    Owner-Operator Indemnification. 

        Owner-Operator
shall release, defend, indemnify and hold harmless Counterparty from and against any and all loss, cost, expense, damage and liability arising out of or related to the
Lease Operations or the ownership or operation of the Lease Assets, in each case (i) to the extent resulting from Owner-Operator's breach of this Agreement, gross negligence or willful
misconduct or (ii) to the extent attributable to periods prior to the date hereof. 

Section
5.2    Counterparty Indemnification. 

        Counterparty
shall release, defend, indemnify and hold harmless Owner-Operator from and against any and all loss, cost, expense, damage and liability arising out of or related to the
Lease Operations or the ownership or operation of the Lease Assets (other than to the extent of Owner-Operator's
indemnification set forth in Section 5.1 above) to the extent attributable to periods from and after the date hereof. 

 
 

ARTICLE VI
  TERMINATION    
    

Section
6.1    Termination. 

        This
Agreement shall terminate upon the first to occur of: 

        (a)   the
Assignment executed pursuant to Section 4.1 becoming effective in accordance with its terms; 

        (b)   Owner-Operator
and Counterparty ceasing to be Affiliates; and 

        (c)   Owner-Operator
and Counterparty mutually agree in writing to such termination. 

For
purposes of this Section, "Affiliate" shall mean, with respect to a given person or entity, any other person or entity (i) that directly or
indirectly (through one or more intermediaries) controls, or is controlled by, or is under common control with, such first mentioned person or entity, (ii) that beneficially owns, holds or
controls 50% or more of the interest of such first mentioned person or entity, or (iii) for which 50% or more of the interest therein is beneficially owned, held or controlled by such first
mentioned person or entity. 

Section
6.2.    Final Accounting Statement. 

        Upon
termination of this Agreement, Owner-Operator shall promptly deliver to Counterparty a final Accounting Statement effective as of the date of such termination (taking into account
the balance of any reserve or operating accounts existing as of the date of such termination) and the Parties shall promptly pay any final Net Profits or Net Loss in accordance with the terms of
Section 2.3. 

Section
6.3    Survival. 

        Notwithstanding
the termination of this Agreement, Section 6.2 shall survive until such time as the Parties have fulfilled their obligations thereunder; Section 2.3 shall
survive to the extent required for the effectiveness of Section 6.2; Section 3.2 shall survive for a period of 1 year; Sections 5.1 and 5.2 shall survive indefinitely; and this
Section 6.3 shall survive to the extent necessary to give effect to terms hereof. 

4

 

 
 

ARTICLE VII
  MISCELLANEOUS    
    

Section
7.1    Choice of Law. 

        This
Agreement shall be governed by the laws of the State of California without regard to choice of law principles that would apply the laws of another jurisdiction. 

Section
7.2    Severability. 

        If
any provision of this Agreement contravenes, or is unenforceable under, applicable laws such provision shall be deemed severable and of no force or effect to the extent of such
contravention or unenforceability but all other provisions hereof shall nevertheless remain in full force and effect. If any such severed provision alters the overall economic effect between the
Parties hereunder, the Parties shall use good faith efforts to amend this Agreement to create the economic effect that would have existed but for such severing. 

Section
7.3    Assignments. 

        Neither
Party shall assign this Agreement without the express prior written consent of the other Party. Owner-Operator shall not assign the Leases without the express prior written
consent of Counterparty. 

Section
7.4    Headings. 

        The
headings of Articles and Sections of this Agreement are used for convenience of reference only and shall not limit or affect the legal construction of any provision hereof. 

        IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written. 

	 	 	BREITBURN ENERGY COMPANY LP

By                        , its general partner
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

	

 	
 	

BREITBURN OPERATING L.P.

By BreitBurn Operating GP, LLC, its general partner
	

 	
 	

By:	
 	

	 	 	Name:	 	

	 	 	Title:	 	

5

EXHIBIT A TO OPERATIONS AND PROCEEDS AGREEMENT

Leases 

[Description
of Leases included in Non-Consent Assets] 

QuickLinks

CONTRIBUTION, CONVEYANCE AND ASSUMPTION AGREEMENT

RECITALS

ARTICLE I DEFINITIONS

ARTICLE II CONTRIBUTIONS, ACKNOWLEDGMENTS AND DISTRIBUTIONS

ARTICLE III ASSUMPTIONS OF CERTAIN LIABILITIES; INDEMNIFICATION

ARTICLE IV ADDITIONAL TRANSACTIONS

ARTICLE V TITLE MATTERS

ARTICLE VI FURTHER ASSURANCES

ARTICLE VII EFFECTIVE TIME

ARTICLE VIII MISCELLANEOUS

Schedule A

Schedule B

EXHIBIT A

ARTICLE I OPERATIONS

ARTICLE II ACCOUNTING

ARTICLE III REPORTING

ARTICLE IV SURFACE USE ASSIGNMENT

ARTICLE V ASSUMPTION AND INDEMNIFICATION

ARTICLE VI TERMINATION

ARTICLE VII MISCELLANEOUS

EXHIBIT B

FORM OF OPERATIONS AND PROCEEDS AGREEMENT

ARTICLE I OPERATIONS

ARTICLE II ACCOUNTING

ARTICLE III INFORMATION ACCESS

ARTICLE IV ASSIGNMENT

ARTICLE V INDEMNIFICATION

ARTICLE VI TERMINATION

ARTICLE VII MISCELLANEOUS

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