Document:

EXHIBIT
10.4

 

EXECUTION COPY

 

 

 

 

TOM BROWN, INC.

 

 

 

 

$155,000,000

 

 

SENIOR SUBORDINATED

CREDIT AGREEMENT

 

 

dated as of June 27, 2003

 

 

 

 

THE BANK OF NOVA SCOTIA,

BNP PARIBAS 

and

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Co-Syndication Agents

 

 

JPMORGAN CHASE BANK,

as Administrative Agent

 

 

J.P. MORGAN SECURITIES INC.,

as Sole Bookrunner and Sole Lead Arranger

 

 

 

 

TABLE OF
CONTENTS

 

	
  SECTION 1

  	
  DEFINITIONS

  
	
  1.1

  	
  Defined Terms

  
	
  1.2

  	
  Other Definitional Provisions

  
	
   

  	
   

  
	
  SECTION 2

  	
  AMOUNT AND
  TERMS OF LOANS

  
	
  2.1

  	
  Loans

  
	
  2.2

  	
  Procedure for Borrowing

  
	
  2.3

  	
  Maturity and Exchange Notes

  
	
  2.4

  	
  Repayment of Loans

  
	
  2.5

  	
  Optional and Mandatory Prepayments

  
	
  2.6

  	
  Interest Rates and Payment Dates

  
	
  2.7

  	
  Computation of Interest

  
	
  2.8

  	
  Pro Rata Treatment and Payments

  
	
  2.9

  	
  Alternate Rate of Interest

  
	
  2.10

  	
  Increased Costs.

  
	
  2.11

  	
  Break Funding Payments

  
	
  2.12

  	
  Taxes.

  
	
  2.13

  	
  Mitigation Obligations; Replacement of
  Lenders.

  
	
   

  	
   

  
	
  SECTION 3

  	
  REPRESENTATIONS
  AND WARRANTIES

  
	
  3.1

  	
  Corporate Existence

  
	
  3.2

  	
  Financial Condition

  
	
  3.3

  	
  Litigation

  
	
  3.4

  	
  No Breach

  
	
  3.5

  	
  Authority

  
	
  3.6

  	
  Approvals

  
	
  3.7

  	
  Use of Proceeds and Letters of Credit

  
	
  3.8

  	
  ERISA

  
	
  3.9

  	
  Taxes

  
	
  3.10

  	
  Properties, etc.

  
	
  3.11

  	
  No Material Misstatements

  
	
  3.12

  	
  Investment Company Act

  
	
  3.13

  	
  Public Utility Holding Company Act

  
	
  3.14

  	
  Subsidiaries

  
	
  3.15

  	
  Defaults

  
	
  3.16

  	
  Environmental Matters

  
	
  3.17

  	
  Compliance with the Law

  
	
  3.18

  	
  Insurance

  
	
  3.19

  	
  Hedging Agreements

  
	
  3.20

  	
  Material Agreements

  
	
  3.21

  	
  Solvency

  
	
   

  	
   

  
	
  SECTION 4

  	
  CONDITIONS
  PRECEDENT

  
	
   

  	
   

  
	
  SECTION 5

  	
  AFFIRMATIVE
  COVENANTS

  
	
  5.1

  	
  Reporting Requirements

  
	
  5.2

  	
  Litigation

  
	
  5.3

  	
  Maintenance, Etc.

  
	
  5.4

  	
  Environmental Matters.

  

 

i

 

	
  5.5

  	
  Title to Oil and Gas Properties

  
	
  5.6

  	
  ERISA Information and Compliance

  
	
  5.7

  	
  Gas Marketing.

  
	
  5.8

  	
  Take-Out Financing

  
	
  5.9

  	
  Exchange Notes

  
	
  5.10

  	
  Use of Proceeds of the Take-Out Debt

  
	
  5.11

  	
  Additional Subsidiaries

  
	
  5.12

  	
  Further Assurances

  
	
   

  	
   

  
	
  SECTION 6

  	
  NEGATIVE COVENANTS

  
	
  6.1

  	
  Limitation on Indebtedness

  
	
  6.2

  	
  Limitation on Restricted Payments

  
	
  6.3

  	
  Limitation on Restrictions on Distributions
  from Restricted Subsidiaries

  
	
  6.4

  	
  Limitation on Sales of Assets and
  Subsidiary Stock

  
	
  6.5

  	
  Limitation on Liens

  
	
  6.6

  	
  Limitation on Affiliate Transactions

  
	
  6.7

  	
  Change of Control

  
	
  6.8

  	
  Limitation on Voting Stock of Restricted
  Subsidiaries

  
	
  6.9

  	
  Merger,
  Consolidation, etc.

  
	
  6.10

  	
  Limitation on Lines of Business

  
	
  6.11

  	
  ERISA Compliance

  
	
   

  	
   

  
	
  SECTION 7

  	
  EVENTS OF DEFAULT

  
	
  7.1

  	
  Listing of Events of Default

  
	
  7.2

  	
  Action if Bankruptcy

  
	
  7.3

  	
  Action if other Event of Default

  
	
   

  	
   

  
	
  SECTION 8

  	
  SUBORDINATION

  
	
  8.1

  	
  Agreement To Subordinate

  
	
  8.2

  	
  Liquidation; Dissolution; Bankruptcy

  
	
  8.3

  	
  Default on Senior Indebtedness

  
	
  8.4

  	
  Acceleration of Payment of Loans

  
	
  8.5

  	
  When Distribution Must Be Paid Over

  
	
  8.6

  	
  Subrogation

  
	
  8.7

  	
  Relative Rights

  
	
  8.8

  	
  Subordination May Not Be Impaired By the
  Borrower

  
	
  8.9

  	
  Rights of Administrative Agent

  
	
  8.10

  	
  Distribution or Notice to Representative

  
	
  8.11

  	
  Section 8 Not To Prevent Events of
  Default or Limit Right To Accelerate

  
	
  8.12

  	
  Administrative Agent Entitled to Rely

  
	
  8.13

  	
  Administrative Agent to Effectuate
  Subordination

  
	
  8.14

  	
  Administrative Agent Not Fiduciary for
  Holders of Senior Indebtedness

  
	
  8.15

  	
  Reliance by Lenders of Senior Indebtedness
  on Subordination Provisions

  
	
   

  	
   

  
	
  SECTION 9

  	
  THE
  ADMINISTRATIVE AGENT

  
	
  9.1

  	
  Appointment

  
	
  9.2

  	
  Delegation of Duties

  
	
  9.3

  	
  Exculpatory Provisions

  
	
  9.4

  	
  Reliance by Administrative Agent

  
	
  9.5

  	
  Notice of Default

  
	
  9.6

  	
  Non-Reliance on Administrative Agent and
  Other Lenders

  
	
  9.7

  	
  Indemnification

  

 

ii

 

	
  9.8

  	
  Administrative Agent in Its Individual
  Capacity

  
	
  9.9

  	
  Successor Administrative Agent

  
	
   

  	
   

  
	
  SECTION 10

  	
  MISCELLANEOUS

  
	
  10.1

  	
  Amendments and Waivers

  
	
  10.2

  	
  Notices

  
	
  10.3

  	
  No Waiver; Cumulative Remedies

  
	
  10.4

  	
  Survival of Representations and Warranties

  
	
  10.5

  	
  Payment of Expenses and Taxes

  
	
  10.6

  	
  Successors and Assigns; Participations and
  Assignments

  
	
  10.7

  	
  Adjustments; Set-off

  
	
  10.8

  	
  Counterparts

  
	
  10.9

  	
  Severability

  
	
  10.10

  	
  Integration

  
	
  10.11

  	
  GOVERNING
  LAW

  
	
  10.12

  	
  Submission To Jurisdiction; Waivers

  
	
  10.13

  	
  Acknowledgments

  
	
  10.14

  	
  WAIVERS OF JURY TRIAL

  
	
  10.15

  	
  Confidentiality

  

 

iii

 

	
  SCHEDULES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1.1

  	
   

  	
  Commitments

  
	
  Schedule 1.1

  	
   

  	
  Material Subsidiaries as of the Closing
  Date

  
	
  Schedule 3.14

  	
   

  	
  Subsidiaries and Partnerships

  
	
  Schedule 3.18

  	
   

  	
  Insurance

  
	
  Schedule 3.19

  	
   

  	
  Hedging Agreements

  
	
  Schedule 6.6(b)

  	
   

  	
  Affiliate Transactions

  
	
   

  	
   

  	
   

  
	
  EXHIBITS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
  Form of Subsidiary Guarantee

  
	
  EXHIBIT B

  	
   

  	
  Form of Indenture

  
	
  EXHIBIT C

  	
   

  	
  Form of Assignment and Acceptance

  
	
  EXHIBIT D-1

  	
   

  	
  Form of Initial Loan Note

  
	
  EXHIBIT D-2

  	
   

  	
  Form of Term Note

  
	
  EXHIBIT E

  	
   

  	
  Form of Closing Certificate

  
	
  EXHIBIT F

  	
   

  	
  Form of Compliance Certificate

  
					

 

iv

 

SENIOR SUBORDINATED CREDIT
AGREEMENT, dated as of June 27, 2003, among TOM BROWN, INC., a Delaware
corporation (the “Borrower”), the several lenders from time to time
parties hereto (collectively, the “Lenders”; individually, a “Lender”),
and THE BANK OF NOVIA SCOTIA, BNP PARIBAS, and WACHOVIA BANK, NATIONAL
ASSOCIATION as Co-Syndication Agents (the “Co-Syndication Agents”), and
JPMORGAN CHASE BANK, a New York banking corporation, as Administrative Agent
for the Lenders hereunder.

 

The
parties hereto hereby agree as follows:

 

SECTION 1  DEFINITIONS

 

1.1           Defined Terms.  As used in this Agreement, the following
terms shall have the following meanings:

 

“ABR
Loan”:  a Loan bearing interest at a
rate determined by reference to the Alternate Base Rate in accordance with the
provisions of Section 2.

 

“Accepting
Holder”:  as defined in Section
2.5(d).

 

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

 

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

 

“Additional
Assets”:  (i) any property or assets
(other than Indebtedness and Capital Stock) to be used by the Borrower or a
Restricted Subsidiary in a Related Business; (ii) the Capital Stock of a Person
that becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Borrower or another Restricted Subsidiary; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; provided, however, that, in the case
of clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in a
Related Business.

 

“Adjusted
LIBO Rate”:  with respect to each
day during each Interest Period pertaining to a Eurodollar Loan, a rate per
annum determined for such day in accordance with the following formula (rounded
upward to the nearest 1/100th of 1%):

 

	
  LIBO Rate

  
	
  1.00 — Eurocurrency Reserve Requirements

  

 

“Adjusted
Margin”:  with respect to any Loan,
0 basis points during the three-month period commencing on the Initial Maturity
Date and for each subsequent three-month period thereafter, 50 basis points
higher than the Adjusted Margin for the immediately preceding three-month
period.

 

“Adjusted
Rate”:  the rate equal to 50 basis
points plus the interest rate borne by the Loans on the day immediately
preceding the Initial Maturity Date.

 

 

“Administrative
Agent”:  JPMorgan Chase Bank,
together with its affiliates, as the arranger of the Commitments and as the
administrative agent for the Lenders under this Agreement and the other Loan
Documents, together with any of its successors.

 

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

 

“Affiliate
Transaction”:  as defined in Section
6.6.

 

“Agreement”:  this Senior Subordinated Credit Agreement,
as amended, supplemented or otherwise modified from time to time.

 

“Alternate
Base Rate”:  for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1⁄2 of 1%.  For purposes hereof:  “Prime Rate” shall mean the rate of
interest per annum publicly announced from time to time by the Administrative
Agent as its prime rate in effect at its principal office in New York City; and
“Federal Funds Effective Rate” shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.  If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined without regard to
clause (b) of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist.  Any change in the Alternate Base Rate due to
a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective as of the opening of business on the effective day of such change in
the Prime Rate or the Federal Funds Effective Rate, respectively.

 

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

 

“Applicable
Margin”:  with respect to any Loan,
0 basis points during the three-month period commencing on the Closing Date and
for each subsequent three-month period thereafter

 

2

 

until the Initial Maturity
Date, 50 basis points higher than the Applicable Margin for the immediately
preceding three-month period.

 

“Asset
Disposition”:  any sale, lease
(other than an operating lease entered into in the ordinary course of
business), transfer, issuance or other disposition (or series of related sales,
leases, transfers, issuances or dispositions that are part of a common plan) of
shares of Capital Stock of a Restricted Subsidiary (other than directors’
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a “disposition”) by the Borrower or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction), other than (i) disposition of surplus,
obsolete or worn out equipment or equipment that is no longer useful in the
conduct of the Borrower’s and/or its Restricted Subsidiaries’ business and that
is disposed of in the ordinary course of business; (ii) a disposition of
inventory in the ordinary course of business; (iii) the sale of Cash
Equivalents in the ordinary course of business; (iv) a disposition by a
Restricted Subsidiary to the Borrower or by the Borrower or a Restricted
Subsidiary to a Wholly Owned Subsidiary; (v) the abandonment, assignment,
lease, sublease or farm-out of Oil and Gas Properties, or the forfeiture or
other disposition of such properties pursuant to standard form operating
agreements, in each case in the ordinary course of business in a manner that is
customary in a Related Business; (vi) the disposition of property received in settlement
of debts owing to such Person as a result of foreclosure, perfection or
enforcement of any Lien or debt, which debts were owing to such Person in the
ordinary course of business; (vii) for purposes of Section 6.4 only, a
disposition subject to Section 6.2; (viii) transactions permitted under Section
6.9; (ix) an issuance of Capital Stock by a Restricted Subsidiary of the
Borrower to the Borrower or to a Wholly Owned Subsidiary; (x) dispositions of
assets with a Fair Market Value of less than $1,000,000 (determined in the
aggregate in the case of a series of related dispositions); (xi) dispositions
in connection with Permitted Liens; (xii) the licensing or sublicensing of
intellectual property or other general intangibles and licenses, leases or subleases
of other property in the ordinary course of business which do not materially
interfere with the business of the Borrower and its Restricted Subsidiaries;
and (xiii) foreclosure on assets.

 

“Assignee”:  as defined in Section 10.6(b).

 

“Assignment
and Acceptance”:  an Assignment and
Acceptance, substantially in the form of Exhibit C hereto.

 

“Attributable
Indebtedness”:  in respect of a
Sale/Leaseback Transaction means, as at the time of determination, the present
value (discounted at the interest rate implicit in such transaction determined
in accordance with GAAP) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).

 

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

 

“Average
Life”:  as of the date of
determination, with respect to any Indebtedness or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the numbers of years
from the date of determination to the dates of each successive scheduled
principal payment

 

3

 

of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied
by the amount of such payment by (ii) the sum of all such payments.

 

“Bank
Indebtedness”:  any and all amounts,
whether outstanding on the Closing Date or Incurred after the Closing Date, payable
by the Borrower under or in respect of the Senior Credit Agreement and any
related notes, collateral documents, letters of credit and Guarantees and any
Hedging Agreement entered into in connection with the Senior Credit Agreement,
including principal, premium, if any, interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization
relating to the Borrower at the rate specified therein whether or not a claim
for post filing interest is allowed in such proceedings), fees, charges,
expenses, reimbursement obligations, guarantees and all other amounts payable
thereunder or in respect thereof.

 

“Benefitted
Lender”:  as defined in Section
10.7(a).

 

“Blockage
Notice”:  as defined in Section 8.3.

 

“Board
of Governors”:  the Board of
Governors of the Federal Reserve System (or any successor thereto).

 

“Borrower”:  as defined in the preamble hereto.

 

“Business
Day”:  a day other than a Saturday,
Sunday or other day on which banking institutions in New York, New York are
authorized or required by law to close; provided that with respect to
notices and determinations in connection with, and payments of principal and
interest on, Eurodollar Loans, such day is also a day for trading by and
between banks in Dollar deposits in the London interbank eurodollar market.

 

“Capital
Stock”:  of a Person, any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents of, or interests in (however designated) equity of such
Person, including any Preferred Stock, partnership interests and limited
liability company membership interests, but excluding any debt securities
convertible into such equity.

 

“Capitalized
Lease Obligations”:  an obligation
that is required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount of
such obligation determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date such lease may be terminated without
penalty.

 

“Cash
Equivalents”:  means (i) securities
issued or directly and fully guaranteed or insured by the United States or
Canadian government, or any agency or instrumentality thereof, having
maturities of not more than one year from the date of acquisition; (ii)
marketable general obligations issued by any state or province of the United
States of America or Canada or any political subdivision of any such state or
province or any public instrumentality thereof maturing within one year from
the date of acquisition thereof and, at the time of acquisition thereof, having
a credit rating of “A” or better from either S&P or Moody’s; (iii)
certificates of deposit, time deposits, eurodollar time deposits, overnight
bank deposits or bankers’ acceptances having maturities of not more than one
year from the date of acquisition thereof issued by any commercial bank the
long-term debt of which is rated at the time of acquisition thereof at least
“A” or the equivalent thereof by S&P, “A” or the equivalent thereof by
Moody’s, “R-1 low” or

 

4

 

the equivalent thereof by
Dominion Bond Rating Service Limited or “A-1” or the equivalent thereof by
Canada Bond Rating Service, and having capital and surplus in excess of $500
million; (iv) repurchase obligations with a term of not more than seven (7)
days for underlying securities of the types described in clauses (i), (ii) and
(iii) entered into with any bank meeting the qualifications specified in clause
(iii) above; (v) commercial paper rated at the time of acquisition thereof at
least “A-1” or the equivalent thereof by S&P, “P-1” or the equivalent
thereof by Moody’s, “R-1 low” or the equivalent thereof by Dominion Bond Rating
Service or “A-1” by Canada Bond Rating Service or carrying an equivalent rating
by a nationally recognized rating agency, if the named rating agencies cease
publishing ratings of investments, and in either case maturing within one year
after the date of acquisition thereof; and (vi) interests in any investment
company which invests solely in instruments of the type specified in clauses
(i) through (v) above.

 

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

 

“Change
in Law”:  (a) the adoption of any
law, rule or regulation after the date of this Agreement, (b) any change in any
law, rule or regulation or in the interpretation or application thereof by any
Governmental Authority after the date of this Agreement or (c) compliance by
any Lender (or, for purposes of Section 2.10(b), by any Applicable Lending
Office of such Lender or by such Lender’s holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

 

“Change
of Control”:  the circumstance that
(i) any Person or “group” (within the meaning of Section 13(d) or 14(d) of the
Exchange Act) (A) shall have acquired beneficial ownership of 35% or more of
any outstanding class of Capital Stock having ordinary voting power in the election
of directors of the Borrower or (B) shall obtain the power (whether or not
exercised) to elect a majority of the Borrower’s directors or (ii) the Board of
Directors of the Borrower shall not consist of a majority of Continuing
Directors.  For purposes of this
definition, “Continuing Directors” means the directors of the Borrower
on the Closing Date and each other director, if such other director’s
nomination for election to the Board of Directors of the Borrower is
recommended by a majority of the then Continuing Directors.

 

“Closing
Date”:  the date on which the
conditions precedent set forth in Section 4 shall be satisfied or waived, which
date is June 27, 2003.

 

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

 

“Commitment”:  as to any Lender, its obligation to make a
Loan to the Borrower on the Closing Date in an amount equal to the amount set
forth opposite such Lender’s name in Schedule 1.1A under the heading
“Commitment”; collectively, as to all such Lenders, the “Commitments”.

 

“Commitment
Percentage”:  as to any Lender at
any time, the percentage of the aggregate Commitments then constituted by such
Lender’s Commitment (or, after the Loans are made on the Closing Date, the
percentage of the aggregate Loans then constituted by such Lender’s Loans).

 

“Conduit
Lender”:  any special purpose
corporation organized and administered by any Lender for the purpose of making
Loans otherwise required to be made by such Lender and

 

5

 

designated to the
Administrative Agent and the Borrower by such Lender in a written instrument; provided,
that the designation by any Lender of a Conduit Lender shall not relieve the
designating Lender of any of its obligations to fund a Loan under this Agreement
if, for any reason, its Conduit Lender fails to fund any such Loan, and the
designating Lender (and not the Conduit Lender) shall have the sole right and
responsibility to deliver all consents and waivers required or requested under
this Agreement with respect to its Conduit Lender, and provided, further,
that no Conduit Lender shall (a) be entitled to receive any greater amount
pursuant to Sections 2.10, 2.11 and 2.12 or 10.5 than the designating Lender
would have been entitled to receive in respect of the extensions of credit made
by such Conduit Lender or (b) be deemed to have any Commitment.

 

“Consolidated
Coverage Ratio”:  as of any date of
determination, with respect to any Person, the ratio of (i) the aggregate
amount of Consolidated EBITDAX of such Person for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
for which financial statements are in existence to (ii) Consolidated Interest
Expense for such four fiscal quarters; provided, however, that
(1) if the Borrower or any Restricted Subsidiary (x) has Incurred any
Indebtedness since the beginning of such period that remains outstanding on
such date of determination or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, Consolidated EBITDAX and Consolidated Interest Expense for such period
shall be calculated after giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the first day of such
period (except that in making such computation, the amount of Indebtedness
under any revolving credit facility outstanding on the date of such calculation
shall be computed based on (A) the average daily balance of such Indebtedness
during such four fiscal quarters or such shorter period for which such facility
was outstanding or (B) if such facility was created after the end of such four
fiscal quarters, the average daily balance of such Indebtedness during the
period from the date of creation of such facility to the date of such
calculation) and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period or (y) has
repaid, repurchased, defeased or otherwise discharged any Indebtedness since
the beginning of the period that is no longer outstanding on such date of
determination or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio involves a discharge of Indebtedness (in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and the related commitment
terminated), Consolidated EBITDAX and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to such
discharge of such Indebtedness, including with the proceeds of such new
Indebtedness, as if such discharge had occurred on the first day of such
period, (2) if since the beginning of such period the Borrower or any
Restricted Subsidiary shall have disposed of any company, division, operating
unit, segment, business, group of related assets or line of business or if the
transaction giving rise to the need to calculate the Consolidated Coverage
Ratio is an Asset Disposition, (x) the Consolidated EBITDAX for such period
shall be reduced by an amount equal to the Consolidated EBITDAX (if positive)
directly attributable to the assets which are the subject of such Asset
Disposition for such period or increased by an amount equal to the Consolidated
EBITDAX (if negative) directly attributable thereto for such period and (y)
Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Borrower or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Borrower and its
continuing Restricted Subsidiaries in connection with such Asset Disposition
for such period (or, if the Capital Stock of any Restricted Subsidiary is sold,
the Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Borrower and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (3) if since the beginning of such period the

 

6

 

Borrower or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary or
is merged with or into the Borrower) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
any company, division, operating unit, segment, business, group of related
assets or line of business, Consolidated EBITDAX and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any Indebtedness) as if such Investment,
acquisition or Incurrence occurred on the first day of such period and (4) if
since the beginning of such period any Person (that subsequently became a
Restricted Subsidiary or was merged with or into the Borrower or any Restricted
Subsidiary since the beginning of such period) shall have Incurred any
Indebtedness or discharged any Indebtedness, made any disposition or Asset
Disposition or any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (2) or (3) above if made by the Borrower or a
Restricted Subsidiary during such period, Consolidated EBITDAX and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Incurrence, discharge, disposition, Asset
Disposition, Investment or asset acquisition occurred on the first day of such
period.  For purposes of this
definition, whenever pro forma effect is to be given to any calculation under
this definition, the pro forma calculations shall be determined in good faith
by a responsible financial or accounting officer of the Borrower and where
applicable shall be made on a basis consistent with Regulation S-X under the
Securities Act.  If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be calculated as if the rate in effect
on the date of determination had been the applicable rate for the entire period
(taking into account any Hedging Agreement applicable to such Indebtedness if
such Hedging Agreement has a remaining term in excess of 12 months).

 

“Consolidated
EBITDAX”:  for any period, the sum
of Consolidated Net Income for such period plus the following expenses
or charges to the extent deducted from Consolidated Net Income in such
period:  interest, income taxes,
depreciation, depletion, amortization and exploration expense, determined on a
consolidated basis in accordance with GAAP.

 

“Consolidated
Interest Expense”:  for any period,
the total interest expense of the Borrower and its consolidated Restricted
Subsidiaries, plus, to the extent not included in such interest expense,
but without duplication, (i) interest expense attributable to Capitalized Lease
Obligations and the interest portion of rent expense associated with
Attributable Indebtedness in respect of the relevant lease giving rise thereto,
determined as if such lease were a capitalized lease in accordance with GAAP
and the interest component of any deferred payment obligations, (ii)
amortization of debt discount and debt issuance cost, (iii) non-cash interest
expense, (iv) commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers’ acceptance financing, (v) interest
actually paid by the Borrower or any Restricted Subsidiary under any Guarantee
of Indebtedness or other obligation of any other Person, (vi) net costs associated
with interest rate Hedging Obligations (including amortization of fees), (vii)
interest that was capitalized during such period, (viii) the product of (a) all
dividends paid in cash, Cash Equivalents or Indebtedness or accrued during such
period on any series of Disqualified Stock of such Person or on Preferred Stock
of its Restricted Subsidiaries payable to a party other than the Borrower or a
Wholly Owned Subsidiary times (b) a fraction, the numerator of which is
one and the denominator or of which is one minus the then current
combined federal, state, provincial and local statutory tax rate of such Person
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP and (ix) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than the Borrower) in
connection with

 

7

 

Indebtedness Incurred by
such plan or trust minus, to the extent included in (i) to (ix) above,
amortization or write-off of deferred financing costs of such Person and its
Restricted Subsidiaries during such period; provided, however,
that there shall be excluded therefrom any such interest expense of any
Unrestricted Subsidiary to the extent the related Indebtedness is not
Guaranteed or paid by the Borrower or any Restricted Subsidiary.  For purposes of the foregoing, gross
interest expense shall be determined after giving effect to any net payments
made or received by the Borrower and its Subsidiaries with respect to interest
rate Hedging Agreements. 
Notwithstanding anything to the contrary contained herein, commissions,
discounts, yield and other fees and charges Incurred in connection with any
transaction pursuant to which the Borrower or any Subsidiary of the Borrower
may sell, convey or otherwise transfer or grant a security interest in any
accounts receivable or related assets shall be included in Consolidated
Interest Expense.

 

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

 

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

 

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

 

“Co-Syndication
Agents”:  as defined in the Preamble
hereto.

 

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

 

“Disqualified
Stock”:  with respect to any Person,
any Capital Stock that by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable) or upon

 

8

 

the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock (excluding Capital Stock that is convertible or exchangeable
solely at the option of the Borrower or a Restricted Subsidiary) or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case, on or prior to the date that is 91 days after the Final Maturity Date provided,
that only the portion of Capital Stock which so matures or is mandatorily
redeemable, is so convertible or exchangeable or is so redeemable at the option
of the holder thereof prior to such date shall be deemed to be Disqualified
Stock; provided, further, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Borrower to repurchase such Capital Stock upon the occurrence of
a change of control or asset disposition (each defined in a substantially
identical manner to the corresponding definitions in this Agreement) shall not
constitute Disqualified Stock if the terms of such Capital Stock (and all such
securities into which it is convertible or for which it is ratable or
exchangeable) provide that the Borrower may not repurchase or redeem any such
Capital Stock (and all such securities into which it is convertible or for
which it is ratable or exchangeable) pursuant to such provision prior to
compliance by the Borrower with the provisions of this Agreement.

 

“Dollars”
and “$”:  dollars in lawful
currency of the United States of America.

 

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

 

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

 

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

 

“ERISA
Event”:  (i) the occurrence of a
“reportable event” described in section 4043 of ERISA and the regulations
issues thereunder, (ii) the withdrawal of the Borrower, any Subsidiary or any
ERISA Affiliate from a Plan during a plan year in which it was a “substantial
employer” as

 

9

 

defined in section
4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan
or the treatment of a Plan amendment as a termination under section 4041 of
ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC or
(v) any other event or condition which might constitute grounds under section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer any Plan.

 

“Eurocurrency
Reserve Requirements”:  for any day
as applied to a Eurodollar Loan, the aggregate (without duplication) of the
maximum rates (expressed as a decimal fraction) of reserve requirements in
effect on such day (including, without limitation, basic, supplemental,
marginal and emergency reserves) under any regulations of the Board of
Governors dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Board of Governors) maintained by a member bank of such system.

 

“Eurodollar
Loan”:  a Loan bearing interest at a
rate determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Section 2.

 

“Event
of Default”:  as defined in Section
7.1.

 

“Exchange
Act”:  the Securities Exchange Act
of 1934, as amended.

 

“Exchange
Note”:  each note issued under the
Indenture delivered pursuant to Section 2.3 and 5.9; collectively, the “Exchange
Notes”.

 

“Exchange
Request”:  as defined in Section
5.9(b).

 

“Exchanged
Properties”:  properties used or
useful in a Related Business received by the Borrower or a Restricted
Subsidiary in trade or as a portion of the total consideration for other such
properties.

 

“Excluded
Taxes”:  with respect to the
Administrative Agent, any Lender or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income
or franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such recipient
is organized or in which its principal office is located or, in the case of any
Lender, in which its Applicable Lending Office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the recipient is located and (c) in
the case of a Foreign Lender (other than an assignee pursuant to a request by
the Borrower under Section 2.13(b)), any withholding tax that is imposed on
amounts payable to such Foreign Lender at the time such Foreign Lender becomes
a party to this Agreement (or designates a new Applicable Lending Office) or is
attributable to such Foreign Lender’s failure to comply with Section 2.12(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new Applicable Lending Office (or
assignment), to receive additional amounts from the Borrower with respect to
such withholding tax pursuant to Section 2.12(a).

 

“Fair
Market Value”:  with respect to any
assets to be transferred pursuant to any Asset Disposition or any non-cash
consideration or property transferred or received by any Person, the fair
market value of such consideration or other property as determined in good
faith by (a) an Authorized Officer of the Borrower if such fair market value is
less than $10,000,000 or (b) the

 

10

 

Board of Directors of the
Borrower if such fair market value is equal to or greater than $10,000,000, in
each case as certified to the Administrative Agent.

 

“Final
Maturity Date”:  June 27, 2010.

 

“Financial
Statements”:  the financial
statement or statements of the Borrower and its Consolidated Subsidiaries for
the fiscal periods ending December 31, 2002 and March 31, 2003 described or
referred to in Section 3.2.

 

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

 

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

 

“GAAP”:  generally accepted accounting principles in
the United States of America in effect on the date of this Agreement, including
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such entity as are approved by a significant segment of the
accounting profession.

 

“Gas
Marketing Policy”:  as defined in
Section 4(j).

 

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

 

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

 

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

 

“Guarantee”:  any obligation, contingent or otherwise, to
purchase or to furnish funds for the payment or maintenance of, or liability
under or with respect to the Indebtedness, net worth, working capital or
earnings of any Person or any production or revenues generated by (or any
capital or other expenditures incurred in connection with the acquisition and exploitation
of, exploration for, development of or production from) any Hydrocarbons, or a
guarantee of the payment of dividends or other distributions upon the Capital
Stock of any Person, or an agreement to purchase, sell or lease (as lessee or
lessor) Property, products, materials, supplies or

 

11

 

services primarily for the
purpose of enabling a debtor to make payment of such debtor’s obligations or an
agreement to assure a creditor against loss, and including, without limitation,
causing a bank, surety company or other financial institution or similar entity
to issue a letter of credit, surety bond or other similar instrument for the
benefit of another Person; provided, however, that the term
“Guarantee” shall not include endorsements for collection or deposit in the
ordinary course of business.  The terms
“Guarantee” and “Guaranteed” used as a verb has a corresponding meaning.

 

“Guarantor”:  each Subsidiary that is a guarantor of Bank
Indebtedness as of the Closing Date and each Subsidiary that is required to
become a Guarantor pursuant to Section 5.11.

 

“Guarantor
Senior Indebtedness”:  with respect
to a Guarantor, the following obligations, whether outstanding on the date of
this Agreement or thereafter Incurred, without duplication: (i) any Guarantee
of the Bank Indebtedness by such Guarantor and all other Guarantees by such
Guarantor of Senior Indebtedness of the Borrower or Guarantor Senior
Indebtedness of any other Guarantor; and (ii) all obligations consisting of
principal of and premium, if any, and accrued and unpaid interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to the Guarantor regardless of whether postfiling
interest is allowed in such proceeding) on, and fees and other amount owing in
respect of, all other Indebtedness of the Guarantor, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is expressly provided that the obligations in respect of such
Indebtedness are not senior in right of, or are subordinate to, payment of the
obligations of such Guarantor under the Guarantee; provided, however,
that Guarantor Senior Indebtedness will not include (1) any obligations of such
Guarantor to another Subsidiary or the Borrower, (2) any liability for federal,
state, local, foreign or other taxes owed or owing by such Guarantor, (3) any
accounts payable or other liability to trade creditors arising in the ordinary
course of business (including Guarantees thereof or instruments evidencing such
liabilities), (4) any Indebtedness of such Guarantor that is expressly
subordinate in right of payment to any of the Indebtedness of such Guarantor,
including any Guarantor Senior Subordinated Indebtedness and Guarantor
Subordinated Obligations of such Guarantor or (5) any Capital Stock.

 

“Guarantor
Senior Subordinated Indebtedness”: 
with respect to a Guarantor, the obligations of such Guarantor under the
Subsidiary Guarantee and any other Indebtedness of such Guarantor that
specifically provides that such Indebtedness is to rank pari passu in right of payment with the
obligations of such Guarantor under the Subsidiary Guarantee and is not
expressly subordinated by its terms in right of payment to any Indebtedness of
such Guarantor which is not Guarantor Senior Indebtedness of such Guarantor.

 

“Guarantor
Subordinated Obligation”: with respect to a Guarantor, any Indebtedness of
such Guarantor (whether outstanding on the Closing Date or thereafter Incurred)
which is expressly subordinate in right of payment to the obligations of such
Guarantor under the Subsidiary Guarantee pursuant to a written agreement.

 

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

 

12

 

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

 

“Hedging
Obligations”:  of any Person means
the obligations of such Person pursuant to any Hedging Agreement.

 

“Holder”:  the Person in whose name an Exchange Note or
a Loan (and any corresponding Note(s)) is registered.

 

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

 

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

 

“Incur”:  issue, assume, Guarantee, incur or otherwise
become liable for; provided, however, that any Indebtedness or
Capital Stock of a Person existing at the time such Person becomes a Restricted
Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall
be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a
Restricted Subsidiary and the terms “Incurred” and “Incurrence”
have meanings correlative to the foregoing.

 

“Indebtedness”:  with respect to any Person on any date of determination (without
duplication):

 

(i)         the principal of and premium, if any,
in respect of indebtedness of such Person for borrowed money,

 

(ii)        the principal of and premium, if any, in
respect of obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments,

 

(iii)       the principal component of all
obligations of such Person in respect of letters of credit, bankers’
acceptances or other similar instruments (including reimbursement obligations
with respect thereto except to the extent such reimbursement obligation relates
to a trade payable and such obligation is satisfied within 30 days of
Incurrence),

 

(iv)       the principal component of all
obligations of such Person to pay the deferred and unpaid purchase price of
property (except trade payables), which purchase price is due more than six
months after the date of placing such property in service or taking delivery
and title thereto,

 

(v)        all Capitalized Lease Obligations and
all Attributable Indebtedness of such Person,

 

(vi)       the principal component or liquidation
preference of all obligations of such Person with respect to the redemption,
repayment or other repurchase of

 

13

 

Disqualified Stock or, with
respect to any Subsidiary of the Borrower, any Preferred Stock (but excluding,
in each case, any accrued dividends),

 

(vii)      the principal component of all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided, however,
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness of such other Persons,

 

(viii)     the principal component of all Indebtedness
of other Persons to the extent Guaranteed by such Person,

 

(ix)       to the extent not otherwise included in
this definition, net obligations of such Person under Hedging Agreements (the
amount of any such obligations to be equal at any time of determination to the
termination value of such agreement or arrangement giving rise to such
obligation that would be payable by such Person at such time), and

 

(x)        to the extent not otherwise included in
this definition, the amount then outstanding (i.e., advanced, and received by,
and available for use by such Person) under any receivables financing (as set
forth in the books and records of such Person and confirmed by the agent,
trustee or other representative of the institution or group providing such
receivables financing).

 

The amount of Indebtedness
of any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability at such
date, upon the occurrence of the contingency giving rise to the obligation, of
any contingent obligations described above at such date.

 

In addition, “Indebtedness”
of any Person shall include Indebtedness described in the preceding paragraph
that would not appear as a liability on the balance sheet of such Person if:

 

(i)                                       such Indebtedness is the obligation of a
partnership or joint venture that is not a Restricted Subsidiary (a “Joint
Venture”);

 

(ii)                                    such Person or a Restricted Subsidiary of
such Person is a general partner of the Joint Venture (a “General Partner”);
and

 

(iii)                                 there is recourse, by contract or operation
of law, with respect to the payment of such Indebtedness to property or assets
of such Person or a Restricted Subsidiary of such Person; and then such
Indebtedness shall be included in an amount not to exceed:

 

(a)                                   the lesser of (1) the net assets of the
General Partner and (2) the amount of such obligations to the extent that there
is recourse, by contract or operation of law, to the property or assets of such
Person or a Restricted Subsidiary of such Person; or

 

(b)                                   if less than the amount determined pursuant
to clause (a) immediately above, the actual amount of such Indebtedness that is
recourse to such Person or a Restricted Subsidiary of such Person, if the
Indebtedness is evidenced by a writing and is for a determinable amount and the
related

 

14

 

interest expense shall be included
in Consolidated Interest Expense to the extent actually paid by the Borrower or
its Restricted Subsidiaries.

 

“Indemnified
Liabilities”:  as defined in Section
10.5(d).

 

“Indemnified
Taxes”:  all Taxes other than
Excluded Taxes.

 

“Indemnitee”:  as defined in Section 10.5(b).

 

“Indenture”:  the Indenture, substantially in the form of
Exhibit B hereto (with such changes therein as the Borrower may request and
Administrative Agent may approve, such approval not to be unreasonably
withheld), if and when executed and delivered by the Borrower and the Trustee
thereunder, as amended, waived, supplemented or otherwise modified from time to
time.

 

“Initial
Loan”:  as defined in Section
2.1(a).

 

“Initial
Loan Rate”:  the rate equal to the
Adjusted LIBO Rate plus 600 basis points, or, in the circumstances set
forth in Section 2.9, the Alternate Base Rate plus 500 basis points.

 

“Initial
Maturity Date”:  June 27, 2004.

 

“Initial
Note”:  as defined in Section
10.6(e).

 

“Interest
Payment Date”:  with respect to any Loan,
the last day of the Interest Period applicable to the Loan, and in addition,
the date of any prepayment of such Loan.

 

“Interest
Period”:  (a) prior to the Initial
Maturity Date, as to any Initial Loan, (i) initially, the period commencing on
the Closing Date and ending on the numerically corresponding day (or, if there
is no numerically corresponding day, on the last day) in the calendar month
that is three months thereafter and (ii) thereafter, each period commencing on
the last day of the next preceding Interest Period and ending on the earlier of
(A) the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is three months
thereafter and (b) following the Initial Maturity Date, as to any Term Loan,
(i) initially, the period commencing on the Initial Maturity Date and ending on
the last day of the fiscal quarter of the Borrower following the Initial
Maturity Date and (ii) thereafter, each period commencing on the last day of
the next preceding Interest Period and ending on the earlier of (A) the last
day of the fiscal quarter of the Borrower following such date, and (B) the
Final Maturity Date; provided, however, that if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of a
Eurodollar Loan only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day.  Interest shall
accrue from and including the first day of an Interest Period to but excluding
the last day of such Interest Period.

 

“Investment”:  with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the form of any
direct or indirect advance, loan (other than advances to customers in the
ordinary course of business) or other extension of credit (including by way of
Guarantee or similar arrangement, but excluding any debt or extension of credit
represented by a bank deposit other than a time deposit) or capital
contribution to (by means of any transfer of cash or other property to others
or any payment for property or services for the

 

15

 

account or use of others),
or any purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by, such Person and all other items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that none of the following will be deemed to be an
Investment:  (a) Hedging Obligations
entered into in the ordinary course of business and in compliance with this
Agreement; (b) endorsements of negotiable instruments and documents in the
ordinary course of business; and (c) an acquisition of assets, Capital Stock or
other securities by the Borrower or a Restricted Subsidiary for consideration
to the extent such consideration consists of common equity securities of the
Borrower.  For purposes of Section 6.2,
(i) “Investment” shall include the portion (proportionate to the Borrower’s
equity interest in a Restricted Subsidiary to be designated as an Unrestricted
Subsidiary) of the fair market value of the net assets of such Restricted Subsidiary
of the Borrower at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Borrower shall
be deemed to continue to have a permanent “Investment” in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Borrower’s “Investment”
in such Subsidiary at the time of such redesignation less (y) the
portion (proportionate to the Borrower’s equity interest in such Subsidiary) of
the fair market value of the net assets of such Subsidiary at the time that
such Subsidiary is so redesignated a Restricted Subsidiary; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors of the Borrower.  If the Borrower or any Restricted Subsidiary
of the Borrower sells or otherwise disposes of any Voting Stock of any
Restricted Subsidiary of the Borrower such that, after giving effect to any
such sale or disposition, such entity is no longer a Subsidiary of the
Borrower, the Borrower shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value (as conclusively
determined in good faith by the Board of Directors of the Borrower) of the
Capital Stock of such Subsidiary not sold or disposed of.

 

“Investment
Bank”:  one or more investment banks
reasonably satisfactory to the Administrative Agent which may be engaged by the
Borrower to publicly sell or privately place the Take-Out Debt in accordance
with Section 5.8.

 

“Lenders”:  as defined in the preamble to this
Agreement.

 

“Leverage
Ratio”:  as of any date of
determination, the ratio of:  (i) the
sum of the aggregate outstanding Indebtedness (other than Hedging Obligations)
of the Borrower and its Restricted Subsidiaries as of the date of calculation
on a consolidated basis in accordance with GAAP to (ii) Consolidated EBITDAX of
the Borrower and its Restricted Subsidiaries for the period of the most recent
four consecutive fiscal quarters ending prior to the date of such determination
for which financial statements are in existence; provided, however,
that:  (1) if the Borrower or any
Restricted Subsidiary: (a) has Incurred any Indebtedness since the beginning of
such period that remains outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Leverage Ratio is an
Incurrence of Indebtedness, Indebtedness at the end of such period,
Consolidated EBITDAX and Consolidated Interest Expense for such period will be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such period (except
that in making such computation, the amount of Indebtedness under any revolving
credit facility outstanding on the date of such calculation will be computed
based on (i) (the average daily balance of such Indebtedness during such four
fiscal quarters or such shorter period for which such facility was outstanding;
or (ii) if such facility was created after the end of such four fiscal
quarters, the average daily balance of such Indebtedness during the period from
the date of creation of such facility to the date of such calculation) and the
discharge of any other Indebtedness repaid,

 

16

 

repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period; or (b) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination or if the transaction giving rise to the need to calculate the
Leverage Ratio involves a discharge of Indebtedness (in each case other than
Indebtedness incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and the related commitment
terminated), Indebtedness, Consolidated EBITDAX and Consolidated Interest
Expense for such period will be calculated after giving effect on a pro forma
basis to such discharge of such Indebtedness, including with the proceeds of
such new Indebtedness, as if such discharge had occurred on the first day of
such period; (2) if since the beginning of such period the Borrower or any
Restricted Subsidiary will have disposed of any company, division, operating
unit, segment, business, group of related assets or line of business or if the
transaction giving rise to the need to calculate the Leverage Ratio is an Asset
Disposition: (a) Indebtedness at the end of such period will be reduced by an
amount equal to the Indebtedness discharged, defeased or retired with the Net
Available Cash of such Asset Disposition and the assumption of Indebtedness by
the transferee; (b) the Consolidated EBITDAX for such period will be reduced by
an amount equal to the Consolidated EBITDAX (if positive) directly attributable
to the assets which are the subject of such Asset Disposition for such period
or increased by an amount equal to the Consolidated EBITDAX (if negative)
directly attributable thereto for such period; and (c) Consolidated Interest
Expense for such period will be reduced by an amount equal to the Consolidated
Interest Expense directly attributable to any Indebtedness of the Borrower or
any Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged
with respect to the Borrower and its continuing Restricted Subsidiaries in connection
with such Asset Disposition for such period (or, if the Capital Stock of any
Restricted Subsidiary is sold, the Consolidated Interest Expense for such
period directly attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Borrower and its continuing Restricted Subsidiaries are no
longer liable for such Indebtedness after such sale); (3) if since the
beginning of such period the Borrower or any Restricted Subsidiary (by merger
or otherwise) will have made an Investment in any Restricted Subsidiary (or any
Person which becomes a Restricted Subsidiary or is merged with or into the
Borrower) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit,
division or line of business, Indebtedness, Consolidated EBITDAX and
Consolidated Interest Expense for such period will be calculated after giving
pro forma effect thereto as if such Investment or acquisition occurred on the
first day of such period; and (4) if since the beginning of such period any
Person (that subsequently became a Restricted Subsidiary or was merged with or
into the Borrower or any Restricted Subsidiary since the beginning of such
period) will have Incurred any Indebtedness or discharged any Indebtedness,
made any disposition or Asset Disposition or any Investment or acquisition of
assets that would have required an adjustment pursuant to clause (1), (2) or (3)
above if made by the Borrower or a Restricted Subsidiary during such period,
Indebtedness, Consolidated EBITDAX and Consolidated Interest Expense for such
period will be calculated after giving pro forma effect thereto as if such
Incurrence, discharge, disposition, Asset Disposition, Investment or asset
acquisition occurred on the first day of such period.  For purposes of this definition, whenever pro forma effect is to
be given to any calculation under this definition, the pro forma calculations
will be determined in good faith by a responsible financial or accounting
officer of the Borrower and where applicable shall be made on a basis
consistent with Regulation S-X under the Securities Act.  If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest expense on such
Indebtedness will be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Hedging Agreement applicable to such Indebtedness if such Hedging
Agreement has a remaining term in excess of 12 months).

 

17

 

“LIBO
Rate”:  with respect to each day
during each Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined by the Administrative Agent to be the offered rate for deposits in
Dollars with a term comparable to such Interest Period that appears on the
applicable Telerate Page at approximately 10:00 A.M., New York City time, two
(2) Business Days prior to the beginning of such Interest Period; provided,
however, that if at any time for any reason such offered rate does not
appear on the applicable Telerate Page, “LIBO Rate” shall mean, with respect to
each day during each Interest Period pertaining to a Eurodollar Loan, the rate
per annum equal to the rate at which the Administrative Agent is offered Dollar
deposits at or about 10:00 A.M., New York City time, two (2) Business Days
prior to the beginning of such Interest Period in the London interbank eurodollar
market for delivery on the first day of such Interest Period for the number of
days comprised therein and in an amount comparable to the amount of its
Eurodollar Loans to be outstanding during such Interest Period.

 

“Lien”:  any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).

 

“Loan
Documents”:  this Agreement, the
Loan Notes and the Subsidiary Guarantee.

 

“Loan
Notes”:  the collective reference to
the Term Notes and the Initial Notes.

 

“Loan
Parties”:  the collective reference
to the Borrower and each of its Subsidiaries that is from time to time is a
party to any Loan Document.

 

“Loans”:  as defined in Section 2.1(b).

 

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

 

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

 

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

 

“Material
Subsidiary”:  any Subsidiary of the
Borrower (a) listed on Schedule 1.1B or (b) that, as of the date of its
formation or its acquisition, or at any time thereafter, has a total asset
value in excess of $25,000,000 (or its equivalent in other currencies).

 

“Maverick”:  Maverick Acquisition Corporation, a
corporation organized under the laws of the State of Texas, which is a
Subsidiary of the Borrower.

 

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

 

“Moody’s”:  Moody’s Investors Service, Inc., and its
successors.

 

18

 

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

 

“Net
Available Cash”:  from an Asset
Disposition means cash payments received by the Borrower or any Restricted
Subsidiary (including the Fair Market Value of any Cash Equivalents and any
cash payments received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when received, but
excluding any other consideration received in the form of assumption by the
acquiring person of Indebtedness or other obligations relating to the
properties or assets that are the subject of such Asset Disposition or received
in any other noncash form (except, in the case of Exchanged Properties, to the
extent subsequently converted to cash or Cash Equivalents within 240 days after
such Asset Disposition)) therefrom, in each case net of (i) all legal,
accounting, investment banking, title and recording tax expenses, commissions
and other fees and expenses incurred, and all federal, state, provincial,
foreign and local taxes required to be paid or accrued as a liability under
GAAP as a consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness that is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or that must by its
terms, or in order to obtain a necessary consent to such Asset Disposition, or
by applicable law be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and retained
by the Borrower or any Restricted Subsidiary after such Asset Disposition; provided,
however, that if any consideration for an Asset Disposition (which would
otherwise constitute Net Available Cash) is required to be held in escrow
pending determination of whether a purchase price adjustment will be made, such
consideration (or any portion thereof) shall become Net Available Cash only at
such time as it is released to the Borrower or any Restricted Subsidiary from
escrow.

 

“Net
Cash Proceeds”:  with respect to any
issuance or sale of Capital Stock or Indebtedness, the cash proceeds of such
issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ or
placement agents’ fees, discounts or commissions and brokerage, consultant and
other fees actually incurred in connection with such issuance or sale and net
of taxes paid or payable as a result of such issuance or sale (after taking
into account any available tax credit or deductions and any tax sharing
arrangements).

 

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

 

“Non-Recourse
Debt”:  as defined in the Senior
Credit Agreement as in effect on the Closing Date.

 

“Notes”:  the Loan Notes and the Exchange Notes, as
originally executed or as subsequently amended from time to time pursuant to
the applicable provisions hereof.

 

“Oil
and Gas Properties”:  the
Hydrocarbon Interests; the Properties now or hereafter pooled or unitized with
the Hydrocarbon Interests; all presently existing or future unitization,
pooling agreements and declarations of pooled units and the units created
thereby (including without limitation all units created under orders,
regulations and rules of any Governmental Authority having jurisdiction) which
may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, joint venture agreements, contracts and other agreements which
relate to any of the Hydrocarbon Interests or the production, sale, purchase,
exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under

 

19

 

and which may be produced
and saved or attributable to the Hydrocarbon Interests, the lands covered
thereby and all oil in tanks and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; all tenements, profits á prendre, hereditaments, appurtenances and
Properties in anywise appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests, Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any
of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal Property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil wells, gas wells, water wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.

 

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

 

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

 

“Original
Initial Note”:  as defined in
Section 10.6(e).

 

“Original
Term Note”:  as defined in Section
10.6(e).

 

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

 

“Participant”:  as defined in Section 10.6(c).

 

“Pay
the Loans”:  as defined in Section
8.3.

 

“Payment
Blockage Period”:  as defined in
Section 8.3.

 

“Payment
Sharing Notice”:  a written notice
from the Borrower or any Lender informing the Administrative Agent that an
Event of Default has occurred and is continuing and directing the
Administrative Agent to allocate payments thereafter received from or on behalf
of the Borrower or any Guarantor in accordance with the provisions of Section
2.8.

 

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

 

“Permitted
Investment”:  an Investment by the Borrower
or any Restricted Subsidiary in (i) a Restricted Subsidiary; (ii) cash and Cash
Equivalents; (iii) receivables owing to the Borrower or any Restricted
Subsidiary, if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; provided,
however, that such trade

 

20

 

terms may include such
concessionary trade terms as the Borrower or any such Restricted Subsidiary
deems reasonable under the circumstances; (iv) Investments in negotiable
instruments held for collection; lease, utility and other similar deposits; (v)
payroll, travel and similar advances to cover matters that are expected at the
time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans or
advances to officers, directors and employees of the Borrower or any Restricted
Subsidiary made in the ordinary course of business consistent with past practices
of the Borrower or such Restricted Subsidiary not in excess of $2,000,000
aggregate amount outstanding at any one time; (vii) stock, obligations or
securities received in settlement of debts created in the ordinary course of
business and owing to the Borrower or any Restricted Subsidiary or in
satisfaction of judgments or pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of a debtor; (viii) the
Subsidiary Guarantee and Guarantees by the Borrower or any Guarantor of
Indebtedness otherwise permitted to be Incurred by the Borrower or any
Restricted Subsidiary under this Agreement; (ix) Investments made as a result
of non-cash consideration from Asset Dispositions effected in compliance with
Section 6.4; (x) Investments in existence on the Closing Date; (xi) Investments
in a Person that will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary business of such
Restricted Subsidiary is a Related Business; (xii) Investments in another
Person if as a result of such Investment such other Person is merged or
consolidated with or into, or transfers or conveys all or substantially all its
assets to, the Borrower or a Restricted Subsidiary; provided, however,
that such Person’s primary business is a Related Business; (xiii) Investments
the payment for which consists exclusively of Capital Stock (other than
Disqualified Stock) of the Borrower and (xiv) Investments by the Borrower or
any of its Restricted Subsidiaries, together with all other Investments
pursuant to this clause (xiv) not to exceed $15,000,000 outstanding at any one
time.

 

“Permitted
Liens”:  with respect to any Person,
(i) Liens securing Indebtedness and other obligations of the Borrower under the
Senior Credit Agreement and related Hedging Agreements and other Senior
Indebtedness and Liens on assets of Restricted Subsidiaries securing Guarantees
of Indebtedness and other obligations of the Borrower under the Senior Credit
Agreement and other Guarantor Senior Indebtedness permitted to be Incurred
under this Agreement; (ii) pledges or deposits by such Person under workmen’s
compensation laws, unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts (other than for the
payment of Indebtedness) or leases to which such Person is a party, or deposits
to secure public or statutory obligations of such Person or deposits or cash or
United States government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or import or
customs duties or for the payment of rent, in each case Incurred in the
ordinary course of business; (iii) Liens imposed by law, including carriers’,
warehousemen’s and mechanics’ Liens, in each case for sums not yet due or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made in respect thereof; (iv) Liens for taxes, assessments or other
governmental charges not yet due or which are being contested in good faith by
appropriate proceedings; provided appropriate reserves required pursuant
to GAAP have been made in respect thereof; (v) Liens in favor of issuers of
surety or performance bonds or letters of credit or bankers’ acceptances issued
pursuant to the request of and for the account of such Person in the ordinary
course of its business; provided, however, that such letters of
credit do not constitute Indebtedness; (vi) encumbrances, easements or
reservations of, or rights of others for, licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or liens incidental
to the conduct of the business of such Person or to the ownership of its
properties which do not in the aggregate materially adversely affect the value
of said properties or materially impair their use in the

 

21

 

operation of the business of
such Person; (vii) Liens securing Hedging Obligations; provided that the
aggregate value of the obligation secured by all such Liens permitted by this
clause (vii) shall not exceed $15,000,000 in the aggregate at any one time
outstanding and no such Liens shall extend to the Hydrocarbon Interests; (viii)
leases and subleases of real property which do not materially interfere with
the ordinary conduct of the business of the Borrower or any of its Restricted
Subsidiaries; (ix) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment have not
been finally terminated or the period within which such proceedings may be
initiated has not expired; (x) Liens for the purpose of securing the payment
(or the refinancing of the payment) of all or a part of the purchase price of,
or Capitalized Lease Obligations or other Indebtedness with respect to, assets
or property acquired or constructed in the ordinary course of business; provided
that (A) the aggregate principal amount of Indebtedness secured by such Liens
is otherwise permitted to be Incurred under this Agreement and does not exceed
the cost of the assets or property acquired or constructed and (B) such Liens
are created within 180 days of construction or acquisition of such assets or
property and do not encumber any other assets or property of the Borrower or
any Restricted Subsidiary other than such assets or property and assets affixed
or appurtenant thereto; (xi) Liens arising solely by virtue of any statutory or
common law provision relating to banker’s Liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with a
depositary institution; provided that (A) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Borrower in excess of those set forth by regulations promulgated
by the Federal Reserve Board, and (B) such deposit account is not intended by
the Borrower or any Restricted Subsidiary to provide collateral to the
depository institution; (xii) Liens arising from Uniform Commercial Code
financing statement filings regarding operating leases entered into by the
Borrower and its Restricted Subsidiaries in the ordinary course of business;
(xiii) Liens existing on the Closing Date; (xiv) Liens on property or shares of
stock of a Person at the time such Person becomes a Restricted Subsidiary; provided,
that (A) such Liens are not created, Incurred or assumed in connection with, or
in contemplation of, such other Person becoming a Restricted Subsidiary and (B)
any such Lien may not extend to any other property owned by the Borrower or any
other Restricted Subsidiary; (xv) Liens on property at the time the Borrower or
a Restricted Subsidiary acquired the property, including any acquisition by
means of a merger or consolidation with or into the Borrower or any other
Restricted Subsidiary; provided, that (A) such Liens are not created,
Incurred or assumed in connection with, or in contemplation of, such
acquisition and (B) such Liens may not extend to any other property owned by
the Borrower or any other Restricted Subsidiary; (xvi) Liens securing
Indebtedness or other obligations of a Restricted Subsidiary owing to the
Borrower or a Wholly Owned Subsidiary; (xvii) Liens securing the Loans and the
Exchange Notes and the Subsidiary Guarantee; (xviii) Liens securing Refinancing
Indebtedness Incurred to refinance Indebtedness that was previously so secured;
provided that any such Lien is limited to all or part of the same
property or assets (plus improvements, accessions, proceeds or dividends or
distributions in respect thereof) that secured (or, under the written
arrangements under which the original Lien arose, could secure) the
Indebtedness being refinanced; (xix) reservations in original grants from any
Governmental Authority; (xx) rights of any Governmental Authority to terminate
a lease; and (xxi) other Liens securing obligations not in excess of $5,000,000
in the aggregate.

 

“Person”:  an individual, partnership, corporation,
limited liability company, association, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Authority or
other entity of whatever nature.

 

“PIK
Interest Amount”:  the aggregate
amount equal to the amount of interest borne by an Initial Note or a Term Note
in excess of 12.0% per annum.

 

22

 

“Plan”:  any employee pension benefit plan, as
defined in section 3(2) of ERISA, which (i) is currently or hereafter
sponsored, maintained or contributed to by the Borrower, any Subsidiary or an
ERISA Affiliate or (ii) was at any time during the preceding six calendar years
sponsored, maintained or contributed to, by the Borrower, any Subsidiary or an
ERISA Affiliate.

 

“Preferred
Stock”: as applied to the Capital Stock of any corporation, Capital Stock
of any class or classes (however designated) which is preferred as to the
payment of dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such corporation, over shares of
Capital Stock of any other class of such corporation.

 

“Production
Payments”:  a production payment
obligation (whether volumetric or Dollar-denominated) of the Borrower or any of
its Subsidiaries which are payable from a specified share of proceeds received
from production from specified Oil and Gas Properties, together with all
undertakings and obligations in connection therewith.

 

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

 

“Refinancing
Indebtedness”:  Indebtedness that is
Incurred to refund, refinance, replace, renew, repay or extend (including
pursuant to any defeasance or discharge mechanism) (collectively, “refinance,”
“refinances,” and “refinanced” shall have a correlative meaning)
any Indebtedness existing on the date of this Agreement or Incurred in
compliance with this Agreement (including Indebtedness of the Borrower that
refinances Indebtedness of any Restricted Subsidiary and Indebtedness of any
Restricted Subsidiary that refinances Indebtedness of another Restricted
Subsidiary) including Indebtedness that refinances Refinancing Indebtedness; provided,
however, that (i) the Stated Maturity of the Refinancing Indebtedness is
no earlier than the Stated Maturity of the Indebtedness being refinanced, (ii)
the Refinancing Indebtedness has an Average Life at the time such Refinancing
Indebtedness is Incurred that is equal to or greater than the Average Life of
the Indebtedness being refinanced and (iii) such Refinancing Indebtedness is
Incurred in an aggregate principal amount (or if issued with original issue
discount, an aggregate issue price) that is equal to or less than the sum of
the aggregate principal amount (or if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being refinanced
(plus, without duplication, any additional Indebtedness Incurred to pay
interest or premiums required by the instruments governing such existing
Indebtedness and fees Incurred in connection therewith) and (iv) if the
Indebtedness being extended, refinanced replaced, defeased or refunded is
subordinated in right of payment to the Loans or the Subsidiary Guarantee, such
Refinancing Indebtedness is subordinated in right of payment to the Loans or
the Subsidiary Guarantee on terms at least as favorable to the Holders as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.

 

“Register”:  as defined in Section 10.6(b).

 

“Reinvestment
Deferred Amount”:  with respect to
any Asset Disposition, the aggregate Net Available Cash received by the
Borrower or any of its Restricted Subsidiaries in connection therewith that are
not applied to prepay the Loans or the Exchange Notes pursuant to Section
2.5(b) as a result of the delivery of a Reinvestment Notice.

 

“Reinvestment
Notice”:  a written notice executed
by an Authorized Officer stating that no Event of Default has occurred and is
continuing and that the Borrower (directly or indirectly

 

23

 

through a Restricted
Subsidiary) intends and expects to use all or a specified portion of the Net
Available Cash of an Asset Disposition to acquire Additional Assets.

 

“Reinvestment
Prepayment Amount”:  with respect to
any Asset Disposition, the Reinvestment Deferred Amount relating thereto less
any amount expended prior to the relevant Reinvestment Prepayment Date to
acquire Additional Assets.

 

“Reinvestment
Prepayment Date”:  with respect to
any Asset Disposition, the earlier of (a) the date occurring 90 days after such
Asset Disposition and (b) the date on which the Borrower shall have determined
not to, or shall have otherwise ceased to, acquire Additional Assets with all
or any portion of the relevant Reinvestment Deferred Amount.

 

“Related
Business”:  any business which is
the same as or related, ancillary or complementary to any of the businesses of
the Borrower and its Restricted Subsidiaries on the Closing Date.

 

“Representative”:  any trustee, agent or representative (if
any) of an issue of Senior Indebtedness; provided that when used in
connection with the Senior Credit Agreement, the term “Representative” shall
refer to the global administrative agent under the Senior Credit Agreement.

 

“Required
Lenders”:  at any time, Lenders
holding more than 50% in principal amount of outstanding Loans (or, prior to
the Closing Date, more than 50% of the Commitments).

 

“Restricted
Investment”:  any Investment other
than a Permitted Investment.

 

“Restricted
Payment”:  as defined in Section 6.2(a).

 

“Restricted
Subsidiary”:  any Subsidiary of the
Borrower other than an Unrestricted Subsidiary.

 

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

 

“Sale/Leaseback
Transaction”:  an arrangement
relating to property now owned or hereafter acquired by the Borrower or a
Restricted Subsidiary whereby the Borrower or such Restricted Subsidiary
transfers such property to a Person and the Borrower or such Restricted
Subsidiary leases it from such Person.

 

“SEC”:  the Securities and Exchange Commission or
any Governmental Authority which succeeds to the powers and functions thereof.

 

“securities”:  any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in any
profit sharing agreement or arrangement, bonds, debentures, options, warrants,
notes, or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
“securities” or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.

 

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

 

“Securities
Demand”:  as defined in Section
5.8(a).

 

24

 

“Senior Credit Agreement”: 
a collective reference to (i) that certain Credit Agreement [U.S.
Revolving Credit Agreement], dated as of June 27, 2003, among Tom Brown, Inc.,
the various financial institutions as are, or may from time to time become,
parties to such Credit Agreement, the various financial institutions as are, or
may from time to time become, Agents under such Credit Agreement, and the
Global Administrative Agent, (ii) that certain Credit Agreement [Canadian
Revolving Credit Agreement], dated as of June 27, 2003, among Tom Brown
Resources Ltd. and Tom Brown Resources Funding Corp., the various financial
institutions as are, or may from time to time become, parties to such Credit
Agreement, the various financial institutions as are, or may from time to time
become, Agents under such Credit Agreement, JPMorgan Chase Bank, Toronto
Branch, as Canadian administrative agent, and the Global Administrative Agent,
and (iii) that certain Credit Agreement [Canadian Term Credit Agreement], dated
as of March 20, 2001, among Tom Brown Resources Funding Corp., the various
financial institutions as are, or may from time to time become, parties to such
Credit Agreement, the various financial institutions as are or may from time to
time become Agents under such Credit Agreement, The Chase Manhattan Bank of
Canada, as Canadian administrative agent, and The Chase Manhattan Bank, as
global administrative agent, as amended by that certain First Amendment to
Credit Agreement, dated June 27, 2003, among Tom Brown Resources Funding Corp.,
the various financial institutions as are, or may from time to time become,
parties to such Credit Agreement, the various financial institutions as are or
may from time to time become Agents under such Credit Agreement, JPMorgan Chase
Bank, Toronto Branch, as Canadian administrative agent, and the Global
Administrative Agent, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.

 

“Senior
Indebtedness”:  whether outstanding
on the Closing Date or thereafter issued, the Bank Indebtedness and all other
Indebtedness of the Borrower, including interest thereon (including any
interest accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) and fees relating
thereto, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that the obligations in
respect of such Indebtedness are not superior or are subordinate in right of
payment to the Loans; provided, however, that Senior Indebtedness
will not include (i) any obligation of the Borrower to any Subsidiary, (ii) any
liability for federal, state, foreign, local or other taxes owed or owing by
the Borrower, (iii) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (iv) any Indebtedness, Guarantee or
obligation of the Borrower that is expressly subordinate or junior in right of
payment to any other Indebtedness, Guarantee or obligation of the Borrower,
including any Senior Subordinated Indebtedness and any Subordinated Obligations
or (v) any Capital Stock.

 

“Senior
Subordinated Indebtedness”:  the
Loans, the Exchange Notes, and any other Indebtedness of the Borrower that
specifically provides that such Indebtedness is to rank pari passu with the Loans in right of
payment and is not subordinated by its terms in right of payment by its terms
to any Indebtedness or other obligation of the Borrower which is not Senior
Indebtedness.

 

“Solvent”:  with respect to any Person at any time, a
condition under which (a) the fair saleable value of such Person’s assets is,
on the date of determination, greater than the total amount of such Person’s
liabilities (including contingent and unliquidated liabilities) at such time;
and (b) such Person is able to pay all of its liabilities as such liabilities
mature.  For purposes of this definition
(i) the amount of a Person’s contingent or unliquidated liabilities at any time
shall

 

25

 

be that amount which, in
light of all the facts and circumstances then existing, represents the amount
which can reasonably be expected to become an actual or matured liability, (ii)
the “fair saleable value” of an asset shall be the amount which may be realized
within a reasonable time either through collection or sale of such asset at its
regular market value, and (iii) the “regular market value” of an asset shall be
the amount which a capable and diligent business person could obtain for such
asset from an interested buyer who is willing to purchase such asset under
ordinary selling conditions.

 

“S&P”:  Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Companies, Inc., and its successors.

 

“Stated
Maturity”:  with respect to any
Indebtedness or Security, the date specified in such Indebtedness or Security
as the fixed date on which the payment of principal of such Indebtedness or
Security is due and payable, including pursuant to any mandatory redemption
provision, but shall not include any contingent obligations to repay, redeem or
repurchase any such principal prior to the date originally scheduled for the
payment thereof.

 

“Subordinated
Obligation”:  any Indebtedness of the
Borrower (whether outstanding on the Closing Date or thereafter Incurred) which
is expressly subordinate or junior in right of payment to the Loans pursuant to
a written agreement.

 

“Subsequent
Initial Note”:  as defined in
Section 10.6(e).

 

“Subsequent
Term Note”:  as defined in Section
10.6(e).

 

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

 

“Subsidiary
Guarantee”: the Guarantee of the Loans and Notes by a Guarantor
substantially in the form of Exhibit A hereto.

 

“Successor
Company”:  as defined in Section
6.9(b).

 

“Take-Out
Debt”:  unsecured notes or
debentures of the Borrower that may be issued by the Borrower after the Closing
Date to refinance the Loans or Exchange Notes.

 

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

 

“Telerate
Page”: the display designated as Page 3750 on the Telerate System
Incorporated Service (or such other page as may replace such page on such
service for the purpose of displaying the rates at which Dollar deposits are
offered by leading banks in the London interbank deposit market).

 

“Term
Loan”:  as defined in Section
2.1(b).

 

26

 

“Term
Note”:  as defined in Section
10.6(e).

 

“Transferee”:
any Assignee or Participant.

 

“Trustee”:  as defined in Section 5.9(a).

 

“Type”:  when used in respect of any Loan, shall
refer to the Rate by reference to which interest on such Loan is
determined.  For purposes hereof, the
term “Rate” shall include the Adjusted LIBO Rate and the Alternate Base
Rate.

 

“Unrestricted
Non-Recourse Debt”:  Indebtedness
(i) as to which neither the Borrower nor any of its Restricted Subsidiaries (a)
provides any Guarantee or credit support of any kind (including any
undertaking, guarantee, indemnity, agreement or instrument that would
constitute Indebtedness) or (b) is directly or indirectly liable as a guarantor
or otherwise; (ii) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of any
other Indebtedness of the Borrower or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) the terms of
which provide that there is no recourse against any of assets of the Borrower
or any of its Restricted Subsidiaries.

 

“Unrestricted
Subsidiary”:  (i) any Subsidiary of
the Borrower that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors of the Borrower in the manner
provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.  The Board of Directors of the Borrower may
designate any Subsidiary of the Borrower (including any newly acquired or newly
formed Subsidiary or a Person becoming a Subsidiary through merger or
consolidation or Investment therein) to be an Unrestricted Subsidiary only
if:  (a) such Subsidiary or any of its
Subsidiaries does not own any Capital Stock or Indebtedness of or have any
Investment in, or own or hold any Lien on any property of, any other Subsidiary
of the Borrower which is not a Subsidiary of the Subsidiary to be so designated
or otherwise an Unrestricted Subsidiary; (b) all the Indebtedness of such
Subsidiary and its Subsidiaries shall, at the date of designation, and will at
all times thereafter, consist of Unrestricted Non-Recourse Debt; (c) such
designation and the Investment of the Borrower in such Subsidiary complies with
Section 6.2; (d) such Subsidiary, either alone or in the aggregate with all
other Unrestricted Subsidiaries, does not operate, directly or indirectly, all
or substantially all of the business of the Borrower and its Subsidiaries; (e)
such Subsidiary is a Person with respect to which neither the Borrower nor any
of its Restricted Subsidiaries has any direct or indirect obligation:  (i) to subscribe for additional Capital
Stock of such Person; or (ii) to maintain or preserve such Person’s financial
condition or to cause such Person to achieve any specified levels of operating
results; and (f) on the date such Subsidiary is designated an Unrestricted
Subsidiary, such Subsidiary is not a party to any agreement, contract,
arrangement or understanding with the Borrower or any Restricted Subsidiary
with terms substantially less favorable to the Borrower than those that might
have been obtained from Persons who are not Affiliates of the Borrower.  Any such designation by the Board of
Directors of the Borrower shall be evidenced to the Administrative Agent by
filing with the Administrative Agent a resolution of the Board of Directors of
the Borrower giving effect to such designation and a certificate of an
Authorized Officer certifying that such designation complies with the foregoing
conditions.  If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be Incurred as of such date.  The Board of Directors of the Borrower may designate any
Unrestricted Subsidiary to be a Restricted

 

27

 

Subsidiary; provided
that immediately after giving effect to such designation, no Default shall have
occurred and be continuing or would occur as a consequence thereof and the
Borrower could incur at least $1.00 of additional Indebtedness under Section
6.1(a) on a pro forma basis taking into account such designation.

 

“Voting
Stock”:  of any Person as of any
date, the Capital Stock of such Person that is as of such time entitled to vote
in the election of the Board of Directors of such Person.

 

“Wholly
Owned Subsidiary”:  any Restricted
Subsidiary of which all of the outstanding shares of Capital Stock (other than
directors’ qualifying shares) on a fully-diluted basis, are owned by such
Person or one or more of its Wholly Owned Subsidiaries or by such Person and
one or more of its Wholly Owned Subsidiaries.

 

1.2           Other
Definitional Provisions. 
(a)  Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes, any other Loan Document or any certificate or other
document made or delivered pursuant hereto.

 

(b)           As used herein and in any Notes and any other Loan
Document, and any certificate or other document made or delivered pursuant
hereto or thereto, accounting terms relating to the Borrower and its
Subsidiaries not defined in Section 1.1 and accounting terms partly defined in
Section 1.1, to the extent not defined, shall have the respective meanings
given to them under GAAP.

 

(c)           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, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.

 

(d)           The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.

 

SECTION 2  AMOUNT AND TERMS OF LOANS

 

2.1           Loans.  (a) 
Subject to the terms and conditions hereof, each Lender severally agrees
to make a loan (individually, an “Initial Loan” and collectively, the “Initial
Loans”) to the Borrower on the Closing Date, in an aggregate principal
amount equal to such Lender’s Commitment. 
Any Commitments not drawn on the Closing Date shall terminate.

 

(b)           Subject to the terms and conditions hereof, each Lender
severally agrees, if the Initial Loans have not been repaid or exchanged for
Exchange Notes on the Initial Maturity Date, to convert the then outstanding
principal amount of its Initial Loans into a loan (individually, a “Term
Loan” and collectively, the “Term Loans”; the Initial Loans and the
Term Loans, collectively, the “Loans”) to the Borrower, on the Initial
Maturity Date, in an aggregate principal amount equal to then outstanding
principal amount of the Initial Loans held by such Lender.  Upon the making by such Lender of such Term
Loan, each Lender shall cancel on its records a principal amount of the Initial
Loans held by such Lender corresponding to the principal amount of Term Loans
made by such Lender, which corresponding principal amount of the Initial Loans
shall be satisfied by the conversion thereof into Term Loans.

 

(c)           Prior to the Initial Maturity Date, the Initial Loans
shall be comprised entirely of Eurodollar Loans or ABR Loans.  Each Lender may at its option make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise

 

28

 

of such option shall not affect the obligation of
the Borrower to repay such Loan in accordance with the terms of this Agreement.

 

(d)           The failure of any Lender to make the Initial Loan to be
made by it shall not relieve any other Lender of its obligation, if any,
hereunder to make its Initial Loan on the Closing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Initial Loan to be
made by such other Lender on the Closing Date.

 

2.2           Procedure
for Borrowing.  The Borrower
shall give the Administrative Agent irrevocable notice (which notice must be
received by the Administrative Agent prior to 10:00 A.M., New York City time,
three (3) Business Days prior to the anticipated Closing Date) requesting that
the Lenders make the Initial Loans on the Closing Date and specifying the
amount to be borrowed.  Upon receipt of
such notice the Administrative Agent shall promptly notify each Lender
thereof.  Not later than 12:00 Noon, New
York City time, on the Closing Date each Lender shall make available to the
Administrative Agent at its office specified in Section 10.2 an amount in immediately
available funds equal to the Initial Loans to be made by such Lender.  The Administrative Agent shall credit the
account of the Borrower on the books of such office of the Administrative Agent
with the aggregate of the amounts made available to the Administrative Agent by
the Lenders in immediately available funds.

 

2.3           Maturity and Exchange Notes.  (a) 
All the Initial Loans will mature on the Initial Maturity Date.

 

(b)           All the Term Loans will mature on the Final Maturity Date.

 

(c)           Each Lender will have the option (i) on or after the
Initial Maturity Date at any time or from time to time to receive Exchange
Notes in exchange for the Term Loans or, (ii) on the Initial Maturity Date, to
receive Exchange Notes in exchange for the Initial Loans, of such Lender then
outstanding, in each case in accordance with Section 5.9.  The principal amount of the Exchange Notes
will equal 100.0% of the aggregate principal amount (including any accrued and
unpaid interest not required to be paid in cash) of the Loans for which they
are exchanged.  If a Default (but not an
Event of Default) shall have occurred and be continuing on the date of such
exchange, any notices given or cure periods commenced while the Loan was outstanding
shall be deemed given or commenced (as of the actual dates thereof) for all
purposes with respect to the Exchange Note (with the same effect as if the
Exchange Note had been outstanding as of the actual dates thereof).

 

2.4           Repayment
of Loans.  The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Loan in accordance with
the terms hereof and of the Loan Notes. 
The Borrower hereby further agrees to pay to the Administrative Agent
for the account of each Lender interest on the unpaid principal amount of the
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 2.6.

 

2.5           Optional and Mandatory Prepayments.  (a) 
The Borrower may at any time and from time to time prepay the Loans, in
whole or in part, without premium or penalty; provided, that if a Loan
is prepaid on any day other than the last day of the Interest Period applicable
thereto, the Borrower shall also pay any amounts owing pursuant to Section 2.11
and provided, further, that on or after the Initial Maturity
Date, any prepayment shall be applied pro rata among the Loans and Exchange
Notes as provided in Section 2.5(d). 
Upon receipt of any such notice the Administrative Agent shall promptly
notify each Lender thereof.  Partial
prepayments of Loans and the Exchange Notes shall be in an aggregate principal
amount equal to the lesser of (A) $1,000,000, or a whole multiple thereof and
(B) the aggregate unpaid principal amount of the Loans and Exchange Notes, as
the case may be.

 

29

 

(b)           (i)  If, subsequent
to the Closing Date, the Borrower or any of its Restricted Subsidiaries shall
issue the Take-Out Debt or any Indebtedness (other than Indebtedness Incurred
pursuant to Section 6.1(b)(i), (iii), (iv), (v)(y), (v)(z), (vi), (vii),
(viii), (ix), (x) or (xi)) or Capital Stock (other than shares of Capital Stock
of a Subsidiary issued to the Borrower or any Wholly Owned Subsidiary of the
Borrower), an amount equal to 100% of the Net Cash Proceeds thereof shall be
promptly applied toward the prepayment of the Loans and the Exchange Notes as
provided in Section 2.5(d); provided, however, that, except in
the case of any Take-Out Debt, such Net Cash Proceeds need not be applied to
the prepayment of the Loans and the Exchange Notes to the extent that such Net
Cash Proceeds are required to be and are applied pursuant to the Senior Credit
Agreement in satisfaction of obligations thereunder.

 

(ii)           If, subsequent to the Closing Date,
the Borrower or any of its Restricted Subsidiaries shall be required to apply
any Net Available Cash pursuant to Section 6.4, an amount equal to such Net
Available Cash shall be promptly applied toward the prepayment of the Loans and
the Exchange Notes as provided in Section 2.5(d) below.

 

(c)           The Borrower shall give the Administrative Agent (which
shall promptly notify each Lender) at least three (3) Business Days’ prior
irrevocable notice or, telephone notice promptly confirmed in writing of each
prepayment in whole or in part pursuant to this Agreement setting forth the
date and amount thereof.  If any such
notice is given, the amount specified in such notice shall be due and payable
on the date specified therein, together with accrued interest to, but
excluding, such date on the amount prepaid.

 

(d)           As promptly as practicable after the Administrative Agent
receives notice of a prepayment pursuant to Section 2.5(c), the Administrative
Agent, in cooperation with the Trustee, shall give notice to each holder of an
Exchange Note of the pro rata amount that would be payable to such holder in
respect of such holder’s Exchange Note and the expected date of such
prepayment.  Any holder of noncallable
Exchange Notes that wishes to accept such prepayment (each, an “Accepting
Holder”) shall notify the Trustee and the Administrative Agent in writing
within ten (10) Business Days of receipt of notice of prepayment.  Payments and offers to prepay the Loans and
Exchange Notes shall be made ratably among the Loans and Exchange Notes.  After the Administrative Agent receives the
prepayment amount, such prepayment amount shall be distributed promptly by the
Administrative Agent, in cooperation with the Trustee, subject to Section
2.8(b), in the following order, with appropriate adjustments being made to
account for the receipt by the Trustee of any prepayment in respect of the
Exchange Notes:  First, to the
payment of all amounts described in clauses “First” and “Second”
of Section 2.8(b)(i); Second, to the payment of interest then due and
payable on the Loans, Exchange Notes of Accepting Holders and callable Exchange
Notes, ratably among the Lenders, the Accepting Holders and Holders of callable
Exchange Notes in accordance with the aggregate amount of interest owed to each
such Lender, Accepting Holder and Holder; and Third, to the payment of
the principal amount of the Loans, the Exchange Notes of Accepting Holders and
the callable Exchange Notes that is then due and payable, ratably among the
Lenders, the Accepting Holders and Holders of callable Exchange Notes in
accordance with the aggregate principal amount owed to each such Lender,
Accepting Holder and Holder.  Amounts
offered to and rejected by any Exchange Note holder shall be ratably applied to
prepay the Loans, the Exchange Notes held by Accepting Holders and callable
Exchange Notes.  Any offers to prepay
non-callable Exchange Notes shall be made in accordance with the provisions
relating thereto in the Indenture, and with applicable law, and the
distribution of the relevant prepayment amount hereunder shall be made promptly
after the expiration of such offer.

 

2.6           Interest
Rates and Payment Dates. 
(a)  Initial Loans shall bear
interest for the period from and including the date such Initial Loans are made
to, but excluding, the Initial Maturity Date

 

30

 

on the unpaid principal thereof at a rate per
annum equal to the Initial Loan Rate for the Interest Period in effect for such
Initial Loan plus the Applicable Margin.

 

(b)           Term Loans shall bear interest for the period from and
including the Initial Maturity Date to, but excluding, the Final Maturity Date
or date of exchange for an Exchange Note on the unpaid principal thereof at a
rate per annum equal to the Adjusted Rate plus the Adjusted Margin.

 

(c)           Notwithstanding Sections 2.6(a) and (b), the interest rate
borne by the Loans shall not be less than 8.50% per annum and shall not exceed
14.0% per annum.  To the extent the
interest on any Loan exceeds a rate of 12.0% per annum, the Borrower may elect
to pay such excess interest (or portion thereof) by paying the appropriate PIK
Interest Amount through the increase in the principal amount of the applicable
Loans.  If requested by any Lender, the
Borrower shall issue Subsequent Initial Notes or Subsequent Term Notes, as the
case may be, in an aggregate principal amount equal to such PIK Interest
Amount.

 

(d)           (i) If all or a portion of the principal amount of any
Loan shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), all outstanding Loans (whether or not overdue)
shall bear interest at a rate per annum equal to the rate that would otherwise
be applicable thereto pursuant to the foregoing provisions of this Section plus
200 basis points and (ii) if all or a portion of any interest payable on any
Loan or other amount payable hereunder shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise), such overdue amount shall
bear interest at a rate per annum equal to the rate then applicable to the
Loans (without giving effect to clause (i) above) plus 200 basis points,
in each case, with respect to clauses (i) and (ii) above, from the date of such
non-payment until such amount is paid in full (as well after as before
judgment).  Notwithstanding anything to
the contrary in Section 2.6(c), all interest payable pursuant to this Section
2.6(d) shall be paid in immediately available funds.

 

(e)           Interest shall be payable in arrears on each Interest
Payment Date and upon the maturity date of the Loan in respect of which any
such interest is accruing, provided that interest accruing pursuant to
Section 2.6(d) shall be payable from time to time on demand.

 

2.7           Computation
of Interest.  Interest and fees
payable pursuant hereto shall be calculated on the basis of a 360-day year for
the actual days elapsed, except that, with respect to ABR Loans the rate of
interest on which is calculated on the basis of the Prime Rate, the interest
thereon shall be calculated on the basis of a 365- (or 366-, as the case may
be) day year for the actual days elapsed. 
The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of each determination of an Adjusted LIBO
Rate.  Any change in the interest rate
on a Loan resulting from a change in the Alternate Base Rate or the Adjusted
LIBO Rate shall become effective as of the opening of business on the day on
which such change becomes effective.  The
Administrative Agent shall as soon as practicable notify the Borrower and the
relevant Lenders of the effective date and the amount of each such change in
interest rate.  Each determination of an
interest rate by the Administrative Agent pursuant to any provision of this
Agreement shall be conclusive and binding on the Borrower and the Lenders in
the absence of manifest error.

 

2.8           Pro
Rata Treatment and Payments. 
(a)  Except to the extent
otherwise provided herein, the borrowing of Loans by the Borrower from the
Lenders shall be made pro  rata according to the relevant
Commitment Percentages of the Lenders with respect to the Loans borrowed.

 

(b)           Whenever any payment received by the Administrative Agent
under this Agreement or any Note or any Loan Document is insufficient to pay in
full all amounts then due and payable to the Administrative Agent and the
Lenders under this Agreement:

 

31

 

(i)            if the Administrative Agent has not
received a Payment Sharing Notice (or, if the Administrative Agent has received
a Payment Sharing Notice but the Event of Default specified in such Payment
Sharing Notice has been cured or waived in accordance with the provisions of
this Agreement), subject to Section 8, such payment shall be distributed by the
Administrative Agent and applied by the Administrative Agent, in cooperation
with the Trustee, and the Lenders in the following order, with appropriate
adjustment being made to account for any payment received by the Trustee in
respect of the Exchange Notes:  First,
to the payment of reasonable fees and expenses due and payable to the
Administrative Agent under and in connection with this Agreement or the
Subsidiary Guarantee or due and payable to the Trustee under the Indenture; Second,
to the payment of all reasonable expenses due and payable under Section 10.5
and any equivalent section of the Indenture, ratably among the Lenders and the
Exchange Note Holders in accordance with the aggregate amount of such payments
owed to each such Lender or Holder; Third, to the payment of accrued and
unpaid interest then due and payable on the Loans and the Exchange Notes
ratably among the Lenders and the Exchange Note Holders in accordance with the
aggregate amount of interest owed to each Lender and Exchange Note Holder; and Fourth,
to the payment of the principal amount of the Loans and the Exchange Notes that
is then due and payable, ratably among the Lenders and the Exchange Note
Holders in accordance with the aggregate principal amount owed to each such
Lender and Exchange Note Holder (and in the case of any Exchange Notes that are
classified as “Fixed Rate Notes” in the Indenture, subject to the provisions of
Section 2.5(d)); or

 

(ii)           if the Administrative Agent has
received a Payment Sharing Notice that remains in effect, subject to Section 8,
all payments received by the Administrative Agent under this Agreement or any
Note shall be distributed by the Administrative Agent and applied by the
Administrative Agent, in cooperation with the Trustee, and the Lenders in the
following order, with appropriate adjustment being made to account for any
payment received by the Trustee in respect of the Exchange Notes:  First, to the payment of all amounts
described in clauses “First” and “Second” of the foregoing clause
(i), in the order set forth therein; Second, to the payment of the
interest accrued and unpaid on all Loans and Exchange Notes, regardless of
whether any such amount is then due and payable, ratably among the Lenders and
the Exchange Note Holders in accordance with the aggregate accrued interest
plus the aggregate principal amount owed to such Lender and the Exchange Note
Holders; and Third, to the payment of the principal amount of all Loans
and Exchange Notes, regardless of whether any such amount is then due and
payable, ratably among the Lenders and the Exchange Note Holders in accordance
with the aggregate principal amount owed to each Lender and Exchange Note
Holder (and in the case of any Exchange Notes that are classified as “Fixed
Rate Notes” in the Indenture, subject to the provisions of Section 2.5(d)).

 

(c)           All payments (including prepayments) to be made by the
Borrower on account of principal, interest and fees shall be made without
setoff or counterclaim and shall be made prior to 12:00 Noon, New York City
time, on the due date thereof to the Administrative Agent, for the account of
the Lenders at the Administrative Agent’s office specified in Section 10.2, in
lawful money of the United States of America and in immediately available
funds.  The Administrative Agent shall
promptly distribute such payments in accordance with the provisions of Section
2.8(b) upon receipt in like funds as received. 
If any payment hereunder (other than payments on the Eurodollar Loans)
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day.  If any payment on a Eurodollar Loan becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day unless the

 

32

 

result of such extension would be to extend such
payment into another calendar month, in which event such payment shall be made
on the immediately preceding Business Day. 
In the case of any extension of any payment of principal pursuant to the
preceding two sentences, interest thereon shall be payable at the then
applicable rate during such extension.

 

(d)           Unless the Administrative Agent shall have been notified
in writing by any Lender prior to the Closing Date that such Lender will not
make the amount that would constitute its share of such borrowing available to
the Administrative Agent, the Administrative Agent may assume that such Lender
is making such amount available to the Administrative Agent, and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount.  If
such amount is not made available to the Administrative Agent by the required
time on the Closing Date, such Lender shall pay to the Administrative Agent, on
demand, such amount with interest thereon at a rate equal to the daily average
Federal Funds Effective Rate for the period until such Lender makes such amount
immediately available to the Administrative Agent.  A certificate of the Administrative Agent submitted to any Lender
with respect to any amounts owing under this Section 2.8(d) shall be conclusive
in the absence of manifest error.  If
such Lender’s share of such borrowing is not made available to the
Administrative Agent by such Lender within three (3) Business Days of the
Closing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to ABR Loans, on demand,
from the Borrower.

 

2.9           Alternate Rate of Interest.  If prior to the commencement of any Interest
Period for a Eurodollar Loan:

 

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

 

(b)           the Administrative Agent is advised
by the Required Lenders that the Adjusted LIBO Rate for such Interest Period
will not adequately and fairly reflect the cost to such Lenders of making or
maintaining such Eurodollar Loans for such Interest Period; or

 

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

 

then the Administrative Agent shall give
notice thereof to the Borrower and the Lenders by telephone or telecopy as
promptly as practicable thereafter and, until the Administrative Agent notifies
the Borrower and the Lenders that the circumstances giving rise to such notice
no longer exist, any request for the borrowing of, or conversion of any Loan
to, a Eurodollar Loan for the affected Interest Period shall be ineffective.

 

2.10         Increased
Costs.

 

(a)           If any Change in Law shall:

 

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

 

33

 

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

 

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

 

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

 

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

 

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

 

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

 

34

 

Borrower and the Administrative Agent and
shall be conclusive absent manifest error. 
The Borrower shall pay such Lender the amount shown as due on any such
certificate within ten (10) days after receipt thereof.

 

2.12         Taxes.

 

(a)           Any and all payments by or on account of any obligation of
the Borrower hereunder or under any other Loan Document shall be made free and
clear of and without deduction for any Indemnified Taxes or Other Taxes; provided
that if the Borrower shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section), the Administrative
Agent or each Lender (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions and (iii) the Borrower shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law; provided that if a Lender is in breach of its obligations under
Section 2.12(e), then the Borrower shall only be obligated to comply with
clauses (ii) and (iii) of this Section 2.12(a) with respect to payments to be
made to such Lender.

 

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

 

(c)           The Borrower shall indemnify the Administrative Agent and
each Lender, within ten (10) days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent
or such Lender, as the case may be, on or with respect to any payment by or on
account of any obligation of the Borrower hereunder or under any other Loan
Document (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority; provided that if a
Lender is in breach of its obligations under Section 2.12(e), then the Borrower
shall have no obligations under this Section 2.12(c) with respect to any
payments or liabilities described herein made or owed by such Lender.  A certificate as to the amount of such payment
or liability delivered to the Borrower by a Lender, or by the Administrative
Agent on its own behalf or on behalf of a Lender, shall be conclusive absent
manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within ten (10)
days after receipt thereof.

 

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

 

(e)           Each Lender that is not organized under the laws of the
United States of America or a state thereof agrees that such Lender will
deliver to the Borrower and the Administrative Agent two duly completed copies
of United States Internal Revenue Service Form W-8 BEN or W-8 ECI (or if such
forms are no longer required, a representation by such Lender) certifying in
either case that such Lender is entitled to receive payments from the Loan
Parties under the Loan Documents without deduction or withholding of any United
States federal income taxes.  Each
Lender which so delivers a Form W-8 BEN or W-8 ECI further undertakes to
deliver to the Borrower and the Administrative Agent two additional copies of
such form (or a successor form) on or before such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it and such

 

35

 

amendments thereto or extensions or renewals thereof
as may be reasonably requested by the Borrower or the Administrative Agent, in
each case, certifying that such Lender is entitled to receive payments from the
Borrower under the Loan Documents without deduction or withholding of any
United States federal income taxes, unless (i) an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and (ii) such Lender advises
the Borrower and the Administrative Agent that it is not capable of receiving
such payments without any deduction or withholding of United States federal
income tax.

 

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

 

2.13         Mitigation Obligations; Replacement
of Lenders.

 

(a)           If any Lender requests compensation under Section 2.10, or
if the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.12,
then such Lender shall use reasonable efforts to designate a different
Applicable Lending Office for funding or booking its Loans hereunder or to
assign its rights and obligations hereunder to another of its offices, branches
or Affiliates, if, in the judgment of such Lender, such designation or
assignment (i) would eliminate or reduce amounts payable pursuant to Section
2.10 or 2.12, as the case may be, in the future and (ii) would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender.  The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or assignment.

 

(b)           If (i) any Lender requests compensation under Section
2.10, (ii) the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section
2.12, or (iii) any Lender defaults in its obligation to fund Loans hereunder,
then the Borrower may, at its sole expense and effort, upon notice to such
Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 10.6), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
that (1) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld or
delayed, (2) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon and all other
amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrower (in the
case of all other amounts), (3) the assignee and assignor shall have entered
into an Assignment and Acceptance, and (4) in the case of any such assignment
resulting from a claim for compensation under Section 2.10 or payments required
to be made pursuant to Section 2.12, such assignment will result in a reduction
in such compensation or payments.

 

36

 

SECTION 3  REPRESENTATIONS AND WARRANTIES

 

To induce the Administrative
Agent and the Lenders to enter into this Agreement and to make the Loans, the
Borrower hereby represents and warrants to the Administrative Agent and each
Lender that:

 

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

 

3.2           Financial
Condition.  The audited
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
at each of December 31, 2000, December 31, 2001 and December 31, 2002 and the
related consolidated statements of income, stockholders’ equity and cash flow
of the Borrower and its Consolidated Subsidiaries for the fiscal years ended on
said dates, with the opinion thereon of Arthur Andersen LLP (for fiscal year
2000 and fiscal year 2001) and KPMG LLP (for fiscal year 2002) heretofore
furnished to each of the Lenders and the unaudited consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as at March 31, 2003 and
their related consolidated statements of income, stockholders’ equity and cash
flow of the Borrower and its Consolidated Subsidiaries for the three month
period ended on such date heretofore furnished to the Administrative Agent, are
complete and correct and fairly present, in all material respects, the
consolidated financial condition of the Borrower and its Consolidated
Subsidiaries as at said dates and the results of its operations for the fiscal
year and the three month period on said dates, all in accordance with GAAP, as
applied on a consistent basis (subject, in the case of the interim financial
statements, to normal year-end adjustments). 
The pro forma balance sheet and the related pro forma statement of
income of the Borrower as of, or for the twelve month period ending on, each of
December 31, 2002 and March 31, 2003 delivered to the Administrative Agent and
prepared giving effect to the Acquisition and the financing thereof (i) have
been prepared in good faith in accordance with GAAP and in accordance with
Regulation S-X under the Securities Act, (ii) are based upon assumptions
believed to be reasonable and (iii) present fairly, in all material respects,
the unaudited, pro forma financial position of the Borrower and its
Subsidiaries as of, or for the periods ending, on said dates.  Neither the Borrower nor any Consolidated
Subsidiary has on the Closing Date any material Indebtedness, contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the Financial Statements.  Since March 31, 2003, there has been no
change or event which could reasonably be expected to have a Material Adverse
Effect.  Since the date of the Financial
Statements, neither the business nor the Properties of the Borrower or any
Restricted Subsidiary have been materially and adversely affected as a result
of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike
or other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental
Authority, riot, activities of armed forces or acts of God or of any public
enemy.

 

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

 

37

 

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

 

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

 

3.6           Approvals.  No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by any Loan Party of the Loan
Documents or for the validity or enforceability thereof.

 

3.7           Use of Proceeds and Letters of Credit.  The Borrower will, and will cause each
Subsidiary to, use the proceeds of the Loans to pay a portion of the purchase
price for the Acquisition.  No part of
the proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the regulations of the Board of
Governors, including Regulation U.

 

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

 

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

 

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

 

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

 

(d)           No Plan (other than a defined
contribution plan) or any trust created under any such Plan has been terminated
within the last six calendar years.  No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been
or is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be
incurred with respect to any Plan.  No
ERISA Event with respect to any Plan has occurred.

 

(e)           Full payment when due has been made
of all amounts which the Borrower, any Subsidiary or any ERISA Affiliate is
required under the terms of each Plan or applicable law to

 

38

 

have paid as contributions
to such Plan, and no accumulated funding deficiency (as defined in section 302
of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan.

 

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

 

(g)           None of the Borrower, any Subsidiary
or any ERISA Affiliate sponsors, maintains, or contributes to an employee
welfare benefit plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former employees of
such entities, that may not be terminated by the Borrower, a Subsidiary or any
ERISA Affiliate in its sole discretion at any time without any material
liability.

 

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

 

(i)            None of the Borrower, any Subsidiary
or any ERISA Affiliate is required to provide security under section 401(a)(29)
of the Code due to a Plan amendment that results in an increase in current
liability for the Plan.

 

3.9           Taxes.  Each of the Borrower and its Subsidiaries
has filed all U.S. federal income tax returns, Canadian income tax returns and
all other tax returns which are required to be filed by them and have paid all
material taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Subsidiary. 
The charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Borrower, adequate.  No
tax lien has been filed and, to the knowledge of the Borrower, no claim is
being asserted with respect to any such tax, fee or other charge.

 

3.10         Properties,
etc.

 

(a)           Each of the Borrower and its Restricted Subsidiaries has
good and defensible title to its material (individually or in the aggregate)
Properties, free and clear of all Liens, except Liens permitted by Section 6.5.

 

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

 

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

 

39

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

40

 

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

 

(d)           All Hazardous Materials, if any,
generated at any and all Property of the Borrower or any Restricted Subsidiary
have been transported, treated and disposed of in accordance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and, to the best knowledge of the
Borrower with respect to the transport and disposal of the Borrower’s or any Restricted
Subsidiary’s Hazardous Materials, all such transport carriers and treatment and
disposal facilities have been and are operating in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are not the
subject of any existing, pending or threatened action, investigation or inquiry
by any Governmental Authority in connection with any Environmental Laws;

 

(e)           The Borrower has taken all steps
reasonably necessary to determine and has determined that no Hazardous
Materials, have been disposed of or otherwise released and there has been no
threatened release of any Hazardous Materials on or to any Property of the
Borrower or any Restricted Subsidiary except in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment;

 

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

 

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

 

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

 

3.18         Insurance.  Schedule 3.18 attached hereto
contains an accurate and complete description of all material policies of fire,
liability, workmen’s compensation and other forms of insurance owned or held by
the Borrower and each Subsidiary.  All
such policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date of the closing and through

 

41

 

the respective dates set forth in Schedule
3.18 have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. 
Such policies are sufficient for compliance with all requirements of law
and of all agreements to which the Borrower or any Subsidiary is a party; are
valid, outstanding and enforceable policies; provide adequate insurance
coverage in at least such amounts and against at least such risks (but
including in any event public liability) as are usually insured against in the same
general area by companies engaged in the same or a similar business for the
assets and operations of the Borrower and each Subsidiary.

 

3.19         Hedging
Agreements.  Schedule 3.19
sets forth, as of the Closing Date, a true and complete list of all Hedging Agreements
(including commodity price swap agreements) and all forward agreements or
contracts of sale which provide for prepayment for deferred shipment or
delivery of oil, gas or other commodities) of the Borrower and each Restricted
Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark to market
value thereof, all credit support agreements relating thereto (including any
margin required or supplied), and the counter party to each such agreement.

 

3.20         Material
Agreements.  Except for the Loan
Documents, the “Combined Loan Documents” referred to in the Senior
Credit Agreement and the Hedging Agreements, as of the Closing Date, neither
the Borrower nor any of its Subsidiaries are parties to any material
agreements, leases, indentures, purchase agreements, obligations in respect of
letters of credit, Guarantees, joint venture agreements, and other instruments
in effect or to be in effect as of the Closing Date providing for, evidencing,
securing or otherwise relating to any Indebtedness of the Borrower or any of
its Subsidiaries.

 

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

 

SECTION 4  CONDITIONS
PRECEDENT

 

The agreement of each Lender
to make the Initial Loan requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan
on the Closing Date (but in any event no later than June 30, 2003) of the
following conditions precedent:

 

(a)           Loan Documents.  The Administrative Agent shall have received
(i) this Agreement, executed and delivered by an Authorized Officer of the
Borrower with a counterpart for each Lender, (ii) for the account of each
Lender requesting the same, a Loan Note conforming to the requirements hereof
and executed by an Authorized Officer of the Borrower and (iii) the Subsidiary
Guarantee to be entered into on the Closing Date, executed and delivered by an
Authorized Officer of each relevant Guarantor.

 

(b)           Senior Credit Agreement.  The Lenders shall have received a complete
and correct copy of the Senior Credit Agreement, in form and substance
satisfactory to the Lenders, and such Agreement shall be in full force and
effect and none of the provisions thereof shall have been amended, waived,
supplemented, or otherwise modified without the prior written consent of the
Administrative Agent.  All conditions
precedent for the funding of the Senior Credit Agreement shall have been
satisfied or waived contemporaneously with the satisfaction of the

 

42

 

conditions hereunder and
such funding shall occur contemporaneously with the funding of the Initial
Loans, in each case on terms and conditions satisfactory to the Administrative
Agent.

 

(c)           Acquisition.  The Administrative Agent shall have received
copies of the Acquisition Documents, and none of the material terms and
conditions of the Acquisition Documents shall have been waived without the
consent of the Required Lenders.  The
Acquisition shall have been, or contemporaneously with the initial funding of
Loans on the Closing Date shall be, consummated as contemplated by and pursuant
to the Acquisition Documents and applicable law (without any amendment to or
waiver of any material terms or conditions of the Acquisition Documents not
approved by the Required Lenders), and evidence therefor shall have been
provided to the Administrative Agent.

 

(d)           Payment of Fees.  All fees and expenses required to be paid on
or before the Closing Date shall have been paid or provision for payment
thereof shall have been made.

 

(e)           Governmental Approvals.  All governmental and third party approvals
necessary and material in connection with the Acquisition, the financing
contemplated hereby and the continuing operations of the Borrower and its
Restricted Subsidiaries shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Acquisition or
the financings thereof.

 

(f)            Financial Statements.  The Lenders shall have received the
financial statements referred to in Section 3.2.

 

(g)           Legal Opinions.  The Lenders shall have received a
satisfactory executed legal opinion from Vinson & Elkins L.L.P.

 

(h)           Closing Certificate.  The Administrative Agent shall have
received, with a photocopy for each Lender, a certificate of the Borrower,
dated the Closing Date, substantially in the form of Exhibit E.

 

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

 

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

 

(k)           Projections.  The Lenders shall have received satisfactory
projections of the Borrower through the 2005 fiscal year.

 

(l)            Representations and Warranties.  Each of the representations and warranties
made in or pursuant to Section 3 or that are contained in any other Loan
Document shall be true and correct in all material respects on and as of the
date of the borrowing of the Initial Loans as if made on and as of such date.

 

(m)          No Default.  No Default shall have occurred and be
continuing on the Closing Date or after giving effect to the Initial Loans to be
made on the Closing Date.

 

43

 

The making of the Initial Loans by the
Lenders hereunder shall conclusively be deemed to constitute an acknowledgement
by the Administrative Agent and each Lender that each of the conditions
precedent set forth in this Section 4 shall have been satisfied in accordance
with its respective terms or shall have been irrevocably waived by such Person.

 

SECTION 5  AFFIRMATIVE COVENANTS

 

The Borrower hereby agrees
that, so long as the Commitments remain in effect, any Loan or Loan Note
remains outstanding and unpaid, or any other amount is owing to any Lender or
the Administrative Agent hereunder or under any of the other Loan Documents:

 

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

 

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

 

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

 

(c)           Notice of Default, Etc.  Promptly after the Borrower knows that any
Default or any Material Adverse Effect has occurred, a notice of such Default,
Event of Default or Material Adverse Effect, describing the same in reasonable
detail and the action the Borrower proposes to take with respect thereto.

 

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

 

44

 

Restricted Subsidiary of the
Borrower, or the Board of Directors of the Borrower or any Restricted
Subsidiary of the Borrower, to such letter or report.

 

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

 

(f)            Notices Under Other Loan
Agreements.  Promptly after the
furnishing thereof, copies of any statement, report or notice furnished to any
Person pursuant to the terms of any indenture, loan or credit or other similar
agreement, other than this Agreement and not otherwise required to be furnished
to the Lenders pursuant to any other provision of this Section 5.1.

 

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

 

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

 

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

 

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

 

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

 

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

 

The Borrower will furnish to the
Administrative Agent, at the time it furnishes each set of financial statements
pursuant to paragraph (a) or (b) above, a compliance certificate substantially
in the form of Exhibit F executed by an Authorized Officer certifying as
to the matters set forth therein and stating that no Default has occurred and
is continuing (or, if any Default has occurred and is continuing, describing
the same in reasonable detail).

 

5.2           Litigation.  The Borrower shall promptly give to the
Administrative Agent notice of: (i) all legal or arbitral proceedings, and of
all proceedings before any Governmental Authority affecting the Borrower or any
Restricted Subsidiary, except proceedings which, if adversely determined, could
not reasonably be expected to have a Material Adverse Effect, (ii) any
litigation or proceeding

 

45

 

against or adversely affecting the Borrower
or any Restricted Subsidiary in which injunctive or similar relief is sought
and (iii) the occurrence of any development with respect to any action, suit or
proceeding previously disclosed to the Administrative Agent or the Lenders
pursuant to this Agreement if such action, suit or proceeding could reasonably
be expected to result in a Material Adverse Effect.  The Borrower will, and will cause each of its Restricted
Subsidiaries to, promptly notify the Administrative Agent and each of the
Lenders of any claim, judgment, Lien or other encumbrance affecting any
Property of the Borrower or any Restricted Subsidiary if the value of the
claim, judgment, Lien, or other encumbrance when aggregated with all other
existing claims, judgment or Liens affecting such Property shall exceed
$10,000,000.

 

5.3           Maintenance,
Etc.

 

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

 

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

 

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

 

46

 

material Properties, (iii) do all other
things necessary to keep unimpaired, except for Liens permitted in Section 6.5,
its rights with respect to its Oil and Gas Properties and other material
Properties and prevent any forfeiture thereof or a default thereunder, except
to the extent a portion of such Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts and except for dispositions
permitted by Section 6.4.  The Borrower
will and will cause each Restricted Subsidiary to operate its Oil and Gas
Properties and other material Properties or cause or make reasonable and
customary efforts to cause such Oil and Gas Properties and other material
Properties to be operated in a careful and efficient manner in accordance with
the practices of the industry and in compliance with all applicable contracts
and agreements and in compliance with all Governmental Rules, except where the
failure to comply would not reasonably be expected to have a Material Adverse
Effect.

 

5.4           Environmental
Matters.

 

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

 

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

 

5.5           Title
to Oil and Gas Properties.  The
Borrower shall, and shall cause each Restricted Subsidiary to, maintain good
and defensible title to its material (individually or in the aggregate) Oil and
Gas Properties and to do all things reasonably necessary to cure any material
title defects which are not Liens permitted by Section 6.5 of which the
Borrower or any Restricted Subsidiary has knowledge or has been provided notice.

 

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

 

47

 

Affiliate to, (i) satisfy in full and in a
timely manner, without incurring any late payment or underpayment charge or
penalty and without giving rise to any lien, all of the contribution and
funding requirements of section 412 of the Code (determined without regard to
subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii)
pay, or cause to be paid, to the PBGC in a timely manner, without incurring any
late payment or underpayment charge or penalty, all premiums required pursuant
to sections 4006 and 4007 of ERISA.

 

5.7           Gas Marketing.

 

(a)           After its delivery in compliance with Section 4(j), (i)
the Borrower shall not modify the Gas Marketing Policy without the prior
written consent of the Administrative Agent and the Required Lenders and (ii)
unless otherwise consented to in writing by the Administrative Agent and the
Required Lenders, the Borrower shall, and shall cause each Restricted
Subsidiary to, comply with the Gas Marketing Policy.

 

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

 

5.8           Take-Out
Financing.  (a)  The Borrower shall take any and every action
reasonably necessary or desirable so that the Investment Bank can, as soon as
practicable after the date hereof publicly sell or privately place, in one or
more offerings or placements, the Take-Out Debt.  The Investment Bank, in its reasonable discretion after consultation
with the Borrower, shall determine whether, and in which amounts, the Take-Out
Debt shall be issued by the Borrower and the amount of each series of Take-Out
Debt to be issued if the Take-Out Debt is to be issued in a series of offerings
and/or placements.  Upon notice by the
Investment Bank (a “Securities Demand”), at any time and from time to
time on or after the date that is three months after the Closing Date if all
Loans shall not have been repaid in full or the Commitments shall not have been
terminated, the Borrower will cause the issuance and sale of Take-Out Debt upon
such terms and conditions as specified in the Securities Demand; provided
that (i) the interest rate (whether floating or fixed) shall be determined by
the Investment Bank in light of the then prevailing market conditions for
comparable debt securities but in no event shall the weighted average effective
yield on the Take-Out Debt (determined
by excluding any yield that may be attributable to the issuance by the Borrower
of any common equity or warrants to acquire common equity) exceed 14.0%
per annum or the cash-pay effective yield on the Take-Out Debt exceed 12.0% per
annum; (ii) the Investment Bank, in its reasonable discretion after
consultation with the Borrower, shall determine whether the Take-Out Debt shall
be issued through a public offering or a private placement; (iii) the maturity
of any Take-Out Debt shall not be earlier than six months after the final
maturity of the last facility to mature under the Senior Credit Agreement; (iv)
the Take-Out Debt will be issued pursuant to an indenture or other agreement,
which shall contain terms, conditions and covenants that are no more
restrictive with respect to the Borrower and its Subsidiaries than those
contained in this Agreement; and (v) all other arrangements with respect to the
Take-Out Debt shall be reasonably satisfactory in all respects to the
Investment Bank in light of the then prevailing market conditions.

 

(b)           The Borrower will give the Administrative Agent prior
notice of its intention to file a registration statement or to effect a private
placement of the Take-Out Debt.  The
Borrower will notify the Administrative Agent promptly upon the receipt of any
comments from the SEC in connection with the registration statement, will
furnish the Administrative Agent with a copy of any written

 

48

 

comments from the SEC, will respond in a reasonably
prompt manner and appropriately to any such comments and will furnish a copy to
the Administrative Agent of any such response to the SEC.

 

5.9           Exchange
Notes.  (a)  The Borrower shall, as promptly as
practicable after the nine month anniversary of the Closing Date and in any
event prior to the Initial Maturity Date, enter into the Indenture with a bank
or trust company acting as indenture trustee thereunder (the “Trustee”),
which shall be organized and doing business under the laws of the United States
of America or any state thereof, in good standing, which is authorized under
such laws to exercise corporate trust powers and is subject to supervision or
examination by federal or state authority and which has a combined capital and
surplus of not less than $50,000,000.

 

(b)           The Borrower will, on or prior to the third Business Day
following the written request (the “Exchange Request”) of any Lender
execute, and cause the Trustee to authenticate, and deliver to such Lender in
accordance with the Indenture an Exchange Note bearing interest as set forth
therein in exchange for such Lender’s Loan dated the date of the issuance of
such Exchange Note, registered in the name specified by such Lender, in the
principal amount equal to 100% of the aggregate principal amount (including any
accrued and unpaid interest not required to be paid in cash) of the Loans for
which they are exchanged.  Each Exchange
Request shall specify the principal amount of the Loans to be exchanged
pursuant to this Section 5.9, which shall be at least $1,000,000 and in
integral multiples of $100,000 in excess thereof and, if such Lender holds Loan
Notes, be accompanied by the Loan Notes to be exchanged for Exchange
Notes.  No Exchange Request shall be
made more than 30 days prior to the Initial Maturity Date.  Any Loan Notes delivered to the Borrower
under this Section 5.9 in exchange for Exchange Notes shall be cancelled by the
Borrower and the corresponding amount of the Lender’s Loan deemed repaid and
the Exchange Notes shall be governed by and construed in accordance with the
terms of the Indenture.

 

(c)           If Exchange Notes are issued pursuant to the terms hereof,
the holders of such Exchange Notes shall have the registration rights set forth
in Exhibit E to the Indenture, which Exhibit is hereby incorporated by
reference in this Agreement, and the Borrower hereby agrees to be bound by the
provisions thereof applicable to the Borrower.

 

5.10         Use
of Proceeds of the Take-Out Debt. 
The Borrower shall use the Net Cash Proceeds received by it from the
sale of the Take-Out Debt to repay the Loans and the Exchange Notes pursuant to
Section 2.5.

 

5.11         Additional
Subsidiaries.  If any additional
Restricted Subsidiary of the Borrower is formed or acquired after the Closing
Date, the Borrower will notify the Administrative Agent and the Lenders
thereof.  The Borrower will (i) cause
any Material Subsidiary (unless such Subsidiary is a Foreign Subsidiary or an
Unrestricted Subsidiary) to execute a joinder to the Subsidiary Guarantee
within 30 days after such Subsidiary is formed or acquired or it is determined
to have the requisite total asset value to be a Material Subsidiary (but in any
event no later than the date on which such Subsidiary Guarantees any Bank
Indebtedness) and (ii) cause any other Subsidiary that Guarantees any Bank
Indebtedness, other than any Foreign Subsidiary that only Guarantees the Bank
Indebtedness of another Foreign Subsidiary, to execute a joinder to the
Subsidiary Guarantee no later than the date on which such Subsidiary Guarantees
such Bank Indebtedness.

 

5.12         Further
Assurances.  Upon reasonable
request of the Administrative Agent, execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper
to carry out more effectively the purpose of this Agreement.

 

49

 

SECTION 6  NEGATIVE
COVENANTS

 

So long as any Loan or Loan
Note remains outstanding and unpaid, or any other amount is owing to any Lender
or the Administrative Agent hereunder or under any other Loan Document:

 

6.1           Limitation
on Indebtedness.  (a)  The Borrower shall not, and shall not permit
any of its Restricted Subsidiaries to, Incur any Indebtedness; provided,
however, that from and after the Initial Maturity Date the Borrower and
its Restricted Subsidiaries may Incur Indebtedness if on the date thereof (A)
the Consolidated Coverage Ratio of the Borrower and its Restricted Subsidiaries
is at least 3.00 to 1.00 and the Leverage Ratio of the Borrower and its
Restricted Subsidiaries is less than 3.00 to 1:00, in each case as certified in
reasonable detail by an Authorized Officer of the Borrower, and (B) no Default
shall have occurred and be continuing or would occur as a consequence of
Incurring such Indebtedness.

 

(b)           Notwithstanding Section 6.1(a), the Borrower and its
Restricted Subsidiaries may Incur the following Indebtedness:

 

(i)            (A) Indebtedness of the Borrower or
any Restricted Subsidiary Incurred pursuant to the Senior Credit Agreement in
an aggregate amount up to $425,000,000 less the aggregate principal
amount of all scheduled principal repayments and all mandatory prepayments of
principal thereof permanently reducing the commitments thereunder and (B)
Guarantees of the Borrower or Restricted Subsidiaries in respect of the
Indebtedness Incurred pursuant to the Senior Credit Agreement;

 

(ii)           Indebtedness Incurred under the Loan
Documents, the Indenture, the Notes and any other document entered into
pursuant thereto;

 

(iii)          Indebtedness represented by the
Subsidiary Guarantee and other Guarantees by the Borrower or the Guarantors of
Indebtedness Incurred in accordance with the provisions of this Agreement; provided
that in the event such Indebtedness that is being Guaranteed is (A) Senior
Subordinated Indebtedness or Guarantor Senior Subordinated Indebtedness, then
the related Guarantee shall rank equally in right of payment to the Loans or
the Subsidiary Guarantee, as applicable, or (B) a Subordinated Obligation or a
Guarantor Subordinated Obligation, then the related Guarantee shall be
subordinated in right of payment to the Loans or the Subsidiary Guarantee, as
applicable;

 

(iv)          Indebtedness of the Borrower owing to
and held by any Restricted Subsidiary or Indebtedness of a Restricted
Subsidiary owing to and held by the Borrower or any Restricted Subsidiary; provided,
however, (A) such Indebtedness is expressly subordinated in right of
payment from and after such time as the Loans shall become due and payable
(whether at Stated Maturity, acceleration or otherwise) to the prior payment in
full in cash of all obligations with respect to the Loans or the Subsidiary
Guarantee and (B) (1) any subsequent issuance or transfer of Capital Stock or
any other event which results in any such Indebtedness being beneficially held
by a Person other than the Borrower or a Wholly Owned Subsidiary of the
Borrower and (2) any sale or other transfer of any such Indebtedness to a
Person other than the Borrower or a Wholly Owned Subsidiary of the Borrower
shall be deemed, in each case, to constitute an Incurrence of such Indebtedness
by the issuer thereof;

 

(v)           Indebtedness represented by (x) the
Take-Out Debt, (y) any Indebtedness (other than the Indebtedness described in
clauses (i), (iii), (iv), (vii), (viii), (ix) and (x) of

 

50

 

this Section 6.1(b))
outstanding on the Closing Date and (z) any Refinancing Indebtedness Incurred
in respect of any Indebtedness described in this clause (v) or clause (vi) or
Incurred pursuant to Section 6.1(a);

 

(vi)          Indebtedness of a Restricted
Subsidiary Incurred and outstanding on the date on which such Restricted
Subsidiary was acquired by the Borrower (other than Indebtedness Incurred to
provide all or any portion of the funds utilized to consummate the transaction
or series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by the Borrower or
otherwise in connection with, or in contemplation of, such acquisition), provided,
however, that at the time such Restricted Subsidiary is acquired by the
Borrower, the Borrower would have been able to Incur $1.00 of additional
Indebtedness pursuant to Section 6.1(a) after giving effect to the Incurrence
of such Indebtedness pursuant to this clause (vi);

 

(vii)         Indebtedness under Hedging Agreements
incurred in the ordinary course of business;

 

(viii)        Indebtedness Incurred in respect of
workers’ compensation claims, self-insurance obligations, performance, surety
and similar bonds and completion guarantees provided by the Borrower or a
Restricted Subsidiary in the ordinary course of business;

 

(ix)           Indebtedness arising from agreements
of the Borrower or a Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each case, Incurred or
assumed in connection with the disposition of any business, assets or Capital
Stock of a Restricted Subsidiary in accordance with the terms of this
Agreement, other than Guarantees by the Borrower or any Restricted Subsidiary
of Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or a Subsidiary of the Borrower for the purpose of financing
such acquisition, provided that the maximum aggregate liability in
respect of all such Indebtedness shall at no time exceed the gross proceeds
actually received by the Borrower and its Restricted Subsidiaries in connection
with such disposition;

 

(x)            (A) 
Indebtedness arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business, provided, however, that
such Indebtedness is extinguished within five (5) Business Days of Incurrence
and (B) Indebtedness associated with account payable overdraft facilities for
Tom Brown Resources Ltd. not to exceed $5,000,000 at any time outstanding and
Guarantees thereof by the Borrower;

 

(xi)           the Incurrence by the Borrower or any
of the Restricted Subsidiaries of Indebtedness (including Capitalized Lease
Obligations and Attributable Indebtedness) Incurred to finance the purchase,
lease or improvement of property (real or personal), equipment or other assets
(in each case whether through the direct purchase of assets or the Capital
Stock of any Person owning such assets); provided that the aggregate
principal amount of all Indebtedness Incurred pursuant to this clause (xi) and
all Refinancing Indebtedness to refund, refinance or replace any Indebtedness
Incurred pursuant to this clause (xi) does not exceed $10,000,000 in an
aggregate principal amount at any time outstanding; and

 

51

 

(xii)          Indebtedness (other than Indebtedness
described in clauses (i)-(xi)) in a principal amount which, when taken together
with the principal amount of all other Indebtedness Incurred pursuant to this
Section 6.1(b)(xii) and then outstanding, will not exceed $25,000,000.

 

(c)           Notwithstanding the foregoing, the Borrower shall not
Incur any Indebtedness under Section 6.1(b) if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Loans to at least the same extent as
such Subordinated Obligations.  No
Guarantor shall Incur any Indebtedness under Section 6.1(b) if the proceeds
thereof are used, directly or indirectly, (i) to refinance any Subordinated
Obligations of such Guarantor unless such Indebtedness shall be subordinated to
the obligations of such Guarantor under the Subsidiary Guarantee to at least
the same extent as such Subordinated Indebtedness or (ii) to refinance
Indebtedness of the Borrower.  No
Restricted Subsidiary may Incur Indebtedness if the proceeds are used to
refinance Indebtedness of the Borrower.

 

(d)           For purposes of determining compliance with, and the
outstanding principal amount of any particular Indebtedness Incurred pursuant
to and in compliance with, this covenant:

 

(i)      in the event that Indebtedness meets the
criteria of more than one of the types of Indebtedness described in Section
6.1, the Borrower, in its sole discretion, will classify such item of
Indebtedness on the date of Incurrence and only be required to include the
amount and type of such Indebtedness in one of such clauses;

 

(ii)     Guarantees of, or obligations in respect of
letters of credit relating to, Indebtedness which is otherwise included in the
determination of a particular amount of Indebtedness shall not be included; and

 

(iii)    Indebtedness permitted by this covenant need
not be permitted solely by reference to one provision permitting such Indebtedness
but may be permitted in part by one such provision and in part by one or more
other provisions of this covenant permitting such Indebtedness.

 

Accrual of interest, accrual
of dividends, the accretion of accreted value, the payment of interest in the
form of additional Indebtedness and the payment of dividends in the form of
additional shares of Preferred Stock will not be deemed to be an incurrence of
Indebtedness for purposes of this covenant. 
The amount of any Indebtedness outstanding as of any date shall be (i)
the amount of Indebtedness issued at a price that is less than the principal
amount thereof will be equal to the amount of the liability in respect thereof
determined in accordance with GAAP and (ii) the principal amount or liquidation
preference thereof, together with any interest thereon that is more than 30
days past due, in the case of any other Indebtedness.  For purposes of determining compliance with any
Dollar-denominated restriction on the Incurrence of Indebtedness, the
Dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was Incurred, in the case of term
Indebtedness, or first committed, in the case of revolving credit Indebtedness;
provided that if such Indebtedness is Incurred to refinance other
Indebtedness denominated in a foreign currency, and such refinancing would
cause the applicable Dollar-dominated restriction to be exceeded if calculated
at the relevant currency exchange rate in effect on the date of such
refinancing, such Dollar-dominated restriction shall be deemed not to have been
exceeded so long as the principal amount of such refinancing Indebtedness does
not exceed the principal amount of such Indebtedness being refinanced.  Notwithstanding any other provision of this
Section 6.1, the maximum amount of Indebtedness that the Borrower may Incur
pursuant to this covenant shall not be deemed to be exceeded solely as a result
of fluctuations in the exchange rate of currencies.  The principal

 

52

 

amount of any Indebtedness Incurred to
refinance other Indebtedness, if Incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such Refinancing
Indebtedness is denominated that is in effect on the date of such refinancing.

 

(e)           In addition, the Borrower will not permit any of its
Unrestricted Subsidiaries to Incur any Indebtedness or issue any shares of
Disqualified Stock, other than Unrestricted Non-Recourse Debt.  If at any time an Unrestricted Subsidiary
becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be
deemed to be Incurred by a Restricted Subsidiary of the Borrower as of such
date (and, if such Indebtedness is not permitted to be Incurred as of such date
under this Section 6.1, the Borrower shall be in Default of this Section 6.1).

 

(f)            The Borrower shall not Incur any Indebtedness if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
contractually subordinated in right of payment to Senior Subordinated
Indebtedness; provided, that no Indebtedness shall be deemed contractual
subordinated in right of payment to any other Indebtedness solely by virtue of
being unsecured.  No Guarantor shall
Incur any Indebtedness if such Indebtedness is contractually subordinate or
junior in ranking in any respect to any Guarantor Senior Indebtedness of such
Guarantor unless such Indebtedness is Guarantor Senior Subordinated
Indebtedness of such Guarantor or is contractually subordinated in right of
payment to Guarantor Senior Subordinated Indebtedness of such Guarantor; provided,
that no Indebtedness shall be deemed contractual subordinated in right of
payment to any other Indebtedness solely by virtue of being unsecured.

 

6.2           Limitation on Restricted Payments.
 (a)  Prior to the Initial Maturity Date, the Borrower shall not, and
shall not permit any Restricted Subsidiary, directly or indirectly, to (i)
declare or pay any dividend or make any distribution on or in respect of its
Capital Stock (including any payment in connection with any merger or
consolidation involving the Borrower or any of its Restricted Subsidiaries)
except dividends or distributions payable solely in the Capital Stock of the
Borrower (other than Disqualified Stock) or in options, warrants or rights to purchase
such Capital Stock and except dividends or distributions payable to the
Borrower or any Restricted Subsidiary (and if such Restricted Subsidiary is not
a Wholly Owned Subsidiary, its other holders of Capital Stock on a pro rata
basis), (ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Borrower or any direct or indirect parent of the Borrower
held by Persons other than the Borrower or a Restricted Subsidiary of the
Borrower (other in exchange for its Capital Stock (other than Disqualified
Stock)), (iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment any Subordinated Obligations or Guarantor Subordinated
Obligations (other than the purchase, repurchase, redemption, defeasance or
other acquisition of Subordinated Obligations or Guarantor Subordinated
Obligations purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of
the date of purchase, repurchase, redemption, defeasance or acquisition) or
(iv) make any Restricted Investment in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Restricted Investment referred to in clauses (i) through (iv)
being herein referred to as a “Restricted Payment”).

 

(b)           From and after the Initial Maturity Date, the Borrower
shall not, and shall not permit any of its Restricted Subsidiaries, directly or
indirectly, to make any Restricted Payment if at the time the Borrower or such
Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have
occurred and be continuing (or would result therefrom); or (2) the Borrower is
not able to incur an additional $1.00 of Indebtedness pursuant to Section
6.1(a) after giving effect on a pro forma basis to such Restricted Payment; or
(3) the aggregate amount of such Restricted Payment and all other Restricted

 

53

 

Payments declared or made subsequent to the Initial
Maturity Date would exceed the sum of (i) 50% of Consolidated Net Income of the
Borrower for the period (treated as one accounting period) from the Closing
Date to the end of the most recent fiscal quarter ending prior to the date of
such Restricted Payment as to which financial statements are in existence (or,
in case such Consolidated Net Income shall be a deficit, minus 100% of
such deficit), (ii) the aggregate Net Cash Proceeds, or the fair market value
of Property other than cash, received by the Borrower on or after the Closing
Date from the issuance or sale (other than to a Subsidiary of the Borrower) of
Capital Stock (other than Disqualified Stock) of the Borrower or any options,
warrants or rights to purchase such Capital Stock, and (iii) the aggregate Net
Cash Proceeds, or the fair market value of Property other than cash, received
by the Borrower as capital contributions to the Borrower (other than from a Subsidiary
of the Borrower) on or after the Closing Date.

 

(c)           The provisions of Section 6.2(a) and
6.2(b) shall not prohibit:

 

(i)            any purchase, retirement, payment,
defeasance or redemption of Capital Stock or Subordinated Obligations of the
Borrower or Guarantor Subordinated Obligations made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Capital Stock of the
Borrower (other than Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary or an employee stock ownership plan or similar trust to
the extent such sale to an employee stock ownership plan or similar trust is
financed by loans from or Guaranteed by the Borrower or any Restricted
Subsidiary unless such loans have been repaid with cash on or prior to the date
of determination)); provided, however, that such purchase or
redemption shall be excluded in subsequent calculations of the amount of
Restricted Payments;

 

(ii)           any purchase, retirement, payment,
defeasance or redemption of Subordinated Obligations of the Borrower or
Guarantor Subordinated Obligations, as the case may be, made by exchange for,
or out of the proceeds of the substantially concurrent sale of, Subordinated
Obligations of the Borrower or Guarantor Subordinated Obligations, as the case
may be, that qualifies as Refinancing Indebtedness provided, however,
that such purchase, retirement, payment, defeasance or redemption shall be
excluded in subsequent calculations of the amount of Restricted Payments;

 

(iii)          dividends paid within 60 days after
the date of declaration if at such date of declaration such dividend would have
complied with this provision; provided, however, that such
dividend shall be included in the subsequent calculation of amount of
Restricted Payments;

 

(iv)          so long as no Default has occurred and
is continuing, the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Borrower issued in accordance with the
terms of this Agreement to the extent such dividends are included in the
definition of “Consolidated Interest Expense”; provided that the payment
of such dividends will be excluded from the calculation of Restricted Payments;

 

(v)           repurchases of Capital Stock deemed
to occur upon exercise of stock options or warrants such Capital Stock
represents a portion of the exercise price thereof; provided, however,
that such repurchases will be excluded in subsequent calculations of the amount
of Restricted Payments; and

 

54

 

(vi)          Restricted Payments in an amount not
to exceed $40,000,000; provided that the amount of such Restricted
Payments will be included in the subsequent calculation of the amount of
Restricted Payments.

 

The amount of all Restricted
Payments (other than cash) shall be the fair market value on the date of such
Restricted Payment of the asset(s) or securities proposed to be transferred or
issued by the Borrower or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment. 
The fair market value of any non-cash Restricted Payment shall be
determined conclusively by the Board of Directors acting in good faith whose
resolution with respect thereto shall be delivered to the Administrative Agent,
such determination to be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if such
fair market value is estimated to exceed $5,000,000.  Not later than the date of making any Restricted Payment, the Borrower
shall deliver to the Administrative Agent a certificate signed by a Authorized
Officer stating that such Restricted Payment is permitted and setting forth the
basis upon which the calculations required by this covenant were computed
together with any opinion or appraisal required hereby.

 

6.3           Limitation on Restrictions on
Distributions from Restricted Subsidiaries.  The Borrower shall not, and shall not permit any of its
Restricted Subsidiaries to, create or permit to exist or become effective any
consensual encumbrance or consensual restriction on the ability of any such
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligation owed to the
Borrower, (ii) make any loans or advances to the Borrower or (iii) transfer any
of its property or assets to the Borrower or any Restricted Subsidiary; except:

 

(a)           any encumbrance or restriction
pursuant to an agreement in effect at or entered into on the Closing Date,
including this Agreement and the Senior Credit Agreement, or pursuant to the
Indenture;

 

(b)           any encumbrance or restriction with
respect to a Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior to the date on
which such Restricted Subsidiary was acquired by the Borrower (other than
Indebtedness issued as consideration in, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or series
of related transactions pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary of the Borrower or was acquired by the Borrower) and
outstanding on such date;

 

(c)           any encumbrance or restriction
pursuant to an agreement effecting a refunding, replacement or refinancing of
Indebtedness issued pursuant to an agreement referred to in clauses (a) or (b)
or this clause (c) or contained in any amendment to an agreement referred to in
clauses (a) or (b) or this clause (c); provided, however, that
the encumbrances and restrictions with respect to such Restricted Subsidiary
contained in any such agreement or amendment are no less favorable in any
material respect to the Lenders than the encumbrances and restrictions with
respect to such Restricted Subsidiary contained in such agreements referred to
in clauses (a) and (b) on the Closing Date or the date such Restricted
Subsidiary became a Restricted Subsidiary, whichever is applicable;

 

(d)           in the case of clause (c) above, any
encumbrance or restriction (1) that restricts in a customary manner the subletting,
assignment or transfer of any property or asset that is subject to a lease,
license or similar contract, or the assignment or transfer of any such lease,
license or other contract, (2) contained in mortgages, pledges or other
security agreements permitted under this Agreement securing Indebtedness of the
Borrower or a Restricted Subsidiary to the extent such encumbrances or
restrictions restrict the transfer of the property subject to such mortgages,

 

55

 

pledges or other security
agreements or (3) pursuant to customary provisions restricting dispositions of
real property interests set forth in any reciprocal easement agreements of the
Borrower or any Restricted Subsidiary;

 

(e)           purchase money obligations for
property acquired in the ordinary course of business that impose encumbrances
or restrictions of the nature described in clause (c) above on the property so
acquired;

 

(f)            any restriction with respect to a
Restricted Subsidiary (or any of its property or assets) imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
the Capital Stock or assets of such Restricted Subsidiary (or the property or
assets that are subject to such restriction) pending the closing of such sale
or disposition; and

 

(g)           encumbrances or restrictions arising
or existing by reason of applicable law, regulation or order.

 

6.4           Limitation on Sales of Assets and
Subsidiary Stock.  (a)  The Borrower shall not, and shall not permit
any of its Restricted Subsidiaries to, make any Asset Disposition unless:  (i) the Borrower or such Restricted
Subsidiary receives consideration at the time of such Asset Disposition at
least equal to the Fair Market Value (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset Disposition;
(ii) at least 85% of the consideration thereof received by the Borrower or such
Restricted Subsidiary is in the form of cash, Cash Equivalents and/or Exchanged
Properties; and (iii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Borrower (or such Restricted
Subsidiary, as the case may be):  (A) first,
to the extent the Borrower or any Restricted Subsidiary is required by the
terms of any Senior Indebtedness, to prepay, repay or purchase such Senior
Indebtedness; and (B) second, to prepay or redeem the Loans and Exchange
Notes at par plus accrued and unpaid interest, if any, thereon in
accordance with Section 2.5(d); provided, however, that, in
connection with any prepayment, repayment or purchase of Indebtedness pursuant
to clause (iii)(A), the Borrower or such Restricted Subsidiary shall retire
such Indebtedness and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased.

 

(b)           For the purposes of this covenant, securities received by
the Borrower or any Restricted Subsidiary of the Borrower from the transferee
that are promptly converted by the Borrower or such Restricted Subsidiary into
cash will be deemed to be cash.

 

Notwithstanding the
foregoing provisions, the Borrower and its Restricted Subsidiaries shall not be
required to apply any Net Available Cash in accordance herewith if the Borrower
has delivered a Reinvestment Notice with respect to such Net Available Cash, provided
that, on each Reinvestment Payment Date, an amount equal to the Reinvestment
Prepayment Amount with respect to the relevant Asset Disposition shall be
applied toward the prepayment of the Loans and the Exchange Notes at par plus
accrued and unpaid interest, if any, thereon, in accordance with Section
2.5(d).

 

6.5           Limitation
on Liens.  The Borrower shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
create or permit to exist any Lien (other than Permitted Liens) on any of its
property or assets (including Capital Stock), whether owned on the date of this
Agreement or thereafter acquired, securing any Indebtedness, unless
contemporaneously therewith effective provision is made to secure the Loans or,
in respect of Liens on any such Restricted Subsidiary’s property or assets, the
Subsidiary Guarantee by such Restricted Subsidiary equally and ratably with (or
prior to in the case of Liens with respect to Subordinated Obligations) such
Indebtedness for so long as such Indebtedness is so secured.

 

56

 

6.6           Limitation on Affiliate Transactions.  (a) 
The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or conduct any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Borrower (an “Affiliate
Transaction”) unless: (i) the terms of such Affiliate Transaction are no
less favorable to the Borrower or such Subsidiary, as the case may be, than
those that could be obtained at the time of such transaction in arm’s-length
dealings with a Person who is not such an Affiliate; (ii) in the event such
Affiliate Transaction involves an aggregate amount in excess of $10,000,000,
the terms of such transaction have been approved by a majority of the members
of the Board of Directors of the Borrower and by a majority of the members of
such Board having no personal stake in such transaction, if any (and such
majority or majorities, as the case may be, determines that such Affiliate
Transaction satisfies the criteria in (i) above); and (iii) in the event such
Affiliate Transaction involves an aggregate amount in excess of $20,000,000,
the Borrower has received a written opinion from an independent investment
banking or accounting firm of nationally recognized standing that such
Affiliate Transaction is not materially less favorable than those that might
reasonably have been obtained in a comparable transaction at such time on an
arms-length basis from a Person that is not an Affiliate.

 

(b)           The foregoing provisions of Section 6.6(a) shall not apply
to (i) any Restricted Payment (other than a Restricted Investment) permitted to
be made pursuant to Section 6.2, (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
and other reasonable fees, compensation, benefits and indemnities paid or
entered into by the Borrower or its Restricted Subsidiaries in the ordinary
course of business to or with officers, directors or employees of the Borrower
and its Restricted Subsidiaries, (iii) loans or advances to employees in the
ordinary course of business of the Borrower or any of its Restricted
Subsidiaries, (iv) any transaction between the Borrower and a Restricted
Subsidiary or between Restricted Subsidiaries, (v) the payment of reasonable
and customary fees paid to, and indemnity provided on behalf of, officers,
directors or employees of the Borrower or any Restricted Subsidiary of the
Borrower, and (vi) the performance of obligations of the Borrower or any of its
Restricted Subsidiaries under the terms of any agreement to which the Borrower
or any of its Restricted Subsidiaries is a party on the Closing Date and
identified on Schedule 6.6(b), as these agreements may be amended,
modified or supplemented from time to time; provided, however,
that any future amendment, modification or supplement entered into after the
Closing Date will be permitted to the extent that its terms are not more
disadvantageous to the Lenders than the terms of the agreements in effect on
the Closing Date.

 

6.7           Change of
Control.  (a)  Upon a Change of Control after the Initial
Loan Maturity Date, each Holder shall have the right to require that the
Borrower repurchase all or any part of such Holder’s Loans at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest on the
relevant interest payment date), such repurchase to be made in accordance with
Section 6.7(b).

 

(b)           Within 30 days following any such Change of Control, the
Borrower shall mail a notice to each Holder with a copy to the Administrative
Agent stating:

 

(i)            that a Change of Control has
occurred and that such Holder has the right to require the Borrower to purchase
such Holder’s Loans at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of Holders of record on a record date to receive
interest on the relevant interest payment date);

 

57

 

(ii)           the repurchase date (which shall be
no earlier than 30 days nor later than 60 days from the date such notice is
mailed); and

 

(iii)          the procedures determined by the
Borrower, consistent with this Section, that a Holder must follow in order to
have its Loans purchased.

 

(c)           Holders electing to have a Loan purchased will be required
to give notice in writing to the Borrower at the address specified in Section
10.2 at least three (3) Business Days prior to the purchase date.  Each Holder will be entitled to withdraw its
election if the Borrower receives, not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter from such
Holder setting forth the name of such Holder, the principal amount of the Loan
which was to be purchased and a statement that such Holder is withdrawing its
election to have such Loan purchased.

 

(d)           On the purchase date, the Borrower shall pay the purchase
price for the Loans to be purchased, to the Holders entitled thereto upon, in
the case of Loans evidenced by Loan Notes, surrender of such Loan Notes.

 

(e)           The Borrower shall comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and any other securities
laws or regulations in connection with the repurchase of Loans pursuant to this
Section.  To the extent that the provisions
of any securities laws or regulations conflict with provisions of this Section,
the Borrower shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this Section by
virtue thereof.

 

6.8           Limitation on Voting Stock of Restricted
Subsidiaries.  The Borrower will
not, and will not permit any Restricted Subsidiary to, transfer, convey, sell,
lease or otherwise dispose of any Voting Stock of any Restricted Subsidiary or
to issue any of its Voting Stock (other than, if necessary, shares of its
Voting Stock constituting directors’ qualifying shares) to any Person except
(i) to the Borrower or a Wholly Owned Subsidiary; or (ii) in compliance with
Section 6.4 and immediately after giving effect to such issuance or sale, such
Restricted Subsidiary either continues to be a Restricted Subsidiary or if such
Restricted Subsidiary would no longer be a Restricted Subsidiary, then the
Investment of the Borrower in such Person (after giving effect to such issuance
or sale) would have been permitted to be made under Section 6.2 as if made on
the date of such issuance or sale. 
Notwithstanding the foregoing, the Borrower may sell all the Voting
Stock of a Restricted Subsidiary as long as the Borrower complies with the
terms of Section 6.4.

 

6.9           Merger, Consolidation,
etc.  (a)  Prior to the Initial Maturity Date, neither
the Borrower nor any Restricted Subsidiary will merge into or with or
consolidate with any other Person, or sell, lease or otherwise dispose of
(whether in one transaction or in a series of transactions) all or
substantially all of its Property or assets to any other Person, except (i) any
Subsidiary of the Borrower may be merged or consolidated with or into the
Borrower (provided that the Borrower shall be the continuing or surviving
corporation) or with or into any one or more Wholly Owned Subsidiaries (provided
that the Wholly Owned Subsidiary or Subsidiaries shall be the continuing or
surviving corporation), and (ii) any Subsidiary may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any Wholly Owned Subsidiary.

 

(b)           From and after the Initial Maturity Date, the Borrower may
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person, if:

 

(i)            the resulting, surviving or
transferee Person (the “Successor Company”) shall be a corporation,
partnership, trust, or limited liability company organized and

 

58

 

existing under the laws of
the United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Borrower) shall expressly assume, by an
assumption agreement supplemental hereto, executed by the Successor Company and
delivered to the Administrative Agent, in form and substance satisfactory to
the Administrative Agent, all the obligations of the Borrower under the Notes,
the Loans and this Agreement;

 

(ii)           immediately after giving effect to
such transaction (and treating any Indebtedness which becomes an obligation of
the Successor Company or any Restricted Subsidiary as a result of such
transaction as having been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), no Default shall have occurred and
be continuing;

 

(iii)          immediately after giving effect to
such transaction, the Successor Company would be able to Incur an additional
$1.00 of Indebtedness pursuant to Section 6.1(a); and

 

(iv)          the Borrower shall have delivered to
the Administrative Agent a certificate of an Authorized Officer and an opinion
of counsel to the Borrower, each stating that such consolidation, merger,
transfer or lease and such assumption agreement (if any) comply with this Agreement.

 

For purposes of this Section
6.9, the sale, lease, conveyance, assignment, transfer, or other disposition of
all or substantially all of the properties and assets of one or more Restricted
Subsidiaries of the Borrower, which properties and assets, if held by the
Borrower instead of such Restricted Subsidiaries, would constitute all or
substantially all of the properties and assets of the Borrower on a
consolidated basis, shall be deemed to be the transfer of all or substantially
all of the properties and assets of the Borrower.

 

The Successor Company shall
succeed to, and be substituted for, and may exercise every right and power of,
the Borrower under this Agreement, but in the case of a lease of all or
substantially all its assets, the Borrower shall not be released from the
obligation to pay the principal of and interest on the Loans and the Notes.

 

Notwithstanding clauses
(ii), (iii) and (iv) of the first sentence of this Section 6.9(b):  (1) any Restricted Subsidiary of the
Borrower may consolidate with, merge into or transfer all or part of its
properties and assets to the Borrower; and (2) the Borrower may merge with an
Affiliate incorporated solely for the purpose of reincorporating the Borrower
in another jurisdiction to realize tax or other benefits.

 

6.10         Limitation
on Lines of Business.  The
Borrower will not, and will not permit any Restricted Subsidiary to, engage in
any business other than a Related Business.

 

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

 

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

 

59

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 7  EVENTS OF
DEFAULT

 

7.1           Listing
of Events of Default.  Each of
the following events or occurrences described in this Section 7.1 shall
constitute an “Event of Default”:

 

60

 

(a)           any Loan Party shall default in the
payment or prepayment when due of any principal of or interest on any Loan, or
any other amount payable by it hereunder or under any other Loan Document and
such default, other than a default of a payment or prepayment of principal
(which shall have no cure period), shall continue unremedied for a period of
five (5) days; or

 

(b)           any Loan Party or any Restricted
Subsidiary that is a Material Subsidiary shall default in the payment when due
of any principal of or interest on any of its other Indebtedness (other than
Non-Recourse Debt) aggregating $10,000,000 or more, or any event specified in
any note, agreement, indenture or other document evidencing or relating to any
such Indebtedness shall occur if the effect of such event is to cause, or (with
the giving of any notice or the lapse of time or both) to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause after giving effect to all applicable grace periods, such
Indebtedness to become due prior to its stated maturity; or

 

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

 

(d)           the Borrower shall default in the
performance of any of its obligations under Section 5.8, 5.9 or Section 6, or
the Borrower shall default in the performance of any of its obligations under
Section 5 or any Loan Party shall default in the performance of its obligations
under any other Loan Document (other than the payment of amounts due which
shall be governed by Section 8.1) and such default shall continue unremedied
for a period of 30 days after the earlier to occur of (i) notice thereof to the
Borrower by the Administrative Agent or any Lender (through the Administrative
Agent), or (ii) the Borrower otherwise becoming aware of such default; or

 

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

 

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

 

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

 

61

 

60 days; or (iv) an order
for relief against the Borrower shall be entered in an involuntary case under
the Federal Bankruptcy Code; or

 

(h)           a judgment or judgments for the
payment of money in excess of $10,000,000 in the aggregate shall be rendered by
a court against any Loan Party or any Restricted Subsidiary that is a Material
Subsidiary and the same shall not be discharged (or provision shall not be made
for such discharge), or a stay of execution thereof shall not be procured,
within 60 days from the date of entry thereof and such Loan Party or such
Restricted Subsidiary, as applicable, shall not, within said period of 60 days,
or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed during
such appeal; or

 

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

 

(j)            a Change of Control shall occur
prior to the Initial Maturity Date.

 

7.2           Action
if Bankruptcy.  If any Event of
Default described in Section 7.1(f) with respect to the Borrower shall occur,
the Commitments (if not theretofore terminated) shall automatically terminate
and the outstanding principal amount of all outstanding Loans and all other
obligations hereunder shall automatically be and become immediately due and
payable, without demand, protest or presentment or notice of any kind, all of
which are hereby expressly waived by the Borrower and its Subsidiaries.  Without limiting the foregoing, the
Administrative Agent and the Lenders shall be entitled to exercise any and all
other remedies available to them under the Loan Documents and applicable law.

 

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

 

SECTION 8  SUBORDINATION

 

8.1           Agreement
To Subordinate.  The Borrower
agrees, and each Lender agrees, that the Loans and Indebtedness evidenced by
the Notes is subordinated in right of payment, to the extent and in the manner
provided in this Section 8, to the prior payment in full in cash or Cash
Equivalents of all Senior Indebtedness and that the subordination is for the
benefit of and enforceable by the holders of Senior Indebtedness.  The Loans shall in all respects rank equally
with all other Senior Subordinated Indebtedness of the Borrower and shall be
senior in right of payment to all Subordinated Obligations of the
Borrower.  Only indebtedness of the
Borrower that is Senior Indebtedness shall rank senior to the Loans in
accordance with the provisions set forth herein.

 

8.2           Liquidation; Dissolution;
Bankruptcy.  Upon any payment or
distribution of the assets or securities of the Borrower upon a total or
partial liquidation or a dissolution of the Borrower or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Borrower or

 

62

 

its property or in the event of an assignment
for the benefit of creditors or marshalling of the Borrower’s assets and
liabilities:

 

(a)           holders of Senior Indebtedness shall
be entitled to receive payment in full in cash or Cash Equivalents in respect
of Senior Indebtedness (including interest after, or which would accrue but
for, the commencement of any proceeding at the rate specified in the applicable
documents governing such Senior Indebtedness, whether or not a claim for such
interest would be allowed) before Lenders shall be entitled to receive any
payment of principal of, or premium, if any, or interest on the Loans; and

 

(b)           until the Senior Indebtedness is paid
in full in cash or Cash Equivalents, any payment or distribution to which
Lenders would be entitled but for this Section 8 shall be made to holders of
Senior Indebtedness as their interests may appear.

 

8.3           Default
on Senior Indebtedness.  The
Borrower may not pay the principal of, premium, if any, or interest on, or
other payment obligations in respect of, the Loans or make any deposit pursuant
to any defeasance provision or otherwise purchase or retire any Loans
(collectively, “Pay the Loans”) if (a) any Senior Indebtedness is not
paid when due in cash or Cash Equivalents or (b) any other default on Senior
Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated
in accordance with its terms unless, in either case, (i) the default has been
cured or waived in writing and any such acceleration has been rescinded in
writing or (ii) such Senior Indebtedness has been paid in full in cash or Cash
Equivalents; provided, however, that the Borrower may Pay the
Loans without regard to the foregoing if the Borrower and the Administrative
Agent receive written notice approving such payment from the Representative of
the Senior Indebtedness with respect to which either of the events set forth in
(a) or (b) above has occurred and is continuing.  During the continuance of any default (other than a default
described in clause (a) or (b) of the preceding sentence) with respect to any
Bank Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
the Borrower may not Pay the Loans for a period (a “Payment Blockage Period”)
commencing upon the receipt by the Administrative Agent (with a copy to the
Borrower) of written notice (a “Blockage Notice”) of such default from
the Representative of such Bank Indebtedness specifying an election to effect a
Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (A) by written notice to the Administrative Agent
and the Borrower from the Person or Persons who gave such Blockage Notice, (B)
because such Bank Indebtedness has been repaid in full or (C) because the
default giving rise to such Blockage Notice is no longer continuing).  Notwithstanding the provisions described in
the immediately preceding sentence (but subject to the provisions contained in
the first sentence of this Section), unless the holders of such Bank Indebtedness
or the Representative of such holders shall have accelerated the maturity of
such Bank Indebtedness, the Borrower may resume payments on the Loans after
such Payment Blockage Period (including any missed payments).  Not more than one Blockage Notice may be
given in any consecutive 360-day period, irrespective of the number of defaults
with respect to Bank Indebtedness during such period.

 

8.4           Acceleration of Payment of Loans.  If payment of the Loans is accelerated
because of an Event of Default, the Borrower and the Administrative Agent shall
promptly notify the holders of the Bank Indebtedness or the Representative of
such holders of such acceleration.  If
any Bank Indebtedness is outstanding, the Borrower may not Pay the Loans until
five (5) Business Days after such holders or the Representative of the Bank
Indebtedness receives notice of such acceleration and, thereafter, may Pay the
Loans only if the provisions of this Section 8 otherwise permit the payment at
that time.

 

63

 

8.5           When Distribution Must Be Paid Over.  If a payment or distribution is made to the
Lenders that due to the subordination provisions of this Section 8 should not
have been made to them, the Lenders who receive the payment or distribution
shall hold such payment or distribution in trust for holders of Senior
Indebtedness and pay such payment or distribution over to them as their
interests may appear.

 

8.6           Subrogation.  After all Senior Indebtedness is paid in
full and until the Loans are paid in full, the Lenders shall be subrogated to
the rights of holders of Senior Indebtedness to receive distributions
applicable to Senior Indebtedness.  A
distribution made under this Section 8 to holders of Senior Indebtedness that
otherwise would have been made to the Lenders is not, as between the Borrower
and the Lenders, a payment by the Borrower on Senior Indebtedness.

 

8.7           Relative Rights.  This Section 8 defines the relative rights of the Lenders and
holders of Senior Indebtedness.  Nothing
in this Agreement shall:

 

(a)           impair, as between the Borrower and
the Lenders, the obligation of the Borrower, which is absolute and
unconditional, to pay principal of, premium, if any, and interest on the Loans
in accordance with their terms; or

 

(b)           prevent the Administrative Agent or
any Lender from exercising its available remedies upon a Default, subject to
the rights of holders of Senior Indebtedness to receive distributions otherwise
payable to Lenders.

 

8.8           Subordination May Not Be Impaired By
the Borrower.  No right of any
holder of Senior Indebtedness to enforce the subordination of the Loans and the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by the Borrower or by its failure to comply with this Agreement.

 

8.9           Rights
of Administrative Agent. 
Notwithstanding Section 8.3, the Administrative Agent may continue to
make payments on the Loans and shall not be charged with knowledge of the
existence of facts that would prohibit the making of any such payments unless,
not less than two (2) Business Days prior to the date of such payment, the
Administrative Agent receives notice to it that payments may not be made under
this Section 8.  The Borrower, a
Representative or a holder of Senior Indebtedness may give the notice; provided,
however, that, if an issue of Senior Indebtedness has a Representative,
only the Representative may give the notice.

 

The Administrative Agent or
any Lender in its individual or any other capacity may hold Senior Indebtedness
with the same rights it would have if it were not the Administrative Agent or
any Lender.  The Administrative Agent
shall be entitled to all the rights set forth in this Section 8 with respect to
any Senior Indebtedness that may at any time be held by it, to the same extent
as any other holder of Senior Indebtedness; and nothing in Section 9 shall
deprive the Administrative Agent of any of its rights as such holder.  Nothing in this Section 8 shall apply to
claims of, or payments to, the Administrative Agent under or pursuant to
Section 9.7.

 

8.10         Distribution or Notice to
Representative.  Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).

 

8.11         Section 8 Not To Prevent Events of
Default or Limit Right To Accelerate. 
The failure to make a payment pursuant to the Loans by reason of any
provision in this Section 8 shall not be

 

64

 

construed as preventing the occurrence of a
Default.  Nothing in this Section 8
shall have any effect on the right of the Lenders or the Administrative Agent
to accelerate the maturity of the Loans.

 

8.12         Administrative Agent Entitled to Rely.  Upon any payment or distribution pursuant to
this Section 8, the Administrative Agent and the Lenders shall be entitled to
rely (a) upon any order or decree of a court of competent jurisdiction in which
any proceedings of the nature referred to in Section 8.2 are pending, (b) upon
a certificate of the liquidating trustee or agent or other Person making such
payment or distribution to the Administrative Agent or to the Lenders or (c)
upon the Representatives for the holders of Senior Indebtedness for the purpose
of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Borrower, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Section
8.  In the event that the Administrative
Agent determines, in good faith, that evidence is required with respect to the
right of any Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Section 8, the Administrative Agent
may request such Person to furnish evidence to the reasonable satisfaction of
the Administrative Agent as to the amount of Senior Indebtedness held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and other facts pertinent to the rights of such Person
under this Section 8, and, if such evidence is not furnished, the
Administrative Agent may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.  The provisions of Section 9 shall be
applicable to all actions or omissions of actions by the Administrative Agent
pursuant to this Section 8.

 

8.13         Administrative Agent to Effectuate
Subordination.  Each Lender
hereby authorizes and directs the Administrative Agent on such Lender’s behalf
to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Lenders and the holders of Senior
Indebtedness as provided in this Section 8 and appoints the Administrative
Agent as attorney-in-fact for any and all such purposes.

 

8.14         Administrative Agent Not Fiduciary
for Holders of Senior Indebtedness. 
The Administrative Agent shall not be deemed to owe any fiduciary duty
to the holders of Senior Indebtedness and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to the Lenders or the
Borrower or any other Person, money or assets to which any holders of Senior
Indebtedness shall be entitled by virtue of this Section 8 or otherwise.

 

8.15         Reliance by Lenders of Senior
Indebtedness on Subordination Provisions.  Each Lender acknowledges and agrees, that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of the Loans,
to acquire and continue to hold, or to continue to hold, such Senior
Indebtedness and such holder of Senior Indebtedness shall be deemed
conclusively to have relied on such subordination provisions in acquiring and
continuing to hold, or in continuing to hold, such Senior Indebtedness.

 

SECTION 9  THE ADMINISTRATIVE AGENT

 

9.1           Appointment.
 Each Lender hereby irrevocably
designates and appoints the Administrative Agent as the agent of such Lender
under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the Administrative Agent, in such capacity, to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto.   Notwithstanding
any provision to the contrary elsewhere in this Agreement, the

 

65

 

Administrative Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.

 

9.2           Delegation
of Duties.  The Administrative
Agent may execute any of its duties under this Agreement and the other Loan
Documents by or through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties.  The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.

 

9.3           Exculpatory
Provisions.  Neither the
Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement or any other Loan Document (except to the extent that any of the
foregoing are found by a final and nonappealable decision of a court of
competent jurisdiction to have resulted from its or such Person’s own gross
negligence or willful misconduct) or (b) responsible in any manner to any of
the Lenders for any recitals, statements, representations or warranties made by
any Loan Party or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under
or in connection with, this Agreement or any other Loan Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document or for any failure of any Loan Party
a party thereto to perform its obligations hereunder or thereunder.  The Administrative Agent shall not be under
any obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Loan Party.

 

9.4           Reliance by Administrative Agent.  The Administrative Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Administrative Agent.  The Administrative Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders (or, if so specified by this Agreement, all Lenders) as it
deems appropriate or it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it
by reason of taking or continuing to take any such action.  The Administrative Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this
Agreement and the other Loan Documents in accordance with a request of the
Required Lenders (or, if so specified by this Agreement, all Lenders), and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Loans.

 

9.5           Notice of
Default.  The Administrative
Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default and
stating that such notice is a “notice of default.”  In the event that the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Lenders.  The Administrative Agent
shall take such action with respect to such Default as shall be reasonably
directed by the Required Lenders (or, if so specified by this Agreement, all
Lenders); provided that unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take

 

66

 

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.

 

9.6           Non-Reliance on Administrative
Agent and Other Lenders.  Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
any Loan Party or any Affiliate of any Loan Party, shall be deemed to
constitute any representation or warranty by the Administrative Agent to any
Lender.  Each Lender represents to the
Administrative Agent 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 appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Loan Parties and their Affiliates and
made its own decision to make its Loans hereunder and enter into this
Agreement.  Each Lender also represents
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
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property, financial
and other condition and creditworthiness of the Loan Parties and their
Affiliates.  Except for notices, reports
and other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial
or otherwise), prospects or creditworthiness of any Loan Party or any Affiliate
of any Loan Party which may come into the possession of the Administrative
Agent or any of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates.

 

9.7           Indemnification.  The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Commitment Percentages in effect on the
date on which indemnification is sought under this Section 9.7 (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance with
their Commitment Percentages immediately prior to such date), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever which
may at any time (whether before or after the payment of the Loans) be imposed
on, incurred by or asserted against the Administrative Agent in any way
relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements which are found by a final
and non-appealable decision of a court of competent jurisdiction to have
resulted from the Administrative Agent’s gross negligence or willful
misconduct.  The agreements in this
Section shall survive the payment of the Loans and all other amounts payable
hereunder.

 

9.8           Administrative Agent in Its
Individual Capacity.  The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with any Loan Party as though the
Administrative Agent were not the Administrative Agent hereunder.  With respect to the Loans made or renewed by
it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms “Lender”
and “Lenders” shall include the Administrative Agent in its individual
capacity.

 

67

 

9.9           Successor Administrative Agent.  The Administrative Agent may resign as
Administrative Agent upon ten (10) days’ notice to the Lenders and the
Borrower.  If the Administrative Agent
shall resign as Administrative Agent under this Agreement and the other Loan
Documents, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall (unless an Event of
Default shall have occurred and be continuing) be subject to the approval of
the Borrower (which approval shall not be unreasonably withheld or delayed),
whereupon such successor agent shall succeed to the rights, powers and duties
of the Administrative Agent, and the term “Administrative Agent” shall
mean such successor agent effective upon such appointment and approval, and the
former Administrative Agent’s rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of
such former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans.  If no successor
agent has accepted appointment as Administrative Agent by the date that is ten
(10) days following a retiring Administrative Agent’s notice of resignation,
the retiring Administrative Agent’s resignation shall nevertheless thereupon
become effective and the Lenders shall assume and perform all of the duties of
the Administrative Agent hereunder until such time, if any, as the Required
Lenders appoint a successor agent as provided for above.  After any retiring Administrative Agent’s
resignation as Administrative Agent, the provisions of this Section 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Loan Documents.

 

SECTION 10  MISCELLANEOUS

 

10.1         Amendments
and Waivers.  Neither this
Agreement nor any Loan Note, the Subsidiary Guarantee, nor any terms hereof or
thereof, may be amended, supplemented or modified except in accordance with the
provisions of this Section.  The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agent
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders or the Administrative Agent,
as the case may be, may specify in such instrument, any of the requirements of
this Agreement or the other Loan Documents or any Default and its consequences;
provided, however, that no such waiver and no such amendment,
supplement, or modification shall (i) (A) reduce the amount or extend the
scheduled date of maturity of any Loan or of any mandatory prepayment thereof,
(B) reduce the stated rate of any interest thereon or fee payable hereunder or
extend the scheduled date of any payment thereof or increase the aggregate
amount or extend the expiration date of any Lender’s Commitment, (C) restrict
the right of each Lender to exchange Term Loans, or Initial Loans on the
Initial Maturity Date, for Exchange Notes or amend the rate of such exchange or
(D) make any change to the subordination provisions of this Agreement that
adversely affects the rights of any Lender, in each case without the written
consent of each Lender directly affected thereby, (ii) (A) amend, modify, or
waive any provision of this Section 10.1, (B) reduce the percentage specified
in the definition of Required Lenders, (C) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under the Loan
Documents except as expressly permitted hereby, (D) amend, modify or waive any
provision in the Exchange Notes that requires (or would, if any Exchange Notes
were outstanding, require) the approval of all holders of Exchange Notes, in
each case without the consent of all of the Lenders or (E) release all or
substantially all of the Guarantors from their obligations under the Subsidiary
Guarantee, in each case, without the consent of all Lenders, (iii) amend any
provision of Section 8 hereof or Section 4 of the Subsidiary Guarantee which
adversely affects the rights of the holders of Senior Indebtedness or Guarantor
Senior Indebtedness then outstanding unless the holders of such Senior
Indebtedness or Guarantor Senior Indebtedness (or any group or Representative
thereof authorized to give consent) consent to such change or (iv) amend,
modify or waive any provision of Section 9 without the written consent of the
then Administrative Agent.  Any 

 

68

 

such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Borrower and the other Loan Parties, the Lenders, the
Administrative Agent, and all future holders of the Loans.  In the case of any waiver, the Borrower and
the other Loan Parties, the Lenders and the Administrative Agent shall be restored
to their former positions and rights hereunder and under the other Loan
Documents, and any Default waived shall be deemed to be cured and not
continuing; no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.

 

10.2         Notices.  All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three (3) Business Days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of the Borrower and the
Administrative Agent, and as set forth in an administrative questionnaire
delivered to the Administrative Agent in the case of the Lenders, or to such
other address as may be hereafter notified by the respective parties hereto:

 

	
  Borrower:

  	
  Tom Brown, Inc.

  
	
   

  	
  555 17th Street, Suite
  1850

  
	
   

  	
  Denver, Colorado  80202-3918

  
	
   

  	
  Attention:  Daniel G.
  Blanchard, Executive Vice President, Chief

  Financial Officer and Treasurer

  
	
   

  	
  Telephone:

  	
  303-260-5039

  
	
   

  	
  Facsimile: 

  	
   303-260-5095

  
	
   

  	
   

  
	
  with a copy to:

  	
  Attention:  Mark Burford,
  Director of Investor Relationsand Assistant Treasurer

  
	
   

  	
  Telephone:

  	
  303-260-5146

  
	
   

  	
  Facsimile: 

  	
  303-260-5161

  
	
   

  	
   

  
	
  Administrative Agent:

  	
  JPMorgan Chase Bank

  
	
   

  	
  Loan and Agency Services

  
	
   

  	
  1111 Fannin, 8th
  Floor

  
	
   

  	
  Houston, Texas 77002

  
	
   

  	
  Attention: 

  	
  James DeLeon

  
	
   

  	
  Telephone:

  	
  713-750-2366

  
	
   

  	
  Facsimile: 

  	
  713-427-6307

  

 

 

provided that any notice, request or demand to or
upon the Administrative Agent or the Lenders shall not be effective until
received.

 

Notices and other
communications to the Lenders hereunder may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative
Agent; provided that the foregoing shall not apply to notices pursuant
to Section 2 unless otherwise agreed by the Administrative Agent and the
applicable Lender.  The Administrative
Agent or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may
be limited to particular notices or communications.

 

69

 

10.3         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 or under the other Loan Documents 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.  The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.

 

10.4         Survival of Representations and
Warranties.  All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of
the Loans hereunder.

 

10.5         Payment
of Expenses and Taxes.  The
Borrower agrees (a) to pay or reimburse the Administrative Agent for all its
reasonable and customary out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including the reasonable fees and disbursements of counsel to the
Administrative Agent, with statements with respect to the foregoing to be
submitted to the Borrower prior to the Closing Date (in the case of amounts to
be paid on the Closing Date) and from time to time thereafter on a quarterly
basis or such other periodic basis as the Administrative Agent shall deem
appropriate, (b) to pay or reimburse each Lender and the Administrative Agent
for all its costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, including the fees and disbursements of counsel
(including the allocated fees and expenses of in-house counsel) to each Lender
and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold
each Lender and the Administrative Agent harmless from, any and all liabilities
with respect to, or resulting from any delay in paying, stamp, excise and other
taxes, if any, that may be payable or determined to be payable in connection
with the execution and delivery of, or consummation or administration of any of
the transactions contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Agreement, the other
Loan Documents and any such other documents, and (d) to pay, indemnify, and
hold each Lender and the Administrative Agent and their respective officers,
directors, employees, affiliates, agents and controlling persons (each, an “Indemnitee”)
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other Loan
Documents and any such other documents, including any of the foregoing relating
to the use of proceeds of the Loans or the violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations of the
Borrower or any of its Subsidiaries and the reasonable fees and expenses of
legal counsel in connection with claims, actions or proceedings by any
Indemnitee against any Loan Party under any Loan Document (all the foregoing in
this clause (d), collectively, the “Indemnified Liabilities”), provided,
that the Borrower shall have no obligation hereunder to any Indemnitee with
respect to Indemnified Liabilities to the extent such Indemnified Liabilities
are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of such Indemnitee.  Without limiting
the foregoing, and to the extent permitted by applicable law, the Borrower
agrees not to assert and to cause its Subsidiaries not to assert, and hereby
waives and agrees to cause its Subsidiaries to waive, all rights for
contribution or any other rights of recovery with respect to all claims,
demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any
Indemnitee.  All amounts due under this
Section 10.5 shall be payable not later than ten (10) days after

 

70

 

written demand therefor.  Statements payable by the Borrower pursuant
to this Section 10.5 shall be submitted to Mark Burford, Director of Investor
Relations and Assistant Treasurer (Telephone No. (303) 260-5146) (Facsimile No.
(303) 260-5161), at the address of the Borrower set forth in Section 10.2, or
to such other Person or address as may be hereafter designated by the Borrower
in a written notice to the Administrative Agent.  The agreements in this Section 10.5 shall survive repayment of
the Loans and all other amounts payable hereunder.

 

10.6         Successors and Assigns;
Participations and Assignments. 
(a)  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that (i)
the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void) and (ii) no Lender may assign or otherwise transfer its rights
or obligations hereunder except in accordance with this Section.

 

(b)           (i)  Subject to the
conditions set forth in paragraph (b)(ii) below, any Lender may assign to one
or more assignees (each, an “Assignee”) all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitments and the Loans at the time owing to it) without the consent of the
Borrower but with the prior written consent (such consent not to be
unreasonably withheld) of the Administrative Agent, provided that no
consent of the Administrative Agent shall be required for an assignment to an
Assignee that is a Lender immediately prior to giving effect to such
assignment.

 

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

 

(A)          except in the case of an assignment to a
Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the
entire remaining amount of the assigning Lender’s Commitments or Loans, the
amount of the Commitments or Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $1,000,000 unless the Administrative Agent otherwise consents, provided
that such amounts shall be aggregated in respect of each Lender and its
Affiliates or Approved Funds, if any;

 

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

 

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

 

For
the purposes of this Section 10.6, the term “Approved Fund” has the following
meaning:

 

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

 

71

 

(iii)          Subject to acceptance and recording
thereof pursuant to paragraph (b)(iv) below, from and after the effective date
specified in each Assignment and Acceptance the Assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Acceptance, be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to
the benefits of Sections 2.10, 2.11, 2.12 and 10.5).  Any assignment or transfer by a Lender of rights or obligations
under this Agreement that does not comply with this Section 10.6 shall be
treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (c)
of this Section.

 

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

 

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

 

(c)           (i)  Any Lender
may, without the consent of the Borrower but with the prior written consent
(such consent not to be unreasonably withheld) of the Administrative Agent (provided
that no consent of the Administrative Agent shall be required for the sale of a
participation to a Person that is a Lender or a Participant immediately prior
to giving effect to such participation), sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitments and the Loans owing to it); provided that (A)
such Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement pursuant to
which a Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that
such agreement may provide that such Lender will not, without the consent of
the Participant, agree to any amendment, modification or waiver that (1)
requires the consent of each Lender directly affected thereby pursuant to the
proviso to the second sentence of Section 10.1 and (2) directly affects such
Participant.  Subject to paragraph
(c)(ii) of this Section, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 2.10, 2.11

 

72

 

and 2.12 to the same extent as if it were a Lender
and had acquired its interest by assignment pursuant to paragraph (b) of this
Section.  To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 10.7(b)
as though it were a Lender, provided such Participant shall be subject
to Section 10.7(a) as though it were a Lender.

 

(ii)           A Participant shall not be entitled
to receive any greater payment under Section 2.10 or 2.12 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower’s prior written consent.  Any Participant that is a Foreign Lender
shall not be entitled to the benefits of Section 2.12 unless such Participant
complies with Section 2.12(e).

 

(d)           Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure obligations
to a Federal Reserve Bank, and this Section shall not apply to any such pledge
or assignment of a security interest; provided that no such pledge or
assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or Assignee for such
Lender as a party hereto.  The Borrower,
upon receipt of written notice from the relevant Lender, agrees to issue Notes
to any Lender requiring Notes to facilitate transactions of the type described
in this paragraph (d).

 

(e)           (i)  To the extent
requested by any Lender, the Borrower shall execute and deliver to such Lender
an Initial Note dated the Closing Date substantially in the form of Exhibit
D-1 hereto to evidence the portion of the Initial Loan made by such Lender
and with appropriate insertions (“Original Initial Notes”).  On each Interest Payment Date, to the extent
requested by any Lender, the Borrower shall execute and deliver to such Lender
on such Interest Payment Date a note dated such Interest Payment Date
substantially in the form of Exhibit D-1 hereto in a principal amount
equal to such Lender’s pro rata portion of such PIK Interest Amount and with
other appropriate insertions (each a “Subsequent Initial Note” and,
together with the Original Initial Notes, the “Initial Notes”).  A Subsequent Initial Note shall bear
interest from the date of its issuance at the same rate borne by all Initial
Notes at the date of issuance and from time to time thereafter.

 

(ii)           Unless converted to an Exchange Note
and, to the extent requested by any Lender, the Borrower shall execute and
deliver to such Lender a Term Note dated the Initial Maturity Date
substantially in the form of Exhibit D-2 hereto to evidence the Term
Loan made on such date, in the principal amount of the Initial Notes held by
such Lender on such date and with other appropriate insertions (collectively,
the “Original Term Notes”).  On
or after the Initial Maturity Date, on each Interest Payment Date, to the
extent requested by any Lender, the Borrower shall execute and deliver to such
Lender on such Interest Payment Date a Term Note dated such Interest Payment
Date substantially in the form of Exhibit D-2 hereto in a principal
amount equal to such Lender’s pro rata portion of such PIK Interest Amount and
with other appropriate insertions (each a “Subsequent Term Note” and,
together with the Original Term Notes, the “Term Notes”).  A Subsequent Term Note shall bear interest
from the date of its issuance at the same rate borne by all Term Notes at the
date of issuance and from time to time thereafter.

 

(iii)          On or prior to the effective date of
any Assignment and Acceptance, the assigning Lender shall surrender any
outstanding Loan Notes held by it all or a portion of which are being assigned,
and the Borrower, at its own expense, shall, upon a request to the
Administrative Agent by the assigning Lender or the Assignee, as applicable,
execute and deliver to the Administrative Agent (in exchange for outstanding
Loan Notes of the

 

73

 

assigning
Lender, if any) a new Loan Note to the order of such Assignee in an amount
equal to the amount of such Assignee’s Loans after giving effect to such
Assignment and Acceptance and, if the assigning Lender has retained a Loan
hereunder, a new Loan Note, to the order of the assigning Lender in an amount
equal to the amount of such Lender’s Loans after giving effect to such
Assignment and Acceptance.  Any such new
Loan Notes shall be dated the Closing Date and shall otherwise be in the form
of the Loan Note replaced thereby.  Any
Loan Notes surrendered by the assigning Lender shall be returned by the
Administrative Agent to the Borrower marked “cancelled.”

 

(f)            Notwithstanding the foregoing, any Conduit Lender may
assign any or all of the Loans it may have funded hereunder to its designating
Lender without the consent of the Borrower or the Administrative Agent and
without regard to the limitations set forth in Section 10.6(b).  Each of the Borrower, each Lender and the
Administrative Agent hereby confirms that it will not institute against a
Conduit Lender or join any other Person in instituting against a Conduit Lender
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding under any state bankruptcy or similar law, for one year and one day
after the payment in full of the latest maturing commercial paper note issued
by such Conduit Lender; provided, however, that each Lender
designating any Conduit Lender hereby agrees to indemnify, save and hold harmless
each other party hereto for any loss, cost, damage or expense arising out of
its inability to institute such a proceeding against such Conduit Lender during
such period of forbearance.

 

10.7         Adjustments;
Set-off.  (a)  If any Lender (a “Benefitted Lender”)
shall at any time receive any payment of all or part of its Loans or interest
thereon, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 7.1(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of such other Lender’s Loans or interest thereon, such Benefitted Lender shall
purchase for cash from the other Lenders a participating interest in such
portion of each such other Lender’s Loan, or shall provide such other Lenders
with the benefits of any such collateral, or the proceeds thereof, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest.

 

(b)           In addition to any rights and remedies of the Lenders
provided by law, each Lender shall have the right, during the continuation of
any Event of Default, without prior notice to the Borrower, any such notice
being expressly waived by the Borrower to the extent permitted by applicable
law, to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held or owing by such Lender or any branch or agency thereof
to or for the credit or the account of the Borrower.  Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such set-off and application made by such
Lender, provided that the failure to give such notice shall not affect
the validity of such set-off and application.

 

10.8         Counterparts.
 This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to constitute
one and the same instrument.  Delivery
of an executed signature page of this Agreement by facsimile transmission shall
be effective as delivery of a manually executed counterpart hereof.  A set of the copies of this Agreement signed
by all the parties shall be lodged with the Borrower and the Administrative
Agent.

 

74

 

10.9         Severability.
 Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

 

10.10       Integration.  This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof and thereof, and there
are no promises, undertakings, representations or warranties by the
Administrative Agent or any Lender relative to the subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.

 

10.11       GOVERNING LAW.  THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.

 

10.12       Submission To Jurisdiction; Waivers.  The Borrower hereby irrevocably and
unconditionally:

 

(a)           submits for itself and its property
in any legal action or proceeding relating to this Agreement and the other Loan
Documents to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;

 

(b)           consents that any such action or
proceeding may be brought in such courts and waives any objection that it may
now or hereafter have to the venue of any such action or proceeding in any such
court or that such action or proceeding was brought in an inconvenient court or
forum and agrees not to plead or claim the same;

 

(c)            agrees that service of process in
any such action or proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form of mail),
postage prepaid, to the Borrower, at the address specified in Section 10.2 or
at such other address of which the Administrative Agent shall have been
notified pursuant thereto;

 

(d)           agrees that nothing herein shall
affect the right to effect service of process in any other manner permitted by
law or shall limit the right to sue in any other jurisdiction; and

 

(e)           waives, to the maximum extent not
prohibited by law, any right it may have to claim or recover in any legal
action or proceeding referred to in this Section any special, exemplary,
punitive or consequential damages.

 

10.13       Acknowledgments.  The Borrower hereby acknowledges that:

 

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

 

(b)           neither the Administrative Agent nor
any Lender has any fiduciary relationship with or duty to the Borrower arising
out of or in connection with this Agreement or any of the other Loan Documents,
and the relationship between Administrative Agent and Lenders, on one

 

75

 

hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely that
of creditor and debtor; and

 

(c)           no joint venture is created hereby or
by the other Loan Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Lenders or among the Borrower and the Lenders.

 

10.14       WAIVERS OF JURY TRIAL.  THE
BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

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

 

10.16       Co-Syndication Agents. 
None of the Co-Syndication Agents shall have any duties or
responsibilities hereunder in its capacity as such.

 

76

 

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.

 

 

	
   

  	
  TOM BROWN, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  

  	
  Daniel G. Blanchard

  
	
   

  	
  Title:

  	
  Executive Vice President,

  Chief Financial Officer and Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK,

  as Administrative Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Robert C. Mertensotto

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NOVA SCOTIA,
  as Co-Syndication

  Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BNP PARIBAS, as
  Co-Syndication Agent and as a

  Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WACHOVIA BANK, NATIONAL
  ASSOCIATION, as

  Co-Syndication Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Jay Chernosky

  
	
   

  	
  Title:

  	
  Managing Director

  
					

 

77

 

SCHEDULE
1.1A TO

SENIOR SUBORDINATED

CREDIT AGREEMENT

 

COMMITMENTS

 

LENDERS

 

JPMORGAN CHASE BANK

Commitment:  $85,250,000

 

THE BANK OF NOVA SCOTIA

Commitment:  $15,500,000

 

BNP PARIBAS

Commitment:  $38,750,000

 

WACHOVIA BANK, NATIONAL ASSOCIATION

Commitment:  $15,500,000

 

78Exhibit
10.1

 

SEVERANCE AGREEMENT IN
THE EVENT OF A CHANGE OF CONTROL

BETWEEN BUSINESS BANK OF CALIFORNIA AND CINDI
MORALES

 

Dear Cindi:

 

The Board of Directors of Business Bank of California (the “Bank”) has
authorized the President or Chief Executive Officer of the Bank to offer
severance agreements in the event of a change of control to selected key
executives.  Selections shall be made at
the sole discretion of the President or Chief Executive Officer, and an executive
is not eligible unless selected and notified of his or her selection.  You have been selected to receive such an
agreement and are hereby so notified. 
The terms are as follows:

 

In the event of (i) a merger where the Bank is not the surviving
corporation, (ii) a transfer of all or substantially all of the assets of the
Bank or (iii) any acquisition, consolidation or other corporate reorganization
where there is a change in ownership of at least fifty-one percent (51%) except
as may result from a transfer of shares to another corporation in exchange for
at least eighty percent (80%) control of that corporation, and, in the event
that your employment is terminated for any reason during the twelve (12) month
period immediately following the effective date of consummation of such merger
or other corporate reorganization by the surviving entity, in the event of
merger; by the transferee of assets in the event of a purchase or sale; or by
the acquirer, in the event of an acquisition of stock in the Bank, then you
shall be entitled to the following severance benefits commencing upon the
effective date of termination of your employment: (a) You shall receive within
ten (10) days of such termination or within such time period as prescribed by
law a Base Benefit equal to Twelve (12) months
of base salary at the rate in effect at the date of the termination of your
employment, and (b) an Added Benefit of two (2) weeks of base salary for each
full Year of Service, provided, however, that the total Base Benefit and Added
Benefit payable to you shall not exceed Eighteen (18)
months of Pay.  Base salary shall be
your salary exclusive of bonuses, commissions and any other form of
compensation.

 

Severance pay shall be payable in a lump sum and shall be subject to
all legally required withholding.

 

In order to be eligible to receive such benefit, you must perform your
duties in a satisfactory manner through the “severance period” as specified by
the Bank, your employment must be terminated involuntarily by action of the
Bank as a result of or within 12 months of a change of control and you must
sign a general release of all claims in a form and manner as prescribed by the
Bank.

 

You will not be eligible for severance if you resign before the
termination date designated by the Bank, even if you received advance notice of
your involuntary termination, if you resign or are involuntarily terminated
because you violated any policy, procedure or rule of the Bank, because of
performance-related reasons, because you engaged in dishonest or wrongful
conduct or because you committed any crime. 
You are also not eligible for severance if you receive an offer of a
comparable position with the Bank or any of its parents, subsidiaries, related
or affiliated persons or entities with no significant reduction in your current
base salary, a significant 

 

 

reduction being a reduction of 10% or more of the base salary in effect
during the pay period ending on or coincident with the date of termination by
the Bank.  You will be entitled to
severance pay if you are offered such a position at a work location more than
thirty (30) miles from your place of employment at the Bank.

 

You are not eligible for severance in the event you are party to an
individual written employment contract with the Bank, except to the extent that
contract specifically provides for these terms and conditions.

 

If you are laid off or discharged because of a plant shut-down or mass
layoff to which the Worker Adjustment and Retraining Notice Act of 1988
(“WARN”) applies, severance payments shall not be available except as provided
in this paragraph.  In accordance with
WARN, an Employee shall be given either 60 days’ notice of termination of
employment, 60 days’ pay in lieu of notice, or a combination of notice and pay
in lieu of notice the total of which equals not less than 60 days.  The amount of severance pay to which you are
entitled under this agreement shall be determined by subtracting the number of
days’ pay in lieu of notice you receive pursuant to WARN from the amount of
severance pay to which you would be otherwise entitled under this Agreement.

 

This Agreement embodies the entire understanding of the parties on the
subjects set forth herein, and there are no promises, terms, conditions, or
obligations, oral or written, express or implied, other than those contained
herein.  This Agreement may not be
amended or modified except in writing signed by both parties.

 

Nothing in this document is intended to create, or shall be considered
or construed as creating an employment contract between you and Business Bank
of California, or shall modify or affect in any way your at will employment
relationship with Business Bank of California. You understand that no employee
or representative of the Bank, other than its President or Chief Executive
Officer, has the authority to enter into any agreement for employment for any
specified period of time, or to make any agreement contrary to the foregoing.

 

Further, neither the President nor the Chief Executive Officer of the
Bank may alter the at-will nature of the employment relationship unless the
President or Chief Executive Officer and you both sign a written agreement that
clearly and expressly specifies the intent to do so.

 

Sincerely,

 

 

	
  /s/ Alan J. Lane

  	
   

  
	
  Alan J. Lane

  	
   

  
	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
  May 23, 2003

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Cindi Morales

  	
   

  	
   

  
	
   

  	
  Cindi Morales

  	
   

  	
   

  
					

 

2

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