Document:

Exhibit 10.1

 

CREDIT AGREEMENT

 

[US/Canadian Facilities]

 

Dated as of September 30, 2005

 

among

 

PACIFIC ENERGY PARTNERS, L.P.,
as the US Borrower,

 

RANGELAND PIPELINE COMPANY,

as the Canadian Borrower,

 

BANK OF AMERICA, N.A.,

as US Administrative Agent,

US L/C Issuer and US Swing Line Lender,

 

BANK OF AMERICA, N.A., acting through its Canada Branch,

as Canadian Administrative Agent,

Canadian L/C Issuer and Canadian Swing Line Lender

 

LEHMAN COMMERCIAL PAPER INC.,

as Syndication Agent,

 

BNP PARIBAS, CITICORP USA, INC., and WACHOVIA BANK, N.A.,

as Co-Documentation Agents,

 

and

 

The Other Lenders Party Hereto

 

BANC OF AMERICA SECURITIES LLC,

 

and

 

LEHMAN BROTHERS INC.
as

Joint Lead Arrangers

 

 

 

 

TABLE OF CONTENTS

 

	
  Section

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS

  	
   

  
	
  1.01

  	
   

  	
  Defined Terms

  	
   

  
	
  1.02

  	
   

  	
  Other Interpretive Provisions

  	
   

  
	
  1.03

  	
   

  	
  Accounting Terms

  	
   

  
	
  1.04

  	
   

  	
  Rounding

  	
   

  
	
  1.05

  	
   

  	
  Times of Day

  	
   

  
	
  1.06

  	
   

  	
  Letter of Credit Amounts

  	
   

  
	
  1.07

  	
   

  	
  References to US Obligations and Canadian
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS

  	
   

  
	
  2.01

  	
   

  	
  Committed Loans

  	
   

  
	
  2.02

  	
   

  	
  Borrowings, Conversions and Continuations
  of Committed Loans

  	
   

  
	
  2.03

  	
   

  	
  Letters of Credit

  	
   

  
	
  2.04

  	
   

  	
  Swing Line Loans

  	
   

  
	
  2.05

  	
   

  	
  Prepayments

  	
   

  
	
  2.06

  	
   

  	
  Termination or Reduction of Commitments

  	
   

  
	
  2.07

  	
   

  	
  Repayment of Loans

  	
   

  
	
  2.08

  	
   

  	
  Interest

  	
   

  
	
  2.09

  	
   

  	
  Fees

  	
   

  
	
  2.10

  	
   

  	
  Computation of Interest and Fees

  	
   

  
	
  2.11

  	
   

  	
  Evidence of Debt

  	
   

  
	
  2.12

  	
   

  	
  Payments Generally; Administrative Agent’s
  Clawback

  	
   

  
	
  2.13

  	
   

  	
  Sharing of Payments by Lenders

  	
   

  
	
  2.14

  	
   

  	
  Increase in Commitments

  	
   

  
	
  2.15

  	
   

  	
  Creation of Bankers’ Acceptances

  	
   

  
	
  2.16

  	
   

  	
  Terms of Acceptance by Canadian Lenders.

  	
   

  
	
  2.17

  	
   

  	
  General Procedures for Bankers’
  Acceptances.

  	
   

  
	
  2.18

  	
   

  	
  Execution of Bankers’ Acceptances

  	
   

  
	
  2.19

  	
   

  	
  Prepayment of Bankers’ Acceptances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III. TAXES, YIELD PROTECTION AND
  ILLEGALITY

  	
   

  
	
  3.01

  	
   

  	
  Taxes

  	
   

  
	
  3.02

  	
   

  	
  Illegality

  	
   

  
	
  3.03

  	
   

  	
  Inability to Determine Rates

  	
   

  
	
  3.04

  	
   

  	
  Increased Costs; Reserves on Eurodollar
  Rate Loans

  	
   

  
	
  3.05

  	
   

  	
  Compensation for Losses

  	
   

  
	
  3.06

  	
   

  	
  Mitigation Obligations

  	
   

  
	
  3.07

  	
   

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT
  EXTENSIONS

  	
   

  
	
  4.01

  	
   

  	
  Conditions of Initial Credit Extension

  	
   

  
	
  4.02

  	
   

  	
  Conditions to all Credit Extensions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V. REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  5.01

  	
   

  	
  Existence, Qualification and Power;
  Compliance with Laws

  	
   

  

 

 

	
  5.02

  	
   

  	
  Authorization; No Contravention

  	
   

  
	
  5.03

  	
   

  	
  Governmental Authorization; Other Consents

  	
   

  
	
  5.04

  	
   

  	
  Binding Effect

  	
   

  
	
  5.05

  	
   

  	
  Financial Statements; No Material Adverse
  Effect

  	
   

  
	
  5.06

  	
   

  	
  Litigation

  	
   

  
	
  5.07

  	
   

  	
  No Default

  	
   

  
	
  5.08

  	
   

  	
  Ownership of Property; Liens

  	
   

  
	
  5.09

  	
   

  	
  Environmental Compliance

  	
   

  
	
  5.10

  	
   

  	
  Insurance

  	
   

  
	
  5.11

  	
   

  	
  Taxes

  	
   

  
	
  5.12

  	
   

  	
  ERISA Compliance

  	
   

  
	
  5.13

  	
   

  	
  Subsidiaries; Equity Interests

  	
   

  
	
  5.14

  	
   

  	
  Margin Regulations; Investment Company Act;
  Public Utility Holding Company Act

  	
   

  
	
  5.15

  	
   

  	
  Disclosure

  	
   

  
	
  5.16

  	
   

  	
  Compliance with Laws

  	
   

  
	
  5.17

  	
   

  	
  Intellectual Property; Licenses, Etc

  	
   

  
	
  5.18

  	
   

  	
  Labor Disputes and Acts of God

  	
   

  
	
  5.19

  	
   

  	
  Solvency

  	
   

  
	
  5.20

  	
   

  	
  Valero Acquisition Closing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI. AFFIRMATIVE COVENANTS

  	
   

  
	
  6.01

  	
   

  	
  Financial Statements

  	
   

  
	
  6.02

  	
   

  	
  Certificates; Other Information

  	
   

  
	
  6.03

  	
   

  	
  Notices

  	
   

  
	
  6.04

  	
   

  	
  Payment of Obligations

  	
   

  
	
  6.05

  	
   

  	
  Preservation of Existence, Etc

  	
   

  
	
  6.06

  	
   

  	
  Maintenance of Properties

  	
   

  
	
  6.07

  	
   

  	
  Maintenance of Insurance

  	
   

  
	
  6.08

  	
   

  	
  Compliance with Laws

  	
   

  
	
  6.09

  	
   

  	
  Books and Records

  	
   

  
	
  6.10

  	
   

  	
  Inspection Rights

  	
   

  
	
  6.11

  	
   

  	
  Use of Proceeds

  	
   

  
	
  6.12

  	
   

  	
  Subsidiary Guarantors

  	
   

  
	
  6.13

  	
   

  	
  Agreement to Deliver Security Documents;
  Collateral Release Event

  	
   

  
	
  6.14

  	
   

  	
  Performance on US Borrower’s Behalf

  	
   

  
	
  6.15

  	
   

  	
  Environmental Matters; Environmental
  Reviews

  	
   

  
	
  6.16

  	
   

  	
  Compliance with Agreements

  	
   

  
	
  6.17

  	
   

  	
  Deposit Accounts

  	
   

  
	
  6.18

  	
   

  	
  Unrestricted Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII. NEGATIVE COVENANTS

  	
   

  
	
  7.01

  	
   

  	
  Liens

  	
   

  
	
  7.02

  	
   

  	
  Investments

  	
   

  
	
  7.03

  	
   

  	
  Indebtedness

  	
   

  
	
  7.04

  	
   

  	
  Fundamental Changes

  	
   

  
	
  7.05

  	
   

  	
  Dispositions

  	
   

  
	
  7.06

  	
   

  	
  Restricted Payments

  	
   

  
	
  7.07

  	
   

  	
  Change in Nature of Business

  	
   

  
	
  7.08

  	
   

  	
  Transactions with Affiliates

  	
   

  
	
  7.09

  	
   

  	
  Burdensome Agreements

  	
   

  
	
  7.10

  	
   

  	
  Use of Proceeds

  	
   

  

 

ii

 

	
  7.11

  	
   

  	
  Prohibited Contracts

  	
   

  
	
  7.12

  	
   

  	
  Swap Contracts

  	
   

  
	
  7.13

  	
   

  	
  Subsidiaries

  	
   

  
	
  7.14

  	
   

  	
  Open Position; Trading

  	
   

  
	
  7.15

  	
   

  	
  Designation and Conversion of Restricted
  and Unrestricted Subsidiaries; Debt of Unrestricted Subsidiaries

  	
   

  
	
  7.16

  	
   

  	
  Amendments to Organizational Documents

  	
   

  
	
  7.17

  	
   

  	
  Financial Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES

  	
   

  
	
  8.01

  	
   

  	
  Events of Default

  	
   

  
	
  8.02

  	
   

  	
  Remedies Upon Event of Default

  	
   

  
	
  8.03

  	
   

  	
  Application of Funds

  	
   

  
	
  8.04

  	
   

  	
  Allocation to US and Canadian Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX. ADMINISTRATIVE AGENT

  	
   

  
	
  9.01

  	
   

  	
  Appointment and Authority

  	
   

  
	
  9.02

  	
   

  	
  Rights as a Lender

  	
   

  
	
  9.03

  	
   

  	
  Exculpatory Provisions

  	
   

  
	
  9.04

  	
   

  	
  Reliance by Administrative Agent

  	
   

  
	
  9.05

  	
   

  	
  Delegation of Duties

  	
   

  
	
  9.06

  	
   

  	
  Resignation of Administrative Agent

  	
   

  
	
  9.07

  	
   

  	
  Non-Reliance on Administrative Agent and
  Other Lenders

  	
   

  
	
  9.08

  	
   

  	
  No Other Duties, Etc

  	
   

  
	
  9.09

  	
   

  	
  Administrative Agent May File Proofs of
  Claim

  	
   

  
	
  9.10

  	
   

  	
  Collateral and Guaranty Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X. MISCELLANEOUS

  	
   

  
	
  10.01

  	
   

  	
  Amendments, Etc

  	
   

  
	
  10.02

  	
   

  	
  Notices; Effectiveness; Electronic
  Communication

  	
   

  
	
  10.03

  	
   

  	
  No Waiver; Cumulative Remedies

  	
   

  
	
  10.04

  	
   

  	
  Expenses;
  Indemnity; Damage Waiver

  	
   

  
	
  10.05

  	
   

  	
  Payments Set Aside

  	
   

  
	
  10.06

  	
   

  	
  Successors and Assigns

  	
   

  
	
  10.07

  	
   

  	
  Treatment of Certain Information;
  Confidentiality

  	
   

  
	
  10.08

  	
   

  	
  Right of Setoff

  	
   

  
	
  10.09

  	
   

  	
  Interest Rate Limitation

  	
   

  
	
  10.10

  	
   

  	
  Counterparts; Effectiveness

  	
   

  
	
  10.11

  	
   

  	
  Survival of Representations and Warranties

  	
   

  
	
  10.12

  	
   

  	
  Severability

  	
   

  
	
  10.13

  	
   

  	
  Replacement of Lenders

  	
   

  
	
  10.14

  	
   

  	
  No General Partner’s Liability

  	
   

  
	
  10.15

  	
   

  	
  Governing Law; Jurisdiction; Etc

  	
   

  
	
  10.16

  	
   

  	
  Waiver of Jury Trial

  	
   

  
	
  10.17

  	
   

  	
  USA PATRIOT Act Notice

  	
   

  
	
  10.18

  	
   

  	
  Existing Credit Agreement

  	
   

  
	
  10.19

  	
   

  	
  ENTIRE AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
           
  SIGNATURES

  	
   

  

 

iii

 

	
  SCHEDULES

  	
   

  
	
   

  	
   

  
	
   

  	
  1.01-1

  	
  Existing Letters of Credit

  	
   

  
	
   

  	
  1.01-2

  	
  Security Schedule

  	
   

  
	
   

  	
  2.01

  	
  Commitments and Applicable
  Percentages

  	
   

  
	
   

  	
  5.05

  	
  Supplement to Interim
  Financial Statements

  	
   

  
	
   

  	
  5.09

  	
  Environmental Matters

  	
   

  
	
   

  	
  5.12(c)

  	
  ERISA Matters

  	
   

  
	
   

  	
  5.13

  	
  Subsidiaries; Other Equity
  Investments

  	
   

  
	
   

  	
  7.01

  	
  Existing Liens

  	
   

  
	
   

  	
  7.03

  	
  Existing Indebtedness

  	
   

  
	
   

  	
  7.11

  	
  Prohibited Contracts

  	
   

  
	
   

  	
  10.02

  	
  Administrative Agent’s
  Office; Certain Addresses for Notices

  	
   

  
	
   

  	
  10.06

  	
  Processing
  and Recordation Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  A-1

  	
  Committed Loan Notice (US)

  	
   

  
	
   

  	
  A-2

  	
  Committed Loan Notice
  (Canadian)

  	
   

  
	
   

  	
  B

  	
  Swing Line Loan Notice

  	
   

  
	
   

  	
  C-1

  	
  US Note

  	
   

  
	
   

  	
  C-2

  	
  Canadian Note

  	
   

  
	
   

  	
  D

  	
  Compliance Certificate

  	
   

  
	
   

  	
  E

  	
  Assignment and Assumption

  	
   

  
	
   

  	
  F

  	
  Guaranty

  	
   

  
	
   

  	
  G

  	
  Opinion Matters

  	
   

  
	
   

  	
  H

  	
  Solvency Certificate

  	
   

  
	
   

  	
  I

  	
  Indemnification Agreement

  	
   

  

 

iv

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (“Agreement”) is entered into as of
September 30, 2005, among PACIFIC ENERGY PARTNERS, L.P., a Delaware limited
partnership (the “US Borrower”), RANGELAND PIPELINE COMPANY, a Nova
Scotia unlimited liability company, each lender from time to time party hereto
(collectively, the “Lenders” and individually, a “Lender”), and
BANK OF AMERICA, N.A., as US Administrative Agent, US L/C Issuer and US Swing
Line Lender, BANK OF AMERICA, N.A., acting through its Canada Branch, as Canadian
Administrative Agent, Canadian L/C Issuer and Canadian Swing Line Lender,
LEHMAN COMMERCIAL PAPER INC., as Syndication Agent, BNP PARIBAS, CITICORP USA,
INC., and WACHOVIA BANK, N.A., as Co-Documentation Agents.

 

The US Borrower and the Canadian Borrower have requested that the
Lenders provide revolving credit facilities as described herein, and the
Lenders are willing to do so on the terms and conditions set forth herein.

 

In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:

 

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

 

1.01        Defined
Terms.  As used in this Agreement, the following terms shall have
the meanings set forth below:

 

“Acquisition Adjustment Period” means each period from and after
the Acquisition Initial Adjustment Date beginning with the funding of the
purchase price for a Specified Acquisition, provided that US Borrower
has given notice at least five (5) Business Days prior to such date that it is
electing that such Specified Acquisition shall commence an Acquisition
Adjustment Period, and ending on the earlier of (a) 270 days after the
commencement of such period and (b) the receipt of Net Cash Proceeds of
Additional Equity by US Borrower after the commencement of such period in an
amount sufficient to cause US Borrower to be in compliance with Sections 7.17(a),
(b) and (c) after giving effect to the receipt of such proceeds; provided,
further, during any Acquisition Adjustment Period, no additional
Acquisition Adjustment Period shall commence, nor shall such Acquisition
Adjustment Period be extended, by any subsequent Specified Acquisition until
the current Acquisition Adjustment Period shall have terminated and US Borrower
shall be in compliance with Sections 7.17(a), (b) and (c).
As used above, “Specified Acquisition” means one or more acquisitions of
assets of or from or of Equity Interests of any Person (other than the US
Borrower or any of its Restricted Subsidiaries) made from and after the
Acquisition Initial Adjustment Date that, in a rolling 12-month period, have
aggregate purchase prices in excess of $30,000,000, and specifically excluding
the Valero Acquisition.

 

“Acquisition Initial Adjustment Date” means (a) if the Borrower
has received the proceeds of the issuance of at least $270,000,000 of Equity
Interests during the period from August 8, 2005 through and including the
Closing Date, then the Closing Date, and (b) otherwise, the earlier of (i)
June 30, 2006 or (ii) the date on which the Borrower has received 

 

 

the proceeds of the issuance of
at least $270,000,000 of Equity Interests from and after August 8, 2005.

 

“Additional Equity” means any contribution to the equity capital
of any Person whether or not occurring in connection with the issuance or sale
of Equity Interests by such Person.

 

“Administrative Agent” means, with respect to the Canadian
Borrower, Canadian Lenders, the Canadian Loans or the Canadian Letters of
Credit, the Canadian Administrative Agent, and otherwise, the US Administrative
Agent.

 

“Administrative Agent’s Office” means the Administrative Agent’s
address and, as appropriate, account as set forth on Schedule 10.02, or
such other address or account as the Administrative Agent may from time to time
notify to the US Borrower and the Lenders.

 

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

 

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

 

“Agreement” means this Credit Agreement.

 

“Aggregate Commitment” means the US Aggregate Commitment or the
Canadian Allocated Aggregate Commitment as provided in Section 1.07.

 

“Applicable Debt Rating” means, as of any date of determination,
(a) prior to the date upon which the Collateral is subject to release pursuant
to Section 6.14, the rating that is one level above the Debt Rating then
in effect, and (b) on and after the date upon which the Collateral is subject
to release pursuant to Section 6.14, the Debt Rating then in effect.

 

“Applicable Percentage” means the US Applicable Percentage or
the Canadian Applicable Percentage as provided in Section 1.07.

 

“Applicable Rate” means, from time to time, the following
percentages per annum, based upon the Applicable Debt Rating as set forth
below:

 

2

 

	
  Applicable Rate

  	
   

  
	
  Pricing

  Level

  	
   

  	
  Applicable

  Debt Ratings

  S&P/Moody’s

  	
   

  	
  Commitment

  Fee

  	
   

  	
  Eurodollar

  Rate +

  Letter of

  Credit

  Stamping

  Fee Rate

  	
   

  	
  Base Rate

  +

  Canadian US

  Dollar Base Rate

  +

  Canadian Prime

  Rate +

  	
   

  
	
  1

  	
   

  	
  BBB/Baa2 or better

  	
   

  	
  0.1875

  	
  %

  	
  0.750

  	
  %

  	
  0.00

  	
  %

  
	
  2

  	
   

  	
  BBB-/Baa3

  	
   

  	
  0.2000

  	
  %

  	
  0.875

  	
  %

  	
  0.00

  	
  %

  
	
  3

  	
   

  	
  BB+/Ba1

  	
   

  	
  0.2500

  	
  %

  	
  1.125

  	
  %

  	
  0.00

  	
  %

  
	
  4

  	
   

  	
  BB/Ba2

  	
   

  	
  0.3000

  	
  %

  	
  1.500

  	
  %

  	
  0.25

  	
  %

  
	
  5

  	
   

  	
  BB-/Ba3

  	
   

  	
  0.3750

  	
  %

  	
  1.750

  	
  %

  	
  0.50

  	
  %

  
	
  6

  	
   

  	
  B+/B1 or worse

  	
   

  	
  0.5000

  	
  %

  	
  2.000

  	
  %

  	
  0.75

  	
  %

  

 

On each day of an Acquisition Adjustment Period, the rates set forth
above that would otherwise be the Applicable Rate shall be increased by the
following for the indicated applicable Pricing Level: 0.125% for Pricing
Level 1, 0.250 % for Pricing Level 2, 0.375% for Pricing
Level 3, Pricing Level 4 and Pricing Level 5, and 0.500% for
Pricing Level 6.

 

Initially, the Applicable Rate shall be determined based upon the
Applicable Debt Ratings specified in the certificate delivered pursuant to Section
4.01(a)(ix).  Thereafter, each change
in the Applicable Rate resulting from a publicly announced change in the
Applicable Debt Rating shall be effective during the period commencing on the
date of the first public announcement thereof by the applicable rating agency
and ending on the date immediately preceding the effective date of the next
such change.

 

“Approved
Counterparty” means (a) a counterparty that is a Lender or an Affiliate of
any Lender at the time the applicable Swap Contract is entered into, (b) a
counterparty who has, at the time the applicable Swap Contract is made,
long-term unsecured and unenhanced debt obligations rated A or A2 or better,
respectively, by either Moody’s or S&P, (c) a counterparty who has an
Affiliate that has Guaranteed its obligations under the applicable Swap
Contract who has, at the time the applicable Swap Contract is made, long-term
unsecured and unenhanced debt obligations rated A or A2 or better,
respectively, by either Moody’s or S&P or (d) a counterparty otherwise
acceptable to Required Lenders.

 

“Approved Fund” means any Fund 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.

 

“Arrangers” means Banc of America Securities LLC and Lehman
Brothers Inc., in their capacity as joint lead arrangers.

 

3

 

“Assignee Group” means two or more Eligible Assignees that are
Affiliates of one another or two or more Approved Funds managed by the same
investment advisor.

 

“Assignment and Assumption” means an assignment and assumption
entered into by a Lender and an Eligible Assignee (with the consent of any
party whose consent is required by Section 10.06(b)), and accepted
by the US Administrative Agent, in substantially the form of Exhibit E
or any other form approved by the US Administrative Agent.

 

“Attributable Indebtedness” means, on any date, (a) in respect
of any capital lease of any Person, the capitalized amount thereof that would
appear on a balance sheet of such Person prepared as of such date in accordance
with GAAP, and (b) in respect of any Synthetic Lease Obligation, the
capitalized amount of the remaining lease payments under the relevant lease
that would appear on a balance sheet of such Person prepared as of such date in
accordance with GAAP if such lease were accounted for as a capital lease.

 

“Audited Financial Statements” means the audited consolidated
balance sheet of the US Borrower and its Subsidiaries for the fiscal year ended
December 31, 2004, and the related consolidated statements of income or
operations, shareholders’ equity and cash flows for such fiscal year of the US
Borrower and its Subsidiaries, including the notes thereto.

 

“Availability Period” means the period from and including the
Closing Date to the earliest of (a) the Maturity Date, (b) the date
of termination of the Aggregate Commitments pursuant to Section 2.06,
and (c) the date of termination of the commitment of each Lender to make
Loans and of the obligation of the L/C Issuer to make L/C Credit Extensions
pursuant to Section 8.02.

 

“Available Cash” for any fiscal quarter has the meaning set
forth in the Partnership Agreement for such fiscal quarter.

 

“BA Discount Rate” means, in respect of a BA being accepted by a
Canadian Lender on any date, (i) for a Canadian Lender that is listed in
Schedule I to the Bank Act
(Canada), the average bankers’ acceptance rate as quoted on Reuters CDOR page
(or such other page as may, from time to time, replace such page on that
service for the purpose of displaying quotations for bankers’ acceptances
accepted by leading Canadian financial institutions) at approximately 10:00
a.m. (Toronto, Ontario time) on such drawdown date for bankers’ acceptances
having a comparable maturity date as the maturity date of such BA (the “CDOR
Rate”); or, if such rate is not available at or about such time, the
average of the bankers’ acceptance rates (expressed to five decimal places) as
quoted to the Canadian Administrative Agent by the Schedule I BA Reference
Banks as of 10:00 a.m. (Toronto, Ontario time) on such drawdown date for
bankers’ acceptances having a comparable maturity date as the maturity date of
such BA; and (ii) for a Canadian Lender that is listed in Schedule II to
the Bank Act (Canada) or a
Canadian Lender that is listed in Schedule III to the Bank Act (Canada) that is not subject to
the restrictions and requirements referred to in subsection 524 (2) of the Bank Act (Canada), the rate established by
the Canadian Administrative Agent to be the lesser of (A) the CDOR Rate
plus 10 Basis Points and (B) the average of the bankers’ acceptance rates
(expressed to five decimal places) as quoted to the Canadian Administrative
Agent by the Schedule II BA Reference Banks and the Schedule 

 

4

 

III BA Reference Banks as of
10:00 a.m. (Toronto, Ontario time) on such drawdown date for bankers’
acceptances having a comparable maturity date as the maturity date of such BA.

 

“BA Equivalent Advance” means a loan provided hereunder by a
Canadian Lender in lieu of accepting and purchasing a BA pursuant to Section
2.16(f).

 

“Bank of America” means Bank of America, N.A.

 

“Bank of Canada Rate” means the “Bank Rate” as set by The Bank
of Canada, as quoted on Reuters Page BOCFAD.

 

“Bankers’ Acceptance” or “BA” means a non-interest
bearing bill of exchange on a Canadian Lender’s usual form (or a bill of
exchange within the meaning of the Bill of
Exchange Act (Canada), or a depository bill within the meaning of
the Depository Bills and Notes Act
(Canada)), denominated in Canadian Dollars, drawn by or on behalf of the
Canadian Borrower, for a term selected by the Canadian Borrower of either one,
two, three or six months (as reduced or extended by Canadian Administrative
Agent, acting reasonably, to allow the maturity thereof to fall on a Canadian
Business Day), or such shorter term as agreed to by the Canadian Lenders,
payable in Canada, and accepted by a Canadian Lender in accordance with this
Agreement.

 

“Base Rate”  means for any day a fluctuating rate
per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1%
and (b) the rate of interest in effect for such day as publicly announced
from time to time by Bank of America as its “prime rate”.  The “prime rate” is a rate set by Bank of
America based upon various factors including Bank of America’s costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.  Any change in such
rate announced by Bank of America shall take effect at the opening of business
on the day specified in the public announcement of such change.

 

“Base Rate Committed Loan” means a Committed Loan that is a Base
Rate Loan.

 

“Base Rate Loan” means a Loan that bears interest based on the
Base Rate.

 

“Beneficial Owner” has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular “person” (as that term is used in
Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have
beneficial ownership of all securities that such “person” has the right to
acquire by conversion or exercise of other securities, whether such right is
currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.

 

“Borrowers” means, collectively, US Borrower, and the Canadian
Borrower, in each case, so long as it is permitted to borrow hereunder or
request the issuance of a Letter of Credit; “Borrower” means,
individually, any of such Persons as provided in Section 1.07.

 

“Borrowing” means a Committed Borrowing or a Swing Line
Borrowing as the context may require.

 

5

 

“Business Day” means a US Business Day or a Canadian Business
Day as provided in Section 1.07.

 

“Canadian Administrative Agent” means Bank of America, N.A.,
acting through its Canada branch, as Canadian Administrative Agent hereunder,
and its successors in such capacity.

 

“Canadian Aggregate Commitment” means, at any time, the
aggregate amount of the Canadian Commitments at such time.

 

“Canadian Allocated Aggregate Commitment” means the amount of
the US Aggregate Commitment allocated by US Borrower from time to time as the
Canadian Allocated Aggregate Commitment pursuant to Section 2.01(b), not
to exceed the Canadian Allocated Aggregate Commitment.

 

“Canadian Allocated Commitment Amount” means, as to each Lender,
such Lender’s Canadian Applicable Percentage or, if applicable, its Canadian
branch’s or its Affiliate’s Canadian Applicable Percentage, in each case as set
forth opposite such Lender’s, Canadian branch’s or Affiliate’s name on Schedule
2.01 or in the Assignment and Assumption pursuant to which such
Lender, Canadian branch or Affiliate becomes a party hereto, as applicable, of
the Canadian Allocated Aggregate Commitment.

 

“Canadian Allocated Maximum Aggregate Commitment” means the
aggregate maximum Canadian Allocated Commitments of all Lenders, their Canadian
branches or Affiliates as set forth opposite such Lender’s, Canadian branch’s
or Affiliate’s name on Schedule 2.01 or in the Assignment and Assumption
pursuant to which such Lender, Canadian branch or Affiliate becomes a party
hereto, as applicable.  As of the date
hereof the Canadian Allocated Maximum Aggregate Commitment is $100,000,000.

 

“Canadian Allocation Period” means any time during which either
(a) US Borrower has allocated any portion of the US Aggregate Commitment as the
Canadian Allocated Aggregate Commitment pursuant to Section 2.01(b) or
(b) the Canadian Total Outstandings exceeds zero.

 

“Canadian Applicable Percentage” means:

 

(a)           at any time the US
Commitments remain outstanding and not during a Canadian Allocation Period,
with respect to each Lender, the Canadian Applicable Percentage of such Lender,
its Canadian branch or affiliate set forth opposite such Lender’s, Canadian
branch’s or affiliate’s name on Schedule 2.01 or in the Assignment and
Assumption pursuant to which such Lender, Canadian branch or affiliate becomes
a party hereto; and

 

(b)           during a Canadian
Allocation Period, with respect to each Canadian Lender, the percentage
(carried out to the ninth decimal place) of the Canadian Allocated Aggregate
Commitment represented by such Lender’s Canadian Commitment at such time.  If the commitment of each Lender to make
Canadian Loans and the obligation of the Canadian L/C Issuer to make L/C Credit
Extensions have been terminated pursuant to Section 8.02 or if the
Canadian Aggregate Commitment has expired, then the Canadian Applicable
Percentage of each Lender shall be determined based on the Canadian Applicable
Percentage of such Lender most 

 

6

 

recently in effect, giving
effect to any subsequent assignments. 
The initial Canadian Applicable Percentage of each Lender is set forth
opposite the name of such Lender on Schedule 2.01 or in the Assignment
and Assumption pursuant to which such Lender, Canadian branch or Affiliate
becomes a party hereto, as applicable.

 

“Canadian Borrower” means during any Canadian Allocation Period,
Rangeland Pipeline Company, a Nova Scotia unlimited liability company.

 

“Canadian Business Day” means any day that is a US Business Day,
other than a day which shall be, in the Provinces of Ontario, Alberta or
Quebec, a legal holiday or day on which banking institutions are required or
authorized to close. Any Canadian Business Day that relates to any Eurodollar
Rate Loans must also be a day on which dealings in Dollar deposits are
conducted by and between banks in the London interbank eurodollar market.

 

“Canadian Commitment” means, as to each Canadian Lender, its
obligation during a Canadian Allocation Period to (a) make Canadian Committed
Advances to the Canadian Borrower pursuant to Section 2.01(c), (b)
purchase participations in Canadian L/C Obligations, and (c) purchase participations
in Swing Line Loans to the Canadian Borrower, in an aggregate principal amount
at any one time outstanding not to exceed such Canadian Lender’s Canadian
Allocated Commitment Amount.

 

“Canadian Committed Advances” has the meaning specified in Section 2.01(c).

 

“Canadian Committed Loans” has the meaning specified in Section
2.01(c) hereof.

 

“Canadian Dollars” and “C$” means the lawful currency of
Canada.

 

“Canadian L/C Advance” means with respect to each Canadian
Lender, such Canadian Lender’s funding of its participation in any Canadian L/C
Borrowing in accordance with its Canadian Applicable Percentage.

 

“Canadian L/C Borrowing” means an extension of credit resulting
from a drawing under any Canadian Letter of Credit which has not been
reimbursed on the date when made or refinanced as a Canadian Committed Advance.

 

“Canadian L/C Issuer” means Bank of America, acting through its
Canada branch, in its capacity as the issuer of Canadian Letters of Credit
hereunder, and its successors in such capacity. 
Canadian Administrative Agent may, with the consent of the Canadian
Borrower and the Canadian Lender in question, or the Canadian Borrower may,
with the consent of Canadian Lender in question and notice to the Canadian
Administrative Agent, appoint any Canadian Lender hereunder as a Canadian L/C
Issuer in place of or in addition to Bank of America, acting through its Canada
Branch.  The Royal Bank of Canada shall
also be a L/C Issuer as to Existing Letters of Credit issued pursuant to the
Rangeland Credit Facility.

 

“Canadian L/C Obligations” means, as at any date of
determination, the aggregate amount available to be drawn under all outstanding
Canadian Letters of Credit plus the aggregate of all Unreimbursed
Amounts allocable to Canadian Letters of Credit, including all Canadian L/C
Borrowings.  For purposes of computing
the amount available to be drawn under any 

 

7

 

Canadian Letter of Credit, the
amount of such Canadian Letter of Credit shall be determined in accordance with
Section 1.06.  For all purposes of
this Agreement, if on any date of determination a Canadian Letter of Credit has
expired by its terms but any amount may still be drawn thereunder by reason of
the operation of Rule 3.14 of the ISP, such Canadian Letter of Credit shall be
deemed to be “outstanding” in the amount so remaining available to be drawn.

 

“Canadian Lenders” means, during a Canadian Allocation Period,
each Lender designated as a Canadian Lender on Schedule 2.01 and the
successors and permitted assigns of each such party, and, as the context
requires, includes the Canadian Swing Line Lender and each Canadian L/C Issuer.

 

“Canadian Lending Office” means, as to any Lender, the office or
offices of such Lender in Canada described as such in such Lender’s
Administrative Questionnaire, or such other office or offices as a Lender may
from time to time notify the Borrower and the Administrative Agent.

 

“Canadian Letter of Credit” means any standby letter of credit
issued by Canadian L/C Issuer hereunder at the application of the Canadian
Borrower.

 

“Canadian Letter of Credit Sublimit” means an amount equal to
C$50,000,000.  The Canadian Letter of
Credit Sublimit is part of, and not in addition to, the Canadian Aggregate
Commitment.

 

“Canadian Loans” means an extension of credit by a Canadian
Lender to the Canadian Borrower under Article II in the form of a
Canadian Committed Advance (including a Canadian Committed Loan or Bankers’
Acceptances) or a Canadian Swing Line Loan.

 

“Canadian Note” means a promissory note made by the Canadian
Borrower in favor of a Lender evidencing Canadian Committed Loans made by such
Lender, substantially in the form of Exhibit C-2.

 

“Canadian Prime Rate” means on any day a fluctuating rate of
interest per annum equal to the higher of (i) the rate of interest per
annum most recently announced by the Canadian Administrative Agent as its
reference rate for Canadian Dollar commercial demand loans made to a Person in
Canada; and (ii) the Canadian Administrative Agent’s discount rate for
Bankers’ Acceptances having a maturity of one month plus one-half percent
(0.5%) per annum. Changes in the Canadian Prime Rate resulting from changes in
the foregoing described reference rate or discount rate shall take place
immediately without notice or demand of any kind.

 

“Canadian Prime Rate Loan” means a Canadian Loan that bears
interest based on the Canadian Prime Rate.

 

“Canadian Resident Lender” means a Canadian Lender that is, at
the relevant time (a) not a “non-resident” of Canada for the purposes of
the Income Tax Act (Canada) or (b) an “authorized foreign bank” as defined
in section 2 of the Bank Act
(Canada) and in subsection 248(1) of the Income
Tax Act (Canada), that is not subject to the restrictions and
requirements referred to in subsection 524(2) of the Bank Act (Canada), and which will receive
all amounts paid or credited to it with respect to the Canadian Loans and the
Canadian Letters of 

 

8

 

Credit and fees and other
amounts payable in connection therewith in respect of its “Canadian banking
business” for the purposes of paragraph 212(13.3)(a) of the Income Tax Act
(Canada).

 

“Canadian Swing Line Lender” means Bank of America, N.A. acting
through its Canada branch, in its capacity as provider of Canadian Swing Line
Loans to the Canadian Borrower.

 

“Canadian Swing Line Loan” has the meaning specified in Section
2.04(a).

 

“Canadian Swing Line Sublimit” means the lesser of (a)
C$10,000,000 and (b) the Canadian Allocated Aggregate Commitment.  The Canadian Swing Line Sublimit is part of,
and not in addition to, the Canadian Allocated Aggregate Commitment.

 

“Canadian Total Outstandings” means the aggregate Outstanding
Amount of all Canadian Loans and all Canadian L/C Obligations.

 

“Canadian US Dollar Base Rate” means for a day, the rate per
annum equal to the higher of (a) the Federal Funds Rate for such day plus
one-half of one percent (0.5%) and (b) the rate of interest per annum most
recently established by Canadian Administrative Agent as its reference rate for
US Dollar commercial loans made to a Person in Canada.  Any change in the Canadian US Dollar Base
Rate due to a change in the Canadian Administrative Agent’s reference rate
shall be effective on the effective date of such change.

 

“Canadian US Dollar Base Rate Loan” means a US
Dollar-denominated Canadian Loan to the Canadian Borrower that bears interest
based upon the Canadian US Dollar Base Rate.

 

“Capital Adequacy Requirements” means Guideline A, Part I,
dated January 2001, entitled “Capital Adequacy Requirements” and
Guideline A, Part II, dated November 1997, entitled “Capital
Adequacy Requirements – Market Risk” each issued by the Office of the
Superintendent of Financial Institutions Canada (which encompass the guidelines
contained in the report dated July 1988 and entitled “International
Convergence of Capital Measurement and Capital Standards” released by the Basel
Committee on Banking Regulations and Supervisory Practices of the Bank for
International Settlements) and all other guidelines or requirements relating to
capital adequacy issued by the Office of the Superintendent of Financial
Institutions Canada or any other Governmental Authority regulating or having
jurisdiction with respect to any Lender, as amended, modified, supplemented,
reissued or replaced from time to time.

 

“Cash Collateralize” has the meaning specified in Section 2.03(g).

 

“Change in Law” means the occurrence, after the date of this
Agreement, of any of the following: (a) the adoption or taking effect of
any law, rule, regulation or treaty, (b) any change in any law, rule,
regulation or treaty or in the administration, interpretation or application
thereof by any Governmental Authority or (c) the making or issuance of any
request, guideline or directive (whether or not having the force of law) by any
Governmental Authority.

 

“Change of Control” means (i) the direct or indirect sale,
lease, transfer, conveyance or other disposition (other than by way of merger
or consolidation), in one or a series of related transactions, of all or
substantially all of the properties or assets (including Equity Interests of
the Restricted Subsidiaries) of the Borrower and its Restricted Subsidiaries
taken as a whole to any 

 

9

 

“person” (as that term is used
in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a plan relating
to the liquidation or dissolution of the Borrower; (iii) the General Partner
ceases to be the sole general partner of the Borrower or Management LLC ceases
to be the sole general partner of General Partner; (iv) Qualified Owners shall,
for any reason, not be the Beneficial Owners, directly or indirectly, of more
than 50% of the Voting Stock of the General Partner and of Management LLC, in each
case measured by voting power rather than number of shares; or (v) the first
day on which a majority of the members of the board of directors of Management
LLC are not Continuing Directors.

 

“Closing Date” means the first date all the conditions precedent
in Section 4.01 are satisfied or waived in accordance with Section 10.01.

 

“Code” means the Internal Revenue Code of 1986.

 

“Collateral” means all property of any kind which is subject to
a Lien in favor of Lenders (or in favor of any Administrative Agent for the
benefit of Lenders) or which, under the terms of any Security Document, is
purported to be subject to such a Lien, in each case granted or created to
secure all or part of the Obligations or the Lender Swap Obligations.

 

“Commitment” means, as to any Lender, its Canadian Allocated
Commitment Amount, if any, and its US Commitment.

 

“Committed Borrowing” means a borrowing consisting of
simultaneous Committed Loans of the same Type and, in the case of Eurodollar
Rate Loans, having the same Interest Period made by each of the Lenders
pursuant to Section 2.01 or the acceptance or purchase by Canadian
Lenders of Bankers’ Acceptances issued by the Canadian Borrower under Section
2.17.

 

“Committed Loan Notice” means a notice of (a) a Committed
Borrowing, (b) a conversion of Committed Loans from one Type to the other, or
(c) a continuation of Eurodollar Rate Loans, pursuant to Section 2.02(a),
which, if in writing, shall be substantially in the form of Exhibit A-1.

 

“Committed Loans” means collectively, the US Committed Loans and
the Canadian Committed Advances; and “Committed Loan” means any
Committed Loan, in each case, as provided in Section 1.07.

 

“Compliance Certificate” means a certificate substantially in
the form of Exhibit D.

 

“Consolidated EBITDA” means, for any period, for the US Borrower
and its Restricted Subsidiaries on a consolidated basis, an amount equal to
Consolidated Net Income for such period plus (a) the following to the extent
deducted in calculating such Consolidated Net Income: (i) Consolidated Interest
Charges for such period, (ii) the provision for Federal, state, local and
foreign income taxes payable by the US Borrower and its Restricted Subsidiaries
for such period, (iii) depreciation and amortization expense and (iv) with
respect to (A) the fiscal quarter ended March 31, 2005, Specified 2005
Nonrecurring Items not to exceed $4,600,000 (composed of approximately
$2,000,000 of Insurance Expense, approximately $2,000,000 of LTIP Expense and
approximately $600,000 of California Repair/Maintenance Expense), (B) the
fiscal quarter 

 

10

 

ended June 30, 2005, Specified
2005 Nonrecurring Items not to exceed $1,500,000 for California
Repair/Maintenance Expense, (C) the fiscal quarter ending September 30, 2005,
Specified 2005 Nonrecurring Items not to exceed $500,000 for California
Repair/Maintenance Expense, (D) the fiscal quarter ending December 31, 2005,
Specified 2005 Nonrecurring Items not to exceed $1,500,0000 for California
Repair/Maintenance Expense and (E) all time periods, other expenses of the US
Borrower and its Restricted Subsidiaries reducing such Consolidated Net Income
which do not represent a cash item in such period or any future period and
minus (b) the following to the extent included in calculating such Consolidated
Net Income:  (i) Federal, state, local
and foreign income tax credits of the US Borrower and its Restricted
Subsidiaries for such period and (ii) all non-cash gains increasing
Consolidated Net Income for such period. 
The following additional adjustments shall be made in determining
Consolidated EBITDA for all purposes of this Agreement other than for purposes
of Section 7.17(a):

 

(x) if, since the beginning of the four fiscal quarter period for which
Consolidated EBITDA is being determined, the US Borrower or any Restricted
Subsidiary shall have acquired or disposed of any material operating assets or
entity (other than the acquisition of the Valero Assets) or consolidated or
merged with or into any Person (other than such a transaction with another of
the US Borrower or any Restricted Subsidiary), or a Subsidiary shall be
redesignated as either an Unrestricted Subsidiary or a Restricted Subsidiary,
then Consolidated EBITDA shall be calculated, in a manner satisfactory to the
Administrative Agent in its discretion, after giving pro forma effect to such
acquisition (including the revenues of the properties acquired), disposition,
consolidation, merger or redesignation, as if such acquisition, disposition,
consolidation, merger or redesignation had occurred on the first day of such
period.

 

(y) with respect to the acquisition of the Valero Assets, for each
fiscal quarter ending on or prior to September 30, 2005, Consolidated EBITDA
for such fiscal quarter shall be increased by the amount of $9,375,000.

 

(z) if the Pier 400 Conditions exist, then, for the period beginning
with and including the fiscal quarter in which the construction of the Pier 400
Project has commenced and ending with and including the fiscal quarter in which
the Pier 400 Project has commenced operations, Consolidated EBITDA for each
fiscal quarter during such period may be increased by an amount to represent
projected quarterly pro forma Consolidated EBITDA attributable to the projected
operation of the Pier 400 Project, which quarterly pro forma amount for each
such fiscal quarter shall be: (i) proposed by the Borrower and acceptable to
the Administrative Agent in its sole discretion, (ii) only for highly certain,
clearly definable and defensible items, (iii) subject to the achievement of
milestones specified by the Administrative Agent, (iv) for any such quarter, a
prorated amount acceptable to the Administrative Agent representing the
percentage of the total costs of the Pier 400 Project to be expended as of the
end of such fiscal quarter, and (v) in the case of the fiscal quarter in which
operations have so commenced, a prorated amount for the portion of such quarter
prior to such commencement of operations. 
The foregoing quarterly projected pro forma amounts will not be used for
any fiscal quarter beginning after the commencement of operations of the Pier
400 Project, but for the first three fiscal quarters in which the Pier 400
Project has full fiscal quarters of operations, Consolidated EBITDA will use
the actual Consolidated EBITDA attributable to the Pier 400 Project (A) for the
first such fiscal quarter times 4, (B) for the first two such fiscal quarters
times 2, and (C) for the first three such fiscal quarters times 4/3rds.

 

11

 

As used in this definition, “Specified 2005 Nonrecurring Items”
means, without duplication, the following nonrecurring expense items incurred
or to be incurred by the US Borrower and its Subsidiaries in Fiscal Year 2005:
(I) an insurance deductible associated with the remediation of the Pyramid Lake
oil release on Line 63 (“Insurance Expense”), (II) unscheduled repair
and maintenance costs associated with earth movement and stream erosion near
the US Borrower’s Southern California operations as a result of heavy rainfall
(“California Repair/Maintenance Expense”) and (III) a cash expense
related to the accelerated vesting of restricted units under the US Borrower’s
long-term incentive plan as a result of the change in control attributable to
LB Pacific, LP’s (a Delaware limited partnership) acquisition of the 2% general
partnership interest in the US Borrower (“LTIP Expense”).  As used in this definition, “Pier 400
Project” means that certain marine petroleum off-loading, storage and
distribution facility to be constructed at or near Pier 400 in the Port of Los
Angeles, California, and “Pier 400 Conditions” means that the Borrower
or a Restricted Subsidiary shall own, and shall have commenced construction of
the Pier 400 Project and be pursuing construction of the Pier 400 Project in a
reasonable manner in the normal course of construction of facilities of this
type, and the Administrative Agent shall have reasonably determined that the
Borrower or such Restricted Subsidiary possesses all contracts, permits and
consents for the construction, ownership and operation of the Pier 400 Project,
other than, at a particular time, customary permits that the Administrative
Agent has determined could not have been issued at that time, such as permits
for actual operation that require inspection of facilities after completion.

 

“Consolidated Funded Indebtedness” means, as of any date of
determination, for the US Borrower and its Restricted Subsidiaries on a
consolidated basis, the sum of (a) the outstanding principal amount of all
obligations, whether current or long-term, for borrowed money (including
Obligations hereunder but excluding Lender Swap Obligations) and all
obligations evidenced by bonds, debentures, notes, loan agreements or other similar
instruments, (b) all purchase money Indebtedness, (c) all direct obligations
arising under bankers’ acceptances, bank guaranties and similar instruments,
(d) all obligations in respect of the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of
business), (e) Attributable Indebtedness in respect of capital leases and
Synthetic Lease Obligations, (f) without duplication, all Guarantees with
respect to outstanding Indebtedness of the types specified in clauses (a)
through (e) above of Persons other than the US Borrower or any Restricted
Subsidiary, and (g) all Indebtedness of the types referred to in clauses (a)
through (f) above of any partnership or joint venture (other than a joint
venture that is itself a corporation or limited liability company) in which the
US Borrower or a Restricted Subsidiary is a general partner or joint venturer,
unless such Indebtedness is expressly made non-recourse to the US Borrower or
such Restricted Subsidiary.

 

“Consolidated Interest Charges” means, for any period, for the
US Borrower and its Restricted Subsidiaries on a consolidated basis, the sum of
(a) all interest, premium payments, debt discount, fees, charges and related
expenses of the US Borrower and its Restricted Subsidiaries in connection with
borrowed money (including capitalized interest) or in connection with the
deferred purchase price of assets, in each case to the extent treated as
interest in accordance with GAAP, but excluding non-cash expenses for deferred
financing costs and expenses for termination of interest rate hedging
obligations and (b) the portion of rent expense of the US Borrower and its
Restricted Subsidiaries with respect to such period under capital leases that
is treated as interest in accordance with GAAP.

 

12

 

“Consolidated Interest Coverage Ratio” means, as of any date of
determination, the ratio of (a) Consolidated EBITDA for the period of the four
prior fiscal quarters ending on such date to (b) Consolidated Interest Charges
for such period.

 

“Consolidated Net Income” means, for any period, for the US
Borrower and its Restricted Subsidiaries’ gross revenues for such period,
including any cash dividends or distributions actually received from any other
Person during such period, minus the US Borrower’s and its Restricted
Subsidiaries’ expenses and other proper charges against income (including taxes
on income to the extent imposed), determined on a consolidated basis in
accordance with GAAP consistently applied after eliminating earnings or losses
attributable to outstanding minority interests and excluding the net earnings
of any Person other than a Restricted Subsidiary in which the US Borrower or
any of its Subsidiaries has an ownership interest.  Consolidated Net Income shall not include (i)
any gain or loss from the Disposition of assets, (ii) any extraordinary gains
or losses, (iii) any non-cash gains or losses resulting from mark to market activity
as a result of the accounting pursuant to SFAS 133 and related pronouncements
or (iv) any non-cash losses associated with SFAS 142, 143 and 144 and related
pronouncements.

 

“Consolidated Senior Funded Indebtedness” means, as of any date
of determination, Consolidated Funded Indebtedness, but excluding the Senior
Notes and Subordinated Debt.

 

“Consolidated Senior Leverage Ratio” means, as of any date of
determination, the ratio of (a) Consolidated Senior Funded Indebtedness as of
such date to (b) Consolidated EBITDA for the period of the four fiscal quarters
most recently ended prior to such date for which financial statements
contemplated by Section 6.01 are available to the US Borrower.

 

“Consolidated Total Leverage Ratio” means, as of any date of
determination, the ratio of (a) Consolidated Funded Indebtedness as of such
date to (b) Consolidated EBITDA for the period of the four fiscal quarters most
recently ended prior to such date for which financial statements contemplated
by Section 6.01 are available to the US Borrower.

 

“Continuing Directors” means, as of any date of determination,
any member of the board of directors of the Management LLC who (a) was a member
of such board of directors on the date of this Agreement; or (b) was nominated
for election or elected to such board of directors with the approval of a
majority of the Continuing Directors who were members of such board of
directors at the time of such nomination or election.

 

“Contractual Obligation” means, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

 

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

 

“Credit Extension” means each of the following: (a) a Borrowing
and (b) an L/C Credit Extension.

 

13

 

“Debt Rating” means, as of any date of determination, the rating
as determined by either S&P or Moody’s (collectively, the “Debt Ratings”)
of the US Borrower’s non-credit-enhanced, senior unsecured long-term debt;
provided that if a Debt Rating is issued by each of the foregoing rating
agencies, then the higher of such Debt Ratings shall apply (with the Debt
Rating for Pricing Level 1 being the highest and the Debt Rating for Pricing
Level 6 being the lowest), unless there is a split in Debt Ratings of more than
one level, in which case the Pricing Level that is one level higher than the
Pricing Level of the lower Debt Rating shall apply.

 

“Debtor Relief Laws” means the Bankruptcy
Code of the United States, the Bankruptcy
and Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada), the Winding-up and Restructuring Act (Canada) and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief Laws of the United States, Canada (or any province
therein) or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.

 

“Default” means any event or condition that constitutes an Event
of Default or that, with the giving of any notice, the passage of time, or
both, would be an Event of Default.

 

“Default Rate” means (a) when used with respect to Obligations
other than Letter of Credit Fees, an interest rate equal to (i) in the case of
US Dollar denominated obligations, the Base Rate plus the Applicable
Rate, if any, applicable to Base Rate Loans plus 2% per annum; provided,
however, that with respect to a Eurodollar Rate Loan, the Default Rate
shall be an interest rate equal to the interest rate (including any Applicable
Rate) otherwise applicable to such Loan plus 2% per annum (ii) in the case of
Canadian Dollar denominated obligations, the Canadian Prime Rate plus
the Applicable Rate, if any, applicable to Canadian Prime Rate Loans plus 2%
per annum, and (b) when used with respect to Letter of Credit Fees, a rate
equal to the Applicable Rate plus 2% per annum.

 

“Defaulting Lender” means any Lender that (a) has failed to fund
any portion of the Committed Loans, participations in L/C Obligations or
participations in Swing Line Loans required to be funded by it hereunder within
one Business Day of the date required to be funded by it hereunder, (b) has
otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within one Business Day of
the date when due, unless the subject of a good faith dispute, or (c) has been
deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.

 

“Depository Bills and Notes Act (Canada)” means the Depository Bills and Notes Act (Canada),
R.S.C. 1998, c. 13, including the regulations made and, from time to time, in
force under that Act.

 

“Discount Proceeds” means, in respect of each Bankers’
Acceptance, funds in an amount which is equal to:

 

	
   

  	
   

  	
  Face Amount

  	
   

  
	
   

  	
  1 + 

  	
  (Rate x Term)

  	
   

  	
   

  
	
   

  	
  365

  	
   

  
					

 

14

 

(where “Face Amount” is the principal amount of the Bankers’ Acceptance
being purchased, “Rate” is the BA Discount Rate divided by 100 and “Term” is
the number of days in the term of the Bankers’ Acceptance.)

 

“Disposition” or “Dispose” means the sale, transfer,
license, lease or other disposition (including any sale and leaseback
transaction), including by way of condemnation, of any property by any Person,
including any sale, assignment, transfer or other disposal, with or without
recourse, of any notes or accounts receivable or any rights and claims
associated therewith.

 

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

 

“Eligible Assignee” means (a) a Lender (other than a
Defaulting Lender); (b) an Affiliate of a Lender (other than a Defaulting
Lender); (c) an Approved Fund; and (d) any other Person (other than a
natural person) approved by (i) the Administrative Agent, the L/C Issuer
and the Swing Line Lender, and (ii) unless an Event of Default has
occurred and is continuing, the US Borrower (each such approval not to be
unreasonably withheld or delayed); provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include the US Borrower or any of the
US Borrower’s Affiliates or Subsidiaries other than Lehman Commercial Paper,
Inc.

 

“Environmental Laws” means any and all federal, state,
provincial, local, and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any Hazardous Materials into
the environment, including those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.

 

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

 

“Equity Interests” means, with respect to any Person, all of the
shares of capital stock of (or other ownership or profit interests in) such
Person, all of the warrants, options or other rights for the purchase or
acquisition from such Person of shares of capital stock of (or other ownership
or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase or
acquisition from such Person of such shares (or such other interests), and all
of the other ownership or profit interests in such Person (including
partnership, member or trust interests therein), whether voting or nonvoting,
and whether or not such shares, warrants, options, rights or other interests
are outstanding on any date of determination. 
Equity Interests of US Borrower includes all incentive compensation
rights and similar rights.

 

15

 

“ERISA” means the Employee Retirement Income Security Act of
1974.

 

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

 

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

 

“Eurodollar Rate” means for any Interest Period with respect to
a Eurodollar Rate Loan, the rate per annum equal to the British Bankers
Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other
commercially available source providing quotations of BBA LIBOR as designated
by the US Administrative Agent from time to time) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, for Dollar deposits (for delivery on the first day of such Interest
Period) with a term equivalent to such Interest Period.  If such rate is not available at such time
for any reason, then the “Eurodollar Rate” for such Interest Period shall be
the rate per annum determined by the US Administrative Agent to be the rate at
which deposits in Dollars for delivery on the first day of such Interest Period
in same day funds in the approximate amount of the Eurodollar Rate Loan being
made, continued or converted by Bank of America and with a term equivalent to
such Interest Period would be offered by Bank of America and with a term
equivalent to such Interest Period would be offered by Bank of America’s London
Branch to major banks in the London interbank eurodollar market at their
request at approximately 11:00 a.m. (London time) two Business Days prior to
the commencement of such Interest Period.

 

“Eurodollar Rate Loan” means a Committed Loan that bears
interest at a rate based on the Eurodollar Rate.

 

“Event of Default” has the meaning specified in Section 8.01.

 

“Excess Sale Proceeds” has the meaning specified in Section 7.05(f).

 

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

 

“Excluded Taxes” means, with respect to the Administrative
Agent, any Lender, the L/C Issuer or any other recipient of any payment to be
made by or on account of any obligation of 

 

16

 

any Borrower hereunder, (a)
taxes imposed on or measured by its overall net income or capital (however
denominated), and franchise taxes imposed on it (in lieu of, or in addition to,
net income taxes), by the jurisdiction (or any political subdivision thereof)
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable
Lending Office is located or in which it carries on business, (b) any branch
profits taxes imposed by the United States or any similar tax imposed by any
other jurisdiction in which any Borrower is located, (c) in the case of a
Canadian Lender (other than an assignee pursuant to a request by the Canadian
Borrower under Section 10.13), any withholding tax that is imposed under the
provisions of the Income Tax Act
(Canada), on amounts payable to such Canadian Lender at the time such Canadian
Lender becomes a Canadian Lender or that is attributable to such Canadian
Lender’s failure or inability (other than as a result of a Change in Law) to
qualify as a Canadian Resident Lender at the relevant time, except and only to
the extent that such Canadian Lender (or its assignor, if any) was entitled at
the time of designation of a new Lending Office (or assignment) to receive
additional amounts from any Borrower with respect to such withholding tax
pursuant to Section 3.01(a), and (d) in the case of a Foreign Lender (other
than an assignee pursuant to a request by any Borrower under Section 10.13),
any withholding tax that is imposed on amounts payable to such Foreign Lender
at the time such Foreign Lender becomes a party hereto (or designates a new
Lending Office) or is attributable to such Foreign Lender’s failure or
inability (other than as a result of a Change in Law) to comply with Section 3.01(e),
except to the extent that such Foreign Lender (or its assignor, if any) was
entitled, at the time of designation of a new Lending Office (or assignment),
to receive additional amounts from any Borrower with respect to such
withholding tax pursuant to Section 3.01(a).

 

“Existing BAs” means the BAs existing on the Closing Date issued
under the Rangeland Credit Facility listed on the schedule to Exhibit I
attached hereto.

 

“Existing BA Lenders” means those lenders that have accepted
Existing BAs.

 

“Existing Credit Agreement” means that certain Credit Agreement
dated as of July 19, 2002, among PEG, as the borrower, the US Borrower,
Bank of America, N.A. (successor by merger to Fleet National Bank), as
administrative agent, and a syndicate of lenders.

 

“Existing Letters of Credit” means all Letters of Credit
existing on the Closing Date issued under the Existing Credit Agreement and
Rangeland Credit Facility listed on Schedule 1.01-1.

 

“Extraordinary Receipts” means gross proceeds received by any
Loan Party relating to insurance in respect of casualty to property that such
Loan Party has determined (which determination must be made with reasonable
promptness following such casualty) will not be applied to the repair or
replacement thereof within 180 days following such casualty in accordance with
the Security Documents; provided  that in no event shall such
Extraordinary Receipts include Net Cash Proceeds.

 

“Federal Funds Rate”  means, for any day, the rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; provided that (a) if 

 

17

 

such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if no such rate is so published on such next succeeding Business
Day, the Federal Funds Rate for such day shall be the average rate (rounded upward,
if necessary, to a whole multiple of 1/100 of 1%) charged to Bank of America on
such day on such transactions as determined by the Administrative Agent.

 

“Fee Letter” means the letter agreement, dated June 24,
2005, among the US Borrower, PEG, the Administrative Agent, the Syndication
Agent, and the Arrangers.

 

“Foreign Lender” means any Lender (other than a Canadian Lender)
that is organized under the Laws of a jurisdiction other than that in which the
US Borrower is resident for tax purposes. 
For purposes of this definition, the United States, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.

 

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

 

“Fund” means any Person (other than a natural person) that is
(or will be) engaged in making, purchasing, holding or otherwise investing in
commercial loans and similar extensions of credit in the ordinary course of its
business.

 

“GAAP” means generally accepted accounting principles in the
United States set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the
circumstances as of the date of determination, consistently applied.

 

“General Partner” means Pacific Energy GP LP, a Delaware limited
partnership.

 

“Governmental Authority” means the government of the United
States, Canada or any other nation, or of any political subdivision thereof,
whether state, provincial 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 (including any supra-national bodies such as the
European Union or the European Central Bank).

 

“Granting Lender” has the meaning specified in Section 10.06(h).

 

“Guarantee” means, as to any Person, (a) any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation payable or
performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation, (ii) to purchase or lease
property, securities or services for the purpose of assuring the obligee in
respect of such Indebtedness or other obligation of the payment or performance
of such Indebtedness or other obligation, (iii) to maintain working 

 

18

 

capital, equity capital or any
other financial statement condition or liquidity or level of income or cash
flow of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation, or (iv) entered into for the purpose of
assuring in any other manner the obligee in respect of such Indebtedness or
other obligation of the payment or performance thereof or to protect such
obligee against loss in respect thereof (in whole or in part), or (b) any Lien
on any assets of such Person securing any Indebtedness or other obligation of
any other Person, whether or not such Indebtedness or other obligation is
assumed by such Person (or any right, contingent or otherwise, of any holder of
such Indebtedness to obtain any such Lien). 
The amount of any Guarantee shall be deemed to be an amount equal to the
stated or determinable amount of the related primary obligation, or portion thereof,
in respect of which such Guarantee is made or, if not stated or determinable,
the maximum reasonably anticipated liability in respect thereof as determined
by the guaranteeing Person in good faith. 
The term “Guarantee” as a verb has a corresponding meaning.

 

“Guarantors” means, collectively, the US Borrower and, subject
to Section 6.12(a) and (b), each Restricted Subsidiary of the US
Borrower.

 

“Guaranty” means the Guarantees made by the Guarantors in favor
of the Administrative Agent, L/C Issuer and the Lenders, substantially in the
form of Exhibit F, to the extent required by Section 6.12.

 

“Hazardous Materials” means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, 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 applicable Environmental Law.

 

“Income Tax Act (Canada)” means the Income Tax Act, R.S.C. 1985 c. 1 (fifth supplement),
including the regulations made and, from time to time, in force under that Act.

 

“Indebtedness” means, as to any Person at a particular time,
without duplication, all of the following, whether or not included as
indebtedness or liabilities in accordance with GAAP:

 

(a)           all
obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar
instruments;

 

(b)           all
direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties and
similar instruments;

 

(c)           net
obligations of such Person under any Swap Contract;

 

(d)           whether
or not so included as liabilities in accordance with GAAP, all obligations of
such Person to pay the deferred purchase price of property or services (other
than trade accounts payable in the ordinary course of business not outstanding
more than 120 days after the date the respective goods are delivered or the
respective services are rendered, other than obligations contested in good
faith by appropriate 

 

19

 

proceedings, if required, and for which
adequate reserves are maintained on the books of such Person in accordance with
GAAP, and indebtedness (excluding prepaid interest thereon) secured by a Lien
on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether
or not such indebtedness shall have been assumed by such Person or is limited
in recourse.

 

(e)           indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

 

(f)            capital
leases and Synthetic Lease Obligations;

 

(g)           all
obligations of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any Equity Interest in such Person or any of its
Affiliates (except redemptions of Equity Interests maturing or redeemable no
earlier than 180 days after the Maturity Date), valued, in the case of a
redeemable preferred Equity Interest, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends;
and

 

(h)           all
Guarantees of such Person in respect of any of the foregoing.

 

For all purposes hereof, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture (other than a joint
venture that is itself a corporation or limited liability company) in which
such Person is a general partner or a joint venturer, unless such Indebtedness
is expressly made non-recourse to such Person, other than customary exceptions
acceptable to Required Lenders.  The
amount of any net obligation under any Swap Contract on any date shall be
deemed to be the Swap Termination Value thereof as of such date.  The amount of any capital lease or Synthetic
Lease Obligation as of any date shall be deemed to be the amount of
Attributable Indebtedness in respect thereof as of such date.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Indemnitees” has the meaning specified in Section 10.04(b).

 

“Information” has the meaning specified in Section 10.07.

 

“Initial Financial Statements” means:

 

(a)           the Audited
Financial Statements;

 

(b)           the
unaudited consolidated financial statements of the US Borrower as of June 30,
2005; and

 

(c)           the pro forma consolidated financial
statements of the US Borrower as of June 30, 2005 after giving effect to the
Valero Acquisition as if the Valero Acquisition had been 

 

20

 

closed on such date (in respect of the balance sheet) or for the period
ending on such date (in respect of the income statement and cash flow
statement).

 

“Interest Act (Canada)” means the Interest Act, R.S.C. 1985, c. I-15, including the
regulations made and, from time to time, in force under that Act.

 

“Interest Payment Date” means, (a) as to any Loan other than a
Base Rate Loan, Canadian Prime Rate Loan or Canadian US Dollar Base Rate Loan,
the last day of each Interest Period applicable to such Loan and the Maturity
Date; provided, however, that if any Interest Period for a
Eurodollar Rate Loan exceeds three months, the respective dates that fall every
three months after the beginning of such Interest Period shall also be Interest
Payment Dates; and (b) as to any Base Rate Loan, Canadian Prime Rate Loan or
Canadian US Dollar Base Rate Loan (including a Swing Line Loan), the last
Business Day of each March, June, September and December and the Maturity Date.

 

“Interest Period” means, as to each Eurodollar Rate Loan, the
period commencing on the date such Eurodollar Rate Loan is disbursed or
converted to or continued as a Eurodollar Rate Loan and ending on the date one,
two, three or six months thereafter, as selected by a Borrower in its Committed
Loan Notice or such other period that is twelve months or less requested by a
Borrower and consented to by all the Lenders; provided that:

 

(i)            any
Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day
falls in another calendar month, in which case such Interest Period shall end
on the next preceding Business Day;

 

(ii)           any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and

 

(iii)          no
Interest Period shall extend beyond the Maturity Date.

 

“Investment” means, as to any Person, any direct or indirect
acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition of Equity Interests of another Person, or (b) a loan,
advance or capital contribution to, Guarantee or assumption of debt of, or
purchase or other acquisition of any other debt or equity participation or
interest in, another Person, including any partnership or joint venture
interest in such other Person and any arrangement pursuant to which the
investor Guarantees Indebtedness of such other Person, or (c) the purchase or
other acquisition (in one transaction or a series of transactions) of assets of
another Person that constitute a business unit. 
For purposes of covenant compliance, the amount of any Investment shall
be the amount actually invested, without adjustment for subsequent increases or
decreases in the value of such Investment.

 

“IP Rights” has the meaning specified in Section 5.17.

 

“IRS” means the United States Internal Revenue Service.

 

21

 

“ISP” means, with respect to any Letter of Credit, the
“International Standby Practices 1998” published by the Institute of International
Banking Law & Practice (or such later version thereof as may be in effect
at the time of issuance).

 

“Issuer Documents” means with respect to any Letter of Credit,
the Letter of Credit Application, and any other document, agreement and
instrument entered into by the L/C Issuer and the Borrower (or any Restricted
Subsidiary) or in favor of the L/C Issuer and relating to any such Letter of
Credit.

 

“Judgment Interest Act (Alberta)” means the Judgment Interest Act, R. S.A. 2000 c.
J-1, including the regulations made and, from time to time, in force under that
Act.

 

“Laws” means, collectively, all international, foreign, federal,
state, provincial and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any Governmental
Authority, in each case whether or not having the force of law.

 

“L/C Advance” means, with respect to each Lender, such Lender’s
funding of its participation in any L/C Borrowing in accordance with its
Applicable Percentage.

 

“L/C Borrowing” means an extension of credit resulting from a
drawing under any Letter of Credit which has not been reimbursed on the date
when made or refinanced as a Committed Borrowing and shall mean a US L/C
Borrowing or a Canadian L/C Borrowing, as provided in Section 1.07.

 

“L/C Credit Extension” means, with respect to any US Letter of
Credit or Canadian Letter of Credit, as applicable, the issuance thereof or
extension of the expiry date thereof, or the increase of the amount thereof.

 

“L/C Issuer” means the Canadian L/C Issuer or the US L/C Issuer
as provided in Section 1.07.

 

“L/C Obligations” means the US L/C Obligations or the Canadian
L/C Obligations as provided in Section 1.07.

 

“Lender” has the meaning specified in the introductory paragraph
hereto, subject to Section 1.07, and, as the context requires, includes
the Swing Line Lender.

 

“Lender Counterparty” means a Lender or an Affiliate of a
Lender.

 

“Lender Swap Obligations” means all obligations arising from
time to time under Swap Contracts entered into from time to time between the US
Borrower or any Guarantor and a Lender Counterparty; provided that (a) if such
Lender Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender
hereunder, Lender Swap Obligations shall only include such obligations to the
extent arising from transactions entered into at the time such counterparty 

 

22

 

was a Lender hereunder or an
Affiliate of a Lender hereunder, and (b) for any of the forgoing to be included
within “Lender Swap Obligations” hereunder, the applicable Lender Counterparty
must have provided the Administrative Agent written notice of the existence
thereof and such transaction must not otherwise be prohibited under this
Agreement.

 

“Lending Office” means the US Lending Office or Canadian Lending
Office as provided in Section 1.07.

 

“Letter of Credit” means a Canadian Letter of Credit or a US
Letter of Credit as provided in Section 1.07.

 

“Letter of Credit Application” means an application and
agreement for the issuance or amendment of a Letter of Credit in the form from
time to time in use by the L/C Issuer.

 

“Letter of Credit Expiration Date” means the day that is seven
days prior to the Maturity Date then in effect (or, if such day is not a
Business Day, the next preceding Business Day).

 

“Letter of Credit Fee” has the meaning specified in Section 2.03(i).

 

“Lien” means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement in
the nature of a security interest of any kind or nature whatsoever (including
any conditional sale or other title retention agreement, any easement, right of
way or other encumbrance on title to real property, and any financing lease
having substantially the same economic effect as any of the foregoing).

 

“Loan” means an extension of credit by a Lender under Article
II in the form of a Committed Loan or a Swing Line Loan.  “Loan” may mean a US Loan or a
Canadian Loan as provided in Section 1.07.

 

“Loan Documents” means this Agreement, each Note, each Issuer
Document, the Fee Letter, the BAs, the Guaranty and each Security Document.

 

“Loan Parties” means, collectively, the Borrowers and each
Guarantor.

 

“Management LLC” means Pacific Energy Management LLC, a Delaware
LLC.

 

“MAPL Assets” means, collectively, the Mid-Alberta Pipeline and
all of the other properties, assets, rights, interests and undertakings
pursuant to the MAPL Purchase Agreement.

 

“MAPL Purchase Agreement” means the Purchase and Sale Agreement
between Imperial Oil, a partnership of McColl-Frontenac Petroleum Inc. and
Imperial Oil Limited, Rangeland Northern Pipeline Company and the Borrower.

 

“Material Adverse Effect” means (a) a material adverse change
in, or a material adverse effect upon, the operations, income, properties,
liabilities or condition of the US Borrower and its Restricted Subsidiaries
taken as a whole; (b) a material impairment of the ability of any Loan Party to
perform its obligations under any Loan Document to which it is a party; or (c)
a material 

 

23

 

adverse effect upon the
legality, validity, binding effect or enforceability against any Loan Party of
any Loan Document to which it is a party.

 

“Maturity Date” means September 30, 2010.

 

“Maximum Rate” has the meaning assigned such term in Section
10.09.

 

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

 

“Multiemployer Plan” means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA, to which any Loan Party or any
ERISA Affiliate makes or is obligated to make contributions, or during the
preceding five plan years, has made or been obligated to make contributions.

 

“Net BA Proceeds” means with respect to any Bankers’ Acceptance,
the Discount Proceeds thereof less the amount equal to the stamping fee paid in
respect thereto at the Applicable Rate as provided for in Section 2.09(b).

 

“Net Cash Proceeds” means the remainder of (a) the gross
proceeds received by any Loan Party from (i) a Disposition or (ii) the issuance
of Additional Equity, as applicable, less (b) initial purchase discounts and
underwriting commissions, investment banking fees, legal, accounting and other
professional fees and expenses, and other usual and customary transaction
costs, in each case only to the extent paid or payable by a Loan Party in cash
and related to such Disposition, or Additional Equity issuance, as applicable.

 

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

 

“Notes” means collectively, the US Notes and the Canadian Notes.

 

“Obligations” means the Lender Swap Obligations and all advances
to, and debts, liabilities, obligations, covenants and duties of, any Loan
Party arising under any Loan Document or otherwise with respect to any Loan or
Letter of Credit, whether direct or indirect (including those acquired by
assumption), absolute or contingent, due or to become due, now existing or
hereafter arising and including interest and fees that accrue after the
commencement by or against any Loan Party of any proceeding under any Debtor
Relief Laws naming such Person as the debtor in such proceeding, regardless of
whether such interest and fees are allowed claims in such proceeding.

 

24

 

“Organization Documents” means, (a) with respect to any
corporation, the certificate or articles of incorporation and the bylaws (or
equivalent or comparable constitutive documents with respect to any non-U.S.
jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement;
and (c) with respect to any partnership, joint venture, trust, unlimited
liability company or other form of business entity, the partnership, joint venture
or other applicable agreement of formation or organization and any agreement,
instrument, filing or notice with respect thereto filed in connection with its
formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any
certificate or articles of formation or organization of such entity.

 

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

 

“Outstanding Amount” means (i) with respect to Loans on any
date, the aggregate outstanding principal amount thereof in Dollars after
giving effect to any borrowings and prepayments or repayments of Loans, as the
case may be, occurring on such date; and (ii) with respect to any L/C
Obligations on any date, the amount of such L/C Obligations on such date after
giving effect to any L/C Credit Extension occurring on such date and any other
changes in the aggregate amount of the L/C Obligations as of such date,
including as a result of any reimbursements by the applicable Borrower of
Unreimbursed Amounts in Dollars.

 

“Participant” has the meaning specified in Section 10.06(d).

 

“Partnership Agreement” means the First Amended and Restated
Agreement of Limited Partnership of the US Borrower dated as of July 26, 2002, as
amended.

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

“PEG” means Pacific Energy Group LLC, a Delaware limited
partnership.

 

“Pension Plan” means any “employee pension benefit plan” (as
such term is defined in Section 3(2) of ERISA), other than a Multiemployer
Plan, that is subject to Title IV of ERISA and is sponsored or maintained by
any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA
Affiliate contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made
contributions at any time during the immediately preceding five plan years.

 

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

 

“Petroleum Inventory” means crude oil, condensate, natural gas,
natural gas liquids (N.G.L.’s), refined petroleum products, liquefied petroleum
gases (LPG’s) or any blend thereof.

 

25

 

“Plan” means any “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) established by the US Borrower or, with
respect to any such plan that is subject to Section 412 of the Code or Title IV
of ERISA, any ERISA Affiliate.

 

“Platform” has the meaning specified in Section 6.02.

 

“Position” means (a) any physically owned Petroleum Inventory,
(b) any obligation to purchase or sell Petroleum Inventory, however evidenced,
whether for the then current or forward time, (c) any exchange or
over-the-counter put, call or other options or any forward or futures contract
regarding Petroleum Inventory, (d) any type of Swap Contract regarding
Petroleum Inventory and (e) any other arrangement relating to Petroleum
Inventory that has price or spread risk.

 

“PUC” means the applicable public utility commission or other
similar Governmental Authority having regulatory authority over certain
Restricted Subsidiaries of the Borrower.

 

“PUC Restricted Subsidiary” means a Restricted Subsidiary that
is under the regulatory authority of a PUC.

 

“Qualified Owners” means one or more funds managed by Lehman
Brothers Holdings, Inc. or its Affiliates, or their corporate successors, and
one or more funds managed by First Reserve Corporation or its Affiliates, or
their corporate successors.

 

“Rangeland Credit Facility”
means that certain Credit Agreement dated as of May 11, 2004 among Rangeland
Pipeline Company, the Royal Bank of Canada, as Agent, and the lenders party
thereto.

 

“Real Property Collateral” has the meaning assigned to such term
in Section 6.13.

 

“Register” has the meaning specified in Section 10.06(c).

 

“Registered Public Accounting Firm” has the meaning specified in
the Securities Laws and shall be independent of the US Borrower as prescribed
by the Securities Laws.

 

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

 

“Reportable Event” means any of the events set forth in Section
4043(c) of ERISA, other than events for which the 30 day notice period has been
waived.

 

“Request for Credit Extension” means (a) with respect to a
Borrowing, conversion or continuation of Committed Loans, a Committed Loan
Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit
Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan
Notice.

 

“Required Lenders” means, as of any date of determination, (a)
Lenders having more than 50% of the US Aggregate Commitment plus the Canadian
Allocated Aggregate 

 

26

 

Commitment, if any, or (b), if
the commitment of each Lender to make Loans and the obligation of the L/C
Issuer to make L/C Credit Extensions have been terminated pursuant to Section 8.02,
Lenders holding in the aggregate more than 50% of the Total Outstandings (with
the aggregate amount of each Lender’s risk participation and funded participation
in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for
purposes of this definition); provided that the US Commitment and
Canadian Commitment of, and the portion of the Total Outstandings held or
deemed held by, any Defaulting Lender shall be excluded for purposes of making
a determination of Required Lenders.

 

“Responsible Officer” means the chief executive officer,
president, chief financial officer, controller, assistant controller, treasurer
or assistant treasurer of a Loan Party. 
Any document delivered hereunder that is signed by a Responsible Officer
of a Loan Party shall be conclusively presumed to have been authorized by all
necessary corporate, partnership and/or other action on the part of such Loan
Party and such Responsible Officer shall be conclusively presumed to have acted
on behalf of such Loan Party.

 

“Restricted Payment” means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interest of the US Borrower or any Restricted Subsidiary, or any payment
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such Equity Interest, or on
account of any return of capital to the US Borrower’s or such Subsidiary’s
stockholders, partners or members (or the equivalent Person thereof).

 

“Restricted Subsidiary” means each Subsidiary of the US Borrower
that is not an Unrestricted Subsidiary.

 

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

 

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

 

“Schedule I BA Reference Banks” means the Lenders listed in
Schedule I to the Bank Act (Canada)
as are, at such time, designated by Canadian Administrative Agent, with the
prior consent of the Canadian Borrower (acting reasonably), as the Schedule I
BA Reference Banks.

 

“Schedule II BA Reference Banks” means the Lenders listed in
Schedule II to the Bank Act
(Canada) as are, at such time, designated by Canadian Administrative Agent,
with the prior consent of the Canadian Borrower (acting reasonably), as the
Schedule II BA Reference Banks.

 

“Schedule III BA Reference Banks” means the Lenders listed in
Schedule III to the Bank Act
(Canada) as are, at such time, designated by Canadian Administrative Agent,
with the prior consent of the Canadian Borrower (acting reasonably), as the
Schedule III BA Reference Banks.

 

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

 

27

 

“Securities Laws” means the Securities Act of 1933, the
Securities Exchange Act of 1934, Sarbanes-Oxley and the applicable accounting
and auditing principles, rules, standards and practices promulgated, approved
or incorporated by the SEC or the Public Company Accounting Oversight Board, as
each of the foregoing may be amended and in effect on any applicable date hereunder.

 

“Security Documents” means the instruments listed in the
Security Schedule and all other security agreements, deeds of trust, mortgages,
chattel mortgages, pledges, deposit instruments, Guarantees, financing
statements, continuation statements, extension agreements and other agreements
or instruments now, heretofore, or hereafter delivered by any Loan Party to
Administrative Agent in connection with this Agreement or any transaction
contemplated hereby to secure or Guarantee the payment of any part of the
Obligations or the Lender Swap Obligations or the performance of any Loan
Party’s other duties and obligations under the Loan Documents (but excluding
Swap Contracts).

 

“Security Schedule” means Schedule 1.01-2 hereto.

 

“Senior Notes” means notes as described in Section 7.03(b).

 

“Solvent” and “Solvency” mean, with respect to any Person
on a particular date, that on such date both (a) (i) the fair value of the
property of such Person is greater than the total amount of liabilities,
including, without limitation, contingent liabilities, of such Person, (ii) the
present fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured, (iii) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person’s ability to pay such debts and liabilities as they mature, and
(iv) such Person is not engaged in business or a transaction, and is not about
to engage in business or a transaction, for which such Person’s property would
constitute an unreasonably small capital, and (b) such Person is “solvent”
within the meaning given that term and similar terms under applicable Laws
relating to fraudulent transfers and conveyances.  The amount of contingent liabilities at any
time shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability (irrespective of whether
such contingent liabilities meet the criteria for accrual under Statement of
Financial Accounting Standard No. 5).

 

“SPC” has the meaning specified in Section 10.06(h).

 

“Subordinated Debt” means all unsecured Indebtedness of the US
Borrower and its Restricted Subsidiaries for money borrowed which is
subordinated, upon terms reasonably satisfactory to the Administrative Agent
and the Required Lenders, in right of payment to the payment in full in cash of
all Obligations.

 

“Subsidiary” of a Person means a corporation, partnership, joint
venture, limited liability company, unlimited liability company or other
business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned,
or the management of which is 

 

28

 

otherwise controlled, directly,
or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references
herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of the US Borrower.

 

“Swap Contract” means (a) any and all rate swap transactions,
basis swaps, credit derivative transactions, forward rate transactions,
commodity swaps, commodity options, forward commodity contracts, equity or
equity index swaps or options, bond or bond price or bond index swaps or
options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options, spot
contracts, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether
or not any such transaction is governed by or subject to any master agreement,
and (b) any and all transactions of any kind, and the related confirmations,
which are subject to the terms and conditions of, or governed by, any form of
master agreement published by the International Swaps and Derivatives
Association, Inc., any International Foreign Exchange Master Agreement, or any
other master agreement (any such master agreement, together with any related
schedules, a “Master Agreement”), including any such obligations or
liabilities under any Master Agreement.

 

“Swap Termination Value” means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as
the mark-to-market value(s) for such Swap Contracts, as determined based upon
one or more mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include a Lender or any
Affiliate of a Lender).

 

“Swing Line Borrowing” means a borrowing of a Swing Line Loan
pursuant to Section 2.04.

 

“Swing Line Lender” means the US Swing Line Lender or the
Canadian Swing Line Lender as provided in Section 1.07.

 

“Swing Line Loan” the US Swing Line Loan or the Canadian Swing
Line Loan as provided in Section 1.07.

 

“Swing Line Loan Notice” means a notice of a Swing Line
Borrowing pursuant to Section 2.04(b), which, if in writing, shall be
substantially in the form of Exhibit B.

 

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

 

29

 

of the residual value of the
property subject to such operating lease upon expiration or early termination
of such lease and the amount of such obligations shall be the amount determined
in accordance with the Code.

 

“Taxes” means all present or future taxes, levies, imposts,
duties, deductions, withholdings, assessments, fees or other charges imposed by
any Governmental Authority, including any interest, additions to tax or penalties
applicable thereto, including all taxes imposed pursuant to Part XIII of the
Income Tax Act (Canada) and any withholding or other taxes imposed on any
Lender Party under Canadian Law.

 

“Threshold Amount” means $20,000,000.

 

“Total Outstandings” means the aggregate Outstanding Amount of
all Loans and all L/C Obligations.

 

“Type” means, with respect to a Committed Loan, its character as
a Base Rate Loan, a Eurodollar Rate Loan, a Canadian Prime Rate Loan, a
Canadian US Dollar Base Rate Loan, or BAs.

 

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

 

“United States” and “U.S.” mean the United States of
America.

 

“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).

 

“Unrestricted Subsidiary” means any Subsidiary of the US Borrower
designated as such on Schedule 5.13 or which the US Borrower has
designated in writing to the Administrative Agent to be an Unrestricted
Subsidiary pursuant to Section 7.15.

 

“US Administrative Agent” means Bank of America in its capacity
as administrative agent under any of the Loan Documents, (other than in
connection with the Canadian Loans and Canadian Letters of Credit) or any
successor administrative agent.

 

“US Aggregate Commitment” means the US Commitments of all the
Lenders.

 

“US Applicable Percentage” means with
respect to any Lender at any time, the percentage (carried out to the ninth
decimal place) of the US Aggregate Commitment represented by such Lender’s US
Commitment at such time.  If the
commitment of each Lender to make US Loans and the obligation of the L/C
Issuers to make L/C Credit Extensions have been terminated pursuant to Section 8.02
or if the US Aggregate Commitment have expired, then the US Applicable
Percentage of each Lender shall be determined based on the US Applicable Percentage
of such Lender most recently in effect, giving effect to any subsequent
assignments.  The initial Applicable
Percentage of each Lender is set forth opposite the name of such Lender on Schedule
2.01 or in the Assignment and Assumption pursuant to which such Lender
becomes a party hereto, as applicable.

 

30

 

“US Borrower” has the meaning specified in the introductory
paragraph hereto.

 

“US Borrower Materials” has the meaning specified in Section
6.02.

 

“US Business Day” means any day other than a Saturday, Sunday or
other day on which commercial banks are authorized to close under the Laws of,
or are in fact closed in, the state where the Administrative Agent’s Office is
located, the state of California or the state of New York and, if such day
relates to any Eurodollar Rate Loan, such day must also be a day on which
dealings in Dollar deposits are conducted by and between banks in the London
interbank eurodollar market.

 

“US Commitment” means, as to each Lender, its obligation to (a)
make US Loans to the US Borrower pursuant to Section 2.01(a), (b)
purchase participations in US L/C Obligations, and (c) purchase participations
in Swing Line Loans to the US Borrower, in an aggregate principal amount at any
one time outstanding not to exceed the amount set forth opposite such Lender’s
name on Schedule 2.01 or in the Assignment and Assumption pursuant to
which such Lender becomes a party hereto, as applicable, as such amount may be
adjusted from time to time in accordance with this Agreement; provided,
during a Canadian Allocation Period, the US Commitment of any Lender that is or
has a branch or Affiliate that is a Canadian Lender shall be reduced by the
Canadian Allocated Commitment Amount of such Canadian Lender.

 

“US Committed Loans” has the meaning specified in Section 2.01.

 

“US Dollar Equivalent” of any amount of any currency at any date
means (i) if such currency is Dollars, the amount of such currency, or (ii) if
such currency is Canadian Dollars, the equivalent in Dollars of such amount of
such currency based upon the rate of exchange for such conversion as quoted by
the Bank of Canada at approximately 12:00 noon, Toronto time (or, if not so
quoted, the spot rate of exchange quoted for wholesale transactions made by
Administrative Agent) on the date on or as of which such amount is to be
determined.

 

“US L/C Advance” means, with respect to each US Lender, such US
Lender’s funding of its participation in any US L/C Borrowing in accordance
with its US Applicable Percentage.

 

“US L/C Borrowing” means an extension of credit resulting from a
drawing under any US Letter of Credit which has not been reimbursed on the date
when made or refinanced as a US Committed Loan.

 

“US L/C Issuer” means Bank of America in its capacity as issuer
of US Letters of Credit hereunder, or any successor issuer of US Letters of
Credit hereunder.

 

“US L/C Obligations” means, as at any date of determination, the
aggregate amount available to be drawn under all outstanding US Letters of
Credit plus the aggregate of all US Unreimbursed Amounts, including all
US L/C Borrowings.  For purposes of
computing the amount available to be drawn under any US Letter of Credit, the
amount of such US Letter of Credit shall be determined in accordance with Section
1.06.  For all purposes of this
Agreement, if on any date of determination a US Letter of Credit has expired by
its terms but any amount may still be drawn thereunder by reason of the
operation of Rule 3.14 of the ISP, such US Letter of Credit shall be deemed to
be “outstanding” in the amount so remaining available to be drawn.

 

31

 

“US Lender” means each Lender other than the separate branch (or
Affiliate) of such Lender named as a Canadian Lender.

 

“US Lending Office” means, as to any Lender, the office or
offices of such Lender described as such in such Lender’s Administrative
Questionnaire, or such other office or offices as a Lender may from time to
time notify the Borrower and the Administrative Agent.

 

“US Letter of Credit” means any standby letter of credit issued
by US L/C Issuer hereunder at the application of the US Borrower and shall
include the Existing Letters of Credit.

 

“US Letter of Credit Sublimit” means an amount equal to $100,000,000.  The US Letter of Credit Sublimit is part of,
and not in addition to, the US Aggregate Commitment.

 

“US Loan” means an extension of credit by a Lender to the US
Borrower under Article II in the form of a US Committed Loan or a Swing
Line Loan.

 

“US Note” means a promissory note made by the US Borrower in
favor of a Lender evidencing US Committed Loans made by such Lender,
substantially in the form of Exhibit C-1.

 

“US Swing Line Lender” means Bank of America, in its capacity as
provider of Swing Line Loans to US Borrower.

 

“US Swing Line Loan” has the meaning specified in Section
2.04(a).

 

“US Swing Line Sublimit” means the lesser of (a) $10,000,000 and
(b) the US Aggregate Commitment.  The US
Swing Line Sublimit is part of, and not in addition to, the US Aggregate
Commitment.

 

“US Total Outstandings” means the aggregate Outstanding Amount
of all US Loans and all US L/C Obligations.

 

“Valero Acquisition” means the purchase by the US Borrower or
one or more of its Subsidiaries of certain terminal and pipeline assets
pursuant to the Valero Acquisition Agreement.

 

“Valero Acquisition Agreement” means that Sale and Purchase
Agreement entered into as of the July 1, 2005 by and among the Valero Sellers
and PEG.

 

“Valero Acquisition Documents” means the Valero Acquisition
Agreement and all other agreements, assignments, deeds, conveyances,
certificates and other documents and instruments now or hereafter executed and
delivered by or between PEG, or any other Loan Party and the Valero Sellers
pursuant to the Valero Acquisition Agreement or in connection with the Valero
Acquisition.

 

“Valero Sellers” means Support Terminals Operating Partnership,
L.P., Kaneb Pipe Line Operating Partnership, L.P., and Shore Terminals LLC.

 

32

 

“Voting Stock” of any Person as of any date means the Equity
Interests of such Person that is at the time entitled (without regard to the
occurrence of any contingency) to vote in the election of the board of
directors or comparable governing body of such Person.

 

1.02        Other Interpretive
Provisions.  With
reference to this Agreement and each other Loan Document, unless otherwise
specified herein or in such other Loan Document:

 

(a)             The
definitions of terms herein shall apply equally to the singular and plural
forms of the terms defined.  Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.  The words “include,”
“includes” and “including” shall be deemed to be followed by the
phrase “without limitation.”  The word “will”
shall be construed to have the same meaning and effect as the word “shall.”  Unless the context requires otherwise, (i)
any definition of or reference to any agreement, instrument or other document
(including any Organization Document) shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or in any other Loan
Document), (ii) any reference herein to any Person shall be construed to
include such Person’s successors and assigns, (iii) the words “herein,”
“hereof” and “hereunder,” and words of similar import when used
in any Loan Document, shall be construed to refer to such Loan Document in its
entirety and not to any particular provision thereof, (iv) all references in a
Loan Document to Articles, Sections, Exhibits and Schedules shall be construed
to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan
Document in which such references appear, (v) any reference to any law shall
include all statutory and regulatory provisions consolidating, amending,
replacing or interpreting such law and any reference to any law or regulation
shall, unless otherwise specified, refer to such law or regulation as amended,
modified or supplemented from time to time, and (vi) the words “asset”
and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

 

(b)           In the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including;” the words “to”
and “until” each mean “to but excluding;” and the word “through”
means “to and including.”

 

(c)           Section
headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Loan Document.

 

(d)           Unless
otherwise stated, all references in this Agreement to dollar amounts or “$”
shall be references to Dollars.

 

1.03        Accounting
Terms.

 

(a)             Generally.  All
accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial
ratios and other financial calculations) required to be submitted pursuant to
this Agreement shall be prepared in conformity with, GAAP applied on a
consistent basis, as in effect from time to time, applied in 

 

33

 

a manner consistent with that used in preparing the Audited Financial
Statements, except as otherwise specifically prescribed herein.

 

(b)             Changes in
GAAP.  If at any time any change in GAAP would affect
the computation of any financial ratio or requirement set forth in any Loan
Document, and either the US Borrower or the Required Lenders shall so request,
the Administrative Agent, the Lenders and the US Borrower shall negotiate in
good faith to amend such ratio or requirement to preserve the original intent
thereof in light of such change in GAAP (subject to the approval of the
Required Lenders); provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to such
change therein and (ii) the US Borrower shall provide to the
Administrative Agent and the Lenders financial statements and other documents
required under this Agreement or as reasonably requested hereunder setting
forth a reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.

 

(c)           Consolidation
of Variable Interest Entities.  All references herein to
consolidated financial statements of the US Borrower and its Subsidiaries or to
the determination of any amount for the US Borrower and its Subsidiaries on a
consolidated basis or any similar reference shall, in each case, be deemed to
include each variable interest entity that the US Borrower is required to
consolidate pursuant to FASB Interpretation No. 46 – Consolidation of Variable
Interest Entities: an interpretation of ARB No. 51 (January 2003) as if
such variable interest entity were a Subsidiary as defined herein.

 

1.04        Rounding.  Any
financial ratios required to be maintained by the US Borrower pursuant to this
Agreement shall be calculated by dividing the appropriate component by the
other component, carrying the result to one place more than the number of
places by which such ratio is expressed herein and rounding the result up or
down to the nearest number (with a rounding-up if there is no nearest number).

 

1.05        Times of Day.  Unless otherwise
specified, all references herein to times of day shall be references to Eastern
time (daylight or standard, as applicable).

 

1.06        Letter of Credit Amounts.  Unless otherwise
specified, all references herein to the amount of a Letter of Credit at any
time shall be deemed to be the stated amount of such Letter of Credit in effect
at such time; provided, however, that with respect to any Letter of Credit
that, by its terms or the terms of any Issuer Document related thereto,
provides for one or more automatic increases in the stated amount thereof, the
amount of such Letter of Credit shall be deemed to be the maximum stated amount
of such Letter of Credit after giving effect to all such increases, whether or
not such maximum stated amount is in effect at such time.

 

1.07        References to US
Obligations and Canadian Obligations.  Unless
otherwise specified, all references in this Agreement to Administrative Agent,
Aggregate Commitment, Applicable Percentage, Borrower, Business Day, L/C
Advance, L/C Borrowing, L/C Issuer, L/C Obligations, Lenders, Lending Office,
Letter of Credit, Loan, Swing Line Lender, and Swing Line Loan, shall mean: (a)
in respect to US Committed Loans under Section 2.01(a), US Letters of
Credit under Section 2.03(a)(i), and US Swing Line Loans under Section
2.04 (a), the US Administrative Agent, US Aggregate Commitment, US Applicable
Percentage, US Borrower, 

 

34

 

US Business Day, US L/C
Advance, US L/C Borrowing, US L/C Issuer, US L/C Obligations, US Lenders, US
Lending Office, US Letters of Credit, US Loan, US Swing Line Lender, and US
Swing Line Loan, respectively; and (b) in respect to Canadian Committed
Advances under Section 2.01(c), Canadian Letters of Credit under Section
2.03(a)(ii) and Canadian Swing Line Loans under Section 2.04(a),
Canadian Administrative Agent, Canadian Allocated Aggregate Commitment,
Canadian Applicable Percentage, the Canadian Borrower, Canadian Business
Day,  Canadian L/C Advance, Canadian L/C
Borrowing, Canadian L/C Issuer, Canadian L/C Obligations, Canadian Lenders,
Canadian Lending Office, Canadian Letter of Credit, Canadian Loan, Canadian
Swing Line Lender, and Canadian Swing Line Loan, respectively.

 

ARTICLE II.

THE COMMITMENTS AND CREDIT EXTENSIONS

 

2.01        Committed
Loans.

 

(a)             US Committed
Loans to US Borrower. 
Subject to the terms and conditions set forth herein, each US Lender
severally agrees to make loans (each such loan, a “US Committed Loan”)
to the US Borrower from time to time, on any Business Day during the
Availability Period, in an aggregate amount not to exceed at any time
outstanding the amount of such Lender’s US Commitment; provided, however,
that after giving effect to any Borrowing of US Committed Loans, (i) the US
Total Outstandings shall not exceed the US Aggregate Commitment, and (ii) the
aggregate Outstanding Amount of the US Committed Loans of any Lender, plus
such Lender’s US Applicable Percentage of the Outstanding Amount of all US L/C
Obligations, plus such Lender’s US Applicable Percentage of the
Outstanding Amount of all Swing Line Loan to the US Borrower shall not exceed such
Lender’s US Commitment.  Within the
limits of each Lender’s US Commitment, and subject to the other terms and
conditions hereof, the US Borrower may borrow under this Section 2.01(a),
prepay under Section 2.05, and reborrow under this Section 2.01(a).
 US Committed Loans shall be made only in
Dollars and may be Base Rate Loans or Eurodollar Rate Loans, as further
provided herein.

 

(b)             Canadian
Allocation of US Aggregate Commitment.  The US Borrower shall have the right to
allocate (or reallocate, if previously allocated) a portion of the US Aggregate
Commitment as the Canadian Allocated Aggregate Commitment by notice to the
Administrative Agent; provided that (i) any such notice shall be
received by the Administrative Agent not later than 1:00 p.m. five Canadian
Business Days prior to the date such allocation or reallocation shall become
effective, (ii) any such allocation or reallocation shall be in an aggregate
amount of $5,000,000 or any whole multiple in excess thereof, not to exceed
Canadian Allocated Maximum Aggregate Commitment, or shall be a reallocation to
zero, (iii) the US Borrower shall not allocate or reallocate any portion
of the US Aggregate Commitment if, after giving effect thereto and to any
concurrent prepayments hereunder (a) the US Total Outstandings would exceed the
US Aggregate Commitment, (b) the Canadian Total Outstandings would exceed the
Canadian Allocated Aggregate Commitment, (c) any US Lender’s US Commitment
would not equal or exceed the sum of the Outstanding Amount of such US Lender’s
US Committed Loans plus such Lender’s US Applicable Percentage of the
Outstanding Amount of US L/C Obligations, plus such Lender’s US
Applicable Percentage of the Outstanding Amount of all US Swing Line Loan; or
(d) any Canadian Lender’s Canadian Commitment would not equal or exceed the sum
of the Outstanding Amount of such Canadian 

 

35

 

Lender’s Canadian Committed Advances plus such Canadian Lender’s
Canadian Applicable Percentage of the Outstanding Amount of Canadian L/C
Obligations plus such Canadian Lender’s Canadian Applicable Percentage of the
Outstanding Amount of all Canadian Swing Line Loans, and (iv) the US Borrower
shall make not more than four allocations or reallocations of the US Aggregate
Commitment in any calendar year.  The
Administrative Agent will promptly notify the Canadian Administrative Agent and
the Canadian Lenders at their Canadian Lending Offices of any such notice of
allocation or reallocation of the US Aggregate Commitment and the amount of
their respective Canadian Allocated Commitment Amounts, and shall notify all
Lenders of the US Commitments and Canadian Allocated Aggregate Commitment upon
the effectiveness of such allocation or reallocation, which effectiveness shall
require no vote or consent of any Lender or Agent.

 

(c)             Canadian
Committed Advances to Canadian Borrower.  Subject to the terms and conditions hereof,
each Canadian Lender severally agrees to extend credit to the Canadian Borrower
on any Business Day during the Canadian Allocation Period, and such extension
of credit shall constitute separate Borrowings to the Canadian Borrower, by (i)
advancing funds in Dollars or Canadian Dollars to the Canadian Borrower (herein
called such Canadian Lender’s “Canadian Committed Loans”) and (ii)
accepting and purchasing drafts of Bankers’ Acceptances issued under this
Agreement by the Canadian Borrower (herein called such Canadian Lender’s “Bankers’
Acceptances”; each Canadian Lender’s Canadian Committed Loans and Bankers’
Acceptances are herein collectively called such Canadian Lender’s “Canadian
Committed Advances”) upon the Canadian Borrower’s separate request from
time to time during a Canadian Allocation Period, provided, however
that after giving effect to any Canadian Committed Advance, (x), the Canadian
Total Outstandings do not exceed the Canadian Allocated Aggregate Commitments
determined as of the date on which the requested Canadian Committed Advances
are to be made, and (y) after giving effect to such Canadian Committed Advance
the Outstanding Amount of the Canadian Committed Advances by each Canadian
Lender plus such Canadian Lender’s Canadian Applicable Percentage of the
Outstanding Amount of Canadian L/C Obligations plus such Canadian
Lender’s Canadian Applicable Percentage of the Outstanding Amount of all Swing
Line Loans to the Canadian Borrower does not exceed such Canadian Lender’s
Canadian Commitment.  Within the limits
of each Lender’s Canadian Commitment, and subject to the other terms and
conditions hereof, the Canadian Borrower may borrow and issue BAs under this Section 2.01(c),
prepay under Section 2.05, and reborrow and issue new BAs under this
Section 2.01(c).  The
Canadian Borrower may have no more than five Borrowings of BA’s collectively
outstanding at any time.  Bankers’
Acceptances shall be issued only in Canadian Dollars.  Canadian Loans may be made, at the option of
the requesting Canadian Borrower, in Dollars or Canadian Dollars. Canadian
Loans made in Dollars may be Canadian US Dollar Base Rate Loans or Eurodollar
Rate Loans, and Canadian Loans made in Canadian Dollars shall only be Canadian
Prime Rate Loans.

 

2.02        Borrowings, Conversions
and Continuations of Committed Loans.

 

(a)             Each
Committed Borrowing, each conversion of Committed Loans from one Type to the
other, each continuation of Eurodollar Rate Loans and each issuance of Bankers’
Acceptances as shall be made upon the Borrower’s irrevocable notice to the
Administrative Agent, which may be given by telephone.  Each such notice must be received by the
Administrative Agent not later than 1:00 p.m. (i) three Business Days prior to
the requested date 

 

36

 

of any Committed Borrowing of, conversion to or continuation of
Eurodollar Rate Loans, of any conversion of Eurodollar Rate Loans to Base Rate
Committed Loans or any issuance of Bankers’ Acceptances, and (ii) one Business
Day prior to the requested date of any Borrowing of Base Rate Committed Loans,
Canadian Prime Rate Loans or Canadian US Dollar Base Rate Loans; provided,
however, that if the US Borrower wishes to request Eurodollar Rate Loans
having an Interest Period other than one, two, three or six months in duration
as provided in the definition of “Interest Period”, the applicable notice must
be received by the Administrative Agent not later than 1:00 p.m. four Business
Days prior to the requested date of such Borrowing, conversion or continuation,
whereupon the Administrative Agent shall give prompt notice to the US Lenders
of such request and determine whether the requested Interest Period is
acceptable to all of them.  Not later than
1:00 p.m., three Business Days before the requested date of such Borrowing,
conversion or continuation, the Administrative Agent shall notify the Borrower
(which notice may be by telephone) whether or not the requested Interest Period
has been consented to by all the Lenders. 
Each telephonic notice by the Borrower pursuant to this Section 2.02(a)
must be confirmed promptly by delivery to the Administrative Agent of a written
Committed Loan Notice, appropriately completed and signed by a Responsible
Officer of the Borrower.  Each Committed
Borrowing of, conversion to or continuation of Eurodollar Rate Loans shall be
in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess
thereof.  Except as provided in Section 2.03(c)
and Section 2.04(c), each Committed Borrowing of or conversion to Base
Rate Committed Loans, Canadian Prime Rate Loans or Canadian US Dollar Base Rate
Loans shall be in a principal amount of $500,000 or a whole multiple of
$100,000 in excess thereof.  Each
Committed Loan Notice as to a Borrowing of US Committed Loans (whether
telephonic or written) shall specify (i) whether the Borrower is requesting a
Committed Borrowing, a conversion of Committed Loans from one Type to the other
or a continuation of Eurodollar Rate Loans, (ii) the requested date of the US Committed
Borrowing, conversion or continuation, as the case may be (which shall be a
Business Day), (iii) the principal amount of US Committed Loans to be borrowed,
converted or continued, (iv) the Type of Committed Loans to be borrowed or to
which existing Committed Loans are to be converted, and (v) if applicable, the
duration of the Interest Period with respect thereto.  Each Loan Notice as to a Borrowing of
Canadian Committed Advances (whether telephonic or written) shall specify (i)
whether the Canadian Borrower is requesting a Borrowing, a conversion of a
Canadian Committed Advance from one Type to the other or a continuation of
Bankers’ Acceptances, (ii) the requested date of the Borrowing, conversion or
continuation (which shall be a Business Day), and (iii) the principal amount of
the Canadian Committed Advances to be borrowed or to which existing Canadian
Committed Advances are to be converted and whether it is Canadian
Dollar-denominated Loan or a US Dollar-denominated Loan or the principal amount
of Bankers’ Acceptances to be issued.  If
the Borrower fails to specify a Type of Committed Loan in a Committed Loan
Notice or if the Borrower fails to give a timely notice requesting a conversion
or continuation, then the applicable Committed Loans shall be made as, or
converted to, Base Rate Loans or, in the case of the Canadian Borrower,
Canadian Prime Rate Loans.  Any such
automatic conversion to Base Rate Loans or Canadian Prime Rate Loans shall be
effective as of the last day of the Interest Period then in effect with respect
to the applicable Eurodollar Rate Loans or Bankers’ Acceptances.  If the Borrower requests a Committed
Borrowing of, conversion to, or continuation of Eurodollar Rate Loans or
Bankers’ Acceptances in any such Committed Loan Notice, but fails to specify an
Interest Period, it will be deemed to have specified an Interest Period of one
month.

 

37

 

(b)             Following
receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify
each Lender of the amount of its Applicable Percentage of the applicable
Committed Loans, and if no timely notice of a conversion or continuation is
provided by an applicable Borrower with respect to an expiring Eurodollar Loan
or Bankers’ Acceptances, the Administrative Agent shall notify each Lender of
the details of any automatic conversion to Base Rate Loans or, in the case of
the Canadian Borrower, Canadian Prime Rate Loans described in the preceding
subsection.  In the case of a Committed
Borrowing each Lender shall make the amount of its Committed Loan available to
the Administrative Agent in immediately available funds at the Administrative
Agent’s Office not later than 1:00 p.m. on the Business Day specified in the
applicable Committed Loan Notice.  Upon
satisfaction of the applicable conditions set forth in Section 4.02
(and, if such Committed Borrowing is the initial Credit Extension, Section 4.01),
the Administrative Agent shall make all funds so received available to the
requesting Borrower in like funds as received by the Administrative Agent
either by (i) crediting the account of the applicable Borrower on the books of
the Administrative Agent with the amount of such funds or (ii) wire transfer of
such funds, in each case in accordance with instructions provided to (and
reasonably acceptable to) the Administrative Agent by such Borrower; provided,
however, that if, on the date the Loan Notice with respect to such
Committed Borrowing is given by the Borrower, there are L/C Borrowings outstanding,
then the proceeds of such Committed Borrowing, first, shall be applied
to the payment in full of any such L/C Borrowings, and second, shall be
made available to the Borrower as provided above.

 

(c)             Except as
otherwise provided herein, a Eurodollar Rate Loan may be continued or converted
only on the last day of an Interest Period for such Eurodollar Rate Loan.  During the existence of a Default, no Loans
may be requested as, converted to or continued as Eurodollar Rate Loans without
the consent of the Required Lenders.

 

(d)             The
Administrative Agent shall promptly notify the Borrower and the Lenders of the
interest rate applicable to any Interest Period for Eurodollar Rate Loans upon
determination of such interest rate.  At
any time that Base Rate Loans are outstanding, the Administrative Agent shall
notify the Borrower and the Lenders of any change in Bank of America’s prime
rate used in determining the Base Rate promptly following the public
announcement of such change.  At any time
that Canadian Prime Rate Loans or Canadian US Dollar Base Rate Loans are
outstanding, the Canadian Administrative Agent shall notify the Canadian
Borrower and the Canadian Lenders of any change in Bank of America’s Canadian
prime rate used in determining the Canadian Prime Rate or of any change in Bank
of America’s Canadian reference rate used in determining the Canadian US Dollar
Base Rate, respectively, in each case, promptly following the public
announcement of such change.

 

(e)             After giving
effect to all Committed Borrowings, all conversions of Committed Loans from one
Type to the other, and all continuations of Committed Loans as the same Type,
there shall not be more than five Interest Periods in effect with respect to
Loans to the US Borrower and no more than five Borrowings in effect with
respect to Bankers’ Acceptances.

 

2.03        Letters
of Credit.

 

(a)             The Letter
of Credit Commitment.

 

38

 

(i)            Subject to
the terms and conditions set forth herein, (A) the US L/C Issuer agrees, in
reliance upon the agreements of the US Lenders set forth in this Section 2.03,
(1) from time to time on any Business Day during the period from the
Closing Date until the Letter of Credit Expiration Date, to issue US Letters of
Credit for the account of the US Borrower or any of its Restricted
Subsidiaries, and to amend US Letters of Credit previously issued by it, in
accordance with subsection (b) below, and (2) to honor drawings under
the US Letters of Credit; and (B) the US Lenders severally agree to participate
in US Letters of Credit issued for the account of the US Borrower or its
Restricted Subsidiaries and any drawings thereunder; provided that after
giving effect to any L/C Credit Extension with respect to any US Letter of
Credit, (x) the US Total Outstandings shall not exceed the US Aggregate
Commitment, (y) the aggregate Outstanding Amount of the US Committed Loans
of any Lender, plus such Lender’s US Applicable Percentage of the
Outstanding Amount of all US L/C Obligations, plus such Lender’s US Applicable
Percentage of the Outstanding Amount of all US Swing Line Loans shall not
exceed such Lender’s US Commitment, and (z) the Outstanding Amount of the US
L/C Obligations shall not exceed the US Letter of Credit Sublimit.  Each request by the US Borrower for the
issuance or amendment of a US Letter of Credit shall be deemed to be a
representation by the US Borrowers that the L/C Credit Extension so requested
complies with the conditions set forth in the proviso to the preceding
sentence.  Within the foregoing limits,
and subject to the terms and conditions hereof, the US Borrower’s ability to
obtain US Letters of Credit shall be fully revolving, and accordingly the US
Borrower may, during the foregoing period, obtain US Letters of Credit to
replace US Letters of Credit that have expired or that have been drawn upon and
reimbursed.  All Existing Letters of
Credit shall be deemed to have been issued pursuant hereto, and from and after
the Closing Date shall be subject to and governed by the terms and conditions
hereof; provided that Existing Letters of Credit will not be subject to new
administrative issuance fees, as referred to in the last sentence of Section
2.03(j), on the deemed issuance hereunder.

 

(ii)           Subject to
the terms and conditions set forth herein, (A) the Canadian L/C Issuer agrees,
in reliance upon the agreements of the Canadian Lenders set forth in this Section 2.03,
(1) from time to time on any Business Day during the period from the
Closing Date until the Letter of Credit Expiration Date, to issue Canadian
Letters of Credit for the benefit of the Canadian Borrower or any Restricted
Subsidiaries that are organized under the laws of Canada or a province thereof,
and to amend Canadian Letters of Credit previously issued by it, in accordance
with subsection (b) below, and (2) to honor drawings under the
Canadian Letters of Credit; and (B) the Canadian Lenders severally agree
to participate in Canadian Letters of Credit issued for the benefit of the
Canadian Borrower or any such Restricted Subsidiaries and any drawings
thereunder; provided that after giving effect to any L/C Credit
Extension with respect to any Canadian Letter of Credit, (x) the Canadian Total
Outstandings do not exceed the Canadian Allocated Aggregate Commitments
determined as of the date on which the requested L/C Credit Extensions are to
be made, and (y) after giving effect to such L/C Credit Extension the
Outstanding Amount of the Canadian Committed Advances by each Canadian Lender
plus such Canadian Lender’s Canadian Applicable Percentage of the Outstanding
Amount of Canadian L/C Obligations plus such Canadian Lender’s Canadian
Applicable Percentage of the Outstanding Amount of all Canadian Swing Line 

 

39

 

Loans shall not exceed such Canadian Lender’s
Canadian Commitment, and (z) the Outstanding Amount of the Canadian L/C
Obligations shall not exceed the Canadian Letter of Credit Sublimit.  Each request by the Canadian Borrower for the
issuance or amendment of a Canadian Letter of Credit shall be deemed to be a
representation by the Canadian Borrower that the L/C Credit Extension so
requested complies with the conditions set forth in the proviso to the
preceding sentence.  Within the foregoing
limits, and subject to the terms and conditions hereof, the Canadian Borrower’s
ability to obtain Canadian Letters of Credit shall be fully revolving, and
accordingly the Canadian Borrower may, during the foregoing period, obtain
Canadian Letters of Credit to replace Canadian Letters of Credit that have
expired or that have been drawn upon and reimbursed.

 

(iii)          The L/C
Issuer shall not issue any Letter of Credit, if:

 

(A)          the expiry
date of such requested Letter of Credit would occur more than twelve months
after the date of issuance, unless the Required Lenders have approved such
expiry date; or

 

(B)           the expiry
date of such requested Letter of Credit would occur after the Letter of Credit
Expiration Date, unless all the Lenders have approved such expiry date.

 

(iv)          The L/C
Issuer shall not be under any obligation to issue any Letter of Credit if:

 

(A)          any order,
judgment or decree of any Governmental Authority or arbitrator shall by its
terms purport to enjoin or restrain the L/C Issuer from issuing such Letter of
Credit, or any Law applicable to the L/C Issuer or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the L/C Issuer shall prohibit, or request that the L/C Issuer
refrain from, the issuance of letters of credit generally or such Letter of
Credit in particular or shall impose upon the L/C Issuer with respect to such
Letter of Credit any restriction, reserve or capital requirement (for which the
L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing
Date, or shall impose upon the L/C Issuer any unreimbursed loss, cost or
expense which was not applicable on the Closing Date and which the L/C Issuer
in good faith deems material to it;

 

(B)           the issuance
of such Letter of Credit would violate one or more policies of the L/C Issuer;

 

(C)           except as
otherwise agreed by the Administrative Agent and the L/C Issuer, such Letter of
Credit is in an initial stated amount less than $500,000 (or, if denominated in
Canadian Dollars, C$500,000);

 

(D)          such Letter
of Credit is to be denominated in a currency other than Dollars, in the case of
US Letters of Credit or is to be denominated in a currency other than Dollars
or Canadian Dollars, in the case of Canadian Letters of Credit,

 

40

 

(E)           such Letter
of Credit contains any provisions for automatic reinstatement of the stated
amount after any drawing thereunder;

 

(F)           a default of
any Lender’s obligations to fund under Section 2.03(c) exists or
any Lender is at such time a Defaulting Lender hereunder, unless the L/C Issuer
has entered into satisfactory arrangements with the Borrower or such Lender to
eliminate the L/C Issuer’s risk with respect to such Lender; or

 

(G)           such Letter
of Credit is a commercial letter of credit.

 

(v)           The L/C
Issuer shall not amend any Letter of Credit if the L/C Issuer would not be
permitted at such time to issue such Letter of Credit in its amended form under
the terms hereof.

 

(vi)          The L/C
Issuer shall be under no obligation to amend any Letter of Credit if (A) the
L/C Issuer would have no obligation at such time to issue such Letter of Credit
in its amended form under the terms hereof, or (B) the beneficiary of such
Letter of Credit does not accept the proposed amendment to such Letter of
Credit.

 

(vii)         The US L/C
Issuer shall act on behalf of the US Lenders with respect to any Letters of
Credit issued by it and the documents associated therewith, the Canadian L/C
Issuer shall act on behalf of the Canadian Lenders with respect to any Letters
of Credit issued by it and the documents associated therewith and each L/C
Issuer shall have all of the benefits and immunities (A) provided to the
Administrative Agent in Article IX with respect to any acts taken or
omissions suffered by the L/C Issuer in connection with Letters of Credit
issued by it or proposed to be issued by it and Issuer Documents pertaining to
such Letters of Credit as fully as if the term “Administrative Agent” as used
in Article IX included each L/C Issuer with respect to such acts or
omissions, and (B) as additionally provided herein with respect to the L/C
Issuer.

 

(b)             Procedures
for Issuance and Amendment of Letters of Credit.

 

(i)            Each Letter
of Credit shall be issued or amended, as the case may be, upon the request of
the Borrower delivered to the L/C Issuer (with a copy to the Administrative
Agent) in the form of a Letter of Credit Application, appropriately completed
and signed by a Responsible Officer of the Borrower.  Such Letter of Credit Application must be
received by the L/C Issuer and the Administrative Agent not later than 1:00
p.m. at least two Business Days (or such later date and time as the
Administrative Agent and the L/C Issuer may agree in a particular instance in
their sole discretion) prior to the proposed issuance date or date of
amendment, as the case may be.  In the
case of a request for an initial issuance of a Letter of Credit, such Letter of
Credit Application shall specify in form and detail satisfactory to the L/C
Issuer: (A) the proposed issuance date of the requested Letter of Credit (which
shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof;
(D) the name and address of the beneficiary thereof; (E) the documents to be
presented by such beneficiary in case of any drawing thereunder; (F) the full
text of any certificate to be presented by such beneficiary in case of any
drawing thereunder; and (G) such other matters as the L/C Issuer may
require.  In the case of a 

 

41

 

request for an amendment of any outstanding
Letter of Credit, such Letter of Credit Application shall specify in form and
detail satisfactory to the L/C Issuer (A) the Letter of Credit to be amended;
(B) the proposed date of amendment thereof (which shall be a Business Day); (C)
the nature of the proposed amendment; and (D) such other matters as the L/C
Issuer may require.  Additionally, the
Borrower shall furnish to the L/C Issuer and the Administrative Agent such
other documents and information pertaining to such requested Letter of Credit
issuance or amendment, including any Issuer Documents, as the L/C Issuer or the
Administrative Agent may require.

 

(ii)           Promptly
after receipt of any Letter of Credit Application, the L/C Issuer will confirm
with the Administrative Agent (by telephone or in writing) that the
Administrative Agent has received a copy of such Letter of Credit Application
from the Borrower and, if not, the L/C Issuer will provide the Administrative
Agent with a copy thereof.  Unless the
L/C Issuer has received written notice from any Lender, the Administrative
Agent or any Loan Party, at least one Business Day prior to the requested date
of issuance or amendment of the applicable Letter of Credit, that one or more
applicable conditions contained in Article IV shall not then be
satisfied, then, subject to the terms and conditions hereof, the L/C Issuer
shall, on the requested date, issue a Letter of Credit for the account of the
Borrower (or the applicable Restricted Subsidiary) or enter into the applicable
amendment, as the case may be, in each case in accordance with the L/C Issuer’s
usual and customary business practices. 
Immediately upon the issuance of each Letter of Credit, each Lender
shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the L/C Issuer a risk participation in such Letter of Credit in
an amount equal to the product of such Lender’s Applicable Percentage times
the amount of such Letter of Credit.

 

(iii)          Promptly
after its delivery of any Letter of Credit or any amendment to a Letter of
Credit to an advising bank with respect thereto or to the beneficiary thereof,
the L/C Issuer will also deliver to the Borrower and the Administrative Agent a
true and complete copy of such Letter of Credit or amendment.

 

(c)             Drawings and
Reimbursements; Funding of Participations.

 

(i)            Upon receipt
from the beneficiary of any Letter of Credit of any notice of a drawing under
such Letter of Credit, the L/C Issuer shall notify the Borrower and the
Administrative Agent thereof.  Not later
than 1:00 p.m. on the date of any payment by the L/C Issuer under a Letter of
Credit (each such date, an “Honor Date”), the Borrower shall reimburse
the L/C Issuer through the Administrative Agent in an amount equal to the
amount of such drawing.  If the Borrower
fails to so reimburse the L/C Issuer by such time, the Administrative Agent
shall promptly notify each Lender of the Honor Date, the amount of the
unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such
Lender’s Applicable Percentage thereof. 
In such event, the Borrower shall be deemed to have requested a
Committed Borrowing of Base Rate Loans in the case of a Letter of Credit issued
for the account of US Borrower, a Canadian US Dollar Base Rate Loan in the case
of a US Dollar denominated Letter of Credit issued for the account of the
Canadian Borrower, or a Canadian Prime Rate Loan in the case of a Canadian
Dollar denominated Letter of Credit issued for the account of the Canadian
Borrower to be 

 

42

 

disbursed on the Honor Date in an amount
equal to the Unreimbursed Amount, without regard to the minimum and multiples
specified in Section 2.02 for the principal amount of Base Rate
Loans, Canadian US Dollar Base Rate Loans, or Canadian Prime Rate Loans, but
subject to the amount of the unutilized portion of the Aggregate Commitment and
the conditions set forth in Section 4.02 (other than the delivery
of a Loan Notice).  Any notice given by
the L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i)
may be given by telephone if immediately confirmed in writing; provided
that the lack of such an immediate confirmation shall not affect the
conclusiveness or binding effect of such notice.

 

(ii)           Each Lender
shall upon any notice pursuant to Section 2.03(c)(i) make funds
available to the Administrative Agent for the account of the L/C Issuer at the
Administrative Agent’s Office in an amount equal to its Applicable Percentage
of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day
specified in such notice by the Administrative Agent, whereupon, subject to the
provisions of Section 2.03(c)(iii), each Lender that so makes funds
available shall be deemed to have made a Base Rate Committed Loan or Canadian
Prime Rate Loan, as applicable, to the Borrower in such amount.  The Administrative Agent shall remit the
funds so received to the L/C Issuer.

 

(iii)          With respect
to any Unreimbursed Amount that is not fully refinanced by a Committed
Borrowing of Base Rate Loans, Canadian US Dollar Base Rate Loans or Canadian
Prime Rate Loans because the conditions set forth in Section 4.02
cannot be satisfied or for any other reason, the Borrower shall be deemed to
have incurred from the L/C Issuer an L/C Borrowing in the amount of the
Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due
and payable on demand (together with interest) and shall bear interest at the
Default Rate.  In such event, each Lender’s
payment to the Administrative Agent for the account of the L/C Issuer pursuant
to Section 2.03(c)(ii) shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Lender in satisfaction of its participation obligation under this Section 2.03.

 

(iv)          Until each
Lender funds its Committed Loan or L/C Advance pursuant to this Section 2.03(c)
to reimburse the L/C Issuer for any amount drawn under any Letter of Credit,
interest in respect of such Lender’s Applicable Percentage of such amount shall
be solely for the account of the L/C Issuer.

 

(v)           Each
Lender’s obligation to make Committed Loans or L/C Advances to reimburse the
L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c),
shall be absolute and unconditional and shall not be affected by any
circumstance, including (A) any setoff, counterclaim, recoupment, defense or
other right which such Lender may have against the L/C Issuer, the Borrower or
any other Person for any reason whatsoever; (B) the occurrence or continuance
of a Default, or (C) any other occurrence, event or condition, whether or not
similar to any of the foregoing; provided, however, that each
Lender’s obligation to make Committed Loans pursuant to this Section 2.03(c)
is subject to the conditions set forth in Section 4.02 (other than
delivery by the Borrower of a Committed Loan Notice).  No such making of an L/C Advance shall 

 

43

 

relieve or otherwise impair the obligation of
the Borrower to reimburse the L/C Issuer for the amount of any payment made by
the L/C Issuer under any Letter of Credit, together with interest as provided
herein.

 

(vi)          If any
Lender fails to make available to the Administrative Agent for the account of
the L/C Issuer any amount required to be paid by such Lender pursuant to the
foregoing provisions of this Section 2.03(c) by the time specified
in Section 2.03(c)(ii), the L/C Issuer shall be entitled to recover
from such Lender (acting through the Administrative Agent), on demand, such
amount with interest thereon for the period from the date such payment is
required to the date on which such payment is immediately available to the L/C
Issuer at a rate per annum equal to the greater of the Federal Funds Rate (or,
as to Canadian-Dollar denominated obligations, the Bank of Canada Rate) and a
rate determined by the L/C Issuer in accordance with banking industry rules on
interbank compensation.  A certificate of
the L/C Issuer submitted to any Lender (through the Administrative Agent) with
respect to any amounts owing under this clause (vi) shall be conclusive absent
manifest error.

 

(d)             Repayment of
Participations.

 

(i)            At any time
after the L/C Issuer has made a payment under any Letter of Credit and has received
from any Lender such Lender’s L/C Advance in respect of such payment in
accordance with Section 2.03(c), if the Administrative Agent
receives for the account of the L/C Issuer any payment in respect of the
related Unreimbursed Amount or interest thereon (whether directly from the
Borrower or otherwise, including proceeds of Cash Collateral applied thereto by
the Administrative Agent), the Administrative Agent will distribute to such
Lender its Applicable Percentage thereof (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Lender’s
L/C Advance was outstanding) in the same funds as those received by the
Administrative Agent.

 

(ii)           If any
payment received by the Administrative Agent for the account of the L/C Issuer
pursuant to Section 2.03(c)(i) is required to be returned under any
of the circumstances described in Section 10.05 (including pursuant
to any settlement entered into by the L/C Issuer in its discretion), each
Lender shall pay to the Administrative Agent for the account of the L/C Issuer
its Applicable Percentage thereof on demand of the Administrative Agent, plus
interest thereon from the date of such demand to the date such amount is
returned by such Lender, at a rate per annum equal to the Federal Funds Rate
(or, as to Canadian Dollar denominated obligations, the Bank of Canada Rate)
from time to time in effect.  The
obligations of the Lenders under this clause shall survive the payment in full
of the Obligations and the termination of this Agreement.

 

(e)             Obligations
Absolute.  The obligation of the Borrower to reimburse the
L/C Issuer for each drawing under each Letter of Credit and to repay each L/C
Borrowing shall be absolute, unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement under all
circumstances, including the following:

 

44

 

(i)            any lack of
validity or enforceability of such Letter of Credit, this Agreement, or any
other Loan Document;

 

(ii)           the
existence of any claim, counterclaim, setoff, defense or other right that the
Borrower or any Restricted Subsidiary may have at any time against any
beneficiary or any transferee of such Letter of Credit (or any Person for whom
any such beneficiary or any such transferee may be acting), the L/C Issuer or
any other Person, whether in connection with this Agreement, the transactions
contemplated hereby or by such Letter of Credit or any agreement or instrument
relating thereto, or any unrelated transaction;

 

(iii)          any draft,
demand, certificate or other document presented under such Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; or any loss or
delay in the transmission or otherwise of any document required in order to
make a drawing under such Letter of Credit;

 

(iv)          any payment
by the L/C Issuer under such Letter of Credit against presentation of a draft
or certificate that does not strictly comply with the terms of such Letter of
Credit; or any payment made by the L/C Issuer under such Letter of Credit to
any Person purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of such
Letter of Credit, including any arising in connection with any proceeding under
any Debtor Relief Law; or

 

(v)           any other
circumstance or happening whatsoever, whether or not similar to any of the
foregoing, including any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Borrower or any Restricted
Subsidiary.

 

The Borrower shall promptly examine a copy of each Letter of Credit and
each amendment thereto that is delivered to it and, in the event of any claim
of noncompliance with the Borrower’s instructions or other irregularity, the
Borrower will immediately notify the L/C Issuer.  The Borrower shall be conclusively deemed to
have waived any such claim against the L/C Issuer and its correspondents unless
such notice is given as aforesaid.

 

(f)              Role of L/C
Issuer.  Each
Lender and the Borrower agree that, in paying any drawing under a Letter of
Credit, the L/C Issuer shall not have any responsibility to obtain any document
(other than any sight draft, certificates and documents expressly required by
the Letter of Credit) or to ascertain or inquire as to the validity or accuracy
of any such document or the authority of the Person executing or delivering any
such document.  None of the L/C Issuer,
the Administrative Agent, any of their respective Related Parties nor any
correspondent, participant or assignee of the L/C Issuer shall be liable to any
Lender for (i) any action taken or omitted in connection herewith at the
request or with the approval of the Lenders or the Required Lenders, as
applicable; (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any document or instrument related to any Letter of Credit or
Issuer Document.  The Borrower hereby
assumes all risks of the acts or omissions of any beneficiary or transferee
with respect to its use of any Letter of Credit; provided, however,
that this 

 

45

 

assumption is not intended to, and shall not, preclude the Borrower’s
pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. 
None of the L/C Issuer, the Administrative Agent, any of their
respective Related Parties nor any correspondent, participant or assignee of
the L/C Issuer shall be liable or responsible for any of the matters described
in clauses (i) through (v) of Section 2.03(e); provided, however,
that anything in such clauses to the contrary notwithstanding, the Borrower may
have a claim against the L/C Issuer, and the L/C Issuer may be liable to the
Borrower, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Borrower which the Borrower
proves were caused by the L/C Issuer’s willful misconduct or gross negligence
or the L/C Issuer’s willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit.  In
furtherance and not in limitation of the foregoing, the L/C Issuer may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary,
and the L/C Issuer shall not be responsible for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason.

 

(g)             Cash
Collateral.  Upon the request of the
Administrative Agent, (i) if the L/C Issuer has honored any full or partial
drawing request under any Letter of Credit and such drawing has resulted in an
L/C Borrowing, or (ii) if, as of the Letter of Credit Expiration Date, any L/C
Obligation for any reason remains outstanding, the Borrower shall, in each
case, immediately Cash Collateralize the then Outstanding Amount of all L/C
Obligations.  Sections 2.05
and 8.02(c) set forth certain additional requirements to deliver Cash
Collateral hereunder.  For purposes of
this Section 2.03, Section 2.05 and Section 8.02(c), “Cash
Collateralize” means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the L/C Issuer and the Lenders, as
collateral for the L/C Obligations, cash or deposit account balances pursuant
to documentation in form and substance satisfactory to the Administrative Agent
and the L/C Issuer (which documents are hereby consented to by the
Lenders).  Derivatives of such term have
corresponding meanings.  The Borrower hereby
grants to the Administrative Agent, for the benefit of the L/C Issuer and the
Lenders, a security interest in all such cash, deposit accounts and all
balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in
blocked, non-interest bearing deposit accounts at Bank of America.

 

(h)             Applicability
of ISP.  Unless
otherwise expressly agreed by the L/C Issuer and the Borrower when a Letter of
Credit is issued (including any such agreement applicable to an Existing Letter
of Credit), the rules of the ISP shall apply to each Letter of Credit.

 

(i)              Letter of
Credit Fees.  The US Borrower shall pay to
the Administrative Agent for the account of each US Lender in accordance with
its US Applicable Percentage a Letter of Credit fee (the “US Letter of
Credit Fee”) for each US Letter of Credit equal to the Applicable Rate times
the daily amount available to be drawn under such US Letter of Credit.  The Canadian Borrower shall pay to the
Canadian Administrative Agent for the account of each Canadian Lender in
accordance with its Canadian Applicable Percentage a Letter of Credit fee (the
“Canadian Letter of Credit Fee”) for each Canadian Letter of Credit
equal to the Applicable

 

46

 

Rate times the daily amount available to be drawn under such
Canadian Letter of Credit;  provided,
however, notwithstanding the foregoing, the Canadian Letter of Credit Fees
for Canadian Letters of Credit which are not “direct credit substitutes” (as
determined by the Canadian Administrative Agent, acting reasonably) within the
meaning of the Capital Adequacy Requirements shall be 66-2/3% of the rate
otherwise specified in the definition of Applicable Rate.  For purposes of computing the daily amount
available to be drawn under any Letter of Credit, the amount of such Letter of
Credit shall be determined in accordance with Section 1.06.  Letter of Credit Fees shall be (i) computed
on a quarterly basis in arrears and (ii) due and payable on the last
Business Day of each March, June, September and December, commencing with the
first such date to occur after the issuance of such Letter of Credit, on the
Letter of Credit Expiration Date and thereafter on demand.  If there is any change in the Applicable Rate
during any quarter, the daily amount available to be drawn under each Letter of
Credit shall be computed and multiplied by the Applicable Rate separately for
each period during such quarter that such Applicable Rate was in effect.  Notwithstanding anything to the contrary
contained herein, upon the request of the Required Lenders, while any Event of
Default exists, all Letter of Credit Fees shall accrue at the Default Rate.

 

(j)              Fronting Fee
and Documentary and Processing Charges Payable to L/C Issuer.  The
Borrower shall pay directly to the L/C Issuer for its own account a fronting
fee with respect to each Letter of Credit, at the rate per annum specified in
the Fee Letter, computed on the daily amount available to be drawn under such
Letter of Credit on a quarterly basis in arrears.  Such fronting fee shall be due and payable on
the last Business Day after the end of each March, June, September and December
in respect of the most recently-ended quarterly period (or portion thereof, in
the case of the first payment), commencing with the first such date to occur
after the issuance of such Letter of Credit, on the Letter of Credit Expiration
Date and thereafter on demand.  For
purposes of computing the daily amount available to be drawn under any Letter
of Credit, the amount of such Letter of Credit shall be determined in
accordance with Section 1.06.  In
addition, the Borrower shall pay directly to the L/C Issuer for its own account
the customary issuance, presentation, amendment and other processing fees, and
other standard costs and charges, of the L/C Issuer relating to letters of
credit as from time to time in effect. 
Such customary fees and standard costs and charges are due and payable
on demand and are nonrefundable.

 

(k)             Conflict
with Issuer Documents.  In the event of any conflict
between the terms hereof and the terms of any Issuer Document, the terms hereof
shall control.

 

(l)              Letters of
Credit Issued for Restricted Subsidiaries.  Notwithstanding
that a Letter of Credit issued or outstanding hereunder is in support of any
obligations of, or is for the account of, a Restricted Subsidiary, the
applicable Borrower shall be obligated to reimburse the L/C Issuer hereunder
for any and all drawings under such Letter of Credit.  The Borrower hereby acknowledges that the issuance
of Letters of Credit for the account of Restricted Subsidiaries inures to the
benefit of the Borrower, and that the Borrower’s business derives substantial
benefits from the businesses of such Restricted Subsidiaries.

 

2.04        Swing
Line Loans.

 

(a)             The Swing
Line.

 

47

 

(i)            Subject to
the terms and conditions set forth herein, the US Swing Line Lender agrees, in
reliance upon the agreements of the other Lenders set forth in this Section
2.04, to make loans (each such loan, a “US Swing Line Loan”) to the
US Borrower from time to time on any Business Day during the Availability
Period in an aggregate amount not to exceed at any time outstanding the amount
of the US Swing Line Sublimit, notwithstanding the fact that such US Swing Line
Loans, when aggregated with the Applicable Percentage of the Outstanding Amount
of US Committed Loans and US L/C Obligations, of the Lender acting as Swing
Line Lender, may exceed the amount of such Lender’s US Commitment; provided,
however, that after giving effect to any Swing Line Loan, (i) the US
Total Outstanding Amount shall not exceed the US Aggregate Commitment, and (ii)
the Outstanding Amount of US Committed Loans by any Lender, plus such
Lender’s US Applicable Percentage of the Outstanding Amount of US L/C
Obligations, plus such Lender’s US Applicable Percentage of the
Outstanding Amount of all US Swing Line Loans made to US Borrower, shall not
exceed such Lender’s US Commitment, and provided, further, that
no Borrower shall use the proceeds of any Swing Line Loan to refinance any
outstanding Swing Line Loan.  Within the
foregoing limits, and subject to the other terms and conditions hereof, the US
Borrower may borrow under this Section 2.04, prepay under Section 2.05(a),
and reborrow under this Section 2.04. 
Immediately upon the making of a US Swing Line Loan to US Borrower, each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees
to, purchase from the US Swing Line Lender a risk participation in such US
Swing Line Loan in an amount equal to the product of such Lender’s US
Applicable Percentage times the amount of such US Swing Line Loan.  Each US Swing Line Loan shall be a Base Rate
Loan.

 

(ii)           Subject to
the terms and conditions set forth herein, the Canadian Swing Line Lender
agrees, in reliance upon the agreements of the other Canadian Lenders set forth
in this Section 2.04, to make loans (each such loan, a “Canadian
Swing Line Loan”) to the Canadian Borrower from time to time on any
Business Day during the Availability Period in an aggregate amount not to
exceed at any time outstanding the amount of the Canadian Swing Line Sublimit,
notwithstanding the fact that such Canadian Swing Line Loans, when aggregated
with the Applicable Percentage of the Outstanding Amount of Canadian Committed
Advances and Canadian L/C Obligations of the Lender acting as Canadian Swing
Line Lender, may exceed the amount of such Lender’s Canadian Commitment; provided,
however, that after giving effect to any Canadian Swing Line Loan, (i)
the Canadian Total Outstandings shall not exceed the Canadian Allocated
Aggregate Commitment and (ii) the Outstanding Amount of Canadian Committed
Loans by any Canadian Lender plus such Canadian Lender’s Canadian
Applicable Percentage of the Outstanding Amount of Canadian L/C Obligations plus
such Canadian Lender’s Canadian Applicable Percentage of the Outstanding Amount
of all Swing Line Loans made to the Canadian Borrower shall not exceed such
Canadian Lender’s Canadian Commitment and provided, further, that
no Borrower shall use the proceeds of any Swing Line Loan to refinance any
outstanding Swing Line Loan.  Within the
foregoing limits, and subject to the other terms and conditions hereof, the
Canadian Borrower may borrow under this Section 2.04, prepay under Section 2.05(a),
and reborrow under this Section 2.04. 
Immediately upon the making of a Swing Line Loan to the Canadian
Borrower, each Canadian Lender shall be deemed to, and hereby irrevocably and
unconditionally 

 

48

 

agrees to, purchase from the Canadian Swing
Line Lender a risk participation in such Canadian Swing Line Loan in an amount
equal to the product of such Canadian Lender’s Canadian Applicable Percentage,
as appropriate, times the amount of such Canadian Swing Line Loan.  Canadian Borrower may request
Dollar-denominated or Canadian Dollar-denominated Swing Line Loans. Each Swing
Line Loan to the Canadian Borrower shall be a Canadian US Dollar Base Rate Loan
if the Loan is requested in Dollars, and each Swing Line Loan to the Canadian
Borrower shall be a Canadian Prime Rate Loan if requested in Canadian Dollars.

 

(b)             Borrowing
Procedures. 
Each Swing Line Borrowing shall be made upon a Borrower’s irrevocable
notice to the applicable Swing Line Lender and the applicable Administrative
Agent which may be given by telephone. Each such notice must be received by
such Swing Line Lender and the applicable Administrative Agent not later than
1:00 p.m. on the requested borrowing date, and shall specify (i) the amount to
be borrowed, which shall be a minimum of $1,000,000 (or, if denominated in
Canadian Dollars, C$1,000,000), (ii) the requested borrowing date, which shall
be a Business Day, and (iii) for Swing Line Loans to the Canadian Borrower
whether such Swing Line Loans are Dollar-denominated or Canadian
Dollar-denominated.  Each such telephonic
notice must be confirmed promptly by delivery to the Swing Line Lender and the
applicable Administrative Agent of a written Swing Line Loan Notice,
appropriately completed and signed by a Responsible Officer of such
Borrower.  Promptly after receipt by the
Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line
Lender will confirm with the applicable Administrative Agent (by telephone or
in writing) that the applicable Administrative Agent has also received such
Swing Line Loan Notice and, if not, the Swing Line Lender will notify the
applicable Administrative Agent (by telephone or in writing) of the contents
thereof.  Unless the Swing Line Lender
has received notice (by telephone or in writing) from the applicable
Administrative Agent (including at the request of any Lender) prior to 2:00
p.m. on the date of the proposed Swing Line Borrowing (A) directing the Swing
Line Lender not to make such Swing Line Loan as a result of the limitations set
forth in the proviso to the first sentence of Section 2.04(a) (i) or (ii),
or (B) that one or more of the applicable conditions specified in Article IV
is not then satisfied, then, subject to the terms and conditions hereof, the
Swing Line Lender will, not later than 3:00 p.m. on the borrowing date
specified in such Swing Line Loan Notice, make the amount of its Swing Line
Loan available to such Borrower.

 

(c)             Refinancing
of Swing Line Loans.

 

(i)            The Swing
Line Lender at any time in its sole and absolute discretion may request, on
behalf of any Borrower with any outstanding Swing Line Loans (which hereby
irrevocably authorizes the Swing Line Lender to so request on its behalf), that
each US Lender make a Committed Loan that is a Base Rate Loan, or each Canadian
Lender make a Committed Loan that is a Canadian US Dollar Base Rate Loan (if
originally made in US Dollars) or is a Canadian Prime Rate Loan (if originally
made in Canadian Dollars), as applicable, in an amount equal to such US
Lender’s US Applicable Percentage or such Canadian Lender’s Canadian Applicable
Percentage, respectively, of the amount of Swing Line Loans then
outstanding.  Such request shall be made
in writing (which written request shall be deemed to be a Committed Loan Notice
for purposes hereof) and in accordance with the requirements of Section 2.02,
without regard to the 

 

49

 

minimum and multiples specified therein for the
principal amount of Base Rate Loans, Canadian US Dollar Base Rate Loans or
Canadian Prime Rate Loans, as the case may be, but subject to the unutilized
portion of the US Commitment or Canadian Commitment, as the case may be, and
the conditions set forth in Section 4.02.  The Swing Line Lender shall furnish such
Borrower with a copy of the applicable Committed Loan Notice promptly after
delivering such notice to the Administrative Agent or Canadian Administrative
Agent, as appropriate.  Each US Lender or
Canadian Lender, as the case may be, shall make an amount equal to its
respective US Applicable Percentage or Canadian Applicable Percentage of the
amount specified in such Committed Loan Notice available to the applicable
Administrative Agent in immediately available funds for the account of the
Swing Line Lender at the applicable Administrative Agent’s Office not later
than 1:00 p.m. on the day specified in such Committed Loan Notice, whereupon,
subject to Section 2.04(c)(ii), each Lender that so makes funds
available shall be deemed to have made a Committed Loan that is a Base Rate
Loan, Canadian US Dollar Base Rate Loan or Canadian Prime Rate Loan, as the
case may be, to such Borrower in such amount. 
The applicable Administrative Agent shall remit the funds so received to
the Swing Line Lender.

 

(ii)           If for any
reason any Swing Line Loan cannot be refinanced by such a Borrowing in
accordance with Section 2.04(c)(i), or pursuant to a Committed Borrowing
requested in accordance with Section 2.02, as the case may be, the
request for Committed Loans submitted by the Swing Line Lender as set forth in Section
2.04(c)(i) shall be deemed to be a request by the Swing Line Lender that
each of the US Lenders or Canadian Lenders, as the case may be, fund its risk
participation in the relevant Swing Line Loan and each such Lender’s payment to
the applicable Administrative Agent for the account of the Swing Line Lender
pursuant to Section 2.04(c)(i) shall be deemed payment in respect of
such participation.

 

(iii)          If any
Lender fails to make available to the applicable Administrative Agent for the
account of the Swing Line Lender any amount required to be paid by such Lender
pursuant to the foregoing provisions of this Section 2.04(c) by the time
specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled
to recover from such Lender (acting through the Administrative Agent or
Canadian Administrative Agent), on demand, such amount with interest thereon
for the period from the date such payment is required to the date on which such
payment is immediately available to the Swing Line Lender at a rate per annum
equal to the greater of the Federal Funds Rate (or, as to Canadian Dollar
denominated Swing Line Loans, the Bank of Canada Rate) and a rate determined by
the Swing Line Lender in accordance with banking industry rules on interbank
compensation.  A certificate of the Swing
Line Lender submitted to any Lender (through the applicable Administrative
Agent) with respect to any amounts owing under this clause (iii) shall be
conclusive absent manifest error.

 

(iv)          Each
Lender’s obligation to make Committed Loans or to purchase and fund risk
participations in Swing Line Loans pursuant to this Section 2.04 shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, any Borrower or any
other Person for any reason 

 

50

 

whatsoever, (B) the occurrence or continuance
of a Default, or (C) any other occurrence, event or condition, whether or not
similar to any of the foregoing; provided, however, that each
Lender’s obligation to make Committed Loans pursuant to this Section 2.04(c)
is subject to the conditions set forth in Section 4.2.  No such funding of risk participations shall
relieve or otherwise impair the obligation of any Borrower to repay Swing Line
Loans made to it, together with interest as provided herein.

 

(d)             Repayment of
Participations.

 

(i)            At any time
after any Lender has purchased and funded a risk participation in a Swing Line
Loan, if the Swing Line Lender receives any payment on account of such Swing
Line Loan, the Swing Line Lender will distribute to such Lender its US
Applicable Percentage or Canadian Applicable Percentage, as the case may be, of
such payment (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Lender’s risk participation was
funded) in the same funds as those received by the Swing Line Lender.

 

(ii)           If any
payment received by the Swing Line Lender in respect of principal or interest
on any Swing Line Loan is required to be returned by the Swing Line Lender
under any of the circumstances described in Section 10.05 (including pursuant
to any settlement entered into by the Swing Line Lender in its discretion),
each Lender shall pay to the Swing Line Lender its appropriate US Applicable
Percentage or Canadian Applicable Percentage thereof on demand of the
applicable Administrative Agent, plus interest thereon from the date of such
demand to the date such amount is returned, at a rate per annum equal to the
Federal Funds Rate (or, as to Canadian Dollar-denominated Swing Line Loans, the
Bank of Canada Rate).  The applicable
Administrative Agent will make such demand upon the request of the Swing Line
Lender.  The obligations of the Lenders
under this clause shall survive the payment in full of the Obligations and the
termination of this Agreement.

 

(e)             Interest for
Account of Swing Line Lender. 
The Swing Line Lender shall be responsible for invoicing each Borrower
for interest on the Swing Line Loans made to it.  Until each Lender funds its Committed Loan or
risk participation pursuant to this Section 2.04 to refinance such
US Lender’s US Applicable Percentage or such Canadian Lender’s Canadian
Applicable Percentage, as appropriate, of any Swing Line Loan, interest in
respect of such US Applicable Percentage or Canadian Applicable Percentage
shall be solely for the account of the Swing Line Lender.

 

(f)              Payments
Directly to Swing Line Lender. 
Each Borrower shall make all payments of principal and interest in
respect of the Swing Line Loans made to it directly to the Swing Line Lender.

 

2.05        Prepayments.

 

(a)             The US
Borrower or the Canadian Borrower may, upon notice to the Administrative Agent,
at any time or from time to time voluntarily prepay Committed Loans in whole or
in part without premium or penalty; provided that (i) such notice must
be received by 

 

51

 

the Administrative Agent not later than 1:00 p.m. (A) three Business
Days prior to any date of prepayment of Eurodollar Rate Loans and (B) one
Business Day prior to any date of prepayment of Base Rate Loans, Canadian Prime
Rate Loans or Canadian US Dollar Base Rate Loans; (ii) any prepayment of
Eurodollar Rate Loans shall be in a principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof; and (iii) any prepayment of Base Rate
Loans, Canadian Prime Rate Loans or Canadian US Dollar Base Rate Loans shall be
in a principal amount of $500,000 (or C$500,000, if applicable) or a whole
multiple of $100,000 (or C$100,000, if applicable) in excess thereof or, in
each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and
amount of such prepayment and the Type(s) of Loans to be prepaid.  The Administrative Agent will promptly notify
each Lender of its receipt of each such notice, and of the amount of such
Lender’s Applicable Percentage of such prepayment.  If such notice is given by a Borrower, such
Borrower shall make such prepayment and the payment amount specified in such
notice shall be due and payable on the date specified therein.  Any prepayment of a Eurodollar Rate Loan
shall be accompanied by all accrued interest on the amount prepaid, together
with any additional amounts required pursuant to Section 3.05.  Each such prepayment shall be applied to the
Committed Loans of the Lenders in accordance with their respective Applicable
Percentages.

 

(b)             The Borrower
may, upon notice to the Swing Line Lender (with a copy to the Administrative
Agent or Canadian Administrative Agent, as appropriate), at any time or from
time to time, voluntarily prepay Swing Line Loans made to it in whole or in
part without premium or penalty; provided that (i) such notice must be
received by the Swing Line Lender and the Administrative Agent or Canadian
Administrative Agent not later than 1:00 p.m. on the date of the prepayment,
and (ii) any such prepayment shall be in a minimum principal amount of
$100,000.  Each such notice shall specify
the date and amount of such prepayment. 
If such notice is given by the Borrower, it shall make such prepayment
and the payment amount specified in such notice shall be due and payable on the
date specified therein.

 

(c)             If for any
reason the US Total Outstandings at any time exceed the US Aggregate Commitment
then in effect, the US Borrower shall immediately prepay US Loans and/or Cash
Collateralize the US L/C Obligations in an aggregate amount equal to such
excess; provided, however, that the US Borrower shall not be
required to Cash Collateralize the US L/C Obligations pursuant to this Section 2.05(c)
unless after the prepayment in full of the US Loans the US Total Outstandings
exceed the US Aggregate Commitment then in effect.

 

(d)             If for any
reason the Canadian Total Outstandings at any time exceed the Canadian
Allocated Aggregate Commitment then in effect, the Canadian Borrower shall
immediately prepay Canadian Loans and/or Cash Collateralize the BAs or the
Canadian L/C Obligations in an aggregate amount equal to such excess.  Any such excess shall be applied first to
outstanding Canadian Committed Loans and Swing Line Loans to the Canadian
Borrower, and then to prepay BAs in accordance with Section 2.19.  The Canadian Borrower shall not be required
to Cash Collateralize BAs or the Canadian L/C Obligations pursuant to this Section 2.05(d)
unless after the prepayment in full of the Canadian Loans the Canadian Total
Outstandings exceed the Canadian Allocated Aggregate Commitment then in
effect.  Canadian Administrative Agent
shall have the right to calculate the Canadian Total Outstandings for all
purposes, including making determinations from time to time of US Dollar
Equivalent of 

 

52

 

Outstanding Amounts of Canadian Dollar-denominated obligations and the
available undrawn portion of the Canadian Allocated Aggregate Commitment which
determination, when notified to the Canadian Borrower, will be conclusive,
absent manifest error.

 

(e)             Any Net Cash
Proceeds that are Excess Sale Proceeds shall be applied as a mandatory
prepayment on the Loans to the extent required by Section 7.05(f).

 

(f)              Any
Extraordinary Receipts shall be immediately applied as a mandatory prepayment
on the Loans; provided, however, that prepayments under this Section 2.05(f)
shall not be required until the aggregate amount of unapplied Extraordinary Receipts
exceeds $1,000,000.

 

(g)             At any time
that the Consolidated Total Leverage Ratio exceeds 4.5 to 1.0, upon the receipt
by any Loan Party of the Net Cash Proceeds of any offerings of Equity Interests
(other than from another Loan Party), the Borrower will prepay a principal
amount of the Loans in an amount equal to the lesser of (i) the amount of such
Net Cash Proceeds or (ii) the amount necessary to cause the Consolidated Total
Leverage Ratio to not exceed 4.5 to 1.0. 
The foregoing shall not be construed to permit any offerings of Equity
Interests not otherwise permitted by this Agreement.

 

(h)             Prepayment
under Section 2.05(a), (b), (c) or (d) shall be applied to the
Obligations specified in such Section. 
Prepayment under Section 2.05(e) or (f) shall be applied (i) in
the case of Net Cash Proceeds or Extraordinary Receipts in respect of assets of
the Canadian Borrower or any other Subsidiaries which are incorporated in
Canada or a province thereof, to the Canadian Total Outstandings, and (ii)
otherwise to the US Total Outstandings and, in each case, first to outstanding
Loans, then, in the case of the Canadian Total Outstandings, BAs, then to Cash
Collateralize L/C Obligations. 
Prepayment under Section 2.05(g) shall be applied first to US
Total Outstanding and then to the Canadian Total Outstandings and, in each
case, first to outstanding Loans, then, in the case of the Canadian Total
Outstandings, BAs, then to Cash Collateralize L/C Obligations.  Prepayment under this Section 2.05
shall not reduce the US Aggregate Commitment or the Canadian Aggregate
Commitment.

 

2.06        Termination or Reduction
of Commitments.  The
Borrower may, upon notice to the Administrative Agent, terminate the US
Aggregate Commitment, or from time to time permanently reduce the US Aggregate
Commitment; provided that (i) any such notice shall be received by the
Administrative Agent not later than 1:00 p.m. five Business Days prior to the
date of termination or reduction, (ii) any such partial reduction shall be in
an aggregate amount of $10,000,000 or any whole multiple of $1,000,000 in
excess thereof, (iii) the Borrower shall not terminate or reduce the US
Aggregate Commitment if, after giving effect thereto and to any concurrent
prepayments hereunder, the Total Outstandings would exceed the US Aggregate
Commitment and (iv) if, after giving effect to any reduction of the US
Aggregate Commitment, the US Letter of Credit Sublimit or the US Swing Line
Sublimit exceeds the amount of the US Aggregate Commitment, the US Letter of
Credit Sublimit or Canadian Swing Line Sublimit, as applicable, shall be
automatically reduced by the amount of such excess.  The Administrative Agent will promptly notify
the Lenders of any such notice of termination or reduction of the Aggregate
Commitments.  Any reduction of the
Aggregate Commitments shall be applied to the 

 

53

 

Commitment of each Lender
according to its Applicable Percentage. 
All fees accrued until the effective date of any termination of the Aggregate
Commitments shall be paid on the effective date of such termination.

 

2.07        Repayment
of Loans.

 

(a)             Each
Borrower shall repay to the Lenders on the Maturity Date the aggregate
principal amount of Committed Loans made to it to the extent outstanding on
such date.

 

(b)             Each
Borrower shall repay to the Swing Line Lender the balance outstanding on the
Swing Line Loan (i) on a weekly basis or at the discretion of the Swing Line
Lender on demand or (ii) at the Maturity Date.

 

2.08        Interest.

 

(a)             Subject to the
provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall bear
interest on the outstanding principal amount thereof for each Interest Period
at a rate per annum equal to the Eurodollar Rate for such Interest Period plus
the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Base Rate plus the Applicable Rate; (iii)
each Canadian Prime Rate Loan shall bear interest on the outstanding principal
amount thereof from the applicable borrowing date at a rate per annum equal to
the Canadian Prime Rate plus the Applicable Rate, and (iii) each
Canadian US Dollar Base Rate Loan shall bear interest on the outstanding
principal amount thereof from the applicable borrowing date at a rate per annum
equal to the Canadian US Dollar Base Rate plus the Applicable Rate.

 

(b)             (i)          If any
amount of principal of any Loan is not paid when due (without regard to any
applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the Default Rate to the fullest extent
permitted by applicable Laws.

 

(ii)           If any
amount (other than principal of any Loan) payable by the Borrower under any
Loan Document is not paid when due (without regard to any applicable grace
periods), whether at stated maturity, by acceleration or otherwise, then upon
the request of the Required Lenders, such amount shall thereafter bear interest
at a fluctuating interest rate per annum at all times equal to the Default Rate
to the fullest extent permitted by applicable Laws.

 

(iii)          Upon the
request of the Required Lenders, while any Event of Default exists, the
Borrower shall pay interest on the principal amount of all outstanding
Obligations hereunder at a fluctuating interest rate per annum at all times
equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(iv)          Accrued and
unpaid interest on past due amounts (including interest on past due interest)
shall be due and payable upon demand.

 

(c)             Interest on
each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein.  Interest 

 

54

 

hereunder shall be due and payable in accordance with the terms hereof
before and after judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law.

 

2.09        Fees.  In addition to
certain fees described in subsections (i) and (j) of Section 2.03:

 

(a)             Commitment
Fee.  The
US Borrower shall pay to the Administrative Agent for the account of each
Lender in accordance with its US Applicable Percentage, a commitment fee equal
to the Applicable Rate times the actual daily amount by which the US
Aggregate Commitment exceed the sum of (i) the Outstanding Amount of US
Committed Loans and US Swing Line Loans and (ii) the Outstanding Amount of US
L/C Obligations.  The Canadian Borrower
shall pay to the Administrative Agent for the account of each Canadian Lender
in accordance with its Canadian Applicable Percentage, a commitment fee equal
to the Applicable Rate times the actual daily amount by which the Canadian
Allocated Aggregate Commitment exceeds the US Dollar Equivalent of the sum of
(i) the Outstanding Amount of Canadian Committed Advances and Canadian Swing
Line Loans and (ii) the Outstanding Amount of Canadian L/C Obligations.  The commitment fee shall accrue at all times
during the Availability Period, including at any time during which one or more
of the conditions in Article IV is not met, and shall be due and payable
quarterly in arrears on the last Business Day of each March, June, September
and December, commencing with the first such date to occur after the Closing
Date, and on the Maturity Date.  The
commitment fee shall be calculated quarterly in arrears, and if there is any
change in the Applicable Rate during any quarter, the actual daily amount shall
be computed and multiplied by the Applicable Rate separately for each period
during such quarter that such Applicable Rate was in effect.

 

(b)             Stamping
Fees.  In consideration of
each Canadian Lender’s commitment to accept or participate in Bankers’
Acceptances under this Agreement, the Canadian Borrower will pay to Canadian
Administrative Agent for the account of such Canadian Lender a stamping fee
equal to the Applicable Rate per annum indicated as the Stamping Fee Rate
multiplied by the face amount of each Bankers’ Acceptance accepted by such
Canadian Lender on behalf of the Canadian Borrower under this Agreement
calculated for the number of days in the term of such Bankers’ Acceptance.  Such stamping fee shall be due and payable on
the date on which such Bankers’ Acceptances are accepted and shall be deducted
from the Discount Proceeds paid to the Canadian Borrower.  If the Default Rate is in effect pursuant to Section
2.08 while an Event of Default exists, the Applicable Rate in respect of
BAs shall be increased by two percent (2%) per annum.  If during the term of a BA the Applicable
Rate changes as provided in the definition of Applicable Rate or as a result of
an Event of Default as provided above, the stamping fee paid with respect to
such BA (the “Initial Fee”) shall be recalculated based upon such change
for the number of days during the term of such BA that such change is
applicable, and the Canadian Borrower shall pay such excess as an additional
fee for the acceptance of such BA, and if such recalculated amount is less than
the Initial Fee, such difference shall be credited to the Canadian
Borrower.  Administrative Agent will give
notice promptly to Canadian Administrative Agent of any change (and its
effective date) in the Applicable Rate, and Canadian Administrative Agent will
in turn give notice promptly to the Canadian Borrower and Canadian Lenders of
such change in the Applicable Rate.

 

55

 

(c)             Other Fees.          (i)  The Borrower shall pay to the
Arrangers and the Administrative Agent for their own respective accounts fees
in the amounts and at the times specified in the Fee Letter.  Such fees shall be fully earned when paid and
shall not be refundable for any reason whatsoever.

 

(ii)           The
applicable Borrower shall pay to the Lenders such fees as shall have been
separately agreed upon in writing in the amounts and at the times so
specified.  Such fees shall be fully
earned when paid and shall not be refundable for any reason whatsoever.

 

2.10        Computation of Interest
and Fees.  All
computations of interest for Base Rate Loans or Canadian US Dollar Base Rate
Loans when such rate is determined by Bank of America’s “prime rate” or
“reference rate” and all computations of interest for Canadian Prime Rate Loans
and BAs shall be made on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed.  All
other computations of fees and interest shall be made on the basis of a 360-day
year and actual days elapsed (which results in more fees or interest, as
applicable, being paid than if computed on the basis of a 365-day year). For
the purposes of the Interest Act (Canada), whenever interest payable pursuant
to this Agreement is calculated on the basis of a period other than a calendar
year, each rate of interest determined pursuant to such calculation expressed
as an annual rate is equivalent to such rate as so determined multiplied by the
actual number of days in the calendar year in which the same is to be
ascertained and divided by the number of days in such period.  Interest shall accrue on each Loan for the
day on which the Loan is made, and shall not accrue on a Loan, or any portion
thereof, for the day on which the Loan or such portion is paid, provided
that any Loan that is repaid on the same day on which it is made shall, subject
to Section 2.12(a), bear interest for one day.  Each determination by the Administrative
Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error.

 

2.11        Evidence
of Debt.

 

(a)             The Credit
Extensions made by each Lender shall be evidenced by one or more accounts or
records maintained by such Lender and by the Administrative Agent in the
ordinary course of business.  The
accounts or records maintained by the Administrative Agent and each Lender
shall be conclusive absent manifest error of the amount of the Credit
Extensions made by the Lenders to the Borrower and the interest and payments
thereon.  Any failure to so record or any
error in doing so shall not, however, limit or otherwise affect the obligation
of the Borrower hereunder to pay any amount owing with respect to the
Obligations.  In the event of any
conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters,
the accounts and records of the Administrative Agent shall control in the
absence of manifest error.  Upon the request
of any US Lender made through the Administrative Agent, the US Borrower shall
execute and deliver to such US Lender (through the Administrative Agent) a US
Note, which shall evidence such Lender’s US Committed Loans in addition to such
accounts or records.  Upon the request of
any Canadian Lender made through the Administrative Agent, the Canadian
Borrower shall execute and deliver to such Canadian Lender (through the
Administrative Agent) a Canadian Note, which shall evidence such Lender’s
Canadian Committed Advances in addition to such accounts or records.

 

56

 

(b)             In addition
to the accounts and records referred to in subsection (a), each Lender and the
Administrative Agent shall maintain in accordance with its usual practice
accounts or records evidencing the purchases and sales by such Lender of
participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the
accounts and records maintained by the Administrative Agent and the accounts
and records of any Lender in respect of such matters, the accounts and records
of the Administrative Agent shall control in the absence of manifest error.

 

2.12        Payments Generally;
Administrative Agent’s Clawback.

 

(a)             General.  All
payments to be made by any Borrower shall be made without condition or
deduction for any counterclaim, defense, recoupment or setoff.  All payments of principal and interest on the
Loans shall be made in the currency in which such corresponding Loan was funded.  All fees in respect of BAs and Canadian
Letters of Credit shall be paid in Canadian Dollars and all other fees shall be
paid in Dollars.  Except as otherwise
expressly provided herein, all payments by the Borrower hereunder shall be made
to the Administrative Agent, for the account of the respective Lenders to which
such payment is owed, at the Administrative Agent’s Office and in immediately
available funds not later than 2:00 p.m. on the date specified herein.  The Administrative Agent will promptly
distribute to each Lender its Applicable Percentage (or other applicable share
as provided herein) of such payment in like funds as received by wire transfer
to such Lender’s Lending Office.  All
payments received by the Administrative Agent after 2:00 p.m. shall be deemed
received on the next succeeding Business Day for all purposes other than Section
8.01(a) and any applicable interest or fee shall continue to accrue.  If any payment to be made by the Borrower
shall come due on a day other than a Business Day, payment shall be made on the
next following Business Day, and such extension of time shall be reflected in
computing interest or fees, as the case may be.

 

(b)             (i)  Funding
by Lenders; Presumption by Administrative Agent.  Unless the
Administrative Agent shall have received notice from a Lender prior to the
proposed date of any Committed Borrowing of Eurodollar Rate Loans (or, in the
case of any Committed Borrowing of Base Rate Loans, Canadian Prime Rate Loans,
Bankers’ Acceptances or Canadian US Dollar Base Rate Loans, prior to 12:00 noon
on the date of such Committed Borrowing) that such Lender will not make
available to the Administrative Agent such Lender’s share of such Committed
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with Section 2.02 (or,
in the case of a Committed Borrowing of Base Rate Loans, Canadian Prime Rate
Loans or Canadian US Dollar Rate Base Loans, that such Lender has made such
share available in accordance with and at the time required by Section 2.02)
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount.  In such event, if
a Lender has not in fact made its share of the applicable Committed Borrowing
available to the Administrative Agent, then the applicable Lender and the
relevant Borrower severally agree to pay to the Administrative Agent forthwith
on demand such corresponding amount in immediately available funds with
interest thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (A) in the case of a payment to be made by such Lender, the greater
of the Federal Funds Rate (or, as to Canadian Dollar denominated amounts, the
Bank of Canada Rate) and a rate determined by the Administrative Agent in
accordance with banking industry rules on interbank compensation and (B) in the
case 

 

57

 

of a payment to be made by the Borrower, the interest rate applicable
to Base Rate Loans or Canadian Prime Rate Loans, as applicable.  If the Borrower and such Lender shall pay
such interest to the Administrative Agent for the same or an overlapping
period, the Administrative Agent shall promptly remit to the Borrower the
amount of such interest paid by the Borrower for such period.  If such Lender pays its share of the
applicable Committed Borrowing to the Administrative Agent, then the amount so
paid shall constitute such Lender’s Loan included in such Committed
Borrowing.  Any payment by the Borrower
shall be without prejudice to any claim the Borrower may have against a Lender
that shall have failed to make such payment to the Administrative Agent.

 

(ii)           Payments by
Borrower; Presumptions by Administrative Agent.  Unless
the Administrative Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Administrative Agent for the
account of the Lenders or the L/C Issuer hereunder that the Borrower will not
make such payment, the Administrative Agent may assume that the Borrower has
made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders or the L/C Issuer, as the case may
be, the amount due.  In such event, if
the Borrower has not in fact made such payment, then each of the Lenders or the
L/C Issuer, as the case may be, severally agrees to repay to the Administrative
Agent forthwith on demand the amount so distributed to such Lender or the L/C
Issuer, in immediately available funds with interest thereon, for each day from
and including the date such amount is distributed to it to but excluding the
date of payment to the Administrative Agent, at the greater of the Federal
Funds Rate (or, as to Canadian Dollar denominated amounts, the Bank of Canada
Rate) and a rate determined by the Administrative Agent in accordance with
banking industry rules on interbank compensation.

 

A notice of
the Administrative Agent to any Lender or the Borrower with respect to any amount
owing under this subsection (b) shall be conclusive, absent manifest error.

 

(c)             Failure to
Satisfy Conditions Precedent.  If any Lender makes
available to the Administrative Agent funds for any Loan to be made by such
Lender as provided in the foregoing provisions of this Article II, and
such funds are not made available to the Borrower by the Administrative Agent
because the conditions to the applicable Credit Extension set forth in Article
IV are not satisfied or waived in accordance with the terms hereof, the
Administrative Agent shall return such funds (in like funds as received from
such Lender) to such Lender, without interest.

 

(d)             Obligations
of Lenders Several.  The obligations of the
Lenders hereunder to make Committed Loans, to fund participations in Letters of
Credit and Swing Line Loans and to make payments pursuant to Section 10.04(c)
are several and not joint.  The failure
of any Lender to make any Committed Loan, to fund any such participation or to
make any payment under Section 10.04(c) on any date required
hereunder shall not relieve any other Lender of its corresponding obligation to
do so on such date, and no Lender shall be responsible for the failure of any
other Lender to so make its Committed Loan, to purchase its participation or to
make its payment under Section 10.04(c).

 

58

 

(e)             Funding
Source.  Nothing herein shall be deemed to obligate any
Lender to obtain the funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain
the funds for any Loan in any particular place or manner.

 

(f)            Currency Indemnity.  If a payment relative to any of the
Obligations is made to Administrative Agent, L/C Issuer or Lenders in a
currency (the “Other Currency”) other than the currency in which the Obligation
is denominated (the “Obligation Currency”), whether voluntarily or pursuant to
an order of judgment of a court or tribunal of any jurisdiction, such payment
will, to the extent permitted by applicable Law, constitute a discharge of the
liability in respect of such Obligations only to the extent of the amount of
Obligation Currency which Administrative Agent, L/C Issuer or Lenders purchases
with the amount received at the designated place of payment, such purchase to
be at such time as Administrative Agent, L/C Issuer or Lenders may reasonably
elect, but in any event within three Business Days after receipt of such
payment.  If the amount of Obligation
Currency able to be purchased is less than the amount of such Obligation
Currency originally due to it in respect to the relevant Obligation, the
relevant Borrower will indemnify and save Administrative Agent, L/C Issuer and
Lenders harmless from and against any loss or damage arising as a result of
such deficiency.  This indemnity will
constitute an obligation separate and independent from the other obligations
contained herein, will give rise to a separate and independent cause of action,
will apply irrespective of any indulgence granted by Administrative Agent, L/C
Issuer or Lenders and will continue in full force and effect notwithstanding
any judgment or order in respect of any amount due hereunder or under any
judgment or order.

 

2.13        Sharing of Payments by
Lenders.  If any
Lender shall, by exercising any right of setoff or counterclaim or otherwise,
obtain payment in respect of any principal of or interest on any of the
Committed Loans made by it, or the participations in L/C Obligations or in
Swing Line Loans held by it resulting in such Lender’s receiving payment of a
proportion of the aggregate amount of such Committed Loans or participations
and accrued interest thereon greater than its pro  rata share
thereof as provided herein, then the Lender receiving such greater proportion
shall (a) notify the Administrative Agent of such fact, and (b) purchase (for
cash at face value) participations in the Committed Loans and subparticipations
in L/C Obligations and Swing Line Loans of the other Lenders, or make such
other adjustments as shall be equitable, so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans
and other amounts owing them, provided that:

 

(a)             if any such
participations or subparticipations are purchased and all or any portion of the
payment giving rise thereto is recovered, such participations or
subparticipations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest; and

 

(b)             the
provisions of this Section shall not be construed to apply to (x) any payment
made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or (y) any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Committed Loans or
subparticipations in L/C Obligations or Swing 

 

59

 

Line Loans to any assignee or participant, other than to the Borrower or
any Restricted Subsidiary thereof (as to which the provisions of this Section
shall apply).

 

Each Loan
Party consents to the foregoing and agrees, to the extent it may effectively do
so under applicable Law, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against such Loan Party rights of
setoff and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Loan Party in the amount of such
participation.

 

2.14        Increase in Commitments.

 

(a)             Request for
Increase.  Provided there exists no Default, upon notice
to the Administrative Agent (which shall promptly notify the Lenders), the US
Borrower may from time to time, request an increase in the Aggregate
Commitments by an amount (for all such requests) not exceeding $200,000,000; provided
that any such request for an increase shall be in a minimum amount of
$50,000,000.  At the time of sending such
notice, the US Borrower (in consultation with the Administrative Agent) may
determine which Lenders will receive a request for such an increase, may invite
one or more Eligible Assignees to become Lenders pursuant to a joinder
agreement in form and substance satisfactory to the Administrative Agent and
its counsel, or may specify that all Lenders are requested to respond within a
specified time period as to whether such Lender will agree to increase its
Commitment, and if so, the amount of such increase (which shall in no event be
less than ten Business Days from the date of delivery of such notice to all
Lenders).  If the US Borrower makes such
a request to all Lenders, each Lender will respond to such request by notice to
the Administrative Agent within such time period, and any Lender not responding
within such time period shall be deemed to have declined to increase its
Commitment.

 

(b)             Notification
by Administrative Agent; Additional Lenders.  The
Administrative Agent shall notify the Borrower and each Lender of the Lenders’
responses to any request made hereunder.

 

(c)             Effective
Date and Allocations.  If the Aggregate Commitments
are increased in accordance with this Section, the Administrative Agent and the
US Borrower shall determine the effective date (the “Increase Effective Date”)
and the final allocation of such increase. 
The Administrative Agent shall promptly notify the US Borrower and the
Lenders of the final allocation of such increase and the Increase Effective
Date.

 

(d)             Conditions
to Effectiveness of Increase.  As a condition precedent to
such increase, the US Borrower shall deliver to the Administrative Agent a
certificate of each Loan Party dated as of the Increase Effective Date (in
sufficient copies for each Lender) signed by a Responsible Officer of such Loan
Party (i) certifying and attaching the resolutions adopted by the US Borrower
approving or consenting to such increase, and that, before and after giving
effect to such increase, (i) the representations and warranties contained in Article
V and the other Loan Documents are true and correct on and as of the
Increase Effective Date, except to the extent that such representations and
warranties specifically refer to an earlier date, in which case they are true
and correct as of such earlier date, and except that for purposes of this Section 2.14,
the representations and warranties contained in subsections (a) and (b) of

 

60

 

Section 5.05 shall be deemed to refer to the most
recent statements furnished pursuant to subsections (a) and (b), respectively,
of Section 6.01, (ii) no Default exists, and (iii) the financial
covenants contained in Section 7.17 are satisfied on a pro forma basis after giving effect to
such increase (using Consolidated EBITDA for the most recently ended four
fiscal quarter period).  The Borrower
shall prepay any Committed Loans outstanding on the Increase Effective Date
(and pay any additional amounts required pursuant to Section 3.05)
to the extent necessary to keep the outstanding Committed Loans ratable with
any revised Applicable Percentages arising from any nonratable increase in the
Commitments under this Section.

 

(e)             Conflicting
Provisions.  This Section shall supersede
any provisions in Sections 2.13 or 10.01 to the contrary.

 

2.15        Creation of Bankers’
Acceptances.  Upon receipt of a
Committed Loan Notice requesting a Borrowing by way of Bankers’ Acceptances,
which notice is received by the Canadian Administrative Agent not later than
1:00 p.m. one Business Day prior to the requested day of such Borrowing,
and subject to the provisions of this Agreement, each Canadian Lender shall
accept, in accordance with its Canadian Applicable Percentage of the requested
Borrowing from time to time such Bankers’ Acceptances as the Canadian Borrower
shall request provided that:

 

(a)           Bankers’
Acceptances shall be issued on a Canadian Business Day;

 

(b)           each
Bankers’ Acceptance shall have a term of one, two, three or six months
(excluding days of grace), or such shorter period as may be agreed to by the
Canadian Lenders), as selected by the Canadian Borrower in the relevant
Committed Loan Notice provided that each Bankers’ Acceptance shall mature on a
Canadian Business Day;

 

(c)           the face amount of each
Bankers’ Acceptance shall be not less than C$5,000,000 and in multiples of
C$1,000,000 for any amounts in excess thereof; and

 

(d)             each Bankers’ Acceptance shall be in a form
acceptable to the Canadian Administrative Agent.

 

2.16        Terms of Acceptance by
Canadian Lenders.

 

(a)           Delivery
and Payment.  Subject to Sections
2.17 and 2.18 and only if a valid appointment pursuant to Section
2.16(d) is not in place, the Canadian Borrower shall pre-sign and deliver
to each Canadian Lender bankers’ acceptance drafts in sufficient quantity to
meet the Canadian Borrower’s requirements for anticipated Borrowings by way of
Bankers’ Acceptances.  The Canadian
Borrower shall, at its option, provide for payment to Canadian Administrative
Agent for the benefit of Canadian Lenders of each Bankers’ Acceptance on the
date on which a Bankers’ Acceptance matures, either by payment of the full face
amount thereof, through the rollover of maturing BAs or through utilization of
a Conversion to another Type of Borrowing in accordance with this Agreement, or
through a combination thereof.  The Canadian
Borrower waives presentment for payment of Bankers’ Acceptances by Canadian
Lenders and shall not claim from Canadian Lenders any days of grace for the
payment at maturity of Bankers’ Acceptances. 
Any amount owing by the Canadian Borrower in respect of any Bankers’
Acceptance which is not paid in accordance with the foregoing, shall, as and
from the date on 

 

61

 

which such Bankers’ Acceptance
matures, be deemed to be outstanding hereunder as a Canadian Prime Rate Loan.

 

(b)           No
Liability.  Canadian Administrative
Agent and Canadian Lenders shall not be liable for any damage, loss or improper
use of any bankers’ acceptance draft endorsed in blank except for any loss
arising by reason of Canadian Administrative Agent or a Canadian Lender failing
to use the same standard of care in the custody of such bankers’ acceptance
drafts as Canadian Administrative Agent or such Canadian Lender use in the
custody of their own property of a similar nature.

 

(c)           BA Marketing.  Except as agreed between the Canadian Lenders
and the Canadian Borrower from time to time, upon a request by the Canadian
Borrower for a Borrowing by way of Bankers’ Acceptances, the Canadian Borrower
shall elect one of the marketing options (each, an “Option”) described
in Section 2.16(d) pursuant to which each Canadian Lender shall make available
its share of such Borrowing.  Upon
receipt by the Canadian Administrative Agent of a Committed Loan Notice from
the Canadian Borrower in connection with a Borrowing by way of Bankers’
Acceptances, the Canadian Administrative Agent shall promptly notify the
Canadian Lenders thereof and advise each Canadian Lender of the Option selected
by the Canadian Borrower.

 

(d)           BA Marketing Options.  The Borrower shall elect to market Bankers’
Acceptances as follows:

 

(A)          Option #1

 

(i)            it shall obtain quotations regarding
the sale of all the Bankers’ Acceptances to be accepted by the Canadian Lenders
and shall accept such of the offers as it deems appropriate, but in any event
shall accept offers equal to the full amount of the requested Borrowing by way
of Bankers’ Acceptances; and

 

(ii)           it shall provide the Canadian Administrative Agent with details
regarding the sale of the Bankers’ Acceptances described in (A)(i) above,
whereupon the Canadian Administrative Agent shall promptly notify the Canadian
Lenders of the identity of the purchasers of such Bankers’ Acceptances, the
amounts being purchased by such purchasers, the BA discount rates, the discount
proceeds and the BA stamping fees applicable to such borrowing by way of
Bankers’ Acceptances (including each Canadian Lender’s share thereof); or

 

(B)           Option #2

 

(iii)          each Canadian Lender shall purchase all Bankers’ Acceptances accepted by
it at the BA Discount Rate equal to the CDOR Rate for bankers’ acceptances in
Canadian Dollars having comparable issue dates and maturity dates to the
Bankers’ Acceptances purchased by such Canadian Lender.

 

62

 

If the Canadian Borrower fails to elect an Option upon requesting a
Borrowing by way of Bankers’ Acceptances, it will be deemed to have elected
Option #2.

 

(e)           Power
of Attorney.  To facilitate the
procedures contemplated in this Agreement, the Canadian Borrower appoints each
Canadian Lender from time to time as the attorney-in-fact of the Canadian
Borrower to execute, endorse and deliver on behalf of the Canadian Borrower
drafts or depository bills in the form or forms prescribed by such Canadian
Lender for Bankers’ Acceptances denominated in Canadian Dollars.  Each Bankers’ Acceptance executed and
delivered by a Canadian Lender on behalf of the Canadian Borrower shall be as
binding upon the Canadian Borrower as if it had been executed and delivered by
a duly authorized officer of the Canadian Borrower.  The foregoing appointment shall cease to be
effective, in respect of any Canadian Lender regarding the Canadian Borrower,
three Business Days following receipt by such Canadian Lender of a written
notice from the Canadian Borrower revoking such appointment (which notice shall
be copied to the Canadian Administrative Agent); provided that any such
revocation shall not affect Bankers’ Acceptances previously executed and
delivered by such Canadian Lender pursuant to such appointment.

 

(f)            Pro-Rata Treatment
of Canadian Committed Advances.

 

(i)            Each Canadian
Committed Advance shall be made available by each Canadian Lender and all
repayments and reductions in respect thereof shall be made and applied in a
manner so that the Canadian Committed Advances outstanding hereunder to each
Canadian Lender will, to the extent possible, thereafter be pro rata in
accordance with such Canadian Lender’s Canadian Applicable Percentage.  The Canadian Administrative Agent is
authorized by the Canadian Borrower and each Canadian Lender to determine, in
its sole and unfettered discretion, the portion of each Canadian Committed
Advance and each Type of Canadian Committed Advance to be made available by
each Canadian Lender to the Canadian Borrower and the application of repayments
and reductions of Canadian Committed Advances to give effect to the provisions
of this section, provided that no Canadian Lender shall, as a result of any
such determination, have a Canadian Applicable Percentage of the aggregate
Canadian Committed Advances which is in excess of its Canadian Applicable
Percentage of the Canadian Allocated Aggregate Commitment.

 

(ii)           In the event it is not
practicable to allocate Bankers’ Acceptances to each Canadian Lender such that
the aggregate amount of Bankers’ Acceptances required to be purchased by such
Canadian Lender hereunder is in a whole multiple of C$100,000, the Canadian
Administrative Agent is authorized by the Canadian Borrower and each Canadian
Lender to make such allocation as the Canadian Administrative Agent determines
in its sole and unfettered discretion may be equitable in the circumstances
and, if the aggregate amount of such Bankers’ Acceptances is not a whole
multiple of C$100,000, then the Canadian Administrative Agent may allocate (on
a basis considered by it to be equitable) the excess of such Canadian Committed
Advance over the next lowest whole multiple of C$100,000 to one Canadian
Lender, which shall purchase a Bankers’ Acceptance with a face amount equal to
the excess and having the same term as the corresponding Bankers’
Acceptances.  In no event shall the
portion of the outstanding Borrowings by way of Bankers’ Acceptances of a
Canadian Lender exceed such Canadian Lenders’ Canadian Applicable Percentage of
the aggregate Borrowings by way of 

 

63

 

Bankers’ Acceptances by more
than C$100,000 as a result of such exercise of discretion by the Canadian
Administrative Agent.

 

(g)           BA
Equivalent Advances.  Each Canadian
Lender may, in lieu of accepting a BA on the date of any Borrowing, make a BA
Equivalent Advance.  The amount of each
BA Equivalent Advance shall be equal to the Discount Proceeds (with reference
to the applicable BA Discount Rate) which would be realized from a hypothetical
sale of those BAs which, but for this subsection, would have been sold to such
Canadian Lender.  If such Canadian Lender
does not otherwise have a BA Discount Rate applicable to it, the applicable BA
Discount Rate will be calculated as though such Canadian Lender was listed on
Schedule II or Schedule III of the Bank Act (Canada).  Any BA Equivalent Advance shall be made on
the relevant date of any Borrowing, and shall remain outstanding for the term
of the corresponding BA.  On the maturity
date of the corresponding BA, such BA Equivalent Advance shall be repaid in an
amount equal to the face amount of a draft that would have been accepted by
such Canadian Lender if such Canadian Lender had accepted and purchased a BA
hereunder.  Each BA Equivalent Advance
made pursuant to this subsection shall be deemed to be a BA accepted and
purchased by such Canadian Lender pursuant to the terms hereof, and except in
this subsection, any reference to a BA shall include such BA Equivalent
Advance.

 

(h)           Existing Bankers’
Acceptance at the Closing Date.  The Canadian
Lenders and the Canadian Borrower acknowledge that the Canadian Borrower has
obligations in the principal sum of C$15,000,000 in connection with the
Existing BAs.  The Existing BAs will be
deemed to be outstanding as Bankers’ Acceptances under this Agreement, will
reduce the availability under this Agreement by the principal amount thereof
outstanding at any time and will otherwise be subject to the terms and
conditions of this Agreement.  The
Canadian Borrower undertakes to repay the holders of the Existing BAs in full
the amounts outstanding in connection with the Existing BAs on the applicable
maturity dates, which repayment the Canadian Borrower may make from the
proceeds of a Canadian Loan obtained by it in accordance with the terms of this
Agreement.

 

(i)            Indemnification.  Each Canadian Lender, to the extent of its
Canadian Applicable Percentage, agrees to indemnify and save harmless the
Existing BA Lenders from any liability the Existing BA Lenders may incur or
suffer with respect to the Existing BAs by executing an indemnification
agreement in favor of the Existing BA Lenders substantially in the form
attached hereto as Exhibit I.

 

2.17        General Procedures for
Bankers’ Acceptances.

 

(a)           Continuations.  In the case of a continuation of maturing Bankers’
Acceptances of the Canadian Borrower, each Canadian Lender in order to satisfy
the continuing liability of the Canadian Borrower to the Canadian Lender for
the face amount of the maturing Bankers’ Acceptances, shall retain for its own
account the Net BA Proceeds of each new Bankers’ Acceptance issued by it in
connection with such continuation; and the Canadian Borrower shall, on the
maturity date of the maturing Bankers’ Acceptances of the Canadian Borrower,
pay to Canadian Administrative Agent for the benefit of Canadian Lenders an
amount equal to the difference between the face amount of such maturing
Bankers’ Acceptances and the aggregate Net BA Proceeds of such new Bankers’
Acceptances.

 

64

 

(b)           Conversion from
Canadian Prime Rate Loans or Canadian US Dollar Base Rate Loans.  In the case of a conversion from a Borrowing
of Canadian Prime Rate Loans or Canadian US Dollar Base Rate Loans to the
Canadian Borrower into a Borrowing by way of Bankers’ Acceptances to be
accepted by a Canadian Lender pursuant to Section 2.12, such Canadian
Lender, in order to satisfy the continuing liability of the Canadian Borrower
to it for the principal amount of the Canadian Prime Rate Loans or Canadian US
Dollar Base Rate Loans being converted, shall retain for its own account the
Discount Proceeds of each new Bankers’ Acceptance issued by it in connection
with such conversion; and the Canadian Borrower shall, on the date of issuance
of the Bankers’ Acceptances, pay to Canadian Administrative Agent for the
benefit of Canadian Lenders an amount equal to the difference between the
aggregate principal amount of the Canadian Prime Rate Loans or Canadian US
Dollar Base Rate Loans being converted owing to the Canadian Lenders and the
aggregate Discount Proceeds of such Bankers’ Acceptances.

 

(c)           Authorization.
The Canadian Borrower hereby authorizes each Canadian Lender to complete,
stamp, hold, sell, rediscount or otherwise dispose of all Bankers’ Acceptances
of the Canadian Borrower accepted by it pursuant to this section in accordance
with the instructions provided by the Canadian Borrower pursuant to Section
2.03, as applicable.

 

(d)           Depository Notes.  The parties agree that in the administering
of Bankers’ Acceptances, each Canadian Lender may avail itself of the debt
clearing services offered by a clearing house for depository notes pursuant to
the Depository Bills and Notes Act
(Canada) and that the procedures set forth in Article II be deemed
amended to the extent necessary to comply with the requirements of such debt
clearing services.

 

2.18        Execution of Bankers’
Acceptances.  The signatures of any
authorized signatory on Bankers’ Acceptances which are authorized and requested
hereunder by the Canadian Borrower may, at the option of the Canadian Borrower,
be reproduced in facsimile and such Bankers’ Acceptances bearing such facsimile
signatures shall be binding on the Canadian Borrower as if they had been
manually signed by such authorized signatory. 
Notwithstanding that any person whose signature appears on any Bankers’
Acceptance as a signatory may no longer be an authorized signatory of the
Canadian Borrower at the date of issuance of a Bankers’ Acceptance, and
notwithstanding that the signature affixed may be a reproduction only, such
signature shall, unless prior to its use the Canadian Borrower has notified the
Canadian Administrative Agent in writing to contrary, nevertheless be valid and
sufficient for all purposes as if such authority had remained in force at the time
of such issuance and as if such signature had been manually applied, and any
such Bankers’ Acceptance so signed shall be binding on the Canadian Borrower.

 

2.19        Prepayment of Bankers’
Acceptances.  Any amounts received by
Canadian Administrative Agent to be applied to outstanding Bankers’
Acceptances, whether pursuant to an Event of Default and acceleration of the
Obligations under Section 8.01 or a prepayment as permitted or required
under Section 2.05, shall be deposited into an escrow account maintained
by and in the name of Canadian Administrative Agent for the benefit of Canadian
Lenders for set-off against such outstanding Bankers’ Acceptances as they
mature, and pending such application shall bear interest at the rate declared
by Canadian Administrative Agent from time to time as that payable by it in
respect of deposits for such amount and for such period relative to 

 

65

 

the maturity date of such
Bankers’ Acceptances, as applicable. 
Upon the repayment of all such outstanding Bankers’ Acceptances, any
amounts remaining (including accrued interest) will (i) during the continuance
of an Event of Default, be subject to such remedies as each Lender Party may
have hereunder or under applicable Law, or (ii) otherwise, be released to the
Canadian Borrower.

 

ARTICLE III.

TAXES, YIELD PROTECTION AND ILLEGALITY

 

3.01        Taxes.

 

(a)             Payments
Free of Taxes.  Any and all payments by or
on account of any obligation of any Borrower hereunder or under any other Loan
Document shall be made free and clear of and without reduction or withholding
for any Indemnified Taxes or Other Taxes, provided that if a Borrower
shall be required by applicable Law to deduct any Indemnified Taxes (including
any Other Taxes) from such payments, then (i) the sum payable shall be
increased (and in the case of interest, the amount of interest 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, Lender or L/C Issuer, as the case may be, receives an
amount equal to the sum it would have received had no such deductions been
made, (ii) such Borrower shall make such deductions and (iii) such Borrower
shall timely pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable Law.

 

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

 

(c)             Indemnification
by the Borrower.  Each Borrower shall
indemnify the Administrative Agent, each Lender and the L/C Issuer, within 10
days after demand therefor, for the full amount of any Indemnified Taxes or
Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on
or attributable to amounts payable under this Section) paid by the
Administrative Agent, such Lender or the L/C Issuer, as the case may be, 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.  A certificate as to the
amount of such payment or liability delivered to the Borrower by a Lender or
the L/C Issuer (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Lender or the L/C
Issuer, shall be conclusive absent manifest error.

 

(d)             Evidence of
Payments.  As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by a Borrower to a Governmental Authority,
such 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)             Status of
Lenders.  Any Lender that is entitled to an exemption
from or reduction of withholding tax with respect to payments hereunder or
under any other Loan Document shall 

 

66

 

deliver to the applicable Borrower (with a copy to the Administrative
Agent), at the time or times prescribed by applicable Law or reasonably
requested by such Borrower or the Administrative Agent, such properly completed
and executed documentation prescribed by applicable Law as will permit such
payments to be made without withholding or at a reduced rate of
withholding.  In addition, any Lender, if
requested by a Borrower or the Administrative Agent, shall deliver such other
documentation prescribed by applicable Law or reasonably requested by such Borrower
or the Administrative Agent as will enable such Borrower or the Administrative
Agent to determine whether or not such Lender is subject to backup withholding
or information reporting requirements.

 

Without
limiting the generality of the foregoing, in the event that the US Borrower is
resident for tax purposes in the United States, any Foreign Lender shall
deliver to the US Borrower and the Administrative Agent (in such number of
copies as shall be requested by the recipient) on or prior to the date on which
such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the request of the US Borrower or the Administrative
Agent, but only if such Foreign Lender is legally entitled to do so), whichever
of the following is applicable:

 

(i)            duly
completed copies of Internal Revenue Service Form W-8BEN claiming eligibility
for benefits of an income tax treaty to which the United States is a party,

 

(ii)           duly
completed copies of Internal Revenue Service Form W-8ECI,

 

(iii)          in the case
of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under section 881(c) of the Code, (x) a certificate to the effect that
such Foreign Lender is not (A) a “bank” within the meaning of section
881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the US Borrower
within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled
foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly
completed copies of Internal Revenue Service Form W-8BEN, or

 

(iv)          any other
form prescribed by applicable Law as a basis for claiming exemption from or a
reduction in United States federal withholding tax duly completed together with
such supplementary documentation as may be prescribed by applicable Law to
permit the US Borrower to determine the withholding or deduction required to be
made.

 

(f)              Treatment of
Certain Refunds.  If the Administrative Agent,
any Lender or the L/C Issuer determines, in its sole discretion, that it has
received a refund of any Taxes or Other Taxes as to which it has been
indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section, it shall pay to the Borrower an
amount equal to such refund (but only to the extent of indemnity payments made,
or additional amounts paid, by the Borrower under this Section with respect to
the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of the Administrative Agent, such Lender or the L/C Issuer, as the
case may be, and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund), provided that the 

 

67

 

Borrower, upon the request of the Administrative Agent, such Lender or
the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Administrative Agent, such Lender or the L/C Issuer in the
event the Administrative Agent, such Lender or the L/C Issuer is required to
repay such refund to such Governmental Authority.  This subsection shall not be construed to
require the Administrative Agent, any Lender or the L/C Issuer to make
available its tax returns (or any other information relating to its taxes that
it deems confidential) to the Borrower or any other Person.

 

3.02        Illegality.  If
any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, make
or maintain any Bankers’ Acceptance or to determine or charge interest rates
based upon the Eurodollar Rate or BA Discount Rate, or any Governmental
Authority has imposed material restrictions on the authority of such Lender to
purchase or sell, or to take deposits of, Dollars in the London interbank
market, then, on notice thereof by such Lender to the Borrower through the
Administrative Agent, any obligation of such Lender to make or continue
Eurodollar Rate Loans or Bankers’ Acceptance, as applicable, or to convert Base
Rate Committed Loans or Canadian US Dollar Base Rate Loans, as applicable, to
Eurodollar Rate Loans or Bankers’ Acceptance, as applicable, shall be suspended
until such Lender notifies the Administrative Agent and the Borrower that the
circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, the Borrower
shall, upon demand from such Lender (with a copy to the Administrative Agent),
prepay or, if applicable, convert all Eurodollar Rate Loans or Bankers’
Acceptance, as applicable, of such Lender to Base Rate Loans or Canadian Prime
Rate Loans, as applicable, either on the last day of the Interest Period
therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate
Loans to such day, or immediately, if such Lender may not lawfully continue to
maintain such Eurodollar Rate Loans or such Bankers’ Acceptances.  Upon any such prepayment or conversion, the
Borrower shall also pay accrued interest on the amount so prepaid or converted.

 

3.03        Inability to Determine
Rates. 
If the Required Lenders determine that for any reason in
connection with any request for a Eurodollar Rate Loan or a Bankers’ Acceptance
or a conversion to or continuation thereof that (a) Dollar deposits are
not being offered to banks in the London interbank eurodollar market for the
applicable amount and Interest Period of such Eurodollar Rate Loan,
(b) adequate and reasonable means do not exist for determining the
Eurodollar Rate or BA Discount Rate for any requested Interest Period with
respect to a proposed Eurodollar Rate Loan or Bankers’ Acceptance, or
(c) the Eurodollar Rate or BA Discount Rate for any requested Interest
Period with respect to a proposed Eurodollar Rate Loan or Bankers’ Acceptance
does not adequately and fairly reflect the cost to such Lenders of funding such
Loan or Bankers’ Acceptance, the Administrative Agent will promptly so notify
the Borrower and each Lender. 
Thereafter, the obligation of the Lenders to make or maintain Eurodollar
Rate Loans or Bankers’ Acceptance, as applicable, shall be suspended until the
Administrative Agent (upon the instruction of the Required Lenders) revokes
such notice.  Upon receipt of such
notice, the Borrower may revoke any pending request for a Borrowing of,
conversion to or continuation of Eurodollar Rate Loans, or Bankers’ Acceptance,
as applicable, or, failing that, will be deemed to have converted such request
into a request for a Committed 

 

68

 

Borrowing of Base Rate Loans or
Canadian Prime Rate Loans, as applicable in the amount specified therein.

 

3.04        Increased Costs; Reserves
on Eurodollar Rate Loans.

 

(a)             Increased
Costs Generally. 
If any Change in Law shall:

 

(i)            impose,
modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for
the account of, or credit extended or participated in by, any Lender (except
any reserve requirement contemplated by Section 3.04(e)) or the L/C
Issuer;

 

(ii)           subject any
Lender or the L/C Issuer to any tax of any kind whatsoever with respect to this
Agreement, any Letter of Credit, any participation in a Letter of Credit, any Eurodollar
Rate Loan or any Bankers’ Acceptance made by it, or change the basis of
taxation of payments to such Lender or the L/C Issuer in respect thereof
(except for Indemnified Taxes or Other Taxes covered by Section 3.01
and the imposition of, or any change in the rate of, any Excluded Tax payable
by such Lender or the L/C Issuer); or

 

(iii)          impose on
any Lender or the L/C Issuer or the London interbank market any other
condition, cost or expense affecting this Agreement or Eurodollar Rate Loans
made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Eurodollar Rate Loan (or of
maintaining its obligation to make any such Loan), making or maintaining any
Bankers’ Acceptance (or of maintaining its obligation to make any such Bankers’
Acceptance), or to increase the cost to such Lender or the L/C Issuer of
participating in, issuing or maintaining any Letter of Credit (or of maintaining
its obligation to participate in or to issue any Letter of Credit), or to
reduce the amount of any sum received or receivable by such Lender or the L/C
Issuer hereunder (whether of principal, interest or any other amount) then,
upon request of such Lender or the L/C Issuer, the Borrower will pay to such
Lender or the L/C Issuer, as the case may be, such additional amount or amounts
as will compensate such Lender or the L/C Issuer, as the case may be, for such
additional costs incurred or reduction suffered.

 

(b)             Capital
Requirements.  If any Lender or the L/C
Issuer determines that any Change in Law affecting such Lender or the L/C
Issuer or any Lending Office of such Lender or such Lender’s or the L/C
Issuer’s holding company, if any, regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender’s or the L/C
Issuer’s capital or on the capital of such Lender’s or the L/C Issuer’s holding
company, if any, as a consequence of this Agreement, the Commitments of such
Lender or the Loans made by, or participations in Letters of Credit held by,
such Lender, or the Letters of Credit issued by the L/C Issuer, to a level
below that which such Lender or the L/C Issuer or such Lender’s or the L/C
Issuer’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s or the L/C Issuer’s policies and the policies
of such Lender’s or the L/C Issuer’s holding company with respect to capital
adequacy), then from time to time the 

 

69

 

Borrower will pay to such Lender or the L/C Issuer, as the case may be,
such additional amount or amounts as will compensate such Lender or the L/C
Issuer or such Lender’s or the L/C Issuer’s holding company for any such
reduction suffered.

 

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

 

(d)             Delay in
Requests.  Failure or delay on the part of any Lender or
the L/C Issuer to demand compensation pursuant to the foregoing provisions of
this Section shall not constitute a waiver of such Lender’s or the L/C Issuer’s
right to demand such compensation, provided that the Borrower shall not
be required to compensate a Lender or the L/C Issuer pursuant to the foregoing
provisions of this Section for any increased costs incurred or reductions
suffered more than nine months prior to the date that such Lender or the L/C
Issuer, as the case may be, notifies the Borrower of the Change in Law giving
rise to such increased costs or reductions and of such Lender’s or the L/C
Issuer’s intention to claim compensation therefor (except that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the nine-month period referred to above shall be extended to include the period
of retroactive effect thereof).

 

(e)             Reserves on
Eurodollar Rate Loans. 
The Borrower shall pay to each Lender, as long as such Lender shall be
required to maintain reserves with respect to liabilities or assets consisting
of or including Eurocurrency funds or deposits (currently known as
“Eurocurrency liabilities”), additional interest on the unpaid principal amount
of each Eurodollar Rate Loan equal to the actual costs of such reserves
allocated to such Loan by such Lender (as determined by such Lender in good
faith, which determination shall be conclusive), which shall be due and payable
on each date on which interest is payable on such Loan, provided the Borrower
shall have received at least 10 days’ prior notice (with a copy to the
Administrative Agent) of such additional interest from such Lender.  If a Lender fails to give notice 10 days
prior to the relevant Interest Payment Date, such additional interest shall be
due and payable 10 days from receipt of such notice.

 

3.05        Compensation for Losses.  Upon
demand of any Lender (with a copy to the Administrative Agent) from time to
time, the Borrower shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a)             any
continuation, conversion, payment or prepayment of any Loan other than a Base
Rate Loan, Canadian Prime Rate Loan or Canadian US Dollar Base Rate Loan on a
day other than the last day of the Interest Period for such Loan (whether
voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b)             any failure
by the Borrower (for a reason other than the failure of such Lender to make a
Loan) to prepay, borrow, continue or convert any Loan other than a Base Rate
Loan, 

 

70

 

Canadian Prime Rate Loan or Canadian US Dollar Base Rate Loan on the
date or in the amount notified by the Borrower; or

 

(c)             any
assignment of a Eurodollar Rate Loan on a day other than the last day of the
Interest Period therefor as a result of a request by the Borrower pursuant to Section 10.13;

 

including any loss of anticipated profits and any loss or expense
arising from the liquidation or reemployment of funds obtained by it to
maintain such Loan or from fees payable to terminate the deposits from which
such funds were obtained.  The Borrower
shall also pay any customary administrative fees charged by such Lender in
connection with the foregoing.

 

For purposes of calculating amounts payable by the Borrower to the
Lenders under this Section 3.05, each Lender shall be deemed to
have funded each Eurodollar Rate Loan made by it at the Eurodollar Rate for
such Loan by a matching deposit or other borrowing in the London interbank
eurodollar market for a comparable amount and for a comparable period, whether
or not such Eurodollar Rate Loan was in fact so funded.

 

3.06        Mitigation Obligations.  If any Lender
requests compensation under Section 3.04, or 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 3.01,
or if any Lender gives a notice pursuant to Section 3.02, then such
Lender shall use reasonable efforts to designate a different Lending Office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the
judgment of such Lender, such designation or assignment (i) would eliminate or
reduce amounts payable pursuant to Section 3.01 or 3.04,
as the case may be, in the future, or eliminate the need for the notice
pursuant to Section 3.02, as applicable, and (ii) in each case,
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.

 

3.07        Survival.  All of the Borrower’s
obligations under this Article III shall survive termination of the
Aggregate Commitments and repayment of all other Obligations hereunder.

 

ARTICLE IV.

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

 

4.01        Conditions of Initial
Credit Extension.  The obligation of the L/C Issuer and each
Lender to make its initial Credit Extension hereunder is subject to
satisfaction of the following conditions precedent:

 

(a)             The US
Administrative Agent’s receipt of the following, each of which shall be
originals or telecopies (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer (or a vice
president, in the case of Security Documents and Guaranties, or a secretary or
assistant secretary, in the case of certificates) of the signing Loan Party,
each dated the Closing Date (or, in the case of certificates of governmental
officials, a recent date before the Closing Date) and each in form and substance
reasonably satisfactory to the US Administrative Agent and each of the Lenders:

 

71

 

(i)            executed
counterparts of this Agreement and the Guaranty, sufficient in number for
distribution to the US Administrative Agent, each Lender and each Borrower;

 

(ii)           a Note
executed by the US Borrower or the Canadian Borrower, as applicable, in favor
of each Lender requesting a Note;

 

(iii)          each
Security Document listed in the Security Schedule;

 

(iv)          such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Loan Party as the US
Administrative Agent may require evidencing the identity, authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible
Officer in connection with this Agreement and the other Loan Documents to which
such Loan Party is a party;

 

(v)           such
documents and certifications as the US Administrative Agent may reasonably
require to evidence that each Loan Party is duly organized or formed, and that
each Loan Party is validly existing, in good standing and qualified to engage
in business in each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification;

 

(vi)          favorable
opinions of Vinson & Elkins LLP, counsel to the Loan Parties, addressed to
the US Administrative Agent and each Lender, as to the matters set forth in Exhibit G
and such other matters concerning the Loan Parties and the Loan Documents
as the Required Lenders may reasonably request, and favorable opinions of
Holme, Roberts and Owen, special Colorado, Montana, Utah and Wyoming counsel to
the Loan Parties, Morrison & Foerster, special California counsel to the
Loan Parties, of Bennett Jones LLP special Alberta counsel to the Loan Parties,
of Stewart McKelvey Sterling Scales special Nova Scotia counsel to the Loan
Parties, and of Duane Morris LLP, special Pennsylvania and New Jersey counsel
to the US Borrower, in each case addressed to the US Administrative Agent,
Canadian Administrative Agent, each Lender and each L/C Issuers as to such
matters concerning the Loan Parties and the Loan Documents as the US
Administrative Agent may reasonably request;

 

(vii)         a
certificate of a Responsible Officer of the US Borrower either (A) attaching
copies of all consents, licenses and approvals required in connection with the
execution, delivery and performance by each Loan Party and the validity against
each Loan Party of the Loan Documents to which it is a party, and such
consents, licenses and approvals shall be in full force and effect, or (B)
stating that no such consents, licenses or approvals are so required;

 

(viii)        the Initial
Financial Statements;

 

(ix)           a
certificate signed by a Responsible Officer of the US Borrower certifying
(A) that the conditions specified in Sections 4.02(a), (b)
and (c) have been satisfied and (B) the current Debt Ratings;

 

(x)            evidence
that all insurance required to be maintained pursuant to the Loan Documents has
been obtained and is in effect;

 

72

 

(xi)           documents,
in form and substance satisfactory to US Administrative Agent, confirming that
with the concurrent payment in full of all indebtedness under the Rangeland
Credit Facility on the Closing Date other than Existing Letters of Credit and
Existing BAs, (A) all Lien releases, UCC-3 termination statements and other
documentation evidencing the release of Liens on any Loan Party’s property
securing such indebtedness shall be released and (B) the credit facilities
thereunder shall contemporaneously therewith be terminated;

 

(xii)          a
certificate from a Responsible Officer of the US Borrower, in substantially the
form of Exhibit H hereto, attesting to the Solvency of each Loan Party
before and after giving effect to the transactions contemplated by this
Agreement and the Valero Acquisition Documents;

 

(xiii)         a
certificate from the chief executive officer and chief financial officer of the
US Borrower (A) attaching forecasts, in form reasonably satisfactory to the US
Administrative Agent, of balance sheets, income statements and cash flow
statements for each year commencing with the first fiscal year of the US
Borrower following the Closing Date through the Maturity Date, (B) certifying
that (1) the pro forma Consolidated EBITDA (calculated giving pro forma effect
to the Valero Acquisition) for the twelve months ended June 30, 2005 was not
less than $128,500,000, (2) the pro forma Consolidated Total Leverage Ratio
(calculated giving pro forma effect to the Valero Acquisition) for the twelve
months ended June 30, 2005 was not greater than 4.2 to 1.0, and (3) such pro
forma financial statements and forecasts were prepared in good faith on the
basis of assumptions that were reasonable in light of then existing conditions,
and (C) certifying (prior to giving effect to the Valero Acquisition) as to
matters that would be required by Section 906 and Section 302 of
Sarbanes-Oxley.

 

(xiv)        a copy of
each Valero Acquisition Document and all other material documents, instruments
and agreements executed and/or delivered by any Loan Party in connection with
the Valero Acquisition Agreement and the closing of the Valero Acquisition,
together with a certificate from the Responsible Officer of the US Borrower
certifying that (A) such copies are accurate and complete and represent the
complete understanding and agreement of the parties thereto, (B) no material
right or obligation of any party thereto has been modified, amended or waived,
except as otherwise disclosed in such certificate, (C) the US Borrower has
obtained all approvals required by the United States Federal Trade Commission
and (D) subject only to funding the initial Borrowing to be made hereunder, the
Valero Acquisition has been consummated on the terms set forth in such Valero
Acquisition Documents; and

 

(xv)         such other
assurances, certificates, documents, consents or opinions as the US
Administrative Agent, the L/C Issuer, Swing Line Lender, or the Required
Lenders reasonably may require.

 

(b)           An executed
indemnification agreement from the Canadian Lenders shall be delivered to the
Existing BA Lenders in substantially the form of Exhibit I attached hereto.

 

(c)           Any fees
required to be paid on or before the Closing Date shall have been paid.

 

73

 

(d)             Unless
waived by the US Administrative Agent, the US Borrower shall have paid all
fees, charges and disbursements of counsel to the US Administrative Agent to
the extent invoiced prior to or on the Closing Date, plus such additional
amounts of such fees, charges and disbursements as shall constitute its
reasonable estimate of such fees, charges and disbursements incurred or to be
incurred by it through the closing proceedings (provided that such estimate
shall not thereafter preclude a final settling of accounts between the US
Borrower and the US Administrative Agent).

 

Without
limiting the generality of the provisions of Section 9.04, for
purposes of determining compliance with the conditions specified in this Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the US Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.

 

4.02        Conditions to all Credit
Extensions.  The obligation of each Lender to honor any Request
for Credit Extension (other than a Committed Loan Notice requesting only a
conversion of Committed Loans to the other Type, or a continuation of
Eurodollar Rate Loans or BAs) is subject to the following conditions precedent:

 

(a)             The representations
and warranties of the US Borrower and each other Loan Party contained in Article
V or any other Loan Document, or which are contained in any document
furnished at any time under or in connection herewith or therewith, shall be
true and correct on and as of the date of such Credit Extension, except to the
extent that such representations and warranties specifically refer to an
earlier date, in which case they shall be true and correct as of such earlier
date, and except that for purposes of this Section 4.02, the
representations and warranties contained in subsections (a) and (b) of Section 5.05
shall be deemed to refer to the most recent statements furnished pursuant to
clauses (a) and (b), respectively, of Section 6.01.

 

(b)             No Default
shall exist, or would result from such proposed Credit Extension or from the
application of the proceeds thereof.

 

(c)             No Material
Adverse Effect shall have occurred, and no event or circumstance shall have
occurred that could reasonably be expected to cause a Material Adverse Effect,
relating to the US Borrower’s consolidated financial condition or businesses
since the date of the date of the most recent financial statements delivered
pursuant to Section 4.01(a)(viii) or Section 6.01, as applicable.

 

(d)             Each Loan Party
shall be Solvent.

 

(e)             The US
Administrative Agent and, if applicable, the L/C Issuer shall have received a
Request for Credit Extension in accordance with the requirements hereof.

 

Each Request
for Credit Extension (other than a Committed Loan Notice requesting only a
conversion of Committed Loans to the other Type or a continuation of Eurodollar
Rate Loans) submitted by the US Borrower shall be deemed to be a representation
and warranty that the 

 

74

 

conditions specified in Sections 4.02(a),
(b), (b) and (d) have been satisfied on and as of the date of the
applicable Credit Extension.

 

ARTICLE V.

REPRESENTATIONS AND WARRANTIES

 

The US Borrower represents and warrants to the Administrative Agent and
the Lenders that:

 

5.01        Existence, Qualification
and Power; Compliance with Laws.  Each
Loan Party (a) is duly organized or formed, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or
organization, (b) has all requisite power and authority and all requisite
governmental licenses, authorizations, consents and approvals to (i) own or
lease its assets and carry on its business and (ii) execute, deliver and
perform its obligations under the Loan Documents to which it is a party,
(c) is duly qualified and is licensed and in good standing under the Laws
of each jurisdiction where its ownership, lease or operation of properties or
the conduct of its business requires such qualification or license, and (d) is
in compliance with all Laws; except in each case referred to in clause (b)(i),
(c) or (d), to the extent that failure to do so could not reasonably be
expected to have a Material Adverse Effect.

 

5.02        Authorization; No
Contravention.  The execution, delivery and performance by each
Loan Party of each Loan Document to which such Person is party, have been duly
authorized by all necessary corporate or other organizational action, and do
not and will not (a) contravene the terms of any of such Person’s Organization
Documents; (b) conflict with or result in any breach or contravention of, or
the creation of any Lien under, or require any payment to be made under (i) any
material Contractual Obligation to which such Person is a party or affecting
such Person or the properties of such Person or any of its Subsidiaries or (ii)
any order, injunction, writ or decree of any Governmental Authority or any
arbitral award to which such Person or its property is subject; or (c) violate
any Law.

 

5.03        Governmental
Authorization; Other Consents.  No
approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, any Loan Party of this Agreement or any other Loan
Document or any Valero Acquisition Document which has not been obtained or
waived, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors’ rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.

 

5.04        Binding Effect.  This Agreement has
been, and each other Loan Document, when delivered hereunder, will have been,
duly executed and delivered by each Loan Party that is party thereto.  This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and binding
obligation of such Loan Party, enforceable against each Loan Party that is party
thereto in accordance with its terms.

 

75

 

5.05        Financial Statements;
No Material Adverse Effect.

 

(a)             The
Audited Financial Statements (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein; (ii) fairly present, in all material respects, the
consolidated financial condition of the US Borrower and its Subsidiaries as of
the date thereof and their results of operations for the period covered thereby
in accordance with GAAP consistently applied throughout the period covered
thereby, except as otherwise expressly noted therein; and (iii) disclose all
material indebtedness and other liabilities, direct or contingent, of the US
Borrower and its Subsidiaries as of the date thereof, including liabilities for
taxes, material financial commitments and Indebtedness.

 

(b)             The
unaudited consolidated and consolidating balance sheets and statements of
income of the US Borrower and its Subsidiaries dated June 30, 2005, and the
related consolidated statements of shareholders’ equity and cash flows for the
fiscal quarter ended on that date (i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby, except as otherwise
expressly noted therein, and (ii) fairly present, in all material respects, the
consolidated and consolidating financial condition of the US Borrower and its
Subsidiaries as of the date thereof and their results of operations for the
period covered thereby, subject, in the case of clauses (i) and (ii), to the
absence of footnotes and to normal year-end audit adjustments.  Schedule 5.05 sets forth all material
indebtedness and other liabilities not included in the financial statements,
direct or contingent, of the US Borrower and its consolidated Subsidiaries as
of the date of such financial statements, including liabilities for taxes,
material financial commitments and Indebtedness.

 

(c)             Since
the date of the Audited Financial Statements, there has been no event or
circumstance, either individually or in the aggregate, that has had or could
reasonably be expected to have a Material Adverse Effect.

 

(d)             The
consolidated and consolidating pro forma balance sheets of the US Borrower and
its Subsidiaries as at June 30, 2005 (taking into account the Valero
Acquisition), and the related consolidated and consolidating pro forma
statement of income and consolidated statement of cash flows of the US Borrower
and its Subsidiaries for the period covered thereby, certified by the chief
financial officer of the US Borrower, copies of which have been furnished to
each Lender, fairly present, in all material respects, the consolidated and
consolidating pro forma financial condition of the US Borrower and its
Subsidiaries as at such date and the consolidated and consolidating pro forma
results of operations of the US Borrower and its Subsidiaries for the period
ended on such date, all in accordance with GAAP.

 

5.06        Litigation.   There are no
actions, suits, proceedings, claims or disputes pending or, to the knowledge of
the US Borrower, threatened, at law, in equity, in arbitration or before any
Governmental Authority, by or against the US Borrower or any of its Restricted
Subsidiaries or against any of their properties or revenues that (a) purport to
affect or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby, (b) purport to affect or pertain to the
Valero Acquisition or any Valero Acquisition Document, or (c) either
individually or in the aggregate, if determined adversely, could reasonably be
expected to have a Material Adverse Effect.

 

5.07        No Default.  Neither the US
Borrower nor any of its Restricted Subsidiaries is in default under or with
respect to any Contractual Obligation that could, either individually or in 

 

76

 

the aggregate, reasonably be
expected to have a Material Adverse Effect. 
No Default has occurred and is continuing or would result from the
consummation of the transactions contemplated by this Agreement or any other
Loan Document.

 

5.08        Ownership of Property;
Liens.  Each
of the US Borrower and each Restricted Subsidiary has good record and
marketable title in fee simple to, or valid leasehold or contractual interests
in, all real property necessary or used in the ordinary conduct of its
business, except for such defects in title as could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.  The property of the US Borrower and its
Restricted Subsidiaries is subject to no Liens, other than Liens permitted by Section 7.01.  Notwithstanding the foregoing, to the extent
that the exercise by the Lenders of their respective rights or remedies with
respect to the Collateral or any other action taken or proposed to be taken by
the Lenders hereunder or under the other Loan Documents would result in a
change of control of any PUC Restricted Subsidiary, such exercise is subject to
filings with and prior approval by the applicable PUC as may be required in
respect of a regulated utility under the applicable PUC’s regulations.

 

5.09        Environmental
Compliance.  The
US Borrower and its Subsidiaries periodically conduct in the ordinary course of
business a review of the effect of existing Environmental Laws and claims
alleging potential liability or responsibility for violation of any
Environmental Law on their respective businesses, operations and properties,
and as a result thereof based on the information obtained, the US Borrower has
reasonably concluded that, except as specifically disclosed in Schedule 5.09,
such Environmental Laws and claims could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.

 

5.10        Insurance.  The properties
of the US Borrower and its Restricted Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the US Borrower, in
such amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where the US Borrower or the applicable Subsidiary
operates.

 

5.11        Taxes.  The US
Borrower and its Restricted Subsidiaries have filed all Federal, state and
other material tax returns and reports required to be filed, and have paid all
Federal, state and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in
good faith by appropriate proceedings diligently conducted and for which
adequate reserves have been provided in accordance with GAAP.  There is no proposed tax assessment against
the US Borrower or any Restricted Subsidiary that would, if made, have a
Material Adverse Effect.  Neither any
Loan Party nor any Restricted Subsidiary thereof is party to any tax sharing
agreement.

 

5.12        ERISA Compliance.   Except as
disclosed on Schedule 5.12(c):

 

(a)             Each
Plan is in compliance in all material respects with the applicable provisions
of ERISA, the Code and other Federal or state Laws.  Each Plan that is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from
the IRS or an application for such a letter is currently being processed by the
IRS with respect thereto and, to the knowledge of the US Borrower, nothing has
occurred which would prevent, or cause the 

 

77

 

loss of, such qualification.  The
US Borrower and each ERISA Affiliate have made all required contributions to
each Plan subject to Section 412 of the Code, and no application for a funding
waiver or an extension of any amortization period pursuant to Section 412 of
the Code has been made with respect to any Plan.

 

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

 

(c)             (i)  No
ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension
Plan has any Unfunded Pension Liability; (iii) neither the US Borrower nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) neither the US
Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Sections 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the US
Borrower nor any ERISA Affiliate has engaged in a transaction that could be
subject to Sections 4069 or 4212(c) of ERISA.

 

5.13        Subsidiaries; Equity
Interests.  As of the Closing Date, the
US Borrower has no Subsidiaries other than those specifically disclosed in Part
(a) of Schedule 5.13, and all of the outstanding Equity Interests in
such Subsidiaries have been validly issued, are owned by a Loan Party in the
amounts specified on Part (a) of Schedule 5.13 free and clear of
all Liens and, to the extent applicable, are fully paid and nonassessable.  The US Borrower has no equity investments in
any other corporation or entity other than those specifically disclosed in Part (b)
of Schedule 5.13.  Schedule
5.13 identifies each Subsidiary as either Restricted or Unrestricted, and
each Restricted Subsidiary on such schedule is a wholly-owned Subsidiary.

 

5.14        Margin Regulations;
Investment Company Act; Public Utility Holding Company Act.

 

(a)             The
US Borrower is not engaged and will not engage, principally or as one of its
important activities, in the business of purchasing or carrying margin stock
(within the meaning of Regulation U issued by the FRB), or extending credit for
the purpose of purchasing or carrying margin stock.

 

(b)             None
of the US Borrower, any Person Controlling the US Borrower, or any Subsidiary
(i) 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,” within the meaning of the Public Utility Holding Company Act
of 1935, or (ii) is or is required to be registered as an “investment company”
under the Investment Company Act of 1940.

 

5.15        Disclosure.  The US
Borrower has disclosed to the Administrative Agent and the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, 

 

78

 

could reasonably be expected to
result in a Material Adverse Effect.  No
report, financial statement, certificate or other information furnished
(whether in writing or orally) by or on behalf of any Loan Party to the
Administrative Agent or any Lender in connection with the transactions
contemplated hereby and the negotiation of this Agreement or delivered
hereunder or under any other Loan Document (in each case, as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the US Borrower represents only that such information was prepared
in good faith based upon assumptions believed to be reasonable at the time.

 

5.16        Compliance with Laws.  Each of the US
Borrower and each of its Subsidiaries is in compliance in all material respects
with the requirements of all Laws and all orders, writs, injunctions and
decrees applicable to it or to its properties, except in such instances in
which (a) such requirement of Law or order, writ, injunction or decree is being
contested in good faith by appropriate proceedings diligently conducted or (b)
the failure to comply therewith, either individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.  Without limiting the foregoing, except as set
forth in Schedule 5.13, each of the US Borrower and each of its
Subsidiaries (i) has filed and maintained in all material respects all tariffs
applicable to its business with each applicable commission, (ii) and all such
tariffs are in material compliance with all Laws administered or promulgated by
each applicable commission and (iii) has imposed charges on its customers in
material compliance with such tariffs, all contracts applicable to its business
and all applicable Laws or otherwise in material compliance with Law, except
where the failure to comply therewith, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.  As used herein, “commission” includes the
Federal Energy Regulatory Commission and each other US federal, Canadian
federal, state, provincial, or local governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over any Related
Person or its properties.

 

5.17        Intellectual Property;
Licenses, Etc.  The
US Borrower and its Restricted Subsidiaries own, or possess the right to use,
all of the trademarks, service marks, trade names, copyrights, patents, patent
rights, franchises, licenses and other intellectual property rights (collectively,
“IP Rights”) that are reasonably necessary for the operation of their
respective businesses, without conflict with the rights of any other Person
which could reasonably be expected to have a Material Adverse Effect.  To the knowledge of the US Borrower, no
slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by the US
Borrower or any Restricted Subsidiary infringes upon any rights held by any
other Person which could reasonably be expected to have a Material Adverse
Effect.  No claim or litigation regarding
any of the foregoing is pending or, to the knowledge of the US Borrower,
threatened, which, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

 

5.18        Labor Disputes and
Acts of God.  Neither the business nor the properties of
the US Borrower or any of its Restricted Subsidiaries has been affected by any
fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), which could reasonably be
expected to have a Material Adverse Effect.

 

79

 

5.19        Solvency.  Upon giving effect to the execution of this
Agreement, the other Loan Documents, the Valero Acquisition Documents, and the
sale of Senior Notes by the US Borrower and each Guarantor that is a party
thereto and the consummation of the transactions contemplated hereby and
thereby, the US Borrower and each Guarantor will be Solvent.

 

5.20        Valero Acquisition
Closing.

 

(a)           After giving effect to each of the
transactions under the Valero Acquisition Documents, all representations and
warranties made by any Loan Party in any Loan Document will be true and correct
in all respects on and as of the date of consummation of such transactions.

 

(b)           Each of the representations and
warranties made by any Loan Party in the Valero Acquisition Documents is true
and correct in all material respects; and to the knowledge of the US Borrower,
none of such parties has failed to perform any obligation or covenant required
by the Valero Acquisition Documents to be performed or complied with by it on
or before the Closing Date. 
Simultaneously with making of the Loans on the Closing Date, all
transactions under the Valero Acquisition Documents will have been consummated
in compliance with the terms and conditions thereof and all conditions precedent
to such consummation will be fully satisfied.

 

ARTICLE VI.

AFFIRMATIVE COVENANTS

 

So long as any
Lender shall have any Commitment hereunder, any Loan or other Obligation (other
than the Lender Swap Obligations) hereunder shall remain unpaid or unsatisfied,
the US Borrower shall, and shall (except in the case of the covenants set forth
in Sections 6.01, 6.02, and 6.03) cause
each Restricted Subsidiary (as applicable) to:

 

6.01        Financial Statements.  Deliver to the
US Administrative Agent and each Lender, in form and detail satisfactory to
Administrative Agent and the Required Lenders:

 

(a)             as
soon as available, but in any event within 90 days after the end of each fiscal
year of the US Borrower, a consolidated and consolidating balance sheet of the
US Borrower and its Subsidiaries as at the end of such fiscal year, and the
related consolidated and consolidating statement of income or operations, and
consolidated statements of shareholders’ equity and cash flows for such fiscal
year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and prepared in accordance with
GAAP, such consolidated statements to be audited and accompanied by a report
and opinion of a Registered Public Accounting Firm of nationally recognized
standing, which report and opinion shall be prepared in accordance with
generally accepted auditing standards and applicable Securities Laws and shall
not be subject to any “going concern” or like qualification or exception or any
qualification or exception as to the scope of such audit, such consolidating
statements to be certified by a Responsible Officer of the US Borrower to the
effect that such 

 

80

 

statements are fairly stated in all material respects when considered
in relation to the consolidated financial statements of the US Borrower and its
Subsidiaries; and

 

(b)             as
soon as available, but in any event within 45 days after the end of each of the
first three fiscal quarters of each fiscal year of the US Borrower (commencing
with the fiscal quarter ended September 30, 2005), a consolidated and
consolidating balance sheet of the US Borrower and its Subsidiaries as at the
end of such fiscal quarter, and the related consolidated and consolidating
statements of income or operations for such fiscal quarter and for the portion
of the US Borrower’s fiscal year then ended, and consolidated statements of
shareholders’ equity and cash flows for the portion of the US Borrower’s fiscal
year then ended, setting forth in each case in comparative form the figures for
the corresponding fiscal quarter of the previous fiscal year, as applicable,
and the corresponding portion of the previous fiscal year, all in reasonable
detail, such consolidated statements to be certified by a Responsible Officer
of the US Borrower as fairly presenting the financial condition, results of
operations, shareholders’ equity and cash flows of the US Borrower and its
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes and such consolidating statements to
be certified by a Responsible Officer of the US Borrower to the effect that
such statements are fairly stated in all material respects when considered in
relation to the consolidated financial statements of the US Borrower and its
Subsidiaries.

 

As to any information contained in materials furnished pursuant to Section 6.02(d),
the US Borrower shall not be separately required to furnish such information
under clause (a) or (b) above, but the foregoing shall not be in derogation of
the obligation of the US Borrower to furnish the information and materials
described in clauses (a) and (b) above at the times specified therein.

 

6.02        Certificates; Other
Information.  Deliver
to the US Administrative Agent and each Lender, in form and detail satisfactory
to the Administrative Agent and the Required Lenders:

 

(a)             concurrently
with the delivery of the financial statements referred to in Section 6.01(a),
the audit report and opinion referred to therein;

 

(b)             concurrently
with the delivery of the financial statements referred to in Sections 6.01(a)
and (b), a duly completed Compliance Certificate signed by a Responsible
Officer of the US Borrower;

 

(c)             promptly
after any request by the US Administrative Agent or any Lender, copies of any
detailed audit reports, management letters or recommendations submitted to the
board of directors (or the audit committee of the board of directors) of the US
Borrower by independent accountants in connection with the accounts or books of
the US Borrower or any Subsidiary, or any audit of any of them;

 

(d)             promptly
after the same are available, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of the US
Borrower, and copies of all annual, regular, periodic and special reports and
registration statements which the US Borrower may file or be required to file
with the SEC under Section 

 

81

 

13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise
required to be delivered to the Administrative Agent pursuant hereto;

 

(e)             promptly
after the furnishing thereof, copies of any statement or report furnished to
any holder of debt securities of any Loan Party or any Subsidiary thereof
pursuant to the terms of any indenture, loan or credit or similar agreement and
not otherwise required to be furnished to the Lenders pursuant to Section 6.01
or any other clause of this Section 6.02;

 

(f)              promptly,
and in any event within five Business Days after receipt thereof by any Loan
Party or any Subsidiary thereof, copies of each notice or other correspondence
received from the SEC (or comparable agency in any applicable non-U.S.
jurisdiction) concerning any investigation or possible investigation or other
inquiry by such agency regarding financial or other operational results of any
Loan Party or any Subsidiary thereof;

 

(g)             promptly
upon the occurrence thereof, notice of material acquisitions and divestitures
by the US Borrower or any of its Subsidiaries;

 

(h)           as soon as
available, and in any event within 90 days after the end of each fiscal year, a
business and financial plan for the US Borrower (in form reasonably
satisfactory to the Administrative Agent), prepared or caused to be prepared by
a Responsible Officer of the US Borrower, setting forth for the then calendar
year, budgets for the US Borrower; and

 

(i)              promptly,
such additional information regarding the business, financial or corporate
affairs of the US Borrower or any Subsidiary, or compliance with the terms of
the Loan Documents, as the US Administrative Agent or any Lender may from time
to time reasonably request.

 

Documents
required to be delivered pursuant to Section 6.01(a) or (b) or
Section 6.02(d) (to the extent any such documents are included in
materials otherwise filed with the SEC) may be delivered electronically and if
so delivered, shall be deemed to have been delivered on the date (i) on which
the US Borrower posts such documents, or provides a link thereto on the US
Borrower’s website on the Internet at the website address listed on Schedule
10.02; or (ii) on which such documents are posted on the US Borrower’s
behalf on an Internet or intranet website, if any, to which each Lender and the
US Administrative Agent have access (whether a commercial, third-party website
or whether sponsored by the Administrative Agent); provided that: (i)
the US Borrower shall deliver paper copies of such documents to the
Administrative Agent or any Lender that requests the US Borrower to deliver
such paper copies until a written request to cease delivering paper copies is
given by the Administrative Agent or such Lender and (ii) the US Borrower shall
notify the Administrative Agent and each Lender (by telecopier or electronic
mail) of the posting of any such documents and provide to the Administrative
Agent by electronic mail electronic versions (i.e., soft copies) of such
documents.  Notwithstanding anything
contained herein, in every instance the US Borrower shall be required to
provide paper copies of the Compliance Certificates required by Section
6.02(b) to the US Administrative Agent. 
Except for such Compliance Certificates, the Administrative Agent shall
have no obligation to request the delivery or to maintain copies of the
documents referred to above, and in any event shall have no responsibility to
monitor compliance by the US Borrower with any 

 

82

 

such request for delivery, and
each Lender shall be solely responsible for requesting delivery to it or
maintaining its copies of such documents.

 

The US Borrower hereby acknowledges that (a) the Administrative Agent
and/or the Arrangers will make available to the Lenders and the L/C Issuer materials
and/or information provided by or on behalf of the US Borrower hereunder
(collectively, “US Borrower Materials”) by posting the US Borrower
Materials on IntraLinks or another similar electronic system (the “Platform”)
and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive
material non-public information with respect to the US Borrower or its
securities) (each, a “Public Lender”). 
The US Borrower hereby agrees that so long as the US Borrower is the issuer
of any outstanding debt or equity securities that are registered or issued
pursuant to a private offering or is actively contemplating issuing any such
securities (w) all US Borrower Materials that are to be made available to
Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a
minimum, shall mean that the word “PUBLIC” shall appear prominently on the
first page thereof; (x) by marking US Borrower Materials “PUBLIC,” the US
Borrower shall be deemed to have authorized the Administrative Agent, the
Arrangers, the L/C Issuer and the Lenders to treat such US Borrower Materials
as not containing any material non-public information with respect to the US
Borrower or its securities for purposes of United States Federal and state securities
laws (provided, however, that to the extent such US Borrower Materials
constitute Information, they shall be treated as set forth in Section 10.07);
(y) all US Borrower Materials marked “PUBLIC” are permitted to be made
available through a portion of the Platform designated “Public Investor;” and
(z) the Administrative Agent and the Arrangers shall be entitled to treat any
US Borrower Materials that are not marked “PUBLIC” as being suitable only for
posting on a portion of the Platform not designated “Public Investor.”

 

6.03        Notices.  Promptly
notify the Administrative Agent and each Lender:

 

(a)             of
the occurrence of any Default;

 

(b)             of
any matter that has resulted or could reasonably be expected to result in a
Material Adverse Effect, including any of the following if the effect thereof
could reasonably be expected to have a Material Adverse Effect:  (i) breach or non-performance of, or any
default under, a Contractual Obligation of the US Borrower or any Restricted
Subsidiary; (ii) any dispute, litigation, investigation, proceeding or
suspension between the US Borrower or any Restricted Subsidiary and any
Governmental Authority; or (iii) the commencement of, or any material
development in, any litigation or proceeding affecting the US Borrower or any Restricted
Subsidiary, including pursuant to any applicable Environmental Laws;

 

(c)             of
the occurrence of any ERISA Event;

 

(d)             of
any material change in accounting policies or financial reporting practices by
the US Borrower or any Subsidiary; and

 

(e)             of
any announcement by Moody’s or S&P of any change in a Debt Rating.

 

Each notice
pursuant to this Section shall be accompanied by a statement of a Responsible
Officer of the US Borrower setting forth details of the occurrence referred to
therein 

 

83

 

and stating what action the US
Borrower has taken and proposes to take with respect thereto.  Each notice pursuant to Section 6.03(a)
shall describe with particularity any and all provisions of this Agreement and
any other Loan Document that have been breached.

 

6.04        Payment of Obligations.  Pay and
discharge as the same shall become due and payable, all its obligations and
liabilities, including (a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless the same are
being contested in good faith by appropriate proceedings diligently conducted
and adequate reserves in accordance with GAAP are being maintained by the US
Borrower or such Subsidiary; and (b) all Indebtedness, as and when due and
payable, but subject to any applicable grace periods and subordination
provisions contained in any instrument or agreement evidencing such
Indebtedness.

 

6.05        Preservation of
Existence, Etc.  (a) Preserve,
renew and maintain in full force and effect its legal existence and good
standing under the Laws of the jurisdiction of its organization except in a
transaction permitted by Section 7.04 or 7.05;
(b) take all reasonable action to maintain all rights, privileges,
permits, licenses and franchises necessary or desirable in the normal conduct
of its business, except to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (c) preserve
or renew all of its registered patents, trademarks, trade names and service
marks, the non-preservation of which could reasonably be expected to have a
Material Adverse Effect.

 

6.06        Maintenance of
Properties.  (a) Maintain,
preserve and protect all of its material properties and equipment necessary in
the operation of its business in good working order and condition, ordinary
wear and tear excepted; (b) make all necessary repairs thereto and
renewals and replacements thereof except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (c) use the
standard of care typical in the industry in the operation and maintenance of
its facilities.

 

6.07        Maintenance of
Insurance.  Maintain
with financially sound and reputable insurance companies not Affiliates of the
US Borrower, insurance with respect to its properties and business against loss
or damage of the kinds customarily insured against by Persons engaged in the
same or similar business, of such types and in such amounts as are customarily
carried under similar circumstances by such other Persons and providing (a) for
payment of losses to the Administrative Agent as its interests may appear, (b)
that such policies may not be canceled or reduced or affected in any material
manner for any reason without 30 days prior notice to the Administrative Agent,
and (c) for any other matters specified in any applicable Security Document or
which the Administrative Agent may reasonably require.  Each Loan Party will maintain any additional
insurance coverage as described in the respective Security Documents.

 

6.08        Compliance with Laws.  Comply in all
material respects with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property, except
in such instances in which (a) such requirement of Law or order, writ,
injunction or decree is being contested in good faith by appropriate
proceedings diligently conducted; or (b) the failure to comply therewith could
not reasonably be expected to have a Material Adverse Effect.

 

84

 

6.09        Books and Records.  Maintain (a)
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the US Borrower
or such Subsidiary, as the case may be; and (b) such books of record and
account in material conformity with all applicable requirements of any
Governmental Authority having regulatory jurisdiction over the US Borrower or
such Subsidiary, as the case may be.

 

6.10        Inspection Rights.  Permit,
subject to Section 10.07, representatives and independent contractors of the
Administrative Agent and each Lender to visit and inspect any of its properties,
to examine its corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with its directors, officers, and independent public accountants, all
at the expense of the US Borrower and at such reasonable times during normal
business hours and as often as may be reasonably desired, upon reasonable
advance notice to the US Borrower; provided, however, that when
an Event of Default exists the Administrative Agent or any Lender (or any of
their respective representatives or independent contractors) may do any of the
foregoing at the expense of the US Borrower at any time during normal business
hours and without advance notice.

 

6.11        Use of Proceeds.  Use the
proceeds of the initial Credit Extension (a) to partially finance the Valero
Acquisition, (b) to refinance outstanding Indebtedness under the Existing
Credit Agreement, (c) to refinance the outstanding Indebtedness under the
Rangeland Credit Facility, (d) subject to Section 7.06 for working
capital purposes or to fund quarterly distributions by the Borrower pursuant to
the Partnership Agreement, (e) for capital expenditures and other lawful
corporate purposes and (f) for the payment of fees and expenses required to be
paid under this Agreement and the Valero Acquisition.  Use the proceeds of the other Credit
Extensions for working capital, capital expenditures, and other general
corporate purposes not in contravention of any Law or of any Loan Document.

 

6.12        Subsidiary Guarantors.

 

(a)             Subject
to Section 6.12(b), each Restricted Subsidiary of the US Borrower now
existing or created, acquired or coming into existence after the date hereof
shall, promptly upon request by Administrative Agent, execute and deliver to
Administrative Agent an absolute and unconditional Guaranty of the timely
repayment of the Obligations and the due and punctual performance of the
obligations of the US Borrower hereunder; provided that, foreign
Subsidiaries shall not be required to execute and deliver such Guaranty if
material adverse tax consequences would result therefrom, and Aurora Pipeline
Company Ltd. shall not be required to execute and deliver such Guaranty.  The US Borrower will cause each such Restricted
Subsidiary to deliver to Administrative Agent, simultaneously with its delivery
of such a Guaranty, written evidence reasonably satisfactory to Administrative
Agent and its counsel that such Restricted Subsidiary has taken all corporate,
limited liability company or partnership action necessary to duly approve and
authorize its execution, delivery and performance of such Guaranty and any
other documents which it is required to execute.

 

(b)             Pacific
Pipeline System LLC, Pacific Terminals LLC and each other PUC Restricted
Subsidiary shall not be required to provide a Guaranty pursuant to subsection
(a) of this Section 6.12 unless regulatory approval shall have been
obtained for such Guaranty from 

 

85

 

the applicable public utility commission having such regulatory
authority over such PUC Restricted Subsidiary (in this Section called the
applicable “PUC”).  US Borrower shall not
be required to seek new approvals for Pacific Pipeline System LLC and Pacific
Terminals LLC, but shall be required to exercise reasonable commercial efforts
to obtain approval of the applicable PUC for such a Guaranty with respect to
each other PUC Restricted Subsidiary.

 

(c)             In
the event the US Borrower shall be unable to obtain approval of the applicable
PUC for any such Guaranty after the exercise of reasonable commercial efforts
(or, with respect to Pacific Pipeline System LLC and Pacific Terminals LLC, is
not required to seek such approval), the US Borrower shall use reasonable
commercial efforts to obtain, and at all times thereafter shall maintain, the
approval of the applicable PUC for a debt obligation satisfactory to
Administrative Agent issued by such PUC Restricted Subsidiary payable to PEG,
and for the pledge by PEG of such debt obligation to Administrative Agent for
the benefit of the Lenders to secure the Obligations.  At the time such approval is obtained (if at
all), PEG shall cause such PUC Restricted Subsidiary to incur such debt
obligation and shall pledge such debt obligation to Administrative Agent for the
benefit of the Lenders, which debt obligation and pledge shall be reasonably
satisfactory to the Administrative Agent in form and substance.  PEG will deliver to the Administrative Agent,
simultaneously with its delivery of such debt obligation and such pledge,
written evidence reasonably satisfactory to Administrative Agent and its
counsel that PEG and such PUC Restricted Subsidiary have taken all corporate,
limited liability company or partnership action to approve and authorize its
execution, delivery and performance of such debt obligation and pledge.  If the debt obligation and pledge
contemplated by the preceding two sentences are permitted without the approval
of the applicable PUC, during such period that the Guaranty is not provided by
the applicable PUC Restricted Subsidiary pursuant to this Section 6.13,
upon request of Required Lenders, the applicable PUC Restricted Subsidiary
shall incur such debt obligation and PEG shall provide such pledge as
contemplated by the preceding two sentences.

 

(d)             Neither
this Section 6.12 nor any other provision of any Loan Document shall
require a Guaranty by a PUC Restricted Subsidiary, or the incurrence of debt
obligation by a PUC Restricted Subsidiary and pledge thereof, in either case to
the extent that such PUC Restricted Subsidiary shall not have obtained the
required approval of the applicable PUC.

 

6.13        Agreement
to Deliver Security Documents; Collateral Release Event.

 

(a)             Subject
to Section 6.13(b), US Borrower agrees to deliver and to cause each
other Loan Party to deliver, to further secure the Obligations and any Lender Swap Obligations, whenever
reasonably requested by Administrative Agent, deeds of trust, mortgages, pledge
agreements, security agreements, floating charges, financing statements, continuation
statements, extension agreements, acknowledgments, and other Security Documents
in form and substance reasonably satisfactory to Administrative Agent, in each
case for the purpose of granting, confirming, protecting and perfecting Liens
or security interests (floating charges in the case of Collateral located in
Canada) in any real property, fixtures and contract rights necessary to the
operation of the pipeline systems, gathering systems and storage facilities
owned by such Loan Party (collectively, the “Real Property Collateral”) now
owned or hereafter acquired by any Loan Party, including Liens in Equity
Interests in each other Restricted Subsidiary now owned or hereafter acquired
by any Loan Party or in such other property which 

 

86

 

is at such time Collateral or which was intended to be Collateral
pursuant to any Security Document previously executed and not then released by
Administrative Agent.  US Borrower also
agrees to deliver, whenever reasonably requested by Administrative Agent,
favorable opinions from legal counsel acceptable to Administrative Agent with
respect to the enforceability of the Liens created by the Security Documents,
in a form and substance reasonably acceptable to the Administrative Agent.

 

(b)             Pacific
Pipeline System LLC, Pacific Terminals LLC and each other PUC Restricted
Subsidiary shall not be required to execute and deliver any Security Document
pursuant to subsection (a) of this Section 6.13 unless regulatory
approval shall have been obtained for such Security Document from the
applicable PUC having such regulatory authority over such PUC Restricted
Subsidiary.  The US Borrower shall cause
each PUC Restricted Subsidiary other than Pacific Pipeline System LLC and
Pacific Terminals LLC to use its reasonable commercial efforts to obtain the
approval of the applicable PUC for Liens and security interests covering any
Real Property Collateral now owned or hereafter acquired by such Person to
secure the obligations in such PUC Restricted Subsidiary’s Guaranty (if
delivered pursuant to Section 6.13).

 

(c)             Neither
this Section 6.13 nor any other provision of any Loan Document shall
require a PUC Restricted Subsidiary to deliver any Security Document pursuant
to Section 6.13(a) to the extent that such PUC Restricted
Subsidiary shall not have obtained the required approval of the applicable PUC
after the exercise of its commercially reasonable efforts in accordance with
subsection (b) of this Section 6.13.

 

(d)             Without
limiting the provisions of Section 6.13(a), but subject to Sections
6.13(b) and (c), to the
extent
reasonably requested by Administrative Agent, the US Borrower agrees to deliver
and to cause each Guarantor to deliver, to further secure the Obligations and
any Lender Swap Obligations, deeds of trust, mortgages, pledge agreements,
security agreements, financing statements, continuation statements, extension
agreements, acknowledgments, and other Security Documents in form and substance
reasonably satisfactory to Administrative Agent, in each case for the purpose
of granting, confirming, protecting and perfecting Liens or security interests
in any and all assets, real, personal or mixed, tangible or intangible, now
owned or hereafter acquired by such Person, including Liens on Equity Interests
in each other Restricted Subsidiary now owned or hereafter acquired by any such
Person.  US Borrower also agrees to
deliver, whenever reasonably requested by Administrative Agent, favorable
opinions from legal counsel acceptable to Administrative Agent with respect to
the enforceability of the Liens created by the Security Documents, in a form
and substance reasonably acceptable to the Administrative Agent.

 

(e)             Notwithstanding
the other provisions of this Section 6.13, Pacific Marketing and Transportation
LLC shall not be required to grant Liens on its property existing on the date
hereof and expansions of, additions to, or replacements for, such existing
property of Pacific Marketing and Transportation LLC.

 

(f)              Upon
the satisfaction of the conditions for release of all Collateral pursuant to Section
9.10(e), then the US Borrower and each Restricted Subsidiary shall be
released from the obligation to grant, confirm, protect or perfect Liens or
security interests pursuant to the 

 

87

 

provisions of this Section 6.13 (but without impairing any
obligation in respect of Cash Collateralized L/C Obligations and Bankers’
Acceptances from time to time).

 

6.14        Performance on US Borrower’s Behalf.  If any Loan Party
fails to pay any taxes, insurance premiums, expenses, attorneys’ fees or other
amounts it is required to pay under any Loan Document, the Administrative Agent
may pay the same after notice of such payment by the Administrative Agent is
given to the US Borrower.  The US
Borrower shall immediately reimburse the Administrative Agent for any such
payments and each amount paid by the Administrative Agent shall constitute an
Obligation owed hereunder which is due and payable on the date such amount is
paid by the Administrative Agent.

 

6.15        Environmental Matters; Environmental Reviews.

 

(a)             Comply
in all material respects with all Environmental Laws now or hereafter
applicable to such Loan Party as well as all contractual obligations and
agreements with respect to Environmental Liabilities and shall obtain, at or
prior to the time required by applicable Environmental Laws, all environmental,
health and safety permits, licenses and other authorizations necessary for its
operations and will maintain such authorizations in full force and effect,
conduct any investigation, study, sampling and testing, and undertake any
cleanup, removal, remedial or other action necessary to remove and clean up all
Hazardous Materials from any of its properties, in accordance with the
requirements of all Environmental Laws. 
Each Loan Party will promptly pay and discharge when due all debts,
claims, liabilities and obligations with respect to any clean-up or remediation
measures necessary to comply with Environmental Laws unless, in each case, the
same are being contested in good faith by appropriate proceedings diligently
conducted and adequate reserves in accordance with GAAP are being maintained by
the applicable Loan Party.

 

(b)             Promptly
furnish to Administrative Agent all written notices of violation, orders,
claims, citations, complaints, penalty assessments, suits or other proceedings
received by any Loan Party, or of which it has notice, pending or threatened
against any Loan Party, the potential liability of which exceeds $20,000,000 or
would have a Material Adverse Effect if resolved adversely against any Loan
Party, by any Governmental Authority with respect to any alleged violation of
or non-compliance with any Environmental Laws or any permits, licenses or authorizations
in connection with its ownership or use of its properties or the operation of
its business.

 

(c)             Promptly
furnish to Administrative Agent all requests for information, notices of claim,
demand letters, and other notifications, received by any Loan Party in
connection with its ownership or use of its properties or the conduct of its
business, relating to potential responsibility with respect to any
investigation or clean-up of Hazardous Material at any location, the potential
liability of which exceeds $20,000,000 or would have a Material Adverse Effect
if resolved adversely against any Loan Party.

 

6.16        Compliance with Agreements.  Observe, perform or
comply with each indenture, mortgage, deed of trust, security agreement, lease,
and franchise, and each agreement, contract or other instrument or obligation
to which it is a party or by which it or any of its properties is bound, unless
any such failure to so observe, perform or comply is remedied within 

 

88

 

the applicable period of grace
(if any) provided therein or unless such failure to so observe, perform or
comply would not reasonably be expected to have a Material Adverse Effect.

 

6.17        Deposit Accounts.  The Administrative Agent hereby
appoints each of the L/C Issuer and Lenders to serve as its bailee to perfect
the Administrative Agent’s Liens in any Collateral in the possession of such
L/C Issuer and Lender.  L/C Issuer and
each Lender possessing any Collateral agrees to so act as bailee for the Administrative
Agent in accordance with the terms and provisions hereof.  In furtherance of the forgoing, L/C Issuer
and each Lender acknowledges that certain of the Loan Parties from time to time
maintain accounts at one or more of the Administrative Agent, L/C Issuer and
Lenders (“Lender Party Accounts”). 
L/C Issuer and each Lender agree to hold its Lender Party Accounts as
bailee for the Administrative Agent to perfect the security interest held for
the benefit of the L/C Issuer or a Lender therein.  Prior to the receipt by L/C Issuer or a
Lender of notice from the Administrative Agent that it is exercising exclusive
control over any Lender Party Account (a “Notice of Exclusive Control”),
the Loan Parties are entitled to make withdrawals from the Lender Party
Accounts and make deposits into and give entitlement orders with respect to the
Lender Party Accounts.  Once L/C Issuer
or a Lender has a Notice of Exclusive Control, which such notice shall not be
given until an Event of Default has occurred and is continuing, the
Administrative Agent shall be the only party entitled to make withdrawals from
or otherwise give any entitlement order or other direction with respect to the
Lender Party Accounts.  To the extent not
already occurring, L/C Issuer and each Lender agrees to transfer, in
immediately available funds by wire transfer to the Administrative Agent, the
amount of the collected funds credited to the deposit accounts which are Lender
Party Accounts held by such L/C Issuer or Lender, and deliver to the Administrative
Agent all moneys or instruments relating to such Lender Party Accounts or held
therein and any other Collateral at any time the Administrative Agent demands
payment or delivery thereof after a Notice of Exclusive Control has been
delivered to such L/C Issuer or Lender. 
Each Loan Party agrees that L/C Issuer and each Lender is authorized to
immediately deliver all the Collateral to the Administrative Agent upon the L/C
Issuer’s or Lender’s receipt of a Notice of Exclusive Control from the Administrative
Agent.  Neither L/C Issuer nor any Lender
(other than the Administrative Agent acting for the benefit of the L/C Issuer
and Lenders) shall exercise any right of set-off or banker lien against any
Lender Party Account; provided that L/C Issuer and Lenders shall be entitled to
charge, or set-off against a Lender Party Account and retain for its own
account, any customary fees, costs, charges and expenses owed to it in
connection with the opening, operating and maintaining such Lender Party
Account and for the amount of any item credited to such Lender Party Account
that is subsequently returned for any reason.

 

6.18        Unrestricted
Subsidiaries.  The US Borrower:

 

(a)             will
cause the management, business and affairs of each of the US Borrower and its
Restricted Subsidiaries to be conducted in such a manner (including, without
limitation, by keeping separate books of account, furnishing separate financial
statements of Unrestricted Subsidiaries (either separately or shown separately
in the consolidating financial statements with other Restricted Subsidiaries or
the US Borrower) to creditors and potential creditors thereof and by not
permitting properties of the US Borrower and its respective Restricted
Subsidiaries to be commingled) so that each Unrestricted Subsidiary that is a
corporation or other legal entity will be treated as an entity separate and
distinct from the US Borrower and the Restricted Subsidiaries.

 

89

 

(b)             will
not, and will not permit any of the Restricted Subsidiaries to, incur, assume,
Guarantee or otherwise be or become liable for any Indebtedness of any of the
Unrestricted Subsidiaries.

 

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

 

(d)             may
provide unsecured Guaranties (which Guaranties may not be guaranteed by any
Restricted Subsidiary) of (i) trade obligations (but not Indebtedness) of their
respective Unrestricted Subsidiaries from time to time and (ii) general and
administrative expenses (but not Indebtedness) incurred in the ordinary course
of business of their respective Unrestricted Subsidiaries (such as motor
vehicle leases and employee credit card expenses) from time to time so long as
the aggregate amount of such obligations and expenses (or the specified limit
of the applicable Guarantees, if less) outstanding on any day under proceeding
clauses (i) and (ii) does not exceed the amount of additional Investments
permitted under Section 7.02(h).

 

ARTICLE VII.

NEGATIVE COVENANTS

 

So long as any
Lender shall have any Commitment hereunder, any Loan or other Obligation (other
than the Lender Swap Obligations) hereunder shall remain unpaid or unsatisfied,
the US Borrower shall not, nor shall it permit any Restricted Subsidiary to,
directly or indirectly:

 

7.01        Liens.  Create, incur,
assume or suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than the following:

 

(a)             Liens
pursuant to any Loan Document (including Liens securing intercompany
indebtedness pursuant to Section 6.13);

 

(b)             Liens
for taxes not yet due or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves with respect
thereto are maintained on the books of the applicable Person in accordance with
GAAP;

 

(c)             carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period
of more than 60 days or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves with respect
thereto are maintained on the books of the applicable Person;

 

(d)             pledges
or deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation,
other than any Lien imposed by ERISA;

 

(e)             deposits
of cash or securities to secure the performance of bids, trade contracts and
leases (other than Indebtedness), statutory obligations, surety and appeal
bonds, 

 

90

 

performance bonds and other obligations of a like nature incurred in
the ordinary course of business;

 

(f)              easements,
rights-of-way, restrictions and other similar encumbrances affecting any real
property which do not in any case materially interfere with the ordinary use of
such real property;

 

(g)             Liens
securing Indebtedness permitted under Section 7.03(f); provided
that (i) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness and related general intangibles and
proceeds and (ii) the Indebtedness secured thereby does not exceed as of the
date such Indebtedness is incurred, the cost or fair market value, whichever is
lower, of the property being acquired on the date of acquisition;

 

(h)             rights
reserved to or vested in any Governmental Authority by the terms of any right,
power, franchise, grant, license or permit, or by any provision of Law, to
revoke or terminate any such right, power, franchise, grant, license or permit
or to condemn or acquire by eminent domain or similar process;

 

(i)              rights
reserved to or vested by Law in any Governmental Authority to, in any manner,
control or regulate in any manner any of the properties of any Subsidiary or
the use thereof or the rights and interests of any Subsidiary therein, in any
manner under any and all Laws;

 

(j)              rights
reserved to the grantors of any properties of any Subsidiary, and the
restrictions, conditions, restrictive covenants and limitations, in respect
thereto, pursuant to the terms, conditions and provisions of any rights-of-way
agreements, deeds, contracts or other agreements therewith;

 

(k)             inchoate
Liens in respect of pending litigation or with respect to a judgment which has
not resulted in an Event of Default under Section 8.01;

 

(l)              restrictions,
conditions, terms and other provisions and rights, reserved by the issuing
authority under all leases, licenses and permits;

 

(m)            any
Lien existing on any property or asset of any Person that becomes a Subsidiary
of the US Borrower after the date of this Agreement prior to the time such
Person becomes a Subsidiary; provided that (i) such Lien is not created in contemplation
of or in connection with such Person becoming a Subsidiary, (ii) such Lien
shall not apply to any other property or assets of the US Borrower or any of
its Subsidiaries, (iii) such Lien shall secure only those obligations which it
secures on the date such Person becomes a Subsidiary and any renewals,
extensions and modifications (but not increases) thereof, (iv) the Indebtedness
secured by Liens permitted by this subsection is permitted under Section
7.03(i), and (v) the US Borrower shall demonstrate pro forma compliance
with this Section 7.01(m) at the time such Person becomes a Subsidiary
of the US Borrower;

 

(n)             the
reservation in any original grants from the sovereign of any land in Canada or
interests therein and statutory exceptions to title; and

 

91

 

(o)             Liens
on Property not constituting Collateral for the Obligations and not otherwise
permitted by the foregoing clauses of this Section 7.01; provided that
the aggregate principal or face amount of all Indebtedness secured by Liens
under this Section 7.01(o) shall not exceed $40,000,000 at any time.

 

provided, nothing in this Section 7.01
shall in and of itself constitute or be deemed to constitute an agreement or
acknowledgment by the Administrative Agent or any Lender that any Indebtedness
subject to or secured by any Lien, right or other interest permitted under
subsections (a) through (o) above ranks in priority to any Obligation or Lender
Swap Obligation.

 

7.02        Investments.  Make any
Investments, except:

 

(a)             Investments
held by the US Borrower or any Subsidiary in the form of cash equivalents or
short-term marketable debt securities;

 

(b)             existing
Investments described in Schedule 5.13;

 

(c)             advances
to officers, directors and employees of the US Borrower and Restricted
Subsidiaries in an aggregate amount not to exceed $1,000,000 at any time
outstanding, for travel, entertainment, relocation and analogous ordinary
business purposes;

 

(d)             Investments
of the US Borrower in any existing wholly-owned Restricted Subsidiary and
Investments of any existing wholly-owned Restricted Subsidiary that is a
Guarantor in the US Borrower or in another existing wholly-owned Restricted
Subsidiary;

 

(e)             Investments
representing non-cash consideration of Dispositions permitted under Section
7.05(f)(ii);

 

(f)              Investments
consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course
of business, and Investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors to the extent reasonably
necessary in order to prevent or limit loss;

 

(g)             Guarantees
permitted by Section 7.03;

 

(h)             Investments
in Unrestricted Subsidiaries (including Guaranteed Indebtedness or other
obligations of Unrestricted Subsidiaries), provided that (i) the aggregate
amount of all such Investments at any one time shall not exceed $150,000,000
and (ii) after giving effect to such Investment, the US Borrower and/or the
Canadian Borrower would have at least $10,000,000 in unused availability under
the Commitments;

 

(i)              Investments
pursuant to the Valero Acquisition;

 

(j)              Investments
(including capital contributions) in general or limited partnerships or other
types of entities (each a “venture”) entered into by the Borrower, or any of
its Restricted Subsidiaries with others in the ordinary course of business (but
not including Guarantees of Indebtedness or other obligations of such
ventures); provided that (i) any such venture is engaged exclusively in a
business permitted by Section 7.07, (ii) the interest in such venture is 

 

92

 

acquired in the ordinary course of business and on fair and reasonable
terms and (iii) such venture interests acquired and capital contributions made
(valued as of the date such interest was acquired or the contribution made) do
not exceed, in the aggregate at any time outstanding an amount equal to
$150,000,000;

 

(k)             Investments
in Equity Interests of any Person that becomes a wholly-owned Restricted
Subsidiary and Investments in assets constituting a business unit, in each case
so long as no Default shall have occurred and be continuing at the time such
Investment is made or would result therefrom; and

 

(l)              Investments,
other than specified under paragraph (a) through (k) of this Section 7.02
(but not including Guarantees of Indebtedness or obligations of other Persons),
not to exceed $50,000,000 at any time.

 

7.03        Indebtedness.  Create, incur,
assume or suffer to exist any Indebtedness, except:

 

(a)             Indebtedness
under the Loan Documents;

 

(b)             Indebtedness
under (i) the $250 million of 7-1/8 Senior Notes due 2014 and the $175
million 6-1/4% Senior Notes due 2015 and (ii) other senior notes issued by the
US Borrower, and guaranties thereof by one or more of the Subsidiary
Guarantors; provided that (A) such Indebtedness is unsecured, (B) at the
time of such issuance and after giving effect thereto on a pro forma basis, the
US Borrower shall comply with the covenants contained in Section 7.17,
(C) no principal amount of such Indebtedness matures earlier than two (2) years
after the Maturity Date, as such date exists as of the date of issuance of such
notes, (D) at the time of such issuance and after giving effect thereto, no
Default or Event of Default shall exist or would occur, and (E) the US Borrower
shall have delivered to the Administrative Agent a certificate in reasonable
detail reflecting compliance with each of the forgoing requirements of this Section
7.03(b), including calculations with supporting detail regarding each of
the requirements of Section 7.17, together with such other evidence of
compliance with the forgoing requirements of this Section 7.03(b) as the
Administrative Agent may reasonably request;

 

(c)             Subordinated
Debt and guaranties thereof by one or more of the Subsidiary Guarantors, provided
that (A) such Indebtedness is unsecured, (B) at the time of such issuance and
after giving effect thereto on a pro forma basis, the US Borrower shall comply
with the covenants contained in Section 7.17, (C) no principal amount of
such Subordinated Indebtedness matures earlier than two (2) years after the
Maturity Date, as such date exists as of the date of issuance of such notes,
(D) at the time of such issuance and after giving effect thereto, no Default or
Event of Default shall exist or would occur, and (E) the US Borrower shall have
delivered to the Administrative Agent a certificate in reasonable detail
reflecting compliance with each of the forgoing requirements of this Section
7.03(c), including calculations with supporting detail regarding each of
the requirements of Section 7.17, together with such other evidence of
compliance with the forgoing requirements of this Section 7.03(c) as the
Administrative Agent may reasonably request;

 

93

 

(d)             Guarantees
of the US Borrower or any Guarantor in respect of Indebtedness otherwise
permitted under this Section 7.03 of the US Borrower or any other Guarantor;

 

(e)             obligations
(contingent or otherwise) of the US Borrower or any Restricted Subsidiary
existing or arising under any Swap Contract, provided that (i) such
obligations are (or were) entered into by such Person in the ordinary course of
business for the purpose of directly mitigating risks or reducing costs
associated with liabilities, commitments, investments, assets, or property held
or reasonably anticipated by such Person, or changes in the value of securities
issued by such Person, and not for purposes of speculation, (ii) such Swap
Contract does not contain any provision exonerating the non-defaulting party
from its obligation to make payments on outstanding transactions to the
defaulting party and (iii) such Swap Contract complies with Section 7.12;

 

(f)              Indebtedness
in respect of capital leases, Synthetic Lease Obligations and purchase money
obligations for fixed or capital assets within the limitations set forth in Section 7.01(g);
provided, however, that the aggregate principal amount of all
such Indebtedness at any one time outstanding shall not exceed $75,000,000;

 

(g)             Indebtedness
for C$5,000,000 due June 30, 2007 for the deferred purchase price for the MAPL
Assets payable under and pursuant to the MAPL Purchase Agreement;

 

(h)             Indebtedness
of any Loan Party owing to another Loan Party; and

 

(i)              Indebtedness
other than specified under paragraphs (a) through (h) of this Section 7.03
(including Indebtedness secured by Liens referred to in Section 7.01(m))
in an aggregate principal amount not to exceed $75,000,000 at any one time
outstanding.

 

Nothing contained in this Section 7.03 shall be construed to permit the
US Borrower or any of its Restricted Subsidiaries to create, incur, assume or
suffer to exist any Indebtedness that would cause a violation of Section 7.17.

 

7.04        Fundamental Changes.  Merge,
amalgamate, dissolve, liquidate, consolidate with or into another Person, or
Dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or
in favor of any Person, except that, so long as no Default exists or would
result therefrom:

 

(a)             any
Restricted Subsidiary may merge or amalgamate with (i) the US Borrower, provided
that the US Borrower shall be the continuing or surviving Person, or (ii) any
one or more other wholly-owned Restricted Subsidiaries; and

 

(b)             any
Restricted Subsidiary may Dispose of all or substantially all of its assets
(upon voluntary liquidation or otherwise) to the US Borrower or to a
wholly-owned Restricted Subsidiary that is a Guarantor or would be a Guarantor,
subject to Section 6.12(a) and (b).

 

The Borrower
will not issue any Equity Interests which require preferred or mandatory
Restricted Payments other than distributions out of Available Cash permitted
under Section 7.06.  No Restricted
Subsidiary of the US Borrower will issue any additional Equity Interests,
except a Restricted Subsidiary of a Loan Party may issue additional Equity Interests
to any Loan Party so 

 

94

 

long as (i) such Restricted
Subsidiary is a wholly-owned Subsidiary of the US Borrower after giving effect
thereto, and (ii) such Equity Interests shall be pledged to the Administrative
Agent for the benefit of the Lenders pursuant to Security Documents acceptable
to the Administrative Agent.  No
Restricted Subsidiary of the US Borrower that is a partnership will allow any
diminution of the US Borrower’s interest (direct or indirect) therein, other
than as a result of a failure to make a discretionary capital contribution, or
as a result of a transaction permitted by Section 7.05.

 

7.05        Dispositions.  Make any
Disposition, except:

 

(a)             Dispositions
of equipment or inventory which is worthless or obsolete or no longer necessary
or useful to the proper conduct of its business or which is replaced by
equipment of equal suitability and value;

 

(b)             Dispositions
of property by any Subsidiary to the US Borrower or to a wholly-owned
Subsidiary; provided that if the transferor of such property is a
Guarantor, the transferee thereof must either be the US Borrower or, subject to
Section 6.12(b), a Guarantor;

 

(c)             Dispositions
of inventory in the ordinary course of business;

 

(d)             Dispositions
permitted by Section 7.04;

 

(e)             Dispositions
of Equity Interests in Unrestricted Subsidiaries;

 

(f)              Dispositions of other property for fair consideration
provided that:

 

(i)            prior to and immediately after
giving effect to such proposed Disposition no Default or Event of Default shall
exist and be continuing, and the consummation of any such transaction would not
result in any violation of Section 7.17 calculated for such purpose as
of the date on which such Disposition is to be consummated on a pro forma basis
after giving effect to any such sale, with Consolidated EBITDA calculated as at
the last day of the most recently ended fiscal quarter as if such sale had
occurred on the first day of the relevant four quarter period and giving pro forma effect to the application of
funds to the repayment of Indebtedness;

 

(ii)           such sale or transfer is for
consideration consisting of not less than 75% cash;

 

(iii)          in the event that the aggregate Net
Cash Proceeds of all such Dispositions from the date hereof through the date
any Net Cash Proceeds are received (less the amount thereof previously applied
in accordance with clause (x) of this clause (iii)) exceeds 5% of the US
Borrower’s Consolidated assets measured as of the close of the then most recent
Fiscal Quarter end (such excess amount being herein called “Excess Sale
Proceeds”), Loan Parties shall, within 180 days of the date on which such
Net Cash Proceeds exceeded any such limitation, cause an amount equal to such
Excess Sale Proceeds to be applied (x) to the acquisition of capital assets
used in a business permitted by Section 7.07 or (y) to the extent not applied
pursuant to the immediately preceding clause (x), to prepay the Loans as
provided in Section 2.05;

 

95

 

(iv)          upon receipt
of Excess Sale Proceeds by a Loan Party and until the application thereof as
provided in clause (iii)(x) or (y), such Loan Party shall either, or in
combination equal to the total of such Excess Sale Proceeds, both (A) maintain
such Excess Sale Proceeds in cash or cash equivalents or (B) apply such Excess
Sale Proceeds to prepay the Loans as provided in Section 2.05 but
without reduction of the Aggregate Commitment; and

 

(v)           satisfaction
of the requirements of this Section 7.05(f), other than in respect of
clause (iii), have been set forth in reasonable detail in an officer’s
certificate satisfactory to the Administrative Agent, delivered to the
Administrative Agent as promptly as possible and in no event less than five
Business Days prior to the consummation of such sale;

 

(g)             leases of
tank and other equipment or property in the ordinary course of business;

 

(h)             Dispositions
to Imperial Oil pursuant to the exercise of any option or other right of
Imperial Oil, a partnership of McColl-Frontenac Petroleum Inc. and Imperial Oil
Limited, contemplated by the MAPL Purchase Agreement and related agreements to
reacquire part of the assets sold by Imperial Oil consisting of approximately
eight acres of fee simple real property in the event such real property is no
longer used in connection with the operation of a pipeline;

 

(i)              the making
of an Investment permitted by Section 7.02 to the extent such making of
an Investment is construed to be a Disposition of the cash or property so
invested; and

 

(j)              Dispositions
by the US Borrower and its Subsidiaries not otherwise permitted under this Section 7.05;
provided that the aggregate book value of all property Disposed of in
reliance on this clause (j) in any fiscal year shall not exceed $15,000,000;

 

provided, however, that any Disposition
pursuant to clauses (a), (c) and (e) through (g) shall be for fair market value
as reasonably determined by (i) in the case of a Disposition in excess of
$20,000,000, the board of directors of Management LLC, and (ii) otherwise, a
Responsible Officer of the Borrower.

 

7.06        Restricted Payments.  Declare or make,
directly or indirectly, any Restricted Payment, or incur any obligation
(contingent or otherwise) to do so, except that, so long as no Default shall
have occurred and be continuing at the time of any action described below or
would result therefrom:

 

(a)             each
Subsidiary may make Restricted Payments to the US Borrower, the Guarantors and
any other Person that owns an Equity Interest in such Subsidiary, ratably
according to their respective holdings of the type of Equity Interest in
respect of which such Restricted Payment is being made;

 

(b)             the US
Borrower and each Subsidiary may declare and make dividend payments or other
distributions payable solely in the common stock or other common Equity
Interests of such Person;

 

96

 

(c)             the US
Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity
Interests issued by it with the proceeds received from the substantially
concurrent issue of new shares of its common stock or other common Equity
Interests;

 

(d)             the US
Borrower may declare or pay cash quarterly distributions to the holders of its
Equity Interests in an amount not to exceed Available Cash; and

 

(e)             the US
Borrower may pay cash in lieu of issuance of common Equity Interest pursuant to
incentive compensation rights, provided that such payment is out of
unrestricted cash available for such purpose that would otherwise be an
addition to Available Cash.

 

7.07        Change in Nature of
Business.  Engage
in any material line of business except for marketing, gathering, transporting
(by barge, pipeline, ship, truck or other modes of hydrocarbon transportation),
terminalling, storing, acquiring, processing, dehydrating and otherwise
handling crude oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensates, distillates, liquid hydrocarbons, gaseous hydrocarbons and all
other constituents, elements, compounds or products refined or processed from
any of the foregoing, which activities shall include, for the avoidance of
doubt, constructing, for its own use, and not for resale, pipeline, terminal,
dehydration, processing and other energy-related facilities, and activities or
services reasonably related or ancillary thereto including entering into
purchase and sale agreements, supply agreements and Swap Contracts related to
these businesses.

 

7.08        Transactions with
Affiliates.  Enter
into any transaction of any kind with any Affiliate of the US Borrower, whether
or not in the ordinary course of business, other than on fair and reasonable
terms substantially as favorable to the US Borrower or such Restricted
Subsidiary as would be obtainable by the US Borrower or such Restricted
Subsidiary at the time in a comparable arm’s length transaction with a Person
other than an Affiliate, provided that the foregoing restriction shall not
apply to transactions between or among the US Borrower and any of its
wholly-owned Restricted Subsidiaries or between and among any wholly-owned
Restricted Subsidiaries.

 

7.09        Burdensome Agreements.  Enter into any
Contractual Obligation (other than this Agreement or any other Loan Document)
that (a) limits the ability (i) of any Restricted Subsidiary to make Restricted
Payments to any Loan Party or to otherwise transfer property to any Loan Party,
(ii) of any Restricted Subsidiary to Guarantee the Indebtedness of the US
Borrower or (iii) of the US Borrower or any Restricted Subsidiary to create,
incur, assume or suffer to exist Liens in favor of the Administrative Agents
and the Lenders on property of such Person; provided, however,
that this clause (iii) shall not prohibit any negative pledge (A) incurred
or provided in favor of any holder of Indebtedness permitted under Section 7.03(f)
solely to the extent any such negative pledge relates to the property financed
by or the subject of such Indebtedness and related general intangibles and
proceeds or (B) in easements or rights-of-way existing prior to the acquisition
thereof by the US Borrower or such Restricted Subsidiary; or (b) requires the
grant of a Lien to secure an obligation of such Person if a Lien is granted to
secure the Obligations.

 

7.10        Use of Proceeds.  Use the proceeds of
any Credit Extension, whether directly or indirectly, and whether immediately,
incidentally or ultimately, to purchase or carry margin 

 

97

 

stock (within the meaning of
Regulation U of the FRB) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally
incurred for such purpose.

 

7.11        Prohibited Contracts. 
Other than those listed on Schedule 7.11:

 

(a)             enter into
any “take-or-pay” contract or other contract or arrangement for the purchase of
goods or services which obligates it to pay for such goods or service
regardless of whether they are delivered or furnished to it, other than
contracts for pipeline, terminal or pier capacity, contracts for purchase and
sale of Petroleum Inventory or for services in any case reasonably anticipated
to be utilized in the ordinary course of business; or

 

(b)             incur any
obligation to contribute to any Multiemployer Plan.

 

7.12        Swap Contracts. 
Be a party to or in any manner be liable on any Swap Contract, except the
following, in each case with Approved Counterparties:

 

(a)             Swap
Contracts relating to Petroleum Inventory which are permitted by Section 7.03(e).

 

(b)             Swap
Contracts effectively converting interest rates from fixed to floating, the
notional amounts of which (when aggregated with all other Swap Contracts of the
US Borrower and the Restricted Subsidiaries then in effect effectively
converting interest rates from fixed to floating) do not exceed 100% of the
then outstanding principal amount of the Borrower’s Indebtedness which bears
interest at a fixed rate.

 

(c)             Swap
Contracts effectively converting interest rates from floating to fixed, the
notional amounts of which (when aggregated with all other Swap Contracts of the
US Borrower and the Restricted Subsidiaries then in effect effectively
converting interest rates from floating to fixed) do not exceed 100% of the
then outstanding principal amount of the Borrower’s Indebtedness which bears
interest at a floating rate.

 

(d)             Swap
Contracts entered into with the purpose and effect of mitigating risks
associated with foreign currency reasonably anticipated to be associated with
the business of the US Borrower and the Restricted Subsidiaries.

 

7.13        Subsidiaries. 
The US Borrower will not, and will not permit any Restricted Subsidiary
to, create or acquire any additional Restricted Subsidiary or redesignate an
Unrestricted Subsidiary as a Restricted Subsidiary unless the US Borrower gives
written notice to the Administrative Agent of such creation or acquisition and complies
with Sections  6.12, 6.13, and 7.15.

 

7.14        Open Position; Trading.  The
US Borrower will not, and will not permit any Restricted Subsidiary to, at any
time, have any Positions other than (a) Petroleum Inventory consisting of tank
bottoms and line fill, (b) Positions held in the ordinary course of business
fully hedged in all material respects by offsetting Positions, (c) other
Petroleum Inventory of up to 500,000 barrels in the aggregate at the end of any
monthly or other settlement period and (d) Swap Contracts in respect of
Petroleum Inventory not then owned by, but reasonably anticipated 

 

98

 

to be earned in the ordinary
course of business of, the US Borrower or such Restricted Subsidiary (such as pipeline
loss allowance and other compensation paid in kind).  The US Borrower will not, and will not permit
any Restricted Subsidiary to, at any time engage in trading, purchasing,
selling, or exchanging Petroleum Inventory or any contract therefor except in
connection with the business of gathering, transporting, blending, storing or
marketing by the US Borrower or its Restricted Subsidiaries.

 

7.15        Designation and Conversion
of Restricted and Unrestricted Subsidiaries; Debt of Unrestricted Subsidiaries.

 

(a)             Unless
designated as an Unrestricted Subsidiary on Schedule 5.13 as of the
Closing Date or thereafter so designated in compliance with Section 7.15(b),
any Person that becomes a Subsidiary of the US Borrower or any of its
Restricted Subsidiaries shall be classified as a Restricted Subsidiary.

 

(b)             The US
Borrower may designate by written notification thereof to the Administrative
Agent, any Restricted Subsidiary (other than the Canadian Borrower), including
a newly formed or newly acquired Subsidiary, as an Unrestricted Subsidiary if
(i) prior, and after giving effect, to such designation, no Default would exist
and (ii) such designation is deemed to be an Investment in an Unrestricted
Subsidiary in an amount equal to the fair market value as of the date of such
designation of the US Borrower’s direct and indirect ownership interest in such
Subsidiary and such Investment would be permitted to be made at the time of
such designation under Section 7.02(h). 
Except as provided in this Section 7.15(b), no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary.

 

(c)             The US
Borrower may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary if after giving effect to such designation, (i) the representations
and warranties of the US Borrower and its Restricted Subsidiaries contained in
each of the Loan Documents are true and correct on and as of such date as if
made on and as of the date of such redesignation (or, if stated to have been
made expressly as of an earlier date, were true and correct as of such date),
(ii) no Default would exist, and (iii) the US Borrower complies with the
requirements of Sections 6.12 and 6.13.  Any such designation shall be treated as a
cash dividend in an amount equal to the lesser of the fair market value of the
US Borrower’s direct and indirect ownership interest in such Subsidiary or the
amount of the US Borrower’s cash investment previously made for purposes of the
limitation on Investments under Section 7.02(h).

 

(d)             The US
Borrower shall not permit Unrestricted Subsidiaries to incur Indebtedness
except (i) Non-Recourse Debt up to an aggregate principal amount outstanding at
any one time of  $600,000,000 and (ii)
Indebtedness supported by Guarantees of the US Borrower or Restricted
Subsidiaries permitted by Section 7.02(h).

 

7.16        Amendments to
Organizational Documents.  The US Borrower will not amend or modify the
definition of Available Cash as set forth in the Partnership Agreement, except
for administrative or ministerial changes.

 

99

 

7.17        Financial
Covenants.

 

(a)             Consolidated
Interest Coverage Ratio.  Permit the Consolidated
Interest Coverage Ratio for any period of four fiscal quarters of the US
Borrower to be less than the ratio set forth below opposite the applicable
period during which such four fiscal quarter period is ending:

 

	
  Four Fiscal Quarters Ending
  during

  following the period

  	
   

  	
  Minimum

  Consolidated

  Interest Coverage

  Ratio

  	
   

  
	
  Closing Date
  to the Acquisition Initial Adjustment Date

  	
   

  	
  2.75 to 1.00

  	
   

  
	
  From and
  after the Acquisition Initial Adjustment Date

  	
   

  	
  3.00 to 1.00

  	
   

  

 

(b)             Consolidated
Senior Leverage Ratio.  Permit the Consolidated
Senior Leverage Ratio (i) at any time during an Acquisition Adjustment Period
to be greater than 4.25 to 1.00 or (ii) at any time during any period set forth
below, other than during an Acquisition Adjustment Period, to be greater than
the ratio set forth below opposite such period:

 

	
  Period

  	
   

  	
  Maximum

  Consolidated

  Senior Leverage

  Ratio

  	
   

  
	
  Closing Date
  to the Acquisition Initial Adjustment Date

  	
   

  	
  4.00 to 1.00

  	
   

  
	
  From and
  after the Acquisition Initial Adjustment Date

  	
   

  	
  3.75 to 1.00

  	
   

  

 

(c)             Consolidated
Total Leverage Ratio.  Permit the Consolidated
Total Leverage Ratio (i) at any time during an Acquisition Adjustment Period to
be greater than 5.75 to 1.00 or (ii) at any time during any period of four
fiscal quarters of the US Borrower set forth below, other than during an
Acquisition Adjustment Period, to be greater than the ratio set forth below
opposite such period:

 

100

 

	
  Period

  	
   

  	
  Maximum

  Consolidated

  Total Leverage

  Ratio

  	
   

  
	
  Closing Date
  to the Acquisition Initial Adjustment Date

  	
   

  	
  6.00 to 1.00

  	
   

  
	
  From and
  after the Acquisition Initial Adjustment Date

  	
   

  	
  5.25 to 1.00

  	
   

  

 

ARTICLE VIII.

EVENTS OF DEFAULT AND REMEDIES

 

8.01        Events of Default.  Any of the following
shall constitute an Event of Default:

 

(a)             Non-Payment.  The
US Borrower or any other Loan Party fails to pay (i) when and as required to be
paid herein, any amount of principal of any Loan or any L/C Obligation, or (ii)
within three days after the same becomes due, any interest on any Loan or on
any L/C Obligation, or any fee due hereunder, or (iii) within five days after
the same becomes due, any other amount payable hereunder or under any other
Loan Document; or

 

(b)             Specific
Covenants.  The US Borrower fails to perform or observe any
term, covenant or agreement contained in any of Sections 6.03, 6.05,
6.10, 6.11 or 6.12 or Article VII; or

 

(c)             Other
Defaults.  Any Loan Party fails to perform or observe any
other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and such
failure continues for 30 days after the date on which the Administrative Agent
notifies Borrower of such failure; or

 

(d)             Representations
and Warranties.  Any representation,
warranty, certification or statement of fact made or deemed made by or on
behalf of the US Borrower or any other Loan Party herein, in any other Loan Document,
or in any document delivered in connection herewith or therewith shall be
incorrect or misleading in any material respect when made or deemed made; or

 

(e)             Cross-Default.  (i) The
US Borrower or any Subsidiary (A) fails to make any payment when due after
the expiration of all applicable contractual grace periods (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) in
respect of any Indebtedness or Guarantee (other than Indebtedness hereunder and
Indebtedness under Swap Contracts) having an aggregate outstanding principal
amount of more than the Threshold Amount, or (B) fails to observe or
perform any other agreement or condition relating to any such Indebtedness or
Guarantee or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event occurs, the effect of which default or
other event is to cause, after the expiration of all applicable contractual
grace periods, or to permit the holder or holders of such Indebtedness or the
beneficiary or beneficiaries of such Guarantee (or a trustee or agent on behalf
of such holder or holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to be demanded or to become due
or to 

 

101

 

be repurchased, prepaid, defeased or redeemed (automatically or
otherwise), or an offer to repurchase, prepay, defease or redeem such
Indebtedness to be made, prior to its stated maturity, or such Guarantee to
become payable or cash collateral in respect thereof to be demanded; or
(ii) there occurs under any Swap Contract an Early Termination Date (as
defined in such Swap Contract) resulting from (A) any event of default
under such Swap Contract as to which the US Borrower or any Restricted
Subsidiary is the Defaulting Party (as defined in such Swap Contract) or
(B) any Termination Event (as so defined) under such Swap Contract as to
which the US Borrower or any Subsidiary is an Affected Party (as so defined) and,
in either event, the Swap Termination Value owed by the US Borrower or such
Subsidiary as a result thereof is greater than the Threshold Amount; or

 

(f)              Insolvency
Proceedings, Etc.  Any Loan Party or any of its
Restricted Subsidiaries institutes or consents to the institution of any
proceeding under any Debtor Relief Law, or makes an assignment for the benefit
of creditors; or applies for or consents to the appointment of any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
for it or for all or any material part of its property; or any receiver,
trustee, custodian, conservator, liquidator, rehabilitator or similar officer
is appointed without the application or consent of such Person and the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to all or
any material part of its property is instituted without the consent of such
Person and continues undismissed or unstayed for 60 calendar days, or an order
for relief is entered in any such proceeding; or

 

(g)             Inability to
Pay Debts; Attachment.  (i) The US Borrower or
any Restricted Subsidiary becomes unable or admits in writing its inability or
fails generally to pay its debts as they become due, or (ii) any writ or
warrant of attachment or execution or similar process is issued or levied
against all or any material part of the property of any such Person and is not
released, vacated or fully bonded within 30 days after its issue or levy; or

 

(h)             Judgments.  There
is entered against the US Borrower or any Restricted Subsidiary (i) a final
judgment or order for the payment of money in an aggregate amount exceeding the
Threshold Amount (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage), or (ii) any one
or more non-monetary final judgments that have, or could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect and, in
either case, (A) enforcement proceedings are commenced by any creditor upon
such judgment or order, or (B) there is a period of 30 consecutive days during
which a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, is not in effect; or

 

(i)              ERISA.  (i) An
ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which
has resulted or could reasonably be expected to result in liability of the US
Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan
or the PBGC in an aggregate amount in excess of the Threshold Amount, or (ii)
the US Borrower or any ERISA Affiliate fails to pay when due, after the
expiration of any applicable grace period, any installment payment with respect
to its withdrawal liability under Section 4201 of ERISA under a Multiemployer
Plan in an aggregate amount in excess of the Threshold Amount; or

 

102

 

(j)              Invalidity
of Loan Documents.  Any material provision of
any Loan Document, at any time after its execution and delivery and for any
reason other than as expressly permitted hereunder or thereunder or
satisfaction in full of all the Obligations, ceases to be in full force and
effect; or any Loan Party or any other Person contests in any manner the
validity or enforceability of any material provision of any Loan Document; or
any Loan Party denies that it has any or further liability or obligation under
any Loan Document, or purports to revoke, terminate or rescind any material
provision of any Loan Document; or

 

(k)             Change of
Control.  There occurs any Change of Control.

 

8.02        Remedies Upon Event of
Default.  If any Event of Default occurs and
is continuing, the Administrative Agent shall, at the request of, or may, with
the consent of, the Required Lenders, take any or all of the following actions:

 

(a)             declare the
commitment of each Lender to make Loans and any obligation of the L/C Issuer to
make L/C Credit Extensions to be terminated, whereupon such commitments and
obligation shall be terminated;

 

(b)             declare the
unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by each of the Borrowers;

 

(c)             require that
the Borrowers Cash Collateralize the L/C Obligations (in an amount equal to the
then Outstanding Amount thereof) and BAs (in accordance with Section 2.19); and

 

(d)             exercise on
behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents;

 

provided, however, that upon the
occurrence of an actual or deemed entry of an order for relief with respect to
the US Borrower under the Bankruptcy Code of the United States or with respect
to the Canadian Borrower under any Debtor Relief Law applicable to it, the
obligation of each Lender to make Loans and any obligation of the L/C Issuer to
make L/C Credit Extensions shall automatically terminate, the unpaid principal
amount of all outstanding Loans and all interest and other amounts as aforesaid
shall automatically become due and payable, and the obligation of the Borrowers
to Cash Collateralize the L/C Obligations and BAs as aforesaid shall
automatically become effective, in each case without further act of the
Administrative Agent or any Lender.

 

8.03        Application of Funds.  After the exercise of
remedies provided for in Section 8.02 (or after the Loans have
automatically become immediately due and payable and the L/C Obligations and
BAs have automatically been required to be Cash Collateralized as set forth in
the proviso to Section 8.02), any amounts received on account of
the Obligations shall be applied by the US Administrative Agent in the
following order:

 

First, to payment of
that portion of the Obligations constituting fees, indemnities, expenses and
other amounts (including fees, charges and disbursements of counsel to the
Administrative Agents and amounts payable under Article III) payable to
the Administrative Agents in their capacity as such;

 

103

 

Second, to payment
of that portion of the Obligations constituting fees, indemnities and other
amounts (other than principal, interest and Letter of Credit Fees) payable to
the Lenders and the L/C Issuers (including fees, charges and disbursements of
counsel to the respective Lenders and the L/C Issuers and amounts payable under
Article III), ratably among them in proportion to the respective amounts
described in this clause Second payable to them;

 

Third, to payment of
that portion of the Obligations constituting accrued and unpaid Letter of
Credit Fees and interest on the Loans, L/C Borrowings and other Obligations,
ratably among the Lenders and the L/C Issuers in proportion to the respective
amounts described in this clause Third payable to them;

 

Fourth, to payment
of that portion of the Obligations constituting unpaid principal of the Loans
and L/C Borrowings, to the Lender Swap Obligations, to Cash Collateralize that
portion of L/C Obligations comprised of the aggregate undrawn amount of Letters
of Credit, to Cash Collateralize BAs, and to the payment of any other
Obligations, ratably among the Lenders, the L/C Issuers, and the Lender
Counterparties in proportion to the respective amounts described in this clause
Fourth held by them; and

 

Last, the balance,
if any, after all of the Obligations have been indefeasibly paid in full, to
the US Borrower, the Canadian Borrower or as otherwise required by Law.

 

Subject to Section 2.03(c), amounts used to Cash
Collateralize the aggregate undrawn amount of Letters of Credit and BAs, as
applicable, pursuant to clause Fourth above, shall be applied to satisfy
drawings under such Letters of Credit as they occur and to satisfy such BAs, as
applicable, as they mature.  If any
amount remains on deposit as Cash Collateral after all Letters of Credit and
BAs, as applicable, have either been fully drawn, repaid or expired, such
remaining amount shall be applied to the other Obligations, if any, in the
order set forth above.

 

8.04        Allocation to US and
Canadian Obligations.  In
respect of any amounts received on account of the Obligations after the
exercise of remedies provided for in Section 8.02 (or after the
Loans have automatically become immediately due and payable and the L/C
Obligations have automatically been required to be Cash Collateralized as set
forth in the proviso to Section 8.02), the Administrative Agents
will act in good faith to allocate funds received from the Canadian Borrower
and any other Subsidiaries which are incorporated in Canada or a province
thereof to the direct Obligations (as distinguished from Guaranty obligations)
of the Canadian Borrower and to allocate funds received from the US Borrower
and its Subsidiaries (other than the Canadian Borrower and any other
Subsidiaries which are incorporated in Canada or a province thereof) to the
direct Obligations (as distinguished from Guaranty obligations) of the US
Borrower, but only to the extent that the Administrative Agents determine that
such allocation with not result in a ratable sharing that is not in the
proportions to the total Obligations of the US Borrower and the Canadian
Borrower required under any of the foregoing clauses First through Fourth.  The failure of any allocation to be made
pursuant to the preceding sentence shall not reduce or impair the obligations
of any Loan Party under this Agreement or any other Loan Document or result in
any offset, claim or cause of action against any Administrative Agent or any
Lender.

 

104

 

ARTICLE IX.

ADMINISTRATIVE AGENT

 

9.01        Appointment and Authority.  Each
of the Lenders and the L/C Issuer hereby irrevocably appoints Bank of America,
N.A. to act on its behalf as the US Administrative Agent hereunder and under
the other Loan Documents and each of the Canadian Lenders and the Canadian L/C
Issuer hereby irrevocably appoints Bank of America, N.A., Canada Branch, to act
on its behalf as the Canadian Administrative Agent hereunder and under the
other Loan Documents and authorizes each Administrative Agent to take such
actions on its behalf and to exercise such powers as are delegated to such
Administrative Agent by the terms hereof or thereof, together with such actions
and powers as are reasonably incidental thereto.  The provisions of this Article are solely for
the benefit of each Administrative Agent, the Lenders and the L/C Issuer, and
no Loan Party shall have rights as a third party beneficiary of any of such
provisions, except that the Loan Parties shall have (i) the rights in
connection with the resignation of an Administrative Agent specified in Section
9.06 and (ii) the right to the release of Liens and Guaranties provided for
in Section 9.10.

 

9.02        Rights as a Lender.  The Person serving as
an Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Administrative Agent and the term “Lender” or “Lenders” shall,
unless otherwise expressly indicated or unless the context otherwise requires,
include the Person serving as an Administrative Agent hereunder in its
individual capacity.  Such Person and its
Affiliates may accept deposits from, lend money to, act as the financial
advisor or in any other advisory capacity for and generally engage in any kind
of business with the US Borrower or any Subsidiary or other Affiliate thereof
as if such Person were not an Administrative Agent hereunder and without any
duty to account therefor to the Lenders.

 

9.03        Exculpatory Provisions.  Each Administrative
Agent shall not have any duties or obligations except those expressly set forth
herein and in the other Loan Documents. 
Without limiting the generality of the foregoing, neither Administrative
Agent:

 

(a)             shall be
subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;

 

(b)             shall have
any duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby or by the
other Loan Documents that such Administrative Agent is required to exercise as
directed in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be expressly provided for herein or in the other Loan
Documents), provided that such Administrative Agent shall not be
required to take any action that, in its opinion or the opinion of its counsel,
may expose such Administrative Agent to liability or that is contrary to any
Loan Document or applicable Law; and

 

(c)             shall,
except as expressly set forth herein and in the other Loan Documents, have any
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to the US Borrower or any of its Affiliates that is
communicated to or obtained by the Person serving as the Administrative Agent
or any of its Affiliates in any capacity.

 

105

 

Neither
Administrative Agent shall be liable for any action taken or not taken by it
(i) with the consent or at the request of the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary, or as such
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Sections 10.01 and 8.02) or
(ii) in the absence of its own gross negligence or willful misconduct.  Neither Administrative Agent shall be deemed
to have knowledge of any Default unless and until notice describing such
Default is given to such Administrative Agent by the US Borrower, a Lender or
the L/C Issuer.

 

Neither Administrative Agent shall be responsible for or have any duty
to ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth herein or therein or the occurrence of any Default, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement, any
other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to such Administrative Agent.

 

9.04        Reliance by Administrative
Agent.  Each
Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, Internet or intranet website posting or other distribution) believed
by it to be genuine and to have been signed, sent or otherwise authenticated by
the proper Person.  Each Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon.  In
determining compliance with any condition hereunder to the making of a Loan, or
the issuance of a Letter of Credit, that by its terms must be fulfilled to the
satisfaction of a Lender or the L/C Issuer, each Administrative Agent may
presume that such condition is satisfactory to such Lender or the L/C Issuer
unless the Administrative Agent shall have received notice to the contrary from
such Lender or the L/C Issuer prior to the making of such Loan or the issuance
of such Letter of Credit.  The
Administrative Agent may consult with legal counsel (who may be counsel for the
US Borrower), independent accountants and other experts selected by it, and
shall not be liable for any action taken or not taken by it in accordance with
the advice of any such counsel, accountants or experts.

 

9.05        Delegation of Duties.  Each Administrative
Agent may perform any and all of its duties and exercise its rights and powers
hereunder or under any other Loan Document by or through any one or more sub-agents
appointed by the Administrative Agent. 
Each Administrative Agent and any such sub-agent may perform any and all
of its duties and exercise its rights and powers by or through their respective
Related Parties.  The exculpatory
provisions of this Article shall apply to any such sub-agent and to the Related
Parties of each Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

 

106

 

9.06        Resignation of
Administrative Agent.  An
Administrative Agent may at any time give notice of its resignation to the
Lenders, the L/C Issuer and the US Borrower. 
Upon receipt of any such notice of resignation, the Required Lenders
shall have the right, in consultation with the US Borrower, to appoint a
successor, which shall be a bank with an office in the United States, or an
Affiliate of any such bank with an office in the United States.  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of the
Lenders and the L/C Issuer, appoint a successor Administrative Agent meeting
the qualifications set forth above; provided that if the Administrative
Agent shall notify the US Borrower and the Lenders that no qualifying Person
has accepted such appointment, then such resignation shall nonetheless become
effective in accordance with such notice and (1) the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the other Loan Documents (except that in the case of any
collateral security held by the Administrative Agent on behalf of the Lenders or
the L/C Issuer under any of the Loan Documents, the retiring Administrative
Agent shall continue to hold such collateral security until such time as a
successor Administrative Agent is appointed) and (2) all payments,
communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender and the L/C
Issuer directly, until such time as the Required Lenders appoint a successor
Administrative Agent as provided for above in this Section.  Upon the acceptance of a successor’s
appointment as Administrative Agent hereunder, such successor shall succeed to
and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Administrative Agent, and the retiring Administrative
Agent shall be discharged from all of its duties and obligations hereunder or
under the other Loan Documents (if not already discharged therefrom as provided
above in this Section).  The fees payable
by the US Borrower to a successor Administrative Agent shall be the same as
those payable to its predecessor unless otherwise agreed between the US
Borrower and such successor.  After the
retiring Administrative Agent’s resignation hereunder and under the other Loan
Documents, the provisions of this Article and Section 10.04 shall
continue in effect for the benefit of such retiring Administrative Agent, its
sub-agents and their respective Related Parties in respect of any actions taken
or omitted to be taken by any of them while the retiring Administrative Agent
was acting as Administrative Agent.

 

Any resignation by Bank of America as US Administrative Agent or Bank
of America, acting through its Canada Branch as Canadian Administrative Agent
pursuant to this Section shall also constitute its resignation as L/C Issuer
and Swing Line Lender.  Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder, (a)
such successor shall succeed to and become vested with all of the rights,
powers, privileges and duties of the retiring L/C Issuer and Swing Line Lender,
(b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all
of their respective duties and obligations hereunder or under the other Loan
Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution
for the Letters of Credit, if any, outstanding at the time of such succession
or make other arrangements satisfactory to the retiring L/C Issuer to
effectively assume the obligations of the retiring L/C Issuer with respect to
such Letters of Credit.

 

9.07        Non-Reliance on
Administrative Agent and Other Lenders.  Each
Lender and the L/C Issuer acknowledges that it has, independently and without
reliance upon either 

 

107

 

Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. 
Each Lender and the L/C Issuer also acknowledges that it will, independently
and without reliance upon either Administrative Agent or any other Lender or
any of their Related Parties and based on such documents and information as it
shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other Loan
Document or any related agreement or any document furnished hereunder or
thereunder.

 

9.08        No Other Duties, Etc.  Anything herein to
the contrary notwithstanding, none of the Arrangers, Syndication Agent or
Co-Documentation Agents listed on the cover page hereof shall have any powers,
duties or responsibilities under this Agreement or any of the other Loan
Documents, except in its capacity, as applicable, as an Administrative Agent, a
Lender or the L/C Issuer hereunder.

 

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

 

(a)             to file and
prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Loans, L/C Obligations and all other Obligations that
are owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders, the L/C Issuer and each
Administrative Agent (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Lenders, the L/C Issuer and each
Administrative Agent and their respective agents and counsel and all other
amounts due the Lenders, the L/C Issuer and each Administrative Agent under Sections 2.03(i)
and (j), 2.09 and 10.04) allowed in such judicial
proceeding; and

 

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

 

and any custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Lender and the L/C Issuer to make such payments to
the applicable Administrative Agent and, in the event that the applicable
Administrative Agent shall consent to the making of such payments directly to
the Lenders and the L/C Issuer, to pay to the applicable Administrative Agent
any amount due for the reasonable compensation, expenses, disbursements and
advances of the applicable Administrative Agent and its agents and counsel, and
any other amounts due the applicable Administrative Agent under Sections 2.09
and 10.04.

 

Nothing contained herein shall be deemed to authorize any
Administrative Agent to authorize or consent to or accept or adopt on behalf of
any Lender or the L/C Issuer any plan of reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of 

 

108

 

any Lender or to authorize either Administrative Agent to vote in
respect of the claim of any Lender in any such proceeding.

 

9.10        Collateral and Guaranty
Matters.  The
Lenders and the L/C Issuer irrevocably authorize the US Administrative Agent
and Canadian Administrative Agent , at the cost and expense of the Borrowers,
and with documents in forms acceptable to each Administrative Agent in its
discretion:

 

(a)             to release
all Liens on property granted to or held by an Administrative Agent under any
Loan Document upon termination of the Aggregate Commitments and payment in full
of all Obligations (other than contingent indemnification obligations) and the
expiration or termination of all Letters of Credit;

 

(b)             to release
any Lien on any particular property granted to or held by an Administrative
Agent under any Loan Document (i) if such property is disposed of (other than
to the US Borrower or a Restricted Subsidiary) as part of or in connection with
any transaction permitted under this Agreement, (ii) if such property is owned
by a Restricted Subsidiary that ceases to be a Restricted Subsidiary as a
result of a transaction permitted under this Agreement, or (iii) subject to Section
10.01, if approved by the Required Lenders;

 

(c)             to
subordinate any Lien on any property granted to or held by an Administrative
Agent under any Loan Document to the holder of any Lien on such property that
is permitted by Section 7.01(g);

 

(d)             to release
any Guarantor from its obligations under the Guaranty if such Person ceases to
be a Restricted Subsidiary as a result of a transaction permitted under this
Agreement; and

 

(e)             at such time
as both (i) the Debt Rating by S&P shall be BBB- or better and
(ii) the Debt Rating by Moody’s shall be Baa3 or better and, in either
case, provided that no Default shall have occurred and be continuing and
request for such release has been given to the US Administrative Agent by the
US Borrower, to release all Liens on property granted to or held by either
Administrative Agent under any Loan Document and delivered pursuant to this
Agreement securing the Obligations and the Lender Swap Obligations (other than
in respect of such Cash Collateralized L/C Obligations and Bankers’
Acceptances).

 

Upon request by the US Administrative Agent at any time, the Required
Lenders will confirm in writing the US Administrative Agent’s and Canadian
Administrative Agent’s authority to release or subordinate its interest in
particular types or items of property, or to release any Guarantor from its
obligations under the Guaranty pursuant to this Section 9.10.

 

ARTICLE X.

MISCELLANEOUS

 

10.01      Amendments, Etc.  No amendment or
waiver of any provision of this Agreement or any other Loan Document, and no
consent to any departure by any Borrower or any other Loan Party therefrom,
shall be effective unless in writing signed by the Required Lenders and the 

 

109

 

US Borrower or the applicable
Loan Party, as the case may be, and acknowledged by the Administrative Agent,
and each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however,
that no such amendment, waiver or consent shall:

 

(a)             waive any
condition set forth in Section 4.01(a) without the written consent
of each Lender;

 

(b)             extend or
increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 8.02) without the written consent of such
Lender;

 

(c)             postpone any
date fixed by this Agreement or any other Loan Document for any payment or
mandatory prepayment of principal, interest, fees or other amounts due to the
Lenders (or any of them) or any mandatory reduction of the Aggregate
Commitments hereunder or under any other Loan Document without the written
consent of each Lender directly affected thereby;

 

(d)             reduce the
principal of, or the rate of interest specified herein on, any Loan or L/C
Borrowing, or (subject to clause (vi) of the second proviso to this Section 10.01)
any fees or other amounts payable hereunder or under any other Loan Document,
or change the manner of computation of any financial ratio (including any
change in any applicable defined term) used in determining the Applicable Rate
that would result in a reduction of any interest rate on any Loan or any fee
payable hereunder without the written consent of each Lender directly affected
thereby; provided, however, that only the consent of the Required
Lenders shall be necessary (i) to amend the definition of “Default Rate” or to
waive any obligation of a Borrower to pay interest or Letter of Credit Fees at
the Default Rate or (ii) to amend any financial covenant hereunder (or any
defined term used therein) even if the effect of such amendment would be to
reduce the rate of interest on any Loan or L/C Borrowing or to reduce any fee
payable hereunder;

 

(e)             change Section 2.13
or Section 8.03 in a manner that would alter the pro rata sharing
of payments required thereby without the written consent of each Lender;

 

(f)              change any
provision of this Section or the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to
amend, waive or otherwise modify any rights hereunder or make any determination
or grant any consent hereunder, without the written consent of each Lender;

 

(g)             except as
provided in Section 9.10(d), release all or substantially all of the
value of the Guaranty without the written consent of each Lender; or

 

(h)             except as
provided in Section 9.10(a) or (e), release all or substantially
all of the Collateral without the consent of each Lender;

 

and, provided  further, that (i) no amendment, waiver or
consent shall, unless in writing and signed by the L/C Issuer in addition to
the Lenders required above, affect the rights or duties of the L/C Issuer under
this Agreement or any Issuer Document relating to any Letter of Credit issued
or to be issued by it; (ii) no amendment, waiver or consent shall, unless in
writing and 

 

110

 

signed by the applicable Swing Line Lender in addition to the Lenders required
above, affect the rights or duties of such Swing Line Lender under this
Agreement; (iii) no amendment, waiver or consent shall, unless in writing and
signed by an Administrative Agent in addition to the Lenders required above,
affect the rights or duties of such Administrative Agent under this Agreement
or any other Loan Document; (iv) Section 10.06(h) may not be
amended, waived or otherwise modified without the consent of each Granting
Lender all or any part of whose Loans are being funded by an SPC at the time of
such amendment, waiver or other modification; (v) no amendment, waiver or
consent shall, unless in writing and signed by each Lender Counterparty in
addition to the Lenders required above, amend the provisions of Clause
FOURTH of Section 8.03; and (vi) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed only by the
parties thereto.  Notwithstanding
anything to the contrary herein, no Defaulting Lender shall have any right to
approve or disapprove any amendment, waiver or consent hereunder, except that
the Commitment of such Lender may not be increased or extended without the
consent of such Lender.

 

10.02      Notices; Effectiveness;
Electronic Communication.

 

(a)             Notices
Generally.  Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in subsection (b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopier as follows, and all notices and other communications expressly
permitted hereunder to be given by telephone shall be made to the applicable
telephone number, as follows:

 

(i)            if to any
Borrower, an Administrative Agent, the L/C Issuer or a Swing Line Lender, to
the address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 10.02; and

 

(ii)           if to any
other Lender, to the address, telecopier number, electronic mail address or
telephone number specified in its Administrative Questionnaire.

 

Notices sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received;
and notices sent by telecopier shall be deemed to have been given when sent
(except that, if not given during normal business hours for the recipient,
shall be deemed to have been given at the opening of business on the next
business day for the recipient).  Notices
delivered through electronic communications to the extent provided in
subsection (b) below, shall be effective as provided in such subsection (b).

 

(b)             Electronic
Communications.  Notices and other
communications to the Lenders and the L/C Issuer hereunder may be delivered or
furnished by electronic communication (including e-mail and Internet or
intranet websites) pursuant to procedures approved by the Administrative
Agents, provided that the foregoing shall not apply to notices to any
Lender or the L/C Issuer pursuant to Article II if such Lender or the
L/C Issuer, as applicable, has notified the applicable Administrative Agent
that it is incapable of receiving notices under such Article by electronic
communication.  The Administrative Agents
or the Borrowers may, in their discretion, agree to accept notices and other
communications to it hereunder by electronic 

 

111

 

communications pursuant to procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.

 

Unless the Administrative Agents otherwise prescribe, (i) notices
and other communications sent to an e-mail address shall be deemed received
upon the sender’s receipt of an acknowledgement from the intended recipient
(such as by the “return receipt requested” function, as available, return
e-mail or other written acknowledgement), provided that if such notice
or other communication is not sent during the normal business hours of the
recipient, such notice or communication shall be deemed to have been sent at
the opening of business on the next business day for the recipient, and
(ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at
its e-mail address as described in the foregoing clause (i) of
notification that such notice or communication is available and identifying the
website address therefor.

 

(c)             The Platform.  THE
PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT
WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY
OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS
FROM THE BORROWER MATERIALS.  NO WARRANTY
OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY
AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Administrative Agent or
any of its Related Parties (collectively, the “Agent Parties”) have any
liability to any Borrower, any Lender, the L/C Issuer or any other Person for
losses, claims, damages, liabilities or expenses of any kind (whether in tort,
contract or otherwise) arising out of any Borrower’s or either Administrative
Agent’s transmission of Borrower Materials through the Internet, except to the
extent that such losses, claims, damages, liabilities or expenses are
determined by a court of competent jurisdiction by a final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Agent Party; provided, however, that in no event shall any Agent
Party have any liability to any Borrower, any Lender, the L/C Issuer or any
other Person for indirect, special, incidental, consequential or punitive
damages (as opposed to direct or actual damages).

 

(d)             Change of
Address, Etc.  A Borrower, an Administrative
Agent, the L/C Issuer or a Swing Line Lender may change its address, telecopier
or telephone number for notices and other communications hereunder by notice to
the other parties hereto.  Each other
Lender may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the Borrowers, the US
Administrative Agent and the L/C Issuer. 
In addition, each Lender agrees to notify the applicable Administrative
Agent from time to time to ensure that the applicable Administrative Agent has
on record (i) an effective address, contact name, telephone number, telecopier
number and electronic mail address to which notices and other communications
may be sent and (ii) accurate wire instructions for such Lender.

 

(e)             Reliance by
Administrative Agent, L/C Issuer and Lenders.  The
Administrative Agents, the L/C Issuer and the Lenders shall be entitled to rely
and act upon any notices 

 

112

 

(including telephonic Committed Loan Notices and Swing Line Loan
Notices) purportedly given by or on behalf of any Borrower even if
(i) such notices were not made in a manner specified herein, were
incomplete or were not preceded or followed by any other form of notice
specified herein, or (ii) the terms thereof, as understood by the
recipient, varied from any confirmation thereof.  Each Borrower shall indemnify the
Administrative Agents, the L/C Issuer, each Lender and the Related Parties of each
of them from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of any
Borrower.  All telephonic notices to and
other telephonic communications with an Administrative Agent may be recorded by
such Administrative Agent, and each of the parties hereto hereby consents to
such recording.

 

10.03      No Waiver; Cumulative
Remedies.  No
failure by any Lender, the L/C Issuer or an Administrative Agent to exercise,
and no delay by any such Person in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.  The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by Law.

 

10.04      Expenses; Indemnity; Damage
Waiver.

 

(a)             Costs and
Expenses.  The Borrowers shall pay (i) all reasonable
out-of-pocket expenses incurred by the US Administrative Agent, Canadian
Administrative Agent and their Affiliates (including the reasonable fees,
charges and disbursements of counsel for either such Administrative Agent), in connection
with the syndication of the credit facilities provided for herein, the
preparation, negotiation, execution, delivery and administration of this
Agreement and the other Loan Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the L/C Issuer in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all out-of-pocket expenses incurred by an
Administrative Agent, any Lender or the L/C Issuer (including the fees, charges
and disbursements of any counsel for the Administrative Agent, any Lender or the
L/C Issuer), in connection with the enforcement or protection of its rights
(A) in connection with this Agreement and the other Loan Documents,
including its rights under this Section, or (B) in connection with the
Loans made or Letters of Credit issued hereunder, including all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in respect
of such Loans or Letters of Credit.

 

(b)             Indemnification
by the Borrower.  Each Borrower shall
indemnify each Administrative Agent (and any sub-agent thereof), each other
Agent, each Lender and the L/C Issuer, and each Related Party of any of the
foregoing Persons (each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses (including the fees, charges and
disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or
asserted against any Indemnitee by any third party or by any Borrower or any
other Loan Party arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement, any other Loan Document
or any 

 

113

 

agreement or instrument contemplated hereby or thereby, the performance
by the parties hereto of their respective obligations hereunder or thereunder,
or the consummation of the transactions contemplated hereby or thereby, or in
the case of the Administrative Agent (and any sub-agent thereof) and its
Related Parties only, the administration of this Agreement and the other Loan
Documents, (ii) any Loan or Letter of Credit or the use or proposed use of
the proceeds therefrom (including any refusal by the L/C Issuer to honor a
demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by any Borrower
or any of their subsidiaries, or any Environmental Liability related in any way
to the Borrower or any of its Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory, whether
brought by a third party or by any Borrower or any other Loan Party, and
regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in
whole or in part, out of the comparative, contributory or sole negligence of
the Indemnitee; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses (x) are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the
gross negligence or willful misconduct of such Indemnitee or (y) result
from a claim brought by any Borrower or any other Loan Party against an
Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder
or under any other Loan Document, if such Borrower or such Loan Party has
obtained a final and nonappealable judgment in its favor on such claim as
determined by a court of competent jurisdiction.

 

(c)             Reimbursement
by Lenders.  To the extent that any
Borrower for any reason fails to indefeasibly pay any amount required under
subsection (a) or (b) of this Section to be paid by it to the
Administrative Agent (or any sub-agent thereof), each other Agent, the L/C
Issuer or any Related Party of any of the foregoing, each Lender severally
agrees to pay to the Administrative Agent (or any such sub-agent), the L/C
Issuer or such Related Party, as the case may be, such Lender’s Applicable
Percentage (determined as of the time that the applicable unreimbursed expense
or indemnity payment is sought) of such unpaid amount, provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the Administrative
Agent (or any such sub-agent) or the L/C Issuer in its capacity as such, or
against any Related Party of any of the foregoing acting for the Administrative
Agent (or any such sub-agent) or L/C Issuer in connection with such capacity.  The obligations of the Lenders under this
subsection (c) are subject to the provisions of Section 2.12(c).

 

(d)             Waiver of
Consequential Damages, Etc.  To the fullest extent
permitted by applicable Law, no Borrower shall assert, and each hereby waives,
any claim against any Indemnitee, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Loan or Letter of Credit or
the use of the proceeds thereof.  No
Indemnitee referred to in subsection (b) above shall be liable for any
damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or
other information transmission 

 

114

 

systems in connection with this Agreement or the other Loan Documents
or the transactions contemplated hereby or thereby.

 

(e)             Payments.  All
amounts due under this Section shall be payable not later than ten Business
Days after demand therefor.

 

(f)            Waiver of Judgment Interest Act (Alberta).  To the extent permitted by Law, the
provisions of the Judgment Interest Act
(Alberta) shall not apply to the Canadian Loans and the other Loan Documents
and are hereby expressly waived by the Canadian Borrower.

 

(g)           Deemed Reinvestment Not Applicable.  For the purposes of the Interest Act
(Canada), the principle of deemed reinvestment of interest shall not apply to
any interest calculation under the Loan Documents, and the rates of interest
stipulated in this Agreement are intended to be nominal rates and not effective
rates or yields.

 

(h)             Survival.  The
agreements in this Section shall survive the resignation of the Administrative
Agent and the L/C Issuer, the replacement of any Lender, the termination of the
Aggregate Commitments and the repayment, satisfaction or discharge of all the
other Obligations and Lender Swap Obligations.

 

10.05      Payments Set Aside.  To the extent that
any payment by or on behalf of any Borrower is made to any Administrative
Agent, the L/C Issuer or any Lender, or the Administrative Agent, the L/C
Issuer or any Lender exercises its right of setoff, and such payment or the
proceeds of such setoff or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, set aside or required (including
pursuant to any settlement entered into by the Administrative Agent, the L/C
Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or
any other party, in connection with any proceeding under any Debtor Relief Law
or otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred, and (b) each Lender and the L/C Issuer severally agrees to pay to
the Administrative Agent upon demand its applicable share (without duplication)
of any amount so recovered from or repaid by the Administrative Agent, plus
interest thereon from the date of such demand to the date such payment is made
at a rate per annum equal to the Federal Funds Rate from time to time in
effect.  The obligations of the Lenders
and the L/C Issuer under clause (b) of the preceding sentence shall survive the
payment in full of the Obligations and the termination of this Agreement.

 

10.06      Successors and Assigns.

 

(a)             Successors
and Assigns Generally.  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 neither
any Borrower nor any other Loan Party may assign or otherwise transfer any of
its rights or obligations hereunder without the prior written consent of the
Administrative Agent and each Lender and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (i) to an Eligible
Assignee in accordance with the provisions of subsection (b) of this Section,
(ii) by way of participation in accordance with the provisions of subsection
(d) of this Section, (iii) by way of pledge or assignment of a 

 

115

 

security interest subject to the restrictions of subsection (f) of this
Section, or (iv) to an SPC in accordance with the provisions of subsection (h)
of this Section (and any other attempted assignment or transfer by any party
hereto shall be null and void).  Nothing
in this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby, Participants to the extent provided in subsection (d) of this
Section and, to the extent expressly contemplated hereby, the Related Parties
of each of the Administrative Agent, the L/C Issuer and the Lenders) any legal
or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)             Assignments
by Lenders.  Any Lender may at any time assign to one or
more Eligible Assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans
(including for purposes of this subsection (b), participations in L/C
Obligations and in Swing Line Loans) at the time owing to it); provided
that

 

(i)            except in
the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment
to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a
Lender, the aggregate amount of the Commitment (which for this purpose includes
Loans outstanding thereunder) or, if the Commitment is not then in effect, the
principal outstanding balance of the Loans of the assigning Lender subject to
each such assignment, determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Administrative Agent or, if
“Trade Date” is specified in the Assignment and Assumption, as of the Trade
Date, shall not be less than $5,000,000 unless
each of the Administrative Agent and, so long as no Event of Default has
occurred and is continuing, the US Borrower otherwise consents (each such
consent not to be unreasonably withheld or delayed); provided, however,
that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met;

 

(ii)           each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement with respect to
the Loans or the Commitment assigned, except that this clause (ii) shall not
apply to rights in respect of Swing Line Loans, and if the assignor is a
Canadian Lender it shall designate the portion, if any, of its Canadian
Applicable Percentage assigned with such partial assignment of its Commitment;
provided that after any such assignment, neither the assignor nor the assignee
will have a Canadian Applicable Percentage of the Canadian Maximum Commitment
that exceeds its US Commitment;

 

(iii)          any
assignment of a Commitment must be approved by the US Administrative Agent (and
the Canadian Administrative Agent in the case of a Canadian Lender), the US L/C
Issuer (and the Canadian L/C Issuer in the case of a Canadian Lender) and the
applicable Swing Line Lender unless the Person that is the proposed assignee is
itself a Lender (whether or not the proposed assignee would otherwise qualify 

 

116

 

as an Eligible Assignee) and, in the case of
an assignor that is a Canadian Lender, the proposed assignee is itself a
Canadian Lender; and

 

(iv)          the assignor
and assignee to each assignment shall execute and deliver to the US
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee in the amount, if any, required as set forth in Schedule
10.06 and the Eligible Assignee, if it shall not be a Lender, shall deliver to
the US Administrative Agent an Administrative Questionnaire.

 

Subject to acceptance and recording thereof by the Administrative Agent
pursuant to subsection (c) of this Section, from and after the effective date
specified in each Assignment and Assumption, the Eligible Assignee thereunder
shall be a party to this Agreement and, to the extent of the interest assigned
by such Assignment and Assumption, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from
its obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto) but shall
continue to be entitled to the benefits of Sections 3.01, 3.04,
3.05, and 10.04 with respect to facts and circumstances
occurring prior to the effective date of such assignment.  Upon request, the applicable Borrower (at its
expense) shall execute and deliver a Note to the assignee Lender with respect
to the assigned interest and a replacement Note to the assigning Lender to the
extent of the interest, if any, retained by such assigning Lender.  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
subsection 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
subsection (d) of this Section.  If as a
result of such assignment a Person that was a Lender Counterparty shall cease
to be a Lender Counterparty, the Lender Swap Obligations of such Person, to the
extent arising from transactions entered into at the time such counterparty was
a Lender or an Affiliate of a Lender, shall continue to be secured pursuant to
the terms hereof.

 

Each Eligible Assignee of a Canadian Lender must be a Canadian Resident
Lender immediately following such assignment. 
Any purported assignment by a Canadian Lender to an assignee failing to
satisfy the foregoing condition shall be null and void on its face.

 

(c)             Register.  The
Administrative Agent, acting solely for this purpose as an agent of each
Borrower, shall maintain at the Administrative Agent’s Office a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments of, and principal
amounts of the Loans and L/C Obligations 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 Borrowers, 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. 
The Register shall be available for inspection by each of the Borrowers
and the L/C Issuer at any reasonable time and from time to time upon reasonable
prior notice.  In addition, at any time
that a request for a consent for a material or substantive change to the Loan
Documents is pending, any Lender may request and receive from the
Administrative Agent a copy of the Register.

 

117

 

(d)             Participations.  Any
Lender may at any time, without the consent of, or notice to, the Borrowers or
the Administrative Agent, sell participations to any Person (other than a
natural person or the Borrower or any of the Borrowers’ Affiliates or
Subsidiaries) (each, a “Participant”) in all or a portion of such
Lender’s rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the Loans (including such Lender’s
participations in L/C Obligations) owing to it); provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrowers,
the Administrative Agent, the Lenders and the L/C Issuer shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Agreement.

 

Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in
the first proviso to Section 10.01 that affects such
Participant.  Subject to subsection (e)
of this Section, each Borrower agrees that each Participant shall be entitled
to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender
and had acquired its interest by assignment pursuant to subsection (b) of this
Section.  To the extent permitted by Law,
each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.13 as though it
were a Lender.

 

(e)             Limitations
upon Participant Rights.  A Participant shall not be
entitled to receive any greater payment under Section 3.01 or 3.04 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 Borrowers’ prior written consent. 
A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 3.01 unless the US
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the US Borrower, to comply with Section 3.01(e)
as though it were a Lender.  A
participant that would be a Canadian Lender if it were a Lender shall not be
entitled to the benefits of Section 3.01 unless such Participant would qualify
as a Canadian Resident Lender if it were a Canadian Lender at the time of such
participation.

 

(f)              Certain
Pledges.  Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement
(including under its Note, if any) to secure obligations of such Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank; provided that no such pledge or assignment shall release such
Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

 

(g)             Electronic
Execution of Assignments.  The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and
Assumption shall be deemed to include electronic signatures or the keeping of
records in electronic form, each of which shall be of the same legal effect,
validity or enforceability as a manually executed signature or the use of 

 

118

 

a paper-based recordkeeping system, as the case may be, to the extent
and as provided for in any applicable Law, including the Federal Electronic
Signatures in Global and National Commerce Act, the New York State Electronic
Signatures and Records Act, or any other similar state Laws based on the
Uniform Electronic Transactions Act.

 

(h)             Special
Purpose Funding Vehicles.  Notwithstanding anything to
the contrary contained herein, any Lender (a “Granting Lender”) may
grant to a special purpose funding vehicle identified as such in writing from
time to time by the Granting Lender to the Administrative Agents and Borrowers
(an “SPC”) the option to provide all or any part of any Committed Loan
that such Granting Lender would otherwise be obligated to make pursuant to this
Agreement; provided that (i) nothing herein shall constitute a
commitment by any SPC to fund any Committed Loan, and (ii) if an SPC elects not
to exercise such option or otherwise fails to make all or any part of such
Committed Loan, the Granting Lender shall be obligated to make such Committed
Loan pursuant to the terms hereof or, if it fails to do so, to make such
payment to the Administrative Agent as is required under Section 2.12(b)(ii).  Each party hereto hereby agrees that (i)
neither the grant to any SPC nor the exercise by any SPC of such option shall
increase the costs or expenses or otherwise increase or change the obligations
of any Borrower under this Agreement (including its obligations under Section 3.04),
(ii) no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement for which a Lender would be liable, and (iii) the Granting
Lender shall for all purposes, including the approval of any amendment, waiver
or other modification of any provision of any Loan Document, remain the lender
of record hereunder.  The making of a
Committed Loan by an SPC hereunder shall utilize the Commitment of the Granting
Lender to the same extent, and as if, such Committed Loan were made by such
Granting Lender.  In furtherance of the
foregoing, each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and one
day after the payment in full of all outstanding commercial paper or other
senior debt of any SPC, it will not institute against, or join any other Person
in instituting against, such SPC any bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceeding under the Laws of the United States or
any State thereof.  Notwithstanding
anything to the contrary contained herein, any SPC may (i) with notice to, but
without prior consent of the Borrower and the Administrative Agent and with the
payment of a processing fee in the amount of $3,500, assign all or any portion
of its right to receive payment with respect to any Committed Loan to the Granting
Lender and (ii) disclose on a confidential basis any non-public information
relating to its funding of Loans to any rating agency, commercial paper dealer
or provider of any surety or Guarantee or credit or liquidity enhancement to
such SPC.

 

(i)              Resignation
as L/C Issuer or Swing Line Lender after Assignment.  Notwithstanding anything to the contrary
contained herein, if at any time Bank of America assigns all of its Commitments
and Loans pursuant to subsection (b) above, Bank of America and Bank of America,
N.A., acting through its Canada Branch, may, (i) upon 30 days’ notice to the
Borrowers and the Lenders, resign as L/C Issuer and/or (ii) upon 30 days’
notice to the Borrowers, resign as Swing Line Lender.  In the event of any such resignation as L/C Issuer
or Swing Line Lender, the Borrowers shall be entitled to appoint from among the
Lenders successor L/C Issuers or successor Swing Line Lenders hereunder; provided,
however, that no failure by Borrowers to appoint any such successor
shall affect the resignation of Bank of America and Bank of America, N.A.,
acting through its Canada Branch, as L/C Issuer or Swing 

 

119

 

Line Lender, as the case may be. 
If Bank of America or Bank of America, N.A., acting through its Canada
Branch, resigns as L/C Issuer, it shall retain all the rights and obligations
of the L/C Issuer hereunder with respect to all Letters of Credit outstanding
as of the effective date of its resignation as L/C Issuer and all L/C
Obligations with respect thereto (including the right to require the Lenders to
make Base Rate Loans or fund risk participations in Unreimbursed Amounts
pursuant to Section 2.03(c).  If
Bank of America or Bank of America, N.A., acting through its Canada Branch,
resigns as Swing Line Lender, it shall retain all the rights of the Swing Line
Lender provided for hereunder with respect to Swing Line Loans made by it and
outstanding as of the effective date of such resignation, including the right
to require the Lenders to make Committed Loans or fund risk participations in
outstanding Swing Line Loans pursuant to Section 2.04.  Upon the appointment of a successor L/C
Issuer and/or Swing Line Lender, (a) such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring
L/C Issuer or Swing Line Lender, as the case may be, and (b) the successor L/C
Issuer shall issue letters of credit in substitution for the Letters of Credit,
if any, outstanding at the time of such succession or make other arrangements
satisfactory to Bank of America to effectively assume the obligations of Bank
of America with respect to such Letters of Credit.

 

10.07      Treatment of Certain
Information; Confidentiality.  Each
of the Administrative Agent, the Lenders and the L/C Issuer agrees to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and representatives (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to
the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the
National Association of Insurance Commissioners), (c) to the extent
required by applicable Laws or regulations or by any subpoena or similar legal
process, (d) to any other party hereto which is not a Public Lender,
(e) in connection with the exercise of any remedies hereunder or under any
other Loan Document or any action or proceeding relating to this Agreement or
any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same
as those of this Section, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or
its advisors) to any Swap Contract relating to any Borrower and its
obligations, (g) with the consent of the Borrower or (h) to the
extent such Information (x) becomes publicly available other than as a
result of a breach of this Section or (y) becomes available to the
Administrative Agent, any Lender, the L/C Issuer or any of their respective
Affiliates on a nonconfidential basis from a source other than the Borrowers.

 

For purposes of this Section, “Information” means all
information received from the US Borrower or any Subsidiary relating to the US
Borrower or any Subsidiary or any of their respective businesses, other than
any such information that is available to the Administrative Agent, any Lender
or the L/C Issuer on a nonconfidential basis prior to disclosure by the US
Borrower or any Subsidiary, provided that, in the case of information
received from the US Borrower or any Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the
confidentiality of 

 

120

 

Information as provided in this
Section shall be considered to have complied with its obligation to do so if
such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.

 

Each of the Administrative Agent, the Lenders and the L/C Issuer
acknowledges that (a) the Information may include material non-public
information concerning the US Borrower or a Subsidiary, as the case may be, (b)
it has developed compliance procedures regarding the use of material non-public
information and (c) it will handle such material non-public information in
accordance with applicable Law, including federal, state and provincial
securities Laws.

 

The obligations of the Agents and Lenders under this Section 10.07
will survive the payment of the Obligations and termination of this Agreement.

 

10.08      Right of Setoff.  If an Event of
Default shall have occurred and be continuing, each Lender, the L/C Issuer and
each of their respective Affiliates is hereby authorized at any time and from
time to time, to the fullest extent permitted by applicable Law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final, in whatever currency) at any time held and other obligations (in
whatever currency) at any time owing by such Lender, the L/C Issuer or any such
Affiliate to or for the credit or the account of each Borrower or any other
Loan Party against any and all of the obligations of such Borrower or such Loan
Party now or hereafter existing under this Agreement or any other Loan Document
to such Lender or the L/C Issuer, irrespective of whether or not such Lender or
the L/C Issuer shall have made any demand under this Agreement or any other
Loan Document and although such obligations of such Borrower or such Loan Party
may be contingent or unmatured or are owed to a branch or office of such Lender
or the L/C Issuer different from the branch or office holding such deposit or
obligated on such indebtedness.  The
rights of each Lender, the L/C Issuer and their respective Affiliates under
this Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender, the L/C Issuer or their respective
Affiliates may have.  Each Lender and the
L/C Issuer agrees to notify the Borrowers and the Administrative Agent promptly
after any such setoff and application, provided that the failure to give
such notice shall not affect the validity of such setoff and application.

 

10.09      Interest Rate Limitation.  Notwithstanding
anything to the contrary contained in any Loan Document, the interest paid or
agreed to be paid under the Loan Documents shall not exceed the maximum rate of
non-usurious interest permitted by applicable Law (the “Maximum Rate”).  If the Administrative Agent or any Lender
shall receive interest in an amount that exceeds the Maximum Rate, the excess
interest shall be applied to the principal of the Loans or, if it exceeds such
unpaid principal, refunded to the applicable Borrower.  In determining whether the interest
contracted for, charged, or received by the Administrative Agent or a Lender
exceeds the Maximum Rate, such Person may, to the extent permitted by
applicable Law, (a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
contemplated term of the Loans hereunder.

 

10.10      Counterparts; Effectiveness.  This Agreement may be
executed in counterparts (and by different parties hereto in different
counterparts), each of which shall constitute an 

 

121

 

original, but all of which when
taken together shall constitute a single contract.  Except as provided in Section 4.01,
this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto.  Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be
effective as delivery of a manually executed counterpart of this Agreement.

 

10.11      Survival of Representations
and Warranties.  All
representations and warranties made hereunder and in any other Loan Document or
other document delivered pursuant hereto or thereto or in connection herewith
or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been
or will be relied upon by the Administrative Agent and each Lender, regardless
of any investigation made by the Administrative Agent or any Lender or on their
behalf and notwithstanding that the Administrative Agent or any Lender may have
had notice or knowledge of any Default at the time of any Credit Extension, and
shall continue in full force and effect as long as any Loan or any other
Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit
shall remain outstanding.

 

10.12      Severability.  If any provision of
this Agreement or the other Loan Documents is held to be illegal, invalid or
unenforceable, (a) the legality, validity and enforceability of the remaining
provisions of this Agreement and the other Loan Documents shall not be affected
or impaired thereby and (b) the parties shall endeavor in good faith
negotiations to replace the illegal, invalid or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to
that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

 

10.13      Replacement of Lenders.  If (a) any Lender
requests compensation under Section 3.04, (b) any Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 3.01,
(c) any Lender is a Defaulting Lender, (d) any Lender, pursuant to Section
3.02, determines that they can no longer be a Lender because of an
illegality, (e) any Lender fails to consent to an election, consent, amendment,
waiver or other modification to this Agreement or any other Loan Document that
requires the consent of a greater percentage of the Lenders than the Required
Lenders and such election, consent, amendment, waiver or other modification is
otherwise consented to by the Required Lenders, or (f) if any other
circumstance exists hereunder that gives the Borrowers the right to replace a
Lender as a party hereto, 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, and consents required by, Section 10.06),
all of its interests, rights and obligations under this Agreement and the
related Loan Documents to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment), provided
that:

 

(a)             the Borrower
shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b);

 

122

 

(b)             such Lender
shall have received payment of an amount equal to the outstanding principal of
its Loans and L/C Advances, accrued interest thereon, accrued fees and all
other amounts payable to it hereunder and under the other Loan Documents
(including any amounts under Section 3.05) 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);

 

(c)             in the case
of any such assignment resulting from a claim for compensation under Section 3.04
or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments
thereafter; and

 

(d)             such
assignment does not conflict with applicable Laws.

 

A Lender shall not be required to make any such assignment or
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.

 

10.14      No General Partner’s
Liability.  The Lenders agree for themselves and their
respective successors and assigns, including any subsequent holder of any Note,
no claim arising against either Borrower or any Restricted Subsidiary under any
Loan Document shall be asserted against the General Partner and no judgment,
order or execution entered in any suit, action or proceeding, whether legal or
equitable, on this Agreement, such Note or any of the other Loan Documents
shall be obtained or enforced against the General Partner or its assets for the
purpose of obtaining satisfaction and payment of such Note, the Indebtedness
evidenced thereby or any claims arising thereunder or under this Agreement or
any other Loan Document, any right to proceed against the General Partner
individually or its respective assets being hereby expressly waived, renounced
and remitted by the Lenders for themselves and their respective successors and
assigns.  Nothing in this Section 10.14,
however, shall be construed so as to prevent the US Administrative Agent, any Lender
or any other holder of any Note from commencing any action, suit or proceeding
with respect to or causing legal papers to be served upon the General Partner
for the purpose of (i) obtaining jurisdiction over the US Borrower or any
Restricted Subsidiary or (ii) obtaining judgment, order or execution against
General Partner arising out of any fraud or intentional misrepresentation by
General Partner in connection with the Loan Documents or of recovery of moneys
received by General Partner in violation of the terms of this Agreement.

 

10.15      Governing Law; Jurisdiction;
Etc.

 

(a)             GOVERNING
LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

(b)             SUBMISSION
TO JURISDICTION.  EACH BORROWER IRREVOCABLY
AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR
RECOGNITION 

 

123

 

OR ENFORCEMENT OF ANY JUDGMENT, AND EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH PARTY AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.  NOTHING IN THIS AGREEMENT OR IN ANY
OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY
LENDER OR THE L/C ISSUER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR
ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

(c)             WAIVER OF
VENUE.  EACH PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY
COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION.  EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

(d)             SERVICE OF
PROCESS.  EACH PARTY HERETO IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02.  NOTHING IN THIS AGREEMENT WILL AFFECT THE
RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
APPLICABLE LAW.

 

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

 

124

 

10.17      USA PATRIOT Act Notice.  Each Lender that is
subject to the Act (as hereinafter defined) and the Administrative Agent (for
itself and not on behalf of any Lender) hereby notifies the Borrower that
pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Act”), it is required
to obtain, verify and record information that identifies each Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender or the Administrative Agent, as applicable, to identify
such Borrower in accordance with the Act.

 

10.18      Existing Credit Agreement. 
Effective on the Closing Date (i) US Borrower hereby assumes, as primary
obligor, the obligations and liabilities of PEG under the Existing Credit
Agreement, (ii) this Agreement renews and extends (and does not release or
novate) the indebtedness and obligations outstanding under the Existing Credit
Agreement, (iii) the commitments under the Existing Agreement are renewed and
replaced by the commitments to US Borrower hereunder and all other covenants
and provisions of the Existing Credit Agreement are terminated, except
provisions that expressly survive such termination pursuant to the terms of the
Existing Credit Agreement, including indemnification provisions, (iv) US Borrower
will pay on the Closing Date all accrued and unpaid interest, fees and expenses
outstanding under the Existing Credit Agreement, (v) all Liens and Guarantees
securing or benefiting the commitments, obligations and liabilities under the
Existing Credit Agreement shall continue and shall secure and benefit the Loans
and other obligations and liabilities of the Borrowers under this Agreement,
and the Security Documents delivered pursuant to this Agreement shall amend and
restate the Liens and Guarantees securing or benefiting the commitments,
obligations and liabilities under the Existing Credit Agreement whether or not
any such Security Document so expressly states, and (vi) PEG hereby joins in
this Agreement to evidence its agreement to the foregoing.

 

10.19      ENTIRE AGREEMENT.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.

 

[THE REMAINDER OF THIS PAGE
IS INTENTIONALLY LEFT BLANK.]

 

125

 

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

 

 

	
   

  	
  PACIFIC ENERGY PARTNERS, L.P.,

  
	
   

  	
  as US Borrower

  
	
   

  	
   

  
	
   

  	
  By: Pacific Energy GP, LP, its general partner

  
	
   

  	
   

  
	
   

  	
  By: Pacific Energy Management LLC, its general

  partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Gerald A. Tywoniuk

  
	
   

  	
  Name: Gerald A. Tywoniuk

  
	
   

  	
  Title: Senior Vice President and Chief Financial

  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RANGELAND PIPELINE COMPANY,

  
	
   

  	
  as Canadian Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Gerald A. Tywoniuk

  
	
   

  	
  Name: Gerald A. Tywoniuk

  
	
   

  	
  Title: Senior Vice President and Chief Financial Officer

  

 

1

 

	
   

  	
  BANK OF AMERICA, N.A., as

  
	
   

  	
  US Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

2

 

	
   

  	
  BANK OF AMERICA, N.A., Canada Branch,
  as 

  
	
   

  	
  Canadian Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

3

 

	
   

  	
  BANK OF AMERICA, N.A.,
  as US L/C Issuer,

  US Swing Line Lender and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

4

 

	
   

  	
  BANK OF AMERICA, N.A.,
  Canada Branch, as 

  
	
   

  	
  Canadian L/C Issuer, Canadian Swing Line Lender

  and Canadian Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

5

 

	
   

  	
  LEHMAN COMMERCIAL PAPER INC.,
  as

  
	
   

  	
  Syndication Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

6

 

	
   

  	
  BNP PARIBAS, as
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

7

 

	
   

  	
  BNP PARIBAS  (Canada), as Canadian Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

8

 

	
   

  	
  CITICORP USA, INC.,
  as Documentation Agent

  and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

9

 

	
   

  	
  CITIBANK, N.A., Canada Branch,
  as Canadian

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

10

 

	
   

  	
  WACHOVIA BANK, NATIONAL

  
	
   

  	
  ASSOCIATION, as
  Documentation Agent and 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

11

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.,
  as

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

12

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.,
  Toronto

  Branch, as Canadian Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

13

 

	
   

  	
  THE BANK OF NOVA SCOTIA,
  as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

14

 

	
   

  	
  SOCIÉTÉ GÉNÉRALE,
  as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

15

 

	
   

  	
  SOCIÉTÉ GÉNÉRALE Canada,
  as Canadian

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

16

 

	
   

  	
  UNION BANK OF CALIFORNIA, N.A.,
  as

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

17

 

	
   

  	
  UNION BANK OF CALIFORNIA, N.A.,

  Canada Branch, as Canadian Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

18

 

	
   

  	
  ROYAL BANK OF CANADA,
  as Lender and

  Canadian Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

19

 

	
   

  	
  BANK OF MONTREAL,
  as Lender and Canadian

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

20

 

	
   

  	
  FORTIS CAPITAL CORP.,
  as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

21

 

	
   

  	
  SUNTRUST BANK, as
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

22

 

	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,
  as 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

23

 

	
   

  	
  BANK OF SCOTLAND,
  as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

24

 

	
   

  	
  COMERICA BANK, as
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

25

 

	
   

  	
  COMERICA BANK, Canada Branch, as

  
	
   

  	
  Canadian Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

26

 

	
   

  	
  KEYBANK NATIONAL ASSOCIATION,
  as 

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

27

 

	
   

  	
  MIZUHO CORPORATE BANK, LTD.,
  as

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

28

 

	
   

  	
  WELLS FARGO BANK, N.A., as Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

29

 

	
   

  	
  THE BANK OF NOVA SCOTIA,
  as Canadian

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

30

 

	
   

  	
  PACIFIC ENERGY GROUP LLC

  
	
   

  	
  By:

  	
  Pacific Energy Group LLC, its sole member

  
	
   

  	
  By:

  	
  Pacific Energy Partners, L.P., its sole

  member

  
	
   

  	
  By:

  	
  Pacific Energy GP, LP its general

  partner

  
	
   

  	
  By:

  	
  Pacific Energy Management LLC,

  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald A. Tywoniuk

  	
   

  
	
   

  	
  Name: Gerald A. Tywoniuk

  
	
   

  	
  Title: Senior Vice President and Chief Financial

  Officer

  
					

 

31Exhibit 10.40

 

 

CREDIT
AGREEMENT

 

BETWEEN

 

GAINSCO,
INC.,

AS BORROWER,

 

AND

 

THE
FROST NATIONAL BANK,

AS LENDER

 

SEPTEMBER 30,
2005

 

 

 

TABLE OF
CONTENTS

 

	
  Section

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  	
  DEFINITIONS

  	
   

  
	
  1.1

  	
   

  	
  Definitions

  	
   

  
	
  1.2

  	
   

  	
  Additional Definitions

  	
   

  
	
  1.3

  	
   

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  ADVANCE
  LOANS

  	
   

  
	
  2.1

  	
   

  	
  Advance Loans

  	
   

  
	
  2.2

  	
   

  	
  Advance Borrowings

  	
   

  
	
  2.3

  	
   

  	
  Repayment

  	
   

  
	
  2.4

  	
   

  	
  Mandatory Prepayments

  	
   

  
	
  2.5

  	
   

  	
  Voluntary Prepayments

  	
   

  
	
  2.6

  	
   

  	
  Termination and Reduction of Advance
  Commitment

  	
   

  
	
  2.7

  	
   

  	
  Interest on Advance Loans Generally

  	
   

  
	
  2.8

  	
   

  	
  Computations

  	
   

  
	
  2.9

  	
   

  	
  Interest After an Event of Default

  	
   

  
	
  2.10

  	
   

  	
  Late Charge

  	
   

  
	
  2.11

  	
   

  	
  Payments Generally

  	
   

  
	
  2.12

  	
   

  	
  Booking the Advance Loans

  	
   

  
	
  2.13

  	
   

  	
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  TAXES, YIELD PROTECTION AND ILLEGALITY

  	
   

  
	
  3.1

  	
   

  	
  Taxes

  	
   

  
	
  3.2

  	
   

  	
  Illegality

  	
   

  
	
  3.3

  	
   

  	
  Inability
  to Determine Rates

  	
   

  
	
  3.4

  	
   

  	
  Increased
  Cost and Reduced Return; Capital Adequacy; Reserves on Eurodollar Rate Loans

  	
   

  
	
  3.5

  	
   

  	
  Matters
  Applicable to all Requests for Compensation

  	
   

  
	
  3.6

  	
   

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  CONDITIONS PRECEDENT

  	
   

  
	
  4.1

  	
   

  	
  Conditions
  Precedent to Initial Advance Loan

  	
   

  
	
  4.2

  	
   

  	
  Conditions
  Precedent to all Advance Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  	
  AFFIRMATIVE COVENANTS

  	
   

  
	
  5.1

  	
   

  	
  General
  Covenants

  	
   

  
	
  5.2

  	
   

  	
  Accounts,
  Reports and Other Information

  	
   

  
	
  5.3

  	
   

  	
  Inspection

  	
   

  
	
  5.4

  	
   

  	
  Compliance
  with ERISA

  	
   

  
	
  5.5

  	
   

  	
  Performance
  of Obligations

  	
   

  
	
  5.6

  	
   

  	
  Maintenance
  of Priority of Bank Liens

  	
   

  
	
  5.7

  	
   

  	
  Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  NEGATIVE COVENANTS

  	
   

  
	
  6.1

  	
   

  	
  Total
  Adjusted Capital

  	
   

  
	
  6.2

  	
   

  	
  Combined
  Ratio

  	
   

  

 

 

	
  6.3

  	
   

  	
  Fixed
  Charges Coverage Ratio

  	
   

  
	
  6.4

  	
   

  	
  Consolidated
  Net Worth

  	
   

  
	
  6.5

  	
   

  	
  Dividends

  	
   

  
	
  6.6

  	
   

  	
  Limitation
  on Debt

  	
   

  
	
  6.7

  	
   

  	
  Limitation
  on Liens

  	
   

  
	
  6.8

  	
   

  	
  Burdensome
  Agreements

  	
   

  
	
  6.9

  	
   

  	
  Disposition
  of Assets

  	
   

  
	
  6.10

  	
   

  	
  Acquisition
  of Assets

  	
   

  
	
  6.11

  	
   

  	
  Merger
  and Consolidation

  	
   

  
	
  6.12

  	
   

  	
  Loans
  and Investments

  	
   

  
	
  6.13

  	
   

  	
  ERISA

  	
   

  
	
  6.14

  	
   

  	
  Assignment

  	
   

  
	
  6.15

  	
   

  	
  Transactions
  with Affiliates

  	
   

  
	
  6.16

  	
   

  	
  Business

  	
   

  
	
  6.17

  	
   

  	
  Preferred
  Stock

  	
   

  
	
  6.18

  	
   

  	
  Use
  of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
  7.1

  	
   

  	
  Organization
  and Qualification

  	
   

  
	
  7.2

  	
   

  	
  Authorization;
  Validity

  	
   

  
	
  7.3

  	
   

  	
  Financial
  Statements

  	
   

  
	
  7.4

  	
   

  	
  Compliance
  With Laws and Other Matters

  	
   

  
	
  7.5

  	
   

  	
  Litigation

  	
   

  
	
  7.6

  	
   

  	
  Debt

  	
   

  
	
  7.7

  	
   

  	
  Title
  to Properties

  	
   

  
	
  7.8

  	
   

  	
  Taxes

  	
   

  
	
  7.9

  	
   

  	
  Use
  of Proceeds

  	
   

  
	
  7.10

  	
   

  	
  Possession
  of Franchises, Licenses, Etc.

  	
   

  
	
  7.11

  	
   

  	
  Leases

  	
   

  
	
  7.12

  	
   

  	
  Disclosure

  	
   

  
	
  7.13

  	
   

  	
  ERISA

  	
   

  
	
  7.14

  	
   

  	
  Regulatory
  Acts

  	
   

  
	
  7.15

  	
   

  	
  Solvency

  	
   

  
	
  7.16

  	
   

  	
  Environmental
  Matters

  	
   

  
	
  7.17

  	
   

  	
  Investments

  	
   

  
	
  7.18

  	
   

  	
  Intellectual
  Property, Etc.

  	
   

  
	
  7.19

  	
   

  	
  Reinsurance
  Agreements

  	
   

  
	
  7.20

  	
   

  	
  Retrocession
  Agreements

  	
   

  
	
  7.21

  	
   

  	
  Subsidiaries

  	
   

  
	
  7.22

  	
   

  	
  Labor
  Relations, Collective Bargaining Agreements

  	
   

  
	
  7.23

  	
   

  	
  Preferred
  Stock Documents

  	
   

  
	
  7.24

  	
   

  	
  Survival
  of Representations and Warranties, Etc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  EVENTS OF DEFAULT

  	
   

  
	
  8.1

  	
   

  	
  Default

  	
   

  
	
  8.2

  	
   

  	
  Remedies

  	
   

  
	
  8.3

  	
   

  	
  Application
  of Funds

  	
   

  

 

ii

 

	
  ARTICLE IX

  	
   

  	
  MISCELLANEOUS

  	
   

  
	
  9.1

  	
   

  	
  Notices

  	
   

  
	
  9.2

  	
   

  	
  Expenses

  	
   

  
	
  9.3

  	
   

  	
  Waivers

  	
   

  
	
  9.4

  	
   

  	
  Determinations
  by Lender

  	
   

  
	
  9.5

  	
   

  	
  Set-Off

  	
   

  
	
  9.6

  	
   

  	
  Assignment

  	
   

  
	
  9.7

  	
   

  	
  Amendment
  and Waiver

  	
   

  
	
  9.8

  	
   

  	
  Confidentiality

  	
   

  
	
  9.9

  	
   

  	
  Counterparts

  	
   

  
	
  9.10

  	
   

  	
  Severability

  	
   

  
	
  9.11

  	
   

  	
  Interest
  and Charges

  	
   

  
	
  9.12

  	
   

  	
  Exception
  to Covenants

  	
   

  
	
  9.13

  	
   

  	
  USA
  Patriot Act Notice

  	
   

  
	
  9.14

  	
   

  	
  GOVERNING
  LAW

  	
   

  
	
  9.15

  	
   

  	
  WAIVER
  OF JURY TRIAL

  	
   

  
	
  9.16

  	
   

  	
  ENTIRE
  AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNATURES

  	
   

  	
   

  	
   

  

 

iii

 

Exhibits and
Schedules

 

	
  Exhibit A

  	
  Advance Note

  
	
  Exhibit B

  	
  Pledge Agreement

  
	
  Exhibit C

  	
  Guaranty Agreement

  
	
  Exhibit D

  	
  Advance Loan Notice

  
	
  Exhibit E

  	
  Compliance Certificate

  
	
  Exhibit F

  	
  Applicable Rate Certificate

  
	
  Exhibit G

  	
  Notice of Final Agreement

  
	
  Exhibit H

  	
  Preferred Stock Documents

  
	
   

  	
   

  
	
  Schedule 1.1

  	
  Existing Deposit Accounts

  
	
  Schedule 6.7

  	
  Permitted Liens

  
	
  Schedule 6.15

  	
  Affiliates Transaction

  
	
  Schedule 7.1

  	
  Subsidiaries

  
	
  Schedule 7.3

  	
  Off-Balance Sheet Liability

  
	
  Schedule 7.5

  	
  Existing Litigation

  
	
  Schedule 7.6

  	
  Existing Debt

  
	
  Schedule 7.10

  	
  Licensed Jurisdictions

  
	
  Schedule 7.13

  	
  Plans

  
	
  Schedule 7.16

  	
  Environmental Matters

  
	
  Schedule 7.17

  	
  Existing Investments

  
	
  Schedule 7.19

  	
  Reinsurance Agreements

  
	
  Schedule 7.20

  	
  Retrocession Agreements

  
	
  Schedule 7.22

  	
  Labor Agreements

  
	
  Schedule 9.1

  	
  Notice
  Addresses

  

 

iv

 

Credit
Agreement

 

THIS CREDIT AGREEMENT is dated as of September 30, 2005 (this
agreement, together with all amendments and restatements, this “Agreement”), between GAINSCO, INC. a Texas corporation (“Borrower”), and THE FROST NATIONAL BANK, a national banking
association (“Lender”).

BACKGROUND

 

Borrower has requested that Lender make an advance credit facility
available to Borrower.  Lender has agreed
to do so, subject to the terms and conditions of this Agreement.

AGREEMENT

 

In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, receipt of which is
acknowledged by the parties hereto, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1                                 Definitions.  For
purposes of this Agreement:

 

“Actuary” means either (a) the
Tillinghast division of Towers Perrin, or (b) another independent actuary
acceptable to Lender in its discretion.

 

“Advance Availability” means an amount
equal to 250% of EBITDA for the twelve-month period ended on the date of
determination, determined as at the last day of the most recent fiscal quarter
end of Borrower.

 

“Advance Availability Termination Date”
means September 30 2007.

 

“Advance Borrowing” means a borrowing by Borrower of Advance
Loans made by Lender pursuant to Section 2.1.

 

“Advance Commitment” means Lender’s obligation to make Advance
Loans to Borrower pursuant to Section 2.1, in the aggregate
principal amount not to exceed $10,000,000 as to all Advance Loans made by
Lender.

 

“Advance Loan Maturity Date” means the first to occur of (a) September 30,
2010, (b) the date the Advance Commitment is terminated pursuant to 8.2,
and (c) the date the Obligations are accelerated.

 

“Advance Loan Notice” means a notice of an Advance Borrowing
request pursuant to Section 2.2(a), substantially in the form of Exhibit D.

 

 

“Advance Note” means the promissory note made by Borrower in
favor of Lender evidencing the Advance Loans, substantially in the form of Exhibit A.

 

“Affiliate” means any Person that
directly, or indirectly, through one or more intermediaries, Controls or is
Controlled By or is Under Common Control with any other Person; provided,
however, that Crescent Real Estate Equities Company, Crescent Real
Estate Limited Partnership, and their subsidiaries and affiliates, shall not be
considered Affiliates for the purposes of this Agreement.

 

“Agreement Date” means the date of this
Agreement.

 

“Applicable Law” means (a) in
respect of any Person, all provisions of Laws and orders of Governmental
Authorities applicable to such Person and its properties, including, without
limiting the foregoing, all orders and decrees of all Governmental Authorities
and arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance
charges that are made or performed in the State of Texas, “Applicable Law”
means the Laws of the United States of America, including without limitation
12 U.S.C. §§85 and 86,  and any
other statute of the United States of America now or at any time hereafter
prescribing the maximum rates of interest on loans and extensions of credit,
and the Laws of the State of Texas, and any other Laws of the State of Texas
now or at any time hereafter prescribing maximum rates of interest on loans and
extensions of credit.

 

“Applicable Rate” means, initially, a per
annum percentage equal 2.50%; provided  that, after receipt by
Lender of the initial Applicable Rate Certificate delivered by Borrower
pursuant to Section 5.2(d) and thereafter, such percentage
shall be adjusted as follows:  effective
on the third Business Day after receipt by Lender of such Applicable Rate
Certificate demonstrating a change in either Consolidated Net Worth or EBITDA
so that another Applicable Rate should be applied pursuant to the table below,
the Applicable Rate shall be (a) the percentage set forth in Column 1
if both Consolidated Net Worth and EBITDA are the amounts stated in
Column 1, (b) the percentage set forth in Column 2 if (i) both
Consolidated Net Worth and EBITDA are the amounts stated in Column 2 or (ii) either
Consolidated Net Worth or EBITDA are the amounts stated in Column 1 and Column
2, or (c) the percentage set forth in Column 3 if either Consolidated
Net Worth or EBITDA are the amounts stated in Column 3.  If an Applicable Rate Certificate is not
received by Lender by the date required pursuant to Section 5.2(d),
the Applicable Rate shall be the percentage stated in Column 3 until the
third Business Day after receipt by Lender of an Applicable Rate Certificate
demonstrating a change in either Consolidated Net Worth or EBITDA so that
another Applicable Rate should be applied pursuant to the table below.  For purposes of determining Applicable Rate, (a) Consolidated
Net Worth shall be calculated as at the last day of each fiscal quarter of
Borrower and (b) EBITDA shall be calculated as at the last day of each
fiscal quarter of Borrower for the
preceding four fiscal quarters.

 

	
   

  	
   

  	
  Column 1

  	
   

  	
  Column 2

  	
   

  	
  Column 3

  	
   

  
	
  Consolidated Net Worth

  	
   

  	
  3 $60,000,000

  	
   

  	
  3 $50,000,000 and 

  < $60,000,000

  	
   

  	
  <
  $50,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EBITDA

  	
   

  	
  3 $6,500,000

  	
   

  	
  3 $5,500,000 and < $6,500,000

  	
   

  	
  <
  $5,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Applicable Rate

  	
   

  	
  2.00%

  	
   

  	
  2.25%

  	
   

  	
  2.50%

  	
   

  

 

2

 

“Applicable Rate Certificate” means a
certificate substantially in the form of Exhibit F.

 

“Attorney Costs” means and includes all
fees, expenses and disbursements of any law firm or other external counsel and,
without duplication, the allocated cost of internal legal services and all
expenses and disbursements of internal counsel.

 

“Auditors” means KPMG LLP or other
independent certified public accountants selected by Borrower and reasonably
acceptable to Lender and that are a Registered Public Accounting Firm.

 

“Authorized Control Level” means “Authorized
Control Level” as defined by NAIC from time to time and as applied in the
context of the Risk-Based Capital Guidelines promulgated by NAIC (or any term
substituted therefor by NAIC).

 

“Authorized Signatory” means such senior
personnel of Borrower, any Subsidiary of Borrower or an Obligor as may be duly
authorized and designated in writing by Borrower, such Subsidiary or such
Obligor to execute documents, agreements and instruments on behalf of Borrower,
such Subsidiary or such Obligor.

 

“Bank Liens” means Liens in favor of or
for the benefit of Lender securing all or any of the Obligations, including,
but not limited to, rights in any Collateral created in favor of Lender,
whether by mortgage, pledge, hypothecation, assignment, transfer, or other
granting or creation of Liens.

 

“Business Day” means any day other than a
Saturday, Sunday, or other day on which commercial banks are authorized to
close under the Laws of, or are in fact closed in, the state where Lender’s
office is located and, if such day relates to any Eurodollar Rate Loan, means
any such day on which dealings in Dollar deposits are conducted by and between
banks in the applicable offshore Dollar interbank market.

 

“Capital Leases” means capital leases and
subleases, as defined in the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 13, dated November 1976, as
amended.

 

“Cash Capex” means any capital
expenditure (determined in accordance with GAAP) the source of funds for which
was not or is not proceeds of any Debt (whether or not subordinate to any other
obligation of any Person) or any equity issuance.

 

“Cash Equivalents” means (a) Dollar
denominated deposits, certificates of deposit (including eurodollar
certificates of deposit) and bankers acceptances of (i) any FDIC insured
bank, in amounts up to the FDIC insured limit, (ii) any bank having
capital and surplus in excess

 

3

 

of $500,000,000 or the Dollar equivalent
thereof or (iii) any bank whose short term commercial paper is an
Investment Grade Security, (b) securities with a maturity or redemption
period of six months or less, issued by a Person whose short term debt
obligations are rated Class 1 or 2 by NAIC, (c) agreements to sell
and repurchase direct obligations of, or obligations that are fully guaranteed
as to principal and interest by, the U.S. Treasury, such agreements to be with
primary treasury dealers, to be evidenced by standard industry forms and to
have maturities of not more than six months from the date of commencement of
the repurchase transaction, (d) shares in money market funds rated “Am” or
higher by S&P and (e) demand deposit accounts described in Schedule 1.1.

 

“Code” means the Uniform Commercial Code
as in effect in Texas.

 

“Collateral” means any assets of any
Person in which at any time Lender shall be granted a Bank Lien to secure the
Obligations.

 

“Combined Ratio” means the ratio
(expressed as a percentage rounded to two decimal places) determined as to the
personal automobile insurance lines of Borrower and all Subsidiaries of (a) the
sum of losses incurred, plus loss expenses incurred, plus other underwriting
expenses incurred, minus revenues of NSLI and MGA Agency, Inc., all for
the four fiscal quarter period ended on the date of determination, to (b) the
sum of premiums and policy fees earned, all for the four fiscal quarter period
ended on the date of determination, all as calculated in accordance with GAAP.

 

“Compliance Certificate” means a
compliance certificate, substantially in the form of Exhibit E.

 

“Consolidated Interest Expenses” means,
for any period, for Borrower and its Subsidiaries on a consolidated basis, the
sum of (a) all interest, premium payments, debt discount, fees, charges
and related expenses of Borrower and its Subsidiaries in connection with
borrowed money (including that attributable to Capital Leases) or in connection
with the deferred purchase price of assets, in each case to the extent treated
as interest in accordance with GAAP, and (b) the portion of rent expense
of Borrower and its Subsidiaries with respect to such period under Capital
Leases that is treated as interest in accordance with GAAP.

 

“Consolidated Net Income” means, with
respect to Borrower and its Subsidiaries for any period, the net income (or
loss) of Borrower and its Subsidiaries for such period (excluding any
extraordinary gains and any gains from discontinued operations but including
extraordinary losses for such period), all determined in accordance with GAAP.

 

“Consolidated Net Worth” means, as of any
date of determination, for Borrower and its Subsidiaries on a consolidated
basis, shareholders’ equity of Borrower and its Subsidiaries on that date
determined in accordance in with GAAP.

 

“Contingent Debt” means, for any Person:

 

(a)                                  guarantees,
endorsements (other than endorsements of negotiable instruments for collection
in the ordinary course of business) and other contingent liabilities (whether
direct or indirect) in connection with the obligations of any other Person;

 

4

 

(b)                                 obligations
under any contract providing for the making of loans, advances or capital
contributions to any other Person, or for the purchase of any property from any
other Person, in each case in order to enable such other Person primarily to
maintain working capital, net worth or any other balance sheet condition or to
pay Debts, Dividends or expenses;

 

(c)                                  obligations
under any contract to rent or lease (as lessee) any real or personal property
(other than operating leases) if such contract (or any related document)
provides that the obligation to make payments thereunder is absolute and
unconditional under conditions not customarily found in commercial leases then
in general use or requires that the lessee purchase or otherwise acquire
securities or obligations of the lessor;

 

(d)                                 obligations
in respect of letters of credit; and

 

(e)                                  obligations
under any other contract which, in economic effect, is substantially equivalent
to a guaranty, including but not limited to “keep well” or “capital maintenance”
agreements.

 

“Control” or “Controlled
By” or “Under Common Control”
means possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of voting securities,
by contract or otherwise); provided that, in any event any Person which
beneficially owns, directly or indirectly, 10% or more (in number of votes) of
the securities having ordinary voting power for the election of directors of a
corporation or managers of a limited liability company or other governance
board of an entity shall be conclusively presumed to control such corporation
or limited liability company.

 

“Current Financials” means the most
recent annual Financial Statements of Borrower or any of its Subsidiaries.

 

“Debt” means, at any time, for any
Person, (a) Capital Leases, (b) Contingent Debt, (c) debt
created, issued, incurred or assumed for money borrowed or for the deferred
purchase price of property purchased, (d) all debt, obligations and
liabilities secured by any Lien upon any property owned by such Person, even
though it has not assumed or become liable for the payment of same, and (e) liabilities
in respect of unfunded vested benefits under any Plans; provided, however,
“Debt” shall not include reverse repurchase agreements entered into by Borrower
or a Subsidiary relating to cash management and liquidity management
activities, subject to Applicable Laws in the case of RICs.

 

“Debtor Relief Laws” means any applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, fraudulent conveyance, reorganization or similar debtor relief Laws
affecting the rights of creditors generally from time to time in effect.

 

“Default” means any of the events
specified in Section 8.1 that would, with the giving of notice or
the passage of time, become an Event of Default.

 

“Default Rate” means for any date a
simple per annum interest rate equal to the lesser of (a) the Eurodollar
Rate in effect from time to time, plus 2%, and (b) the Highest Lawful
Rate.

 

5

 

“Discontinued Lines” means property and
casualty insurance (other than personal automobile insurance) written through
or by any Subsidiary prior to the Agreement Date.

 

“Disposition” and “Dispose”
mean any sale, lease, abandonment, transfer, disposal, exchange or other
transfer of any ownership or leasehold interest in or control of any asset.

 

“Dividends” means, with respect to any
Person, any dividend on any class of its capital stock or other equity interest
now or hereafter outstanding, any distribution of cash or property to or for
the benefit of owners of any shares of such stock or other equity interest, any
retirement, redemption, purchase or other acquisition, directly or indirectly,
of any shares of any class of its capital stock or other equity interest now or
hereafter outstanding, or the establishment of a sinking fund or similar
arrangement with respect to such capital stock or other equity interest.

 

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

 

“EBITDA” means, for any period, for
Borrower and its Subsidiaries on a consolidated basis, an amount equal to
Consolidated Net Income for such period plus (a) the following to
the extent deducted in calculating such Consolidated Net Income: (i) Consolidated
Interest Expenses for such period, (ii) the provision for federal, state,
local and foreign income Taxes payable by Borrower and its Subsidiaries for
such period, (iii) the amount of depreciation and amortization expense and
(iv) other expenses of Borrower and its Subsidiaries reducing such
Consolidated Net Income which do not represent a cash item in such period or
any future period, and minus (b) all non-cash items increasing
Consolidated Net Income for such period.

 

“Environment” means ambient air, surface
water and groundwater (including potable water, navigable water and wetlands),
the land surface or subsurface strata, real property improvements or as
otherwise defined in any Environmental Law.

 

“Environmental Claim” means any written
accusation, allegation, notice of violation, claim, demand, order, directive,
consent decree, cost recovery action or other cause of action by, or on behalf
of, any Governmental Authority or any Person for damages, injunctive or
equitable relief, personal injury (including sickness, disease or death),
Remedial Action costs, property damage, natural resource damages, nuisance,
pollution, any adverse effect on the Environment caused by any Hazardous
Material, or for fines, penalties or restrictions, resulting from or based
upon: (a) the existence, or the continuation of the existence, of a
Release; (b) exposure to any Hazardous Material; (c) the presence,
use, handling, transportation, storage, treatment or disposal of any Hazardous
Material; or (d) the violation or alleged violation of any Environmental
Law or Environmental Permit.

 

“Environmental Law” means any and all
applicable domestic Laws, judgments, injunctions, notices or binding agreements
issued, promulgated or entered into by any Governmental Authority, relating in
any way to the Environment, preservation or reclamation of natural resources,
the management, Release or threatened Release of any Hazardous Material or to
health and safety matters, including the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq. (collectively “CERCLA”), the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901
et seq., the Federal Water

 

6

 

Pollution Control Act, as amended by the
Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.,
the Clean Air Act of 1970, 42 U.S.C. §§ 7401 et seq.,
as amended, the Toxic Substances Control Act of 1976, 15 U.S.C. §§ 2601
et seq., the Occupational Safety and
Health Act of 1970, as amended by 29 U.S.C. §§ 651 et seq., the Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. §§ 11001 et seq., the
Safe Drinking Water Act of 1974, as amended by 42 U.S.C. §§ 300(f) et seq., the Hazardous Materials Transportation Act,
49 U.S.C. §§ 5101 et seq., and
any similar or implementing Law.

 

“Environmental Permit” means any permit,
approval, authorization, certificate, license, variance, filing or permission
required by or from any Governmental Authority pursuant to any Environmental
Law.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974.

 

“Eurodollar Basis” means for any day a
rate per annum equal to the “London Interbank Offered Rate” for a three-month
term, as published in the “Money Rates” column of The Wall
Street Journal, Central Edition, from time to time, or if any reason
such rate is no longer available:

 

(a)                                  for
any day the rate per annum (rounded upward to the nearest 1/100 of 1%) equal to
the rate determined by Lender to be the offered rate that appears on the page of
the Telerate screen (or any successor thereto) that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars (for
delivery on the date of determination) with a three-month term, determined as
of approximately 11:00 a.m. (London time) on the date of determination, or

 

(b)                                 if
the rate referenced in clause (a) does not appear on such page or
service or such page or service shall not be available, for any day the
rate per annum (rounded upward to the nearest 1/100 of 1%) equal to the rate
determined by Lender to be the offered rate on such other page or other
service that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on date of determination)
with a three-month term, determined as of approximately 11:00 a.m. (London
time).

 

The Eurodollar Basis shall change effective as of the date of any
change as published in The Wall Street Journal,
Central Edition, or as determined by Lender, as appropriate.  The Eurodollar Basis is a reference rate and
does not necessarily represent the lowest or best rate actually charged to any
customer of Lender.

 

“Eurodollar Rate” means the sum of the
Eurodollar Basis plus the Applicable Rate.

 

“Eurodollar Rate Loan” means the Advance
Loan when it bears interest at a rate based on the Eurodollar Rate.

 

“Event of Default” means any of the
events specified in Section 8.1, provided there has been satisfied
any requirement in connection with such event for the giving of notice, or the
lapse of time, or the happening of any further specified condition, event or
act.

 

7

 

“Existing Debt” means the Debt of
Borrower and its Subsidiaries existing on the Agreement Date, which is
described on Schedule 7.6, including renewals (but not increases)
thereof.

 

“Existing Investments” means the
Investments of Borrower and its Subsidiaries existing on the Agreement Date,
which are described on Schedule 7.17.

 

“Existing Litigation” means the
Litigation involving or otherwise affecting Borrower and its Subsidiaries
existing on the Agreement Date (a) where the amount of the related case
reserve is equal to or greater than $250,000 (if such Litigation relates to the
Insurance Business of Borrower and its Subsidiaries), or (b) which could
reasonably be expected to result in a Material Adverse Change.

 

“Federal Funds Rate” means, for any day,
the rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve Bank on
the Business Day next succeeding such day; provided that (a) if
such day is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is
so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate (rounded upward, if necessary, to a whole
multiple of 1/100 of 1%) charged to Frost on such day on such transactions as
determined by Lender.

 

“Financial Statements” includes, but is
not limited to, balance sheets, profit and loss statements, reconciliations of
capital and surplus and/or partnership capital accounts, as appropriate, and
statements of changes in financial position or cash flow, prepared in
comparative form with respect to the corresponding period of the preceding
fiscal year and prepared in accordance with SAP or GAAP, as appropriate.

 

“Fixed Charges” means the sum of (a) Consolidated
Interest Expenses for the four fiscal quarter period ended on the date of
determination, plus (b) scheduled principal payments of Debt which would
be classified as a current liability on a consolidated balance sheet of
Borrower and its consolidated Subsidiaries payable during the four fiscal
quarter period beginning on the day following the date of determination, plus (c) Cash
Capex actually paid by Borrower during the four fiscal quarter period ended on
the date of determination, plus (d) the aggregate amount of Taxes actually
paid by Borrower and its consolidated Subsidiaries during the four fiscal
quarter period ended on the date of determination, plus (e) cash Dividends
actually paid by Borrower during the four fiscal quarter period ended on the
date of determination.

 

“Fixed Charges Coverage Ratio” means the
ratio (rounded to two decimal places) determined as at the last day of the most
recent fiscal quarter of Borrower of (a) EBITDA for the four fiscal
quarter period ended on the last day of such fiscal quarter, to (b) Fixed
Charges determined as at the last day of such fiscal quarter.

 

“GAAP” means U.S. generally accepted
accounting principles applied on a consistent basis, set forth in the Opinions
of the Accounting Principles Board of the American Institute of Certified
Public Accountants and/or in statements of the Financial Accounting Standards
Board, which are applicable in the circumstances as of the date in question,
and the requisite that such

 

8

 

principles be applied on a consistent basis
shall mean that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period.

 

“GAICA” means General Agents Insurance
Company of America, Inc., an Oklahoma insurance corporation.

 

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

 

“Guarantor” means each material
Subsidiary (whether now or hereafter existing) of Borrower (other than a RIC).

 

“Guaranty” means a Guaranty Agreement,
substantially in the form of Exhibit C, duly executed by each
Guarantor.

 

“Hazardous Materials” means all explosive
or radioactive substances or wastes, hazardous or toxic substances or wastes,
pollutants, solid, liquid or gaseous wastes, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated
biphenyls (“PCBs”) or PCB-containing materials or
equipment, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.

 

“Highest Lawful Rate” means at the
particular time in question the maximum rate of interest which, under
Applicable Law, Lender is then permitted to charge on the Obligations.  If the maximum rate of interest which, under
Applicable Law, Lender is permitted to charge on the Obligations shall change
after the date hereof, the Highest Lawful Rate shall be automatically increased
or decreased, as the case may be, from time to time as of the effective time of
each change in the Highest Lawful Rate without notice to Borrower.  For purposes of determining the Highest
Lawful Rate under Applicable Law, the indicated rate ceiling shall be the
lesser of (a)(i) the “weekly ceiling”,
as that expression is defined in Section 303.003 of the Texas Finance
Code, as amended, or (ii) if available in accordance with the terms
thereof and at Lender’s option after notice to Borrower and otherwise in
accordance with the terms of Section 303.103 of the Texas Finance Code, as
amended, the “annualized ceiling” and (b)(i) if
the amount outstanding under this Agreement is less than $250,000, 24% per
annum, or (ii) if the amount under this Agreement is equal to or greater
than $250,000, 28% per annum.

 

“Insurance Business” means one or more
aspects of the business of selling, issuing or underwriting insurance or
reinsurance.

 

“Insurance Regulator” means, when used
with respect to any RIC, the Governmental Authority, insurance department or
similar administrative authority or agency located in (a) each state in
which such RIC is domiciled or (b) to the extent asserting regulatory
jurisdiction over such RIC, the Governmental Authority, insurance department,
authority or agency in each state in which such RIC is licensed, and shall
include any Federal insurance regulatory department, authority or agency that
may be created and that asserts regulatory jurisdiction over such RIC.

 

9

 

“Interest Payment Date” means each
Payment Date and the Advance Loan Maturity Date.

 

“Internal Control Event” means a material weakness in, or
fraud that involves management or other employees who have a significant role
in, Borrower’s “disclosure controls and procedures” or “internal controls over
financial reporting”, in each case as described in Rule 13A-15 or Rule 15d-15
promulgated under the Securities Act of 1934.

 

“Investment” means, as to any Person, any
direct or indirect acquisition or investment by such Person, whether by means
of (a) the purchase or acquisition of all or substantially all of the
assets of any Person, (b) any direct or indirect purchase or other
acquisition of, or a beneficial interest in, any equity interest or other
securities of any other Person, or (c) any direct or indirect loan,
advance, or capital contribution to or investment in any other Person,
including without limitation the incurrence or sufferance of Debt or accounts
receivable of any other Person that are not current assets or do not arise from
Dispositions to that other Person in the ordinary course of business.

 

“Investment Grade Securities” means and
includes (a) securities that are direct obligations of the United States
of America, the payment of which is backed by the full faith and credit of the
United States of America, (b) debt securities or debt instruments with a
rating of Class (1), (2) or higher by NAIC, or if NAIC shall not then
exist, the equivalent of such rating by any other nationally recognized
securities rating agency, but excluding any debt securities or instruments
constituting loans or advances among Borrower and Subsidiaries, and (c) any
fund investing exclusively in investments of the type described in clauses (a) and
(b), which funds may also hold immaterial amounts of cash pending
investment and/or distribution.

 

“Investment Policy” means the written
policies and procedures which govern the acquisition and maintenance of
Investments and the cash management procedures of each Borrower and each of its
Subsidiaries, as such written policies and procedures exist on the Agreement
Date.

 

“Laws” means, collectively, all
international, foreign, Federal, state and local constitutions, statutes,
treaties, rules, guidelines, regulations, ordinances, codes and administrative
or judicial precedents or authorities, including the interpretation or
administration thereof by any Governmental Authority charged with the
enforcement, interpretation or administration thereof, and all applicable administrative
orders, directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authority, in each case whether or not having
the force of law.

 

“Lender’s Office” means Lender’s address
and, as appropriate, account as set forth on Schedule 9.1, or such
other address or account as Lender may from time to time notify Borrower.

 

“Lien” means any mortgage, pledge,
security interest, encumbrance, lien or charge of any kind (including any
agreement to give or not to give any of the foregoing), any conditional sale or
other title retention agreement, any financing or other lease in the nature
thereof, and the filing of or agreement to give any financing statement or
other similar form of public notice under the Laws of any jurisdiction.

 

10

 

“Litigation” means any proceeding, claim,
lawsuit and/or investigation conducted or threatened by or before any
Governmental Authority, including, but not limited to, proceedings, claims,
lawsuits, and/or investigations under or pursuant to any environmental,
occupational, safety and health, antitrust, unfair competition, securities,
Tax, or other Law, or under or pursuant to any contract, agreement or other
instrument.

 

“Litigation Report” means a report,
certified to be true, correct and complete by an Authorized Officer of Borrower
and each of its Subsidiaries which is a party to any Litigation, describing all
Litigation (a) relating to Insurance Business of Borrower and each of its
Subsidiaries, where the amount of the related case reserve is equal to or
greater than $250,000,  or (b) which
could reasonably be expected to result in a Material Adverse Change, in format
acceptable to Lender.

 

“Loan Documents” means this Agreement,
the Advance Note, the Security Documents, the Guaranties and all other
documents and instruments executed and delivered to Lender by any Obligor or
any other Person in connection with this Agreement.

 

“Loss Report” means a quarterly
summarization of losses, allocated loss adjustment expenses and related
reserves in format acceptable to Lender.

 

“Material Adverse Change or Effect” means
(a)  a material adverse change in, or a material adverse effect upon, the
operations, business, properties, liabilities (actual or contingent) or
financial condition of Borrower or Borrower and its Subsidiaries taken as a
whole; (b) a material impairment of the ability of any Obligor to perform
its obligations under any Loan Document to which it is a party; or (c)  a
material adverse effect upon the legality, validity, binding effect or
enforceability against any Obligor of any Loan Document to which it is a party
or its property is subject.

 

“Maximum Amount” means the maximum amount
of interest which, under Applicable Law, Lender is permitted to charge on the
Obligations.

 

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

 

“NAIC” means the National Association of
Insurance Commissioners or any successor organization thereto.

 

“NAIC Tests” means the ratios and other
financial measurements developed by NAIC under its Insurance Regulatory
Information System, as in effect from time to time.

 

“Notice of Final Agreement” means the
Arbitration and Notice of Final Agreement, substantially in the form of Exhibit G.

 

“NSLI” means National Specialty Lines, Inc.,
a Florida corporation.

 

“Obligations” means all obligations,
indebtedness and liabilities under the Loan Documents now or hereafter owing by
Borrower or any other Person to or for the benefit of Lender, whether joint or
several, fixed or contingent, including principal, interest, expenses of
collection and foreclosure and attorneys’ fees that Borrower is responsible for
pursuant to Section 9.2. 
Without limiting the generality of the foregoing, “Obligations”
includes interest,

 

11

 

fees and other amounts that would accrue
after the commencement by or against Borrower, any Affiliate thereof or any
other Person (other than Lender, any Assignee or any Participant) of any
proceeding under any Debtor Relief Laws naming such Person as the debtor in
such proceeding, regardless of whether such interest, fees and other amounts
are allowed claims in such proceeding.

 

“Obligor” means Borrower and each other
Person liable for performance of any of the Obligations or the property of
which secures the performance of any of the Obligations.

 

“Off-Balance Sheet Liabilities” means,
with respect to any Person as of any date of determination thereof, without
duplication and to the extent not included as a liability on the consolidated
balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with
respect to any asset securitization transaction (including any accounts
receivable purchase facility) (i) the unrecovered investment of purchasers
or transferees of assets so transferred and (ii) any other payment,
recourse, repurchase, hold harmless, indemnity or similar obligation of such
Person or any of its Subsidiaries in respect of assets transferred or payments
made in respect thereof, other than limited recourse provisions that are
customary for transactions of such type and that neither (x) have the
effect of limiting the loss or credit risk of such purchasers or transferees
with respect to payment or performance by the obligors of the assets so transferred
nor (y) impair the characterization of the transaction as a true sale
under applicable Laws (including Debtor Relief Laws); (b) the monetary
obligations under any financing lease or so-called “synthetic,” tax retention
or off-balance sheet lease transaction which, upon the application of any
Debtor Relief Law to such Person or any of its Subsidiaries, would be
characterized as indebtedness; (c) the monetary obligations under any sale
and leaseback transaction which does not create a liability on the consolidated
balance sheet of such Person and its Subsidiaries; or (d) any other
monetary obligation arising with respect to any other transaction which (i) upon
the application of any Debtor Relief Law to such Person or any of its
Subsidiaries, would be characterized as indebtedness or (ii) is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the consolidated balance sheet of such Person and its
Subsidiaries (for purposes of this clause (d), any transaction
structured to provide tax deductibility as interest expense of any Dividend,
coupon or other periodic payment will be deemed to be the functional equivalent
of a borrowing).

 

“Outstanding Amount” means, as of any
date of determination, the aggregate outstanding principal amount of all
Advance Loans, after giving effect to any Advance Borrowing and any principal
payment of Advance Loans occurring on such date.

 

“Payment Date” means the first day of
each calendar month.

 

“PBGC” means the Pension Benefit Guaranty
Corporation established under ERISA.

 

“PCAOB” means the Public Company Accounting Oversight Board,
or any entity succeeding to any of its principal functions.

 

“Permitted Debt” means (a) Existing
Debt, (b) the Obligations, (c) trade accounts payable and other
similar obligations incurred in the ordinary course of business, (d) intercompany
balances in the ordinary course of business among Borrower and its
Subsidiaries; provided, that all amounts owed by any Obligor to its
Subsidiaries shall be subordinated to all Obligations on

 

12

 

terms acceptable to Lender, (e) Capital
Leases of Borrower and each of its Subsidiaries in an aggregate principal
amount not to exceed $500,000 at any time, and (f) other Debt of Borrower
and Subsidiaries in an aggregate amount not to exceed $500,000 at any time and
that is subordinated to the Obligations on terms acceptable to Lender in its
discretion.

 

“Permitted Liens” means (a) Bank
Liens, (b) pledges or deposits made to secure payment of workmen’s
compensation, or to participate in any fund in connection with workmen’s
compensation, unemployment insurance, pensions, or other social security
programs (excluding any Liens in respect of ERISA), (c) good-faith pledges
or deposits made to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money), or leases, or to secure statutory
obligations, surety or appeal bonds, or indemnity, performance, or other
similar bonds in the ordinary course of business, (d) encumbrances
consisting of zoning restrictions, easements, or other restrictions on the use
of real property, none of which impair the use of such property by any Obligor
or any of its Subsidiaries in the operation of its business in any manner which
would have a Material Adverse Effect, (e) Liens described on Schedule 6.7,
(f) reinsurance trust accounts and Liens securing performance with respect
to such reinsurance trust accounts if such Lien attaches to property in the
reinsurance trust account, only, (g) the following, if the validity or
amount thereof is being contested in good faith and by appropriate and lawful
proceedings and so long as levy and execution thereon have been stayed and
continue to be stayed: claims and Liens for Taxes due and payable; claims and
Liens upon, and defects of title to, real or personal property or other legal
process prior to adjudication of a dispute on the merits, including mechanic’s
and materialmen’s Liens; and adverse judgments on appeal, (h) set-off,
charge-back and other rights of depository and collection banks and other
financial institutions with respect to money or instruments of Borrower or its
Subsidiaries on deposit with or in possession of such institutions, (i) Liens
arising under Capital Leases permitted under this Agreement, and (j) Liens
securing reverse repurchase agreements entered into by Borrower or a Subsidiary
if (i) such reverse repurchase agreement relates to cash management and
liquidity management activities (subject to Applicable Laws in the case of
RICs) of Borrower or such Subsidiary and (ii) such Lien attaches to the
security the subject of such reverse repurchase agreement, only.

 

“Person” means and includes an
individual, a partnership, a joint venture, a limited liability company, a
corporation, a trust, an unincorporated organization, and a government or any
department, Governmental Authority, agency or political subdivision thereof.

 

“Plan” means any plan subject to
Title IV of ERISA and maintained for employees of any Obligor or any of
its Subsidiaries, or of any member of a controlled group of corporations, as
the term “controlled group of corporations” is defined in Section 1563 of
the Internal Revenue Code of 1986, as amended, of which any Obligor or any of
its Subsidiaries is a part.

 

“Pledge Agreement” means the Pledge
Agreement executed by Borrower, substantially in the form of Exhibit B.

 

“Preferred Stock” means the Series A
Convertible Redeemable Preferred Stock of Borrower.

 

“Preferred Stock Documents” means the Statement
of Resolution Establishing and Designating a Series of Shares of GAINSCO,
INC., Series A Convertible Preferred Stock,

 

13

 

par value $100.00 per share, filed
with the Secretary of State of the State of Texas on October 1, 1999, as
amended by Articles of Amendment to the Statement of Resolution establishing
and Designating the Series A Convertible Preferred Stock of GAINSCO, INC.,
filed with the Secretary of State of the State of Texas on January 21, 2005.

 

“Prime Rate” means for any day a per
annum rate of interest equal to the “prime rate,” as published in the “Money
Rates” column of The Wall Street Journal, Central
Edition, from time to time, or if for any reason such rate is no longer
available, the rate established by Lender as its prime rate.  The Prime Rate shall change effective as of
the date of any change as published in The Wall Street Journal,
Central Edition, or as established by Lender, as appropriate.  The Prime Rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged to any
customer of Lender.

 

“Prime Rate Loan” means the Advance Loan
when it bears interest at a rate based on the Prime Rate.

 

“Principal Office” means the location of
Lender’s chief executive office.

 

“Registered Public Accounting Firm” means
an accounting firm that (a) has registered with the PCAOB pursuant to the
provisions of Section 102 of Sarbanes-Oxley and whose registration has not
been withdrawn, terminated, revoked or suspended and (b) meets the “independence”
requirements of Section 10A of the Securities Exchange Act of 1934.

 

“Reinsurance Agreement” means any
agreement, contract, treaty or other arrangement whereby one or more insurers,
as reinsurers, assume liabilities under insurance policies or agreements issued
by another insurance or reinsurance company or companies.

 

“Release” means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing, depositing, dispersing, emanating or migrating of
any Hazardous Material in, into, onto or through the Environment.

 

“Remedial Action” means (a) ”remedial
action” as such term is defined in CERCLA, 42 U.S.C. Section 9601(24),
and (b) all other actions required by any Governmental Authority or
voluntarily undertaken to: (i) cleanup, remove, treat, abate or in any
other way address any Hazardous Material in the Environment; (ii) prevent
the Release or threat of Release, or minimize the further Release of any
Hazardous Material so it does not migrate or endanger or threaten to endanger
public health, welfare or the Environment; or (iii) perform studies and
investigations in connection with, or as a precondition to, (i) or (ii) above.

 

“Reportable Event” means a reportable
event as defined in Section 4043(b) of Title IV of ERISA or PBGC
regulations issued thereunder, other than a reportable event not subject to Section 4043’s
notification requirements pursuant to PGBC’s regulations.

 

“Reset Date”  means the first Business Day after the first
day on which all of the following have occurred or exist:  (a) the aggregate amount of reserves, as
stated in the current Financial Statements of each RIC prepared in accordance
with SAP, attributable to Discontinued Lines, only, net of all excess, quota
share are loss portfolio reinsurance reserves related to such Discontinued
Lines, is less than $18,000,000, (b) the aggregate amount of reserves that
an Actuary determines to be the highest individual actuarial amount for
Discontinued Lines is equal

 

14

 

to or less than the aggregate amount of
reserves, as stated in the current Financial Statements of each RIC prepared in
accordance with SAP, attributable to Discontinued Lines, (c) no Default or
Event of Default exists, and (d) Borrower has delivered to Lender a
certificate, in format and with supporting information acceptable to Lender,
executed by the chief financial officer or other Authorized Signatory of
Borrower acceptable to Lender, certifying as to the matters in clauses (a),
(b) and (c).

 

“Retrocession Agreement” means any
agreement, contract, treaty or other arrangement whereby one or more insurers
or reinsurers, as retrocessionaires, assume liabilities of reinsurers under a
Reinsurance Agreement or other retrocessionaires under another retrocession
agreement.

 

“RIC” means any Subsidiary, whether now
owned or hereafter acquired, that is authorized or admitted to carry on or
transact Insurance Business in any jurisdiction, is regulated by any Insurance
Regulator, and is required by any Insurance Regulator to file an annual
statement in the form prescribed by NAIC for a property and casualty insurance
company.

 

“Risk-Based Capital Ratio” means for a
RIC, the ratio (expressed as a percentage), at any time, of the Total Adjusted
Capital of such RIC to the Authorized Control Level of such RIC.

 

“S&P” means Standard & Poor’s
Ratings Group, a division of McGraw-Hill, Inc., a New York corporation.

 

“SAP” means the statutory accounting and
reporting practices prescribed by the insurance Laws or Insurance Regulator (or
other similar Governmental Authority) with respect to each RIC.

 

“Sarbanes-Oxley” means the Sarbanes-Oxley
Act of 2002.

 

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

 

“Securities Laws” means the Securities
Act of 1933, the Securities Exchange Act of 1934, Sarbanes-Oxley and the
applicable accounting and auditing principles, rules, standards and practices
promulgated, approved or incorporated by the SEC or the PCAOB.

 

“Security Documents” means, collectively,
the Pledge Agreement and any and all other documents, instruments, financing
statements, public notices and the like executed and delivered in connection
with any of the Bank Liens or the Collateral.

 

“Solvent” means, with respect to any
Person, that the fair value of the assets of such Person (both at fair
valuation and at present fair saleable value) is, on the date of determination,
greater than the total amount of liabilities (including contingent and
unliquidated liabilities) of such Person as of such date and that, as of such
date, such Person is able to pay all liabilities of such Person as such
liabilities mature and such Person does not have unreasonably small capital
with which to carry on its business.  In
computing the amount of contingent or unliquidated liabilities at any time,
such liabilities will be computed at the amount which, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability discounted to
present value at rates believed to be reasonable by such Person.

 

15

 

“Special Counsel” means the law firm of
Winstead Sechrest & Minick P.C., or such other legal counsel as
Lender may select.

 

“Subsidiary” of a Person means a
corporation, partnership, joint venture, limited liability company or other
business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned,
or the management of which is otherwise Controlled, directly or indirectly
through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references to
a “Subsidiary” or to “Subsidiaries” refers to a Subsidiary or Subsidiaries of
Borrower.

 

“Taxes” means all taxes, assessments,
fees or other charges from time to time or at any time imposed by any Laws or
by any Governmental Authority.

 

“Total Adjusted Capital”
means “Total Adjusted Capital” as defined by NAIC from time to time and as
applied in the context of the Risk-Based Capital Guidelines promulgated by NAIC
(or any term substituted therefor by NAIC).

 

1.2                                 Additional Definitions. 
The following additional terms have the meaning specified in the
indicated Section or other provision of this Agreement:

 

	
  Term

  	
   

  	
  Section/Provision

  
	
   

  	
   

  	
   

  
	
  Advance Loan

  	
   

  	
  Section 2.1

  
	
  Agreement

  	
   

  	
  Introductory Paragraph

  
	
  Assignee

  	
   

  	
  Section 9.6(c)

  
	
  Borrower

  	
   

  	
  Introductory Paragraph

  
	
  Eurocurrency liabilities

  	
   

  	
  Section 3.4(c)

  
	
  Indemnified Matters

  	
   

  	
  Section 5.7

  
	
  Indemnified Taxes

  	
   

  	
  Section 3.1(a)

  
	
  Indemnitees

  	
   

  	
  Section 5.7

  
	
  Information

  	
   

  	
  Section 9.8

  
	
  Lender

  	
   

  	
  Introductory Paragraph

  
	
  Other Taxes

  	
   

  	
  Section 3.1(b)

  
	
  Participant

  	
   

  	
  Section 9.6(b)

  
	
  Participation

  	
   

  	
  Section 9.6(b)

  
	
  Properties

  	
   

  	
  Section 7.16(a)

  

 

1.3                                 Construction.  Unless otherwise expressly provided in this
Agreement or the context requires otherwise, (a) the singular shall
include the plural, and vice versa, (b) words of a gender include the
other gender, (c) all accounting terms shall be construed in accordance
with GAAP or SAP, as the context requires, (d) all references to time are
San Antonio time, (e) monetary references are to Dollars, (f) all
references to “Articles,” “Sections,” “Exhibits,” and “Schedules” are to the
Articles, Sections, Exhibits, and Schedules of and to this Agreement, (g) headings
used in this Agreement and each other Loan Document are for convenience only
and shall not be used in connection with the interpretation of any provision
hereof or thereof, (h) references to any Person include that Person’s
heirs, personal representatives, successors, and permitted assigns, that Person
as a debtor-in possession, and any receiver, trustee, liquidator,

 

16

 

conservator,
custodian, or similar party appointed for such Person or all or substantially
all of its assets, (i) references to any Law include every amendment or
restatement to it, rule and regulation adopted under it, and successor or
replacement for it, and (j) references to a particular Loan Document
include each amendment, modification, or supplement to or restatement of it
made in accordance with this Agreement and such Loan Document.

 

ARTICLE II

 

ADVANCE LOANS

 

2.1                                 Advance Loans.  Subject to the terms and conditions set forth
herein, Lender agrees to make a single advance or multiple advances, on a non-revolving
basis (each such advance, an “Advance Loan”),
to Borrower from time to time on any Business Day during the period from the
Agreement Date to the first to occur of the (a) Advance Availability
Termination Date, and (b) the Advance Loan Maturity Date, in an aggregate
amount not to exceed the lesser of (y) the Advance Commitment, and (z) the
Advance Availability.  Advance Loans,
once repaid, may not be reborrowed.

 

2.2                                 Advance Borrowings.

 

(a)                                  Each
Advance Borrowing shall be made upon Borrower’s irrevocable notice to Lender,
which may be given by telephone.  Each
such notice must be received by Lender not later than 10:00 a.m. (i) one
Business Day prior to the requested date of any Advance Borrowing of Eurodollar
Rate Loans and (ii) one Business Day prior to the requested date of any
Advance Borrowing of Prime Rate Loans. 
Each such telephonic notice must be confirmed promptly by delivery to
Lender of a written Advance Loan Notice appropriately completed and signed by
an Authorized Signatory of Borrower. 
Each Advance Loan Notice (whether telephonic or written) shall specify (i) the
requested date of the Advance Borrowing, as the case may be (which shall be a
Business Day), (ii) the principal amount of the Advance Loan to be
borrowed and (iii) whether such Advance Borrowing will be a Eurodollar
Rate Loan or a Prime Rate Loan.

 

(b)                                 Upon
satisfaction of the applicable conditions set forth in Article IV,
not later than 2:00 p.m. on the applicable borrowing date, Lender shall
credit the account of Borrower on the books of Lender in Dollars constituting
immediately available funds in the amount specified in the related Advance Loan
Notice.

 

2.3                                 Repayment.

 

The principal of the Advance Loans shall be due and payable on the
following dates and in the following amounts:

 

	
  Payment Date

  	
   

  	
  Payment Amount

  
	
   

  	
   

  	
   

  
	
  Each Payment
  Date after the Advance Availability Termination Date

  	
   

  	
  An amount
  equal to 1/60th of the Outstanding Amount on the Advance Availability Termination
  Date

  
	
   

  	
   

  	
   

  
	
  Advance Loan
  Maturity Date

  	
   

  	
  The
  remaining unpaid Outstanding Amount

  

 

17

 

2.4                                 Mandatory Prepayments.

 

(a)                                  On
each date that the Outstanding Amount exceeds the Advance Availability, Borrower
shall prepay Advance Loans in an amount equal to such excess.

 

(b)                                 On
each date prior to the Advance Availability Termination Date that the
Outstanding Amount exceeds the Advance Commitment, Borrower shall prepay the
Advance Loans in an amount equal to such excess.

 

2.5                                 Voluntary Prepayments.  Borrower may, upon notice to Lender, at any
time or from time to time voluntarily prepay the Advance Loans in whole or in
part without premium or penalty; provided that (a) such notice must
be received by Lender not later than 10:00 a.m. one Business Day prior to
the date of prepayment; and (b) any prepayment shall be in a principal
amount of $100,000 or a whole multiple of $100,000 in excess thereof (or, if
less, the Outstanding Amount).  Each such
notice shall specify the date and amount of such prepayment.  If such notice is given by Borrower, Borrower
shall make such prepayment and the payment amount specified in such notice
shall be due and payable on the date specified therein.  Any voluntary prepayment shall be accompanied
by all accrued interest thereon, together (if Borrower shall have received
demand therefor from Lender in accordance with the terms of Article III
prior to such prepayment, provided the failure of Lender to make such demand by
such time shall not limit or affect the obligation of Borrower to pay such
amounts upon demand) with any additional amounts required pursuant to Article III.

 

2.6                                 Termination and Reduction of Advance Commitment.

 

(a)                                  The
Advance Commitment shall reduce on the date each Advance Loan is made in the
amount of such Advance Loan.

 

(b)                                 Borrower
shall have the right to terminate or reduce the Advance Commitment at any
time.  Each reduction shall be in the
minimum amount of $500,000 and a whole multiple of $100,000 (if the reduction
is greater than $500,000), or the remainder of the Advance Commitment if less
than $500,000.

 

(c)                                  On
the Advance Availability Termination Date, the Advance Commitment shall
automatically reduce to zero and terminate.

 

(d)                                 Upon
any termination or reduction of the Advance Commitment pursuant to this Section 2.6
prior to the Advance Availability Termination Date, Borrower shall immediately
make a repayment of the Advance Loans if required by Section 2.4.

 

(e)                                  Borrower
shall not have any right to rescind any termination or reduction.  Once terminated or reduced, the Advance
Commitment may not be reinstated.

 

18

 

2.7                                 Interest on Advance Loans Generally.

 

(a)                                  Subject
to the provisions of Sections 2.7(b) and 2.9, each (i) Eurodollar
Rate Loan shall bear interest on the outstanding principal amount thereof from
the applicable borrowing date or the effective date of the election by Borrower
that the Advance Loans become a Eurodollar Rate Loan, as applicable, to but not
including the date on which another interest rate becomes applicable to the
Advance Loans pursuant to the terms of this Agreement at a rate per annum equal
to the lesser of (A) the Highest Lawful Rate and (B) the Eurodollar
Rate, and (ii) Prime Rate Loan shall bear interest on the outstanding
principal amount thereof from the date on which the Advance Loans convert to
Prime Rate Loans pursuant to Section 3.2 or 3.3, to but not
including the date on which another interest rate becomes applicable to the Advance
Loans pursuant to the terms of this Agreement at a rate per annum equal to the
lesser of (A) the Highest Lawful Rate and (B) the Prime Rate.  Subject to Sections 2.7(b) and
2.9, all of the Advance Loans shall be a Eurodollar Rate Loan.  Borrower may not elect that the Advance Loans
be a Prime Rate Loan; all of the Advance Loans shall be a Prime Rate Loan only
if the provisions of Section 2.7(b) apply.

 

(b)                                 Subject
to the provisions of Section 2.9, if at any time Lender has
notified Borrower that the provisions of Sections 3.2 or 3.3
apply, all of the Advance Loans shall become a Prime Rate Loan effective on the
date on which Lender determines that the provisions of Sections 3.2
or 3.3 apply and the Advance Loans shall not be a Eurodollar Rate Loan
until Lender notifies Borrower that the provisions of Sections 3.2
and 3.3 no longer apply.

 

(c)                                  Interest
on the Advance Loans shall be due and payable in arrears on each Interest
Payment Date applicable thereto and at such other times as may be specified
herein.  Interest hereunder shall be due
and payable in accordance with the terms hereof before and after judgment, and
before and after the commencement of any proceeding under any Debtor Relief
Law.

 

2.8                                 Computations.  Subject to Section 9.11, interest
on the Advance Loans and any other amounts due hereunder shall be calculated on
the basis of actual days elapsed over a year of 360 days.  Nothing herein shall be deemed to obligate
Lender to obtain the funds for any Advance Loan in any particular place or manner
or to constitute a representation by Lender that it has obtained or will obtain
the funds for any Advance Loan in any particular place or manner.

 

2.9                                 Interest After an Event of Default.  (a) If an Event of Default exists (other
than a Default specified in Section 8.1(e) or (f)), at
the option of Lender, and (b) if an Event of Default specified in Section 8.1(e) or
(f) exists, automatically and without any action by Lender, the
Obligations shall bear interest at a rate per annum equal to the lesser of (i) the
Default Rate and (ii) the Highest Lawful Rate.  Such interest shall be payable on the earlier
of demand and the Advance Loan Maturity Date, and shall accrue until the
earlier of (a) waiver or cure (to the satisfaction of Lender) of the
applicable Event of Default, (b) agreement by Lender to rescind the
charging of interest at the Default Rate, or (c) payment in full of the
Obligations.  Lender shall not be
required to accelerate the maturity of the Advance Loans, to exercise any other
rights or remedies under the Loan Documents, or to give notice to Borrower of
the decision to charge interest at the Default Rate.  Lender will undertake to notify Borrower,
after the effective date, of

 

19

 

the decision
to charge interest at the Default Rate. 
The determination of the Default Rate by Lender shall be prima facie evidence as to the Default
Rate.

 

2.10                           Late Charge.  If a
payment is made 10 days or more late, Borrower will be charged (subject to Section 9.11),
in addition to interest, a delinquency charge of (a) 5% of the unpaid
portion of the regularly scheduled payment, or (b) $250.00, whichever is
less.  Additionally, if the amount of the
Advance Loans (plus all accrued but unpaid interest) is not paid in full on the
Advance Loan Maturity Date, Borrower will be charged (subject to Section 9.11)
a delinquency charge of (a) 5% of the sum of the outstanding principal
balance (plus all accrued but unpaid interest), or (b) $250.00, whichever
is less.  Borrower agrees with Lender
that the charges set forth herein are reasonable compensation to Lender for the
handling of such late payments.

 

2.11                           Payments Generally.

 

(a)                                  Each
payment (including prepayments) by Borrower of the principal of or interest on
the Advance Loans and any other amount owed under this Agreement or any other
Loan Document shall be made not later than 2:00 p.m. on the date specified
for payment under this Agreement to Lender at Lender’s Office, in Dollars
constituting immediately available funds. 
All payments received by Lender after 2:00 `p.m., shall be deemed
received on the next succeeding Business Day and any applicable interest and
fees shall continue to accrue.

 

(b)                                 If
any payment under this Agreement or any other Loan Document shall be specified
to be made upon a day which is not a Business Day, it shall be made on the next
succeeding day which is a Business Day. 
Any extension of time shall in such case be included in computing
interest and fees, if any, in connection with such payment.

 

(c)                                  Borrower
agrees to pay principal, interest, fees and all other amounts due under the
Loan Documents without deduction for set off or counterclaim or any deduction
whatsoever.

 

(d)                                 If
some but less than all amounts due from Borrower are received by Lender, Lender
shall apply such amounts in the following order of priority:  (i) to the payment of Lender’s expenses
required to be paid by Borrower pursuant to the Loan Documents and then due and
payable, if any; (ii) to the payment of all other fees then due and
payable; (iii) to the payment of interest then due and payable on the
Advance Loans; (iv) to the payment of all other amounts not otherwise
referred to in this Section 2.11(d) then due and payable under
the Loan Documents; and (v) to the payment of principal then due and
payable on the Advance Loans.

 

(e)                                  All
prepayments shall be applied (i) first to accrued interest and (ii) second
to outstanding principal in the inverse order of maturity.

 

2.12                           Booking the Advance Loans. 
Lender may make, carry or transfer each Advance Loan at, to or for the
account of any of its offices or the office of any Affiliate of Lender.

 

2.13                           Collateral.  Payment
of the Obligations is secured on the Agreement Date by (a) a perfected
first priority security interest in all of the authorized, issued and
outstanding capital

 

20

 

stock and
other equity interests of each of GAICA and NSLI, and (b) a Guaranty of
the Obligations by NSLI.  Borrower shall
cause each material Subsidiary (other than a RIC) of Borrower created or
acquired after the Agreement Date and each Subsidiary (other than a RIC) that
becomes a material Subsidiary after the Agreement Date to execute and deliver
to Lender a Guaranty or supplement to an existing Guaranty.

 

ARTICLE III

 

TAXES, YIELD
PROTECTION AND ILLEGALITY

 

3.1                                 Taxes.

 

(a)                                  Except
as provided in this Section 3.1, any and all payments by Borrower
to or for the account of Lender under any Loan Document shall be made free and
clear of and without deduction for any and all present or future income, stamp
or other Taxes, duties, levies, imposts, deductions, assessments, fees,
withholdings or similar charges, now or hereafter imposed, and all liabilities
with respect thereto, excluding, in the case of Lender, or its Principal
Office, applicable lending office, or any branch or Affiliate thereof, Taxes
imposed on or measured by its net income (including net income Taxes imposed by
means of a backup withholding tax) franchise Taxes, branch Taxes, Taxes on
doing business or Taxes measured by or imposed upon the overall capital or net
worth of Lender or its Principal Office, applicable lending office, any branch
or Affiliate thereof, in each case imposed: 
(i)  by the jurisdiction under the Laws of which Lender, its
Principal Office, applicable lending office, branch or Affiliate is organized
or is located, or in which the principal executive office of Lender is located,
or any nation within which such jurisdiction is located or any political
subdivision thereof, or (ii)  by reason of any present or former
connection between the jurisdiction imposing such Tax and Lender or its
Principal Office, applicable lending office, branch or Affiliate other than a
connection arising solely from Lender having executed, delivered or performed
its obligation under, or received payment under or enforced this Agreement
pursuant to the Laws of such jurisdiction (all such Taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges, and
liabilities being hereinafter referred to as “Indemnified
Taxes”).  If Borrower shall be
required by any Laws to deduct any Indemnified Taxes from or in respect of any
sum payable under any Loan Document to Lender, (i) the sum payable shall
be increased as necessary to yield to Lender an amount equal to the sum it
would have received had no such deductions been made, (ii) Borrower shall
make such deductions, (iii) Borrower shall pay the full amount deducted to
the relevant taxation authority or other Governmental Authority in accordance
with Applicable Laws, and (iv) promptly (but in no event later than thirty
days) after the date of such payment, Borrower shall furnish to Lender the
original or a certified copy of a receipt evidencing payment thereof.

 

(b)                                 In
addition, Borrower shall pay any and all present or future stamp, court or
documentary taxes and any other excise or property taxes or charges or similar
levies which arise from any payment made under any Loan Document or from the
execution, delivery, performance, enforcement or registration of, or otherwise
with respect to, any Loan Document (hereinafter referred to as “Other Taxes”).

 

(c)                                  If
Borrower shall be required to deduct or pay any Indemnified Taxes or Other
Taxes from or in respect of any sum payable under any Loan Document to Lender,

 

21

 

Borrower shall
also pay to Lender, at the time interest on the Obligations is paid, such
additional amount that Lender determines as necessary to preserve the after-tax
yield (after factoring in all Taxes, including Taxes imposed on or measured by
net income) Lender would have received if such Indemnified Taxes or Other Taxes
had not been imposed.

 

(d)                                 BORROWER SHALL INDEMNIFY LENDER FOR (i)  THE
FULL AMOUNT OF INDEMNIFIED TAXES AND OTHER TAXES (INCLUDING ANY INDEMNIFIED
TAXES OR OTHER TAXES IMPOSED OR ASSERTED BY ANY JURISDICTION ON AMOUNTS PAYABLE
UNDER THIS SECTION) PAID BY LENDER, (ii)  AMOUNTS PAYABLE
UNDER SECTION 3.1(c) AND (iii)  ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, IN EACH CASE WHETHER OR NOT SUCH INDEMNIFIED TAXES OR OTHER TAXES WERE
CORRECTLY OR LEGALLY IMPOSED OR ASSERTED BY THE RELEVANT GOVERNMENTAL
AUTHORITY.  PAYMENT UNDER THIS SECTION 3.1(d) SHALL
BE MADE WITHIN THIRTY DAYS AFTER THE DATE LENDER MAKES A DEMAND THEREFOR.

 

(e)                                  If
Lender determines, in its reasonable discretion, that it has received a refund
of any Indemnified Taxes or Other Taxes as to which it has been indemnified by
Borrower or with respect to which Borrower has paid additional amounts pursuant
to this Section, it shall pay to Borrower an amount equal to such refund
(but only to the extent of indemnity payments made, or additional amounts paid,
by Borrower under this Section with respect to the Indemnified
Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses of Lender and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund), provided
that Borrower, upon the request of Lender, agrees to repay the amount paid over
to Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to Lender in the event Lender is required to
repay such refund to such Governmental Authority.  Neither this Section nor any
other Loan Document shall be construed to require Lender to make available its
tax returns (or any other information relating to its taxes that it deems
confidential) to Borrower or any other Person.

 

3.2                                 Illegality.  If Lender determines that any change in Law
on or after the Agreement Date has made it unlawful, or that any Governmental
Authority on or after the Agreement Date has asserted that it is unlawful, for
Lender or its applicable lending office to make, maintain or fund Eurodollar
Rate Loans, or materially restricts the authority of Lender to purchase or
sell, or to take deposits of, Dollars in the applicable offshore Dollar market,
or to determine or charge interest rates based upon the Eurodollar Basis, then,
on notice thereof by Lender to Borrower, any obligation of Lender to make or
maintain Eurodollar Rate Loans shall be suspended until Lender notifies
Borrower that the circumstances giving rise to such determination no longer
exist.  Upon the date of such notice, all
Eurodollar Rate Loans shall convert to Prime Rate Loans.  Lender agrees to designate a different
lending office if such designation will avoid the need for such notice and will
not, in the good faith judgment of Lender, otherwise be materially
disadvantageous to Lender.

 

3.3                                 Inability to Determine Rates.  If (a) Lender reasonably determines in
connection with any request for or maintenance of a Eurodollar Rate Loan or any
determination of the Eurodollar Basis that (i) Dollar deposits are not
being offered to banks in the applicable offshore

 

22

 

Dollar market
for the applicable amount and applicable term, or (ii) adequate and
reasonable means do not exist for determining the Eurodollar Basis, or (b) 
Lender notifies Borrower that the Eurodollar Basis for such Eurodollar Rate
Loan does not adequately and fairly reflect the cost to Lender of funding or
maintaining such Eurodollar Rate Loan, Lender will promptly notify
Borrower.  Thereafter, the obligation of
Lender to make or maintain Eurodollar Rate Loans shall be suspended until
Lender notifies Borrower that Lender revokes such notice.  Upon the date of such notice, all Eurodollar
Rate Loans shall convert to Prime Rate Loans.

 

3.4                                 Increased Cost and Reduced Return; Capital Adequacy;
Reserves on Eurodollar Rate Loans.

 

(a)                                  If
Lender in good faith determines that as a result of the introduction of or any
change in or in the interpretation of any Law on or after the Agreement Date,
or Lender’s compliance therewith, there shall be any increase in the cost to
Lender of agreeing to make or making, funding or maintaining Eurodollar Rate
Loans, or a reduction in the amount received or receivable by Lender in
connection with any of the foregoing (excluding for purposes of this Section 3.4(a) any
such increased costs or reduction in amount resulting from (i)  Indemnified
Taxes or Other Taxes (as to which Section 3.1 shall govern), (ii)  changes
in the basis of taxation of overall net income or overall gross income by the
United States or any political subdivision of either thereof under the Laws of
which Lender is organized or has its Principal Office or applicable lending
office, and (iii)  reserve requirements contemplated by Section 3.4(c)),
then from time to time within five Business Days after demand of Lender,
Borrower shall pay to Lender such additional amounts as will compensate Lender
for increased cost or reduction.

 

(b)                                 If
Lender in good faith determines that the introduction of any Law regarding
capital adequacy or any change therein or in the interpretation thereof on or
after the Agreement Date, or compliance by Lender (or its lending office)
therewith, has the effect of reducing the rate of return on the capital of
Lender or any corporation controlling Lender with respect to this Agreement as
a consequence of Lender’s obligations hereunder (taking into consideration its
policies with respect to capital adequacy), then from time to time within five
Business Days after demand of Lender and written explanation of its
determination in reasonable detail, Borrower shall pay to Lender such
additional amounts as will compensate Lender for such reduction.

 

(c)                                  Borrower
shall pay to Lender, as long as Lender shall be required under regulations of
the Federal Reserve Board to maintain reserves with respect to liabilities or
assets consisting of or including Eurocurrency funds or deposits (currently
known as “Eurocurrency liabilities”), additional
costs on the unpaid principal amount of each Eurodollar Rate Loan equal to the
actual costs of such reserves allocated to such Eurodollar Rate Loan by Lender
(as determined by Lender in good faith, which determination shall constitute prima facie evidence as to the facts thereof), which shall
be due and payable on each date on which interest is payable on such Eurodollar
Rate Loan, provided Borrower shall have received at least fifteen days’
prior notice of such additional interest from Lender.  If Lender fails to give notice fifteen days
prior to the relevant Payment Date, such additional interest shall be due and
payable fifteen days from receipt of such notice.

 

(d)                                 If
Lender claims any additional amounts payable pursuant to this Section 3.4,
it shall use its reasonable best efforts (consistent with its internal policy
and legal

 

23

 

and regulatory
restrictions) to change the jurisdiction of its applicable lending office, if
the making of such a change would avoid the need for, or reduce the amount of,
any such additional amounts which may thereafter accrue and would not, in the
reasonable judgment of Lender, be disadvantageous to Lender.

 

3.5                                 Matters Applicable to all Requests for Compensation.  Any demand or notice delivered by Lender to
Borrower claiming compensation under this Article III shall be in
writing and shall certify (a) that one of the events described in this Article III
has occurred, describing in reasonable detail the nature of such event and (b) as
to the amount or amounts for which Lender seeks compensation hereunder, setting
forth in reasonable detail the basis for and calculations of such
compensation.  In determining such
amount, Lender may use any reasonable averaging and attribution methods.

 

3.6                                 Survival. 
All of Borrower’s obligations under this Article III shall
survive termination of the Advance Commitment and payment in full of all
Obligations.

 

ARTICLE IV

 

CONDITIONS
PRECEDENT

 

4.1                                 Conditions Precedent to Initial Advance Loan.  The obligation of Lender to make the initial
Advance Loan is subject to (i) receipt by Lender of the following items
which are to be delivered, in form and substance reasonably satisfactory to
Lender and (ii) satisfaction of the following conditions, in form and
substance reasonably satisfactory to Lender:

 

(a)                                  Borrower
Certificate.  A certificate of
officers acceptable to Lender of Borrower certifying as to (i)  the
incumbency of the officers signing such certificate and the Loan Documents to
which it is a party, (ii)  an original certified copy of its Articles
of Incorporation, certified as true, complete and correct as of a date
acceptable to Lender by the appropriate authority of the State of Texas, (iii)  a
copy of its bylaws, as in effect on the Agreement Date, (iv)  a copy
of the resolutions of its Board of Directors authorizing it to execute, deliver
and perform the Loan Documents to which it is a party, (v)  an
original certificate or certificates of good standing, existence and
qualification issued by the appropriate authority or authorities of the State
of Texas (certified as of a date acceptable to Lender), (vi)  the
accuracy of the representations and warranties in the Loan Documents, (vii)  no
Default or Event of Default exists, and (viii)  no Material Adverse
Change having occurred.

 

(b)                                 Obligor
Certificate.  A certificate of
officers acceptable to Lender of each Obligor (other than Borrower) certifying
as to (i)  the incumbency of the officers signing such certificate
and the Loan Documents to which it is a party, (ii)  if a
corporation, an original certified copy of its Articles of Incorporation or
Certificate of Incorporation, as applicable, certified as true, complete and
correct as of a date acceptable to Lender by the appropriate authority of its
state of incorporation, (iii)  if a limited liability company, an
original certified copy of its Articles of Organization (or similar organization
and governance document), certified as true, complete and correct as of a date
acceptable to Lender by the appropriate authority of its state of organization,
(iv)  if a limited partnership, an original certified copy of its
Certificate of Limited Partnership (or similar organization or governance
document), certified as true, complete and correct as of a date acceptable to
Lender by the appropriate authority of its

 

24

 

jurisdiction
of organization, (v)  if a corporation, a copy of its bylaws, as in
effect on the Agreement Date, (vi)  if a limited liability company, a
copy of its operating agreement (or similar organization and governance
document), as in effect on the Agreement Date, (vii)  if a limited
partnership, a copy of its partnership agreement (or similar organization or
governance document), as in effect on the Agreement Date, (viii)  a
copy of the resolutions of the appropriate governance board authorizing it to
execute, deliver and perform the Loan Documents to which it is a party, and (ix)  an
original certificate or certificates of good standing, existence and
qualification issued by the appropriate authority or authorities of its state
of organization and the state in which its chief executive office is located
(certified as of a date acceptable to Lender).

 

(c)                                  GAICA
Certificate.  A certificate of
officers acceptable to Lender of GAICA certifying as to (i)  an
original certified copy of its Articles of Incorporation, certified as true, complete
and correct as of a date acceptable to Lender by the Oklahoma Secretary of
State, and (ii)  a copy of its bylaws, as
in effect on the Agreement Date.

 

(d)                                 Advance
Note.  The duly executed Advance
Note, payable to the order of Lender and in an amount equal to the Advance
Commitment.

 

(e)                                  Applicable
Rate Certificate.  An appropriately
completed Applicable Rate Certificate signed by an Authorized Signatory of
Borrower.

 

(f)                                    Security
Documents.  The duly executed and
completed (i)  Pledge Agreement executed by Borrower, dated as of the
Agreement Date, granting to Lender, a first priority Lien in the Collateral set
forth therein, together with stock certificates evidencing all of the equity
interest of each of GAICA and NSLI (which certificates shall not contain any
restriction on transfer not acceptable to Lender), (ii)  undated,
blank stock powers executed by Borrower of the stock or other equity interest
evidenced by such certificates (with signatures guaranteed as required by
Lender); and (iii)  confirmations of all Liens on all equity
interests of each of GAICA and NSLI.

 

(g)                                 Guaranty.  The duly executed Guaranty (in the form of Exhibit C)
of NSLI.

 

(h)                                 Expenses.  Reimbursement for Attorney Costs incurred
through the date hereof.

 

(i)                                     UCC
and Lien Searches.  Searches of the
Uniform Commercial Code, Tax lien and other records as Lender may require.

 

(j)                                     Opinions
of Borrower’s and Each Other Obligors’ Counsel.  Opinions of counsel to Borrower and each
other Obligor addressed to Lender, dated the Agreement Date and covering such
matters incident to the transactions contemplated hereby as Lender or Special
Counsel may reasonably request.

 

(k)                                  Obligor
Proceedings.  Evidence that all
corporate, limited liability company and partnership proceedings of each Obligor
and each other Person (other than Lender) taken in connection with the
transactions contemplated by this Agreement and the other Loan Documents shall
be reasonably satisfactory in form and substance to Lender and Special

 

25

 

Counsel; and
Lender shall have received copies of all documents or other evidence which
Lender or Special Counsel may reasonably request in connection with such
transactions.

 

(l)                                     Transfer
Restrictions.  Evidence that all
restrictions on transfer of any interest in any equity of GAICA and NSLI
contained in any organization, governance, voting rights, warrant, option or
similar agreement related to GAICA and NSLI are waived or modified in form and
substance satisfactory to Lender.

 

(m)                               Current
Financial Statements.  A copy of the
Current Financials, including (i)  the audited annual consolidated
Financial Statements, showing the financial condition and results of operations
of Borrower and its consolidation Subsidiaries as of, and for the year ended on, December 31, 2004, together
with the opinion of Auditors containing only qualifications and emphasis
acceptable to Lender, (ii)  the unaudited consolidated Financial
Statements, showing the financial condition and results of operations of Borrower
and its consolidated Subsidiaries as of, and for the fiscal quarter ended on, June 30,
2005, (iii)  the annual financial statements of each RIC prepared in
the form of convention blanks prescribed by NAIC, as filed with the Insurance
Regulator of such RIC’s jurisdiction of organization, for the year ended on December 31,
2004, and (iv)  the quarterly financial statements of each RIC prepared in
the form of convention blanks prescribed by NAIC, as filed with the Insurance
Regulator of such RIC’s jurisdiction of organization, for the quarter ended on June 30,
2005.

 

(n)                                 Compliance
Certificate.  A Compliance
Certificate, dated the Agreement Date and signed by an Authorized Signatory of
Borrower, confirming compliance with the financial covenants set forth therein
as of the most recent determination date.

 

(o)                                 Insurance
Evidence that insurance required by the Loan Documents is in effect.

 

(p)                                 Investment
Portfolio and Policy.  A schedule of
all Existing Investments and a copy of the complete currently effective
Investment Policy of each RIC, and Lender shall be satisfied with the
investment portfolio of each RIC and the Investment Policy of each RIC.

 

(q)                                 Notice
of Final Agreement.  The Notice of
Final Agreement executed by all parties thereto.

 

(r)                                    Existing
Debt.  A schedule of all
Existing Debt, in detail satisfactory to Lender.

 

(s)                                  Existing
Litigation.  A schedule of all
Existing Litigation, in detail satisfactory to Lender.

 

(t)                                    Preferred
Stock Documents.  A copy of all
Preferred Stock Documents, together with all amendments thereto.

 

(u)                                 Other
Documents.  In form and substance
satisfactory to Lender and Special Counsel, such other documents, instruments
and certificates as Lender may reasonably require in connection with the
transactions contemplated hereby.

 

26

 

4.2                                 Conditions Precedent to all Advance Loans.  The obligation of Lender to make each Advance
Loan (including the initial Advance Loan) is subject to fulfillment of the
following conditions immediately prior to or contemporaneously with each such
Advance Loan:

 

(a)                                  Representations
and Warranties.  All of the
representations and warranties of Borrower, each of its Subsidiaries and each
other Obligor under this Agreement and each other Loan Document, which,
pursuant to Section 7.24, are made at and as of the time of each
Advance Loan, shall be true and correct when made, except to the extent
applicable to a specific date, both before and after giving effect to the
application of the proceeds of such Advance Loan.

 

(b)                                 No
Default or Event of Default.  There
shall not exist a Default or Event of Default.

 

(c)                                  Notices;
Documents.  Lender shall have
received all notices and documents required by Article II as a
condition to the related Advance Loan.

 

(d)                                 Litigation.  Except as described in Schedule 7.5,
there shall be no Litigation pending against, or, to Borrower’s or any Obligor’s
knowledge, threatened against Borrower, any other Obligor, or any Subsidiary,
or in any other manner relating directly and adversely to Borrower, any other
Obligor, or any Subsidiary, or any of their respective properties, in any court
or before any arbitrator of any kind or before or by any Governmental Authority
which could reasonably be expected to have a Material Adverse Effect.

 

(e)                                  Material
Adverse Change.  There shall have
occurred no change in the business, assets, operations or financial condition
of Borrower, any other Obligor, or any Subsidiary since December 31, 2004,
which caused or could reasonably be expected to cause a Material Adverse
Effect.

 

ARTICLE V

 

AFFIRMATIVE
COVENANTS

 

From the date hereof and so long as this Agreement is in effect and
until payment in full of the Obligations, the termination of the Advance
Commitment, and the performance of all other obligations of each Obligor under
this Agreement and each other Loan Document, Borrower will, and will cause each
Subsidiary to:

 

5.1                                 General Covenants.

 

(a)                                  Payment
of Taxes and Claims.  Pay and
discharge all lawful Taxes imposed upon its income or profits or upon any of
its property before the same shall be in default, and all lawful claims for
labor, rentals, materials and supplies which, if unpaid, might become a Lien
upon its property or any part thereof; provided, however, that
such Person shall not be required to cause to be paid or discharged any such
Tax, assessment or claim so long as the validity thereof shall be contested in
good faith by appropriate proceedings, and adequate book reserves shall be
established with respect thereto, and; provided, further, such
Person shall pay such Tax, charge or claim (i) before any property subject
thereto shall be sold to satisfy a Lien (if the property subject to such Lien
is not subject to a Bank Lien), and (ii) before any

 

27

 

property
subject thereto shall be subject to a Lien to secure such Tax, assessment or
claim (if the property which may be subject to such Lien is subject to a Bank
Lien).

 

(b)                                 Maintenance
of Existence.  Do all things
necessary to preserve and keep in full force and effect its existence as a
corporation, limited liability company or partnership, as appropriate (except,
as to Subsidiaries, as permitted by Section 6.11).

 

(c)                                  Preservation
of Property.  Keep its properties
which are necessary to continue business, whether owned in fee or otherwise, or
leased, in good operating condition, ordinary wear and tear excepted, and
comply with all material leases to which it is a party or under which it
occupies or uses property so as to prevent any material loss or forfeiture
thereunder.

 

(d)                                 Insurance.  Maintain in force with financially sound and
reputable insurers, policies with respect to its property and business against
such casualties and contingencies (including public liability, larceny,
embezzlement or other criminal misappropriation insurance) and in such amounts
as is customary in the case of entities engaged in the same or similar lines of
business of comparable size and financial strength.

 

(e)                                  Compliance
with Applicable Laws.  Comply in all
material respects with the requirements of all applicable Laws and orders of
any Governmental Authority, except where contested in good faith and by proper
proceedings or where the failure to so comply could not reasonably be expected
to have a Material Adverse Effect.

 

(f)                                    Licenses.  Obtain and maintain all material licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its properties or to the conduct of its business.

 

5.2                                 Accounts, Reports and Other Information.  Maintain a system of accounting in accordance
with GAAP or SAP, as appropriate, consistently applied, and furnish, or cause
to be furnished, to Lender the following:

 

(a)                                  Annual
Financial Statements.

 

(i)            As soon as available, but in any
event within 105 days after the last day of each fiscal year of Borrower,
annual consolidated and consolidating Financial Statements (such consolidated
Financial Statements to be audited), showing the consolidated and consolidating
financial condition and results of operations of Borrower and its consolidated
Subsidiaries as of, and for the year ended on, such last day, accompanied by (A) an
opinion of Auditors containing only qualifications (including qualifications as
to the scope of the examination) acceptable to Lender, which opinion shall
state that said consolidated Financial Statements have been prepared in
accordance with GAAP consistently applied, and that the examination of Auditors
in connection with such consolidated Financial Statements has been made in
accordance with generally accepted auditing standards and, if at such time
Auditors are required by Sarbanes-Oxley to deliver an attestation report as to
Borrower, applicable Securities Law, and that said consolidated Financial
Statements present fairly the consolidated financial condition of Borrower and
its consolidated Subsidiaries and their results of operations; (B) if at
such time Auditors are required by Sarbanes-Oxley to deliver an attestation
report as to

 

28

 

Borrower, an attestation report
of Auditors as to Borrower’s internal controls pursuant to Section 404 of
Sarbanes-Oxley expressing a conclusion to which Lender does not object; (C) a
certificate of the chief financial officer of Borrower, which certificate shall
state that said Financial Statements present fairly the financial condition of
Borrower and its consolidated Subsidiaries and their results of operations; and
(D) a description of all Contingent Debt and Off-Balance Sheet Liabilities
of Borrower and its Subsidiaries.

 

(ii)           With respect to each RIC, within 15
days after the first to occur of (A) the required filing date (as
established by Law or the applicable Insurance Regulator), and (B) the
date on which actually filed, audited annual Financial Statements, prepared by
Auditors in accordance with SAP, showing the financial condition and results of
operations of such RIC, as of, and for the year ended on, such last day,
accompanied by (1) an opinion of Auditors containing only qualifications
(including qualifications as to the scope of the examination) acceptable to
Lender, which opinion shall state that said Financial Statements have been
prepared in accordance with SAP consistently applied, and that the examination
of the Auditors in connection with such Financial Statements has been made in
accordance with generally accepted auditing standards and that said Financial
Statements present fairly the financial condition of such RIC, and its results
of operations; and (2) a description of all Contingent Debt and
Off-Balance Sheet Liabilities of such RIC.

 

(iii)          With respect to each RIC, within 15
days after the first to occur of (A) the required filing date (as
established by Law or the applicable Insurance Regulator), and (B) the
date on which actually filed, (1) annual Financial Statements prepared in
the form of convention blanks prescribed by NAIC, as filed with each Insurance
Regulator, and (2) an analysis prepared by Actuary of the loss and loss
adjustment expense reserves of RICs on a combined basis, in format and with
support information acceptable to Lender.

 

(iv)          With respect to each RIC, as soon as
available and in any event within 15 days after the required filing date (as
established by Law or the applicable Insurance Regulator), a copy of the “Statement
of Actuarial Opinion” and “Management Discussion and Analysis” for such RIC
(prepared in accordance with SAP) for each fiscal year of such RIC and as filed
with the applicable Insurance Regulator in compliance with the requirements
thereof (or a report containing equivalent information for such RIC, if such
RIC is not so required to file the foregoing with the applicable Insurance
Regulator).

 

(v)           Within 60 days after the end of each
fiscal year of Borrower, a Litigation Report for such fiscal year.

 

(vi)          Within 75 days after the end of each
fiscal year of Borrower, a Loss Report as at the last day of such year.

 

(vii)         Within 105 days after the end of each
fiscal year of Borrower, unaudited annual financial statements, in format and
with support information acceptable to Lender, showing the results of each of
the personal automobile insurance and Discontinued Lines operations of Borrower
for the fiscal year ended on such day.

 

29

 

(viii)        As soon as available, but in any event
at the same time as the Financial Statements required by Section 5.2(a)(i) are
delivered to Lender, a Compliance Certificate executed by an Authorized
Signatory who is a senior financial officer of Borrower.

 

(b)                                 Quarterly
Financial Statements.

 

(i)            Within 60 days after the last day of
each fiscal quarter (excluding the last fiscal quarter of each fiscal year) of
Borrower, (A) unaudited consolidated and consolidating Financial
Statements (which consolidated and consolidating Financial Statements shall be
in format, prepared in a manner and based on such assumptions and procedures as
are acceptable to Lender), showing the consolidated and consolidating financial
condition and results of operations of Borrower and its consolidated Subsidiaries
as of, and for the quarter ended on, such last day (subject to year-end
adjustment), and which shall include an income statement for the fiscal year
through such last day, prepared in accordance with GAAP; (B) a certificate
of the chief financial officer of Borrower, which certificate shall state that
said Financial Statements present fairly the financial condition of Borrower
and its consolidated Subsidiaries and their results of operations; and (C) a
description of all Contingent Debt and Off-Balance Sheet Liabilities of
Borrower and its Subsidiaries.

 

(ii)           With respect to each RIC, within 60
days after the last day of each fiscal quarter (excluding the last fiscal
quarter of each fiscal year) of such RIC, unaudited quarterly Financial
Statements, prepared in accordance with SAP, showing the financial condition
and results of operations of such RIC as of, and for the quarter ended on, such
last day (subject to year-end adjustment), and which shall include an income
statement for the fiscal year through such last day, and in the form of
quarterly financial statements prescribed by NAIC, and including a report with
respect to “Invested Assets” as set forth on Schedule D on such financial
statements, together with a description of all Contingent Debt and Off-Balance
Sheet Liabilities of such RIC.

 

(iii)          Within 60 days after the end of each
of the first three fiscal quarters of Borrower, a Loss Report as at the last
day of such quarter.

 

(iv)          Within 60 days after the end of each
of the first three fiscal quarters of Borrower, a Compliance Certificate
executed by an Authorized Signatory who is a senior financial officer of
Borrower.

 

(v)           Within 60 days after the end of each
of the first three fiscal quarters of Borrower, unaudited quarterly financial
statements, in format and with support information acceptable to Lender,
showing the results of each of the personal automobile insurance and
Discontinued Lines operations of Borrower for the fiscal quarter ended on such
day.

 

(vi)          Within 60 days after the end of each
of the first three fiscal quarters of each RIC, an analysis prepared by Actuary
of the loss and loss adjustment expense reserves of RICs on a combined basis,
in format and with support information acceptable to Lender.

 

30

 

(c)                                  Annual
Budget.  As soon as available, but in
any event within 60 days after the first day of each fiscal year of Borrower, a
copy of the annual consolidated operating budget of Borrower and Subsidiaries
for such fiscal year in form and substance satisfactory to Lender.

 

(d)                                 Applicable
Rate Certificate.  Within 60 days
after the end of each fiscal quarter of Borrower commencing with the quarter
ending on September 30, 2005, an Applicable Rate Certificate as at the
last day of such fiscal quarter.

 

(e)                                  Other
Reports.  Promptly upon request by
Lender, a copy of (i)  such financial statements, reports, notices or
proxy statements sent by it to stockholders, (ii)  such regular or
periodic reports and any registration statements, prospectuses and written
communications in respect thereof filed by it with any state insurance
department, any securities exchange, or with the SEC or any successor agency,
and (iii)  all press releases concerning it.

 

(f)                                    Notice
of Default.  Promptly upon the happening
of any condition or event which constitutes an Event of Default or Default, a
written notice specifying the nature and period of existence thereof and what
action it is taking and propose to take with respect thereto.

 

(g)                                 Notice
of Litigation.  Promptly upon
becoming aware of the existence of any Litigation before any Governmental
Authority, arbitrator or mediator (but no later than 10 days after the filing
thereof) involving it, which (i) if related to the Insurance Business of
Borrower and its Subsidiaries, under normal operating standards would result in
a case reserve being established in an amount equal to or greater than
$250,000, or (ii) could reasonably be expected to result in a Material
Adverse Change, a written notice specifying the nature thereof and whether it
will contest such proceeding.

 

(h)                                 Notice
of Claimed Default.  Promptly upon
becoming aware that the holder of any note or any evidence of indebtedness or
other security or payee of any obligation in an amount of $100,000 or more has
given notice or taken any action with respect to a claimed default or event of
default thereunder, a written notice specifying the notice given or action
taken by such holder and the nature of the claimed default or event of default
thereunder and what action it is taking or proposes to take with respect
thereto.

 

(i)                                     Notice
from Governmental Authority. 
Promptly upon receipt thereof, information with respect to and copies of
any notices received from any Governmental Authority relating to an order, ruling,
statute or other Law or information which could reasonably be expected to have
a Material Adverse Effect.

 

(j)                                     Investment
Policy.  Within (i)  90
days after the last day of each fiscal year of each RIC, a copy of the
Investment Policy of such RIC applicable to the current fiscal year of such
RIC, as approved by the board of directors or other appropriate governance body
of such RIC, and (ii)  within 5 days after any amendment to or
restatement of any Investment Policy of any RIC, a copy of such amendment or
restatement as approved by the board of directors or other appropriate
governance body of such RIC.

 

(k)                                  Reinsurance
Agreements and Retrocession Agreements. 
Not later than (i)  10 days prior to the termination of each
Reinsurance Agreement and Retrocession Agreement, a copy of the slip or other
document, agreement or correspondence with each

 

31

 

reinsurer,
retrocessionaire, reinsurance broker or agent which will amend, restate or
supersede such terminating Reinsurance Agreement or Retrocession Agreement, and
(ii)  30 days after the first to occur of (A) execution, and (B) the
effective date of each Reinsurance Agreement and Retrocession Agreement, a copy
of each such Reinsurance Agreement and Retrocession Agreement, certified to be
complete and correct by an Authorized Signatory of the RIC a party to such
agreement acceptable to Lender.

 

(l)                                     Auditors’
Reports.  Promptly upon receipt
thereof, a copy of (i)  each other report or “management letter”
submitted to Borrower or any of its Subsidiaries by Auditors in connection with
any annual, interim or special audit made by them of the books of Borrower or
such Subsidiary and (ii)  each report submitted to Borrower or any of
its Subsidiaries by any Auditors to the extent that such report, in the good
faith opinion of Borrower or such Subsidiary, identifies a condition, situation
or event that has or is reasonably likely to have a Material Adverse Effect.

 

(m)                               Internal
Control Event.  Promptly upon the
occurrence of an Internal Control Event, a written notice specifying the nature
and period of existence thereof and what action it is taking and proposes to
take with respect thereto.

 

(n)                                 Other
Regulatory Statements and Reports. 
Promptly (i)  after receipt thereof, copies of all triennial
examinations and risk based capital reports of any RIC, delivered to such
Person by any Insurance Regulator, insurance commission or similar Governmental
Authority, (ii)  after receipt thereof, a copy of the final report to
each RIC from the NAIC for each fiscal year, as to such RIC’s compliance or
noncompliance with each of the NAIC Tests, (iii)  after receipt
thereof, a copy of any notice of termination, cancellation or recapture of any
Reinsurance Agreement or Retrocession Agreement to which a RIC is a party to
the extent such termination, cancellation or recapture is likely to have a
Material Adverse Effect, (iv)  and in any event within ten Business
Days after receipt thereof, copies of any notice of actual suspension, termination
or revocation of any license of any RIC by any Insurance Regulator, including
any request by an Insurance Regulator which commits a RIC to take or refrain
from taking any action and which, if such RIC fails to comply with such
request, would affect the authority of such RIC to conduct its business, and (v)  and
in any event within thirty Business Days after Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of any actual change in the
insurance Laws enacted in any state in which any RIC is domiciled which could
reasonably be expected to have a Material Adverse Effect.

 

(o)                                 A.M.
Best.  Not later than 15 days after
receipt by Borrower, a copy of (i) each A.M. Best report, if any,
with respect to Borrower or any of its Subsidiaries, and (ii) all
correspondence from A.M. Best to Borrower or any of its Subsidiaries the
contents of which (A) relate to a probable downgrade of the A.M. Best
rating of any RIC or (B) describe or relate to a circumstance that could
reasonably be expected to have a Material Adverse Effect.

 

(p)                                 Material
Adverse Effect.  Promptly upon the
occurrence or knowledge of the existence thereof, written notice describing a
condition, situation or event that has or is reasonably likely to have a
Material Adverse Effect.

 

32

 

(q)                                 Requested
Information.  With reasonable
promptness, such other data, including any management reports to the Board of
Directors of Borrower or any of its Subsidiaries, and information as from time
to time may be reasonably requested by Lender.

 

5.3                                 Inspection.  (a) If no Event of Default exists, upon
reasonable prior notice, and (b) if an Event of Default exists, upon
request by Lender, permit Lender or any representatives of Lender to visit and
inspect any of its properties, to examine all books of account, records,
reports and other papers, to make copies and extracts therefrom, and to discuss
the affairs, finances and accounts with its officers, employees, Actuaries and
Auditors (and by this provision Borrower authorizes Actuaries and Auditors to
discuss with Lender and its representatives the finances and affairs of
Borrower and its Subsidiaries).  All
reasonable costs and expenses of Lender related to the first such inspection
during each fiscal year conducted when no Event of Default exists shall be a
part of the Obligations and paid by Borrower to Lender within ten days after
demand by Lender.  All costs and expenses
of Lender related to each such inspection conducted when an Event of Default
exists shall be a part of the Obligations and paid by Borrower to Lender within
ten days after demand by Lender.

 

5.4                                 Compliance with ERISA.  Comply with ERISA in all material respects,
and (a) at all times make contributions within the time limits imposed by
Law to meet the minimum funding standards set forth in ERISA with respect to
any Plan; (b) notify Lender as soon as reasonably practicable of any fact
which it knows or should know, including but not limited to any Reportable
Event, arising in connection with any Plan which could reasonably be expected
to result in termination thereof by the PBGC or for the appointment by a
Governmental Authority of a trustee to administer the Plan; and (c) furnish
to Lender upon such request such additional information concerning any Plan as
Lender may reasonably request.

 

5.5                                 Performance of Obligations.  Perform all of its obligations under the Loan
Documents.

 

5.6                                 Maintenance of Priority of Bank Liens.  Upon the reasonable request of Lender from
time to time, it shall perform such acts and duly authorize, execute,
acknowledge, deliver, file, and record such additional assignments, pledge
agreements, security agreements and other agreements, documents, instruments,
and certificates as Lender may deem necessary or appropriate in order to
perfect and maintain the Bank Liens (including the priority of such Liens) in
favor of Lender and preserve and protect the rights of Lender in respect of the
Collateral.

 

5.7                                 Indemnity. 
BORROWER SHALL DEFEND, PROTECT,
INDEMNIFY AND HOLD HARMLESS LENDER AND ITS AFFILIATES, AND EACH OF THEIR
RESPECTIVE (INCLUDING SUCH AFFILIATES’) OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT LIMITATION, THOSE
RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED SATISFACTION OF ANY
OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING (COLLECTIVELY, “INDEMNITEES”) FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, CLAIMS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE ATTORNEY COSTS FOR
SUCH INDEMNITEES IN CONNECTION

 

33

 

WITH
ANY INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH
INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL
AND WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON
LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR OTHERWISE, ARISING FROM OR
CONNECTED WITH THE PAST, PRESENT OR FUTURE OPERATIONS OF BORROWER OR ANY OF ITS
SUBSIDIARIES OR THEIR RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT
OR FUTURE ENVIRONMENTAL CONDITION OF PROPERTY OF BORROWER OR ANY OF ITS
SUBSIDIARIES), IN ANY MANNER RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS, OR ANY ACT, EVENT OR TRANSACTION OR ALLEGED ACT, EVENT OR
TRANSACTION RELATING OR ATTENDANT THERETO, THE MAKING OF ANY ADVANCE LOAN,
INCLUDING IN CONNECTION WITH, OR AS A RESULT, IN WHOLE OR IN PART, OF ANY
NEGLIGENCE OF LENDER (OTHER THAN THOSE MATTERS RAISED EXCLUSIVELY BY A
PARTICIPANT AGAINST LENDER AND NOT BORROWER), OR THE USE OR INTENDED USE OF THE
PROCEEDS OF ANY ADVANCE LOAN HEREUNDER, OR IN CONNECTION WITH ANY INVESTIGATION
OF ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING ANY CLAIM OR LIABILITY
THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY
INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A COURT OF COMPETENT
JURISDICTION (COLLECTIVELY, “INDEMNIFIED
MATTERS”).  IN ADDITION,
BORROWER SHALL PERIODICALLY, UPON REQUEST, REIMBURSE EACH INDEMNITEE FOR ITS
REASONABLE LEGAL AND OTHER ACTUAL EXPENSES (INCLUDING THE REASONABLE COST OF
ANY INVESTIGATION AND PREPARATION) INCURRED IN CONNECTION WITH ANY INDEMNIFIED
MATTER.  THE REIMBURSEMENT, INDEMNITY AND
CONTRIBUTION OBLIGATIONS UNDER THIS SECTION SHALL BE IN ADDITION TO
ANY LIABILITY WHICH BORROWER MAY OTHERWISE HAVE, SHALL EXTEND UPON THE
SAME TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL BE BINDING UPON AND
INURE TO THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL
REPRESENTATIVES OF BORROWER, LENDER AND ALL OTHER INDEMNITEES.  THIS SECTION SHALL SURVIVE ANY
TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE OBLIGATIONS.

 

ARTICLE VI

 

NEGATIVE
COVENANTS

 

From the date hereof and so long as this Agreement is in effect and
until payment in full of the Obligations, the termination of the Advance
Commitment, and the performance of all other obligations of each Obligor under
this Agreement and each other Loan Document:

 

6.1                                 Total Adjusted Capital.  Borrower shall not permit Total Adjusted
Capital of GAICA to be less than the greater of (a) $40,000,000 and (b) the
amount required for Risk-Based

 

34

 

Capital Ratio
of GAICA to equal (i) prior to the Reset Date, 275%, or (ii) from and
after the Reset Date, 250%, as at the last day of any fiscal quarter of GAICA.

 

6.2                                 Combined Ratio.  Borrower shall not permit the Combined Ratio
to be greater than 100% as at the last day of any fiscal quarter of Borrower.

 

6.3                                 Fixed Charges Coverage Ratio.  Borrower shall not permit the Fixed Charges
Coverage Ratio to be less than 1.25 to 1.00 at any time.

 

6.4                                 Consolidated Net Worth.  Borrower shall not permit Consolidated Net
Worth to be less than $30,000,000 at any time.

 

6.5                                 Dividends. 
Borrower shall not declare, pay or otherwise be liable for the payment
of any Dividend, other than accrued Dividends described in Section 3 of
the Preferred Stock Documents (as such documents exist on the Agreement Date); provided,
(a) such Dividends are declared and paid in accordance with the Preferred
Stock Documents (as such documents exist on the Agreement Date), and (b) both
prior to and after giving effect thereto, no Default or Event of Default shall
exist.

 

6.6                                 Limitation on Debt.  Borrower shall not, and shall not permit any
Subsidiary to, create, incur, assume, become or be liable in any manner in
respect of, or suffer to exist, any Debt except Permitted Debt.

 

6.7                                 Limitation on Liens.  Borrower shall not, and shall not permit any
Subsidiary to, create or suffer to be created or to exist any Lien upon any of
its properties or assets except Permitted Liens.

 

6.8                                 Burdensome Agreements.  Borrower shall not, and shall not permit any
Subsidiary to, enter into any agreement (other than this Agreement or any other
Loan Document) that limits the ability (a) of any Subsidiary to pay
Dividends to Borrower or to otherwise transfer property to Borrower, (b) of
any Subsidiary to guarantee the Obligations or (c) of Borrower or any
Subsidiary to create, incur, assume or suffer to exist Liens on property of
such Person.

 

6.9                                 Disposition of Assets.  Borrower shall not, and shall not permit any
Subsidiary to, directly or indirectly, Dispose of all or any portion of any of
its properties (including any capital stock of any Subsidiary and equity
interests constituting Collateral) and assets except (a) Dispositions pursuant
to its Investment Policy in the ordinary course of business for full and fair
consideration, (b) other Dispositions in the ordinary course of business
for full and fair consideration, (c) mergers of Subsidiaries of Borrower
described in the proviso to Section 6.11, and (d) Dispositions
not in the ordinary course of business if (i) no single asset Disposed of
or single transaction including a Disposition has a value (valued at the
greater of market or book (determined in accordance with GAAP) value) less than
$200,000 and (ii) the aggregate value (valued at the greater of market or
book (determined in accordance with GAAP) value) of all such Dispositions by
Borrower and its Subsidiaries during any fiscal year of Borrower is less than
$500,000.

 

6.10                           Acquisition of Assets. 
Borrower shall not, and shall not permit any Subsidiary to, acquire any
assets, property or business of any Person, or participate in any joint
venture, or

 

35

 

create or
acquire any Subsidiary, except (a) assets acquired in the ordinary course
of business, and (b) acquisitions permitted Section 6.12.

 

6.11                           Merger and Consolidation. 
Borrower shall not, and shall not permit any Subsidiary to, directly or
indirectly consolidate with or merge into any other Person, permit any other
Person to consolidate with or merge into it, or acquire any Person (other than
acquisitions permitted by Section 6.10); provided, so long
as no Default or Event of Default exists at the time of or immediately after
giving effect thereto, (a) Subsidiaries (other than a RIC) may merge with
and into Borrower or any other direct wholly-owned Subsidiary of Borrower so
long as Borrower or such other direct wholly-owned Subsidiary of Borrower is
the survivor and the surviving Subsidiary is a Guarantor; and (b) a RIC
may merge with and into another RIC so long as GAICA is the survivor.

 

6.12                           Loans and Investments. 
Borrower will not, and will not permit any Subsidiary to, make or
maintain any Investment, except:

 

(a)                                  Borrower
and Subsidiaries (other than a RIC) may, subject to and in accordance with
Applicable Law, invest in (i) cash, (ii) Cash Equivalents, and (iii) Investment
Grade Securities.

 

(b)                                 Each
RIC may, subject to and in accordance with Applicable Law, invest in (i) cash,
(ii) Cash Equivalents, (iii) Investment Grade Securities, and (iv) other
Investments (valued at the greater of market or purchase price) with an
aggregate value not greater than 10% of such RIC’s total admitted assets.

 

(c)                                  Borrower
and Subsidiaries may acquire and hold receivables owing to them in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms.

 

(d)                                 Loans
and advances to employees for business related travel expenses, moving expenses
and other similar expenses, in each case incurred in the ordinary course of
business and loans and advances to related parties not exceeding $500,000 in
the aggregate for Borrower and Subsidiaries at any one time outstanding.

 

(e)                                  Investments
acquired by Borrower or any Subsidiary (i) in exchange for any other
investment held by Borrower or such Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other investment or (ii) as a result of a foreclosure by
Borrower or any Subsidiary with respect to any secured investment or other
transfer of title with respect to any secured investment in default.

 

(f)                                    Investments
in Subsidiaries in existence on the Agreement Date.

 

6.13                           ERISA.  Borrower shall
not, and shall not permit any Subsidiary to, make funding contributions with
respect to any Plan that are less than the minimum required by ERISA or the
regulations thereunder, or permit any Plan ever to be subject to involuntary
termination proceeding by the PBGC pursuant to ERISA § 4042(a).

 

6.14                           Assignment.  Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly,
assign or transfer, or attempt to do so, any rights, duties or obligations
under the

 

36

 

Loan
Documents, except in connection with a merger of a Subsidiary described in the
proviso to Section 6.11.

 

6.15                           Transactions with Affiliates.  Borrower shall not, and shall not permit any
Subsidiary to, carry on any transaction with any of their respective Affiliates
except at arm’s length and in the ordinary course of business, except as set
forth on Schedule 6.15.

 

6.16                           Business.  Borrower
shall not, and will not permit any Subsidiary to, engage in any material line
or lines of business activity or any businesses other than lines of business
activity and businesses engaged in on the Agreement Date (other than
Discontinued Lines).

 

6.17                           Preferred Stock. 
Borrower shall not, and shall not permit, any amendment to or
restatement of any Preferred Stock Document.

 

6.18                           Use of Proceeds. 
Borrower shall not use the proceeds of any Advance Loan for any purpose
other than to (a) provide working capital to Borrower, and (b) pay
cash Dividends with respect to Preferred Stock as permitted by Section 6.5.

 

ARTICLE VII

 

REPRESENTATIONS
AND WARRANTIES

 

Borrower represents, warrants, and covenants to Lender as follows:

 

7.1                                 Organization and Qualification.  Borrower and each of its Subsidiaries (a) is
a corporation, limited liability company or limited partnership duly organized,
validly existing, and in good standing under the Laws of its jurisdiction
of organization; (b) is duly licensed and in good standing as a foreign
corporation, limited liability company or limited partnership in each
jurisdiction in which the nature of the business transacted or the property
owned is such as to require licensing as such; and (c) possesses all
requisite corporate, limited liability company or limited partnership
(respectively) power, authority and legal right, to execute, deliver and comply
with the terms of the Loan Documents to be executed by it, all of which have
been duly authorized and approved by all necessary corporate, limited liability
company or limited partnership action (respectively) and for which no approval
or consent of any Governmental Authority which has not been obtained is
required.  No proceeding is pending for
the forfeiture of any Borrower’s or any such Subsidiary’s organization
documents or its dissolution.  The issued
and outstanding capital stock, limited liability company interest and
partnership interest of Borrower and each Subsidiary is duly authorized validly
issued, fully paid and nonassessable, and free of the preemptive rights of
shareholders and other equity holders.  Schedule 7.1
sets forth the respective jurisdiction of organization and percentage ownership
as of the Agreement Date of each Subsidiary. 
Borrower has no direct or indirect Subsidiary other than those set forth
on Schedule 7.1.

 

7.2                                 Authorization; Validity.  The Board of Directors, managers, partners or
other appropriate governance board of each Obligor has duly authorized the
execution and delivery of the Loan Documents to which such Obligor is a party
and the performance of their respective terms. 
No consent of the stockholders, members, partners or other equity
holders of any Obligor is required as a prerequisite to the validity and
enforceability of any Loan Document. 
Each Obligor has full corporate, limited liability or partnership
(respectively) power, authority and

 

37

 

legal right to
execute and deliver and to perform and observe the provisions of all Loan
Documents to which such Obligor is a party. 
Each of the Loan Documents is the legal, valid and binding obligation of
each Obligor which is a party thereto, enforceable in accordance with its
respective terms, subject as to enforcement of remedies to any Debtor Relief
Laws.

 

7.3                                 Financial Statements.  The financial statements described in Section 4.1(m)
heretofore furnished to Lender are complete and correct in all material
respects and prepared in accordance with GAAP or SAP, as appropriate, and
fairly present the financial condition of the Persons described therein as of
the dates indicated and for the periods involved.  There are no Contingent Debts, liabilities
for Taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, any of which are material
in amount in relation to the financial condition of Borrower and its
Subsidiaries, taken as a whole, except as reflected in such financial
statements.  The description of all
Off-Balance Sheet Liabilities of Borrower and Subsidiaries heretofore furnished
to Lender is complete and correct in all material respects.  Since the date of the Financial Statements
described in Section 4.1(m) or the Current Financials, there has
been no Material Adverse Change or, at such times as Auditors are required by
Sarbanes-Oxley to deliver an attestation report as to Borrower or senior
officers of Borrower are required to certify, in connection with the filing
with the Securities and Exchange Commission of the Form 10Q and Form 10K
of Borrower, as to the internal controls of Borrower, Internal Control
Event.  Neither Borrower nor any
Subsidiary has any obligation with respect to any material Off-Balance Sheet
Liability except as described in Schedule 7.3.

 

7.4                                 Compliance With Laws and Other Matters.  The execution, delivery and performance and
compliance with the terms of the Loan Documents will not cause Borrower or any
Subsidiary to be, (a) in violation of its corporate charter or bylaws,
certificate of organization, operating agreement, certificate of limited
partnership, partnership agreement or other organization and governance
document, (b) in violation of any Law in any respect which could have any
Material Adverse Effect, or (c) in default (nor has any event occurred
which, with notice or lapse of time or both, could constitute a default) under
any material agreement (including any agreement related to any Debt or such
Person).

 

7.5                                 Litigation.  There is no Litigation pending against or, to
the knowledge of Borrower, threatened against or affecting any Borrower or any
Subsidiary or their respective assets or properties which involves the
probability of any final judgment or liability which may result in a Material
Adverse Change.  Schedule 7.5
is a complete and correct description of all Existing Litigation.  There are no outstanding or unpaid final
judgments against Borrower or any Subsidiary.

 

7.6                                 Debt. 
Since the date of the latest of the Current Financials, neither Borrower
nor any of its Subsidiaries has incurred any Debt except Permitted Debt.  Schedule 7.6 is a complete and
correct description of all Existing Debt.

 

7.7                                 Title to Properties.  Borrower and each Subsidiary have (a) full
corporate, limited liability or partnership (respectively) power, authority and
legal right to own and operate the properties which it now owns or leases, and
to carry on the lines of business in which it is now engaged, and (b) good
and marketable title to its owned properties, subject to no Lien of any kind,
except Permitted Liens.

 

38

 

7.8                                 Taxes. 
Borrower and each Subsidiary have filed all federal and state and all
other material income Tax returns which are required to be filed by such Person
and have paid all Taxes as shown on said returns, and all Taxes due and payable
without returns and all assessments received to the extent that such Taxes or
assessments have become due and payable. 
All Tax liabilities of Borrower and each Subsidiary are adequately
provided for on the books of such Person, including interest and penalties.  No income Tax liability of a material nature
has been asserted by taxing authorities for Taxes in excess of those already
paid, except such Taxes being contested in good faith by appropriate
proceedings.  There is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of Borrower or any Subsidiary, threatened by any Governmental
Authority regarding any Taxes relating to Borrower or such Subsidiary.  Neither Borrower nor any Subsidiary has
entered into an agreement or waiver or been requested to enter into an
agreement or waiver extending any statute of limitations relating to the
payment or collection of Taxes of Borrower or such Subsidiary, or is aware of
any circumstances that would cause the taxable years or other taxable periods
of Borrower or such Subsidiary not to be subject to the normally applicable
statute of limitations.

 

7.9                                 Use of Proceeds.  No Obligor is engaged principally, or as one
of its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) and
no part of the proceeds of any Advance Loan will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.  None of the
assets of any Obligor is margin stock. 
No Obligor nor any agent acting on its behalf has taken or will take any
action which might cause this Agreement or any of the Loan Documents to violate
any regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, in each case as in effect now or
as the same may hereafter be in effect.

 

7.10                           Possession of Franchises, Licenses, Etc.  Borrower and each Subsidiary possess all
franchises, certificates, licenses, permits and other authorizations from all
Governmental Authorities, free from burdensome restrictions, that (a) are
necessary for the ownership, maintenance and operation of its properties and
assets, and (b) the loss of possession of which could reasonably be
expected to have a Material Adverse Effect, and such Person is not in violation
of any thereof.  Schedule 7.10
lists with respect to each RIC, as of the Agreement Date, all of the
jurisdictions in which such RIC holds licenses (including, without limitation,
licenses or certificates of authority from relevant Insurance Regulators),
permits or authorizations to transact Insurance Business.  To the knowledge of Borrower, (a) no
such license is the subject of a proceeding for suspension, revocation or
limitation or any similar proceedings, (b) there is no sustainable basis
for such a suspension, revocation or limitation, and (c) no such
suspension, revocation or limitation is threatened by any relevant Insurance
Regulator.  As of the Agreement Date, no
RIC transacts any Insurance Business, directly or indirectly, in any
jurisdiction other than those listed on Schedule 7.10.

 

7.11                           Leases.  Borrower and
each Subsidiary enjoy peaceful and undisturbed possession of all leases necessary
for the operation of its properties and assets the loss of possession of which
could reasonably be expected to have a Material Adverse Effect.  All such leases are valid and subsisting and
are in full force and effect.

 

39

 

7.12                           Disclosure.  Neither
this Agreement nor any other document, certificate or statement furnished to
Lender by or on behalf of Borrower or any Subsidiary in connection herewith
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein and therein not
misleading.  There is no fact known to
Borrower or any Subsidiary and not known to the public generally which reasonably
may be expected to materially adversely affect its assets or in the future may
reasonably be expected (so far as Borrower or such Subsidiary can now foresee)
to result in a Material Adverse Effect, which has not been set forth in this
Agreement or in the documents, certificates and statements furnished to Lender
by or on behalf of Borrower or any Subsidiary prior to the date hereof in
connection with the transactions contemplated hereby.

 

7.13                           ERISA.  Schedule 7.13
sets forth each Plan.  Neither Borrower
nor any Subsidiary has (a) incurred any material accumulated funding
deficiency within the meaning of ERISA, or (b) incurred any material
liability to the PBGC in connection with any Plan established or maintained by
it.  No Reportable Event has occurred
with respect to any Plan which could reasonably be expected to result in a
Material Adverse Change.  No Plan is in
the process of termination.

 

7.14                           Regulatory Acts.  None
of Borrower or any Subsidiary is an “investment company” within the meaning of
the Investment Company Act of 1940, as amended, or is subject to regulation
under the Public Utility Holding Act of 1935, the Federal Power Act, the
Interstate Commerce Act, or any other Law (other than Regulation X of the
Board of Governors of the Federal Reserve System and applicable insurance Laws)
which regulates the incurring by Borrower or any Subsidiary of debt, including,
but not limited to, Laws regulating common or contract carriers or the sale of
electricity, gas, steam, water, or other public utility services.

 

7.15                           Solvency.  Borrower
and each Subsidiary is, and Borrower and Subsidiaries on a consolidated basis
are, Solvent.

 

7.16                           Environmental Matters. 
Except as set forth in Schedule 7.16 or as could not
reasonably be expected to result in a Material Adverse Change or Effect:

 

(a)                                  The
properties owned, operated or leased by Borrower and each Subsidiary (the “Properties”) do not contain any Hazardous Materials in
amounts or concentrations which (i) constitute, or constituted a violation
of, or (ii) could reasonably be expected to give rise to liability under,
Environmental Laws, which violations and liabilities, in the aggregate, could
reasonably be expected to result in a Material Adverse Change;

 

(b)                                 All
Environmental Permits have been obtained and are in effect with respect to the
Properties and operations of Borrower and each Subsidiary, and the Properties
and all operations of Borrower and each Subsidiary are in compliance, and have
been in compliance, with all Environmental Laws and all necessary Environmental
Permits, except to the extent that such non compliance or failure to obtain any
necessary permits, in the aggregate, could not reasonably be expected to result
in a Material Adverse Change;

 

(c)                                  Neither
Borrower nor any Subsidiary has received any notice of an Environmental Claim
in connection with the Properties or the operations of Borrower or such
Subsidiary or with regard to any Person whose liabilities for environmental
matters Borrower or

 

40

 

such
Subsidiary has retained or assumed, in whole or in part, contractually, which,
in the aggregate, could reasonably be expected to result in a Material Adverse
Change, nor does Borrower or any Subsidiary have knowledge that any such notice
will be received or is being threatened; and

 

(d)                                 Hazardous
Materials have not been transported from the Properties, nor have Hazardous
Materials been generated, treated, stored or disposed of at, on or under any of
the Properties in a manner that could reasonably be expected to give rise to
liability under any Environmental Law, nor has Borrower or any Subsidiary
retained or assumed any liability contractually, with respect to the
generation, treatment, storage or disposal of Hazardous Materials, which
transportation, generation, treatment, storage or disposal, or retained or
assumed liabilities, in the aggregate, could reasonably be expected to result
in a Material Adverse Change.

 

7.17                           Investments.  Schedule 7.17
is a complete and correct description of all Existing Investments as of the
Agreement Date.  Borrower has provided to
Lender a complete copy of the Investment Policy of each RIC.

 

7.18                           Intellectual Property, Etc. 
Borrower and each Subsidiary have obtained all material patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, that are necessary for the operation of
their respective businesses as presently conducted and as proposed to be
conducted.

 

7.19                           Reinsurance Agreements. 
Except as set forth on Schedule F to the annual statements for each
RIC for its fiscal year ending December 31, 2004, as modified by Schedule F
to the quarterly statements for each RIC for the period ending June 30,
2005, there are no material liabilities outstanding as of the Agreement Date
under any Reinsurance Agreement.  Each
Reinsurance Agreement is in full force and effect; no RIC or, to the knowledge
of Borrower, any other party thereto, is in breach of or default under any such
Reinsurance Agreement; and Borrower has no reason to believe that the financial
condition of any other party to any such Reinsurance Agreement is impaired such
that a default thereunder by such party could reasonably be anticipated.  Each Reinsurance Agreement is qualified under
all applicable Laws to receive the statutory credit assigned to such
Reinsurance Agreement in the relevant annual statement or quarterly statement
at the time prepared.  Except as set
forth on Schedule 7.19, each Person to whom any RIC has ceded any
material liability pursuant to any Reinsurance Agreement on the Agreement Date
has a rating of “A-” or better by A.M. Best.

 

7.20                           Retrocession Agreements. 
Schedule 7.20 is a complete and correct list of all
Retrocession Agreements to which Borrower or any Subsidiary is a party,
describing the names of all parties to each agreement, the date of each
agreement and the termination date of each agreement.

 

7.21                           Subsidiaries.  There
are no restrictions on Borrower or any Subsidiary which prohibit or otherwise
restrict the transfer of cash or other assets from any Subsidiary to Borrower,
other than prohibitions or restrictions existing under or by reason of (a) this
Agreement or the other Loan Documents, and (b) restrictions of Laws and
Governmental Authorities (including Insurance Regulators) having jurisdiction over
Borrower or a Subsidiary.

 

41

 

7.22                           Labor Relations, Collective Bargaining Agreements.  (a) Schedule 7.22 is a list
and description (including dates of termination) of all collective bargaining
agreements between or applicable to Borrower and each Subsidiary and any union,
labor organization or other bargaining agent in respect of the employees of
Borrower and such Subsidiary.

 

(b)                                 None
of Borrower or any Subsidiary is engaged in any unfair labor practice that is
reasonably likely to have a Material Adverse Effect.  There is (i) no significant unfair labor
practice complaint pending against Borrower or any Subsidiary or threatened in
writing against any of them, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is now pending against Borrower or
any Subsidiary or threatened in writing against any of them, (ii) no
significant strike, labor dispute, slowdown or stoppage is pending against
Borrower or any Subsidiary or threatened in writing against Borrower or any
Subsidiary and (iii) to the best knowledge of Borrower and each
Subsidiary, no union representation question exists with respect to the
employees of Borrower or any Subsidiary, except (with respect to any matter
specified in clause (i), (ii) or (iii) above,
either individually or in the aggregate) such as is not reasonably likely to
have a Material Adverse Effect.

 

7.23                           Preferred Stock Documents. 
Attached as Exhibit H is a complete and correct copy of all
Preferred Stock Documents, and all amendments and restatements thereto (other
than each issued and outstanding certificate evidencing the Preferred
Stock).  Except as provided in the Preferred
Stock Documents, there are no agreements between or among Borrower and any
holder of any Preferred Stock regarding the Preferred Stock.

 

7.24                           Survival of Representations and Warranties, Etc.  All representations and warranties made under
this Agreement and the other Loan Documents shall be deemed to be made at and
as of the Agreement Date and at and as of the date of the making of each
Advance Loan, and each shall be true and correct in all material respects when
made, except to the extent applicable to a specific date.  All such representations and warranties shall
survive, and not be waived by, the execution hereof by Lender any investigation
or inquiry by Lender or by the making of any Advance Loan under this Agreement.

 

ARTICLE VIII

 

EVENTS OF DEFAULT

 

8.1                                 Default. 
The term “Event of Default”
as used herein, means the occurrence and continuance of any one or more of the
following events (including the passage of time, if any, specified therefor):

 

(a)                                  Advance
Loans.  The failure or refusal of Borrower
to pay any part of the principal of or interest on any Advance Loan on the date
such payment is due.

 

(b)                                 Other
Obligations.  The failure or refusal
of Borrower to pay any part of the Obligations (other than as referenced in Section 8.1(a))
on or before the date such payment is due and such failure shall continue for
five Business Days after such payment was due.

 

42

 

(c)                                  Certain
Covenants.  The failure or refusal of
any Obligor punctually and properly to perform, observe and comply with any
covenant, agreement or condition contained in Article III, Article VI,
Sections 5.2, 5.3 or 5.6.

 

(d)                                 Other
Covenants.  The failure or refusal of
any Obligor punctually and properly to perform, observe and comply with any
covenant, agreement or condition contained in any of the Loan Documents (other
than covenants to pay the Obligations referenced in Sections 8.1(a) and
(b) and those referenced in Section 8.1(c)) and such
failure shall not have been remedied within ten Business Days after the earlier
of (i)  notice thereof by Lender (which may be telephonic) and (ii)  actual
knowledge thereof by any such Obligor.

 

(e)                                  Voluntary
Debtor Relief.  Any Obligor or any of
its Subsidiaries shall (i) execute an assignment for the benefit of
creditors, or (ii) admit in writing its inability, or be generally unable,
to pay its debts generally as they become due, or (iii) voluntarily seek
the benefit or benefits of any Debtor Relief Law, or (iv) voluntarily
become a party to any proceeding provided for by any Debtor Relief Law that
would suspend or otherwise affect any of the rights of Lender granted in the
Loan Documents.

 

(f)                                    Involuntary
Proceedings.  Any Obligor or any of
its Subsidiaries shall involuntarily (i)  have an order, judgment or
decree entered against it or a material portion of its property by any
Governmental Authority pursuant to any Debtor Relief Law that would suspend or
otherwise affect any of the rights granted to Lender in any of the Loan
Documents, or (ii)  have a petition filed against it or a material
portion of its property seeking the benefit or benefits provided for by any
Debtor Relief Law that would suspend or otherwise affect any of the rights
granted to Lender in any of the Loan Documents, and such order, judgment,
decree or petition is not dismissed within 14 days.

 

(g)                                 Insurance
Regulator.  Any Insurance Regulator
of any jurisdiction suspends or takes any steps towards suspending the business
or operations of any Obligor or any of its Subsidiaries and any such event
could reasonably be expected to result in a Material Adverse Change.

 

(h)                                 Internal
Control Event; Securities Laws.  At
any time Borrower is required to comply with Section 404 of
Sarbanes-Oxley, an Internal Control Event shall occur or any Governmental
Authority shall allege a violation or commence any action based on an alleged
violation of any Securities Laws by Borrower, any employee, officer or director
of Borrower or Borrower’s auditor (with respect to actions of such auditor in
its capacity as auditor for Borrower) and any such event could reasonably be
expected to result in a Material Adverse Change.

 

(i)                                     Judgments.  Any Obligor or any of its Subsidiaries shall
have rendered against it a money judgment in an aggregate uninsured amount in
excess of $500,000 and the same shall remain in effect and unstayed for a
period of thirty consecutive days.

 

(j)                                     Other
Debt.  (i)  Any Obligor or
any of its Subsidiaries shall default (A) in the payment of principal of
or interest on any Debt in an aggregate amount, together with all other Debt in
which a default exists, in excess of $500,000, or (B) in the performance
of any other covenant, term or condition contained in any agreement with
respect to such Debt (if such

 

43

 

default shall
occur and be continuing beyond any grace period with respect to such payment or
performance), if the effect of such default is to cause or permit the holder or
holders of such Debt (or any trustee on their behalf) to cause such Debt to
become due, prepaid, redeemed or purchased prior to its date of maturity; or (ii)  any
event shall occur which either causes or permits the holder or holders of such
Debt (or any trustee on their behalf) to cause such Debt to become due, prepaid,
redeemed or purchased prior to its date of maturity.

 

(k)                                  Misrepresentation.  Any statement, representation or warranty in
the Loan Documents or in any writing ever delivered to Lender pursuant to the
Loan Documents proves to be incorrect in any material respect when made.

 

(l)                                     Stock.  Any Dividend (other than as permitted by Section 6.5)
shall be declared or paid with respect to any equity interest to Borrower, any
capital stock or other equity interest of Borrower shall be redeemed for any
property other than common stock of Borrower or any holder of any capital stock
of Borrower shall take any action to cause Borrower to redeem such capital
stock of Borrower for any property other than common stock of Borrower.

 

(m)                               ERISA.  Any Reportable Event under any Plan, or the
appointment by an appropriate Governmental Authority of a trustee to administer
any Plan, or the termination of any Plan within the meaning of Title IV of
ERISA, or any material accumulated funding deficiency within the meaning of ERISA
under any Plan, or the institution of proceedings by the PBGC to terminate any
Plan or to appoint a trustee to administer any Plan, and any of such events
could reasonably be expected to result in a Material Adverse Change.

 

(n)                                 Loan
Documents.  Any Loan Document shall
at any time after its execution and delivery and for any reason, cease to be in
full force and effect in or be declared to be null and void (other than in
accordance with the terms hereof or thereof) or the validity or enforceability
thereof be contested by any Person party thereto (other than Lender) or any
Person (other than Lender) shall deny in writing that it has any liability or
any further liability or obligations under any Loan Document to which it is a
party; or any Security Document shall for any reason (other than pursuant to
the terms thereof) cease to create a valid and perfected first priority Lien
(other than Permitted Liens) in any Collateral.

 

8.2                                 Remedies. 
If an Event of Default exists:

 

(a)                                  With
the exception of an Event of Default specified in Section 8.1(e) or
(f), Lender may terminate the Advance Commitment and/or declare the
principal of and interest on the Advance Loans and Obligations and other
amounts owed under the Loan Documents to be forthwith due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.

 

(b)                                 Upon
the occurrence of an Event of Default specified in Section 8.1(e) or
(f), the principal of and interest on the Advance Loans and Obligations
and other amounts and under the Loan Documents shall thereupon and concurrently
therewith become due and payable and the Advance Commitment shall forthwith
terminate, all without any action by Lender or any holder of the Advance Note
and without presentment, demand, protest or other notice of any

 

44

 

kind, all of
which are expressly waived, anything in the Loan Documents to the contrary
notwithstanding.

 

(c)                                  Lender
may exercise all of the post-default rights granted to it under the Loan
Documents or under Law.

 

(d)                                 The
rights and remedies of Lender hereunder shall be cumulative and not exclusive.

 

8.3                                 Application of Funds.  After the exercise of remedies provided for
in Section 8.2 (or after the Advance Loans and other Obligations
have automatically become immediately due and payable), any amounts received on
account of the Obligations shall be applied by Lender in the following order:

 

(a)                                  First,
to payment of that portion of the Obligations constituting fees, indemnities,
expenses and other amounts (including Attorney Costs payable under Section 9.2
and amounts payable under Article III) payable under the Loan
Documents to Lender;

 

(b)                                 Second,
to payment of that portion of the Obligations constituting accrued and unpaid
interest on the Advance Loans;

 

(c)                                  Third,
to payment of that portion of the Obligations constituting unpaid principal of
the Advance Loans in such order as Lender elects in its discretion;

 

(d)                                 Fourth,
to all other Obligations; and

 

(e)                                  Last,
to the balance, if any, after all of the Obligations have been indefeasibly
paid in full, to Borrower or as otherwise required by Law;

 

ARTICLE IX

 

MISCELLANEOUS

 

9.1                                 Notices.

 

(a)                                  All
notices and other communications under this Agreement (except in those cases
where giving notice by telephone is expressly permitted) shall be in writing
and shall be deemed to have been given on the date personally delivered or sent
by telecopy (answerback received), or three days after deposit in the mail,
designated as certified mail, return receipt requested, postage-prepaid, or one
day after being entrusted to a reputable commercial overnight delivery service,
addressed to the party to which such notice is directed at its address
determined as provided in this Section. 
All notices and other communications under this Agreement shall be given
if to Borrower, at the address specified on Schedule 9.1, and if to
Lender, at the address specified on Schedule 9.1.

 

(b)                                 Any
party hereto may change the address to which notices shall be directed by
giving ten days’ written notice of such change to the other parties.

 

45

 

9.2                                 Expenses. 
Borrower shall promptly pay:

 

(a)                                  all
reasonable out-of-pocket expenses and reasonable Attorney Costs of Lender in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, the making of the Advance Loans hereunder, and the preparation,
negotiation, execution and delivery of any waiver, amendment or consent by
Lender relating to this Agreement or the other Loan Documents; and

 

(b)                                 all
reasonable costs, out-of-pocket expenses and reasonable Attorney Costs of
Lender incurred for enforcement, collection, restructuring, refinancing and “work-out”,
or otherwise incurred in obtaining performance under the Loan Documents, and
all reasonable costs and out-of-pocket expenses of collection if default is
made in the payment of the Advance Note or other Obligations which in each case
shall include without limitation reasonable fees and expenses of consultants,
counsel for Lender, and administrative fees for Lender.

 

9.3                                 Waivers. 
The rights and remedies of Lender under this Agreement and the other
Loan Documents shall be cumulative and not exclusive of any rights or remedies
which it would otherwise have.  No
failure or delay by Lender in exercising any right shall operate as a waiver of
such right.  Any waiver or indulgence
granted by Lender shall not constitute a modification of any Loan Document,
except to the extent expressly provided in such written waiver or indulgence,
or constitute a course of dealing by Lender at variance with the terms of any
Loan Document such as to require further notice by Lender of Lender’s intent to
require strict adherence to the terms of such Loan Document in the future.  Any such actions shall not in any way affect
the ability of Lender, in its discretion, to exercise any rights available to
it under this Agreement, any other Loan Document or under any other agreement,
whether or not Lender is a party thereto, relating to Borrower, its
Subsidiaries or other Obligors.

 

9.4                                 Determinations by Lender.  Any material determination required or
expressly permitted to be made by Lender under this Agreement shall be made in
its reasonable judgment and in good faith, and shall when made constitute prima facie evidence as to the accuracy
thereof.  Upon Borrower’s reasonable
request, Lender shall provide to Borrower a written explanation in reasonable
detail of the basis of Lender’s determination; provided, any failure to
deliver such explanation shall not impair any right of Lender.

 

9.5                                 Set-Off. 
In addition to any rights now or hereafter granted under Law and not by
way of limitation of any such rights, during the existence of an Event of
Default, Lender and any subsequent holder of the Advance Note or other
Obligations, and any Assignee or Participant in the Advance Note or other Obligation
is hereby authorized by Borrower at any time or from time to time, without
notice to Borrower or any other Person, any such notice being hereby expressly
waived, to set-off, appropriate and apply any deposits (general or special
(except trust and escrow accounts), time or demand, including without
limitation Debt evidenced by certificates of deposit, in each case whether
matured or unmatured) and any other Debt at any time held or owing by Lender or
such holder, Assignee or Participant to or for the credit or the account of
Borrower, against and on account of the Obligations and other liabilities of
Borrower to Lender or such holder, Assignee or Participant, irrespective of
whether or not (a) Lender or such holder, Assignee or Participant shall
have made any demand hereunder or required that Borrower, or (b)  Lender
or such holder, Assignee or Participant shall have declared the principal of
and interest

 

46

 

on the Advance
Loans and other amounts due hereunder to be due and payable as permitted by Section 8.2
and although such obligations and liabilities, or any of them, shall be
contingent or unmatured.  Any sums
obtained by Lender or any Assignee, Participant or subsequent holder of the
Advance Note or other Obligation shall be subject to pro rata treatment of the Obligations and other liabilities
hereunder.

 

9.6                                 Assignment.

 

(a)                                  Neither
Borrower nor any other Obligor may assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of Lender.

 

(b)                                 Lender
may at any time sell participations in all or any part in the Advance
Commitment and/or the Advance Loans (collectively, “Participations”)
to any banks or other financial institutions (“Participants”)
provided that such Participation shall not confer on any Person (other than the
parties hereto) any right to vote on, approve or sign amendments or waivers, or
any other independent benefit or any legal or equitable right, remedy or other
claim under this Agreement or any other Loan Documents, other than the right to
vote on, approve, or sign amendments or waivers or consents with respect to
items that would result in (i) (A) the extension of the date of
maturity of the Advance Loans, or (B) the extension of the due date for
any payment of principal, interest or fees respecting the Advance Loans, or (C) the
reduction of the amount of any installment of principal or interest on or the
change or reduction of any mandatory reduction required hereunder, or (D) a
reduction of the rate of interest on the Advance Loans; or (ii)  the
release of security for the Obligations (except pursuant to this
Agreement).  Notwithstanding the
foregoing, Borrower agrees that Participants shall be entitled to the benefits
of Article VIII and Section 9.5 as though they were
Lender.  To the fullest extent it may
effectively do so under Law, Borrower agrees that any Participant may exercise
any and all rights of banker’s lien, set-off and counterclaim with respect to
its Participation as fully as if such Participant were the holder of the
Advance Loans in the amount of its Participation.

 

(c)                                  Lender
may assign to one or more financial institutions or funds organized under the
Laws of the United States, or any state thereof, or under the Laws of any other
country that is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of any such country, which is engaged
in making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business (each, an “Assignee”) all
of its rights and obligations under this Agreement and the other Loan
Documents.  From and after such
assignment, such Assignee shall succeed to all rights and obligations of Lender
under the Loan Documents.

 

(d)                                 Except
as specifically set forth in this Section 9.6, nothing in this
Agreement or any other Loan Documents, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.

 

(e)                                  Notwithstanding
anything in this Section 9.6 to the contrary, no Assignee or Participant
shall be entitled to receive any greater payment under Article III
than Lender

 

47

 

would have
been entitled to receive with respect to the interest assigned or participated
to such Assignee or Participant.

 

(f)                                    Borrower
shall not be required to deliver to any Participant any information required to
be delivered to Lender pursuant to any Loan Document.

 

9.7                                 Amendment and Waiver.  The provisions of this Agreement may not be
amended, modified or waived except by the written agreement of Borrower and
Lender.  Neither this Agreement nor any
term hereof may be amended orally, nor may any provision hereof be waived
orally but only by an instrument in writing the parties required by this Section 9.7.

 

9.8                                 Confidentiality.  Lender agrees to maintain the confidentiality
of the Information, except that Information may be disclosed (a) to its
and its Affiliates’ directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any Governmental Authority
(including any self-regulatory authority, such as the NAIC), (c) to the
extent required by Laws or by any subpoena or similar legal process, (d) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any action or proceeding relating to this Agreement or any other
Loan Document or the enforcement of rights hereunder or thereunder, (e) subject
to an agreement containing provisions substantially the same as those of this Section,
to any Assignee of or Participant in, or any prospective Assignee of or
Participant in, any of its rights or obligations under this Agreement, (f) with
the written consent of Borrower or (g) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or
(ii) becomes available to Lender on a nonconfidential basis from a source
other than Borrower, any of its Subsidiaries or any other Obligor.  For purposes of this Section, “Information” means all information
received from Borrower, any other Obligor or any Subsidiary relating to
Borrower, any other Obligor or any Subsidiary or any of their respective
businesses, other than any such information that is available to Lender on a
nonconfidential basis prior to disclosure by Borrower, any other Obligor or any
Subsidiary, provided that, in the case of information received from a
Borrower, any other Obligor or any Subsidiary after the date hereof, such
information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality
of Information as provided in this Section shall be considered to
have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

 

9.9                                 Counterparts.  This Agreement may be executed in any number
of counterparts, including via facsimile, each of which shall be deemed to be
an original, but all such separate counterparts shall together constitute but
one and the same instrument.

 

9.10                           Severability.  Any
provision of this Agreement which is for any reason prohibited or found or held
invalid or unenforceable by any Governmental Authority shall be ineffective to
the extent of such prohibition or invalidity or unenforceability without
invalidating the remaining provisions hereof in such jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.

 

48

 

9.11                           Interest and Charges. 
It is not the intention of any parties to this Agreement to make an
agreement in violation of the Laws of any applicable jurisdiction relating to
usury.  Regardless of any provision in
any Loan Document, Lender shall never be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Maximum
Amount.  If Lender ever receives,
collects or applies, as interest, any such excess, such amount which would be
excessive interest shall be deemed a partial repayment of principal by
Borrower.  In determining whether or not
the interest paid or payable, under any specific contingency, exceeds the
Maximum Amount, Borrower and Lender shall, to the maximum extent permitted
under Applicable Law, (a) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effect thereof, and (c) amortize, prorate, allocate
and spread in equal parts, the total amount of interest throughout the entire
contemplated term of the Obligations so that the interest rate is uniform
throughout the entire term of the Obligations; provided, however,
that if the Obligations are paid and performed in full prior to the end of the
full contemplated term thereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Amount, Lender shall refund to
Borrower or such other Person legally entitled thereto the amount of such
excess or credit the amount of such excess against the total principal amount of
the Obligations owing, and, in such event, Lender shall not be subject to any
penalties provided by any Laws for contracting for, charging or receiving
interest in excess of the Maximum Amount. 
This Section shall control every other provision of all agreements
pertaining to the transactions contemplated by or contained in the Loan
Documents.  The provisions of this Section 9.11
applicable to Lender are equally applicable to each Participant, Assignee and
any subsequent holder.

 

9.12                           Exception to Covenants. 
No Obligor shall be deemed to be permitted to take any action or fail to
take any action which is permitted as an exception to any of the covenants
contained herein or which is within the permissible limits of any of the
covenants contained herein if such action or omission would result in the
breach of any other covenant contained herein.

 

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

 

9.14                           GOVERNING LAW.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS; PROVIDED, HOWEVER, IT IS AGREED THAT THE PROVISIONS OF
CHAPTER 346 OF THE TEXAS FINANCE CODE SHALL NOT APPLY TO THE ADVANCE
LOANS, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THE LOAN DOCUMENTS ARE PERFORMABLE IN SAN
ANTONIO, BEXAR COUNTY, TEXAS, AND BORROWER AND LENDER WAIVE THE RIGHT TO BE
SUED ELSEWHERE.  BORROWER AND LENDER
AGREE THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN SAN ANTONIO, TEXAS
SHALL HAVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS.

 

49

 

9.15                           WAIVER OF JURY TRIAL.  EACH OF BORROWER AND LENDER HEREBY KNOWINGLY
VOLUNTARILY, IRREVOCABLY AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT
PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM
ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.  THIS PROVISION IS
A MATERIAL INDUCEMENT TO LENDER ENTERING INTO THIS AGREEMENT AND MAKING ANY
ADVANCE LOANS HEREUNDER.

 

9.16                           ENTIRE AGREEMENT.  THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO.  THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

The
Remainder of This Page Is Intentionally Left Blank.

 

50

 

IN WITNESS WHEREOF, this Agreement is executed as of the date first set
forth above.

 

	
  BORROWER:

  	
  GAINSCO, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn W.
  Anderson

  	
   

  
	
   

  	
  Print Name:

  	
  Glenn W. Anderson

  
	
   

  	
  Print Title:

  	
  President and Chief Executive Officer

  
					

 

 

	
  LENDER:

  	
  THE FROST NATIONAL BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen
  S. Martin

  	
   

  
	
   

  	
  Print Name: Stephen S. Martin

  
	
   

  	
  Print Title: Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00091-of-00352.parquet"}]]