Document:

exv10w1

 

Exhibit 10.1

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

AMONG

PETROQUEST ENERGY, L.L.C.,

As Borrower

PETROQUEST ENERGY, INC.,

As a Guarantor

JPMORGAN CHASE BANK, N.A.,

AS AGENT

J.P. MORGAN SECURITIES, INC.,

AS LEAD ARRANGER AND SOLE BOOK RUNNER

CALYON NEW YORK BRANCH,

AS SYNDICATION AGENT

AND

CERTAIN FINANCIAL INSTITUTIONS,

As Lenders

 

$100,000,000 Credit Facility

November 18, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE I DEFINITIONS	 	 	7	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II THE CREDITS	 	 	26	 
	 
	 	2.1.	 	Commitment	 	 	26	 
	 
	 	2.2.	 	Borrowing Base	 	 	26	 
	 
	 	2.3.	 	Termination	 	 	28	 
	 
	 	2.4.	 	Ratable Loans	 	 	28	 
	 
	 	2.5.	 	Types of Advances	 	 	28	 
	 
	 	2.6.	 	Commitment Fee; Reductions in Borrowing Base	 	 	28	 
	 
	 	2.7.	 	Minimum Amount of Each Advance	 	 	28	 
	 
	 	2.8.	 	Optional Principal Payments	 	 	28	 
	 
	 	2.9.	 	Method of Selecting Types and Interest Periods for New Advances	 	 	29	 
	 
	 	2.10.	 	Conversion and Continuation of Outstanding Advances	 	 	29	 
	 
	 	2.11.	 	Changes in Interest Rate, etc	 	 	30	 
	 
	 	2.12.	 	Rates Applicable After Default	 	 	30	 
	 
	 	2.13.	 	Method of Payment	 	 	30	 
	 
	 	2.14.	 	Noteless Agreement; Evidence of Indebtedness	 	 	31	 
	 
	 	2.15.	 	Telephonic Notices	 	 	31	 
	 
	 	2.16.	 	Interest Payment Dates; Interest and Fee Basis	 	 	32	 
	 
	 	2.17.	 	Notification of Advances, Interest Rates, Facility LCs, Prepayments and Commitment Reductions	 	 	32	 
	 
	 	2.18.	 	Lending Installations	 	 	32	 
	 
	 	2.19.	 	Non-Receipt of Funds by the Agent	 	 	33	 
	 
	 	2.20.	 	Replacement of Lender	 	 	33	 
	 
	 	2.21.	 	Facility LCs	 	 	33	 
	 
	 	2.22.	 	Collateral	 	 	37	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III YIELD PROTECTION; TAXES	 	 	39	 
	 
	 	3.1.	 	Yield Protection	 	 	39	 
	 
	 	3.2.	 	Changes in Capital Adequacy Regulations	 	 	40	 
	 
	 	3.3.	 	Availability of Types of Advances	 	 	40	 
	 
	 	3.4.	 	Funding Indemnification	 	 	40	 
	 
	 	3.5.	 	Taxes	 	 	41	 
	 
	 	3.6.	 	Lender Statements; Survival of Indemnity	 	 	42	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV CONDITIONS PRECEDENT	 	 	44	 
	 
	 	4.1.	 	Initial Credit Extension	 	 	44	 
	 
	 	4.2.	 	Each Credit Extension	 	 	47	 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	ARTICLE V REPRESENTATIONS AND WARRANTIES	 	 	49	 
	 
	 	5.1.	 	Existence and Standing	 	 	49	 
	 
	 	5.2.	 	Authorization and Validity	 	 	49	 
	 
	 	5.3.	 	No Conflict; Government Consent	 	 	49	 
	 
	 	5.4.	 	Financial Statements	 	 	50	 
	 
	 	5.5.	 	Material Adverse Effect	 	 	50	 
	 
	 	5.6.	 	Taxes	 	 	50	 
	 
	 	5.7.	 	Litigation and Contingent Obligations	 	 	50	 
	 
	 	5.8.	 	Subsidiaries	 	 	51	 
	 
	 	5.9.	 	ERISA	 	 	51	 
	 
	 	5.10.	 	Accuracy of Information	 	 	51	 
	 
	 	5.11.	 	Regulation U	 	 	51	 
	 
	 	5.12.	 	Material Agreements	 	 	51	 
	 
	 	5.13.	 	Compliance With Laws	 	 	51	 
	 
	 	5.14.	 	Ownership/Title to the Properties; Licenses; Liens	 	 	52	 
	 
	 	5.15.	 	Plan Assets; Prohibited Transactions	 	 	53	 
	 
	 	5.16.	 	Environmental Matters	 	 	53	 
	 
	 	5.17.	 	Investment Company Act	 	 	55	 
	 
	 	5.18.	 	Public Utility Holding Company Act	 	 	55	 
	 
	 	5.19.	 	Insurance	 	 	55	 
	 
	 	5.20.	 	Solvency	 	 	55	 
	 
	 	5.21.	 	Burdensome Provisions	 	 	56	 
	 
	 	5.22.	 	Relationship with the Lenders	 	 	56	 
	 
	 	5.23.	 	Jurisdiction of Organization	 	 	56	 
	 
	 	5.24.	 	Full Disclosure	 	 	56	 
	 
	 	5.25.	 	Gas Imbalances	 	 	56	 
	 
	 	5.27.	 	No Default	 	 	57	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI COVENANTS	 	 	58	 
	 
	 	6.1.	 	Financial Reporting	 	 	58	 
	 
	 	6.2.	 	Use of Proceeds	 	 	60	 
	 
	 	6.3.	 	Notice of Default	 	 	60	 
	 
	 	6.4.	 	Conduct of Business	 	 	60	 
	 
	 	6.5.	 	Taxes	 	 	61	 
	 
	 	6.6.	 	Insurance	 	 	61	 
	 
	 	6.7.	 	Compliance with Laws	 	 	61	 
	 
	 	6.8.	 	Maintenance of Properties	 	 	61	 
	 
	 	6.9.	 	Inspection	 	 	62	 
	 
	 	6.10.	 	Dividends; Repurchase of Capital Stock; etc	 	 	62	 
	 
	 	6.11.	 	Indebtedness	 	 	62	 
	 
	 	6.12.	 	Acquisitions and Merger	 	 	63	 
	 
	 	6.13.	 	Sale of Assets	 	 	64	 
	 
	 	6.14.	 	Investments and Acquisitions	 	 	64	 
	 
	 	6.15.	 	Liens	 	 	65	 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 
	 	6.17.	 	Operating Leases	 	 	67	 
	 
	 	6.18.	 	Trade Liabilities	 	 	67	 
	 
	 	6.19.	 	Affiliates	 	 	67	 
	 
	 	6.20.	 	Agreement to Deliver Collateral Documents	 	 	67	 
	 
	 	6.21.	 	Maintenance of Liens	 	 	68	 
	 
	 	6.22.	 	Title Information	 	 	68	 
	 
	 	6.23.	 	Deposit of Production Proceeds	 	 	68	 
	 
	 	6.25.	 	Rate Management Transactions	 	 	69	 
	 
	 	6.27.	 	Sale of Accounts	 	 	70	 
	 
	 	6.28.	 	Sale and Leaseback Transactions and Other Off-Balance Sheet Liabilities	 	 	70	 
	 
	 	6.29.	 	Contingent Obligations	 	 	70	 
	 
	 	6.30.	 	Financial Contracts	 	 	70	 
	 
	 	6.31.	 	Financial Covenants	 	 	70	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII DEFAULTS	 	 	72	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII ACCELERATIONS, WAIVERS, AMENDMENTS AND REMEDIES	 	 	76	 
	 
	 	8.1.	 	Acceleration	 	 	76	 
	 
	 	8.2.	 	Amendments	 	 	77	 
	 
	 	8.3.	 	Preservation of Rights	 	 	78	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IX GENERAL PROVISIONS	 	 	79	 
	 
	 	9.1.	 	Survival of Representations	 	 	79	 
	 
	 	9.2.	 	Governmental Regulation	 	 	79	 
	 
	 	9.3.	 	Headings	 	 	79	 
	 
	 	9.4.	 	ENTIRE AGREEMENT	 	 	79	 
	 
	 	9.5.	 	Several Obligations; Benefits of this Agreement	 	 	79	 
	 
	 	9.6.	 	Expenses; Indemnification	 	 	79	 
	 
	 	9.7.	 	Numbers of Documents	 	 	80	 
	 
	 	9.8.	 	Accounting	 	 	80	 
	 
	 	9.9.	 	Severability of Provisions	 	 	80	 
	 
	 	9.10.	 	Nonliability of Lenders	 	 	80	 
	 
	 	9.11.	 	Confidentiality	 	 	81	 
	 
	 	9.12.	 	Nonreliance	 	 	81	 
	 
	 	9.13.	 	Disclosure	 	 	81	 
	 
	 	9.14	 	Interest	 	 	82	 
	 
	 	9.15	 	NO ORAL AGREEMENTS	 	 	82	 
	 
	 	9.16	 	Survival of Representations	 	 	82	 
	 
	 	9.17	 	Amendment and Restatement	 	 	82	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE X THE AGENT	 	 	84	 
	 
	 	10.1.	 	Appointment; Nature of Relationship	 	 	84	 
	 
	 	10.2.	 	Powers	 	 	84	 
	 
	 	10.3.	 	General Immunity	 	 	84	 

 

 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 
	 	10.4.	 	No Responsibility for Loans, Recitals, etc	 	 	84	 
	 
	 	10.5.	 	Action on Instructions of Lenders	 	 	85	 
	 
	 	10.6.	 	Employment of Agents and Counsel	 	 	85	 
	 
	 	10.7.	 	Reliance on Documents; Counsel	 	 	85	 
	 
	 	10.8.	 	Agent’s Reimbursement and Indemnification	 	 	85	 
	 
	 	10.9.	 	Notice of Default	 	 	86	 
	 
	 	10.10.	 	Rights as a Lender	 	 	86	 
	 
	 	10.11.	 	Lender Credit Decision	 	 	86	 
	 
	 	10.12.	 	Successor Agent	 	 	86	 
	 
	 	10.13.	 	Agent’s Fee	 	 	87	 
	 
	 	10.14.	 	Delegation to Affiliates	 	 	87	 
	 
	 	10.15.	 	Execution of Collateral Documents	 	 	88	 
	 
	 	10.16.	 	Collateral Releases	 	 	88	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XI SETOFF; RATABLE PAYMENTS	 	 	89	 
	 
	 	11.1.	 	Setoff	 	 	89	 
	 
	 	11.2.	 	Ratable Payments	 	 	89	 
	 
	 	11.3	 	Application of Collateral	 	 	89	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS	 	 	91	 
	 
	 	12.1.	 	Successors and Assigns	 	 	91	 
	 
	 	12.2.	 	Participations	 	 	91	 
	 
	 	12.3.	 	Assignments	 	 	92	 
	 
	 	12.4.	 	Dissemination of Information	 	 	93	 
	 
	 	12.5.	 	Tax Treatment	 	 	93	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIII NOTICES	 	 	94	 
	 
	 	13.1.	 	Notices	 	 	94	 
	 
	 	13.2.	 	Change of Address	 	 	94	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XIV COUNTERPARTS	 	 	94	 
	 
	 	14.1.	 	Counterparts	 	 	94	 
	 
	 	14.2.	 	Facsimile Documents and Signatures	 	 	94	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	 	 	95	 
	 
	 	15.1.	 	CHOICE OF LAW	 	 	95	 
	 
	 	15.2.	 	CONSENT TO JURISDICTION	 	 	95	 
	 
	 	15.3.	 	WAIVER OF JURY TRIAL	 	 	95	 

 

 

SCHEDULES AND EXHIBITS

SCHEDULES

	 	 	 	 	 
	Schedule 5.1

	 	—
	 	Other Names
	Schedule 5.7

	 	—
	 	Litigation and Contingent Obligations
	Schedule 5.8

	 	—
	 	Subsidiaries
	Schedule 5.14

	 	—
	 	Ownership/Title to the Properties; Licenses; Liens
	Schedule 5.16

	 	—
	 	Environmental Matters
	Schedule 5.23

	 	—
	 	Jurisdiction of Organization
	Schedule 5.25

	 	—
	 	Gas Imbalances
	Schedule 6.11

	 	—
	 	Indebtedness
	Schedule 6.14

	 	—
	 	Investments and Acquisitions
	Schedule 6.25

	 	—
	 	Existing Rate Management Transaction

EXHIBITS

EXHIBIT A — Promissory Note

EXHIBIT B — Borrowing Notice

EXHIBIT C — Assignment Agreement

     SCHEDULE 1 TO Assignment Agreement

EXHIBIT D — Form of Opinion of Porter & Hedges, L.L.P.

EXHIBIT E — Loan/Credit Related Money Transfer Instruction

EXHIBIT F — Compliance Certificate

     SCHEDULE 1 to Compliance Certificate

     SCHEDULE II to Compliance Certificate

EXHIBIT G — Form of Title Opinion

 

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

     This Second Amended and Restated Credit Agreement, dated as of November 18, 2005, is among
PETROQUEST ENERGY, L.L.C., a Louisiana limited liability company; JPMORGAN CHASE BANK, N.A., a
national banking association, individually and as agent (in its agent capacity herein “Agent”) and
as issuer of Letters of Credit (in such capacity the “LC Issuer”); CALYON NEW YORK BRANCH, as
Syndication Agent; and J.P. MORGAN SECURITIES, INC., as Sole Lead Arranger and Sole Book Runner;
and the LENDERS. The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

     As used in this Agreement:

     “Advance” means a borrowing hereunder, (i) made by the Lenders on the same Borrowing Date, or
(ii) converted or continued by the Lenders on the same date of conversion or continuation,
consisting, in either case, of the aggregate amount of the several Loans of the same Type and, in
the case of Eurodollar Loans, for the same Interest Period.

     “Affiliate” of any Person means any other Person directly or indirectly controlling,
controlled by or under common control with such Person. A Person shall be deemed to control
another Person if the controlling Person owns 10% or more of any class of voting securities (or
other ownership interests) of the controlled Person or possesses, directly or indirectly, the power
to direct or cause the direction of the management or policies of the controlled Person, whether
through ownership of stock, by contract or otherwise.

     “Agent” means JPMorgan Chase in its capacity as contractual representative of the Lenders
pursuant to Article X, and not in its individual capacity as a Lender, and any successor Agent
appointed pursuant to Article X.

     “Aggregate Commitment” means the aggregate of the Commitments of all the Lenders, as reduced
from time to time pursuant to the terms hereof.

     “Aggregate Outstanding Credit Exposure” means, at any time, the aggregate of the Outstanding
Credit Exposure of all the Lenders.

     “Agreement” means this credit agreement, as it may be amended or modified and in effect from
time to time.

 

 

     “Agreement Accounting Principles” means generally accepted accounting principles as in effect
from time to time in the United States, applied in a manner consistent with that used in preparing
the financial statements referred to in Section 5.4.

     “Alternate Base Rate” means, for any day, a rate of interest per annum equal to the higher of
(i) the Corporate Base Rate for such day and (ii) the sum of the Federal Funds Effective Rate for
such day plus 1/2% per annum.

     “Applicable Environmental Laws” means any and all federal, state, local and foreign Laws,
judicial decisions, rules, judgments, plans, permits, concessions, grants, franchises, licenses,
agreements and other governmental restrictions relating to (i) the protection of the environment
(including, without limitation, CERCLA, CERCLIS and RCRA), (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into surface water, ground water or land, or (iv) the manufacture, processing,
distribution, use, treatment, storage, Disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof, as such Laws now exist
or are hereafter enacted and/or amended.

     “Applicable Fee Rate” means, at any time, the percentage rate per annum at which commitment
fees are accruing on the unused portion of the Aggregate Commitment at such time as set forth in
the Pricing Schedule.

     “Applicable Margin” means, with respect to Advances of any Type at any time, the percentage
rate per annum which is applicable at such time with respect to Advances of such Type as set forth
in the Pricing Schedule.

     “Arranger” means J.P. Morgan Securities, Inc., a Delaware corporation, and its successors, in
its capacity as Lead Arranger and Sole Book Runner.

     “Article” means an article of this Agreement unless another document is specifically
referenced.

     “Assignment Agreement” is defined in Section 12.3.1.

     “Authorized Officer” means any of the Chairman of the Board, President, Chief Financial
Officer, Treasurer, or any Vice President of the Borrower or the Parent, acting singly.

     “Available Borrowing Base” means, at any time, the Borrowing Base then in effect (after
reduction for each applicable Borrowing Base Reduction Amount) minus the Aggregate Outstanding
Credit Exposure.

     “Borrower” means PetroQuest Energy, L.L.C., a Louisiana limited liability company, and its
successors and assigns.

 

 

     “Borrower Pledge Agreement” means that certain Pledge and Security Agreement of even date
herewith executed by the Borrower in favor of the Agent, for the ratable benefit of the Lenders, as
it may be amended or modified and in effect from time to time.

     “Borrowing Base” shall mean the amount of indebtedness which can be adequately supported by
the value of oil and gas reserves attributable to the Collateral, which value shall be determined
by the Lenders, in the exercise of their sole discretion, in accordance with the Lenders’ customary
practices and standards for oil and gas loans, all as more particularly set forth in Section 2.2.

     “Borrowing Base Reduction Amount” means (a) for each month after the date hereof until the
next semi-annual Borrowing Base redetermination pursuant to Section 2.2.2, $-0-, and (b) for each
month thereafter, such amount as designated by 100% of the Lenders from time to time in connection
with each successive scheduled semi-annual Borrowing Base redetermination pursuant to Section 2.2.2
or successive unscheduled Borrowing Base redetermination pursuant to Section 2.2.3; provided
however, if the Required Lenders fail to timely designate a new Borrowing Base Reduction Amount,
then the Borrowing Base Reduction Amount most recently in effect will continue in effect until the
Required Lenders designate a new Borrowing Base Reduction Amount.

     “Borrowing Date” means a date on which an Advance is made hereunder.

     “Borrowing Notice” is defined in Section 2.9.

     “Business Day” means (i) with respect to any borrowing, payment or rate selection of
Eurodollar Advances, a day (other than a Saturday or Sunday) on which banks generally are open in
Houston, Chicago and New York for the conduct of substantially all of their commercial lending
activities, interbank wire transfers can be made on the Fedwire system and dealings in United
States dollars are carried on in the London interbank market and (ii) for all other purposes, a day
(other than a Saturday or Sunday) on which banks generally are open in Houston, Chicago and New
York for the conduct of substantially all of their commercial lending activities and interbank wire
transfers can be made on the Fedwire system.

     “Capitalized Lease” of a Person means at any date any lease of Property by such Person as
lessee which would be capitalized on a balance sheet as of such date of such Person prepared in
accordance with Agreement Accounting Principles.

     “Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person
under Capitalized Leases which would be shown as a liability on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.

 

 

     “Cash Equivalent Investments” means (i) obligations of, or fully guaranteed by, the United
States of America or any agency thereof and backed by the full faith and credit of the United
States of America, in each case which matures within twelve months from the date of acquisition,
(ii) commercial paper rated A-1 or better by S&P or P-1 or better by Moody’s, (iii) demand deposit
accounts maintained in the ordinary course of business, (iv) certificates of deposit issued by and
time deposits with commercial banks (whether domestic or foreign) having capital and surplus in
excess of $100,000,000, (v) repurchase obligations with a term of not more than 180 days for
underlying securities of the types described in subsection (i) above entered into with a bank
meeting the qualifications described in subsection (iv) above and (vi) money market funds, the
assets of which consist primarily of obligations of the types referred to in clause (i) through
(iv) above; provided in each case that the same provides for payment of both principal and interest
(and not principal alone or interest alone) and is not subject to any contingency (other than the
passage of time) regarding the payment of principal or interest.

     “CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, as from time to time
in effect and any successor thereto.

     “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability
Information System List of the Environmental Protection Agency, as from time to time in effect and
any successor thereto.

     “Change” is defined in Section 3.2.

     “Change in Control” means the acquisition by any Person, or two or more Persons acting in
concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 40% or more of the outstanding shares of
voting stock of the Parent.

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

     “Collateral” means any Property or asset of the Borrower or any Subsidiary, now or hereafter
acquired, which is subject to a Lender Lien in favor of the Lenders (or in favor of the Agent for
the benefit of the Lenders) or which, under the terms of any Collateral Document or otherwise, is
purported to be subject to such a Lien, as described in Section 2.22.

     “Collateral Documents” means, collectively, the Deeds of Trust executed by Borrower, the
Pledge Agreements, the Guaranties, any Security Agreements and all financing statements, notices,
and other documents executed in connection therewith.

     “Collateral Shortfall Amount” is defined in Section 8.1.

 

 

     “Commitment” means, for each Lender, the obligation of such Lender to make Advances to, and
participate in Facility LCs issued upon the application of, the Borrower in an aggregate amount not
exceeding the amount set forth opposite its signature below or as set forth in any Assignment
Agreement relating to any assignment that has become effective pursuant to Section 12.3.2, as such
amount may be modified from time to time pursuant to the terms hereof.

     “Consolidated Current Assets” shall mean the total of the consolidated current assets of the
Parent and Borrower, including amounts available under the Available Borrowing Base; provided,
however, in determining Consolidated Current Assets, such determination shall not include non-cash
gains, losses or charges required (a) under SFAS 133, (b) under SFAS 143 or (c) under SFAS 123(R).

     “Consolidated Current Liabilities” shall mean the total of the consolidated current
liabilities of the Parent, provided, however, in determining consolidated current liabilities, such
determination shall not include non-cash gains, losses or charges required (a) under SFAS 133, (b)
under SFAS 143 or (c) under SFAS 123(R).

     “Consolidated EBITDDA” means for any period Consolidated Net Income for such period plus, to
the extent deducted from revenues in determining Consolidated Net Income, (i) consolidated interest
expense, (ii) expense for taxes paid or accrued, (iii) depreciation, depletion, amortization, and
any other non-cash charges, (iv) extraordinary or non-recurring expenses or losses incurred other
than in the ordinary course of business and (v) unrealized loss from Rate Management Obligations,
if any, minus, to the extent included in Consolidated Net Income, extraordinary or non-recurring
income or gains realized other than in the ordinary course of business, and non-cash credits, all
calculated for the Parent, Borrower and their Subsidiaries on a consolidated basis.

     “Consolidated Indebtedness” means, with reference to any period, the aggregate Indebtedness of
the Parent, the Borrower and their Subsidiaries on a consolidated basis, after excluding
Indebtedness attributable to unrealized Rate Management Transactions.

     “Consolidated Net Income” means, with reference to any period, the net income (or loss) of the
Parent, Borrower and their Subsidiaries calculated on a consolidated basis for such period;
provided, however, in determining Consolidated Net Income, such determination shall not include (i)
non-cash gains, losses or charges required (a) under SFAS 133 (b) under SFAS 143 or under SFAS
123(R); (ii) full cost ceiling limit write downs; and (iii) amortization of deferred compensation
expense.

     “Contingent Obligation” of a Person means any agreement, undertaking or arrangement by which
such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the
payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any
other Person, or agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person

 

 

against loss, (including, without limitation, any comfort letter, or obligations of the type listed above of any
such Person as general partner of a partnership with respect to the liabilities of the partnership)
other than endorsements of instruments in the ordinary course of business in connection with
collection of the instruments.

     “Controlled Group” means all members of a controlled group of corporations or other business
entities and all trades or businesses (whether or not incorporated) under common control which,
together with the Borrower or any of its Subsidiaries, are treated as a single employer under
Section 414 of the Code.

     “Conversion/Continuation Notice” is defined in Section 2.10.

     “Corporate Base Rate” means a rate per annum equal to the corporate base rate or prime rate of
interest announced by JPMorgan Chase, from time to time, changing when and as said corporate base
rate or prime rate changes.

     “Credit Extension” means the making of an Advance or the issuance of a Facility LC hereunder.

     “Credit Extension Date” means the Borrowing Date for an Advance or the issuance date for a
Facility LC.

     “CSP Pipeline” means CSP Pipeline LLC, a Louisiana limited liability company, a Wholly-Owned
Subsidiary of TDC Energy.

     “Deeds of Trust” means all of the Amended and Restated Deeds of Trust, Mortgages, Assignments,
Security Agreements and Financing Statements executed by the Borrower or any Guarantor in favor of
the Agent, for the ratable benefit of the Lenders, as it may be amended or modified and in effect
from time to time, each a “Deed of Trust.”

     “Default” means an event described in Article VII.

     “Disposal” and “Disposed” shall have the meanings specified in RCRA; provided, in the event
RCRA is amended so as to broaden the meaning of “Disposal” or “Disposed”, such broader meaning
shall apply subsequent to the effective date of such amendment; and provided further, to the extent
that the Laws of the states in which the Borrower’s or any Subsidiary’s Oil and Gas Properties are
located establish a meaning for “Disposal” or “Disposed” which is broader than that specified in
RCRA, such broader meaning shall apply.

     “Eligible Assignee” is defined in Section 12.3.1.

 

 

     “Enforcement Action” means any action or proceeding by the Agent for the enforcement of the
Lender Liens created under any or all of the Collateral Documents and any other exercise of any
right or remedy with respect to the Collateral.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and any rule or regulation issued thereunder.

     “Eurodollar Advance” means an Advance which, except as otherwise provided in Section 2.11,
bears interest at the applicable Eurodollar Rate.

     “Eurodollar Base Rate” means, with respect to a Eurodollar Advance for the relevant Interest
Period, the applicable British Bankers’ Association Interest Settlement Rate for deposits in U.S.
dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period, and having a maturity equal to such Interest Period;
provided that, (i) if Reuters Screen FRBD is not available to the Agent for any reason, the
applicable Eurodollar Base Rate for the relevant Interest Period shall instead be the applicable
British Bankers’ Association Interest Settlement Rate for deposits in U.S. dollars as reported by
any other generally recognized financial information service as of 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, and having a maturity equal to such
Interest Period, and (ii) if no such British Bankers’ Association Interest Settlement Rate is
available to the Agent, the applicable Eurodollar Base Rate for the relevant Interest Period shall
instead be the rate determined by the Agent to be the rate at which JPMorgan Chase or one of its
Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London
interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of JPMorgan Chase’s relevant Eurodollar Loan and
having a maturity equal to such Interest Period.

     “Eurodollar Loan” means a Loan which, except as otherwise provided in Section 2.11, bears
interest at the applicable Eurodollar Rate.

     “Eurodollar Rate” means, with respect to a Eurodollar Advance for the relevant Interest
Period, the sum of (i) the quotient of (a) the Eurodollar Base Rate applicable to such Interest
Period, divided by (b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Interest Period, plus (ii) the Applicable Margin.

     “Excluded Subsidiary” means, individually and collectively, PetroQuest Oil & Gas, CSP
Pipeline, Sea Harvester, Salvador Energy, TDC Energy Systems, Indianola Gathering and Wirth
Gathering.

     “Excluded Taxes” means, in the case of each Lender or applicable Lending Installation and the
Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by any
jurisdiction under the Laws, other than those imposed solely as a result of transactions
contemplated by this Agreement.

 

 

     “Exhibit” refers to an exhibit to this Agreement, unless another document is specifically
referenced.

     “Existing Rate Management Transaction” means those certain ISDA Master Agreements or Trade
Confirmations thereunder all as more particularly described on Schedule 6.25.

     “Facility LC” is defined in Section 2.21.1.

     “Facility LC Application” is defined in Section 2.21.3.

     “Facility LC Collateral Account” is defined in Section 2.21.11.

     “Facility Termination Date” means November 18, 2009 or any earlier date on which the Aggregate
Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof.

     “Federal Funds Effective Rate” means, for any day, an interest 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 for such day (or, if
such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 10:00 a.m. (Houston time) on such day on such
transactions received by the Agent from three Federal funds brokers of recognized standing selected
by the Agent in its sole discretion.

     “Fee Letter” means that certain letter dated August 10, 2005 between Arranger and the
Borrower.

     “Financial Contract” of a Person means (i) any exchange-traded or over-the-counter futures,
forward, swap or option contract or other financial instrument with similar characteristics, or
(ii) any Rate Management Transaction.

     “Floating Rate” means, for any day, a rate per annum equal to (i) the Alternate Base Rate for
such day plus (ii) the Applicable Margin, in each case changing when and as the Alternate Base Rate
changes.

     “Floating Rate Advance” means an Advance which, except as otherwise provided in Section 2.11,
bears interest at the Floating Rate.

     “Floating Rate Loan” means a Loan which, except as otherwise provided in Section 2.11, bears
interest at the Floating Rate.

 

 

     “Guaranties” means those certain Guaranties dated of even date herewith, executed by each
Guarantor in favor of the Agent, for the ratable benefit of the Lenders, as it may be amended or
modified and in effect from time to time, each a “Guaranty.”

     “Guarantor” means individually and collectively (i) Parent; (ii) Pittrans; (iii) TDC Energy;
(iv) any hereafter formed or acquired Subsidiary of the Parent, the Borrower, Pittrans or TDC
Energy; and (v) their respective successors and assigns.

     “Hazardous Substance” shall have the meaning specified in CERCLA; provided, in the event
CERCLA is amended so as to broaden the meaning of “Hazardous Substance”, such broader meaning shall
apply subsequent to the effective date of such amendment; and provided further, to the extent that
the Laws of the states in which the Borrower’s or any Subsidiary’s Oil and Gas Properties are
located establish a meaning for “Hazardous Substance” which is broader than that specified in
CERCLA, such broader meaning shall apply.

     “Highest Lawful Rate” means the maximum rate (or, if the context so permits, an amount
calculated at such rate) of interest which, at the time in question, would not cause the interest
charged to exceed the maximum amount which the Lenders would be allowed to contract for, charge,
take, reserve or receive under applicable Law after taking into account, to the extent required by
applicable Law, any and all relevant payments or charges under the Loan Documents.

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

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

     “Indebtedness” of a Person means such Person’s (i) obligations for borrowed money, (ii)
obligations representing the deferred purchase price of Property or services (other than accounts
payable arising in the ordinary course of such Person’s business payable on terms customary in the
trade), (iii) obligations, whether or not assumed, secured by Liens or payable out of the proceeds
or production from Property now or hereafter owned or acquired by such Person; provided that if not
assumed, the amount of such debt will be the lesser of the amount of the debt or the value of the
Property owned by such Person which secures the debt, (iv) obligations which are evidenced by
notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or
other Property arising out of or in connection with the sale of the same or substantially similar
securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations, (viii)
Letters of Credit, (ix) Rate Management Obligations, (x) obligations under Sale and Leaseback
Transactions, and (xi) any other obligation for borrowed money which in

 

 

accordance with Agreement Accounting Principles would be shown as a liability on the consolidated
balance sheet of such Person.

     “Independent Engineer” is defined in Section 6.1(ix).

     “Indianola Gathering” L.L.C. means Indianola Gathering L.L.C., an Oklahoma limited liability
company, of which Pittrans owns a sixteen (16%) membership interest.

     “Initial Reserve Report” means the reserve report dated January 1, 2005, prepared by Ryder
Scott Company, L.P., an independent petroleum engineer, concerning the Oil & Gas Properties based
on reasonable assumptions specified by the Agent (including discount rates and projected
hydrocarbon price assumptions), a copy of which has been delivered to each Lender.

     “Interest Period” means, with respect to a Eurodollar Advance, a period of one, two, three or
six months commencing on a Business Day selected by the Borrower pursuant to this Agreement. Such
Interest Period shall end on the day which corresponds numerically to such date one, two, three or
six months thereafter, provided, however, that if there is no such numerically corresponding day in
such next, second, third or sixth succeeding month, such Interest Period shall end on the last
Business Day of such next, second, third or sixth succeeding month. If an Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a
new calendar month, such Interest Period shall end on the immediately preceding Business Day.

     “Investment” of a Person means any loan, advance (other than commission, travel and similar
advances to officers and employees made in the ordinary course of business), extension of credit
(other than accounts receivable arising in the ordinary course of business on terms customary in
the trade) or contribution of capital by such Person; stocks, bonds, mutual funds, partnership
interests, notes, debentures or other securities owned by such Person; any deposit accounts and
certificate of deposit owned by such Person; and structured notes, derivative financial instruments
and other similar instruments or contracts owned by such Person.

     “JPMorgan Chase” means JPMorgan Chase Bank, N.A., a national banking association having
offices in Houston, Texas, in its individual capacity, and its successors.

     “Law” means all applicable statutes, laws, ordinances, regulations, orders, writs, injunctions
or decrees of any state, commonwealth, nation, country, territory, possession, county, parish,
municipality or Tribunal.

     “LC Fee” is defined in Section 2.21.4.

     “LC Issuer” means JPMorgan Chase (or any Subsidiary or Affiliate of JPMorgan Chase designated
by JPMorgan Chase) in its capacity as issuer of Facility LCs hereunder.

 

 

     “LC Obligations” means, at any time, the sum, without duplication, of (i) the aggregate
undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate
unpaid amount at such time of all Reimbursement Obligations.

     “LC Payment Date” is defined in Section 2.21.5.

     “Lender Liens” means the Liens granted in the Collateral in favor of the Agent for the ratable
benefit of the Lenders or directly for the benefit of any Lender pursuant to the Loan Documents.

     “Lender Rate Management Obligations” means Rate Management Obligations among the Borrower and
any Lender or any Affiliate of any Lender arising under Rate Management Transactions among such
Persons.

     “Lenders” means the lending institutions listed on the signature pages of this Agreement and
their respective successors and assigns.

     “Lending Installation” means, with respect to a Lender or the Agent, the office, branch,
Subsidiary or Affiliate of such Lender or the Agent listed on the signature pages hereof or on a
Schedule or otherwise selected by such Lender or the Agent pursuant to Section 2.18.

     “Letter of Credit” of a Person means a letter of credit or similar instrument which is issued
upon the application of such Person or upon which such Person is an account party or for which such
Person is in any way liable.

     “Lien” means any lien (statutory or other), security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever (including, without
limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or
other title retention agreement).

     “Loan” means, with respect to a Lender, such Lender’s loan made pursuant to Article II (or any
conversion or continuation thereof).

     “Loan Documents” means this Agreement, the Notes, the Facility LC Applications, and the
Collateral Documents.

     “Material Adverse Effect” means a material adverse effect on (i) the business, Property,
condition (financial or otherwise), results of operations, or prospects of the Parent, the Borrower
and their Subsidiaries taken as a whole, (ii) the ability of the Borrower to perform its
obligations under the Loan Documents to which it is a party, (iii) the validity or enforceability
of any of the Loan Documents or the rights or remedies of the Agent or the Lenders thereunder, or
(iv) the

 

 

Collateral or Lender Liens on the Collateral or the perfection or priority of such Lender Liens,
which significantly increases the risk that any of the Obligations will not be repaid as and when
due.

     “Material Indebtedness” is defined in Section 7.5.

     “Modify” and “Modification” are defined in Section 2.21.1.

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

     “Multiemployer Plan” means a Plan maintained pursuant to a collective bargaining agreement or
any other arrangement to which the Borrower or any member of the Controlled Group is a party to
which more than one employer is obligated to make contributions.

     “Non-Recourse Indebtedness” means Indebtedness as to which (a) neither the Parent, the
Borrower or any of their Subsidiaries (i) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness) or (ii) is directly or
indirectly liable as a guarantor or otherwise, (b) no default with respect thereto would permit,
upon notice, lapse of time or both, any holder of any other Indebtedness (other than the
Obligations) of the Parent, the Borrower or their Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated
maturity, and (c) the holders thereof have been notified in writing that they will not have any
recourse to the capital stock or assets of the Parent, the Borrower or any of their Subsidiaries.

     “Non-U.S. Lender” is defined in Section 3.5.4.

     “Note” means, with respect to any Lender, the promissory note issued at the request of such
Lender pursuant to Section 2.14 in the form of Exhibit A.

     “Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, the
Lender Rate Management Obligations, all accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or to any Lender, the Agent, the
LC Issuer, or any indemnified party arising under the Loan Documents.

     “Off-Balance Sheet Liability” of a Person means (i) any repurchase obligation or liability of
such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability
under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability
under any so-called “synthetic lease” transaction entered into by such Person, or (iv) any
obligation arising with respect to any other transaction which is the functional equivalent of or
takes the place of borrowing but which does not constitute a liability on the balance sheets of
such Person, but excluding from this clause (iv) Operating Leases.

 

 

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

     “Operating Lease” of a Person means any lease of Property (other than a Capitalized Lease) by
such Person as lessee which has an original term (including any required renewals and any renewals
effective at the option of the lessor) of one year or more.

     “Operating Lease Obligations” means, as at any date of determination, the amount obtained by
aggregating the present values, determined in the case of each particular Operating Lease by
applying a discount rate (which discount rate shall equal the discount rate which would be applied
under Agreement Accounting Principles if such Operating Lease were a Capitalized Lease) from the
date on which each fixed lease payment is due under such Operating Lease to such date of
determination, of all fixed lease payments due under all Operating Leases of the Parent, the
Borrower and their Subsidiaries.

     “Other Taxes” is defined in Section 3.5.2.

     “Outstanding Credit Exposure” means, as to any Lender at any time, the sum of (i) the
aggregate principal amount of its Loans outstanding at such time, plus (ii) an amount equal to its
Pro Rata Share of the LC Obligations at such time.

 

 

     “Parent” means PetroQuest Energy, Inc., a Delaware corporation.

     “Parent Pledge Agreement” means that certain Pledge and Security Agreement of even date
herewith executed by the Parent in favor of the Agent, for the ratable benefit of the Lenders, as
it may be amended or modified and in effect from time to time.

     “Participant” is defined in Section 12.2.1.

     “Payment Date” means the first day of each January, April, July and October, commencing
January 1, 2006.

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

     “PDP Present Value” means the present value discounted at nine percent (9%) of future net
revenues attributable to all PDP Reserves from the Oil and Gas Properties calculated based on a
Reserve Report prepared in accordance with Section 6.1.

     “PDP Reserves” means Proved Reserves which are categorized as both “Developed” and
“Producing.”

     “Person” means any natural person, corporation, firm, joint venture, partnership, limited
liability company, association, enterprise, trust or other entity or organization, or any
government or political subdivision or any agency, department or instrumentality thereof.

     “PetroQuest Oil & Gas” means PetroQuest Oil & Gas, L.L.C., a Louisiana limited liability
company the sole member of which is the Parent.

     “Pittrans” means Pittrans, Inc., an Oklahoma corporation, a Wholly-Owned Subsidiary of
Borrower.

     “Plan” means an employee pension benefit plan which is covered by Title IV of ERISA or subject
to the minimum funding standards under Section 412 of the Code as to which the Borrower or any
member of the Controlled Group may have any liability.

     “Pledge Agreements” means the Borrower Pledge Agreement, the Parent Pledge Agreement and the
TDC Pledge Agreement, each a “Pledge Agreement.”

     “Pricing Schedule” means the Schedule attached hereto identified as such.

     “Prior Credit Agreement” means the Amended and Restated Credit Agreement dated May 13, 2003
among Borrower, the Parent, the Agent, and the financial institutions party thereto, as amended
from time to time.

 

 

     “Pro Rata Share” means, with respect to a Lender, a portion equal to a fraction the numerator
of which is such Lender’s Commitment and the denominator of which is the Aggregate Commitment.

     “Property” of a Person means any and all property, whether real, personal, tangible,
intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

     “Proved Reserves” has the meaning given that term in the definitions promulgated by the
Society of Petroleum Evaluation Engineers and the World Petroleum Congress as in effect at the time
in question.

     “Rate Management Obligations” of a Person means any and all obligations of such Person,
whether absolute or contingent, realized or unrealized (in which case netted against one another)
and howsoever and whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (i) any and all Rate
Management Transactions, and (ii) any and all cancellations, buy backs, reversals, terminations or
assignments of any Rate Management Transactions.

     “Rate Management Transaction” means any transaction (including an agreement with respect
thereto) now existing or hereafter entered into between the Borrower and any Lender or Affiliate
thereof which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option, interest rate
option, foreign exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to one or more interest rates, foreign
currencies, commodity prices, equity prices or other financial measures including, without
limitation, the Existing Rate Management Transaction.

     “RCRA” means the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil
Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid
Waste Amendments of 1984, as from time to time in effect and any successor thereto.

     “Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor thereto or other regulation or official
interpretation of said Board of Governors relating to reserve requirements applicable to member
banks of the Federal Reserve System.

     “Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as
from time to time in effect and any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by banks for the

 

 

purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve
System.

     “Reimbursement Obligations” means, at any time, the aggregate of all obligations of the
Borrower then outstanding under Section 2.21 to reimburse the LC Issuer for amounts paid by the LC
Issuer in respect of any one or more drawings under Facility LCs.

     “Release” shall have the meaning specified in CERCLA; provided, in the event CERCLA is amended
so as to broaden the meaning of “Release”, such broader meaning shall apply subsequent to the
effective date of such amendment; and provided further, to the extent that the Laws of the states
in which the Borrower’s or any Subsidiary’s Oil and Gas Properties are located establish a meaning
for “Release” which is broader than that specified in CERCLA, such broader meaning shall apply.

     “Release Price” means in connection with the sale of any of the Borrower’s or any Subsidiary’s
Oil and Gas Properties permitted by Section 6.13, the price determined by the Required Lenders in
their discretion based upon the loan value of such Oil and Gas Properties being sold that the
Required Lenders in their discretion (using such methodology, assumptions and discount rates as
such Required Lenders customarily use in assigning loan value to oil and gas properties) assign to
such Oil and Gas Properties as of the time of their sale.

     “Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the
regulations issued under such Section, with respect to a Plan, excluding, however, such events as
to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event, provided, however, that a failure to meet
the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a
Reportable Event regardless of the issuance of any such waiver of the notice requirement in
accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

     “Reports” is defined in Section 9.6.

     “Required Lenders” means (i) Lenders having 100% of the Aggregate Commitment if there are only
two or fewer Lenders; or (ii) Lenders in the aggregate having at
least
662/3% of the Aggregate
Commitment if there are more than two Lenders or, (iii) if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least
662/3% of the aggregate unpaid principal amount
of the outstanding Advances.

     “Reserve Report” means the Initial Reserve Report and each reserve report delivered pursuant
to Sections 6.1(x) or (xi).

     “Reserve Requirement” means, with respect to an Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves) which is imposed under
Regulation D on Eurocurrency liabilities.

 

 

     “Rights” means rights, remedies, powers, and privileges.

     “Risk-Based Capital Guidelines” is defined in Section 3.2.

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

     “Sale and Leaseback Transaction” means any sale or other transfer of Property by any Person
with the intent to lease such Property as lessee.

     “Salvador Energy” means Salvador Energy Company, L.L.C., a Louisiana limited liability
company, a Wholly-Owned Subsidiary of TDC Energy.

     “Schedule” refers to a specific schedule to this Agreement, unless another document is
specifically referenced.

     “Sea Harvester” means Sea Harvester Energy Development Company, L.L.C., a Louisiana limited
liability company, a Wholly-Owned Subsidiary of TDC Energy.

     “Section” means a numbered section of this Agreement, unless another document is specifically
referenced.

     “Security Agreements” means any and all security agreements now or hereafter executed by the
Parent, the Borrower or any of their Subsidiaries in favor of the Agent, for the ratable benefit of
the Lenders, as they may be amended or modified and in effect from time to time.

     “Senior Notes” means the senior unsecured promissory notes due 2012 of the Borrower and
Parent, as co-issuers, issued May 2005 and June 2005 pursuant to the Senior Notes Indenture, and
includes the unsecured guaranties thereof executed from time to time by certain Subsidiaries of
Parent and the Borrower, notes (and the guaranties thereof) issued from time to time in exchange
for such Senior Notes due 2012 and all reissues and replacements of the foregoing.

     “Senior Notes Indenture” means the Indenture dated May 11, 2005, among the Borrower and
Parent, as co-issuers, the subsidiary guarantors identified therein and The Bank of New York Trust
Company, N.A., as the same may be amended or supplemented from time to time.

     “Single Employer Plan” means a Plan maintained by the Borrower or any member of the Controlled
Group for employees of the Borrower or any member of the Controlled Group.

     “Solid Waste” shall have the meaning specified in RCRA; provided, in the event RCRA is amended
so as to broaden the meaning of “Solid Waste”, such broader meaning shall apply

 

 

subsequent to the
effective date of such amendment; and provided further, to the extent that the Laws of the states
in which the Borrower’s or any Subsidiary’s Oil and Gas Properties are located establish a meaning
for “Solid Waste” which is broader than that specified in RCRA, such broader meaning shall apply.

     “Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding securities
having ordinary voting power of which shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more
of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture
or similar business organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise expressly provided,
all references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower and all references
herein to a “Subsidiary” of the Parent shall mean Subsidiaries of the Parent other than the
Excluded Subsidiaries.

     “Substantial Portion” means, ten percent 10% of the present value discounted at ten percent
10% per annum of the PDP Present Value of the Borrower and its Subsidiaries as reflected in the
most recent Reserve Report.

     “Syndication Agent” means Calyon New York Branch and not in its individual capacity as a
Lender, and any successor Syndication Agent appointed pursuant to Article X.

     “Taxes” means any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding
Excluded Taxes and Other Taxes.

     “TDC Energy” means TDC Energy LLC, a Louisiana limited liability company, Wholly-Owned
Subsidiary of Parent.

     “TDC Energy Pledge Agreement” means that certain Pledge and Security Agreement of even date
herewith executed by TDC Energy in favor of the Agent, for the ratable benefit of the Lenders, as
it may be amended or modified and in effect from time to time.

     “TDC Energy Systems” means TDC Energy Systems, L.L.C., a Louisiana limited liability company,
a Wholly-Owned Subsidiary of TDC Energy.

     “Transferee” is defined in Section 12.4.

     “Tribunal” means any government, any arbitration panel, any court or any governmental
department, central bank or comparable agency, commission, board, bureau, agency or instrumentality
of the United States or any state, province, commonwealth, nation, territory, possession, county,
parish, town, township, village or municipality, whether now or hereafter constituted or existing.

 

 

     “Type” means, with respect to any Advance, its nature as a Floating Rate Advance or a
Eurodollar Advance.

     “Unfunded Liabilities” means the amount (if any) by which the present value of all vested and
unvested accrued benefits under all Single Employer Plans exceeds the fair market value of all such
Plan assets allocable to such benefits, all determined as of the then most recent valuation date
for such Plans using PBGC actuarial assumptions for single employer plan terminations.

     “Unmatured Default” means an event which but for the lapse of time or the giving of notice, or
both, would constitute a Default.

     “Utilization Percentage” means as of any day, the quotient obtained by dividing the Aggregate
Outstanding Credit Exposure on such day by the Borrowing Base (after reduction for each applicable
Borrowing Base Reduction Amount) as of such day.

     “Wholly-Owned Subsidiary” of a Person means (i) any Subsidiary all of the outstanding voting
securities of which shall at the time be owned or controlled, directly or indirectly, by such
Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more
Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization 100% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.

     “Wirth Gathering” means Wirth Gathering Partnership, an Oklahoma Limited Liability
Partnership, of which Pittrans owns a fifty percent (50%) interest.

     The foregoing definitions shall be equally applicable to both the singular and plural forms of
the defined terms.

Remainder of this page intentionally left blank.

 

 

ARTICLE II

THE CREDITS

     2.1.
Commitment. From and including the date of this Agreement and prior to the Facility
Termination Date, each Lender severally agrees, on the terms and conditions set forth in this
Agreement to (i) make Advances to the Borrower and (ii) participate in Facility LCs issued upon the
request of the Borrower; provided, that, after giving effect to the making of each such Advance and
the issuance of each such Facility LC, such Lender’s Outstanding Credit Exposure shall not exceed
its Commitment. Subject to the terms of this Agreement, the Borrower may borrow, repay and
reborrow at any time prior to the Facility Termination Date provided, that the Aggregate
Outstanding Credit Exposure shall not exceed the lesser of (a) the Aggregate Commitment and (b) the
Borrowing Base. The Commitments to extend credit hereunder shall expire on the Facility
Termination Date. The LC Issuer will issue Facility LCs hereunder on the terms and conditions set
forth in Section 2.21.

     2.2. Borrowing Base.

          2.2.1 During the period from the date of this Agreement to the date as of which the Borrowing
Base is first redetermined pursuant to Section 2.2.2, the Borrowing Base shall be $25,000,000.00,
as reduced pursuant to Section 2.2.5.

          2.2.2 On or before March 1 and September 1 of each year the Borrower shall furnish to each
Lender all information, reports, and data which the Agent has then requested concerning the
Borrower’s and its Subsidiaries’ businesses and properties (including their Oil and Gas Properties
and interests and the reserves and production relating thereto), together with the Reserve Report
described in Sections 6.1(x) or (xi), as appropriate. By April 1, in the case of the Reserve
Report delivered by March 1, and by October 1, in the case of the Reserve Report delivered by
September 1, or as promptly thereafter as practicable, in either case, (i) the Agent shall
determine and the Required Lenders shall approve an amount for the Borrowing Base (provided that
all Lenders must agree to any increase in the Borrowing Base) and (ii) the Agent shall by notice to
the Borrower designate such amount as the new Borrowing Base available to the Borrower hereunder,
which designation shall take effect immediately on the date such notice is sent and shall remain in
effect (subject to reduction pursuant to Sections 2.2.5 and 2.2.6) until, but not including, the
next date as of which the Borrowing Base is redetermined. If the Borrower does not furnish all
such information, reports, and data by the date specified in the first sentence of this section,
the Agent may nonetheless designate the Borrowing Base at any amount which the Required Lenders
have approved and may redesignate the Borrowing Base from time to time thereafter until each Lender
receives all such information, reports, and data, whereupon the Required Lenders shall designate a
new Borrowing Base as described above. Any redetermination of the Borrowing Base shall not be
effective until written notice is sent to the Borrower.

 

 

          2.2.3 In addition to the foregoing, the Required Lenders or the Borrower may initiate a
redetermination of the Borrowing Base at any other time as they or it, as the case may be, so
elect; provided, however, that the Borrower may initiate only one (1) such unscheduled
redetermination between each scheduled redetermination by specifying in writing to the Lenders the
date on which the Borrower will furnish the information required by Section 2.2.2 and the date on
which it desires such redetermination to occur. The Lenders shall have at least forty-five (45)
days after the delivery of the information required by Section 2.2.2 to make any unscheduled
redetermination of the Borrowing Base requested by the Borrower. The Required Lenders may, at any
time, initiate an unscheduled redetermination of the Borrowing Base by specifying in writing to the
Borrower the date by which the Borrower is to furnish the information required by Section 2.2.2 and
the projected date on which such redetermination is to occur. The Agent shall promptly notify the
Borrower, in writing, of the new Borrowing Base.

          2.2.4 The Agent shall determine and submit to the Lenders for approval by the Required Lenders
the amount of the Borrowing Base and Borrowing Base Reduction Amount based upon the loan collateral
value which they in their discretion assign to the various Oil and Gas Properties of the Parent,
the Borrower and their Subsidiaries at the time in question and based upon such other credit
factors (including, without limitation, the assets, senior and subordinate liabilities, cash flow,
hedged and unhedged exposure to oil and gas prices, foreign exchange rate, and interest rate
changes, business, properties, prospects, management, and ownership of the Parent, the Borrower and
their Subsidiaries) as they in their sole discretion deem significant. It is expressly understood
that the Lenders and the Agent have no obligation to agree upon or designate the Borrowing Base at
any particular amount, whether in relation to the Aggregate Commitment or otherwise, and that the
Lenders’ Commitments to advance funds hereunder is determined by reference to the Borrowing Base
from time to time in effect, and, to the extent permitted by Law and regulatory authorities, for
the purposes of capital adequacy determination and reimbursements under Section 3.2.
Notwithstanding anything to the contrary herein, the amount of the Borrowing Base may not be
increased at any time without the consent of 100% of the Lenders.

          2.2.5 The Borrowing Base shall automatically reduce by the applicable Borrowing Base Reduction
Amount on the first day of each month as specified in the definition of the term “Borrowing Base
Reduction Amount.”

          2.2.6. Upon the sale of any of the Oil and Gas Properties of the Borrower or any Subsidiary
other than those permitted to be sold under Section 6.13(i) through (iv), the Borrower will
immediately make a prepayment of principal on the Loans equal to, and the Borrowing Base will
automatically reduce by, an amount equal to 100% of the Release Price.

          2.2.7. In the event the Aggregate Outstanding Credit Exposure shall, at any time, be in excess
of the amount of the Borrowing Base in effect at such time, then the Borrower shall prepay Credit
Extensions in an amount at least equal to such excess immediately, or at the option of the
Borrower, in three (3) successive installments, each in an amount equal to one-third of

 

 

such
excess, due 60, 90 and 120 days respectively from the date of the determination of the existence of
such excess.

     2.3. Termination. The Aggregate Outstanding Credit Exposure and all other unpaid
Obligations shall be paid in full by the Borrower on the Facility Termination Date.

     2.4. Ratable Loans. Each Advance hereunder shall consist of Loans made from the
several Lenders ratably according to their Pro Rata Shares.

     2.5. Types of Advances. The Advances may be Floating Rate Advances or Eurodollar
Advances, or a combination thereof, selected by the Borrower in accordance with Sections 2.9 and
2.10.

     2.6. Commitment Fee; Reductions in Borrowing Base. The Borrower agrees to pay to the
Agent for the account of each Lender, according to its Pro Rata Share, a commitment fee at a per
annum rate equal to the Applicable Fee Rate on the average daily Available Borrowing Base from the
date hereof to and including the Facility Termination Date, payable in arrears for the immediately
preceding three (3) calendar month period on each Payment Date hereafter and on the Facility
Termination Date. The Borrower may permanently reduce the Borrowing Base in whole, or in part
ratably among the Lenders in integral multiples of $1,000,000, upon at least five Business Days’
written notice to the Agent, which notice shall specify the amount of any such reduction, provided,
however, that the amount of the Borrowing Base may not be reduced below the Aggregate Outstanding
Credit Exposure. All accrued commitment fees shall be payable on the effective date of any
termination of the obligations of the Lenders to make Credit Extensions hereunder.

     2.7. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in the minimum
amount of $1,000,000 (and in multiples of $100,000 if in excess thereof), and each Floating Rate
Advance shall be in the minimum amount of $200,000 (and in multiples of $100,000 if in excess
thereof), provided, however, that any Floating Rate Advance may be in the amount of the Available
Borrowing Base.

     2.8. Optional Principal Payments. The Borrower may from time to time pay, without
penalty or premium, all outstanding Floating Rate Advances, or, in a minimum aggregate amount of
$500,000 or any integral multiple of $100,000 in excess thereof, any portion of the outstanding
Floating Rate Advances upon one Business Day’s prior notice to the Agent. The Borrower may from
time to time pay, subject to the payment of any funding indemnification amounts required by Section
3.4 but without penalty or premium, all outstanding Eurodollar Advances, or, in a minimum aggregate
amount of $500,000 or any integral multiple of $100,000 in excess thereof, any portion of the
outstanding Eurodollar Advances upon three Business Days’ prior notice to the Agent.

 

 

     2.9. Method of Selecting Types and Interest Periods for New Advances. The Borrower
shall select the Type of Advance and, in the case of each Eurodollar Advance, the Interest Period
applicable thereto from time to time. The Borrower shall give the Agent irrevocable notice (a
“Borrowing Notice”) substantially in the form of Exhibit B not later than 10:00 a.m. (Houston time)
at least one Business Day before the Borrowing Date of each Floating Rate Advance and three
Business Days before the Borrowing Date for each Eurodollar Advance, specifying:

	 	(i)	 	the Borrowing Date, which shall be a Business Day, of such Advance,
	 
	 	(ii)	 	the aggregate amount of such Advance,
	 
	 	(iii)	 	the Type of Advance selected, and
	 
	 	(iv)	 	in the case of each Eurodollar Advance, the Interest Period applicable thereto.

Not later than noon (Houston time) on each Borrowing Date, each Lender shall make available its
Loan or Loans in funds immediately available in Houston to the Agent at its address specified
pursuant to Article XIII. The Agent will make the funds so received from the Lenders available to
the Borrower at the Agent’s aforesaid address.

     2.10. Conversion and Continuation of Outstanding Advances. Floating Rate Advances
shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted
into Eurodollar Advances pursuant to this Section 2.10 or are repaid in accordance with Section
2.8. Each Eurodollar Advance shall continue as a Eurodollar Advance until the end of the then
applicable Interest Period therefor, at which time such Eurodollar Advance shall be automatically
converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or was repaid in
accordance with Section 2.8 or (y) the Borrower shall have given the Agent a
Conversion/Continuation Notice (as defined below) requesting that, at the end of such Interest
Period, such Eurodollar Advance continue as a Eurodollar Advance for the same or another Interest
Period. Subject to the terms of Section 2.7, the Borrower may elect from time to time to convert
all or any part of a Floating Rate Advance into a Eurodollar Advance. The Borrower shall give the
Agent irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of a Floating Rate
Advance into a Eurodollar Advance or continuation of a Eurodollar Advance not later than 10:00 a.m.
(Houston time) at least three Business Days prior to the date of the requested conversion or
continuation, specifying:

	 	(i)	 	the requested date, which shall be a Business Day, of such conversion or
continuation,
	 
	 	(ii)	 	the aggregate amount and Type of the Advance which is to be converted or continued,
and

 

 

	 	(iii)	 	the amount of such Advance which is to be converted into or continued as a Eurodollar
Advance and the duration of the Interest Period applicable thereto.

     2.11. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear interest on
the outstanding principal amount thereof, for each day from and including the date such Advance is
made or is automatically converted from a Eurodollar Advance into a Floating Rate Advance pursuant
to Section 2.10, to but excluding the date it is paid or is converted into a Eurodollar Advance
pursuant to Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such day.
Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate
Advance will take effect simultaneously with each change in the Alternate Base Rate. Each
Eurodollar Advance shall bear interest on the outstanding principal amount thereof from and
including the first day of the Interest Period applicable thereto to (but not including) the last
day of such Interest Period at the interest rate determined by the Agent as applicable to such
Eurodollar Advance based upon the Borrower’s selections under Sections 2.8 and 2.9 and otherwise in
accordance with the terms hereof. No Interest Period may end after the Facility Termination Date.

     2.12. Rates Applicable After Default. Notwithstanding anything to the contrary
contained in Sections 2.9 or 2.10, during the continuance of a Default the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the option of the Required
Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to
changes in interest rates), declare that no Advance may be made as, converted into or continued as
a Eurodollar Advance. During the continuance of a Default the Required Lenders may, at their
option, by notice to the Borrower (which notice may be revoked at the option of the Required
Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to
changes in interest rates), declare that (i) each Eurodollar Advance shall bear interest for the
remainder of the applicable Interest Period at the rate otherwise applicable to such Interest
Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per
annum equal to the Floating Rate in effect from time to time plus 2% per annum, provided that,
during the continuance of a Default under Sections 7.6 or 7.7, the interest rates set forth in
clauses (i) and (ii) above shall be applicable to all Credit Extensions without any election or
action on the part of the Agent or any Lender.

     2.13. Method of Payment. All payments of the Obligations hereunder shall be made,
without setoff, deduction, or counterclaim, in immediately available funds to the Agent at the
Agent’s address specified pursuant to Article XIII, or at any other Lending Installation of the
Agent specified in writing by the Agent to the Borrower, by noon (local time) on the date when due
and shall (except in the case of Reimbursement Obligations for which the LC Issuer has not been
fully indemnified by Lenders, or as otherwise specifically required hereunder) be applied ratably
by the Agent among the Lenders. Each payment delivered to the Agent for the account of any Lender
shall be delivered promptly by the Agent to such Lender in the same type of funds that the Agent
received at its address specified pursuant to Article XIII or at any Lending

 

 

Installation specified
in a notice received by the Agent from such Lender. Each reference to the Agent in this Section
2.13 shall also be deemed to refer, and shall apply equally, to the LC Issuer, in the case of
payments required to be made by the Borrower to the LC Issuer pursuant to Section 2.21.6. The
Agent is hereby authorized to charge the account of the Borrower maintained with JPMorgan Chase for
each payment of principal, interest and fees as it becomes due hereunder.

     2.14. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the indebtedness of the
Borrower to such Lender resulting from each Loan made by such Lender from time to time, including
the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

          (ii) The Agent shall also maintain accounts in which it will record (a) the amount of each
Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount
of any principal or interest due and payable or to become due and payable from the Borrower to each
Lender hereunder, (c) the original stated amount of each Facility LC and the amount of LC
Obligations outstanding at any time, and (d) the amount of any sum received by the Agent hereunder
from the Borrower and each Lender’s share thereof.

          (iii) The entries maintained in the accounts maintained pursuant to paragraphs (i) and (ii)
above shall be prima facie evidence of the existence and amounts of the Obligations therein
recorded; provided, however, that the failure of the Agent or any Lender to maintain such accounts
or any error therein shall not in any manner affect the obligation of the Borrower to repay the
Obligations in accordance with their terms.

          (iv) Any Lender may request that its Loans be evidenced by a promissory note (a “Note”). In
such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to the
order of such Lender in a form supplied by the Agent. Thereafter, the Loans evidenced by such Note
and interest thereon shall at all times (including after any assignment pursuant to Section 12.3)
be represented by one or more Notes payable to the order of the payee named therein or any assignee
pursuant to Section 12.3, except to the extent that any such Lender or assignee subsequently
returns any such Note for cancellation and requests that such Loans once again be evidenced as
described in paragraphs (i) and (ii) above.

     2.15. Telephonic Notices. The Borrower hereby authorizes the Lenders and the Agent to
extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds
based on telephonic notices made by any Person or Persons designated in writing by the Borrower
from time to time, it being understood that the foregoing authorization is specifically intended to
allow Borrowing Notices and Conversion/Continuation Notices to be given telephonically. The
Borrower agrees to deliver promptly to the Agent a written confirmation, if such confirmation is
requested by the Agent or any Lender, of each telephonic notice signed by an Authorized Officer.
If the written confirmation differs in any material respect from the action

 

 

taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent manifest error.

     2.16. Interest Payment Dates; Interest and Fee Basis. Interest accrued on each
Floating Rate Advance shall be payable on each Payment Date, commencing with the first such date to
occur after the date hereof, on any date on which the Floating Rate Advance is prepaid, whether due
to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding
principal amount of any Floating Rate Advance converted into a Eurodollar Advance on a day other
than a Payment Date shall be payable on the date of conversion. Interest on Floating Rate
Advances, commitment fees and LC Fees shall be calculated for actual days elapsed on a basis of a
365, or when appropriate 366, day per year. Interest accrued on each Eurodollar Advance shall be
payable on the last day of its applicable Interest Period, on any date on which the Eurodollar
Advance is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on
each Eurodollar Advance having an Interest Period longer than three months shall also be payable on
the last day of each three-month interval during such Interest Period. Interest on Eurodollar
Advances shall be calculated for actual days elapsed on the basis of a 360-day year. Interest
shall be payable for the day an Advance is made but not for the day of any payment on the amount
paid if payment is received prior to noon (local time) at the place of payment. If any payment of
principal of or interest on a Floating Rate Advance shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing interest in connection
with such payment.

     2.17. Notification of Advances, Interest Rates, Facility LCs, Prepayments and Commitment
Reductions. Promptly after receipt thereof, the Agent will notify each Lender of the contents
of each Aggregate Commitment reduction notice, Borrowing Notice, Conversion/Continuation Notice,
and repayment notice received by it hereunder. Promptly after notice from the LC Issuer, the Agent
will notify each Lender of the contents of each request for issuance of a Facility LC hereunder.
The Agent will notify each Lender of the interest rate applicable to each Eurodollar Advance
promptly upon determination of such interest rate and will give each Lender prompt notice of each
change in the Alternate Base Rate.

     2.18. Lending Installations. Each Lender may book its Loans and its participation in
any LC Obligations and the LC Issuer may book the Facility LCs at any Lending Installation selected
by such Lender or the LC Issuer, as the case may be, and may change its Lending Installation from
time to time. All terms of this Agreement shall apply to any such Lending Installation and the
Loans, Facility LCs, participations in LC Obligations and any Notes issued hereunder shall be
deemed held by each Lender or the LC Issuer, as the case may be, for the benefit of any such
Lending Installation. Each Lender and the LC Issuer may, by written notice to the Agent and the
Borrower in accordance with Article XIII, designate replacement or additional Lending Installations
through which Loans will be made by it or Facility LCs will be issued by it and for whose account
Loan payments or payments with respect to Facility LCs are to be made.

 

 

     2.19. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender, as the case
may be, notifies the Agent prior to the date on which it is scheduled to make payment to the Agent
of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a
payment of principal, interest or fees to the Agent for the account of the Lenders, that it does
not intend to make such payment, the Agent may assume that such payment has been made. The Agent
may, but shall not be obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Lender or the Borrower, as the case may be,
has not in fact made such payment to the Agent, the recipient of such payment shall, on demand by
the Agent, repay to the Agent the amount so made available together with interest thereon in
respect of each day during the period commencing on the date such amount was so made available by
the Agent until the date the Agent recovers such amount at a rate per annum equal to (x) in the
case of payment by a Lender, the Federal Funds Effective Rate for such day for the first three days
and, thereafter, the interest rate applicable to the relevant Loan or (y) in the case of payment by
the Borrower, the interest rate applicable to the relevant Loan.

     2.20. Replacement of Lender. If the Borrower is required pursuant to Sections 3.1,
3.2 or 3.5 to make any additional payment to any Lender or if any Lender’s obligation to make or
continue, or to convert Floating Rate Advances into, Eurodollar Advances shall be suspended
pursuant to Section 3.3 (any Lender so affected an “Affected Lender”), the Borrower may elect, if
such amounts continue to be charged or such suspension is still effective, to replace such Affected
Lender as a Lender party to this Agreement, provided that no Default or Unmatured Default shall
have occurred and be continuing at the time of such replacement, and provided further that,
concurrently with such replacement, (i) another bank or other entity which is reasonably
satisfactory to the Borrower and the Agent shall agree, as of such date, to purchase for cash the
Advances and other Obligations due to the Affected Lender pursuant to an assignment substantially
in the form of Exhibit C and to become a Lender for all purposes under this Agreement and to assume
all obligations of the Affected Lender to be terminated as of such date and to comply with the
requirements of Section 12.3 applicable to assignments, and (ii) the Borrower shall pay to such
Affected Lender in same day funds on the day of such replacement (A) all interest, fees and other
amounts then accrued but unpaid to such Affected Lender by the Borrower hereunder to and including
the date of termination, including without limitation payments due to such Affected Lender under
Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment which would have been
due to such Lender on the day of such replacement under Section 3.4 had the Loans of such Affected
Lender been prepaid on such date rather than sold to the replacement Lender.

     2.21. Facility LCs.

          2.21.1. Issuance. Except as provided below, the LC Issuer hereby agrees, on the terms
and conditions set forth in this Agreement, to issue standby and commercial letters of credit
(each, a “Facility LC”) and to renew, extend, increase, decrease or otherwise modify each Facility
LC (“Modify,” and each such action a “Modification”), from time to time from and

 

 

including the date
of this Agreement and prior to the Facility Termination Date upon the request of the Borrower;
provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate
amount of the outstanding LC Obligations shall not exceed $15,000,000 and (ii) the Aggregate
Outstanding Credit Exposure shall not exceed the lesser of (a) the Aggregate Commitment and (b) the
Borrowing Base. No Facility LC shall have an expiry date later than the earlier of (x) the fifth
Business Day prior to the Facility Termination Date and (y) one year after its issuance; provided,
however, that any Facility LC with a one-year tenor may provide for the renewal thereof for
additional one-year periods (which shall in no event extend beyond the fifth Business Day prior to
the Facility Termination Date) unless the LC Issuer provides prior notice of non-renewal to the
beneficiary of such Facility LC.

          2.21.2. Participations. Upon the issuance or Modification by the LC Issuer of a
Facility LC in accordance with this Section 2.21, the LC Issuer shall be deemed, without further
action by any party hereto, to have unconditionally and irrevocably sold to each Lender, and each
Lender shall be deemed, without further action by any party hereto, to have unconditionally and
irrevocably purchased from the LC Issuer, a participation in such Facility LC (and each
Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share.

          2.21.3. Notice. Subject to Section 2.21.1, the Borrower shall give the LC Issuer
notice prior to 10:00 a.m. (Houston time) at least five Business Days prior to the proposed date of
issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of
issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed
terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon
receipt of such notice, the LC Issuer shall promptly notify the Agent, and the Agent shall promptly
notify each Lender, of the contents thereof and of the amount of such Lender’s participation in
such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall,
in addition to the conditions precedent set forth in Article IV (the satisfaction of which the LC
Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility
LC shall be satisfactory to the LC Issuer and that the Borrower shall have executed and delivered
such application agreement and/or such other instruments and agreements relating to such Facility
LC as the LC Issuer shall have reasonably requested (each, a “Facility LC Application”). In the
event of any conflict between the terms of this Agreement and the terms of any Facility LC
Application, the terms of this Agreement shall control.

          2.21.4. LC Fees. The Borrower shall pay to the Agent, for the account of the Lenders
ratably in accordance with their respective Pro Rata Shares, with respect to each Facility LC, a
letter of credit fee at a per annum rate equal to the Applicable Margin for Eurodollar Rate Loans
per annum on the average daily undrawn stated amount under such standby Facility LC, such fee to be
payable in arrears on each Payment Date (such fee described in this sentence an “LC Fee”);
provided, that during the continuance of a Default the LC Fee shall be the sum of 2% plus the
Applicable Margin for Eurodollar Rate Loans per annum. The Borrower shall also pay to the LC
Issuer for its own account (x) in arrears on each Payment

 

 

Date, a fronting fee of .25% per annum of
the face amount of each Facility LC, and (y) documentary and processing charges in connection with
the issuance or Modification of and draws under Facility LCs in accordance with the LC Issuer’s
standard schedule for such charges as in effect from time to time.

          2.21.5. Administration; Reimbursement by Lenders. Upon receipt from the beneficiary
of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the
Agent and the Agent shall promptly notify the Borrower and each other Lender as to the amount to be
paid by the LC Issuer as a result of such demand and the proposed payment date (the “LC Payment
Date”). The responsibility of the LC Issuer to the Borrower and each Lender shall be only to
determine that the documents (including each demand for payment) delivered under each Facility LC
in connection with such presentment shall be in conformity in all material respects with such
Facility LC. The LC Issuer shall endeavor to exercise the same care in the issuance and
administration of the Facility LCs as it does with respect to letters of credit in which no
participations are granted, it being understood that in the absence of any gross negligence or
willful misconduct by the LC Issuer, each Lender shall be unconditionally and irrevocably liable
without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse
the LC Issuer on demand for (i) such Lender’s Pro Rata Share of the amount of each payment made by
the LC Issuer under each Facility LC to the extent such amount is not reimbursed by pursuant to
Section 2.21.6 below, plus (ii) interest on the foregoing amount to be reimbursed by such Lender,
for each day from the date of the LC Issuer’s demand for such reimbursement (or, if such demand is
made after 11:00 a.m. (Houston time) on such date, from the next succeeding Business Day) to the
date on which such Lender pays the amount to be reimbursed by it, at a rate of interest per annum
equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of
interest equal to the rate applicable to Floating Rate Advances.

          2.21.6. Reimbursement by Borrower. The Borrower shall be irrevocably and
unconditionally obligated to reimburse the LC Issuer on or before the applicable LC Payment Date
for any amounts to be paid by the LC Issuer upon any drawing under any Facility LC, without
presentment, demand, protest or other formalities of any kind; provided that neither the Borrower
nor any Lender shall hereby be precluded from asserting any claim for direct (but not
consequential) damages suffered by the Borrower or such Lender to the extent, but only to the
extent, caused by (i) the willful misconduct or gross negligence of the LC Issuer in determining
whether a request presented under any Facility LC issued by it complied with the terms of such
Facility LC or (ii) the LC Issuer’s failure to pay under any Facility LC issued by it after the
presentation to it of a request strictly complying with the terms and conditions of such Facility
LC. All such amounts paid by the LC Issuer and remaining unpaid by the Borrower shall bear
interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate
applicable to Floating Rate Advances for such day if such day falls on or before the applicable LC
Payment Date and (y) the sum of 2% plus the rate applicable to Floating Rate Advances for such day
if such day falls after such LC Payment Date. The LC Issuer will pay to each Lender ratably in
accordance with its Pro Rata Share all amounts received by it from the

 

 

Borrower for application in
payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued
by the LC Issuer, but only to the extent such Lender has made payment to the LC Issuer in respect
of such Facility LC pursuant to Section 2.21.5. Subject to the terms and conditions of this
Agreement (including without limitation the submission of a Borrowing Notice in compliance with
Section 2.9 and the satisfaction of the applicable conditions precedent set forth in Article IV),
the Borrower may request an Advance hereunder for the purpose of satisfying any Reimbursement
Obligation.

          2.21.7. Obligations Absolute. The Borrower’s obligations under this Section 2.21
shall be absolute and unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment that the Borrower may have or have had against the LC Issuer,
any Lender or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and
the Lenders that the LC Issuer and the Lenders shall not be responsible for, and the Borrower’s
Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements thereon, even if such
documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any
dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or
any financing institution or other party to whom any Facility LC may be transferred or any claims
or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any
Facility LC or any such Transferee. The LC Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or
omitted by the LC Issuer or any Lender under or in connection with each Facility LC and the related
drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon
the Borrower and shall not put the LC Issuer or any Lender under any liability to the Borrower.
Nothing in this Section 2.21.7 is intended to limit the right of the Borrower to make a claim
against the LC Issuer for damages as contemplated by the proviso to the first sentence of Section
2.21.6.

          2.21.8. Actions of LC Issuer. The LC Issuer shall be entitled to rely, and shall be
fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall
be fully justified in failing or refusing to take any action under this Agreement unless it shall
first have received such advice or concurrence of the Required Lenders as it reasonably deems
appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by reason of taking or continuing to
take any such action. Notwithstanding any other provision of this Section 2.21, the LC Issuer shall
in all cases be fully protected in acting, or in refraining from acting, under this Agreement in
accordance with a request of the Required Lenders, and such request and any

 

 

action taken or failure
to act pursuant thereto shall be binding upon the Lenders and any future holders of a participation
in any Facility LC.

          2.21.9. Indemnification. The Borrower hereby agrees to indemnify and hold harmless
each Lender, the LC Issuer and the Agent, and their respective directors, officers, agents and
employees from and against any and all claims and damages, losses, liabilities, costs or expenses
which such Lender, the LC Issuer or the Agent may incur (or which may be claimed against such
Lender, the LC Issuer or the Agent by any Person whatsoever) by reason of or in connection with the
issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC
or any actual or proposed use of any Facility LC, including, without limitation, any claims,
damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in
connection with (i) the failure of any other Lender to fulfill or comply with its obligations to
the LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have
against any defaulting Lender) or (ii) by reason of or on account of the LC Issuer issuing any
Facility LC which specifies that the term “Beneficiary” included therein includes any successor by
operation of law of the named Beneficiary, but which Facility LC does not require that any drawing
by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the
LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower
shall not be required to indemnify any Lender, the LC Issuer or the Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the
willful misconduct or gross negligence of the LC Issuer in determining whether a request presented
under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer’s failure to
pay under any Facility LC after the presentation to it of a request strictly complying with the
terms and conditions of such Facility LC. Nothing in this Section 2.21.9 is intended to limit the
obligations of the Borrower under any other provision of this Agreement.

          2.21.10. Lenders’ Indemnification. Each Lender shall, ratably in accordance with its
Pro Rata Share, indemnify the LC Issuer, its Affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense
(including reasonable counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees’ gross negligence or willful misconduct or the LC
Issuer’s failure to pay under any Facility LC after the presentation to it of a request strictly
complying with the terms and conditions of the Facility LC) that such indemnitees may suffer or
incur in connection with this Section 2.21 or any action taken or omitted by such indemnitees
hereunder.

          2.21.11. Rights as a Lender. In its capacity as a Lender, the LC Issuer shall have
the same rights and obligations as any other Lender.

     2.22. Collateral

 

 

          2.22.1 First Lien. The full and complete payment and performance of the Obligations
shall be secured under the Collateral Documents by (i) first and prior Lender Liens in, to and on
at least ninety percent (90%) of the PDP Present Value of Oil and Gas Properties located in the
United States or its offshore waters and at least eighty percent (80%) of the aggregate Proved
Reserves of Oil and Gas Properties located in the United States or its offshore waters, in each
case, now owned or hereafter acquired by the Borrower or any of its Subsidiaries and (ii) the
Pledge Agreements.

          2.22.2 Lender Liens. The Lender Liens in the Collateral shall be further evidenced
and governed by the Collateral Documents.

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ARTICLE III

YIELD PROTECTION; TAXES

     3.1. Yield Protection. If, on or after the date of this Agreement, the adoption of
any Law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive
(whether or not having the force of Law), or any change in the interpretation or administration
thereof by any governmental or quasi-governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation or the LC Issuer with any request or directive (whether or not
having the force of Law) of any such authority, central bank or comparable agency:

	 	(i)	 	subjects any Lender or any applicable Lending Installation or the LC Issuer to any
Taxes, or changes the basis of taxation of payments (other than with respect to Excluded
Taxes) to any Lender or the LC Issuer in respect of its Eurodollar Loans or Facility LCs
or participations therein, or
	 
	 	(ii)	 	imposes or increases or deems applicable any reserve, assessment, insurance charge,
special deposit or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender or any applicable Lending Installation or the LC
Issuer (other than reserves and assessments taken into account in determining the interest
rate applicable to Eurodollar Advances), or
	 
	 	(iii)	 	imposes any other condition the result of which is to increase the cost to any Lender
or any applicable Lending Installation or the LC Issuer of making, funding or maintaining
its Eurodollar Loans or issuing or participating in Facility LCs, or reduces any amount
receivable by any Lender or any applicable Lending Installation or the LC Issuer in
connection with its Eurodollar Loans or Facility LCs or participations therein, or requires
any Lender or any applicable Lending Installation or the LC Issuer to make any payment
calculated by reference to the amount of Eurodollar Loans held or interest or LC Fees
received by it, by an amount deemed material by such Lender or the LC Issuer, as the case
may be,

and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending
Installation or the LC Issuer, as the case may be, of making or maintaining its Eurodollar Loans or
Commitment or issuing or participating in Facility LCs, or to reduce the return received by such
Lender or applicable Lending Installation or the LC Issuer, as the case may be, in connection with
such Eurodollar Loans or Commitment or Facility LCs or participations therein, then, within 15 days
of demand by such Lender or the LC Issuer, the Borrower shall pay such Lender or the LC Issuer such
additional amount or amounts as will compensate such Lender or the LC Issuer for such increased
cost or reduction in amount received.

 

 

     3.2. Changes in Capital Adequacy Regulations. If a Lender or the LC Issuer determines
the amount of capital required or expected to be maintained by such Lender or the LC Issuer, any
Lending Installation of such Lender or the LC Issuer, or any corporation controlling such Lender or
the LC Issuer is increased as a result of a Change, then, within 30 days of demand by such Lender
or the LC Issuer, the Borrower shall pay such Lender or the LC Issuer the amount necessary to
compensate for any shortfall in the rate of return on the portion of such increased capital which
such Lender or the LC Issuer determines is attributable to this Agreement, its Outstanding Credit
Exposure, or its Commitment to make Loans and issue or participate in Facility LCs, as the case may
be, hereunder (after taking into account such Lender’s or the LC Issuer’s policies as to capital
adequacy). “Change” means (i) any change after the date of this Agreement in the Risk-Based
Capital Guidelines or (ii) any adoption of or change in any other Law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or directive (whether or
not having the force of Law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender, the LC Issuer or any Lending Installation or
any corporation controlling any Lender or the LC Issuer. “Risk-Based Capital Guidelines” means (i)
the risk-based capital guidelines in effect in the United States on the date of this Agreement,
including transition rules, and (ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled “International Convergence of
Capital Measurements and Capital Standards,” including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.

     3.3. Availability of Types of Advances. If any Lender determines that maintenance of
its Eurodollar Loans at a suitable Lending Installation would violate any applicable Law, rule,
regulation, or directive, whether or not having the force of Law, or if the Required Lenders
determine that (i) deposits of a type and maturity appropriate to match fund Eurodollar Advances
are not available or (ii) the interest rate applicable to Eurodollar Advances does not accurately
reflect the cost of making or maintaining Eurodollar Advances, then the Agent shall suspend the
availability of Eurodollar Advances and require any affected Eurodollar Advances to be repaid or
converted to Floating Rate Advances, subject to the payment of any funding indemnification amounts
required by Section 3.4.

     3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs on a date
which is not the last day of the applicable Interest Period, whether because of acceleration,
prepayment or otherwise, or a Eurodollar Advance is not made on the date specified by the Borrower
for any reason other than default by the Lenders, the Borrower will indemnify each Lender for any
loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurodollar Advance.

 

 

     3.5. Taxes.

          3.5.1 All payments by the Borrower to or for the account of any Lender, the LC Issuer or the
Agent hereunder or under any Note or Facility LC Application shall be made free and clear of and
without deduction for any and all Taxes. If the Borrower shall be required by Law to deduct any
Taxes from or in respect of any sum payable hereunder to any Lender, the LC Issuer or the Agent,
(i) the sum payable shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section 3.5) such Lender,
the LC Issuer or the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant authority in accordance with applicable
Law and (iv) the Borrower shall furnish to the Agent the original copy of a receipt evidencing
payment thereof within 30 days after such payment is made.

          3.5.2 In addition, the Borrower hereby agrees to pay any present or future stamp or
documentary taxes and any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under any Note or Facility LC Application or from the execution
or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application
(“Other Taxes”).

          3.5.3 The Borrower hereby agrees to indemnify the Agent, the LC Issuer and each Lender for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes
imposed on amounts payable under this Section 3.5) paid by the Agent, the LC Issuer or such Lender
and any liability (including penalties, interest and expenses) arising therefrom or with respect
thereto. Payments due under this indemnification shall be made within 30 days of the date the
Agent, the LC Issuer or such Lender makes demand therefor pursuant to Section 3.6.

          3.5.4 Each Lender that is not incorporated under the Laws of the United States of America or a
state thereof (each a “Non-U.S. Lender”) agrees that it will, not less than ten Business Days after
the date of this Agreement, (i) deliver to each of the Borrower and the Agent two duly completed
copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case
that such Lender is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, and (ii) deliver to each of the Borrower and
the Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it
is entitled to an exemption from United States backup withholding tax. Each Non-U.S. Lender
further undertakes to deliver to each of the Borrower and the Agent (x) renewals or additional
copies of such form (or any successor form) on or before the date that such form expires or becomes
obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so
delivered by it, such additional forms or amendments thereto as may be reasonably requested by the
Borrower or the Agent. All forms or amendments described in the preceding sentence shall certify
that such Lender is entitled to

 

 

receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without
limitation any change in treaty, Law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form or amendment with respect to
it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income tax.

          3.5.5 For any period during which a Non-U.S. Lender has failed to provide the Borrower with an
appropriate form pursuant to Section 3.5.4 above (unless such failure is due to a change in treaty,
Law or regulation, or any change in the interpretation or administration thereof by any
governmental authority, occurring subsequent to the date on which a form originally was required to
be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5
with respect to Taxes imposed by the United States; provided that, should a Non-U.S. Lender which
is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes
because of its failure to deliver a form required under Section 3.5.4, the Borrower shall take such
steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S. Lender to recover
such Taxes.

          3.5.6 Any Lender that is entitled to an exemption from or reduction of withholding tax with
respect to payments under this Agreement or any Note pursuant to the Law of any relevant
jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Agent), at the time or
times prescribed by applicable Law, 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.

          3.5.7 If the U.S. Internal Revenue Service or any other governmental authority of the United
States or any other country or any political subdivision thereof asserts a claim that the Agent did
not properly withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered or properly completed, because such Lender failed to notify the
Agent of a change in circumstances which rendered its exemption from withholding ineffective, or
for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax, withholding therefor, or otherwise, including penalties and
interest, and including taxes imposed by any jurisdiction on amounts payable to the Agent, under
this Section 3.5.7, together with all costs and expenses related thereto (including attorneys’ fees
and time charges of attorneys for the Agent, which attorneys may be employees of the Agent). The
obligations of the Lenders under this Section 3.5.7 shall survive the payment of the Obligations
and termination of this Agreement.

          3.6. Lender Statements; Survival of Indemnity. To the extent reasonably possible, each
Lender shall designate an alternate Lending Installation with respect to its Eurodollar Loans to
reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the
unavailability of Eurodollar Advances under Section 3.3, so long as such

 

 

designation is not, in the judgment of such Lender, disadvantageous to such Lender. Each Lender shall deliver a written
statement of such Lender to the Borrower (with a copy to the Agent) as to the amount due, if any,
under Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error. Determination of amounts payable under
such Sections in connection with a Eurodollar Loan shall be calculated as though each Lender funded
its Eurodollar Loan through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Eurodollar Rate applicable to such Loan, whether in
fact that is the case or not. Unless otherwise provided herein, the amount specified in the
written statement of any Lender shall be payable on demand after receipt by the Borrower of such
written statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall
survive payment of the Obligations and termination of this Agreement.

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ARTICLE IV

CONDITIONS PRECEDENT

     4.1. Initial Credit Extension.

          4.1.1 The Lenders shall not be required to make the initial Credit Extension hereunder unless
the Borrower has furnished the following to the Agent with sufficient copies for the Lenders:

	 	(i)	 	this Agreement;
	 
	 	(ii)	 	copies of the certificate of formation or other applicable
document of the Borrower, together with all amendments thereto, and
certificates of good standing, each certified by the appropriate governmental
officer in Louisiana and certificates of good standing from each other
jurisdiction where the Borrower is qualified to transact business;
	 
	 	(iii)	 	copies of the articles or certificate of incorporation of the
Parent together with all amendments thereto, and a certificate of good
standing, each certified by the appropriate governmental officer in Delaware
and certificates of good standing from each other jurisdiction where the Parent
is qualified to transact business;
	 
	 	(iv)	 	copies of the certificate of formation, organization,
incorporation or other applicable document of each direct or indirect
Subsidiary of the Borrower, together with all amendments thereto, and
certificates of good standing, each certified by the appropriate governmental
officer and certificates of good standing from each other jurisdiction where
any such Subsidiary is qualified to transact business
	 
	 	(v)	 	copies certified by the Secretary or Assistant Secretary of the
Borrower of (i) its limited liability company agreement, and (ii) resolutions
from its managers authorizing the execution of the Loan Documents to which it
is a party;
	 
	 	(vi)	 	copies certified by the Secretary or Assistant Secretary of the
Parent of (i) its by-laws and (ii) resolutions of its Board of Directors
authorizing the execution of the Loan Documents to which it is a party;
	 
	 	(vii)	 	copies certified by the Authorized Officer of each Subsidiary
of (i) its by-laws, limited liability company agreement or other similar
document and (ii) resolutions of each such Subsidiary’s Managers, Members, or
Board of

 

 

	 	 	 	Directors, as applicable, authorizing the execution of the Loan
Documents to which it is a party;
	 
	 	(viii)	 	incumbency certificates, executed by the respective Secretary, Assistant
Secretary or other Authorized Officer of the Borrower, the Parent and each
Subsidiary which shall identify by name and title and bear the signatures of
the Authorized Officers and any other officers authorized to sign the Loan
Documents to which the Borrower, the Parent and such Subsidiary, respectively
is a party, upon which certificate the Agent and the Lenders shall be entitled
to rely until informed of any change in writing by the Borrower;
	 
	 	(ix)	 	a certificate, signed by the chief financial officer of the
Borrower, stating that on the initial Credit Extension Date no Default or
Unmatured Default has occurred and is continuing;

	 	(x)	 	written opinions of counsel to the Borrower and the Guarantors
addressed to the Agent and Lenders and their counsel in substantially the form
of Exhibit D;
	 
	 	(xi)	 	the Notes issued pursuant to Section 2.14 payable to the order
of each Lender, and, if the initial Credit Extension will be the issuance of a
Facility LC, a properly completed Facility LC Application;
	 
	 	(xii)	 	the Deeds of Trust, executed by the Borrower or the
Guarantors, as applicable, in a form satisfactory to the Agent, the Lenders and
their counsel with respect to the Properties therein described, which are part
of the Collateral, and such other agreements, documents and instruments as may
be necessary and appropriate, in form and substance satisfactory to the Agent
and the Lenders, executed and delivered by Borrower or the Guarantors, as
applicable, , as mortgagor or assignor, in favor of the Agent, ratably for the
benefit of the Lenders, in order to create and perfect the Lender Liens in and
to all Collateral described therein;
	 
	 	(xiii)	 	the Pledge Agreements, executed by the Parent, the Borrower and TDC Energy,
in a form satisfactory to the Agent, the Lenders and their counsel with respect
to the Properties therein described, which are a part of the Collateral;
	 
	 	(xiv)	 	the Guaranties, executed by each Guarantor, in a form
satisfactory to the Agent, the Lenders, and their counsel;

 

 

	 	(xv)	 	written money transfer instructions, in substantially the form
of Exhibit E, addressed to the Agent and signed by an Authorized Officer of the
Borrower, on behalf of the Borrower, together with such other related money
transfer authorizations as the Agent may have reasonably requested;
	 
	 	(xvi)	 	title opinions from counsel acceptable to the Agent, or title
reviews satisfactory to the Agent, with respect to the Oil and Gas Properties
included in the Collateral and in a form acceptable to the Agent and the
Lenders, covering at least eighty percent (80%) of the aggregate PDP Reserves
of such Oil and Gas Properties and seventy percent (70%) of the aggregate
present worth of the aggregate Proved Reserves;
	 
	 	(xvii)	 	the Initial Reserve Report upon which the initial Borrowing Base has been
determined acceptable to all the Lenders;
	 
	 	(xviii)	 	copies of any environmental reports regarding any environmental assessment
of the Oil and Gas Properties included in the Collateral, which shall be
acceptable to all Lenders;
	 
	 	(xix)	 	the insurance certificate(s) described in Section 5.20;
	 
	 	(xx)	 	detailed monthly projections (including balance sheets, income
and cash flow statements) for the Parent, the Borrower and their Subsidiaries
on a consolidated basis as of and for the period ending December 31, 2005,
which projections shall be acceptable to the Lenders in their sole discretion;
	 
	 	(xxi)	 	the Financial Statements described in Section 5.4;
	 
	 	(xxii)	 	an Assignment of Notes, Liens and Security Interests in form an substance
satisfactory to the Agent in its sole discretion, executed by each of the
lenders currently party to the Prior Credit Agreement and
	 
	 	(xxiii)	 	such other documents as any Lender or its counsel may have reasonably
requested.

          4.1.2 The Lenders shall not be required to make the initial Credit Extension hereunder unless
the following conditions precedent are satisfied, to the satisfaction of the Agent and the Lenders:

 

 

	 	(i)	 	the Agent and the Lenders shall have satisfactorily completed
their normal and customary due diligence in connection with loans of the type
contemplated by this Agreement;
	 
	 	(ii)	 	this Agreement and any Lender Rate Management Transactions
(including, without limitation, any Existing Rate Management Transactions)
shall each be (or upon the execution, delivery and filing of the Loan Documents
creating the Lenders’ Liens each shall be) secured by the Lender Liens;
	 
	 	(iii)	 	the Agent and the Lenders shall have reviewed and become
satisfied with any changes in the composition of the Borrower’s Board of
Directors and executive management occurring prior to the date of the initial
Credit Extension;
	 
	 	(iv)	 	there shall not have been any Material Adverse Effect on the
Parent, the Borrower or any of their Subsidiaries since September 30, 2005; and
	 
	 	(v)	 	payment of all facility and administrative fees required to be
paid pursuant to any Loan Document and the Fee Letter and legal fees and
disbursements of Agent’s counsel.

	4.2.	 	Each Credit Extension. The Lenders shall not be required to make any
subsequent Credit Extension unless the following conditions precedent are satisfied, to the
satisfaction of the Agent and the Lenders, as of the applicable Credit Extension Date;

	 	(i)	 	There exists no Default or Unmatured Default.
	 
	 	(ii)	 	The representations and warranties contained in Article V are
true and correct as of such Credit Extension Date except to the extent any such
representation or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall have been true and correct on
and as of such earlier date.
	 
	 	(iii)	 	There exists no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or threatened against the Borrower
or any of its Subsidiaries which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
	 
	 	(iv)	 	All legal matters incident to the making of such Credit
Extension shall be satisfactory to the Lenders and their counsel.

 

 

	 	(v)	 	There shall not have been, in the sole judgment of the Lenders,
any change from the Parent’s financial condition as reflected in the Parent’s
consolidated financial statements dated September 30, 2005, that would have a
Material Adverse Effect on the financial condition, business or operations of
the Parent, the Borrower and their Subsidiaries taken as a whole.

     Each Borrowing Notice or request for issuance of a Facility LC with respect to each such
Credit Extension shall constitute a representation and warranty by the Borrower that the conditions
contained in Sections 4.2(i), (ii) and (iii) have been satisfied. Any Lender may require a duly
completed compliance certificate in substantially the form of Exhibit F as a condition to making a
Credit Extension.

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ARTICLE V

REPRESENTATIONS
AND WARRANTIES

     The Parent and the Borrower, jointly and severally, represent and warrant to the Lenders that:

     5.1. Existence and Standing. The Borrower is a limited liability company duly formed
and organized, validly existing and in good standing under the Laws of Louisiana. The Parent is a
corporation duly organized validly existing and in good standing under the Laws of Delaware. Each
of the Parent, the Borrower and their Subsidiaries is a corporation, partnership or limited
liability company duly and properly incorporated or organized, as the case may be, validly existing
and (to the extent such concept applies to such entity) in good standing under the Laws of its
jurisdiction of incorporation or organization. Each of the Parent, the Borrower and their
Subsidiaries has all requisite authority to conduct its business in each jurisdiction in which its
business is conducted. Except as set forth in Schedule 5.1, neither the Parent, the Borrower nor
any of their Subsidiaries has used or transacted business under any other name in the five (5) year
period preceding the date hereof. The Borrower is a Wholly-Owned Subsidiary of the Parent.

     5.2. Authorization and Validity. The Parent, the Borrower and their Subsidiaries have
the power and authority and legal right to execute and deliver the Loan Documents to which they
respectively are a party and to perform their respective obligations thereunder. The execution and
delivery by the Parent, the Borrower and their Subsidiaries of the Loan Documents to which they
respectively are a party and the performance of their respective obligations thereunder have been
duly authorized by proper corporate, partnership or limited liability company proceedings, and the
Loan Documents to which they respectively are a party constitute their legal, valid and binding
obligations enforceable against them in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency or similar Laws affecting the enforcement of creditors’ rights
generally.

     5.3. No Conflict; Government Consent. Neither the execution and delivery by the
Parent, the Borrower or any of their Subsidiaries of the Loan Documents to which they respectively
are a party, nor the consummation of the transactions therein contemplated, nor compliance with the
provisions thereof will violate (i) any Law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on them or (ii) the Parent’s, the Borrower’s or any Subsidiary’s articles
or certificate of incorporation, partnership agreement, certificate of partnership, articles or
certificate of organization, by-laws, or operating or other management agreement, as the case may
be, or (iii) the provisions of any indenture, instrument or agreement to which the Parent, the
Borrower or any of their Subsidiaries is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in, or require, the creation
or imposition of any Lien in, of or on the Property of the Parent, the Borrower or a Subsidiary
pursuant to the terms of any such indenture, instrument or agreement.

 

 

No order, consent,
adjudication, approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of any governmental or public body
or authority, or any subdivision thereof, which has not been obtained by the Parent, the Borrower
or any of their Subsidiaries, is required to be obtained by the Parent, the Borrower or any of
their Subsidiaries in connection with the execution and delivery of the Loan Documents, the
borrowings under this Agreement, the payment and performance by the Borrower of the Obligations or
the legality, validity, binding effect or enforceability of any of the Loan Documents.

     5.4. Financial Statements. The September 30, 2005 consolidated financial statements
of the Parent, and its consolidated subsidiaries heretofore delivered to the Agent were prepared in
accordance with Agreement Accounting Principles in effect on the date such statements were prepared
and fairly present the consolidated financial condition and operations of the Parent and its
consolidated subsidiaries at such date and the consolidated results of their operations for the
period then ended.

     5.5. Material Adverse Effect. Since the date of the financial statements delivered
pursuant to Section 5.4, there has been no change in the business, Property, prospects, condition
(financial or otherwise) or results of operations of the Parent, the Borrower and their
Subsidiaries which could reasonably be expected to have a Material Adverse Effect.

     5.6.
Taxes. The Parent, the Borrower and their Subsidiaries have filed all United States
federal tax returns and all other tax returns which are required to be filed and have paid all
Taxes due pursuant to said returns or pursuant to any assessment received by the Parent, the
Borrower or any of their Subsidiaries, except such taxes, if any, as are being contested in good
faith and as to which adequate reserves have been provided in accordance with Agreement Accounting
Principles and as to which no Lien exists. The United States income tax returns of the Parent, the
Borrower and their Subsidiaries have not been audited by the Internal Revenue Service during the
time period between September, 2000 and the date of this Agreement. No tax liens have been filed
and no claims are being asserted with respect to any such Taxes. The charges, accruals and
reserves on the books of the Parent, the Borrower and their Subsidiaries in respect of any taxes or
other governmental charges are adequate.

     5.7. Litigation and Contingent Obligations. Except as set forth on Schedule 5.7,
there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or,
to the knowledge of any of their officers, threatened against or affecting the Borrower or any of
its Subsidiaries which could reasonably be expected to have a Material Adverse Effect or which
seeks to prevent, enjoin or delay the making of any Credit Extension. Other than any liability
incident to any litigation, arbitration or proceeding which (i) could not reasonably be expected to
have a Material Adverse Effect or (ii) is set forth on Schedule 5.7, the Borrower has no material
contingent obligations not provided for or disclosed in the financial statements referred to in
Section 5.4.

 

 

     5.8.
Subsidiaries. Schedule 5.8 contains an accurate list of all direct or indirect
Subsidiaries of the Borrower as of the date of this Agreement, setting forth their respective
jurisdictions of organization, the percentage of their respective capital stock or other ownership
interests owned by the Borrower or other Subsidiaries, their taxpayer identification number and
organizational number, if any. All of the issued and outstanding shares of capital stock or other
ownership interests of such Subsidiaries have been (to the extent such concepts are relevant with
respect to such ownership interests) duly authorized and issued and are fully paid and
non-assessable.

     5.9.
ERISA. The Unfunded Liabilities of all Single Employer Plans do not in the aggregate
exceed $ 100,000. Neither the Borrower nor any other member of the Controlled Group has incurred,
or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of
$100,000 in the aggregate. Each Plan complies in all material respects with all applicable
requirements of Law and regulations, no Reportable Event has occurred with respect to any Plan,
neither the Borrower nor any other member of the Controlled Group has withdrawn from any Plan or
initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan.

     5.10. Accuracy of Information. Neither the Loan Documents nor any other agreement,
document, certificate, statement, information, exhibit or report (other than projections and review
reports) furnished to the Agent or any Lender by or on behalf of the Borrower or any Subsidiary in
connection with the transactions contemplated in any of the Loan Documents contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading. All writings heretofore or hereafter
exhibited or delivered to the Agent or any Lender by or on behalf of the Borrower or any Subsidiary
are and will be genuine and in all respects what they purport to be.

     5.11. Regulation U. Margin stock (as defined in Regulation U) constitutes less than
25% of the value of those assets of the Parent, the Borrower and their Subsidiaries which are
subject to any limitation on sale, pledge, or other restriction hereunder.

     5.12. Material Agreements. Neither the Parent, the Borrower nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other corporate restriction which
could reasonably be expected to have a Material Adverse Effect. Neither the Parent, the Borrower
nor any Subsidiary is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in (i) any agreement to which it is a party, which
default could reasonably be expected to have a Material Adverse Effect or (ii) any agreement or
instrument evidencing or governing Indebtedness.

     5.13. Compliance With Laws.

          5.13.1. The Parent, the Borrower and their Subsidiaries have complied with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or foreign

 

 

government or any
instrumentality or agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property except for any failure to comply with any
of the foregoing which could not reasonably be expected to have a Material Adverse Effect.

          5.13.2. The Parent, the Borrower and their Subsidiaries have all material licenses, permits,
franchises, or other governmental authorizations necessary for the ownership and, if it is the
operator, operation of their Oil and Gas Properties and the conduct of their respective businesses,
and are in compliance in all material respects with the terms and conditions of all such licenses,
permits, franchises, or other governmental authorizations. Their Oil and Gas Properties (and
properties unitized therewith) operated by Borrower or its Subsidiaries have been maintained,
operated and developed in a good and workman like manner and in conformity with all applicable Laws
and all rules, regulations and orders of all duly constituted Tribunals having jurisdiction and in
conformity with the provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas
Properties; specifically in this connection, (i) after the date of this Agreement, no Oil and Gas
Property is subject to having allowable production reduced below the full and regular allowable
(including the maximum permissible tolerance) because of any overproduction (whether or not the
same was permissible at the time) prior to the date of this Agreement; and (ii) none of the wells
comprising a part of the Oil and Gas Properties (or properties unitized therewith) are deviated
from the vertical more than the maximum permitted by applicable Laws and regulations, rules and
orders of any Tribunal having appropriate jurisdiction, and such wells are, in fact, bottomed under
and are producing from, and the wellbores are wholly within, the Oil and Gas Properties (or in the
case of wells located on properties unitized therewith, such unitized properties).

     5.14. Ownership/Title to the Properties; Licenses; Liens.

          5.14.1. Except as set forth on Schedule 5.14, on the date of this Agreement, the Parent, the
Borrower and their Subsidiaries will have good and defensible title, free of all Liens other than
those permitted by Section 6.15 or contemplated otherwise in this Agreement, all of the Collateral
(including but not limited to their respective material Oil and Gas Properties).

          5.14.2. After giving full effect to the Liens permitted under Section 6.15, except as set out
in Schedule 5.14, the Parent, the Borrower or their Subsidiaries own the net interests in
production attributable to the wells and units evaluated in the Initial Reserve Report or the most
recent Reserve Report furnished to the Lenders pursuant to Sections 6.1(x) or (xi). The ownership
of the Oil and Gas Properties shall not in any material respect obligate the Borrower or any
Subsidiary to bear the costs and expenses relating to the maintenance, development and operations
of each such Oil and Gas Property in any amount in excess of the working interest of each Oil and
Gas Property set forth in the Initial Reserve Report or the most recent Reserve Report furnished to
the Lenders pursuant to Sections 6.1(x) or (xi). The Parent, the Borrower and their Subsidiaries
shall have paid all royalties payable under the oil and gas leases to which

 

 

they are operator,
except those not yet due or contested in accordance with the terms of the applicable joint
operating agreement or otherwise contested in good faith by appropriate proceedings or temporarily
suspended in the ordinary course of business pending determination of title ownership. Upon the
delivery of each Reserve Report furnished to the Lenders pursuant to Sections 6.1(x) or (xi), the
statements made in the preceding sentences of this section shall be true with respect to such
Reserve Reports.

          5.14.3 The Borrower and each Subsidiary possesses all material licenses, permits, franchises,
patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise
possess the right to use such intellectual property without violation of the rights of any other
Person) which are necessary to carry out their respective business as presently conducted and as
presently proposed to be conducted hereafter, and neither the Borrower nor any Subsidiary is in
violation in any material respect of the terms under which it possesses such intellectual property
or the right to use such intellectual property.

          5.14.4 Upon filing of the Deeds of Trust with the Clerk of the County or Parish where the
Property thereby covered is located and the financing statements with the appropriate governmental
entity, and upon filing financing statements relating to the other Collateral Documents with the
appropriate governmental entity, the Collateral Documents will constitute legal, valid and
continuing perfected first liens on the Collateral as security for the Obligations, free and clear
of all other Liens, except for the Liens permitted by Section 6.15.

     5.15. Plan Assets; Prohibited Transactions. The Borrower is not an entity deemed to
hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee benefit plan (as
defined in Section 3(3) of ERISA) which is subject to Title I of ERISA or any plan (within the
meaning of Section 4975 of the Code), and neither the execution of this Agreement nor the making of
Loans hereunder gives rise to a prohibited transaction within the meaning of Section 406 of ERISA
or Section 4975 of the Code.

     5.16. Environmental Matters.

          Schedule 5.16 identifies: (a) all environmental audits, analyses, assessments, or occupational
health studies (whether routine or special) with regard to any Property ordered or undertaken by
the Borrower or any Subsidiary or under the direction, suggestion of or by any Tribunal, lender or
other Person with an interest in such Property, any insurer or any predecessor landowner or lessee
of such Property or any predecessor in interest and, in each case, now within the possession of the
Parent, the Borrower or any of their Subsidiaries; (b) the results of any and all tests or analyses
of water, soil, air, buildings on or near any Property, whether or not compliance was questioned or
indicated which have been taken or made in the period five (5) years prior to the date hereof,
whether conducted by the Borrower or any Subsidiary or any predecessor landowner or lessee of the
Property, any Tribunal or any other Person; (c) the results of and circumstances surrounding any
Tribunal inspection or audit of any Property or each operating entity of the Parent, the Borrower
and any Subsidiary whether routine or relating

 

 

directly or indirectly to contamination or
non-compliance with the Applicable Environmental Laws; or (d) any claim or complaint concerning the
Applicable Environmental Laws relative to the Borrower or any Subsidiary. Except as set forth in
Schedule 5.16, or except as would not have a Material Adverse Effect:

	 	(i)	 	The Parent, the Borrower and their Subsidiaries and their Properties are not in
violation of Applicable Environmental Laws, or subject to any existing, pending or, to
the best knowledge of the Borrower, threatened investigation or inquiry by any Tribunal
or any other Person under or with respect to Applicable Environmental Laws, or subject
to any remedial obligations under Applicable Environmental Laws, and are in compliance
with all permits and licenses required under Applicable Environmental Laws, and this
representation will continue to be true and correct following disclosure to the
applicable Tribunal of all relevant facts, conditions and circumstances, if any,
pertaining to the Parent, the Borrower and their Subsidiaries and their Properties.
	 
	 	(ii)	 	The Borrower undertook, at the time of acquisition of such Properties, all
appropriate inquiry into the previous ownership and uses of such Properties consistent
with good commercial or customary practice. The Borrower has taken all steps necessary
to determine and has determined that no Hazardous Substances or Solid Wastes have been
Disposed of or otherwise Released at, into, upon or under such Properties. The use
which the Borrower makes and intends to make of such Properties will not result in the
use, treatment, storage or Disposal or other Release of any Hazardous Substance or
Solid Waste at, into, upon or under such Properties, except such usage, and temporary
storage in anticipation of usage, as is in the ordinary course of business and in
compliance with Applicable Environmental Laws.
	 
	 	(iii)	 	No notice, notification, demand, request for information, citation, summons,
or order has been received, no review is pending, no penalty has been assessed and, to
the best knowledge of Borrower, no complaint has been filed, no penalty has been
assessed, and no investigation is threatened by any Tribunal or any other Person with
respect to (a) any alleged generation, treatment, storage, recycling, transportation,
Disposal, or Release of any Hazardous Substances by the Borrower or any Subsidiary or
on any Property owned by the Borrower or any Subsidiary, (b) any material remedial
action which might be needed to respond to any such alleged generation, treatment,
storage, recycling, transportation, Disposal, or Release, or (c) any alleged failure by
the Borrower or any Subsidiary to have any permit, license, or authorization required
in connection with the conduct of their business or with respect to any such
generation, treatment, storage, recycling, transportation, Disposal, or Release.

 

 

	 	(iv)	 	There are no Liens arising under or pursuant to any Applicable Environmental
Laws on any of the Properties owned or leased by the Borrower or any Subsidiary, and no
government actions have been taken or are in process which could subject any of such
Properties to such Liens; nor would the Borrower or any Subsidiary be required to place
any notice or restrictions relating to the presence of Hazardous Substances at any
Properties owned by it in any deed to such Properties.

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

     5.18. Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is
a “holding company” or a “subsidiary company” of a “holding company”, or an “affiliate” of a
“holding company” or of a “subsidiary company” of a “holding company”, within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or subject to the Federal Power Act, and
neither the Borrower nor any Subsidiary is subject to any other Law regulating them as a common
carrier or a contract carrier in the rendering of electricity, gas, steam, water, or other similar
service as a regulated public utility.

     5.19.
Insurance. The Certificates signed by the applicable insurers that attest to the
existence of, and summarizes, the property and casualty insurance program carried by the Borrower
with respect to itself and its Subsidiaries and that has been furnished by the Borrower to the
Agent and the Lenders, is complete and accurate. This summary includes the insurer’s or insurers’
name(s), policy number(s), expiration date(s), amount(s) of coverage, type(s) of coverage,
exclusion(s), and deductibles. This summary also includes similar information, and describes any
reserves, relating to any self-insurance program that is in effect.

     5.20.
Solvency.

          5.20.1. Immediately after the consummation of the transactions to occur on the date the
initial Credit Extension is to be made hereunder and immediately following the making of
each Credit Extension, if any, made on such date hereof and after giving effect to the
application of the proceeds of such Credit Extension, (a) the fair value of the assets of
the Parent, the Borrower and their Subsidiaries on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of
the Parent, the Borrower and their Subsidiaries on a consolidated basis; (b) the present
fair saleable value of the Property of the Parent, the Borrower and their Subsidiaries on a
consolidated basis will be greater than the amount that will be required to pay the probable
liability of the Parent, the Borrower and their Subsidiaries on a consolidated basis on
their debts and other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) the Parent, the Borrower and their
Subsidiaries on a consolidated basis will be able to pay their debts and liabilities,

 

 

subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) the Parent, the Borrower and their Subsidiaries on a consolidated basis
will not have unreasonably small capital with which to conduct the businesses in which they
are engaged as such businesses are now conducted and are proposed to be conducted after the
date hereof.

     5.20.2. The Borrower does not intend to, or to permit any of its Subsidiaries to, and
does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to
pay such debts as they mature, taking into account the timing of and amounts of cash to be
received by it or any such Subsidiary and the timing of the amounts of cash to be payable on
or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.

     5.21. Burdensome Provisions. Neither Borrower nor any Subsidiary is a party to any
agreement or instrument containing any burdensome or uncustomary provisions, or subject to any
charter or other corporate restrictions or to any judgment, order, writ, injunction, decree, award,
rule or regulation, which will or could cause a Material Adverse Effect.

     5.22. Relationship with the Lenders. Neither Borrower nor any Person having “control”
(as that term is defined in 12 U.S.C. § 375b(9) or in regulations promulgated pursuant thereto) of
the Borrower is an “executive officer”, “director” or “principal shareholder” (as those terms are
defined in 12 U.S.C. § 375b(8) or (9) or in regulations promulgated pursuant thereto) of any
Lender, or a bank holding company of which any Lender is a Subsidiary or of any Subsidiary of a
bank holding company of which any Lender is a Subsidiary.

     5.23. Jurisdiction of Organization. The Borrower’s and each Subsidiary’s jurisdiction
of organization and organizational identification number and taxpayer identification number are as
set forth on Schedule 5.23.

     5.24. Full Disclosure. There are no significant material facts or conditions relating
to the making of Credit Extensions, any of the Collateral and/or the financial condition and
business of the Borrower or any Subsidiary which could, collectively or individually, cause a
Material Adverse Effect, and which have not been fully disclosed, in writing, to the Lenders.
There are no statements or conclusions in any Reserve Report which are based upon or include
materially misleading information or fail to take into account material information regarding the
matter reported therein, except as to projections as to the results of future operations and
estimated quantities of reserves furnished to the Lenders, as to which the Borrower represents that
such projections were made based on assumptions believed by the Borrower to be reasonable at the
time made. The Borrower has heretofore delivered to each Lender true, correct and complete copies
of the Initial Reserve Report.

     5.25. Gas Imbalances. Except as set forth on Schedule 5.25, as of October 31, 2005,
on a net basis there are no gas imbalances, take or pay or other prepayments with respect to the
Borrower’s or any Subsidiary’s Oil and Gas Properties which would require the Borrower or a

 

 

Subsidiary to deliver Hydrocarbons produced from the Borrower’s or such Subsidiary’s Oil and Gas
Properties at some future time without then or thereafter receiving full payment therefor.

     5.26 No Default. No event has occurred and is continuing which constitutes a Default
or an Unmatured Default.

Remainder of this page intentionally left blank.

 

 

ARTICLE VI

COVENANTS

     During the term of this Agreement, unless the Required Lenders shall otherwise consent in
writing:

     6.1. Financial Reporting. The Parent will maintain, for itself and each Subsidiary, a
system of accounting established and administered in accordance with Agreement Accounting
Principles, and furnish to the Lenders:

	 	(i)	 	within ninety (90) days after the close of each of its fiscal years,
unqualified audited financial statements prepared by independent certified public
accountants acceptable to the Lenders, prepared in accordance with Agreement Accounting
Principles on a consolidated and consolidating basis for itself and its subsidiaries,
including balance sheets as of the end of such period, related profit and loss and
reconciliation of surplus statements, and a statement of cash flows, accompanied by any
management letter prepared by said accountant in connection with the annual audited
financial statements;
	 
	 	(ii)	 	within forty-five (45) days after the close of the first three quarterly
periods of each of its fiscal years, for itself and its Subsidiaries, consolidated and
consolidating unaudited balance sheets as at the close of each such period and
consolidated and consolidating profit and loss and reconciliation of surplus statements
and a statement of cash flows for the period from the beginning of such fiscal year to
the end of such quarter, all certified by its chief financial officer;
	 
	 	(iii)	 	together with the financial statements required under Sections 6.1(i) and
(ii), a compliance certificate in substantially the form of Exhibit F signed by its
chief financial officer showing the calculations necessary to determine compliance with
this Agreement and stating that no Default or Unmatured Default exists, or if any
Default or Unmatured Default exists, stating the nature and status thereof;
	 
	 	(iv)	 	within two hundred seventy (270) days after the close of each fiscal year, a
statement of the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA;
	 
	 	(v)	 	as soon as possible and in any event within ten (10) days after the Parent
knows that any Reportable Event has occurred with respect to any Plan, a statement,
signed by the chief financial officer of the Parent, describing said Reportable Event
and the action which the Parent proposes to take with respect thereto;

 

 

	 	(vi)	 	as soon as possible and in any event within ten (10) days after receipt by the
Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of
its Subsidiaries is or may be liable to any Person as a result of the Release by the
Borrower, any of its Subsidiaries, or any other Person of any Hazardous Substance into
the environment, and (b) any notice alleging any violation of any Applicable
Environmental Law by the Borrower or any of its Subsidiaries;
	 
	 	(vii)	 	promptly upon the furnishing thereof to the shareholders of the Parent, copies
of all financial statements, reports and proxy statements so furnished;
	 
	 	(viii)	 	promptly upon the filing thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which the Parent files with the Securities
and Exchange Commission;
	 
	 	(ix)	 	by March 1st of each year, a Reserve Report prepared by an independent
petroleum engineer chosen by the Borrower and acceptable to the Required Lenders (the
“Independent Engineer”), which report shall be dated as of January 1 of such year,
concerning the Oil and Gas Properties and interests owned by the Parent, the Borrower
and their Subsidiaries which are located in or offshore of the United States of America
and which have attributable to them Proved Reserves. This report shall be in form
satisfactory to Agent and shall include such reasonable assumptions as the Agent shall
specify (including discount rates and projected Hydrocarbon price assumptions), shall
contain sufficient information to enable the Borrower to meet the reporting
requirements concerning oil and gas reserves contained in Regulations S-K and S-X
promulgated by the Securities and Exchange Commission, shall take into account any
material “over-produced” and “under produced” status under gas balancing arrangements,
and shall contain information and analysis comparable in scope to that contained in the
Initial Reserve Report, including the proven oil and gas reserves of the Parent, the
Borrower and their Subsidiaries as of the date of such report, and the discounted net
present value (at a rate acceptable to the Lenders). Together with such report, the
Borrower shall furnish to the Lenders any updated production history of the proven oil
and gas reserves of the Parent, the Borrower and their Subsidiaries as of such date,
the lease operating expenses attributable to the Borrower’s and its Subsidiaries’ Oil
and Gas Properties for the prior twelve month period, together with any other
information as to the operations of the Parent, the Borrower and their Subsidiaries as
reasonably requested by the Lenders. Together with such report, the Borrower shall
furnish to the Lenders such additional data and information concerning pricing,
quantities, or volume of production from or attributable to the Oil and Gas Properties
with respect thereto as the Lenders may reasonably request. This report shall
distinguish (or shall be delivered together with a certificate from an appropriate
officer of the Borrower which distinguishes)

 

 

	 	 	 	those properties treated in the report which are Collateral from those properties treated in the report which are not
Collateral;
	 
	 	(x)	 	by September 1st of each year and promptly following notice of an additional
Borrowing Base redetermination under Section 2.2.3 above, a Reserve Report prepared as
of July 1 of such year by petroleum engineers who are employees of the Borrower,
together with an accompanying report on Oil and Gas Property sales, Oil and Gas
Property purchases and changes in categories, both in the same form and scope as the
reports in clause (x) above. The Reserve Report shall be prepared by or at the
direction of the Borrower and shall be certified by the senior petroleum engineer of
the Borrower as to the truth and accuracy of the information utilized to prepare the
Reserve Report and the estimates included therein;
	 
	 	(xi)	 	as soon as available, and in any event within forty-five (45) days after the
end of each fiscal quarter, a report setting forth volumes, prices and margins for all
marketing activities of the Borrower and Subsidiaries during such fiscal quarter; and
	 
	 	(xii)	 	such other information (including reserve, engineering, geological, and title
information) as the Agent or any Lender may from time to time reasonably request;

     6.2. Use of Proceeds. The Borrower will, and will cause the Parent and each of their
Subsidiaries to, use the proceeds of the Credit Extensions (x) for the acquisition, development and
exploration of Oil & Gas Properties; (y) for working capital requirements, capital expenditures,
permitted acquisitions and other general corporate purposes; and (z) Letters of Credit. The
Borrower will not use any of the proceeds of the Credit Extensions to purchase or carry any “margin
stock” (as defined in Regulation U) or extend credit to others for the purpose of purchasing or
repurchasing or carrying margin stock.

     6.3. Notice of Default. The Borrower will, and will cause each Subsidiary to, give
prompt notice in writing to the Lenders of the occurrence of any Default or Unmatured Default and
of any other development, financial or otherwise, which could reasonably be expected to have a
Material Adverse Effect. Furthermore the Borrower will, and will cause each Subsidiary to, give
prompt notice in writing to the Lenders of the occurrence of any “Default” or “Event of Default” as
defined in the Senior Notes Indenture.

     6.4. Conduct of Business. The Borrower will, and will cause each Subsidiary to, carry
on and conduct its business in substantially the same manner and in substantially the same fields
of enterprise as it is presently conducted and do all things necessary to remain duly incorporated
or organized, validly existing and (to the extent such concept applies to such entity) in good
standing as a domestic corporation, partnership or limited liability company in its jurisdiction of

 

 

incorporation or organization, as the case may be, and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted.

     6.5.
Taxes. The Borrower will, and will cause each Subsidiary to, timely file complete and
correct United States federal and applicable foreign, state and local tax returns required by Law
and pay when due all Taxes, assessments and governmental charges and levies upon it or its income,
profits or Property, except those which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside in accordance with
Agreement Accounting Principles.

     6.6.
Insurance. The Borrower will, and will cause each Subsidiary to, maintain with
financially sound and reputable insurance companies insurance on all their Property in such amounts
and covering such risks as is consistent with sound business practice, and the Borrower will
furnish to any Lender upon request full information as to the insurance carried.

     6.7. Compliance with Laws. The Borrower will, and will cause each Subsidiary to,
comply with all Laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards
to which it may be subject including, without limitation, all Environmental and ERISA Laws.

     6.8. Maintenance of Properties. The Borrower will, and will cause each Subsidiary to,
do all things necessary to, or in respect of non-operated properties cause the operator to,
maintain, preserve, protect and keep in good repair, working order and condition (ordinary wear and
tear excepted) in accordance with good industry practices all of the Oil and Gas Properties owned
by it including, without limitation, all equipment, machinery and facilities, and will make all
necessary and proper repairs, renewals and replacements so that its business carried on in
connection therewith may be properly conducted at all times. The state and condition of the
Collateral and the Oil and Gas Properties owned by the Parent, the Borrower and their Subsidiaries
will be preserved and maintained in accordance with the foregoing standards, except to the extent a
portion of such Oil and Gas Properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts. The Borrower will, and will cause each Subsidiary to, or in
respect of non-operated properties cause the operator to, promptly pay and discharge or cause to be
paid and discharged all delay rentals, royalties, expenses and debt accruing under, and perform or
cause to be performed each and every act, matter or thing required by, each and all of the
assignments, deeds, leases, sub-leases, contracts and agreements affecting the Borrower’s or any
Subsidiary’s interests in its Oil and Gas Properties and will do all other things necessary to keep
unimpaired their respective rights with respect thereto and prevent any forfeiture thereof or a
default thereunder, except to the extent a portion of the Oil and Gas Properties is no longer
capable of producing Hydrocarbons in economically reasonable amounts or without potential for
commercial development. The Borrower will, and will cause each Subsidiary to, or in respect of
non-operated properties cause the operator to, operate its Oil and Gas Properties (or cause its
owned but non-operated Oil and Gas Properties to be operated) in a careful and efficient manner in
accordance with the practices of the industry and in compliance

 

 

with all applicable contracts and
agreements and in compliance in all material respects with all applicable Laws.

     6.9.
Inspection. The Borrower will, and will cause each Subsidiary to, keep accurate books
and financial records and to permit the Agent and the Lenders, by their respective representatives
and agents, to inspect any of the Property, books and financial records of the Borrower and each
Subsidiary, to examine and make copies of the books of accounts and other financial records of the
Borrower and each Subsidiary, and to discuss the affairs, finances and accounts of the Borrower and
each Subsidiary with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Agent or any Lender may designate.

     6.10. Dividends; Repurchase of Capital Stock; etc.. Neither the Parent nor the
Borrower will, nor will they permit any Subsidiary to, declare or pay any dividends or make any
distributions on its capital stock or membership interests (other than dividends payable in its own
capital stock or membership interests, as applicable) or redeem, repurchase or otherwise acquire or
retire any of its capital stock or membership interests at any time outstanding, except (i) that
the Borrower or any Subsidiary may declare and pay dividends or make distributions to its members
or shareholders on a pro rata basis; (ii) the Parent may repurchase, repay, defease, redeem or
otherwise acquire or retire any capital stock with the proceeds of the contemporaneous issuance of
the capital stock of the Parent and (iii) with the prior approval of the Required Lenders, the
Parent may repurchase its capital stock upon the termination of employment of any officer or
employee of the Parent, the Borrower or any of their Subsidiaries or upon the termination of the
services of any director of such Persons; provided further that, the Parent may repurchase up to
$1,000,000 of capital stock in the aggregate from one or more officers or employees of such Persons
upon the termination of the employment of such officers or employees.

     6.11.
Indebtedness. Neither the Borrower nor the Parent will, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

	 	(i)	 	the Credit Extensions;
	 
	 	(ii)	 	Indebtedness existing on the date hereof and described in Schedule 6.11;
	 
	 	(iii)	 	Indebtedness arising under Rate Management Transactions permitted under
Section 6.23;
	 
	 	(iv)	 	Indebtedness among the Parent, the Borrower or any of their Subsidiaries;
	 
	 	(v)	 	Indebtedness associated with bonds or surety obligations required by any
governmental or regulatory authority or prior owner in connection with owning or
operating its Oil and Gas Properties in the ordinary course of business;

 

 

	 	(vi)	 	unsecured accounts payable incurred in the ordinary course of business which
remain unpaid after the expiration of ninety (90) days beyond invoice date or are being
contested in good faith and as to which such reserve as is required by Agreement
Accounting Principles has been made;
	 
	 	(vii)	 	Indebtedness not to exceed $2,000,000 at any one time outstanding related to
purchase money financing;
	 
	 	(viii)	 	Indebtedness relating to Capitalized Lease Obligations not to exceed $2,000,000 at
any one time outstanding;
	 
	 	(ix)	 	Indebtedness relating to net production imbalances not to exceed $2,000,000 at
any one time outstanding;
	 
	 	(x)	 	Indebtedness relating to royalties, overriding royalties and other interests
carved out of production incurred in the ordinary course of oil and gas exploration and
development projects;
	 
	 	(xi)	 	Indebtedness associated with the financing of premiums for business insurance
of the Parent, the Borrower and their Subsidiaries;
	 
	 	(xii)	 	Contingent Obligations of the Parent in connection with guarantees of the
obligations of the Borrower and its Subsidiaries in connection with owning and
operating Oil and Gas Properties in the ordinary course of business.
	 
	 	(xiii)	 	Non-Recourse Indebtedness not to exceed $25,000,000 at any one time outstanding; and
	 
	 	(xiv)	 	Indebtedness under the Senior Notes;
	 
	 	(xv)	 	Indebtedness consisting of a guaranty of any Indebtedness which is otherwise
permitted;
	 
	 	(xvi)	 	any renewal, extension, rearrangement or refinancing (but not increases in)
any of the Indebtedness permitted by clauses (ii) and (xiv) of this Section 6.11; and
	 
	 	(xvii)	 	in addition to any of the exceptions listed above, any Indebtedness of the Parent,
the Borrower or their Subsidiaries in an aggregate principal amount at any one time
outstanding not to exceed $5,000,000.

     6.12. Acquisitions and Merger. Except as provided below, neither the Parent, the
Borrower nor any Subsidiary will, directly or indirectly, acquire all or any Substantial Portion of

 

 

the property, assets or stock of, or interest in, any Person, or merge or consolidate with or into
any other Person, except that a Subsidiary may merge into another Subsidiary or into the Parent or
the Borrower. Notwithstanding the foregoing, the Parent, the Borrower or any Subsidiary may
acquire by purchase, merger or otherwise, additional Oil and Gas Properties or the capital stock or
interests of any Person whose business is primarily the ownership and operation of Oil & Gas
Properties.

     6.13. Sale of Assets. The Borrower will not, nor will it permit any Subsidiary to,
lease, sell or otherwise dispose of its Property to any other Person, except:

	 	(i)	 	the sales of Hydrocarbons in the ordinary course of business.
	 
	 	(ii)	 	transfers of interests in Oil and Gas Properties in the ordinary course of the
joint development of Oil and Gas Properties with others, including without limitation
transfers to other parties to joint development agreements, participation agreements,
farmout agreements, farmin agreements, exploration agreements, operating agreements and
unit agreements;
	 
	 	(iii)	 	the sale or transfer of equipment that is obsolete, worn-out, depleted or no
longer necessary for their business or is replaced by equipment of at least comparable
value and use;
	 
	 	(iv)	 	during any consecutive twelve month period, sales of Oil and Gas Properties in
the ordinary course that will not exceed, in the aggregate, five percent (5%) of the
Borrowing Base then in effect, and that will not materially impair or diminish the
value of the Collateral or the Borrower’s financial condition; and
	 
	 	(v)	 	leases, sales or other dispositions of Oil and Gas Properties, other than those
permitted in subsections (i) through (iv) above, that, during any consecutive
twelve-month period, do not constitute a Substantial Portion of the Oil and Gas
Properties of the Borrower and its Subsidiaries.

Upon the written request of the Borrower setting forth in reasonable detail the transfer, sale
or conveyance of assets in a transaction which may be permitted above, the Agent will execute
and deliver to the Borrower such documentation as is reasonably necessary in the opinion of the
Agent and its counsel to release the Lender Liens on assets so transferred, sold or conveyed.

     6.14. Investments and Acquisitions. The Borrower will not, nor will it permit any
Subsidiary to, make or suffer to exist any Investments or commitments therefore, or to create any
Subsidiary or to become or remain a partner in any partnership or joint venture except:

	 	(i)	 	Cash Equivalent Investments;

 

 

	 	(ii)	 	existing Investments in Subsidiaries and other Investments in existence on the
date hereof and described in Schedule 6.14;
	 
	 	(iii)	 	acquisition of interests in Oil and Gas Properties and related assets in the
ordinary course of the conduct of the exploration, development and production business
of the Borrower and Parent;
	 
	 	(iv)	 	Investments made in the ordinary course of acquiring, exploring, developing and
producing Oil and Gas Properties and marketing, transporting, processing and treating
production therefrom;
	 
	 	(v)	 	loans and advances and other Investments among the Parent, the Borrower and any
of their Subsidiaries;
	 
	 	(vi)	 	any Subsidiary may be created or acquired if within two Business Days of its
creation or acquisition it becomes a Guarantor by executing a Guaranty substantially
similar to the Guaranty;
	 
	 	(vii)	 	any acquisition or merger as permitted in Section 6.12;
	 
	 	(viii)	 	Investments made with respect to Rate Management Transactions permitted by Section
6.23; and
	 
	 	(xi)	 	Investments (including Indebtedness and other obligations) received in
connection with the bankruptcy or reorganization of suppliers, customers and joint
owners of Oil and Gas Properties and in settlement of delinquent obligations of, and
other disputes with such Persons, in the ordinary course of business not to exceed
$2,000,000.

     6.15.
Liens. The Borrower will not, nor will it permit any Subsidiary to, create, incur, or
suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries,
except:

	 	(i)	 	Liens for taxes, assessments or governmental charges or levies on its Property
if the same shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate proceedings and for
which adequate reserves in accordance with Agreement Accounting Principles shall have
been set aside on its books;
	 
	 	(ii)	 	Liens imposed by Law, such as carriers’, warehousemen’s and mechanics’ liens
and other similar liens arising in the ordinary course of business which secure payment
of obligations not more than 60 days past due, or are being contested in

 

 

	 	 	 	good faith and
by appropriate proceedings and for which adequate reserves in accordance with Agreement
Accounting Principles shall have been set aside on its books;
	 
	 	(iii)	 	Liens arising out of pledges or deposits under worker’s compensation Laws,
unemployment insurance, old age pensions, or other social security or retirement
benefits, or similar legislation;
	 
	 	(iv)	 	utility easements, building restrictions and such other encumbrances or charges
against real property as are of a nature generally existing with respect to properties
of a similar character and which do not in any material way affect the marketability of
the same or interfere with the use thereof in the business of the Borrower or its
Subsidiaries;
	 
	 	(v)	 	Liens existing from time to time hereof in favor of the Minerals Management
Service;
	 
	 	(vi)	 	Liens in favor of the Agent, for the benefit of the Lenders, granted pursuant
to any Collateral Document and other Liens expressly permitted under the Collateral
Documents;
	 
	 	(vii)	 	Liens in favor of operators and non-operators under joint operating agreements
or similar contractual arrangements arising in the ordinary course of the business of
the Borrower or its Subsidiaries to secure amounts owing, which amounts are not more
than sixty (60) days past due or are being contested in good faith by appropriate
proceedings, if such reserve as may be required by Agreement Accounting Principles
shall have been made therefor;
	 
	 	(viii)	 	Liens under production sales agreements, division orders, operating agreements, and
other agreements customary in the oil and gas business for processing, producing, and
selling Hydrocarbons securing obligations not constituting Indebtedness and provided
that such Liens do not secure obligations to deliver Hydrocarbons at some future date
without receiving full payment therefor within ninety (90) days of delivery;
	 
	 	(ix)	 	Liens in connection with Rate Management Transactions permitted under Section
6.23; and
	 
	 	(x)	 	Liens or any insurance policy or on any prepaid premiums on any such policy
securing Indebtedness related to the payment of insurance premiums with respect to such
policy which Indebtedness is permitted under Section 6.11(xi).

 

 

     6.16.
Operating Leases. Neither the Borrower nor any Subsidiary will enter into or
remain liable upon any Operating Lease, except for Operating Leases which have Operating Lease
Obligations of not more than $2,000,000 per annum.

     6.17. Trade Liabilities. The Borrower and each of its Subsidiaries will timely pay
all liabilities owed by it on ordinary trade terms to vendors, suppliers, and other Persons
providing goods and services used by it in the ordinary course of its business, except those which
are being contested in good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside in accordance with Agreement Accounting Principles.

     6.18.
Affiliates. The Parent shall not permit the assets of PetroQuest Oil & Gas to ever be
anything other than the legal interests in Oil and Gas Properties, the beneficial interests of
which is owned by Persons other than the Borrower and/or the Parent. The Parent will not permit
any other Person to become a member of PetroQuest Oil & Gas. The Parent will not nor will it
permit the Borrower or any other Subsidiary to transfer assets of the Parent, the Borrower, or any
Subsidiary to or assume or discharge the liabilities of PetroQuest Oil & Gas. The Borrower will
not, and will not permit any Subsidiary to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service) with, or make any payment or transfer
to, any Affiliate except in the ordinary course of business and pursuant to the reasonable
requirements of the Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no
less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain
in a comparable arms-length transaction. Except as permitted below, Parent will not nor will it
permit the Borrower or any other Subsidiary to transfer assets of Parent, the Borrower or any other
Subsidiary to any Excluded Subsidiary, provide, however, Parent, the Borrower or any Subsidiary may
fund working capital to CSP Pipeline in an amount not to exceed $250,000 in any calendar year.

     6.19. Agreement to Deliver Collateral Documents. The Borrower agrees to deliver, and
to cause each Subsidiary to deliver, to further secure the Obligations whenever requested by the
Agent in its sole and absolute discretion, Deeds of Trust, mortgages, chattel mortgages, security
agreements, financing statements and other Collateral Documents in form and substance satisfactory
to the Agent for the purpose of granting, confirming, and perfecting first and prior liens or
security interests in any real or personal Property now owned or hereafter acquired by the Borrower
or any Subsidiary, so as to maintain at all times such liens and security interests in, to and on
at least ninety percent (90%) of the PDP Present Value of Oil and Gas Properties owned by the
Borrower and its Subsidiaries and located in the United States or it s offshore waters and at least
eighty percent (80%) of the aggregate Proved Reserves of Oil and Gas Properties located in the
United States or its offshore waters owned by the Borrower or any of its Subsidiaries. The
Borrower also agrees to deliver, and to cause each Subsidiary to deliver, whenever requested by the
Agent in its sole and absolute discretion, favorable title opinions from legal counsel acceptable
to the Agent with respect to any of the Oil and Gas Properties designated by the Agent, based upon
abstract or record examinations to dates acceptable to the Agent and (i) stating that such Person
has good and defensible title to such properties and

 

 

interests, free and clear of all Liens other
than Liens permitted under Section 6.15, (ii) confirming that such Oil and Gas Properties and
interests therein are subject to Collateral Documents securing the Obligations that constitute and
create legal, valid and duly perfected first deed of trust or mortgage liens in such properties and
interests and first priority assignments of and security interests in the Hydrocarbons attributable
to such properties and interests and the proceeds thereof, and (iii) covering such other matters as
the Agent may request.

     6.20. Maintenance of Liens. The Borrower will perform, and will cause each Subsidiary
to perform, such acts and duly authorize, execute, acknowledge, deliver, file and record such
additional assignments, security agreements, deeds of trust, mortgages and other agreements,
documents, instruments and certificates as the Lenders may reasonably deem necessary or appropriate
in order to perfect and maintain the Liens in favor of the Lenders and preserve and protect the
Rights of the Lenders.

     6.21. Title Information. By March 1st and September 1st of each year, the Borrower
will deliver any acquisition summaries, title opinions and due diligence reports prepared in
connection with the acquisition and the financing of the acquisition of such Oil and Gas Properties
prepared for the Borrower or the Person financing such acquisition and such additional title
information in form and substance acceptable to the Lenders as is requested so that the Lenders
shall have received, together with the title information previously received by the Lenders,
satisfactory title information covering Oil and Gas Properties representing ninety percent (90%) of
the value of such Oil and Gas Properties as set forth in such Reserve Report, as such value is set
forth therein. From time to time upon written request of the Agent, the Borrower shall cause to be
delivered and addressed to the Agent and the Lenders the written opinions of counsel of the
Borrower and any Guarantor to the effect that the Deeds of Trust constitute first, prior perfected
Liens on the Oil and Gas Properties the States of Texas and Louisiana, in substantially the form of
Exhibit G.

     6.22. Deposit of Production Proceeds. Notwithstanding that, by the terms of the
various Loan Documents, the Parent, the Borrower and their Subsidiaries are and will be assigning
to the Agent and the Lenders all of the “Production Proceeds” (as defined therein) accruing to the
Property covered thereby, so long as no Default has occurred the Borrower and each Subsidiary may
continue to receive from the purchasers of production all such Production Proceeds, subject,
however, to the Liens created under the Loan Documents, which Liens are hereby affirmed and
ratified and provided that to further secure the Agent’s and Lenders’ Liens upon such Production
Proceeds, the Borrower and each Subsidiary agree to maintain their operating accounts with the
Agent and not to redirect the payment of Production Proceeds from such operating accounts without
the written consent of the Agent. Upon the occurrence of a Default, the Agent and the Lenders may
exercise all rights and remedies granted under the Loan Documents, including the right to obtain
possession of all Production Proceeds then held by the Borrower or any Subsidiary or to receive
directly from the purchasers of production all Production Proceeds. In no case shall any failure,
whether purposed or inadvertent, by the Agent or the Lenders to collect directly any such
Production Proceeds constitute in any way a waiver,

 

 

remission or release of any of their rights
under the Loan Documents, nor shall any release of any Production Proceeds by the Agent or the
Lenders to the Borrower or any Subsidiary constitute a waiver, remission, or release of any other
Production Proceeds or of any rights of the Agent or the Lenders to collect other Production
Proceeds thereafter.

     6.23. Rate Management Transactions. Neither the Borrower nor any Subsidiary will be a
party to or in any manner be liable on any Rate Management Transactions except:

	 	(i)	 	contracts entered into with the purpose of fixing prices on oil or gas expected
to be produced by the Borrower or its Subsidiaries, provided that at all times: (a) no
such contract fixes a price for a term of more than thirty-six (36) months; (b) the
aggregate monthly production covered by all such contracts (determined, in the case of
contracts that are not settled on a monthly basis, by a monthly pro-ration acceptable
to the Agent) for any single month does not in the aggregate exceed (x) eighty-five
percent (85%) during the first thirty-six (36) months after the date hereof and fifty
percent (50%) during the twelve (12) month period thereafter through and including the
Facility Termination Date of the aggregate Projected Oil Production of the Borrower,
Parent and their Subsidiaries anticipated to be sold in the ordinary course of such
Person’s business for such month and (y) eighty-five percent (85%) during the first
thirty-six (36) months after the date hereof and fifty percent (50%) during the twelve
(12) month period thereafter through and including the Facility Termination Date of the
aggregate Projected Gas Production of the Borrower, Parent and their Subsidiaries
anticipated to be sold in the ordinary course of such Person’s business for such month;
(c) each such contract is with a counterparty or has a guarantor of the obligation of
the counterparty who (unless such counterparty is a Lender or one of its Affiliates) at
the time such contract is made has (or whose holding company has) long-term obligations
rated BBB or better by S&P or Baa2 or better by Moody’s or is an investment grade-rated
industry participant. As used in this subsection, the term “Projected Oil Production”
and “Projected Gas Production” means, in the case of each such commodity, the projected
production of oil or gas, as the case may be, (measured by volume unit or BTU
equivalent, not sales price) for the term of the contracts or a particular month, as
applicable, from Oil and Gas Properties and interests owned by the Parent, the Borrower
and their Subsidiaries which are located in or offshore of the United States of America
and which have attributable to them Proved Reserves, as such production is determined
by the Agent using the most recent Reserve Report delivered pursuant to Section 6.1,
after deducting projected production from any properties or interests sold or under
contract for sale that had been included in such report and after adding projected
production from any properties or interests that had not been reflected in such report
but that are reflected in a separate or supplemental reports meeting the requirements
of Section 6.1 above and otherwise are satisfactory to the Agent; and

 

 

	 	(ii)	 	contracts entered into by the Borrower or any Subsidiary with the purpose and
effect of fixing interest rates on a principal amount of indebtedness of such Person
that is accruing interest at a variable rate, provided that (a) the aggregate notional
amount of such contracts never exceeds eighty-five percent (85%) of the anticipated
outstanding principal balance of the Indebtedness to be hedged by such contracts or an
average of such principal balances calculated using a generally accepted method of
matching interest swap contracts to declining principal balances, (b) the floating rate
index of each such contract generally matches the index used to determine the floating
rates of interest on the corresponding indebtedness to be hedged by such contract, and
(c) each such contract is with a counterparty or has a guarantor of the obligation of
the counterparty who (unless such counterparty is a Lender or one of its Affiliates) at
the time the contract is made has (or whose company has) long-term obligations rated AA
or AA2 or better, respectively, by either S&P or Moody’s or is an investment
grade-rated industry participant.

     6.24. Sale of Accounts. Neither the Borrower nor any Subsidiary will sell or
otherwise dispose of any notes receivable or accounts receivable, with or without recourse.

     6.25. Sale and Leaseback Transactions and Other Off-Balance Sheet Liabilities.
Neither the Borrower nor any Subsidiary will enter into or suffer to exist any (i) Sale and
Leaseback Transaction or (ii) any other transaction pursuant to which it incurs or has incurred
Off-Balance Sheet Liabilities, except for (i) Non-Recourse Indebtedness permitted to be incurred
under the terms of Section 6.11; and (ii) Rate Management Transactions permitted to be incurred
under the terms of Section 6.23.

     6.26. Contingent Obligations. Neither the Borrower nor any Subsidiary will make or
suffer to exist any Contingent Obligation (including, without limitation, any Contingent Obligation
with respect to the obligations of a Subsidiary), other than those in connection with guarantees of
the obligations of Subsidiaries in connection with owning and operating Oil and Gas Properties in
the ordinary course of business, except (i) by endorsement of instruments for deposit or collection
in the ordinary course of business, (ii) the Reimbursement Obligations, and (iii) that the Borrower
or any Subsidiary may incur Contingent Obligations with respect to Obligations permitted hereunder.

     6.27. Financial Contracts. Neither the Borrower nor any Subsidiary will enter into or
remain liable upon any Financial Contract, except for Rate Management Transactions required or
permitted under Section 6.25.

     6.28. Financial Covenants.

          6.28.1 Debt Coverage Ratio. The Borrower will not permit the ratio of (A)
Consolidated Indebtedness to (B) annualized Consolidated EBITDDA, determined on a

 

 

rolling four
quarter basis (and taking into account, on a proforma basis, the revenues and expenses attributable
to any Oil and Gas Properties acquired during the rolling four quarter period and deducting any
revenues and expenses attributable to Oil & Gas Properties disposed of during such period) to be
greater than 2.50 to 1.00.

     6.28.2 Current Ratio. The Borrower will not permit the ratio of Consolidated Current
Assets to Consolidated Current Liabilities, excluding current maturities of long term debt and
current payables resulting from any Rate Management Transaction, to be less than 1.0 to 1.0 at any
time.

     6.30. Senior Notes. The Senior Notes will be unsecured obligations of Parent and the
Borrower, as co-issuers, guarantied by the unsecured guaranties of the Subsidiary Guarantors (as
such term is described in the Senior Notes Indenture). If not previously provided pursuant to the
terms of this Agreement, the Borrower will promptly provide the Agent with copies of all
documentation, notices and reports provided by or on behalf of the Borrower, any Guarantor or any
Subsidiary to the holders of the Senior Notes. On or before the date the financial statements are
due pursuant to Sections 6.1(i) and (ii) hereof, the Borrower shall deliver to the Agent a
certificate, executed by an Authorized Officer of the Borrower, setting forth the outstanding
principal balance of the Senior Notes as of the last day of the preceding month. The Borrower will
not, and will not permit any Guarantor or any Subsidiary to, make any (i) amendment or modification
to the Senior Notes or the Senior Notes Indenture (other than supplemental indentures to add
subsidiary guarantors as contemplated by the Senior Notes Indenture or, in the event of any
discrepancy, to conform the Senior Notes Indenture to the terms in the Senior Notes Indenture)
which would be materially adverse to the Lenders without the prior written consent of the Required
Lenders; or (ii) directly or indirectly voluntarily prepay, defease or in substance defease,
purchase, redeem, retire or otherwise acquire, any portion of the Senior Notes without the prior
written consent of the Required Lenders; provided that (I) Parent may redeem Senior Notes out of
the net cash proceeds of Equity Offerings (as that term is defined in the Senior Notes Indenture)
to the extent described in the Senior Notes; and (II) the Borrower and Parent may comply with their
obligations with respect to the purchase of Senior Notes upon (x) an Asset Disposition (as that
term is defined in the Senior Notes Indenture) to the extent set forth in the Senior Notes
Indenture so long as, prior to such purchase, the Borrower shall have offered to prepay the
Obligations to the Lenders by a like amount and the Lenders shall have declined that offer or (y) a
Change of Control (as that term is defined in the Senior Notes Indenture) to the extent set forth
in the Senior Notes Indenture so long as, if such Change of Control constitutes an Unmatured
Default or an Event of Default, the Obligations to the Lender shall have been paid in full prior to
such purchase.

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ARTICLE VII

DEFAULTS

     The occurrence of any one or more of the following events shall constitute a Default:

     7.1. Any representation or warranty made or deemed made by or on behalf of the Borrower or any
of its Subsidiaries to the Lenders or the Agent under or in connection with this Agreement, any
Credit Extension, or any certificate or information delivered in connection with this Agreement or
any other Loan Document shall prove to have been materially false on the date as of which made.

     7.2. Nonpayment of principal of any Loan when due, nonpayment of any Reimbursement Obligation
within three Business Days after the same becomes due, or nonpayment of interest upon any Loan or
of any commitment fee, LC Fee or other obligations under any of the Loan Documents within five days
after the same becomes due.

     7.3. The material breach by the Borrower of any of the terms or provisions of Sections 6.2,
6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17, 6.18, 6.19, 6.23, 6.24, 6.25, 6.26, 6.27, 6.28, or
6.29.

     7.4. The material breach by the Borrower (other than a breach which constitutes a Default
under another Section of this Article VII) of any of the terms or provisions of this Agreement
which is not remedied within thirty days after written notice from the Agent or any Lender.

     7.5. Failure of the Borrower or any of its Subsidiaries to pay when due any Indebtedness
(other than the Obligations) aggregating in excess of $1,000,000 (“Material Indebtedness”); or the
default by the Borrower or any of its Subsidiaries in the performance (beyond the applicable grace
period with respect thereto, if any) of any term, provision or condition contained in any agreement
under which any such Material Indebtedness was created or is governed, or any other event shall
occur or condition exist, the effect of which default or event is to cause, or to permit the holder
or holders of such Material Indebtedness to cause, such Material Indebtedness to become due prior
to its stated maturity; or any Material Indebtedness of the Borrower or any of its Subsidiaries
shall be declared to be due and payable or required to be prepaid or repurchased (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or the Borrower or any of its
Subsidiaries shall not pay, or admit in writing its inability to pay, its debts generally as they
become due.

     7.6. The Borrower or any of its Subsidiaries shall (i) have an order for relief entered with
respect to it under the federal bankruptcy Laws as now or hereafter in effect, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the

 

 

appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or
any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief
under the federal bankruptcy Laws as now or hereafter in effect or seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any Law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v) take any corporate,
limited liability company or partnership action to authorize or effect any of the foregoing actions
set forth in this Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding
described in Section 7.7.

     7.7. Without the application, approval or consent of the Borrower or any of its Subsidiaries,
a receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower
or any of its Subsidiaries or any Substantial Portion of its Property, or a proceeding described in
Section 7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and such
appointment continues undischarged or such proceeding continues undismissed or unstayed for a
period of 30 consecutive days.

     7.8. Any court, government or governmental agency shall condemn, seize or otherwise
appropriate, or take custody or control of, all or any portion of the Property of the Parent, the
Borrower and their Subsidiaries which, when taken together with all other Property of the Parent,
the Borrower and their Subsidiaries so condemned, seized, appropriated, or taken custody or control
of, during the twelve-month period ending with the month in which any such action occurs,
constitutes a Substantial Portion unless Outstanding Credit Exposure is contemporaneously reduced
by the Release Price determined in connection therewith by the Required Lenders.

     7.9. The Borrower or any of its Subsidiaries shall fail within 30 days to pay, bond or
otherwise discharge one or more (i) judgments or orders for the payment of money in excess of
$2,000,000 (or the equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or
(ii) nonmonetary judgments or orders which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, which judgment(s), in any such case, is/are not stayed
on appeal or otherwise being appropriately contested in good faith.

     7.10. The Unfunded Liabilities of all Single Employer Plans shall exceed in the aggregate
$100,000 or any Reportable Event shall occur in connection with any Plan.

     7.11. The Borrower or any other member of the Controlled Group shall have been notified by the
sponsor of a Multiemployer Plan, if any, that it has incurred withdrawal liability to such
Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid
to Multiemployer Plans by the Borrower or any other member of the Controlled Group as withdrawal
liability (determined as of the date of such notification), exceeds $1,000,000 or requires payments
exceeding $1,000,000 per annum.

 

 

     7.12. The Borrower or any other member of the Controlled Group shall have been notified by the
sponsor of a Multiemployer Plan that such Multiemployer Plan, if any, is in reorganization or is
being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or
termination the aggregate annual contributions of the Borrower and the other members of the
Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or
being terminated have been or will be increased over the amounts contributed to such Multiemployer
Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan
year in which the reorganization or termination occurs by an amount exceeding $100,000.

     7.13. The Borrower or any of its Subsidiaries shall (i) be the subject of any proceeding or
investigation pertaining to the Release by the Borrower, any of its Subsidiaries or any other
Person of any Hazardous Substance into the environment, or (ii) violate any Applicable
Environmental Law, which, in the case of an event described in clause (i) or clause (ii), could
reasonably be expected to have a Material Adverse Effect.

     7.14. Any Change in Control shall occur.

     7.15. The occurrence of any “default”, as defined in any Loan Document (other than this
Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this
Agreement), which default or breach continues beyond any period of grace therein provided.

     7.16. Nonpayment by the Borrower or any Subsidiary of any Rate Management Obligation when due
or the material breach by the Borrower or any Subsidiary of any term, provision or condition
contained in any Rate Management Transaction, in each case subject to any grace period associated
therewith.

     7.17. Any Guaranty shall fail to remain in full force or effect or any action shall be taken
to discontinue or to assert the invalidity or unenforceability of any Guaranty, or any Guarantor
shall fail to comply with any of the terms or provisions of any Guaranty to which it is a party and
such failure could reasonably be expected to have a Material Adverse Effect, or any Guarantor shall
deny that it has any further liability under any Guaranty to which it is a party, or shall give
notice to such effect.

     7.18. Any Collateral Document shall for any reason fail to create a valid and perfected first
priority security interest in any material portion of the Collateral (as determined by the Agent in
its reasonable judgment) purported to be covered thereby, except as permitted by the terms of any
Collateral Document, or any Collateral Document shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or unenforceability of any
Collateral Document as to any material portion of the Collateral (as determined by the

 

 

Agent in its
reasonable judgment), or the Borrower shall fail to comply with any of the material terms or
provisions of any Collateral Document.

     7.19. The representations and warranties set forth in Section 5.15 (Plan Assets; Prohibited
Transactions) shall at any time not be true and correct.

     7.20 The Borrower and/or Parent shall fail to timely pay any of its obligations to the holders
of the Senior Notes or any other “Event of Default” shall occur under the Senior Notes or the
Senior Notes Indenture.

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ARTICLE VIII

ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

     8.1.
Acceleration. If any Default described in Sections 7.6, 7.7 or 7.20 occurs with respect
to the Borrower or any of its Subsidiaries, the obligations of the Lenders to make Loans hereunder
and the obligation and power of the LC Issuer to issue Facility LCs shall automatically terminate
and the Obligations shall immediately become due and payable without any election or action on the
part of the Agent, the LC Issuer or any Lender and the Borrower will be and become thereby
unconditionally obligated, without any further notice, act or demand, to pay to the Agent an amount
in immediately available funds, which funds shall be held in the Facility LC Collateral Account,
equal to the excess of (x) the amount of LC Obligations at such time, over (y) the amount on
deposit in the Facility LC Collateral Account at such time which is free and clear of all rights
and claims of third parties and has not been applied against the Obligations (such difference, the
“Collateral Shortfall Amount”). If any other Default occurs, the Required Lenders (or the Agent
with the consent of the Required Lenders) may (a) terminate or suspend the obligations of the
Lenders to make Loans hereunder and the obligation and power of the LC Issuer to issue Facility
LCs, or declare the Obligations to be due and payable, or both, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or notice of any kind, all of which the Borrower hereby
expressly waives, and (b) upon notice to the Borrower and in addition to the continuing right to
demand payment of all amounts payable under this Agreement, make demand on the Borrower to pay, and
the Borrower will, forthwith upon such demand and without any further notice or act, pay to the
Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral
Account.

	 	(i)	 	If at any time while any Default is continuing, the Agent determines that the
Collateral Shortfall Amount is greater than zero, the Agent may make demand on the
Borrower to pay, and the Borrower will, forthwith upon such demand and without any
further notice or act, pay to the Agent the Collateral Shortfall Amount, which funds
shall be deposited in the Facility LC Collateral Account.
	 
	 	(ii)	 	The Agent may at any time or from time to time after funds are deposited in the
Facility LC Collateral Account, apply such funds to the payment of the Obligations or
any other amounts as shall from time to time have become due and payable by the
Borrower to the Lenders or the LC Issuer under the Loan Documents.
	 
	 	(iii)	 	At any time while any Default is continuing, neither the Borrower nor any
Person claiming on behalf of or through the Borrower shall have any right to withdraw
any of the funds held in the Facility LC Collateral Account. After all of the
Obligations have been indefeasibly paid in full and the Aggregate Commitment has been
terminated, any funds remaining in the Facility LC Collateral Account

 

 

	 	 	 	shall be returned
by the Agent to the Borrower or paid to whomever may be legally entitled thereto at
such time.
	 
	 	(iv)	 	If, within ten (10) days after acceleration of the maturity of the Obligations
or termination of the obligations of the Lenders to make Loans and the obligation and
power of the LC Issuer to issue Facility LCs hereunder as a result of any Default
(other than any Default as described in Sections 7.6, 7.7 or 7.20 with respect to the
Borrower) and before any judgment or decree for the payment of the Obligations due
shall have been obtained or entered, the Required Lenders (in their sole discretion)
shall so direct, the Agent shall, by notice to the Borrower, rescind and annul such
acceleration and/or termination.

     8.2.
Amendments. Subject to the provisions of this Article VIII, the Required Lenders (or the
Agent with the consent in writing of the Required Lenders) and the Borrower may enter into
agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving
any Default hereunder; provided, however, that no such supplemental agreement shall, without the
consent of all of the Lenders:

	 	(i)	 	extend the final maturity of any Loan, or extend the expiry date of any
Facility LC to a date after the Facility Termination Date or forgive all or any portion
of the principal amount thereof or any Reimbursement Obligation related thereto, or
reduce the rate or extend the time of payment of interest or fees thereon or
Reimbursement Obligations related thereto;
	 
	 	(ii)	 	reduce the percentage specified in the definition of Required Lenders;
	 
	 	(iii)	 	extend the Facility Termination Date, or reduce the amount or extend the
payment date for, the mandatory payments required under Section 2.2.7, or increase the
Commitment of any Lender hereunder or the commitment to issue Facility LCs, or permit
the Borrower to assign its rights under this Agreement;
	 
	 	(iv)	 	amend this Section 8.2; or
	 
	 	(v)	 	except as provided in the Collateral Documents, release all or substantially
all of the Collateral.

No amendment of any provision of this Agreement relating to the Agent shall be effective without
the written consent of the Agent, and no amendment of any provision relating to the LC Issuer shall
be effective without the written consent of the LC Issuer. The Agent may waive payment of the fee
required under Section 12.3.2 without obtaining the consent of any other party to this Agreement.

 

 

     8.3. Preservation of Rights. No delay or omission of the Lenders, the LC Issuer or
the Agent to exercise any Right under the Loan Documents shall impair such Right or be construed to
be a waiver of any Default or an acquiescence therein, and the making of a Credit Extension
notwithstanding the existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Credit Extension shall not constitute any waiver or acquiescence. Any
single or partial exercise of any such Right shall not preclude other or further exercise thereof
or the exercise of any other Right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed
by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by Law afforded shall be
cumulative and all shall be available to the Agent, the LC Issuer and the Lenders until the
Obligations have been paid in full.

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ARTICLE IX

GENERAL PROVISIONS

     9.1. Survival of Representations. All representations and warranties of the Borrower
contained in this Agreement shall survive the making of the Credit Extensions herein contemplated.

     9.2. Governmental Regulation. Anything contained in this Agreement to the contrary
notwithstanding, neither the LC Issuer nor any Lender shall be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any applicable Law.

     9.3.
Headings. Section headings in the Loan Documents are for convenience of reference only,
and shall not govern the interpretation of any of the provisions of the Loan Documents.

     9.4. ENTIRE AGREEMENT. THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING AMONG THE BORROWER, THE AGENT, THE LC ISSUER AND THE LENDERS AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS AMONG THE BORROWER, THE AGENT, THE LC ISSUER AND THE LENDERS RELATING
TO THE SUBJECT MATTER THEREOF OTHER THAN THE FEE LETTER DESCRIBED IN SECTION 10.13.

     9.5. Several Obligations; Benefits of this Agreement. The respective obligations of
the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any
other (except to the extent to which the Agent is authorized to act as such). The failure of any
Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties to this Agreement and their respective successors
and assigns, provided, however, that the parties hereto expressly agree that the Arranger shall
enjoy the benefits of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically set
forth therein and shall have the right to enforce such provisions on its own behalf and in its own
name to the same extent as if it were a party to this Agreement.

     9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent and the
Arranger for any costs, internal charges and out-of-pocket expenses (including attorneys’ fees and
time charges of outside attorneys for the Agent, the Arranger, the LC Issuer and the Lenders) paid
or incurred by the Agent or the Arranger in connection with the preparation, negotiation,
execution, delivery, syndication, review, amendment, modification, and administration of the Loan
Documents. The Borrower also agrees to reimburse the Agent, the Arranger, the LC Issuer and the
Lenders for any costs, internal charges and out-of-pocket expenses (including attorneys’ fees and
time charges of outside attorneys for the Agent, the Arranger, the LC Issuer and the Lenders) paid
or incurred by the Agent, the Arranger, the LC Issuer or any Lender in connection

 

 

with the
collection and enforcement of the Loan Documents. The Borrower acknowledges that from time to time
JPMorgan Chase may prepare and may distribute to the Lenders (but shall have no obligation or duty
to prepare or to distribute to the Lenders) certain audit reports (the “Reports”) pertaining to the
Borrower’s assets for internal use by JPMorgan Chase from information furnished to it by or on
behalf of the Borrower, after JPMorgan Chase has exercised its rights of inspection pursuant to
this Agreement.

     (ii) The Borrower hereby further agrees to indemnify the Agent, the Arranger, the LC Issuer,
each Lender, their respective Affiliates, and each of their directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor whether or not the Agent,
the Arranger, the LC Issuer, any Lender or any Affiliate is a party thereto) which any of them may
pay or incur arising out of or relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect application or proposed application of
the proceeds of any Credit Extension hereunder except to the extent that they are determined in a
final non-appealable judgment by a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the party seeking indemnification. The obligations of the
Borrower under this Section 9.6 shall survive the termination of this Agreement.

     9.7. Numbers of Documents. All statements, notices, closing documents, and requests
hereunder shall be furnished to the Agent with sufficient counterparts so that the Agent may
furnish one to each of the Lenders.

     9.8.
Accounting. Except as provided to the contrary herein, all accounting terms used herein
shall be interpreted and all accounting determinations hereunder shall be made in accordance with
Agreement Accounting Principles, except that any calculation or determination which is to be made
on a consolidated basis shall be made for the Borrower and all its Subsidiaries, including those
Subsidiaries, if any, which are unconsolidated on the Borrower’s audited financial statements.

     9.9. Severability of Provisions. Any provision in any Loan Document that is held to
be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the remaining provisions in that
jurisdiction or the operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.

     9.10. Nonliability of Lenders. The relationship between the Borrower on the one hand
and the Lenders, the LC Issuer and the Agent on the other hand shall be solely that of the Borrower
and Lender. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Agent, the Arranger, the LC Issuer nor any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in
connection with any phase of the Borrower’s business or operations. The

 

 

Borrower agrees that
neither the Agent, the Arranger, the LC Issuer nor any Lender shall have liability to the Borrower
(whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection
with, arising out of, or in any way related to, the transactions contemplated and the relationship
established by the Loan Documents, or any act, omission or event occurring in connection therewith,
unless it is determined in a final non-appealable judgment by a court of competent jurisdiction
that such losses resulted from the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any
liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any
special, indirect, consequential or punitive damages suffered by the Borrower in connection with,
arising out of, or in any way related to the Loan Documents or the transactions contemplated
thereby.

     9.11.
Confidentiality. 9.11. Each Lender agrees to hold any confidential information which
it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure
(i) to its Affiliates and to other Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory
officials, (iv) to any Person as requested pursuant to or as required by Law, regulation, or legal
process, (v) to any Person in connection with any legal proceeding to which such Lender is a party,
(vi) to such Lender’s direct or indirect contractual counterparties in swap agreements or to legal
counsel, accountants and other professional advisors to such counterparties, (vii) permitted by
Section 12.4, and (viii) to rating agencies if requested or required by such agencies in connection
with a rating relating to the Advances hereunder. Notwithstanding anything herein to the contrary,
confidential information shall not include, and each Lender (and each employee, representative or
other agent of any Lender) may disclose to any and all Persons, without limitation of any kind, the
“tax treatment” and “tax structure” (in each case, within the meaning of Treasury Regulation
Section 1.6011-4) of the transactions contemplated hereby and all materials of any kind (including
opinions or other tax analyses) that are or have been provided to such Lender relating to such tax
treatment or tax structure; provided that with respect to any document or similar item that in
either case contains information concerning such tax treatment or tax structure of the transactions
contemplated hereby as well as other information, this sentence shall only apply to such portions
of the document or similar item that relate to such tax treatment or tax structure.

     9.12.
Nonreliance. Each Lender hereby represents that it is not relying on or looking to any
margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System)
for the repayment of the Credit Extensions provided for herein.

     9.13.
Disclosure. The Borrower and each Lender hereby (i) acknowledge and agree that JPMorgan
Chase and/or its Affiliates from time to time may hold investments in, make other loans to or have
other relationships with the Parent, the Borrower and their Affiliates, and (ii) waive any
liability of JPMorgan Chase or such Affiliate of JPMorgan Chase to the Borrower or any Lender,
respectively, arising out of or resulting from such investments, loans or relationships

 

 

other than
liabilities arising out of the gross negligence or willful misconduct of JPMorgan Chase or its
Affiliates.

     9.14 Interest. It is the intention of the Parties to comply with applicable usury
Laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in any Loan
Document, in no event shall any Loan Document permit the collection of interest in excess of the
maximum amount permitted by such Laws. If any such excess of interest is contracted for, charged
or received under any Loan Document or if the maturity of the Obligation is accelerated in whole or
in part, or in the event that all or part of the principal or interest of the Obligation shall be
prepaid, so that under any of such circumstances the amount of interest contracted for, charged or
received under any Loan Document on the amount of principal actually outstanding from time to time
under the Obligation shall exceed the maximum amount of interest permitted by applicable usury
Laws, then in any such event: (i) the provisions of this Section 9.14 shall govern and control;
(ii) no Person now or hereafter liable for the payment of the Obligation shall be obligated to pay
the amount of such interest to the extent that it is in excess of the maximum amount of interest
permitted to be contracted for by, charged to or received from the Person obligated thereon under
the applicable usury Laws; (iii) any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount on the Obligation or refunded to the
Person paying the same, at the holder’s option; and (iv) the effective rate of interest shall be
automatically reduced to the maximum lawful rate of interest permitted to be contracted for by,
charged to or received from the Person obligated thereon under the applicable usury Laws as now or
hereafter construed by the courts having jurisdiction thereof. To the extent the Laws of the State
of Texas are applicable for purposes of determining the “Highest Lawful Rate,” such term shall mean
the “weekly rate ceiling” from time to time in effect under Chapter 303 of the Texas Finance Code,
as amended from time to time in effect, subject to the Lender’s right subsequently to change such
method in accordance with applicable Law. The provisions of Chapter 346 of Tex. Finance Code Ann.
(Vernon 2002), regulating certain revolving credit accounts shall not govern or in any manner apply
to the Obligation.

     9.15 NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT, THE OTHER LOAN DOCUMENTS AND
THE FEE LETTER REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

     9.16 Survival of Representations. All representations and warranties herein contained
or made in writing in connection with this Agreement shall survive the execution and delivery of
this Agreement and the making of the Loans hereunder and shall continue in full force and effect
until the Obligation shall have been paid in full.

     9.17 Amendment and Restatement. The Parent and the Borrower acknowledge and agree and
it is the intention of the parties hereto that this Agreement and any Note issued

 

 

hereunder (a)
represents in part a renewal, modification and extension but not a novation or discharge of the
indebtedness outstanding under the Prior Credit Agreement and any documents executed in connection
therewith; and (b) is secured by and entitled to the benefits of certain Collateral Documents (as
identified and defined in the Prior Credit Agreement). Payments pursuant to this Agreement or any
Note hereunder shall be made and applied as provided herein.

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ARTICLE X

THE AGENT

     10.1. Appointment; Nature of Relationship. JPMorgan Chase is hereby appointed by each
of the Lenders as its contractual representative (herein referred to as the “Agent”) hereunder and
under each other Loan Document, and each of the Lenders irrevocably authorizes the Agent to act as
the contractual representative of such Lender with the rights and duties expressly set forth herein
and in the other Loan Documents. The Agent agrees to act as such contractual representative upon
the express conditions contained in this Article X. Notwithstanding the use of the defined term
“Agent,” it is expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan Document and that the
Agent is merely acting as the contractual representative of the Lenders with only those duties as
are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the
Lenders’ contractual representative, the Agent (i) does not hereby assume any fiduciary duties to
any of the Lenders and (ii) is acting as an independent contractor, the rights and duties of which
are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of
the Lenders hereby agrees to assert no claim against the Agent on any agency theory or any other
theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives.

     10.2.
Powers. The Agent shall have and may exercise such powers under the Loan Documents as
are specifically delegated to the Agent by the terms of each thereof, together with such powers as
are reasonably incidental thereto. The Agent shall have no implied duties to the Lenders, or any
obligation to the Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.

     10.3. General Immunity. Neither the Agent nor any of its directors, officers, agents
or employees shall be liable to the Borrower, the Lenders or any Lender for any action taken or
omitted to be taken by it or them hereunder or under any other Loan Document or in connection
herewith or therewith except to the extent such action or inaction is determined in a final
non-appealable judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.

     10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any duty to ascertain,
inquire into, or verify: (a) any statement, warranty or representation made in connection with any
Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants
or agreements of any obligor under any Loan Document, including, without limitation, any agreement
by an obligor to furnish information directly to each Lender; (c) the satisfaction of any condition
specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d)
the existence or possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any

 

 

other
instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation,
perfection or priority of any Lender Lien in any Collateral; or (g) the financial condition of the
Borrower or any Guarantor of any of the Obligations or of any of the Borrower’s or any such
Guarantor’s respective Subsidiaries. The Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Borrower to the Agent at such time, but is
voluntarily furnished by the Borrower to the Agent (either in its capacity as Agent or in its
individual capacity).

     10.5. Action on Instructions of Lenders. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder and under any other Loan Document in
accordance with written instructions signed by the Required Lenders, and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of the Lenders. The
Lenders hereby acknowledge that the Agent shall be under no duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement or any other Loan Document
unless it shall be requested in writing to do so by the Required Lenders. The Agent shall be fully
justified in failing or refusing to take any action hereunder and under any other Loan Document
unless it shall first be indemnified to its satisfaction by the Lenders pro rata against any and
all liability, cost and expense that it may incur by reason of taking or continuing to take any
such action.

     10.6. Employment of Agents and Counsel. The Agent may execute any of its duties as
Agent hereunder and under any other Loan Document by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities
received by it or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders and all matters
pertaining to the Agent’s duties hereunder and under any other Loan Document.

     10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely upon any
Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document
believed by it to be genuine and correct and to have been signed or sent by the proper Person or
Persons, and, in respect to legal matters, upon the opinion of counsel selected by the Agent, which
counsel may be employees of the Agent.

     10.8. Agent’s Reimbursement and Indemnification. The Lenders agree to reimburse and
indemnify the Agent ratably in proportion to their respective Commitments (or, if the Commitments
have been terminated, in proportion to their Commitments immediately prior to such termination) (i)
for any amounts not reimbursed by the Borrower for which the Agent is entitled to reimbursement by
the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Agent on behalf
of the Lenders, in connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents (including, without limitation, for any expenses incurred by the
Agent in connection with any dispute between the Agent and any Lender or between two or more of the
Lenders) and (iii) for any liabilities,

 

 

obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or arising out of the
Loan Documents or any other document delivered in connection therewith or the transactions
contemplated thereby (including, without limitation, for any such amounts incurred by or asserted
against the Agent in connection with any dispute between the Agent and any Lender or between two or
more of the Lenders), or the enforcement of any of the terms of the Loan Documents or of any such
other documents; provided that (i) no Lender shall be liable for any of the foregoing to the extent
any of the foregoing is found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of the Agent and (ii)
any indemnification required pursuant to Section 3.5.7 shall, notwithstanding the provisions of
this Section 10.8, be paid by the relevant Lender in accordance with the provisions thereof. The
obligations of the Lenders under this Section 10.8 shall survive payment of the Obligations and
termination of this Agreement.

     10.9. Notice of Default. The Agent shall not be deemed to have knowledge or notice of
the occurrence of any Default or Unmatured Default hereunder unless the Agent has received written
notice from a Lender or the Borrower referring to this Agreement describing such Default or
Unmatured Default and stating that such notice is a “notice of default”. In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to the Lenders.

     10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent shall have
the same rights and powers hereunder and under any other Loan Document with respect to its
Commitment and its Loans as any Lender and may exercise the same as though it were not the Agent,
and the term “Lender” or “Lenders” shall, at any time when the Agent is a Lender, unless the
context otherwise indicates, include the Agent in its individual capacity. The Agent and its
Affiliates may accept deposits from, lend money to, and generally engage in any kind of trust,
debt, equity, hedge, swap or other transaction, in addition to those contemplated by this Agreement
or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or
such Subsidiary is not restricted hereby from engaging with any other Person.

     10.11. Lender Credit Decision. Each Lender acknowledges that it has, independently
and without reliance upon the Agent, the Arranger or any other Lender and based on the financial
statements prepared by the Borrower and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this Agreement and the other
Loan Documents. Each Lender also acknowledges that it will, independently and without reliance
upon the Agent, the Arranger or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Loan Documents.

     10.12. Successor Agent. The Agent or the Syndication Agent may resign at any time by
giving written notice thereof to the Lenders and the Borrower, such resignation to be effective
upon the appointment of a successor Agent or Syndication Agent or, if no successor has been

 

 

appointed, forty-five days after the retiring Agent or Syndication Agent gives notice of its
intention to resign. The Agent or the Syndication Agent may be removed at any time with or without
cause by written notice received by the such Agent or Syndication Agent from the Required Lenders,
such removal to be effective on the date specified by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the
Borrower and the Lenders, a successor Agent or Syndication agent, as the case may be . If no
successor Agent or Syndication Agent shall have been so appointed by the Required Lenders within
thirty days after the giving notice of its intention to resign, then the resigning Agent or
Syndication Agent may appoint, on behalf of the Borrower and the Lenders, a successor Agent or
Syndication Agent, as the case may be. Notwithstanding the previous sentence, the Agent or the
Syndication Agent may at any time without the consent of the Borrower or any Lender, appoint any of
its Affiliates which is a commercial bank as a successor Agent or Syndication Agent hereunder. If
the Agent or Syndication Agent has resigned or been removed and no successor Agent or Syndication
Agent has been appointed, the Lenders may perform all the duties of the Agent or Syndication Agent
hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable
Lender and for all other purposes shall deal directly with the Lenders. No successor Agent or
Syndication Agent shall be deemed to be appointed hereunder until such successor Agent or
Syndication Agent has accepted the appointment. Any such successor Agent or Syndication Agent
shall be a commercial bank having capital and retained earnings of at least $1,000,000,000. Upon
the acceptance of any appointment as Agent or Syndication Agent hereunder by a successor Agent or
Syndication Agent, such successor Agent or Syndication Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning or removed Agent or
Syndication Agent as the case may be. Upon the effectiveness of the resignation or removal of the
Agent or Syndication Agent, the resigning or removed Agent or Syndication Agent shall be
discharged from its duties and obligations hereunder and under the Loan Documents. After the
effectiveness of the resignation or removal of an Agent or Syndication Agent, the provisions of
this Article X shall continue in effect for the benefit of such Agent or Syndication Agent in
respect of any actions taken or omitted to be taken by it while it was acting as the Agent or
Syndication Agent hereunder and under the other Loan Documents. In the event that there is a
successor to the Agent by merger, or the Agent assigns its duties and obligations to an Affiliate
pursuant to this Section 10.12, then the term “Corporate Base Rate” as used in this Agreement shall
mean the prime rate, base rate or other analogous rate of the new Agent.

     10.13. Agent’s Fee. The Borrower agrees to pay to the Agent, for its own account, the
fees agreed to by the Borrower and the Agent pursuant to the Fee Letter, or as otherwise agreed
from time to time in writing.

     10.14. Delegation to Affiliates. The Borrower and the Lenders agree that the Agent
may delegate any of its duties under this Agreement to any of its Affiliates. Any such Affiliate
(and such Affiliate’s directors, officers, agents and employees) which performs duties in
connection with this Agreement shall be entitled to the same benefits of the indemnification,
waiver and other protective provisions to which the Agent is entitled under Articles IX and X.

 

 

     10.15. Execution of Collateral Documents. The Lenders hereby empower and authorize
the Agent to execute and deliver to the Borrower on their behalf the Collateral Documents and all
related financing statements and any financing statements, agreements, documents or instruments as
shall be necessary or appropriate to effect the purposes of the Collateral Documents.

     10.16. Collateral Releases. The Lenders hereby empower and authorize the Agent to
execute and deliver to the Borrower on their behalf any agreements, documents or instruments as
shall be necessary or appropriate to effect any releases of Collateral which shall be permitted by
the terms hereof or of any other Loan Document or which shall otherwise have been approved by the
Required Lenders (or, if required by the terms of Section 8.2, all of the Lenders) in writing.

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ARTICLE XI

SETOFF; RATABLE PAYMENTS

     11.1.
Setoff. In addition to, and without limitation of, any rights of the Lenders under
applicable Law, if the Borrower becomes insolvent, however evidenced, or any Default occurs, any
and all deposits (including all account balances, whether provisional or final and whether or not
collected or available) and any other Indebtedness at any time held or owing by any Lender or any
Affiliate of any Lender to or for the credit or account of the Borrower or any Guarantor may be
offset and applied toward the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part thereof, shall then be due.

     11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has payment
made to it upon its Outstanding Credit Exposure (other than payments received pursuant to Section
3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender
agrees, promptly upon demand, to purchase a portion of the Outstanding Credit Exposure held by the
other Lenders so that after such purchase each Lender will hold its Pro Rata Share of the Aggregate
Outstanding Credit Exposure. If any Lender, whether in connection with setoff or amounts which
might be subject to setoff or otherwise, receives Collateral or other protection for its
Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon
demand, to take such action necessary such that all Lenders share in the benefits of such
Collateral ratably in proportion to their respective Pro Rata Share of the Aggregate Outstanding
Credit Exposure. In case any such payment is disturbed by legal process, or otherwise, appropriate
further adjustments shall be made.

     11.3 Application of Collateral. The proceeds of the Collateral at any time received by
the Agent following an Enforcement Action shall, when received by the Agent in cash or its
equivalent, be applied by the Agent as follows:

     (i) first, to the payment and satisfaction of all sums paid and costs and expenses (including
reasonable attorneys’ fees and court costs) incurred by the Agent in connection herewith or under
the Collateral Documents, including such amounts paid or incurred in connection with protecting,
preserving or realizing upon the Collateral or enforcing any of the terms of the Collateral
Documents to the extent the Agent is not reimbursed therefor by the Borrower or any Guarantor; and

     (ii) second, to the payment of all remaining Obligations pro rata to each Lender with each
Lender’s Pro Rata Share calculated based on a fraction, the numerator of which is the amount owing
to such Lender in connection with any Loan Document and/or Rate Management Transaction and the
denominator of which is the aggregate amount owing to all Lenders in connection with the Loan
Documents and/or Rate Management Transactions.

 

 

The Borrower and Guarantors shall remain liable to the Agent and the Lenders for any deficiency.
Any surplus remaining after the full, indefeasible payment and satisfaction of the foregoing shall
be returned to the Borrower or to whomsoever a court of competent jurisdiction shall determine to
be entitled thereto. After any Lender has been paid in full for all Obligations of the Borrower
owed to it under the Loan Documents and/or Rate Management Transactions, such Lender shall hold in
trust for, and immediately return to, the Agent any Collateral or proceeds thereof received or held
hereunder.

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ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

     12.1. Successors and Assigns. The terms and provisions of the Loan Documents shall be
binding upon and inure to the benefit of the Borrower and the Lenders and their respective
successors and assigns, except that (i) the Borrower shall not have the right to assign its rights
or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in
compliance with Section 12.3. The parties to this Agreement acknowledge that clause (ii) of this
Section 12.1 relates only to absolute assignments and does not prohibit assignments creating
security interests, including, without limitation, any pledge or assignment by any Lender of all or
any portion of its rights under this Agreement and any Note to a Federal Reserve Bank; provided,
however, that no such pledge or assignment creating a security interest shall release the
transferor Lender from its obligations hereunder unless and until the parties thereto have complied
with the provisions of Section 12.3. The Agent may treat the Person which made any Loan or which
holds any Note as the owner thereof for all purposes hereof unless and until such Person complies
with Section 12.3; provided, however, that the Agent may in its discretion (but shall not be
required to) follow instructions from the Person which made any Loan or which holds any Note to
direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any
Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time
of making such request or giving such authority or consent is the owner of the rights to any Loan
(whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any
subsequent holder or assignee of the rights to such Loan.

     12.2.
Participations.

          12.2.1. Permitted Participants; Effect. Any Lender may, in the ordinary course of its
business and in accordance with applicable Law, at any time sell to one or more banks or other
entities (individually, a “Participant”) participating interests in any Outstanding Credit Exposure
owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other
interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender’s obligations under the Loan Documents shall
remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the owner of its Outstanding Credit
Exposure and the holder of any Note issued to it in evidence thereof for all purposes under the
Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with such Lender’s rights and
obligations under the Loan Documents.

          12.2.2. Voting Rights. Each Lender shall retain the sole right to approve, without
the consent of any Participant, any amendment, modification or waiver of any provision of the

 

 

Loan
Documents other than any amendment, modification or waiver with respect to any Credit Extension or
Commitment in which such Participant has an interest which forgives principal, interest, fees or
Reimbursement Obligation or reduces the interest rate or fees payable with respect to any such
Credit Extension or Commitment, extends the Facility Termination Date or the expiration date for
any Facility LC, postpones any date fixed for any regularly-scheduled payment of principal of or
interest on any Loan in which such Participant has an interest, or any regularly-scheduled payment
of fees on any such Credit Extension or Commitment, releases any Guarantor of any such Credit
Extension or releases any Collateral held in the Facility LC Collateral Account (except in
accordance with the terms hereof) or all or substantially all or any other Collateral, if any,
securing any such Credit Extension.

          12.2.3. Benefit of Setoff. The Borrower and each Guarantor agrees that each
Participant shall be deemed to have the right of setoff provided in Section 11.1 in respect of its
participating interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under the Loan
Documents; provided that each Lender shall retain the right of setoff provided in Section 11.1 with
respect to the amount of participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the right of setoff provided in
Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its
right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant
were a Lender.

     12.3.
Assignments.

          12.3.1. Permitted Assignments. Any Lender may, in the ordinary course of its business
and in accordance with applicable Law, at any time assign to one or more banks or other entities
(individually, an “Eligible Assignee”) all or any part of its rights and obligations under the Loan
Documents. Such assignment shall be substantially in the form of Exhibit C (the “Assignment
Agreement”) or in such other form as may be agreed to by the parties thereto. The consent of the
Borrower, the Agent and LC Issuer shall be required prior to an assignment becoming effective with
respect to an Eligible Assignee which is not a Lender or an Affiliate thereof; provided, however,
that if a Default has occurred and is continuing, the consent of the Borrower shall not be
required. Such consent shall not be unreasonably withheld or delayed. Each such assignment with
respect to an Eligible Assignee which is not a Lender or an Affiliate thereof shall (unless each of
the Borrower and the Agent otherwise consents) be in an amount not less than the lesser of (i)
$5,000,000 or (ii) the remaining amount of the assigning Lender’s Commitment (calculated as at the
date of such assignment) or outstanding Credit Exposure (if the applicable Commitment has been
terminated). Borrower shall not be required to pay any costs associated with any such assignment.

          12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent of an assignment,
together with any consents required by Section 12.3.1, and (ii) payment of a $3,500 fee to the
Agent for processing such assignment (unless such fee is waived by the Agent), such assignment

 

 

shall become effective on the effective date specified in such assignment. The assignment shall
contain a representation by the Eligible Assignee to the effect that none of the consideration used
to make the purchase of the Commitment and Outstanding Credit Exposure under the applicable
Assignment Agreement constitutes “plan assets” as defined under ERISA and that the rights and
interests of the Eligible Assignee in and under the Loan Documents will not be “plan assets” under
ERISA. On and after the effective date of such assignment, such Eligible Assignee shall for all
purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf
of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents,
to the same extent as if it were an original party hereto, and no further consent or action by the
Borrower, the Lenders, the LC Issuer or the Agent shall be required to release the transferor
Lender with respect to the percentage of the Aggregate Commitment and Outstanding Credit Exposure
assigned to such Eligible Assignee. Upon the consummation of any assignment to an Eligible
Assignee pursuant to this Section 12.3.2, the transferor Lender, the Agent, the LC Issuer and the
Borrower shall, if the transferor Lender or the Eligible Assignee desires that its Outstanding
Credit Exposure be evidenced by Notes, make appropriate arrangements so that new Notes or, as
appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Eligible Assignee, in each case in principal
amounts reflecting their respective Commitments, as adjusted pursuant to such assignment.

     12.4. Dissemination of Information. The Borrower authorizes each Lender, upon prior
written notice to Borrower to disclose to any Participant or Eligible Assignee or any other Person
acquiring an interest in the Loan Documents by operation of law (each a “Transferee”) and any
prospective Transferee any and all information in such Lender’s possession concerning the
creditworthiness of the Parent, the Borrower and their Subsidiaries, including without limitation
any information contained in any Reports; provided that each Transferee and prospective Transferee
agrees to be bound by Section 9.11 of this Agreement.

     12.5. Tax Treatment. If any interest in any Loan Document is transferred to any
Transferee which is organized under the Laws of any jurisdiction other than the United States or
any State thereof, the transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section 3.5.4.

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ARTICLE XIII

NOTICES

     13.1.
Notices. Except as otherwise permitted by Section 2.15 with respect to borrowing
notices, all notices, requests and other communications to any party hereunder shall be in writing
(including electronic transmission, facsimile transmission or similar writing) and shall be given
to such party: (x) in the case of the Borrower, the LC Issuer or the Agent, at its address or
facsimile number set forth on the signature pages hereof, (y) in the case of any Lender, at its
address or facsimile number set forth below its signature hereto or set forth in any Assignment
Agreement if by virtue of such Assignment Agreement the Lender became a party to this Agreement or
(z) in the case of any party, at such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the Agent and the Borrower in accordance with the provisions
of this Section 13.1. Each such notice, request or other communication shall be effective (i) if
given by facsimile transmission, when transmitted to the facsimile number specified in this Section
and confirmation of receipt is received, (ii) if given by mail, 72 hours after such communication
is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if
given by any other means, when delivered (or, in the case of electronic transmission, received) at
the address specified in this Section; provided that notices to the Agent under Article II shall
not be effective until received.

     13.2. Change of Address. The Borrower, the Agent, the LC Issuer and any Lender may
each change the address for service of notice upon it by a notice in writing to the other parties
hereto.

ARTICLE XIV

COUNTERPARTS

     14.1. Counterparts. This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the parties hereto may execute
this Agreement by signing any such counterpart. This Agreement shall be effective when it has been
executed by the Borrower, the Agent and the Lenders and each party has notified the Agent by
facsimile transmission or telephone that it has taken such action.

     14.2. Facsimile Documents and Signatures. For purposes of negotiating and finalizing
this Agreement, if this document or any document executed in connection with it is transmitted by
facsimile machine (“fax”), it shall be treated for all purposes as an original document.
Additionally, the signature of any party on this document transmitted by way of a facsimile machine
shall be considered for all purposes as an original signature. Any such faxed document shall be
considered to have the same binding legal effect as an original document. At the request

 

 

of any
party, any faxed document shall be re-executed by each signatory party in an original form.

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

     15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY
EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

     15.2. CONSENT TO JURISDICTION. THE BORROWER AND EACH GUARANTOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR TEXAS STATE COURT SITTING
IN HOUSTON, TEXAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND
THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE
LC ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER OR ANY GUARANTOR IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER OR ANY GUARANTOR AGAINST THE
AGENT, THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE OF THE AGENT, THE LC ISSUER OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN HOUSTON, TEXAS.

     15.3. WAIVER OF JURY TRIAL. THE BORROWER, EACH GUARANTOR, THE AGENT, THE LC ISSUER AND
EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

 

 

     IN WITNESS WHEREOF, The Borrower, the Lenders, the LC Issuer and the Agent have executed this
Agreement as of the date first above written.

	 	 	 	 	 	 	 
	BORROWER:	 	PETROQUEST ENERGY, L.L.C.	 	 
	 
	 	 	 	 	 	 
	 	 	By: PetroQuest Energy, Inc., its sole member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael O. Aldridge	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Michael O. Aldridge, Chief Financial Officer	 	 

	 	 	 
	 

	 	Address for Borrower:
	 
	 	 
	 

	 	PetroQuest Energy, L.L.C.
	 

	 	400 E. Kaliste Saloom Road
	 

	 	Suite 6000
	 

	 	Lafayette, Louisiana 70508
	 

	 	Attention: Michael O. Aldridge,
	 

	 	Chief Financial Officer
	 

	 	Telephone: (337) 232-7028
	 

	 	Fax: (337) 232-0044

PARENT: for the purpose of agreeing to the provisions of Article 5 and Article 6 and Sections 11.1,
12.2.3, 15.2 and 15.3.

	 	 	 	 	 	 	 
	 	 	PETROQUEST ENERGY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael O. Aldridge	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Michael O. Aldridge, Chief Financial Officer	 	 

 

 

	 	 	 	 	 	 	 
	LENDERS:	 	JP MORGAN CHASE BANK, NA,	 	   
	 
	Commitment: $40,000,000	 	As a Lender and as the Agent and LC Issuer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Jo Linda Papadakis	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Jo Linda Papadakis	 	 
	 

	 	 	 	     Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	JPMorgan Chase Bank, N.A.	 	 
	 	 	Chase Tower	 	 
	 	 	600 Travis Street, 20th Floor	 	 
	 	 	Houston, Texas 77002	 	 
	 	 	Attention: Charles Kingswell-Smith	 	 
	 	 	Telephone: (713) 751-7803	 	 
	 	 	Fax: (713) 751-3544	 	 

 

 

	 	 	 	 	 	 	 
	LENDERS:	 	MACQUARIE BANK LIMITED,	 	 
	 	 	As a Lender	 	 
	Commitment: $20,000,000
	 	 	 	 	 	 
	 

	 	By: 	 	/s/ Thomas Wagenhofer	 	 
	 

	 	 	 	 	 
	 

	 	Name:	Thomas Wagenhofer	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	Associate Director 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By: 	 	/s/ Thomas Cullinan	 	 
	 

	 	 	 	 	 
	 

	 	Name:	Thomas Cullinan	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	Attorney 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	Macquarie Bank Limited	 	 
	 	 	333 Clay Street, Suite 4550	 	 
	 	 	Houston, Texas 77002	 	 
	 	 	Attention: Stephen Shatto	 	 
	 	 	Telephone: (713) 980-2962	 	 
	 	 	Fax: (713-986-3610	 	 

 

 

	 	 	 	 	 	 	 
	 	 	CALYON NEW YORK BRANCH,	 	 
	 	 	As a Lender and as Syndication Agent	 	 
	 
	 	 	 	 	 	 
	Commitment: $40,000,000
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Bertrand Cord’homme	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Bertrand Cord’homme	 	 
	 	 	Title:   Director	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael Willis	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Michael Willis	 	 
	 	 	Title:   Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	Calyon Corporate & Investment Bank	 	 
	 	 	1301 Travis Street, Suite 2100	 	 
	 	 	Houston, Texas 77002	 	 
	 	 	Telephone: (713) 890-8634	 	 
	 	 	Fax: (713) 890-8666	 	 

 

 

PRICING SCHEDULE

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Level I	 	Level II	 	Level III	 	Level IV
	Margin	 	Status	 	Status	 	Status	 	Status
	Eurodollar Rate

	 	 	1.375	%	 	 	1.625	%	 	 	1.875	%	 	 	2.125	%
	Floating Rate

	 	 	0.125	%	 	 	0.375	%	 	 	0.625	%	 	 	0.875	%

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Applicable
Fee	 	Level I	 	Level II	 	Level III 	 	Level IV
	Rate	 	Status	 	Status	 	Status	 	 Status
	Commitment

	 	 	0.375	%	 	 	0.375	%	 	 	0.50	%	 	 	0.50	%

     For the purposes of this Schedule, the following terms have the following meanings, subject to
the final paragraph of this Schedule:

     “Level I Status” exists for any day that the Utilization Percentage is less than 50%.

     “Level II Status” exists for any day that the Utilization Percentage is greater than or equal
to 50% but is less than 75%.

     “Level III Status” exists for any day that the Utilization Percentage is greater than or
equal to 75% but is less than 90%.

     Level IV Status” exists any day that the Borrower does not qualify for Level I Status, Level
II Status or Level III Status.

     “Status” means either Level I Status, Level II Status, Level III Status or Level IV Status.

     The Applicable Margin and Applicable Fee Rate for each day shall be determined by Agent from
time to time in accordance with the foregoing table.exv10w1

 

EXHIBIT 10.1

SECOND AMENDMENT AGREEMENT

     This Second Amendment Agreement dated as of November 17, 2005 (this “Amendment”) is
among (i) Pride Offshore, Inc., a Delaware corporation (the “Borrower”), (ii) the financial
institutions signatory hereto and who are Lenders under the Credit Agreement (as defined in the
recitals below) (the “Lenders”), including Calyon New York Branch and Natexis Banques
Populaires, as swingline lenders under the Credit Agreement (the “Swingline Lenders”),
(iii) Citicorp North America, Inc., as administrative agent under the Credit Agreement (the
“Administrative Agent”), (iv) Citibank, N.A., as collateral agent under the Credit
Agreement (in such capacity, the “Collateral Agent”) and as collateral trustee in
connection with the Credit Agreement (in such capacity, the “Collateral Trustee”), and (v)
Calyon New York Branch and Natexis Banques Populaires, as issuers of letters of credit under the
Credit Agreement (the “Issuing Banks”).

RECITALS

     A. On July 7, 2004, the Borrower, the Revolving Lenders, the Term Lenders, the Administrative
Agent, the Collateral Agent, the Issuing Banks, the Swingline Lenders and the guarantors party
thereto entered into a Credit Agreement, which said Credit Agreement was subsequently amended by
that certain First Amendment Agreement dated as of May 10, 2005 (as amended by the First Amendment
and this Amendment, and as hereinafter amended, modified, supplemented, extended or restated from
time to time, the “Credit Agreement”). Capitalized terms used herein that are not defined
herein and are defined in the Credit Agreement are used herein as defined in the Credit Agreement.

     B. Pursuant to Section 2.01(b) of the Credit Agreement, the Borrower received a single Term
Advance in the amount of $300,000,000 on July 7, 2004. Prior to the effectiveness of this
Amendment, all amounts remaining outstanding and due in connection with the Term Advance, the
Forasub Loan and the Opco Loan have been paid.

     C. Given the payoff of the Term Advance, the Forasub Loan and the Opco Loan, the Borrower has
requested that the Credit Agreement be amended as set forth herein.

     NOW, THEREFORE, in consideration of the premises and the covenants, terms, conditions,
representations and warranties herein contained and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree hereby as
follows:

     Section 1.Amendments to Credit Agreement. The Credit Agreement is hereby
amended as follows:

     Section 1.1.Exhibits. Exhibit K to the Credit Agreement identifying the
Initial Rigs is hereby amended by deleting the following rigs: Pride North America, Pride South
Pacific, Pride Hawaii, Pride North Dakota and Pride Rotterdam. The purpose of this amendment is to
release such rigs and any Collateral related to such rigs from the Liens created by the Security
Documents. Each of the parties hereto hereby approves of and consents to the release of such rigs
and any Collateral related to such rigs from the Liens created by the Security Documents, and the
waiver and/or amendment of any and all provisions of the Security Documents if and to the extent
required to permit such release. The Credit Agreement is hereby amended, and the provisions of the
same are hereby waived, if and to the extent required to permit and effect such release. The
Collateral Agent and Collateral Trustee are hereby directed to effect such release. For the
avoidance of doubt, pursuant to the final proviso to the definition of “Collateral” in Section 1.01
of the Credit Agreement, the rigs set forth above and any Collateral related to such rigs no longer
constitute “Collateral.”

 

 

     
Exhibit M to the Credit Agreement identifying the Opco Loan Collateral is hereby amended and
restated in its entirety to read as set forth in Exhibit M attached hereto. The purpose of this
amendment is to reflect that, given the payoff of the Opco Loan, no Opco Loan Collateral exists.

     
Section 1.2. The definition of “Applicable Base Rate Margin for Revolving Advances”,
“Applicable Base Rate Margin for Term Advances”, “Applicable LIBOR Margin for Revolving Advances”,
“Applicable LIBOR Margin for Term Advances”, “Applicable Letter of Credit Rate” and “Applicable
Commitment Fee Rate” in Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety as follows:

     
“Applicable Base Rate Margin for Revolving Advances”, “Applicable Base Rate Margin
for Term Advances”, “Applicable LIBOR Margin for Revolving Advances”, “Applicable
LIBOR Margin for Term Advances”, “Applicable Letter of Credit Rate” and “Applicable
Commitment Fee Rate” mean, for any day, with respect to any Base Rate Advance, LIBOR Advance,
Letter of Credit or commitment fees payable hereunder, as the case may be, the applicable rate per
annum set forth below under the caption “Applicable Base Rate Margin for Revolving Advances”,
“Applicable LIBOR Margin for Revolving Advances”, “Applicable Base Rate Margin for Term Advances”,
“Applicable LIBOR Margin for Term Advances”, “Applicable Letter of Credit Rate” or “Applicable
Commitment Fee Rate”, as the case may be, based upon the Applicable Leverage Ratio for such day:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	Applicable Base	 	 	 	Applicable LIBOR	 	 	 	Applicable Base	 	 	 	Applicable LIBOR	 	 	 	Applicable	 	 	 	Applicable	 	 
	 	 	 	 	Rate Margin for	 	 	 	Margin for	 	 	 	Rate Margin for	 	 	 	Margin for Term	 	 	 	Letter	 	 	 	Commitment	 	 
	 	Applicable Leverage Ratio:	 	 	Revolving Advances	 	 	 	Revolving Advances	 	 	 	Term Advances	 	 	 	Advances	 	 	 	of Credit Rate	 	 	 	Fee Rate	 	 
	 	≥ 5.00 to 1.00
	 	 	 	1.50	%	 	 	 	2.50	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	2.50	%	 	 	 	0.625	%	 
	 	< 5.00 to 1.00 and
≥ 4.50 to 1.00
	 	 	 	1.00	%	 	 	 	2.00	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	2.00	%	 	 	 	0.50	%	 
	 	< 4.50 to 1.00 and
≥ 4.00 to 1.00
	 	 	 	0.75	%	 	 	 	1.75	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	1.75	%	 	 	 	0.375	%	 
	 	< 4.00 to 1.00 and
≥ 3.50 to 1.00
	 	 	 	0.50	%	 	 	 	1.50	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	1.50	%	 	 	 	0.375	%	 
	 	< 3.50 to 1.00 and
≥ 3.00 to 1.00
	 	 	 	0.25	%	 	 	 	1.25	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	1.25	%	 	 	 	0.375	%	 
	 	< 3.00 to 1.00 and
≥ 2.50 to 1.00
	 	 	 	0	 	 	 	 	1.00	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	1.00	%	 	 	 	0.25	%	 
	 	< 2.50 to 1.00 and
≥ 2.00 to 1.00
	 	 	 	0	 	 	 	 	0.75	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	0.75	%	 	 	 	0.25	%	 
	 	< 2.00 to 1.00
	 	 	 	0	 	 	 	 	0.50	%	 	 	 	N/A	 	 	 	 	N/A	 	 	 	 	0.50	%	 	 	 	0.125	%	 
	 

     Section 1.3. Section 2.02. The first sentence of Section 2.02(a) of the
Credit Agreement is hereby amended and restated in its entirety as follows:

	 	 
	 	(a)  Each Borrowing (other than a Swingline Advance) shall be made on notice, given not later
than (x) in the case of a proposed Borrowing comprised of LIBOR Advances, 11:00 A.M. (New
York City time) at least three Business Days prior to the date of the proposed Borrowing and
(y) in the case of a proposed Borrowing comprised of Base Rate Advances, 2:00 P.M. (New York
City time) one Business Day before the day of the proposed Borrowing, by the Borrower to the
Administrative Agent, which shall give prompt notice thereof by
telecopy to each Revolving

-2-

 

     Lender in the case of a Revolving Borrowing and to each Term Lender in the case of the Term
Borrowing.

     Section 1.4. Section 2.09. The first sentence of Section 2.09 of the Credit
Agreement is hereby amended by deleting “(i) in respect of LIBOR Advances, upon at least three
Business Days’ notice, and (ii) in respect of Base Rate Advances” appearing therein.

     Section 1.5. Section 2.12. The first sentence of Section 2.12(a) of the
Credit Agreement is hereby amended by replacing “11:00 A.M.” appearing therein with “4:00 P.M.”

     Section 1.6. Sections 5.01(a)(i) and (ii). Sections 5.01(a)(i) and
5.01(a)(ii) of the Credit Agreement are hereby amended and restated in their entirety as follows:

     (i) as soon as available and in any event within 45 days after the end of each of the
first three quarters of each fiscal year of the Parent, the Consolidated balance sheets of
the Parent and its Subsidiaries as at the end of such quarter, and the Consolidated
statements of income, cash flows and changes in stockholders’ equity of the Parent and its
Subsidiaries for the period commencing at the end of the previous fiscal year and ending
with the end of such quarter, setting forth, in comparative form, the corresponding figures
for the corresponding period of the preceding fiscal year, all in reasonable detail and duly
certified by a financial officer of the Parent as having been prepared in accordance with
GAAP, except for the absence of footnotes, and as fairly presenting in all material respects
the Consolidated financial position and results of operations of the Parent and its
Subsidiaries as of the end of such quarter and for such periods, subject, however, to
year-end audit adjustments, together with a certificate of such officer showing in detail
the calculations of the financial covenants set forth in Sections 5.02(a) and 5.02(b) for
the four quarter period ending at the end of such quarter and as at the end of such quarter,
respectively (provided that the requirements of this Section 5.01(a)(i) shall be deemed
satisfied by delivery of the Parent’s Form 10-Q for such fiscal quarter);

     (ii) as soon as available and in any event not later than 90 days after the end of each
fiscal year of the Parent, copies of the Consolidated balance sheets of the Parent and its
Subsidiaries as at the end of such fiscal year, and Consolidated statements of income, cash
flows and changes in stockholders’ equity of the Parent and its Subsidiaries for such fiscal
year, all certified by KPMG LLP or other independent certified public accountants of
recognized national standing, together with a certificate of a financial officer of the
Parent showing in detail the calculations of the financial covenants set forth in Sections
5.02(a) and 5.02(b) for the four quarter period ending at the end of such year and as at the
end of such year, respectively (provided that the requirements of this Section 5.01(a)(ii)
shall be deemed satisfied by delivery of the Parent’s Form 10-K for such fiscal year);

     Section 1.7. Section 5.01(a)(v). Section 5.01(a)(v) of the Credit Agreement
is hereby amended and restated in its entirety as follows:

     (v) promptly after each receipt by the Parent or any Subsidiary of any Net
Proceeds, Net Cash Proceeds, Extraordinary Receipts or Net Debt Proceeds, if and to
the extent any such Net Proceeds, Net Cash Proceeds, Extraordinary Receipts or Net
Debt Proceeds require a mandatory repayment under Section 2.04, a reasonably
detailed description thereof;

-3-

 

     Section 2. Miscellaneous.

     Section 2.1. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York without regard to its conflicts of
law rules (other than Section 5-1401 of the New York General Obligations Law).

     Section 2.2. Preservation. The Credit Agreement, as specifically modified by
the terms of this Amendment, and each other Credit Document, remains in full force and effect.

     Section 2.3. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken together shall constitute
one and the same agreement.

     Section 2.4. Representations and Warranties. The Borrower hereby represents
and warrants to the Administrative Agent, the Collateral Agent, the Collateral Trustee, the Issuing
Banks and the Lenders that (i) the execution, delivery and performance by the Borrower of this
Amendment and the performance of the Credit Agreement, as amended hereby, by the Borrower are
within the Parent’s and the Borrower’s corporate powers, have been duly authorized by all necessary
corporate action of the Parent and the Borrower, require, in respect of the Borrower, no material
authorization, approval or other action by, or notice to or filing with, any governmental authority
or regulatory body, do not contravene (A) the Parent’s or the Borrower’s certificate of
incorporation or by-laws, or (B) any law applicable to the Borrower, and will not result in the
creation or imposition of any Lien prohibited by the Credit Agreement on any asset of the Parent or
of any Subsidiary, (ii) this Amendment has been duly executed and delivered by the Borrower, (iii)
this Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with their respective
terms, except as such enforceability may be limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally and by
general principles of equity, (iv) the representations and warranties contained in Section 4.01 of
the Credit Agreement, as amended hereby, are correct on and as of the date hereof as though made on
and as of the date hereof, and the representations and warranties contained in any other Credit
Document are correct in all material respects on and as of the date hereof as though made on and as
of the date hereof (other than those representations and warranties that expressly relate solely to
a specific earlier date and that remain correct as of such earlier date), and (v) no event has
occurred and is continuing, or would result from this Amendment, which constitutes a Default or an
Event of Default.

     Section 2.5. Lender Credit Decision. Each of the Lenders and Issuing Banks
acknowledges that it has, independently and without reliance upon the Administrative Agent,
Collateral Agent, Collateral Trustee, any Issuing Bank or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit analysis and decision
to enter into this Amendment and to agree to the various matters set forth herein. Each of the
Lenders and Issuing Banks also acknowledges that it will, independently and without reliance upon
the Administrative Agent, Collateral Agent, Collateral Trustee, any Issuing Bank or any other
Lender and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking any action under the Credit
Agreement as amended hereby.

     Section 2.6. Effectiveness. Following the execution of this Amendment by the
Administrative Agent, the Collateral Agent, the Collateral Trustee, the Majority Lenders and the
Borrower, this Amendment will be effective as of the date first above written. Delivery of an
executed signature page to this Amendment by telecopier shall be as effective as delivery of a
manually executed counterpart of this Amendment.

-4-

 

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their
respective officers thereunto duly authorized, as of the date first above written.

[Remainder of this page intentionally left blank — Signature pages follow]

 
 
 
-5-

 

	 	 	 	 	 
	 	BORROWER:

PRIDE OFFSHORE, INC.

 	 
	 	By:  	/s/ Steven D. Oldham 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	ADMINISTRATIVE AGENT:

CITICORP NORTH AMERICA, INC., as
Administrative Agent
 	 
	 	By:  	/s/ Illegible	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	COLLATERAL AGENT AND COLLATERAL TRUSTEE:

CITIBANK, N.A., as Collateral Agent and as

Collateral Trustee

 	 
	 	By:  	/s/ Illegible 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	ISSUING BANKS AND SWINGLINE LENDERS:

CALYON NEW YORK BRANCH, as an Issuing Bank and

as a Swingline Lender

 	 
	 	By:  	/s/ Illegible 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 	By:  	/s/ Illegible 	 
	 	 	Authorized Officer 	 
	 	 	 	 

	 	 	 	 	 
	 	NATEXIS BANQUES POPULAIRES,

as an Issuing Bank and as a Swingline Lender

 	 
	 	By:  	/s/ Daniel Payer 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 	 	 
	 	By:  	/s/
Timothy L. Polvado
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 

Signature Page to the Second Amendment Agreement

	 	 	 	 	 

 

 

	 	 	 	 	 
	 	OTHER LENDERS:

CITICORP NORTH AMERICA, INC.

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	NATEXIS BANQUES POPULAIRES

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 	 	 
	 	By:  	                                                   /s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 	BANK OF AMERICA, N.A.

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 	NORDEA

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 
	 	 	 
	 	By:  	                                                   /s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	DEUTSCHE BANK TRUST COMPANY AMERICAS

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	                                                   /s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 

Signature Page to the Second Amendment Agreement

	 	 	 	 	 

 

 

	 	 	 	 	 
	 	CALYON NEW YORK BRANCH

 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 

	 	 	 	 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	BNP PARIBAS

 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	SUMITOMO MITSUI BANKING CORPORATION

 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 	 
	 
	 	SEB 

 	 
	 	 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	CRÉDIT INDUSTRIEL ET COMMERCIAL

 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	BECM

 	 
	 	By:  	/s/
Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 

Signature Page to the Second Amendment Agreement

	 	 	 	 	 

 

 

	 	 	 	 	 
	 	DnB NOR BANK ASA

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	                                                   /s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	HSH NORDBANK AG

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	                                                   /s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	BAYERISCHE HYPO-UND VEREINSBANK AG

 	 
	 	By:  	/s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	                                                   /s/  Illegible
 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 
	 	AMEGY BANK NATIONAL ASSOCIATION
(formerly SOUTHWEST BANK OF TEXAS, N.A.)

 	 
	 	By:  	/s/  Illegible 	 
	 	 	Authorized Officer 	 
	 	 	 	 
	 

Signature
Page to the Second Amendment Agreement

 

 

ACKNOWLEDGMENT AND CONSENT

     To induce the Administrative Agent, the Collateral Agent, the Collateral Trustee, the Issuing
Banks and the Lenders to execute the foregoing Second Amendment Agreement, each of the undersigned
Guarantors hereby (a) consents to the execution, delivery and performance of such Second Amendment
Agreement, (b) agrees that (1) neither any Credit Document executed by it nor any obligation of any
of the undersigned nor any right or remedy of the Administrative Agent, the Collateral Agent, the
Collateral Trustee, any Issuing Bank or any Lender with respect to any undersigned Guarantor is
released or impaired by such Second Amendment Agreement, and (2) this acknowledgment and consent
shall not be construed as requiring the consent or agreement of any undersigned Guarantor in any
circumstance, and (c) ratifies and confirms all provisions of the Credit Documents executed by it.

	 	 	 	 	 
	 	GUARANTORS:

PRIDE INTERNATIONAL, INC.

 	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President — Treasury and
Investor Relations 	 
	 
	 	MEXICO DRILLING LIMITED LLC

 	 
	 	By:  	/s/ Steven D. Oldham 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PRIDE CENTRAL AMERICA, LLC

 	 
	 	By:  	/s/ Steven D. Oldham 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PRIDE OFFSHORE INTERNATIONAL LLC
 	 
	 	By:  	/s/ Steven D. Oldham 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PRIDE SOUTH PACIFIC LLC

 	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 

Signature
Page to the Second Amendment Agreement

 

	 	 	 	 	 
	 	
PRIDE DRILLING, LLC

 
	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PRIDE NORTH AMERICA LLC

 	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PETROLEUM SUPPLY COMPANY

 	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PRIDE INTERNATIONAL SERVICES, INC.

 	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PRIDE MEXICO HOLDINGS, LLC

 	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 
	 	PRIDE INTERNATIONAL MANAGEMENT COMPANY

 	 
	 	By:  	/s/ Steven D. Oldham
 	 
	 	 	Name:  	Steven D. Oldham 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 

Signature
Page to the Second Amendment Agreement

 

 

EXHIBIT M

OPCO LOAN COLLATERAL

None

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