Document:

EXHIBIT 4.1

 

Seventh Supplemental Indenture

 

THIS SEVENTH
SUPPLEMENTAL INDENTURE (this “Seventh Supplemental Indenture”) is made as of
December 22, 2004, between OfficeMax Incorporated (formerly Boise Cascade
Corporation), a Delaware corporation (the “Company”), and U.S. Bank Trust
National Association (as successor in interest to Morgan Guaranty Trust Company
of New York), as trustee (the “Trustee”). 
Any term used but not defined herein shall have the corresponding
meaning given to it in the Indenture (as defined below).

 

Recitals of the Company

 

The Company
and the Trustee have heretofore executed and delivered an Indenture dated as of
October 1, 1985, as amended (the “Indenture”), pursuant to which the Company
has heretofore issued its 7.00% Senior Notes due 2013, in the principal amount
of $200,000,000 (the “7.00% Notes”).  The
Company desires to add certain covenants to the Indenture for the benefit of
the holders of the 7.00% Notes as hereinafter set forth.

 

Pursuant to
its Offer to Purchase and Consent Solicitation, dated October 5, 2004 (the “Offer
to Purchase”), the Company commenced a tender offer (as amended from time to
time, the “Tender Offer”) for aggregate cash consideration not to exceed
$1,100,000,000 for any and all of its outstanding 7.00% Notes and for certain
amounts of other Company securities. 
Pursuant to the Tender Offer, the Company has purchased and retired
$93,607,000 in aggregate principal amount of the 7.00% Notes leaving
$106,393,000 in aggregate principal amount of the 7.00% Notes outstanding.

 

Section 901(2)
of the Indenture provides that the Company and the Trustee may amend or
supplement the Indenture without the consent of any Holders to add to the
covenants of the Company for the benefit of the Holders of any series of Securities.

 

The Company
has determined that, without the consent of any Holders, the amendments set
forth in Article I hereof are authorized or permitted by Section 901 of the
Indenture. In furtherance thereof, the Company has delivered to the Trustee an
Opinion of Counsel to that effect and an Opinion of Counsel and an Officers’
Certificate pursuant to Section 102 of the Indenture to the effect that all
conditions precedent provided for in the Indenture to the Trustee’s execution
and delivery of this Seventh Supplemental Indenture have been complied with.

 

All acts and
things necessary to amend the Indenture and to make this Seventh Supplemental
Indenture a valid agreement of the Company and the Trustee, in accordance with
its terms, have been done.

 

NOW, THEREFORE,
the Company hereby covenants and agrees with the Trustee as follows:

 

 

ARTICLE I

 

AMENDMENTS

 

SECTION 1.01.      Addition of Covenants and Exhibits.

 

(a)           The Company hereby agrees, solely for
the benefit of the holders of the 7.00% Notes, to deposit with the Trustee the
securities identified on Exhibit A to this Seventh Supplemental Indenture (the “Pledged
Securities”) and, subject to paragraph (b) below, the Company hereby grants to
the Trustee, solely for the benefit of the holders of the 7.00% Notes, a
security interest in the Pledged Securities for the purpose of securing the
Company’s obligations with respect to payment of principal of, and interest on,
the 7.00% Notes.

 

(b)           The Pledged Securities have been
selected based on the Company’s determination that those securities would
provide proceeds at November 1, 2008 (the first redemption date specified in
the 7.00% Notes), based on the principal amount thereof, equal to 106% of the
aggregate principal amount of 7.00% Notes outstanding as of the date of this
Seventh Supplemental Indenture.  To the
extent the aggregate principal amount of 7.00% Notes outstanding is reduced
(whether through repurchases by the Company, redemption or otherwise), the
Company shall be entitled to request that the Trustee release from the pledge
created pursuant to paragraph (a) above, and deliver to the Company, a portion
of the Pledged Securities representing the security for the payment obligations
with respect to those 7.00% Notes that have been repurchased, redeemed or are
otherwise no longer outstanding; provided that the Trustee shall not be
required to comply with any such request to the extent the remaining Pledged
Securities would be expected to provide proceeds at November 1, 2008 in an
amount less than 106% of the aggregate principal amount of 7.00% Notes
remaining outstanding.  The Trustee
agrees that, subject to the proviso in the preceding sentence, it shall comply
with such a request, subject to receipt by the Trustee of such certificates and
other documents as the Trustee may reasonably require in connection with such
request.  Notwithstanding anything in
this Seventh Supplemental Indenture to the contrary, nothing in this Seventh
Supplemental Indenture shall alter any of the redemption provisions of the
Indenture or the 7% Notes (as they existed prior to the effectiveness of this
Seventh Supplemental Indenture).

 

(c)           The Company agrees to execute and
deliver (i) such endorsements or instruments of assignment and transfer, and
such further agreements, with respect to the Pledged Securities as the Trustee
may reasonably request, and (ii) such financing statements, notices,
instruments, documents, agreements or consents as may be necessary or desirable
to create, preserve, perfect or validate the security interest granted pursuant
to paragraph (a) above.

 

(d)           So long as no Event of Default with
respect to the 7.00% Notes has occurred or is continuing, the Company shall
have the right to exercise any voting or similar rights with respect to the
Pledged Securities.

 

 

(e)           The Trustee is directed and agrees
that the Trustee shall apply any interest payments received by the Trustee with
respect to the Pledged Securities toward the payment of interest on the 7.00%
Notes.

 

(f)            If any Event of Default with respect
to the 7.00% Notes shall have occurred and be continuing, the Trustee shall
have all of the rights, remedies, powers and privileges with respect to the
Pledged Securities of a secured party under the Uniform Commercial Code as in
effect in the State of New York (the "UCC") (whether or not the UCC
is in effect in the jurisdiction where such rights, remedies, powers and
privileges are asserted) and such additional rights, remedies, powers and
privileges to which a secured party is entitled under the laws in effect in any
jurisdiction where any rights, remedies, powers and privileges in respect of
the Indenture or the Pledged Securities may be asserted, including the right,
to the maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Pledged Securities as if the
Trustee were the sole and absolute owner of the Pledged Securities (and the
Company agrees to take all such action as may be appropriate to give effect to
such right).

 

ARTICLE II

 

EFFECTIVE TIME

 

SECTION 2.01.      Effective Time of Amendments to
Indenture.

 

The amendments
to the Indenture set forth in Article I of this Seventh Supplemental Indenture
shall become effective upon the execution and delivery of this Seventh
Supplemental Indenture by the Company and the Trustee and the deposit by the
Company of the Pledged Securities with the Trustee.

 

ARTICLE III

 

MISCELLANEOUS

 

SECTION 3.01.      Execution as Supplemental Indenture.

 

This Seventh
Supplemental Indenture is executed and shall be construed as an indenture
supplemental to the Indenture and, as provided in the Indenture, this Seventh
Supplemental Indenture shall form a part of the Indenture.  Except as herein expressly otherwise defined,
the terms used herein shall have the same meaning as provided in the Indenture.

 

Except as
specifically amended above, the Indenture shall remain in full force and effect
and is hereby ratified and confirmed.

 

SECTION 3.02.      Responsibility for Recitals.

 

The recitals
herein shall be taken as statements of the Company, and the Trustee assumes no
responsibility for the correctness thereof.

 

 

SECTION 3.03.      Successors and Assigns.

 

All the
covenants and agreements in this Seventh Supplemental Indenture by the Company
shall bind its successors and assigns whether so expressed or not.

 

SECTION 3.04.      Conflicts.

 

In the event
of a conflict between the terms and conditions of the Indenture and the terms
and conditions of this Seventh Supplemental Indenture, the terms and conditions
of this Seventh Supplemental Indenture shall prevail.

 

SECTION 3.05.      Counterparts.

 

This Seventh
Supplemental Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

 

 

IN WITNESS
WHEREOF, the parties hereto have caused this Seventh Supplemental Indenture to
be duly executed as of the date first above written.

 

	
   

  	
  OFFICEMAX INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Theodore Crumley

  	
   

  
	
   

  	
  Name:

  	
   Theodore Crumley

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S. BANK TRUST NATIONAL ASSOCIATION

  
	
   

  	
  as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Patrick J. Crowley

  	
   

  
	
   

  	
  Name:

  	
   Patrick J. Crowley

  
	
   

  	
  Title:

  	
  Vice President

  
							

 

 

Exhibit A

to

Seventh Supplemental Indenture

 

List of
Pledged Securities

 

•      $56 million Bank of America Corporation
3.776% note maturing October 30, 2008.

 

•      $57 million General Electric Capital
Corporation (GECC) 3.77% note maturing October 30, 2008

 

A-1Exhibit 4.1

 

CREDIT AGREEMENT

 

dated as of December 16, 2004

among

POGO PRODUCING
COMPANY,

as the Borrower,

CERTAIN COMMERCIAL
LENDING INSTITUTIONS,

as the Lenders,

BANK OF MONTREAL,

acting through its Chicago, Illinois branch

as the Administrative Agent for the Lenders,

BANK OF AMERICA, N.A.,

TORONTO DOMINION (TEXAS) LLC

and

BNP PARIBAS,

as Co-Syndication Agents,

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Documentation Agent,

and

CITIBANK, N.A.,

and

THE BANK OF NOVA SCOTIA,

as Managing Agents

HARRIS
NESBITT CORP.

as Co-Lead Arranger and Sole Bookrunner,

and

BANC OF AMERICA SECURITIES LLC,

as Co-Lead Arranger

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
  DEFINITIONS
  AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION 1.1

  	
  Defined Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION 1.2

  	
  Use of Defined
  Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION 1.3

  	
  Cross-References

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  1.4

  	
  Accounting
  and Financial Determinations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
  COMMITMENTS,
  BORROWING PROCEDURES AND NOTES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION 2.1

  	
  Commitments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.2

  	
  Swing
  Line Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.3

  	
  Letters
  of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.4

  	
  Reduction
  and Termination of the Commitment Amounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.5

  	
  Borrowing
  Procedure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.6

  	
  Continuation
  and Conversion Elections

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.7

  	
  Funding

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.8

  	
  Determination
  of Borrowing Base

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.9

  	
  Revolving
  Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  2.10

  	
  Addition
  of Lenders and Increase in Commitment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  III

  	
  REPAYMENTS,
  PREPAYMENTS, INTEREST AND FEES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  3.1

  	
  Repayments
  and Prepayments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  3.2

  	
  Interest
  Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  3.3

  	
  Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
  CERTAIN
  LIBOR AND OTHER PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.1

  	
  Fixed
  Rate Lending Unlawful

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.2

  	
  Rates
  Unavailable

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.3

  	
  Increased
  LIBOR Loan Costs, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.4

  	
  Funding
  Losses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.5

  	
  Increased
  Capital Costs

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.6

  	
  Period
  of Liability; Lender Substitution

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.7

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.8

  	
  Payments,
  Computations, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.9

  	
  Sharing
  of Payments

  	
   

  
					

 

i

 

	
   

  	
  SECTION
  4.10

  	
  Setoff

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  4.11

  	
  Use
  of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  CONDITIONS
  TO BORROWING

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  5.1

  	
  Initial
  Borrowing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  5.2

  	
  Conditions
  Precedent to Credit Event

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.1

  	
  Organization,
  etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.2

  	
  Due
  Authorization, Non-Contravention, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.3

  	
  Government
  Approval, Regulation, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.4

  	
  Validity,
  etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.5

  	
  Financial
  Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.6

  	
  No
  Material Adverse Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.7

  	
  Litigation,
  etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.8

  	
  Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.9

  	
  Ownership
  of Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.10

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.11

  	
  Pension
  and Welfare Plans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.12

  	
  Environmental
  Warranties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.13

  	
  Regulation
  U

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.14

  	
  Absence
  of Defaults

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  6.15

  	
  Information
  Memorandum

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VII

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.1

  	
  Financial
  Information, Reports, Notices, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.2

  	
  Compliance
  with Laws; Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.3

  	
  Maintenance
  of Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.4

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.5

  	
  Books
  and Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.6

  	
  Environmental
  Covenant

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.7

  	
  Performance
  Under Material Operating Contracts

  	
   

  
					

 

ii

 

	
   

  	
  SECTION
  7.8

  	
  Designation
  and Conversion of Restricted and Unrestricted Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  7.9

  	
  Subsidiary
  Guaranty

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  VIII

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.1

  	
  Limitations
  on Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.2

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.3

  	
  Financial
  Condition

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.4

  	
  Investments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.5

  	
  Restricted
  Payments, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.6

  	
  Consolidation,
  Merger, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.7

  	
  Modification
  of Certain Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.8

  	
  Transactions
  with Affiliates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.9

  	
  Negative
  Pledges, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  8.10

  	
  Speculative
  Hedging

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  9.1

  	
  Listing
  of Events of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  9.2

  	
  Action
  if Bankruptcy

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  9.3

  	
  Action
  if Other Event of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  THE AGENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  10.1

  	
  Actions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  10.2

  	
  Funding
  Reliance, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  10.3

  	
  Exculpation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  10.4

  	
  Successor
  to Administrative Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  10.5

  	
  Loans
  by the Agents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  10.6

  	
  Credit
  Decisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  10.7

  	
  Copies,
  etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.1

  	
  Waivers,
  Amendments, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.2

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.3

  	
  Payment
  of Costs and Expenses

  	
   

  
					

 

iii

 

	
   

  	
  SECTION
  11.4

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.5

  	
  Survival

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.6

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.7

  	
  Headings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.8

  	
  Execution
  in Counterparts, Effectiveness, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.9

  	
  Governing
  Law; Entire Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.10

  	
  Successors
  and Assigns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.11

  	
  Assignments
  and Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.12

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.13

  	
  Other
  Transactions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.14

  	
  USA
  Patriot Act Notice

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SECTION
  11.15

  	
  NO
  ORAL AGREEMENTS

  	
   

  

 

SCHEDULES AND
EXHIBITS

 

	
  SCHEDULE I

  	
  -

  	
  Disclosure Schedule

  
	
  SCHEDULE 2.1

  	
  -

  	
  Commitments

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  -

  	
  Form of Note

  
	
  EXHIBIT B

  	
  -

  	
  Form of Borrowing Request

  
	
  EXHIBIT C

  	
  -

  	
  Form of Continuation/Conversion Notice

  
	
  EXHIBIT D

  	
  -

  	
  Form of Assignment and Assumption Agreement

  
	
  EXHIBIT E-1

  	
  -

  	
  Form of Opinion of Michael J. Killelea,
  Esq., Vice President and General Counsel of Borrower

  
	
  EXHIBIT E-2

  	
  -

  	
  Form of Opinion of Baker Botts L.L.P.,
  special New York counsel to Borrower

  
	
  EXHIBIT F

  	
  -

  	
  Form of Lender Certificate

  
	
  EXHIBIT G

  	
  -

  	
  Form of Request for Swing Line Advance

  
	
  EXHIBIT
  H

  	
  -

  	
  Form
  of Swing Line Note

  

 

iv

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT, dated as of December 16, 2004,
among POGO
PRODUCING COMPANY, a Delaware corporation (the “Borrower”), the various financial
institutions which are or may become parties hereto (collectively, the “Lenders”), and BANK OF MONTREAL, acting through
its Chicago, Illinois branch as administrative agent (the “Administrative Agent”) for the Lenders, BANK OF AMERICA, N.A., TORONTO DOMINION (TEXAS)
LLC and BNP PARIBAS, as
co-syndication agents (each a “Co-Syndication
Agent” and together the “Co-Syndication Agents”) for the
Lenders, WACHOVIA BANK, NATIONAL ASSOCIATION, as
documentation agent (“Documentation Agent”)
for the Lenders, and CITIBANK, N.A.
and THE BANK OF NOVA SCOTIA, as managing
agents (“Managing Agents”) for the
Lenders.

 

W  I  T 
N  E  S  S  E 
T  H :

 

WHEREAS,
the Borrower requests that the Agents and the Lenders enter into this
Credit  Agreement to extend Commitments,
make Loans to the Borrower and issue Letters of Credit for the account of the
Borrower in accordance with the terms and conditions hereof;

 

WHEREAS,
the Agents and the Lenders are willing to enter into the Credit Agreement and
the Lenders are willing, on the terms and subject to the conditions hereinafter
set forth, to extend such Commitments, make such Loans to the Borrower and
issue Letters of Credit for the account of the Borrower; and

 

WHEREAS,
the proceeds of Loans to be made and the Letters of Credit to be issued after
the date hereof will be used to refinance existing Indebtedness and for general
corporate purposes of the Borrower and its Subsidiaries;

 

NOW,
THEREFORE, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

 

SECTION 1.1  Defined Terms.  The following terms
(whether or not underscored) when used in this Agreement, including its
preamble and recitals, shall, except where the context otherwise requires, have
the following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):

 

“Acquisition”
means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of any business or division of
a Person, (b) the acquisition of in excess of 50% of the capital stock of a
corporation, which stock has ordinary voting power for the election of the
members of the acquiree’s board of directors (other than stock having such
power only by reason of the happening of a contingency), or the acquisition of
in excess of 50% of the partnership interests or other equity interests of any
Person not a corporation which acquisition gives the acquirer ordinary voting
power to direct or cause the direction of the management and policies of the
acquiree, or (c) a merger or consolidation or any other combination with
another Person

 

 

(other than a Person that is a Subsidiary of that
Person) provided that the Borrower or a Subsidiary of the Borrower is the
surviving entity.

 

“Additional Costs”
is defined in Section 4.3.

 

“Additional Senior
Unsecured Indebtedness” means any unsecured Indebtedness, including,
without limitation, money market lines of credit, demand note lines of credit,
bankers’ acceptance lines of credit or any similar lines of credit, incurred by
the Borrower after the Effective Date in an aggregate principal amount not to
exceed $50,000,000 at any time outstanding.

 

“Additional Subordinated
Indebtedness” means Indebtedness for borrowed money incurred by the
Borrower after the Effective Date at any time outstanding which complies with
the following requirements:

 

(a)                                  such
new Indebtedness has subordination terms not materially less favorable to the
Lenders as holders of the Notes than the then existing Subordinated
Indebtedness unless such terms are approved by the Required Lenders;

 

(b)                                 the
aggregate principal payments for such new Indebtedness scheduled to be paid in
any Fiscal Year ending prior to the Stated Maturity Date are no greater than
the aggregate scheduled principal payments under the existing Subordinated
Indebtedness; and

 

(c)                                  the
maturity dates of such Indebtedness are no earlier than 180 days after the
Stated Maturity Date.

 

“Administrative Agent”
is defined in the preamble and includes
each other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 10.4.

 

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

 

“Affiliate” of
any Person means any other Person which, directly or indirectly, controls, is
controlled by or is under common control with such Person.  A Person shall be deemed to be “controlled by”
any other Person if such other Person possesses, directly or indirectly, power

 

(a)                                  to
vote 10% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managing general partners, or

 

(b)                                 to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise,

 

provided,
however, for purposes of this
definition (i) no director or employee of the Borrower or any Subsidiary shall
be considered an Affiliate of the Borrower or any Subsidiary solely by virtue
of having that status, (ii) no trustee under, and no committee with
responsibility for administering, any Plan shall be considered an Affiliate of
the Borrower or any Subsidiary, and

 

2

 

(iii) the Borrower and its Subsidiaries shall not be considered
Affiliates of one another .  As used in
this Agreement, “Affiliate” means Affiliates of the Borrower and its
Subsidiaries unless otherwise indicated.

 

“Agents”
means, collectively, the Administrative Agent, the Co-Syndication Agents, the
Documentation Agent and the Managing Agents.

 

“Agreement”
means, on any date, this Credit Agreement as originally in effect on the
Effective Date and as thereafter from time to time amended, supplemented,
amended and restated, or otherwise modified and in effect on such date.

 

“Alternate Reserve Report”
means a report, in form and detail satisfactory to the Administrative Agent and
the Required Lenders, on reserves updated internally by the Borrower making
adjustments for any changes in production volumes, expenses, Applicable Prices
and for dispositions of properties in the six-month period subsequent to the
immediately preceding Reserve Report Date and based upon the immediately
preceding Reserve Report and, at the Borrower’s option, for any acquisitions of
properties not included in the immediately preceding Reserve Report or the
restoration to the Borrowing Base of properties previously removed from the
Borrowing Base by the Borrower.

 

“Applicable Borrowing Base” means, at any time,
the then effective Borrowing Base less the then effective Borrowing Base
Reduction Amount.

 

“Applicable Gas Price”
means the average (rounded to the nearest $.01) of the natural gas prices being
used (including prices for future periods) by the Administrative Agent for
evaluation of oil and gas reserve lending transactions in accordance with the
Administrative Agent’s customary standards (which prices, other than those
fixed by contract and subject to BTU adjustment to reflect the liquids content
of Borrower’s natural gas, will be consistent with those then being applied to
other borrowers of the Administrative Agent generally) as of each
January 1 or July 1, as applicable; provided,
however, that for purposes of
determining the Borrowing Base, production volumes hedged under Commodity
Hedging Contracts or production volumes committed under long-term sales
contracts will be included in the Reserve Reports at the contracted price and
the Applicable Gas Price will be BTU-adjusted to reflect the liquids content of
Borrower’s natural gas.

 

“Applicable Margin”
means with respect to any Prime Rate Loan, LIBOR Loan, or the Commitment Fees
payable hereunder, the applicable percentage per annum set forth below under
the caption “Prime Spread”, “LIBOR Spread” or “Unused Fee”, as the case may be,
determined by reference to the Applicable Rating Level and, if applicable, the
percentage of the Applicable Borrowing Base that the outstanding Credit Exposure
represents at that time:

 

If Applicable Rating Level is “Level I” and
availability under this Agreement is not governed by the Borrowing Base:

 

	
  Prime
  Spread

  	
   

  	
  LIBOR
  Spread

  	
   

  	
  Unused
  Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  0.00

  	
  %

  	
  1.00

  	
  %

  	
  0.30

  	
  %

  

 

3

 

If Applicable Rating Level is either (i) “Level I” and
availability under this Agreement is governed by the Borrowing Base, (ii) “Level
II” or (iii) “Level III”:

 

	
  Borrowing Base Usage

  	
   

  	
  Prime

  Spread

  	
   

  	
  LIBOR
  Spread

  	
   

  	
  Unused

  Fee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Applicable
  Rating Level

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Level I and

  Level II

  	
   

  	
  Level III

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  75% of the Applicable Borrowing Base <
  outstanding Credit Exposure < 100% of the Applicable Borrowing
  Base

  	
   

  	
  0.25

  	
  %

  	
  1.75

  	
  %

  	
  2.00

  	
  %

  	
  0.40

  	
  %

  
	
  60% of the Applicable Borrowing Base <
  outstanding Credit Exposure < 75% of the Applicable Borrowing
  Base

  	
   

  	
  0.00

  	
  %

  	
  1.50

  	
  %

  	
  1.75

  	
  %

  	
  0.35

  	
  %

  
	
  40% of the Applicable Borrowing Base <
  outstanding Credit Exposure < 60% of the Applicable Borrowing
  Base

  	
   

  	
  0.00

  	
  %

  	
  1.25

  	
  %

  	
  1.50

  	
  %

  	
  0.35

  	
  %

  
	
  Outstanding Credit Exposure <
  40% of the Applicable Borrowing Base

  	
   

  	
  0.00

  	
  %

  	
  1.00

  	
  %

  	
  1.25

  	
  %

  	
  0.30

  	
  %

  

 

provided,
however, that during any Deficiency
Period, the “Prime Spread” with respect to Prime Rate Loans shall be “0.25%”
per annum and the “LIBOR Spread” with respect to LIBOR Loans shall be the
applicable “LIBOR Spread” provided above, plus
“0.50%” per annum.

 

For purposes of the foregoing, any change in the
Applicable Margin will occur automatically without prior notice upon (i) any
redetermination of the Borrowing Base Reduction Amount or (ii) any Borrowing
Base redetermination.

 

“Applicable Oil Price”
means the average (rounded to the nearest $.01) of the crude oil and liquid
products prices being used (including prices for future periods) by the
Administrative Agent for evaluation of oil and gas reserve lending transactions
in accordance with the Administrative Agent’s customary standards (which
prices, other than those fixed by contract and adjusted to reflect the quality
of Borrower’s crude oil, will be consistent with those then being applied to
other borrowers of the Administrative Agent generally) as of each
January 1 and July 1, as applicable; provided,
however, that, for purposes of
determining the Borrowing Base, production volumes hedged pursuant to Commodity
Hedging Contracts or production volumes committed under long-term sales
contracts will be included in the Reserve Reports at the

 

4

 

contracted price and the Applicable Oil Price will be
adjusted to reflect the quality of Borrower’s crude oil.

 

“Applicable Price”
means the Applicable Gas Price and the Applicable Oil Price, as the case may
be.

 

“Applicable Rating Level”
means the level set forth below that corresponds to ratings of the Index Debt
or, if no Index Debt is then outstanding and rated, then the corporate debt
rating of Borrower, issued from time to time by S&P or Moody’s, as
applicable:

 

	
   

  	
   

  	
  S&P

  	
   

  	
  Moody’s

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Level I

  	
   

  	
  “BBB-” and
  higher

  	
   

  	
  “Baa3” and
  higher

  	
   

  
	
  Level II

  	
   

  	
  “BB+”

  	
   

  	
  “Ba1”

  	
   

  
	
  Level III

  	
   

  	
  “BB” and
  lower

  	
   

  	
  “Ba2” and
  lower

  	
   

  

 

For purposes of the foregoing, (a) if either Moody’s or S&P shall
not have in effect a rating for the Index Debt or a corporate debt rating of
Borrower (other than by reason of the circumstances referred to in the last
sentence of this definition), then such rating agency shall be deemed to have
established a rating of Level III; (b) if the ratings for the Index Debt
or the corporate debt rating of Borrower, as applicable, established or deemed
to have been established by Moody’s and S&P shall fall within different
Levels, the Applicable Rating Level shall be based on the higher of the two
ratings; and (c) if the ratings for the Index Debt or the corporate debt rating
of Borrower, as applicable, established or deemed to have been established by Moody’s
and S&P shall be changed (other than as a result of a change in the rating
system of Moody’s or S&P), such change shall be effective as of the date on
which it is first announced by the applicable rating agency, irrespective of
when notice of such change shall have been furnished by Borrower to the
Administrative Agent and the Lenders pursuant to Section
7.2(i) hereof or otherwise. 
Each change in the Applicable Rating Level shall apply during the period
commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next change to the Applicable
Rating Level.  If the rating system of
Moody’s or S&P shall change, or if either such rating agency shall cease to
be in the business of rating corporate debt obligations or corporations, as
applicable, Borrower and the Lenders shall negotiate in good faith to amend
this definition to reflect such changed rating system or the unavailability of
ratings from such rating agency and, pending the effectiveness of any such
amendment, the Applicable Rating Level shall be determined by reference to the
rating most recently in effect prior to such change or cessation.

 

“Approved Fund”
means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that
administers or manages a Lender.

 

“Arch Petroleum”
means Arch Petroleum, Inc., a Delaware corporation.

 

“Assignment and
Assumption Agreement” means an Assignment and Assumption Agreement
substantially in the form of Exhibit D.

 

5

 

“Authorized Person”
means the Chief Executive Officer, the President, any Vice President or the
Treasurer of Borrower whose signatures and incumbency shall have been certified
to the Administrative Agent and the Lenders pursuant to Section 5.1.1, or any other officer or
employee of Borrower specified as such to the Administrative Agent in writing
by any of the aforementioned officers of Borrower.

 

“B8/32 Partners”
means B8/32 Partners, Ltd., a corporation organized under the laws of the
Kingdom of Thailand in which the Borrower holds on the Effective Date an equity
interest equal to Thaipo Limited’s working interest in the Block B8/32
Concession located in the Gulf of Thailand.

 

“Borrower” is
defined in the preamble.

 

“Borrowing”
means the Loans of the same Type made by all Lenders on the same Business Day
and pursuant to the same Borrowing Request in accordance with Section 2.1.

 

“Borrowing
Base” means, at any time when applicable pursuant to Section 2.8,
that amount, determined in accordance with Section 2.8 and calculated
using the Administrative Agent’s usual and customary criteria for oil and gas
reserve evaluation.  During the period
from the Effective Date to the date of the initial determination of the
Borrowing Base pursuant to the provisions of Section 2.8, the amount of
the Borrowing Base shall be Nine Hundred Million Dollars ($900,000,000).

 

 

“Borrowing
Base Deficiency” means, when availability under this Agreement is governed
by the Borrowing Base, any time when the aggregate Credit Exposures outstanding
exceed the Applicable Borrowing Base then in effect.

 

“Borrowing
Base Properties”means, when availability under this Agreement is governed
by the Borrowing Base, those oil and gas properties included in the most recent
Reserve Report or Alternate Reserve Report from which the determination of the
Borrowing Base is made hereunder which are (a) owned by (i) the Borrower, (ii)
a Restricted Subsidiary or (iii) Qualified Partnership Properties, (b)
located in the United States, Canada, the Kingdom of Thailand, Hungary, New
Zealand, the North Sea or such other location which is designated in writing by
Borrower to the Administrative Agent and which designation is acceptable to the
Administrative Agent and the Required Lenders and (c) free of all Liens,
including Liens securing Non-Recourse Indebtedness, other than Liens permitted
by Section 8.2.

 

“Borrowing Base Reduction Amount” means, at any
time, (i) 100% of the principal amount of all outstanding Senior Notes
Indebtedness issued since the last redetermination of the Borrowing Base plus
(ii) 30% of the principal amount of all Additional Subordinated
Indebtedness issued since the last redetermination of the Borrowing Base.

 

“Borrowing
Request” means a loan request and certificate duly executed by an
Authorized Person of the Borrower, substantially in the form of Exhibit B hereto.

 

“Business
Day” means any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in Chicago,
Illinois or Houston, Texas;

 

6

 

provided
that, when used in connection with a LIBOR Loan, the term “Business Day” shall also exclude any day on
which banks are not open for dealings in dollar deposits in the London
interbank market.

 

“Capitalization” means the sum, at any time
outstanding and without duplication, of (i) the consolidated Indebtedness
of the Borrower and its Restricted Subsidiaries as determined in accordance
with GAAP plus (ii) Stockholders’ Equity.

 

“Capitalized Lease
Liabilities” means all monetary obligations of the Borrower or any
of its Restricted Subsidiaries under any leasing or similar arrangement which,
in accordance with GAAP, would be classified as a capitalized lease, and, for
purposes of this Agreement and each other Loan Document, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP, and the stated maturity of any such obligations shall be the date of
the last payment of rent or any other amount due under the lease giving rise
thereto prior to the first date upon which such lease may be terminated by the
lessee thereunder without payment of a penalty.

 

“Cash
Equivalent Investment” means, at any time:

 

(a)                                  securities
maturing not more than one year after such time, issued or guaranteed by the
United States Government or its agencies or instrumentalities and GSE’s
(Government Sponsored Enterprises);

 

(b)                                 commercial
paper, maturing not more than nine months from the date of issue, which is
issued by (i) a corporation (other than an Affiliate or a Subsidiary of the
Borrower) organized under the laws of any state of the United States or of the
District of Columbia and rated to be of investment grade by S&P or Moody’s,
or (ii) any Lender (or its holding company);

 

(c)                                  any
certificate of deposit, banker’s acceptance or other bank obligations, maturing
not more than one year after such time, which is issued by either (i) a
commercial banking institution that is a member of the Federal Reserve System
and has a combined capital and surplus and undivided profits of not less than
$100,000,000, or (ii) any Lender;

 

(d)                                 any
repurchase agreement entered into with any Lender (or other commercial banking
institution of the stature referred to in clause
(c)(i)) which (i) is secured by a fully perfected security interest
in any obligation of the type described in any of clauses
(a) through (c), and (ii)
has a market value at the time such repurchase agreement is entered into of not
less than 100% of the repurchase obligation of such Lender (or other commercial
banking institution) thereunder;

 

(e)                                  any
loan participation in a loan which is to a borrower with a long-term debt
rating of investment grade or higher from any nationally recognized rating
agency and is made by (i) a commercial banking institution that is a member of
the Federal Reserve System and has a combined capital and surplus and undivided
profits of not less than $100,000,000, or (ii) any Lender;

 

7

 

(f)                                    any
evidence of Indebtedness, maturing not more than one year after such time,
issued or guaranteed by any agency of the United States Government, which has a
rating of “A-” or better from S&P or a rating of “A3” or better from Moody’s;

 

(g)                                 any
interest bearing account at, or certificate of deposit maturing not more than
one year after such time issued by, a U.S. savings and loan association which
has a rating of “A-” or better from S&P or a rating of “A3” or better from
Moody’s on its long term unsecured debt and which has combined capital and
surplus and undivided profits of not less than $100,000,000;

 

(h)                                 any
interest bearing account at, or certificate of deposit maturing not more than
one year after such time, payable in U.S. Dollars and issued by, (i) a foreign
banking institution or foreign branch of a U.S. banking institution, which
banking institution has a rating of “A-” or better from S&P or a rating of “A3”
or better from Moody’s on its long-term unsecured debt and combined capital and
surplus and undivided profits of not less than $100,000,000, or (ii) any
foreign subsidiary of a U.S. banking institution, which U.S. banking
institution has a rating of “A-” or better from S&P or a rating of “A3” or
better from Moody’s and which subsidiary has combined capital and surplus and
undivided profits of not less than $100,000,000 or (iii) by any Lender;

 

(i)                                     any
evidence of Indebtedness (including variable rate demand notes), maturing not
more than one year after such time, issued by any State of the United States,
by any county or municipality organized or incorporated under the laws of any
State of the United States or by any agency or subdivision of any of the
foregoing, in each case rated “A-” or better by S&P or rated “A3” or better
by Moody’s;

 

(j)                                     any
auction rate or preferred securities issued by domestic or foreign
corporations, municipalities, or closed-end management investment companies and
are designed as short term money market instruments rated “A-” or better by
S&P or rated “A3” or better by Moody’s, provided that such Investment will
not result in any violation of F.R.S. Board Regulation U and further provided
that the Borrower’s ownership interest will not exceed (and will not be
convertible into shares which exceed) 5% of the issuer’s outstanding shares
entitled to vote unless such ownership interest is acquired pursuant to a
merger agreement between the Borrower and such issuer); and

 

(k)                                  any
mutual funds or similar investment vehicles investing primarily in Investments
of the types set forth in the foregoing clauses (a) through (j), provided
that ratings requirements shall be applicable to the mutual fund rather than
the underlying Investments, as follows: 
such mutual funds shall, in each case, have a rating of “A-” or better
from S&P or a rating of “A3” from Moody’s or a rating satisfactory to the
Administrative Agent from another recognized rating agency satisfactory to the
Administrative Agent, provided, however, that it is agreed that
(i) any Investment which when made complies with the requirements of any of the
foregoing clauses (f), (g) or (h) may continue to be held
notwithstanding that such Investment if made thereafter would not comply with
such requirements; and (ii) no Investment otherwise permitted by clauses (i)
or (j) shall be permitted to be made directly or indirectly through a
mutual

 

8

 

fund if,
immediately before or after giving effect thereto, any Default shall have
occurred and be continuing; or

 

(m)                               any
Investments outside of the United States by the Borrower or any of its
Subsidiaries which are the functional foreign equivalents in all material
respects to the investments described in the foregoing clauses (a)
through (g), (i), and (k) of this definition; provided, however,
that at no time may the aggregate amount of any individual Investment permitted
under this Subsection (m) constitute more than ten percent (10%) of the
total principal amount of any applicable mutual fund or other similar
investment vehicle in which the Borrower’s Investment has been made.

 

“Central Time”
means the current time in Chicago, Illinois.

 

“CERCLA” means
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended.

 

“CERCLIS”
means the Comprehensive Environmental Response Compensation Liability
Information System List.

 

“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 the Borrower.

 

“Closing Date”
means December 16, 2004.

 

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

 

“Commitment” means, relative to any Lender,
such Lender’s obligation to make Revolving Loans pursuant to Section 2.1.1, to participate in Swing Line
Advances pursuant to Section 2.2.2
and to participate in Letters of Credit pursuant to Section
2.3.4, as the same may be reduced, increased or adjusted from time
to time in accordance with this Agreement, including Section 2.4 and Section
2.10.  The initial amount of each
Lender’s Commitment is set forth on Schedule 2.1, in the Assignment and
Assumption Agreement pursuant to which such Lender shall have assumed its
Commitment or in the Lender Certificate pursuant to which such Lender shall
have assumed or increased its Commitment, as applicable.

 

“Commitment
Amount” means, on any date, $750,000,000, as the same may be reduced,
increased or adjusted from time to time in accordance with this Agreement,
including Section 2.4 and Section 2.10.

 

“Commitment
Fees” is defined in Section 3.3.1.

 

“Commitment
Termination Date” means the earliest of:

 

(a)                                  the
Stated Maturity Date;

 

9

 

(b)                                 the
date on which the Commitment Amount is terminated in full or reduced to zero
pursuant to Section 2.4; and

 

(c)                                  the
date on which any Commitment Termination Event occurs.

 

Upon the occurrence of any event described in clause (b) or (c),
the Commitments shall terminate automatically and without any further action.

 

“Commitment
Termination Event” means

 

(a)                                  the
occurrence of any Event of Default described in clauses
(a) through (d) of Section 9.1.9; or

 

(b)                                 any
other Event of Default shall have occurred and be continuing and either

 

(i)                                     the
Loans are declared to be due and payable pursuant to Section 9.3,
or

 

(ii)                                  in
the absence of such declaration, the Administrative Agent, acting at the
direction of the Required Lenders, gives notice to the Borrower that the
Commitments have been terminated.

 

“Commodity Hedging
Contract” means a commodity hedging or purchase agreement or similar
arrangement to which the Borrower or any of its Subsidiaries is a party, the
purpose of which is to protect against fluctuations in commodity prices or the
exchange of notional commodity obligations, either generally or under specific
contingencies.

 

“Consolidated Affiliates” means the Affiliates
of the Borrower which in accordance with GAAP are included in the consolidated
financial statements of the Borrower, other than any Subsidiaries of the
Borrower.

 

“Continuation/Conversion
Notice” means a notice of continuation or conversion and certificate
duly executed by an Authorized Person of the Borrower, substantially in the
form of Exhibit C.

 

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

 

“Co-Syndication Agent”
and “Co-Syndication Agents” are defined in the preamble.

 

“Credit Event”
means a Borrowing, Swing Line Advance or the issuance of a Letter of Credit
hereunder.

 

10

 

“Credit Exposure”
means, with respect to any Lender at any time, the sum of the outstanding
principal amount of such Lender’s Revolving Loans, its obligation to
participate in any Swing Line Advances and its LC Exposure at such time.

 

“Default”
means any Event of Default or any condition, occurrence or event which, after
notice or lapse of time or both, would constitute an Event of Default.

 

“Deficiency Period”
means, when availability under this Agreement is governed by the Borrowing
Base, any period commencing upon any date when the aggregate Credit Exposures
outstanding exceeds the Applicable Borrowing Base then in effect, and
continuing until the date that, pursuant to the redetermination of the
Borrowing Base, or by reason of prepayments of the Loans, the aggregate Credit
Exposures outstanding no longer exceed the Applicable Borrowing Base then in
effect.

 

“Disclosure Schedule”
means the Disclosure Schedule attached hereto as Schedule
I, as it may be amended, supplemented or otherwise modified from
time to time by the Borrower with the written consent of the Administrative
Agent and the Required Lenders.

 

“Discounted Present Value”
means, at any time that a calculation thereof is being made, the sum total of
the Future Net Income for each Fiscal Year, or portion thereof, commencing on
or after the date six months from the date of such calculation, as presented in
the then most recent Reserve Report or Alternate Reserve Report delivered
pursuant to Section 7.1(e), discounted
to present value as of the date six months from the date of such calculation at
such rate and in such manner as provided by the requirements of the SEC from
time to time in effect.

 

“Documentation Agent”
is defined in the preamble.

 

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

 

“Domestic Office”
means, relative to any Lender, the office of such Lender designated as such in
its Administrative Questionnaire or designated in the Lender’s Assignment and
Assumption Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.  A Lender may have separate
Domestic Offices for purposes of making, maintaining or continuing, as the case
may be, Prime Rate Loans.

 

“EBITDAX”
means, for any period, with respect to the Borrower and its consolidated
Subsidiaries and Consolidated Affiliates, determined on a consolidated basis in
accordance with GAAP and without duplication, (a) the sum of the amounts for
such period of (i) net income (or loss) after taxes, plus
(ii) interest expense (net of capitalized interest) and dividends paid on
preferred and preference stock of the Borrower, plus
(iii) depreciation expense and depletion expense, plus (iv) amortization expense, plus (v) United States federal and state and
foreign taxes, plus (vi) exploration
expenses, plus (vii) other
non-cash charges and expenses plus
(viii) any losses arising outside of the ordinary course of business which have
been included in the determination of consolidated net income, less (b) any gains arising outside the
ordinary course of business which have been included in the determination of
consolidated net income.

 

11

 

“Effective Date”
means the date this Agreement becomes effective pursuant to Section 11.8.

 

“Eligible Assignee”
means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund, or (d)
any other Person (other than a natural Person) that regularly purchases or
invests in bank loans approved by the Administrative Agent and the Borrower; provided, however,
if (x) such Person is taking delivery of an assignment in connection with
physical settlement of a credit derivatives transaction or (y) an Event of
Default has occurred and is continuing, the Borrower’s approval shall not be
required.  The foregoing approvals by
Administrative Agent and the Borrower, if applicable, shall not be unreasonably
withheld or delayed.

 

“Environmental Laws”
means all applicable laws, statutes, ordinances, rules, regulations, judgments,
writs, injunctions, decrees, orders and awards promulgated or issued by any
Governmental Authority concerning the protection of, or regulating the
discharge of substances into, the environment. 
“Environmental Laws” shall not
include the Occupational Safety and Health Act of 1970 or similar state
statutes.

 

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

 

“Event of Default”
is defined in Section 9.1.

 

“Excluded Taxes”
means, with respect to any of the Agents, any Lender, or any other recipient of
any payment to be made by or on account of any obligation of the Borrower
hereunder, (i) income, franchise or doing business taxes imposed on (or
measured by) its net income or bank share taxes, imposed by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (ii) any branch
profits taxes imposed by the United States of America or any similar tax
imposed by any other jurisdiction in which the Borrower is located and (iii) in
the case of a Foreign Lender, any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender’s failure to comply with Section
4.7(c), except to the extent that such Foreign Lender was entitled,
at the time of designation of a new lending office, to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to Section 4.7(a).

 

“Existing Credit Facility”
means that certain Credit Agreement, dated as of March 8, 2001, as amended from
time to time, among the Borrower, Bank of Montreal, as administrative agent,
and the lenders and other agents named therein.

 

“Federal Funds Rate”
means, for any period, a fluctuating interest rate per annum (equal for each
day during such period) to

 

12

 

(a)                                  the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York; or

 

(b)                                 if
such rate is not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by the
Administrative Agent from three federal funds brokers of recognized standing
selected by it.

 

“Financing Transactions”
means the execution, delivery and performance by the Borrower of the Loan
Documents, the borrowing of the Loans, the use of the proceeds thereof and the
issuance of Letters of Credit hereunder.

 

“Fiscal Quarter”
means any fiscal quarter of a Fiscal Year of the Borrower.

 

“Fiscal Year”
means the period of twelve consecutive calendar months ending on December 31st;
references to a Fiscal Year with a number corresponding to any calendar year (e.g. the “2001 Fiscal Year”) refer to the
Fiscal Year ending on the December 31st occurring during such calendar year.

 

“Fixed Charges”
means, for any period, without duplication with respect to the Borrower and its
consolidated Restricted Subsidiaries and Consolidated Affiliates, determined on
a consolidated basis in accordance with GAAP, the sum of (i) the total interest
charges (including the interest component of capitalized leases but net of
capitalized interest) for such period, net of interest income, plus (ii) dividends paid on preferred and
preference stock of the Borrower, plus
(iii) the current portion of Indebtedness for borrowed money and of all
obligations evidenced by bonds, debentures, notes or other similar instruments
(including the current portion of Non-Recourse Indebtedness, but excluding any
Loans outstanding hereunder) and the current portion of production payments to
be paid as of the end of such period, plus
(iv) the amount of mandatory redemptions of preferred stock to be made by the
Borrower in cash during the succeeding twelve-month period (excluding
redemptions of shares of such preferred stock held by Subsidiaries or
Affiliates of the Borrower).

 

“Fixed
Charge Coverage Ratio” at any date means the ratio of EBITDAX to Fixed
Charges for the four Fiscal Quarters most recently ended on such date.

 

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

 

“F.R.S. Board”
means the Board of Governors of the Federal Reserve System or any successor
thereto.

 

13

 

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

 

“Future Net Income”
means, for each year or portion thereof, the amount for such year or portion
thereof, as reflected in the then most recent Reserve Report or Alternate
Reserve Report, as the case may be, which would result from the expected sale
of recoverable hydrocarbons from or attributable to the Borrower’s interest in
any Proved Reserves located on Borrowing Base Properties.  Future Net Income shall be calculated by
taking the Gross Revenues less all applicable royalties, net profits interests
and similar burdens on production, and costs and expenses (other than general
and administrative costs and expenses) which the Borrower can reasonably be
expected to incur or, in the case of Qualified Partnership Properties, the
Borrower’s interest can reasonably be expected to bear in producing each
product from such Proved Reserves (including production, severance and ad
valorem or like taxes, transportation costs, operating expenses, capital
expenses with respect to such Proved Reserves, and the cost of drilling,
completing and equipping additional wells, including any dry holes, which are reasonably
expected to be drilled for the purpose of completing development of such Proved
Reserves and obtaining therefrom the volumes of such production included for
the purposes hereof).  Commencing with
the third year from the date such calculation is made, such costs and expenses
will be escalated at a rate of the average (rounded to the nearest .01 of 1%)
of the escalation being used by the Administrative Agent for evaluation of oil
and gas transactions in accordance with the Administrative Agent’s customary
standards (which escalations will be consistent with those being applied to
other borrowers of the Administrative Agent generally) as of each
January 1 or July 1, as applicable.

 

“GAAP” is
defined in Section 1.4.

 

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

 

“Governmental Authority”
means any United States federal, state or local or any foreign government,
governmental regulatory or administrative authority, agency or commission or
any court, tribunal or judicial or arbitral body.

 

“Gross Revenues”
means the sum, for the several product classes of hydrocarbon production, of
annual production attributed to each product multiplied by the Applicable
Prices, as the case may be, per unit volume applicable to each product.

 

“Guarantee”
means any agreement, undertaking or arrangement by which any Person guarantees,
endorses or otherwise becomes or is contingently liable (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) for the indebtedness or other obligation to pay money of
any other Person (other than by endorsements of instruments in the course of
collection or deposit), or guarantees the payment of dividends or other
distributions in respect of the shares of any other Person; provided, however,
that any

 

14

 

agreement, undertaking or arrangement by which the
Borrower or any of its Subsidiaries guarantees any payments with respect to (i)
any Hybrid Preferred Securities or, (ii) obligations under oil and gas
exploration, development, operation and related agreements and licenses entered
into in connection with oil and gas exploration and production activities shall
not constitute a Guarantee hereunder. The amount of any Person’s obligation
under any Guarantee shall (subject to any limitation set forth therein) be
deemed to be the outstanding principal amount of the indebtedness or other
obligations subject thereto.

 

“Hazardous Material”
means

 

(a)                                  any
“hazardous substance”, as defined by CERCLA;

 

(b)                                 any
“hazardous waste”, as defined by the Resource Conservation and Recovery Act, as
amended;

 

(c)                                  any
petroleum, crude oil or any fraction thereof;

 

(d)                                 any
hazardous, dangerous or toxic chemical, material waste or substance within the
meaning of any Environmental Law;

 

(e)                                  any
radioactive material, including any naturally occurring radioactive material,
and any source, special or by-product material as defined in 42 U.S.C. §2011
et. seq.,  and any amendments or
reauthorizations thereof;

 

(f)                                    asbestos-containing
materials in any form or condition; or

 

(g)                                 polychlorinated
biphenyls in any form or condition.

 

“Hedging Agreement”
means any interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements, and all other agreements or arrangements
designed to protect such Person against fluctuations in interest rates or
currency exchange rates between Borrower or its Subsidiaries and any Person.

 

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

 

“herein”, “hereof”, “hereto”,
“hereunder” and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.

 

“Highest Lawful Rate”
is defined in Section 3.2.4.

 

“Hybrid Preferred
Securities” means preferred or common equity interests issued by any
Hybrid Preferred Securities Subsidiary.

 

15

 

“Hybrid Preferred
Securities Subsidiary” means any business trust (or similar entity)
(i) all of the common equity interest of which is owned (either directly or
indirectly through one or more wholly-owned Subsidiaries) by the Borrower, (ii)
that has been formed for the purpose of issuing Hybrid Preferred Securities,
and (iii) substantially all of the assets of which consist at all times of
subordinated debt or other obligations of the Borrower or a Subsidiary of the
Borrower and payments made from time to time on such subordinated debt or other
obligations.

 

“Impermissible
Qualification” means, relative to the opinion or certification of
any independent public accountant as to any financial statement of the
Borrower, any qualification or exception to such opinion or certification

 

(a)                                  which
is of a “going concern” nature;

 

(b)                                 which
relates to the limited scope of examination of matters relevant to such
financial statement; or

 

(c)                                  which
relates to the treatment or classification of any item in such financial
statement and which, as a condition to its removal, would require an adjustment
to such item the effect of which would be to cause the Borrower to be in
default of any of its obligations under Section
8.3.

 

“including”
means including without limiting the generality of any description preceding
such term, and, for purposes of this Agreement and each other Loan Document,
the parties hereto agree that the rule of ejusdem
generis shall not be applicable to
limit a general statement, which is followed by or referable to an enumeration
of specific matters, to matters similar to the matters specifically mentioned.

 

“Increased Commitment
Amount” is defined in Section 2.10.

 

“Indebtedness”
of any Person means at the time of any determination thereof, without
duplication:

 

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

 

(b)                                 all
reimbursement obligations, contingent or otherwise, of that Person in respect
of all letters of credit (except those which have as collateral cash or Cash
Equivalent Investments, whether or not drawn) and banker’s acceptances issued
for the account of such Person;

 

(c)                                  all
Capitalized Lease Liabilities of that Person except to the extent such
obligations are offset by the contractual obligations of a third party to make
payments to such Person to reimburse such Person for a portion of those
Capitalized Lease Liabilities and such third party is current with respect to
such payments;

 

16

 

(d)                                 all
preferred stock of the Borrower, other than preferred stock of the Borrower now
existing or hereafter issued which by its express terms is not required to be
redeemed in cash, property, notes or other debt instruments by the Borrower
prior to a date seven years after the Effective Date, is excluded from this
definition;

 

(e)                                  the
net mark-to-market value determined in accordance with GAAP of that Person in
respect of obligations and liabilities arising in connection with or as a
result of early or premature termination of a Commodity Hedging Contract or a
Hedging Agreement, whether or not occurring as a result of a default
thereunder;

 

(f)                                    advance
payment agreements on which performance is incomplete and all obligations of
such Person to pay the deferred purchase price of property (including
obligations arising under conditional sales or other title retention
agreements), or services, except trade accounts payable, accrued expenses and
deferred compensation and other pension, benefit and welfare expenses, in each
case, arising in the ordinary course of business;

 

(g)                                 obligations
of the types described in clauses (a)
through (f) of this definition secured
by a Lien on property owned by such Person, whether or not such obligations
shall have been assumed by such Person or are limited in recourse; and

 

(h)                                 all
Guarantees of such Person.

 

For all purposes of this Agreement, the Indebtedness of any Person
shall include only that portion of the Indebtedness of any partnership or joint
venture for which such Person is liable by contract or by operation of law
unless abrogated by contract. 
Indebtedness of a Person shall not include (i) any Hybrid Preferred
Securities issued by such Person, any subordinated Indebtedness or other obligations
of such Person initially issued to any Hybrid Preferred Securities Subsidiary
in connection with the issuance of Hybrid Preferred Securities or any Guarantee
by such Person of payments with respect to any Hybrid Preferred Securities or
(ii) intercompany loans and advances among the Borrower and its Subsidiaries.

 

“Indemnified Liabilities”
is defined in Section 11.4.

 

“Indemnified Parties”
is defined in Section 11.4.

 

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

 

“Information Memorandum”
means the Confidential Information Memorandum dated November 2004 in respect of
the facilities provided for in this Agreement and distributed to the initial
Lenders under this Agreement.

 

“Interest Period”
means, relative to any LIBOR Loans comprising part of the same Borrowing, the
period beginning on (and including) the date on which such LIBOR Loan is made
or continued as, or converted into, a LIBOR Loan pursuant to Section 2.5 or 2.6
and shall end on (but exclude) the day which numerically corresponds to such
date one, two, three or six

 

17

 

months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), as the Borrower may
select in its relevant notice pursuant to Section
2.5 or 2.6; provided, however,
that

 

(a)                                  the
Borrower shall not be permitted to select Interest Periods to be in effect at
any one time which have expiration dates occurring on more than five different
dates;

 

(b)                                 Interest
Periods commencing on the same date for Loans comprising part of the same
Borrowing shall be of the same duration;

 

(c)                                  if
such Interest Period would otherwise end on a day which is not a Business Day,
such Interest Period shall end on the next following Business Day (unless, if
such Interest Period applies to LIBOR Loans, such next following Business Day
is the first Business Day of a calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day); and

 

(d)                                 no
Interest Period for a Loan may end later than six months after the Stated
Maturity Date.

 

“Investment”
means, relative to any Person,

 

(a)                                  any
loan or advance made by such Person to any other Person (excluding commission,
travel and other loans or advances to officers and employees made in the
ordinary course of business);

 

(b)                                 any
Guarantee of such Person; and

 

(c)                                  any
equity interest held by such Person in any other Person.

 

The amount of any Investment shall be the original principal (in the
case of a loan or advance) or capital amount thereof, less all payments of
principal (in the case of a loan or advance) or return of or on equity in
respect thereof (and without adjustment by reason of the financial condition of
such other Person) and shall, if made by the transfer or exchange of property
other than cash, be deemed to have been made in an original principal or
capital amount equal to the fair market value of such property at the time of
that transfer or exchange.

 

“Issuing Bank”
means Bank of Montreal in its capacity as the issuer of Letters of Credit
hereunder, and its successors in such capacity as provided in Section 2.3.9.  An Issuing Bank may, in its discretion,
arrange for one or more Letters of Credit to be issued by Affiliates of such
Issuing Bank, in which case the term “Issuing Bank” shall include any such
Affiliate with respect to Letters of Credit issued by such Affiliate.

 

“LC Disbursement”
means a payment made by any Issuing Bank pursuant to a Letter of Credit.

 

“LC Exposure”
means, at any time, the sum of (a) the aggregate undrawn amount of all
outstanding Letters of Credit at such time, plus (b) the aggregate amount of
all LC

 

18

 

Disbursements that have not yet been reimbursed by or
on behalf of Borrower at such time.  The
LC Exposure of any Lender at any time shall be its Percentage of the total LC
Exposure at such time.

 

“Lender Certificate”
is defined in Section 2.10.

 

“Lender Commitment Amount”
means, with respect to each Lender, an amount equal to the amount of such
Lender’s Commitment as set forth on Schedule 2.1, in the Assignment and
Assumption Agreement pursuant to which such Lender shall have assumed its
Commitment, or in the Lender Certificate pursuant to which such Lender shall
have assumed or increased its Commitment, as applicable.

 

“Lenders” is
defined in the preamble.

 

“Letter of Credit”
means any letter of credit issued pursuant to this Agreement.

 

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

 

“LIBOR Loan”
means a Loan bearing interest, at all times during an Interest Period
applicable to such Loan, at a fixed rate of interest determined by reference to
the LIBOR.

 

“LIBOR Office”
means, relative to any Lender, the office of such Lender designated as such in
its Administrative Questionnaire or designated in the Lender’s Assignment and
Assumption Agreement or such other office of a Lender as designated from time
to time by notice from such Lender to the Borrower and the Administrative
Agent, whether or not outside the United States, which shall be making or
maintaining LIBOR Loans of such Lender hereunder.

 

“Lien” means
any security interest, mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance or lien (statutory or other) of any kind or nature
whatsoever (other than a Guarantee) with respect to any property, real or
personal.

 

“Loan” means
any Revolving Loan or Swing Line Advance.

 

19

 

“Loan Document”
means this Agreement, the Notes, any Subsidiary Guaranty, any Borrowing
Request, any Continuation/Conversion Notice, any Lender Certificate, any
agreement with respect to fees described in Section
3.3 and each other agreement delivered by Borrower, any Subsidiary
or Affiliate of Borrower in connection with this Agreement, as such may be
amended from time to time.

 

“Managing Agents”
is defined in the preamble.

 

“Material Adverse Effect”
means any change in or effect on the Borrower or any of its Subsidiaries that, individually
or in the aggregate with any other changes in or effects on the Borrower or any
of its Subsidiaries, (i) is materially adverse to the business, properties,
financial condition or results of operations of the Borrower and its
Subsidiaries taken as a whole or (ii) would reasonably be expected to have
a material adverse effect on the Borrower’s ability to perform its respective
obligations under the Loan Documents; provided,
however, that “Material Adverse Effect”
shall not be deemed to include any changes or effects arising out of any
effects of FAS 133 or FAS 143 or other changes in GAAP or in the generally
applicable interpretation thereof.

 

“Moody’s”
means Moody’s Investor Services, Inc. and any successor thereto that is a
nationally recognized rating agency.

 

“NCOC” means
North Central Oil Corporation, a Delaware corporation.

 

“Non-Recourse
Indebtedness” means any Indebtedness of the Borrower or any of its
Subsidiaries with respect to which the holder thereof agrees that (i) neither
the Borrower nor any of its Restricted Subsidiaries is personally liable
therefor and (ii) such holder may require payment only to the extent
specifically identified properties of an Unrestricted Subsidiary are available
to provide therefor, such matters to be set forth in form and substance
reasonably satisfactory to the Administrative Agent in an agreement between
such holder and such Unrestricted Subsidiary.

 

“Non-Standard
Determination” means, when availability under this Agreement is
governed by the Borrowing Base, a determination or redetermination of the
Borrowing Base that may be made either (i) in the event that Borrower fails to
comply with the delivery requirements for Reserve Reports or Alternate Reserve
Reports set forth in Section 7.1(e),
(ii) upon the occurrence of any event that permits redetermination of the
Borrowing Base under Section 2.8(b),
(iii) at the discretion of the Required Lenders, no more than once during any
six month period ending either November 1st, or May 1st, as applicable, (iv) at
the request of the Borrower, no more than once during any six month period
ending either November 1st, or May 1st, as applicable, in any case as provided
in Section 2.8(b), or (v)
notwithstanding any previous request of the Borrower under the preceding clause (iv), at the request of the
Borrower within a period of 60 days after the Borrower’s issuance of any Senior
Notes Indebtedness, any Senior Debt (other than Senior Notes Indebtedness and
Additional Senior Unsecured Indebtedness) or any Additional Subordinated
Indebtedness, in connection with the Borrower’s issuance of any Senior Notes
Indebtedness, any Senior Debt (other than Senior Notes Indebtedness and
Additional Senior Unsecured Indebtedness) or Additional Subordinated
Indebtedness.

 

20

 

“Notes” means
the Revolving Notes and the Swing Line Note.

 

“Obligations”
means all obligations (monetary or otherwise) of the Borrower arising under
this Agreement, the Notes and the other Loan Documents.

 

“Organic Document”
means, relative to any Person and as applicable, its certificate or articles of
organization, formation or incorporation (or comparable document), its by-laws
or operating agreement, and all partnership agreements or limited liability
company agreement, regulations or other general rules of governance or
association and similar arrangements applicable to ownership.

 

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

 

“Participant”
is defined in Section 11.11.

 

“PBGC” means the Pension Benefit Guaranty
Corporation and any entity succeeding to any or all of its functions under
ERISA.

 

“Pension Plan”
means a “pension plan”, as such term is defined in section 3(2) of ERISA, which
is subject to Title IV of ERISA (other than a multi-employer plan as defined in
section 4001(a)(3) of ERISA), and to which the Borrower or any corporation,
trade or business that is, along with the Borrower, a member of a Controlled
Group, may have liability, including any liability by reason of having been a
substantial employer within the meaning of section 4063 of ERISA at any time
during the preceding five years, or by reason of being deemed to be a
contributing sponsor under section 4069 of ERISA.

 

“Percentage”
means, relative to any Lender, the percentage set forth on Schedule 2.1
or set forth in the Lender’s Assignment and Assumption Agreement, as such
percentage may be adjusted from time to time pursuant to (i) Assignment and
Assumption Agreement(s) executed by such Lender and its Assignee Lender(s) and
delivered pursuant to Section 11.11
or (ii) any Lender Certificate delivered pursuant to Section 2.10.

 

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

 

“Plan” means
any Pension Plan or Welfare Plan.

 

“Post-Maturity Rate”
is defined in Section 3.2.2.

 

“Prime Rate”
means, on any date and with respect to all Prime Rate Loans, a fluctuating rate
of interest per annum equal to the higher of

 

(a)                                  the
rate of interest most recently announced by the Administrative Agent at its
Domestic Office as its Prime Rate; and

 

21

 

(b)                                 the
Federal Funds Rate most recently determined by the Administrative Agent plus
1/2%.

 

The Prime Rate is not necessarily intended to be the lowest rate of
interest charged by the Administrative Agent in connection with extensions of
credit. The Prime Rate is a fluctuating rate of interest and changes in the
rate of interest on that portion of any Loans maintained as Prime Rate Loans
will take effect simultaneously with each change in the Prime Rate.  The Administrative Agent will give notice
promptly to the Borrower and the Lenders of changes in the Prime Rate.

 

“Prime Rate Loan”
means a Loan bearing interest at a fluctuating rate determined by reference to
the Prime Rate.

 

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

 

“Proved Developed Behind
Pipe Reserves” means those Proved Reserves which are recoverable
from zones behind casing in existing wells, which will require additional
completion work or a future recompletion prior to the start of production.

 

“Proved Developed
Producing Reserves” means those Proved Reserves which are
recoverable from completion intervals in existing wells currently open and
producing to market.  Improved recovery
reserves are considered to be producing only after an improved recovery project
has been installed and is in operation.

 

“Proved Developed Shut-in
Reserves” means Proved Reserves that are recoverable from completion
intervals open, but not producing.

 

“Proved Reserves”
means those recoverable hydrocarbons which have been proved to a high degree of
certainty by reason of existing production, adequate testing, or in certain
cases by adequate core data and other engineering and geologic information  on zones which are present in existing wells
or in known reservoirs which are recoverable under existing economic and
operating conditions.  Reserves that can
be produced economically through the application of established improved
recovery techniques are included in the proved classification when (a) successful
testing by a pilot project or the operation of any installed program in that
reservoir or one in the immediate area with similar rock and fluid properties
provides support for the engineering analysis on which the project or program
was based, and (b) it is reasonably certain the project will proceed.  Reserves to be recovered by improved recovery
techniques that have yet to be established through repeated economically
successful applications are included in the proved category only after successful
testing by a pilot project or after the operation of an installed program in
the reservoir provides support for the engineering analysis on which the
project or program was based.  Improved
recovery includes all methods for supplementing natural reservoir forces and
energy, or otherwise increasing ultimate recovery from a reservoir, including
(i) pressure maintenance, (ii) cycling, and (iii) secondary recovery in
its original sense.  Improved recovery
also includes the enhanced recovery methods of thermal, chemical flooding, and
the use of miscible and immiscible displacement fluids.

 

22

 

“Proved Undeveloped
Reserves” means Proved Reserves that are recoverable by new wells on
undrilled acreage, from existing wells where a relatively large expenditure is
required for recompletion and from acreage where the application of an improved
recovery technique is planned and the costs required to place the project in
operation are relatively large.  Proved
Undeveloped Reserves on undrilled acreage shall be limited to those drilling
units offsetting productive units that are reasonably certain of production
when drilled.  Proved Reserves for other
undrilled units are Proved Undeveloped Reserves only where it can be demonstrated
with certainty that there is continuity of production from the existing
productive formation.

 

“Qualified Partnership
Properties” means Proved Reserves owned by a partnership or joint
venture in which the Borrower or a Significant Subsidiary is a general partner
or a venturer.

 

“Quarterly Payment Date”
means the last day of each January, April, July and October or, if any such day
is not a Business Day, the next succeeding Business Day.

 

“Refinancing
Indebtedness” means subordinated Indebtedness incurred after the Effective
Date refinancing any or all of the Indebtedness described in clause (a)(i) of the definition of “Subordinated
Indebtedness”.

 

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

 

“Regulatory
Change” means, with respect to any Lender, any change in or adoption of
United States federal, state or foreign law, rule or regulation or the adoption
of, making of, or any change in any interpretations or directives applying to a
class of banks including such Lender under any United States federal, state or
foreign law or regulations by any court, governmental or monetary authority or
central bank charged with the interpretation or administration thereof.

 

“Release”
means a “release”, as such term is defined in CERCLA.

 

“Request
for Swing Line Advance” has the meaning given it in Section 2.2.1(a).

 

“Required
Borrowing Base Lenders” means (i) with respect to any action in connection
with increasing the Borrowing Base, the Lenders holding at least 75% of the
then aggregate outstanding principal amount of the Notes then held by the
Lenders, or, if no such principal amount is then outstanding, the
Administrative Agent and Lenders responsible for at least 75% of the then
current Commitment Amount and (ii) with respect to any action in connection
with decreasing the Borrowing Base, the Lenders holding at least 66 2/3% of the
then aggregate outstanding principal amount of the Notes then held by the
Lenders, or, if no such principal amount is then outstanding, the
Administrative Agent and Lenders responsible for at least 66 2/3 of the then
current Commitment Amount.

 

23

 

“Required Lenders”
means, at any time, Lenders holding more than 50% of the then aggregate
outstanding principal amount of the Notes then held by the Lenders, or, if no
such principal amount is then outstanding, Lenders having more than 50% of the
Commitments.

 

“Reserve Report”
means a report prepared by the Borrower and audited by Ryder Scott Company
Petroleum Engineers, Miller and Lents, Ltd. or other independent petroleum
engineers satisfactory to the Administrative Agent and the Required Lenders
showing, in form and detail satisfactory to the Administrative Agent and
Required Lenders, such engineers’ estimate of the Proved Reserves on the
Borrowing Base Properties and the future Gross Revenue and Future Net Income to
be derived from such Proved Reserves as of the Reserve Report Date for each
year.  The Reserve Report shall estimate
the Proved Reserves and income data for the Proved Developed Producing
Reserves, the Proved Developed Shut-In Reserves, the Proved Developed Behind
Pipe Reserves and the Proved Undeveloped Reserves, and shall, in each case,
report only the Proved Reserves and income data attributable to Borrower’s or a
Restricted Subsidiary’s working interest percentage in or Borrower’s or a
Restricted Subsidiary’s pro rata share
of, as the case may be, any Proved Reserves located on the Borrowing Base
Properties, less the Borrower’s or a Restricted Subsidiary’s obligations or pro
rata share of such obligations, as the case may be, for advance payments for
each such property.  All calculations
including the calculation of Applicable Prices in the Reserve Report shall be
made on a property-by-property and an interest-by-interest basis in order to
reflect the varying royalties, costs and expenses, working interests and
advance payments applicable to the various Borrowing Base Properties covered by
the Reserve Report.  Except as otherwise
specifically required herein, the Reserve Report shall be prepared and
presented in accordance with the requirements of the SEC from time to time in
effect.

 

“Reserve Report Date”
means January 1, with respect to Reserve Reports, and July 1, with respect to
Alternate Reserve Reports, it being understood that no date shall be deemed a
Reserve Report Date until the applicable Reserve Reports or Alternate Reserve
Reports with respect thereto are available.

 

“Restricted
Subsidiary” means any of (i) Arch Petroleum, NCOC, B8/32 Partners, and
Thaipo Limited, (ii) any Subsidiary which is shown in a Reserve Report as
owning any oil and gas properties which are included in the Borrowing Base,
(iii) any Subsidiary which is designated by Borrower in writing as a “Restricted
Subsidiary” on Item 6.8 of the Disclosure Schedule, (iv) any other Subsidiary
which is not designated by Borrower as an Unrestricted Subsidiary in accordance
with Section 7.8, or (v) any other Subsidiary which is the direct owner
of a Subsidiary described in clauses (i) through (iv) of this definition.

 

“Revolving
Loan” is defined in Section 2.1.1
of this Agreement.

 

“Revolving
Note” means a promissory note of the Borrower payable to any Lender, in the
form of Exhibit A hereto (as such promissory
note may be amended, exchanged, endorsed or otherwise modified from time to
time), and also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.

 

“S&P”
means Standard & Poor’s Rating Services, a division of The McGraw Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

 

24

 

“SEC” means the Securities and Exchange
Commission or any successor agency.

 

“Senior Debt”
means, at the time of any determination thereof, without duplication with
respect to any of the Borrower and its Restricted Subsidiaries, the principal
amount of all Indebtedness of that Person constituting borrowed money
(including, without limitation, with respect to the Borrower, the Loans
outstanding under this Agreement and Additional Senior Unsecured Indebtedness
and Senior Notes Indebtedness) other than (i) Subordinated Indebtedness, (ii)
Non-Recourse Indebtedness, (iii) any Guarantee by that Person of any such
Indebtedness of the Borrower or any of its Subsidiaries, and (iv) any Guarantee
by that Person of the portion of any such Indebtedness of any of its Affiliates
that is included at that time on the consolidated balance sheet of the Borrower
and its consolidated Subsidiaries and Affiliates.

 

“Senior Notes Indebtedness” means Indebtedness
for borrowed money incurred by the Borrower after the Effective Date (other
than Additional Senior Unsecured Indebtedness) which complies with the
following requirements:

 

(a)                                  such
Indebtedness must have terms (including interest, amortization, covenants and
events of default) which are not more onerous to Borrower and its Subsidiaries
than those contained in this Agreement unless such terms are approved by the
Required Lenders; and

 

(b)                                 the
maturity dates of such Indebtedness are no earlier than 180 days after the
Stated Maturity Date.

 

“Significant Subsidiary”
means any Subsidiary (i) with assets having a book value equal to or greater
than ten percent (10%) of the consolidated assets of Borrower and its
Subsidiaries or (ii) which accounts for more than ten percent (10%) of EBITDAX
of Borrower and its Subsidiaries.

 

“Stated Maturity Date”
means December 16, 2009.

 

“Stockholders’ Equity” means, as of the time of
any determination thereof that is to be made, shareholders’ equity of the
Borrower and its consolidated Subsidiaries and Consolidated Affiliates
determined in accordance with GAAP plus the absolute cumulative amount
by which such stockholders’ equity shall have been reduced by reason of
non-cash write downs from time to time after the Effective Date.

 

“Subordinated
Indebtedness” means

 

(a)                                  
the Borrower’s (i) 8-1/4% Senior Subordinated Notes, due 2011, issued under the
Indenture dated as of April 10, 2001 between the Borrower and Wells Fargo Bank
Minnesota, National Association, as Trustee and (ii) Refinancing Indebtedness; provided, that:

 

(A)                              such
Refinancing Indebtedness has subordination terms not materially less favorable
to the Lenders as holders of the Notes than the then

 

25

 

existing
Subordinated Indebtedness, unless such terms are approved by the Required
Lenders; and

 

(B)                                the
aggregate principal payments for such Refinancing Indebtedness scheduled to be
paid (1) in any Fiscal Year ending prior to the Stated Maturity Date are no
greater than the aggregate principal payments under the existing schedule of
principal payments of the Subordinated Indebtedness being repaid and (2) prior
to a period ending 180 days after the Stated Maturity Date, shall not exceed
the aggregate principal payments  under
the existing schedule of principal payments of the Subordinated Indebtedness
being repaid; and

 

(b)                                 the
Additional Subordinated Indebtedness.

 

“Subsidiary”
means (A) with respect to any Person, (i) any corporation or limited liability
company of which more than 50% of the outstanding capital stock or member
interests having ordinary voting power to elect a majority of the board of
directors of such corporation or managers of such limited liability company
(irrespective of whether at the time capital stock or member interest of any
other class or classes of such entity shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person and (ii) any partnership in
which such Person or any Subsidiary of such Person is the sole general partner
or is the managing general partner if there is more than one general partner
and that partnership is consolidated (other than on a proportionate basis) with
such Person for purposes of financial reporting under GAAP and (B) with respect
to the Borrower, all Restricted Subsidiaries and Unrestricted Subsidiaries.

 

“Subsidiary Guaranty” means a guaranty
delivered pursuant to Section 7.9 hereof made by a Restricted Subsidiary
of the Borrower in favor of the Administrative Agent guaranteeing the Obligations
under the Loan Documents, in form and substance reasonably acceptable to the
Administrative Agent, as amended, supplemented, restated or otherwise modified
from time to time in accordance with the terms of this Agreement and the other
Loan Documents.  The term “Subsidiary
Guaranties” shall include each and every Subsidiary Guaranty executed and
delivered by a Restricted Subsidiary hereunder.

 

“Swing Line Advances”
has the meaning given it in Section 2.2.

 

“Swing Line Lender”
means Bank of Montreal, its successors and assigns.

 

“Swing Line Note”
means a promissory note of the Borrower payable to the Swing Line Lender, in
the form of Exhibit H hereto (as such
promissory note may be amended, exchanged, endorsed or otherwise modified from
time to time), evidencing the aggregate Indebtedness of the Borrower to such
Lender resulting from Swing Line Advances outstanding from time to time, and
also means all other promissory notes accepted from time to time in
substitution therefor or renewal thereof.

 

26

 

“Swing Line Obligations”
means, at the particular time in question, the sum of all outstanding Swing
Line Advances.

 

“Swing Line Rate”
has the meaning given it in Section 2.2.1.

 

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

 

“Thaipo Limited”
means Thaipo Limited, a corporation organized under the laws of the Kingdom of
Thailand and which is a Subsidiary of the Borrower.

 

“Total Debt to Capitalization Ratio” means the
ratio of (a) the consolidated Indebtedness of the Borrower and its Restricted
Subsidiaries and Consolidated Affiliates as determined in accordance with GAAP
to (b) Capitalization.

 

“Type” means,
relative to any Borrowing or Loan, the portion thereof, if any, being
maintained as a Prime Rate Loan or a LIBOR Loan.

 

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

 

“Unrestricted
Subsidiary” means any Subsidiary of Borrower which is not a Restricted
Subsidiary.

 

“Upfront Fees”
is defined in Section 3.3.3.

 

“USA Patriot Act” means Title III of Pub. L.
107-56 (signed into law October 26, 2001), as amended, reformed or otherwise
modified from time to time.

 

“Welfare Plan”
means a “welfare plan”, as such term is defined in section 3(1) of ERISA.

 

SECTION 1.2  Use of Defined Terms.  Unless otherwise defined or
the context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each other Loan Document, notice and other communication delivered from time to
time in connection with this Agreement or any other Loan Document.

 

SECTION 1.3  Cross-References.  Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Article or
Section are references to such Article or Section of this Agreement or such
other Loan Document, as the case may be, and, unless otherwise specified,
references in any Article, Section or definition to any clause are references
to such clause of such Article, Section or definition.

 

SECTION 1.4  Accounting and Financial
Determinations.  Unless
otherwise specified, all accounting terms used herein or in any other Loan
Document shall be interpreted, all accounting determinations and computations
hereunder or thereunder (including under Section
8.3) shall be made, and all financial statements required to be
delivered hereunder or thereunder shall be

 

27

 

prepared in accordance with, generally accepted
accounting principles as in effect from time to time (“GAAP”), applied
on a basis consistent (except for changes concurred in by the Borrower’s
independent public accountants) with the most recent audited consolidated
financial statements of the Borrower and its consolidated Subsidiaries and
Affiliates; provided that, if the Borrower notifies the Administrative
Agent that the Borrower requests an amendment to any provision hereof to
eliminate the effect of any change occurring after the Effective Date in GAAP
or in the application thereof on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith.

 

ARTICLE II

COMMITMENTS, BORROWING PROCEDURES AND NOTES

 

SECTION 2.1  Commitments. 
On the terms and subject to the conditions of this
Agreement (including Article V), each
Lender severally agrees to make Loans pursuant to the Commitments described in
this Section 2.1.

 

SECTION 2.1.1  Loan Commitment.  From time to time on any Business Day
occurring prior to the Commitment Termination Date, each Lender will make
revolving loans (relative to such Lender, its “Revolving
Loan”) to the Borrower equal to such Lender’s Percentage of the
aggregate amount of the Borrowing requested by the Borrower to be made on such
day. On the terms and subject to the conditions hereof, the Borrower may from
time to time borrow, prepay and reborrow Revolving Loans.

 

SECTION 2.1.2  Lenders Not
Permitted or Required To Make Loans in Excess of Commitment.  Neither any Lender nor the Swing Loan Lender
shall be permitted or required to make any Revolving Loan or Swing Line
Advance, respectively, if, after giving effect thereto,

 

(a)                                  the
aggregate Credit Exposures outstanding would exceed (i) in the event that
availability under this Agreement is governed by the Borrowing Base, the lesser
of (A) the Commitment Amount and (B) the Applicable Borrowing Base then in
effect or (ii) otherwise, the Commitment Amount; or

 

(b)                                 the
aggregate outstanding Credit Exposure of any such Lender would exceed such
Lender’s Commitment.

 

SECTION 2.2  Swing Line Advances.  In addition to borrowings pursuant to Section 2.1.1, Borrower may request the
Swing Line Lender to make advances to Borrower on any Business Day (unless
Borrower and the Swing Line Lender agree otherwise) occurring prior to the
Commitment Termination Date as provided in Section
2.2.1 (herein called “Swing Line
Advances”); provided, however, that at no time shall the
outstanding aggregate principal amount of all Swing Line Advances under this
Agreement exceed $10,000,000.  At any
time when the Swing Line Lender has made Swing Line Advances to the Borrower,
such outstanding Swing

 

28

 

Line Advances shall be
included in calculating the Swing Line Lender’s Percentage of the Commitment
Amount.

 

SECTION 2.2.1  Procedure for
Swing Line Advances.

 

(a)                                  No
later than 10:00 a.m., Central Time, on a Business Day on which Borrower
desires a Swing Line Advance, Borrower shall transmit to Swing Line Lender and
to Administrative Agent by telecopy a notice in substantially the form of Exhibit G attached hereto (herein called a “Request for Swing Line Advance”).  Swing Line Lender will specify the rate of
interest per annum which will be the fixed rate of interest to be charged for
such Swing Line Advance until maturity (herein called the “Swing Line Rate”).

 

(b)                                 Swing
Line Lender shall wire transfer the Swing Line Advance in immediately available
funds by no later than 1:00 p.m., Central Time, on the date requested for such
Swing Line Advance to Administrative Agent, which shall deposit such funds to
an account designated by Borrower by no later than 1:15 p.m., Central Time, on
the same day.

 

(c)                                  Borrower
shall repay each such Swing Line Advance on or before 1:00 p.m., Central Time,
on the following Business Day or at such other maturity (such date of maturity
being no more than 30 days after the date of the Swing Line Advance and no
later than the Stated Maturity Date) as is agreed to by Borrower,
Administrative Agent and the Swing Line Lender. 
The repayment shall be paid on such date by Borrower (which payment may
be in the form of a Swing Line Advance of not more than $5,000,000 advanced to
Borrower on that day) to Administrative Agent in immediately available funds
with instructions to Administrative Agent to forward such proceeds to the Swing
Line Lender.  Any accrued and unpaid
interest pursuant to Swing Line Advances shall be paid by Borrower (which
payment may be in the form of a Swing Line Advance advanced to Borrower on that
day) to Administrative Agent in immediately available funds (i) on the first
Business Day of each calendar quarter with respect to any Prime Rate Loan and
(ii) on the last day of the Interest Period with respect to any LIBOR Loan,
each with instructions to Administrative Agent to forward such proceeds to the
Swing Line Lender.

 

(d)                                 Interest
on the Swing Line Advances shall be computed on the basis of a year of 365 or
366 days and actual days elapsed (including the first day, but excluding the
last day) occurring in the period for which payable and shall not exceed the
Highest Lawful Rate.  Past due principal
and interest (to the extent allowed by law) shall bear interest at the lesser
of the Default Rate or the Highest Lawful Rate and shall be payable on demand.

 

(e)                                  The
Swing Line Advances made by the Swing Line Lender shall be evidenced by the
Swing Line Note.  The date, amount, Swing
Line Rate and maturity of each Swing Line Advance made by the Swing Line Lender
to Borrower, and each payment made on account of the principal thereof, shall
be recorded by the Swing Line Lender on its books.

 

29

 

(f)                                    The
obligation of the Swing Line Lender to make each Swing Line Advance after
timely acceptance by Borrower is further subject to the conditions contained in
Article V.

 

SECTION 2.2.2  Special
Provisions for Swing Line Advances.

 

(a)                                  Participations in Swing Line Advances.

 

(i)                                     If,
at any time, any Event of Default shall have occurred and be continuing, each
Lender, promptly upon request by the Swing Line Lender delivered to
Administrative Agent, shall purchase an undivided participation interest in all
outstanding Swing Line Advances in an amount equal to its Percentage times the
outstanding amount of such Swing Line Advances. 
Each Lender (other than the Swing Line Lender) will transfer immediately
to Administrative Agent for credit to Swing Line Lender, in immediately
available funds, the amount of its participation.  Upon receipt thereof, the Swing Line Lender
will deliver to such other Lender a Swing Line Advance Participation
Certificate, dated the date of receipt of such funds and in the amount of such
Lender’s participation.

 

(ii)                                  Whenever,
at any time after the Swing Line Lender has received from any other Lender such
other Lender’s participating interest in a Swing Line Advance, the Swing Line
Lender receives any payment on account thereof, Administrative Agent will
distribute to such other Lender its participating interest in such amount
(appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender’s participating interest was
outstanding and funded); provided, however, that in the event that any payment
received by Swing Line Lender is required to be returned, such other Lender
will return to Swing Line Lender any portion thereof previously distributed to
it.

 

(b)                                 Acknowledged Privity.  Borrower expressly agrees that, in respect of
each Lender’s funded participation interest in any Swing Line Advance, such
Lender shall be deemed to be in privity of contract with Borrower and have the
same rights and remedies against Borrower under the Loan Documents as if such
funded participation interest in such Swing Line Advance were a Revolving Loan.

 

(c)                                  Unconditional Obligation.  Each Lender’s obligation to purchase
participation interests in Swing Line Advances as provided in this Section
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (A) any set-off,
counterclaim, recoupment, defense or other right which such Lender may have
against Swing Line Lender, Borrower or any other Person for any reason
whatsoever, (B) the existence of any Default or Event of Default at any time,
(C) the occurrence of any event or existence of any condition that could
reasonably be expected to have a Material Adverse Effect, or (D) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.

 

30

 

SECTION 2.3  Letters of Credit.

 

SECTION 2.3.1  Letter of Credit
Commitment.  Subject to the
terms and conditions set forth herein, upon request by Borrower, the Issuing
Bank will issue Letters of Credit for Borrower’s account or the account of any
Subsidiary, in a form reasonably acceptable to the Administrative Agent and the
Issuing Bank, at any time and from time to time prior to the Commitment
Termination Date.  The Borrower agrees to
pay the fees set forth in Section 3.3.2
with respect to each Letter of Credit. 
In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and
conditions of this Agreement shall control.

 

SECTION 2.3.2  Notice of
Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of a Letter of Credit
(or the amendment, renewal or extension of an outstanding Letter of Credit),
Borrower shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to an Issuing Bank and the Administrative Agent (reasonably in advance of
the requested date of issuance, amendment, renewal or extension) a notice
requesting the issuance of a Letter of Credit, or identifying the Letter of
Credit to be amended, renewed or extended, and specifying the date of issuance,
amendment, renewal or extension (which shall be a Business Day), the date on
which such Letter of Credit is to expire (which shall comply with Section 2.3.3), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare, amend, renew or extend such
Letter of Credit.  If requested by the
Issuing Bank, Borrower also shall submit a letter of credit application on the
Issuing Bank’s standard form in connection with any request for a Letter of
Credit.  A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit Borrower shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment, renewal
or extension (i) the LC Exposure shall not exceed $75,000,000 and
(ii) the sum of the total Credit Exposures shall not exceed the total
Commitments of the Lenders.

 

SECTION 2.3.3  Expiration Date.  Each Letter of Credit shall expire at or
prior to the date which is five (5) Business Days prior to the Stated Maturity
Date.

 

SECTION 2.3.4  Participations.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Lender, and each Lender hereby acquires from the Issuing
Bank, a participation in such Letter of Credit equal to such Lender’s
Percentage of the aggregate amount available to be drawn under such Letter of
Credit.  In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and unconditionally
agrees to pay to the Administrative Agent, for the account of the Issuing Bank,
such Lender’s Percentage of each LC Disbursement made by the Issuing Bank and
not reimbursed by Borrower on the date due as provided in paragraph 2.3.5, or of any reimbursement
payment required to be refunded to Borrower for any reason.  Each Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters

 

31

 

of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including any amendment, renewal or extension of any Letter of Credit or the
occurrence and continuance of an Event of 
Default or reduction or termination of the Commitments, and that each
such payment shall be made without any offset, abatement, withholding or
reduction whatsoever.

 

SECTION 2.3.5  Reimbursement.  If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, Borrower shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than 12:00 noon, Central Time, on the date that such LC
Disbursement is made, if Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m., Central Time, on such date, or, if such
notice has not been received by Borrower prior to such time on such date, then
not later than 12:00 noon, Central Time, on (i) the Business Day that Borrower
receives such notice, if such notice is received prior to 10:00 a.m., Central
Time, on the day of receipt, or (ii) the Business Day immediately following the
day that Borrower receives such notice, if such notice is not received prior to
such time on the day of receipt; provided
that Borrower may, subject to the conditions to Borrowing set forth herein,
request in accordance with Section 2.1
or Section 2.2, that such payment be
financed with a Loan in an equivalent amount and, to the extent so financed,
Borrower’s obligation to make such payment shall be discharged and replaced by
such Loan.  If Borrower fails to make
such payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from Borrower in respect
thereof and such Lender’s Percentage thereof. 
Promptly following receipt of such notice, each Lender shall pay to the
Administrative Agent its Percentage of the payment then due from Borrower, in
the same manner as provided in Section 2.5
with respect to Loans made by such Lender (and Section 2.5
shall apply, mutatis  mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank
the amounts so received by it from the Lenders. 
Promptly following receipt by the Administrative Agent of any payment
from Borrower pursuant to this paragraph, the Administrative Agent shall
distribute such payment to the Issuing Bank or, to the extent that Lenders have
made payments pursuant to this paragraph to reimburse the Issuing Bank, then to
such Lenders and the Issuing Bank as their interests may appear.  Any payment made by a Lender pursuant to this
paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the
funding of Prime Rate Loans as contemplated above) shall not constitute a Loan
and shall not relieve Borrower of its obligation to reimburse such LC
Disbursement.

 

SECTION 2.3.6  Obligations
Absolute.  Borrower’s
obligation to reimburse LC Disbursements as provided in paragraph 2.3.5 shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged, fraudulent
or invalid in any respect or any statement therein proving to be untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or
circumstance whatsoever, whether or not similar to any of the foregoing, that
might, but for the provisions of this Section, constitute a legal or equitable
discharge of, or provide a right of setoff

 

32

 

against, Borrower’s
Obligations hereunder.  Neither the
Agents, the Lenders or the Issuing Bank nor any of their Affiliates shall have
any liability or responsibility by reason of or in connection with the issuance
or transfer of any Letter of Credit or any payment or failure to make any
payment thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of such Issuing Bank; provided that the foregoing shall not be
construed to excuse such Issuing Bank from liability to Borrower to the extent
of any direct or actual damages (as opposed to special, indirect, consequential
or punitive damages, claims in respect of which are hereby waived by Borrower
to the extent permitted by applicable law) suffered by Borrower that are caused
by such Issuing Bank’s failure to exercise care when determining whether drafts
and other documents presented under a Letter of Credit comply with the terms
thereof.  The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the
part of the Issuing Bank (as finally determined by a court of competent jurisdiction),
the Issuing Bank shall be deemed to have exercised care in each such
determination.  In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

SECTION 2.3.7  Disbursement
Procedures.  An Issuing Bank
shall, promptly following its receipt thereof, examine all documents purporting
to represent a demand for payment under a Letter of Credit.  Such Issuing Bank shall promptly notify the
Administrative Agent and Borrower by telephone (confirmed by telecopy) of such
demand for payment and whether such Issuing Bank has made or will make an LC
Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve Borrower
of its obligation to reimburse such Issuing Bank and the Lenders with respect
to any such LC Disbursement.

 

SECTION 2.3.8  Interim Interest.  If an Issuing Bank shall make any LC
Disbursement, then, unless Borrower shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that Borrower reimburses such LC Disbursement,
at the rate per annum then applicable to Prime Rate Loans; provided that, if Borrower fails to reimburse
such LC Disbursement when due pursuant to Section
2.3.5, then the Post-Maturity Rate shall apply.  Interest accrued pursuant to this paragraph
shall be for the account of the Issuing Bank, except that interest accrued on
and after the date of payment by any Lender pursuant to Section 2.3.5 to reimburse the Issuing Bank
shall be for the account of such Lender to the extent of such payment.

 

SECTION 2.3.9  Replacement of
the Issuing Bank.  An Issuing
Bank may be replaced at any time by written agreement among Borrower, the
Administrative Agent, the replaced Issuing Bank and the successor Issuing
Bank.  The Administrative Agent shall
notify

 

33

 

the Lenders of any such
replacement of an Issuing Bank.  At the
time any such replacement shall become effective, Borrower shall pay all unpaid
fees accrued for the account of the replaced Issuing Bank pursuant to Section 3.3.2.  From and after the effective date of any such
replacement, (i) the successor Issuing Bank shall have all the rights and
obligations of such Issuing Bank under this Agreement with respect to Letters
of Credit to be issued thereafter and (ii) references herein to the term
“Issuing Bank” shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require.  After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall
remain a party hereto and shall continue to have all the rights and obligations
of an Issuing Bank under this Agreement with respect to Letters of Credit
issued by it prior to such replacement, but shall not be required to issue
additional Letters of Credit.

 

SECTION
2.3.10  Cash
Collateralization.  If (i) any
Event of Default shall occur and be continuing, or (ii) on the Commitment
Termination Date, Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided
that the obligation to deposit such cash collateral shall become effective
immediately, and such deposit shall become immediately due and payable, without
demand or other notice of any kind, upon the occurrence of any Event of Default
with respect to Borrower described in Section
9.1.9; provided further, if
the outstanding principal amount of all outstanding Loans and all other
Obligations have become due and payable pursuant to Section
9.2 or 9.3, an amount equal
to the LC Exposure as of such date shall be deemed to be forthwith due and
payable by the Borrower as of the date of any such occurrence and the
Borrower’s obligation to pay such amount shall be absolute and unconditional
without regard to whether any beneficiary of any outstanding Letter of Credit
has attempted to draw down all or a portion of such amount under the terms of
the Letter of Credit, and to the fullest extent permitted by applicable law,
shall not be subject to any defense or be affected by a right of set-off,
counterclaim or recoupment which the Borrower may now or hereafter have against
any such beneficiary, the Issuing Bank, the Administrative Agent, the Lenders
or any other Person for any reason whatsoever. 
Such deposit shall be held by the Administrative Agent as collateral for
the payment and performance of the Obligations of Borrower under this Agreement
and the Borrower hereby grants to and by its deposit with the Administrative
Agent grants to the Administrative Agent, for the benefit of the Lenders, a
security interest in such cash collateral. The Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal,
over such account for the benefit of the Lenders.  Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole
discretion of the Administrative Agent and at Borrower’s risk and expense, such
deposits shall not bear interest. 
Interest or profits, if any, on such investments shall accumulate in
such account.  Moneys in such account
shall be applied by the Administrative Agent to reimburse the Issuing Bank for
LC Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement Obligations of
Borrower for the LC Exposure at such time or, if the maturity of the Loans has
been accelerated (but subject to the consent of Lenders with LC Exposure
representing greater than 75% of the total LC Exposure), be applied to satisfy
other Obligations of Borrower under this Agreement.  If Borrower is required to provide an amount
of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the

 

34

 

extent not applied as
aforesaid) shall be returned promptly to Borrower after such Event of Default
has been cured or waived.

 

SECTION 2.4  Reduction and Termination of the Commitment Amounts.  The Commitment Amount is subject to reduction
from time to time or termination pursuant to this Section.

 

SECTION 2.4.1  Optional.  Borrower may, from time to time on any
Business Day occurring after the time of the initial Borrowing hereunder,
voluntarily reduce the Commitment Amount; provided,
however, that all such reductions shall
require at least three (3) Business Days’ prior notice to the Administrative
Agent, and each such reduction of the Commitment Amount shall be in a minimum
amount of $5,000,000 and in increments of $1,000,000.

 

SECTION 2.4.2  Mandatory.  Each Lender’s Commitment shall be
automatically terminated on the Commitment Termination Date.

 

SECTION 2.4.3  Pro Rata;
Payment of Fees.  Each
reduction in the Commitment Amount shall be made ratably among the Lenders in
accordance with their respective Percentages. 
The Borrower shall pay to the Administrative Agent for the account of
the Lenders, on the date of each reduction or upon such termination, the
Commitment Fees accrued pursuant to Section 3.3.1
on the amount of the Commitments so reduced or terminated through the date of
such reduction or termination.

 

SECTION 2.5  Borrowing Procedure.  The Borrower may from time to time
irrevocably request that a Borrowing be made in a minimum amount of (i)
$1,000,000 for Prime Rate Loans and (ii) $5,000,000 for LIBOR Loans, and in an
integral multiple of $1,000,000 or, if less, in the unused amount of the
Commitment Amount or outstanding Swing Line Advance.  Such request shall be made by delivering a
Borrowing Request to the Administrative Agent on or before 10:00 a.m., Central
Time, (x) on the Business Day of such Borrowing in the case of a Prime Rate
Borrowing and (y) on a Business Day not less than three Business Days in
advance of a LIBOR Borrowing.  On the
terms and subject to the conditions of this Agreement, each Borrowing shall be
comprised of the Type of Loans, and shall be made on the Business Day,
specified in such Borrowing Request. 
With respect to any Borrowing, the Administrative Agent shall have given
each of the Lenders notice of such Borrowing on or before 10:30 a.m., Central
Time, on the date of such Borrowing and on or before 11:00 a.m., Central Time,
on such Business Day each Lender shall deposit with the Administrative Agent
same day funds in an amount equal to such Lender’s Percentage of the requested
Borrowing.  Such deposit will be made to
an account which the Administrative Agent shall specify from time to time by
notice to the Lenders.  To the extent
funds are received from the Lenders, the Administrative Agent shall make such
funds available to the Borrower by wire transfer to the accounts the Borrower
shall have specified in its Borrowing Request. 
No Lender’s obligation to make any Loan shall be affected by any other
Lender’s failure to make any Loan.

 

SECTION 2.6  Continuation and Conversion Elections.  The Borrower may from time to time
irrevocably elect that all, or any portion in an aggregate minimum amount of
$5,000,000 and an integral multiple of $1,000,000, of any Borrowing be, in the
case of Prime Rate Loans,

 

35

 

converted into LIBOR
Loans or, in the case of LIBOR Loans, be converted into Prime Rate Loans or
continued as LIBOR Loans of the same or different Type.  Such request for a continuation or conversion
of a Borrowing shall be made by delivering a Continuation/Conversion Notice to
the Administrative Agent on or before 10:00 a.m., Central Time, on a Business
Day, such Continuation/Conversion Notice to be delivered at least
three (3) Business Days in advance for any Borrowing continued as or
converted into a LIBOR Loan. In the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBOR Loan at least three
(3) Business Days before the last day of the then current Interest Period with
respect thereto, such LIBOR Loan shall, on such last day, automatically convert
to a Prime Rate Loan. Notwithstanding the above, no portion of the outstanding
principal amount of any Loans may be continued as, or be converted into, LIBOR
Loans when any Default has occurred and is continuing.

 

SECTION 2.7  Funding. 
Each Lender may, if it so elects, fulfill its obligation to make,
continue or convert LIBOR Loans hereunder by causing one of its foreign
branches or Affiliates (or an international banking facility created by such
Lender) to make or maintain such LIBOR Loan; provided,
however, that such LIBOR Loan shall
nonetheless be deemed to have been made and to be held by such Lender and
evidenced by such Lender’s Revolving Note, and the obligation of the Borrower
to repay such LIBOR Loan shall be only to such Lender; provided further, that any such funding
arrangement does not result in additional costs to the Borrower under Section 4.3, 4.4,
4.5 or 4.7
or otherwise that would not have been incurred but for such funding arrangement.

 

36

 

SECTION 2.8  Determination of Borrowing Base.  This Section 2.8 shall be applicable
at all times unless (i) the Applicable Rating Level of the Borrower is Level I
and (ii) the Borrower has elected to have availability under this Agreement no
longer governed by the Borrowing Base; provided, however, that
this Section shall apply at all times prior to the delivery of the Reserve
Report dated effective as of January 1, 2005; and provided  further
that, if at any time availability under this Agreement is not governed by the
Borrowing Base but the Applicable Rating Level of the Borrower declines to
Level II or Level III, the Administrative Agent and the Required Borrowing Base
Lenders shall promptly but in any event not fewer than five (5) Business Days
thereafter initiate the procedure set forth herein for a Non-Standard
Determination of the Borrowing Base. 
Notwithstanding that its Applicable Rating Level is Level I and the
Borrower has elected to not have availability under this Agreement governed by
a Borrowing Base, the Borrower shall have the right to elect to have
availability under this Agreement governed by a Borrowing Base from the date of
such election to the date of the next scheduled redetermination date for such
Borrowing Base by providing written notice of its election to the
Administrative Agent on or before the 45th day preceding the date scheduled for
the delivery of the Reserve Report applicable to the next scheduled
redetermination date.  Any such election
shall (i) be irrevocable for such period of time, but may be changed for
subsequent periods by the delivery of an additional written notice to the
Administrative Agent on or before the 45th day preceding the date scheduled for
the delivery of the Reserve Report applicable to the next scheduled
redetermination date following such period, and (ii) automatically continue for
subsequent six-month periods until such time as the Borrower elects to not have
availability under this Agreement governed by a Borrowing Base in accordance
with clause (i) of this sentence.

 

(a)                                  Upon
each delivery of a Reserve Report or Alternate Reserve Report pursuant to Section 7.1 on or before the respective dates
required thereby, then with respect to the annual or semi-annual, as the case
may be, determination of the Borrowing Base, the Administrative Agent will
propose to the Lenders a Borrowing Base for acceptance by the Required
Borrowing Base Lenders.  If such
Borrowing Base, as proposed by the Administrative Agent is accepted by the
Required Borrowing Base Lenders, then such agreed Borrowing Base shall be
communicated by the Administrative Agent to the Borrower on or before (i) the
next May 1st, in the case of a Reserve Report and (ii) the next November
1st, in the case of an Alternate Reserve Report, and shall remain in effect
until the next November 1st or May 1st; provided
that if such proposed Borrowing Base is
not approved by the Required Borrowing Base Lenders prior to the applicable
date then, within 30 days following the applicable date, the Required Borrowing
Base Lenders will establish and agree to a Borrowing Base established using
criteria agreed upon by the Required Borrowing Base Lenders, and such amount
will be promptly communicated to the Borrower; provided
that the then current Borrowing Base shall remain in effect until the Borrower
is notified of the new Borrowing Base. 
Any Lender that shall fail to reject the proposed Borrowing Base with
fifteen (15) days of its receipt of the proposed Borrowing Base shall be deemed
to have approved the proposed amount of such Borrowing Base.  The new Borrowing Base shall become effective
as of the date that the Borrower receives notification from the Administrative
Agent of the new Borrowing Base.  The
Borrowing Base, as determined and established pursuant to this

 

37

 

Section 2.8(a)
shall be subject, at all times, to the redetermination of the then effective
Borrowing Base as a result of a Non-Standard Determination.

 

(b)                                 With
respect to a Non-Standard Determination of the Borrowing Base, (i) the
Administrative Agent or the Required Lenders shall have the right, but not the
obligation, at any time to notify the Borrower of their intent to perform a
Non-Standard Determination of the Borrowing Base and (ii) the Borrower shall
have the right to request a Non-Standard Determination by sending a written
request to the Administrative Agent for the performance of a Non-Standard
Determination of the Borrowing Base.  In
connection with any Non-Standard Determination and notwithstanding the delivery
of any new Alternate Reserve Report, the Administrative Agent shall propose,
and the Required Borrowing Base Lenders shall agree to and approve, a new
Borrowing Base which shall become effective upon receipt by the Borrower of
notice of such new Borrowing Base until such new Borrowing Base may be
redetermined as a result of a scheduled semi-annual determination of the
Borrowing Base pursuant to Section 2.8(a).  Any Lender that shall fail to reject the
proposed Borrowing Base with fifteen (15) days of its receipt of the proposed
Borrowing Base shall be deemed to have approved the proposed amount of such
Borrowing Base.  In connection with any
Non-Standard Determination, the Borrower shall deliver promptly upon the
request of the Administrative Agent a new Alternate Reserve Report to the
Administrative Agent; provided that
such Alternate Reserve Report, whether or not delivered, shall not preclude or
impact the making of such Non-Standard Determination of the Borrowing Base by
the Administrative Agent or the approval of such Borrowing Base by the Required
Borrowing Base Lenders.

 

(c)                                  At
the request of the Administrative Agent or the Required Lenders, in their sole
discretion, the Borrowing Base may be redetermined in conformity with Section
2.8(b) at any time after the sale, transfer, lease, contribution or other
conveyance in one or more transactions after the date of the latest
redetermination of the Borrowing Base pursuant to this Agreement:

 

(i)                                     by
the Borrower or a Restricted Subsidiary to one or more Persons (other than the
Borrower or a Restricted Subsidiary), of Borrowing Base Properties having a
Discounted Present Value greater than 10% of the Borrowing Base at the latest
redetermination thereof; and

 

(ii)                                  by
the Borrower or a Restricted Subsidiary to one or more Persons (other than the
Borrower or a Restricted Subsidiary), of any of their assets having an
aggregate value in excess of $20,000,000 (based on the greater of book value
and fair market value at the time of any disposition), other than (A) Borrowing
Base Properties, whether directly or indirectly by means of the sale of equity
interests in a Restricted Subsidiary or otherwise, (B) oil, gas, and other
liquid or gaseous hydrocarbons in the ordinary course of business, (C)
equipment and other personal property in the ordinary course of business
consistent with the Borrower’s obligations under Section 7.3, (D)
Investments permitted by Section 8.4, (E) cash payments not
prohibited by this Agreement, including

 

38

 

Restricted Payments permitted by Section 8.5,
(F) Liens permitted by Section 8.2 and rights to production payments in
connection with Non-Recourse Indebtedness, (G) transactions permitted by Section
8.6 and (H) the grant of options, warrants or other rights with respect to
such assets.

 

SECTION 2.9  Revolving Notes.  Each Lender’s Revolving Loans shall be
evidenced by a Revolving Note payable to the order of such Lender in a maximum
principal amount equal to such Lender’s Commitment. The Borrower hereby
irrevocably authorizes each Lender to make (or cause to be made) appropriate
notations on the grid attached to such Lender’s Revolving Note (or on any
continuation of such grid), which notations, if made, shall evidence, inter  alia,
the date of, the outstanding principal of, and the interest rate and Interest
Period applicable to the Revolving Loans evidenced thereby.  Such notations shall be conclusive and
binding on the Borrower absent manifest error; provided,
however, that the failure of any Lender
to make any such notations shall not limit or otherwise affect any Obligations
of the Borrower.

 

SECTION 2.10  Addition
of Lenders and Increase in Commitment Amount.  It is agreed by the parties hereto that, at
any time before the Stated Maturity Date, one or more financial institutions
selected by the Borrower and acceptable to the Administrative Agent, in the
Administrative Agent’s reasonable discretion, may become a Lender under this
Agreement, or any existing Lender may increase its Commitment, in each case in
an amount approved by Borrower, in such financial institution’s or Lender’s
sole discretion by executing and delivering to the Borrower and the
Administrative Agent (i) a certificate substantially in the form of Exhibit F
hereto (a “Lender Certificate”) and (ii) an Administrative
Questionnaire.  Upon receipt and
agreement by the Borrower and the Administrative Agent of any such Lender
Certificate, (a) the aggregate amount of the Commitments of the Lenders
(including any Person that becomes a Lender by delivery of such a Lender
Certificate) and the Commitment Amount automatically without further action by
the Borrower, the Administrative Agent or any Lender shall be increased by the
amount indicated in such Lender Certificate (but not in excess of $250,000,000
in the aggregate at any time for all such increases in the Commitments pursuant
to this Section 2.10) on the effective date set forth in such Lender
Certificate (such increased amount herein the “Increased Commitment Amount”),
(b) the signature pages of the Lenders attached hereto shall be amended to add
such Commitment of such additional Lender or to reflect the increase in the
Commitment of an existing Lender and the Percentages of the Lenders shall be
adjusted accordingly to reflect the additional Lender or in the increase in the
Commitment of an existing Lender, and (c) any such additional Lender shall be
deemed to be a party in all respect to this Agreement and the other Loan
Documents.

 

ARTICLE III

REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

 

SECTION 3.1  Repayments and Prepayments.  The Borrower shall make mandatory repayments
and prepayments and may also make voluntary prepayments from time to time
pursuant to this Section 3.1.  Each prepayment of any Loans made pursuant to
this Section shall be without premium or penalty, except as may be required by Section 4.4.

 

SECTION 3.1.1  Repayments.  The Borrower shall repay in full the unpaid
aggregate principal amount of each Loan upon the Commitment Termination Date.

 

39

 

SECTION 3.1.2  Mandatory
Prepayments on Revolving Loans. 
If at any time prior to the Commitment Termination Date when
availability under the Agreement is governed by the Borrowing Base, the
aggregate Credit Exposures outstanding exceed the Applicable Borrowing Base
then in effect, the Borrower shall forthwith repay the Revolving Loans in an
aggregate amount equal to such excess; provided that the Borrower shall have
the option to prepay such Revolving Loans, in no more than four substantially
equal monthly installments, in an amount such that upon the conclusion of such
mandatory prepayments, the aggregate Credit Exposures outstanding will not
exceed the Applicable Borrowing Base then in effect.  The first such payment pursuant to the
proviso in the preceding sentence shall be due within 90 days after the
commencement date of that Deficiency Period, and the remaining payments shall
be due on the numerically corresponding day of each of the subsequent three
months.  If a subsequent month does not
contain a numerically corresponding day, the Borrower shall make such payment
on the last Business Day of such month, or if the numerically corresponding day
is not a Business Day, such payment will be due on the preceding Business Day.
No mandatory prepayment pursuant to this Section shall automatically effect a
reduction in the Commitment Amount. 
Administrative Agent agrees to give Borrower prompt notice of the
occurrence of a Deficiency Period.

 

SECTION 3.1.3  Repayment Upon
Acceleration.  The Borrower
shall, immediately upon any acceleration of any Loans pursuant to Section 9.2 or 9.3, repay all Loans.

 

SECTION 3.1.4  Voluntary
Prepayments.  The Borrower
may, from time to time on any Business Day prior to the Stated Maturity Date,
make a voluntary prepayment, in whole or in part, of the outstanding principal
amount of all Loans; provided, however, that:

 

(i)                                     any
such prepayment shall be made pro rata among the Lenders with respect to Loans
of the same Type and, if applicable, having the same Interest Period;

 

(ii)                                  any
and all amounts payable pursuant to Section 4.4
hereof in connection with such prepayment shall be paid on the date of such
prepayment;

 

(iii)                               the
Borrower shall give (A) with respect to LIBOR Loans, not less than three nor
more than five Business Days and (B) with respect to Prime Rate Loans, not less
than same day nor more than three Business Days, prior written notice (on or
before 10:00 a.m. Central Time) to the Administrative Agent of any voluntary
prepayments of any Loans; and

 

(iv)                              all
such voluntary partial prepayments shall be in a minimum amount equal to
$1,000,000 for Prime Rate Loans and $5,000,000 for LIBOR Loans, and an integral
multiple of $1,000,000.

 

No voluntary prepayment pursuant to this Section shall automatically
effect a reduction in the Commitment Amount.

 

SECTION 3.2  Interest Provisions.  Interest on the outstanding principal amount
of the Revolving Loans shall accrue and be payable in accordance with this Section 3.2.

 

40

 

SECTION 3.2.1  Rates.  As selected by the Borrower pursuant to an
appropriately delivered Borrowing Request or Continuation/Conversion Notice,
the Loans shall accrue interest as follows:

 

(a)                                  Prime
Rate Loans shall accrue interest at a rate per annum equal to the sum of the
Prime Rate from time to time in effect, plus
the Applicable Margin; and

 

(b)                                 LIBOR
Loans shall accrue interest during each Interest Period applicable thereto at a
rate per annum equal to the sum of LIBOR for such Interest Period, plus the Applicable Margin.

 

All LIBOR Loans shall bear interest at the interest rate applicable
thereto from and including the first day of the applicable Interest Period to (but
not including) the last day of such Interest Period.

 

SECTION 3.2.2  Post-Maturity
Rates.  After the date any
principal amount of any Loan is due and payable (whether on the Stated Maturity
Date, upon acceleration or otherwise), or after any other monetary Obligation
of the Borrower shall have become due and payable and any applicable grace or
cure period shall have expired, the Borrower shall pay interest (after as well
as before judgment) on such amounts at a rate per annum equal to the Prime
Rate, plus a margin of 2%, until paid.

 

SECTION 3.2.3  Payment Dates.  Interest accrued on each Loan shall be
payable, without duplication:

 

(a)                                  on
the Stated Maturity Date;

 

(b)                                 except
with respect to payment or prepayment of Prime Rate Loans, on the date of any payment
or prepayment, in whole or in part, of principal outstanding on such Loan;

 

(c)                                  with
respect to Prime Rate Loans, on each Quarterly Payment Date occurring after the
date of the initial Borrowing hereunder;

 

(d)                                 with
respect to LIBOR Loans, the last day of each applicable Interest Period (and,
if such Interest Period shall exceed 90 days, on the 90th day of such Interest
Period);  and

 

(e)                                  if
the Stated Maturity Date is accelerated pursuant to Section
9.2 or Section 9.3,
immediately upon such acceleration.

 

Interest accrued on Loans or other monetary Obligations pursuant to Section 3.2.2 shall be payable upon demand.

 

SECTION 3.2.4  Maximum Interest.  It is the intention of the parties hereto to
conform strictly to applicable usury laws and, anything herein to the contrary
notwithstanding, the obligations of the Borrower to the Lenders under this
Agreement, the other Loan Documents and any other document or instrument
executed in connection herewith or therewith, shall be

 

41

 

subject to the limitation
that payments of interest or of other amounts constituting interest under
applicable law to a Lender shall not be required to the extent that receipt
thereof would be in excess of the Highest Lawful Rate, or otherwise contrary to
provisions of law applicable to such Lender limiting rates of interest which
may be charged or collected by such Lender. 
Accordingly, if the transactions or the amount paid or otherwise agreed
to be paid for the use, forbearance or detention of money under this Agreement,
the other Loan Documents and any other document or instrument executed in
connection herewith or therewith would exceed the Highest Lawful Rate or
otherwise be usurious under applicable law (including the federal and state
laws of the United States of America, or of any other jurisdiction whose laws
may be mandatorily applicable) with respect to any Lender then, in that event,
notwithstanding anything to the contrary in this Agreement or the other Loan
Documents and any other document or instrument executed in connection herewith
or therewith, it is agreed as follows as to such Lender:

 

(a)                                  with
respect to such Lender, the provisions of this Section
3.2.4 shall govern and control over any other provision in this
Agreement, the other Loan Documents and any other document or instrument
executed in connection herewith or therewith and each provision set forth
therein is hereby so limited;

 

(b)                                 the
aggregate of all consideration which constitutes interest under applicable law
that is contracted for, charged or received under this Agreement, the other
Loan Documents, or under any of the other aforesaid agreements or otherwise in
connection with this Agreement by such Lender shall under no circumstances
exceed the maximum amount of interest allowed by applicable law (such maximum
lawful interest rate, if any, with respect to such Lender herein called the “Highest Lawful Rate”), and all amounts owed
under this Agreement, the other Loan Documents and any other document or instrument
executed in connection herewith or therewith shall be held subject to reduction
and (i) the amount of interest which would otherwise be payable to such
Lender hereunder and under the other Loan Documents and any other document or
instrument executed in connection herewith or therewith, shall be automatically
reduced to the amount allowed under applicable law and (ii) any unearned
interest paid by the Borrower in excess of the Highest Lawful Rate shall be
credited to the Borrower by such Lender (or, if such consideration shall have
been paid in full, refunded to the Borrower);

 

(c)                                  all
sums paid, or agreed to be paid, to such Lender for the use, forbearance and
detention of the indebtedness of the Borrower to such Lender hereunder shall,
to the extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full
so that the actual rate of interest is uniform throughout the full term
thereof;

 

(d)                                 if
at any time the interest provided pursuant to Sections
3.2.1 or 3.2.2, as the case
may be, together with any other fees payable pursuant to or in connection with
this Agreement and deemed interest under applicable law, with respect to any
Lender exceeds that amount which would have accrued at the Highest Lawful Rate,
the amount of interest and any such fees to accrue to such Lender pursuant to
this Agreement shall be limited, notwithstanding anything to the contrary in
this Agreement to that amount which

 

42

 

would have accrued at the Highest Lawful Rate for such
Lender, but any subsequent reductions, as applicable, shall not reduce the
interest to accrue pursuant to this Agreement below such Lender’s Highest
Lawful Rate until the total amount of interest payable to such Lender
(including all consideration which constitutes interest) equals the amount of
interest which would have been payable to such Lender (including all
consideration which constitutes interest) assuming a varying rate per annum
equal to the interest provided pursuant to Sections
3.2.1 and 3.2.2 at all times
in effect, plus the amount of fees
which would have been received but for the effect of this Section 3.2.4.

 

To the extent, if any, applicable to any Lender, on each day, if any,
that Chapter 303.201 of the Texas Finance Code, as amended, to the extent, if
any, applicable to the Administrative Agent or a Lender, the Borrower agrees
that the Highest Lawful Rate shall be the “indicated (weekly) rate ceiling” as
defined in said Section, provided that the Administrative Agent or such
Lender may also rely, to the extent permitted by applicable laws, on
alternative maximum rates of interest under other laws applicable to the
Administrative Agent or such Lender if greater. 
To the extent that Texas law shall be applicable to the determination of
the Highest Lawful Rate of any Lender, the provisions of Chapter 346 of the
Texas Finance Code (which regulates certain revolving credit accounts and
revolving tri-party accounts (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch.
15)) shall not apply to this Agreement, to any Loan or to any Notes, nor shall
this Agreement, any Loan or any Note be governed by or be subject to the
provisions of such Chapter 346 in any manner whatsoever.

 

SECTION 3.3  Fees. 
The Borrower agrees to pay the fees set forth in this Section. All fees
payable hereunder shall be paid on the dates due, in immediately available
funds, to the Administrative Agent (or the Issuing Bank, in the case of fees
payable to it) for distribution, in the case of Commitment Fees and
participation fees, to the Lenders entitled thereto. All such fees shall be
non-refundable.

 

SECTION 3.3.1  Commitment Fee.  The Borrower agrees to pay to the
Administrative Agent for the account of each Lender for the period commencing
on the date of the initial Borrowing or initial issuance of a Letter of Credit
and continuing through the Commitment Termination Date, commitment fees for
each Lender (collectively, the “Commitment Fees”)
at a rate per annum for each day of such period equal to the percentage set
forth under the “Unused Fee” column of the Applicable Margin times the amount
which is the average daily unused portion of each Lender’s Lender Commitment
Amount.  Fees payable pursuant to this Section 3.3.1 shall be payable by the
Borrower in arrears on each Quarterly Payment Date, commencing with the first
such day following the date of the initial Borrowing or initial issuance of a
Letter of Credit and on the Commitment Termination Date.

 

SECTION 3.3.2  Letter of Credit
Fees.  Borrower agrees to pay
(i) to the Administrative Agent for the account of each Lender a participation
fee with respect to its participations in Letters of Credit, which shall accrue
at the same Applicable Margin as interest on LIBOR Loans on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure,

 

43

 

and (ii) to the Issuing
Bank upon issuance of any Letter of Credit by such Issuing Bank a fronting fee
equal to an amount calculated at the rate of 0.125% per annum based on the
stated amount and term of such Letter of Credit, as well as the Issuing Bank’s
standard fees with respect to the administration, issuance, amendment, renewal
or extension of any Letter of Credit or processing of drawings thereunder.  Participation fees shall be payable in
arrears on last day of each March, June, September and December of each year
shall be payable on the third Business Day following such last day, commencing
on the first such date to occur after the Effective Date, provided that all such fees shall be payable
on demand with respect to any Letter of Credit for which Borrower is required
to deposit cash collateral pursuant to Section
2.3.10.  Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
ten (10) days after demand.  All
participation fees and fronting fees shall be computed on the basis of a year
of 360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).

 

SECTION 3.3.3  Other Fees.  The Borrower agrees to pay to the
Administrative Agent for its own account and for the account of each Lender, as
applicable, fees, including, without limitation, an upfront fee (the “Upfront Fee”), in the amounts and at the
times separately agreed upon between Borrower and the Administrative Agent,
including, without limitation, the amounts agreed upon between Borrower and the
Administrative Agent in that certain fee letter agreement dated as December 14,
2004, between the Borrower and the Administrative Agent’s Affiliate, Harris
Nesbitt Corp.

 

ARTICLE IV

CERTAIN LIBOR AND OTHER PROVISIONS

 

SECTION 4.1  Fixed Rate Lending Unlawful.  If any Lender shall determine (which
determination shall, upon notice thereof to the Borrower and the Lenders, be
conclusive and binding on the Borrower if made in good faith) that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful for such Lender to make, continue or maintain any
Loan as, or to convert any Loan into, a LIBOR Loan, the obligations of such
Lender to make, continue, maintain or convert any such Loans shall, upon such
determination, forthwith be suspended until such Lender shall notify the
Administrative Agent that the circumstances causing such suspension no longer
exist, and LIBOR Loans of such Lender shall automatically convert into Prime
Rate Loans at the end of the then current Interest Periods with respect thereto
or sooner, if required by such law or regulation.

 

SECTION 4.2  Rates Unavailable.  If the Administrative Agent or the Required
Lenders shall have determined that by reason of circumstances affecting the
Administrative Agent’s or the Required Lenders’ relevant market, adequate means
do not exist for ascertaining the interest rate applicable hereunder to LIBOR
Loans of such Type, then, upon notice from the Administrative Agent (given at
the direction of the Required Lenders if such determination shall have been
made by the Required Lenders) to the Borrower and the Lenders, the obligations
of all Lenders under Sections 2.5, 2.6 and 2.7
to make or continue any Loans as, or to convert any Loans into, LIBOR Loans
shall forthwith be suspended until the Administrative Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist.

 

44

 

SECTION 4.3  Increased LIBOR Loan Costs, etc.  The Borrower agrees to reimburse each Lender
for any increase in the cost to such Lender of, or any reduction in, the amount
of any sum receivable by such Lender in respect of, making, continuing or
maintaining (or of its obligation to make, continue or maintain) any Loans as,
or of converting (or of its obligation to convert) any Loans into, LIBOR Loans
(such increases in costs and reductions in amounts receivable, after taking
into account such Lender’s estimate, which shall be conclusive if given in good
faith, of the net tax benefit, if any, realized by such Lender from such
additional costs and reductions, being herein called “Additional Costs”), resulting from any
Regulatory Change after the Effective Date which: (i) changes the basis of
taxation of any amounts payable to such Lender under this Agreement in respect
of any of such LIBOR Loans (other than taxes imposed on the overall net income
of such Lender for any such LIBOR Loans by the jurisdiction in which such
Lender has its principal office) or (ii) imposes or modifies (without
duplication of any other amount required to be paid hereunder) any reserve,
special deposit, minimum capital, capital ratio or similar requirements
relating to the making by such Lender of any LIBOR Loans (including any
increase in cost to a Lender by reason of an increase in any reserve
requirement specified from time to time by the F.R.S. Board and applicable to
“Eurodollar Liabilities” as defined in Regulation D of the F.R.S. Board or
other similar reserve requirements affecting Eurodollar deposits).  Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any such
event, such notice to state, in reasonable detail, the reasons therefor and the
Additional Costs.  Such Additional Costs
shall be payable by the Borrower directly to such Lender within thirty (30)
days after the Borrower’s receipt of such notice, and such notice shall, in the
absence of manifest error, be conclusive and binding on the Borrower.

 

SECTION 4.4  Funding Losses.  In the event any Lender shall incur any loss or
reasonable expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBOR
Loan) as a result of

 

(a)                                  any
conversion or repayment or prepayment of the principal amount of any LIBOR
Loans on a date other than the scheduled last day of the Interest Period
applicable thereto, whether pursuant to Section
3.1 or otherwise;

 

(b)                                 any
Loans not being made as LIBOR Loans in accordance with the Borrowing Request
therefor; or

 

(c)                                  any
Loans not being continued as, or converted into, LIBOR Loans in accordance with
the Continuation/ Conversion Notice therefor,

 

then, upon the written notice of such Lender to the Borrower (with a
copy to the Administrative Agent), the Borrower shall, within thirty (30) days
after its receipt thereof, pay directly to such Lender such amount as will (in
the reasonable determination of such Lender) reimburse such Lender for such
loss or expense; provided, that the
Borrower shall not be liable to a Lender hereunder for any such loss or expense
incurred by such Lender as a result of such Lender’s gross negligence or
willful misconduct, breach of this Agreement or failure to comply with a
Borrowing Request or Continuation/ Conversion Notice.  Such written notice (which shall

 

45

 

include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and, if made in good faith, binding on the
Borrower.

 

SECTION 4.5  Increased Capital Costs.  Without duplication of any other provision of
this Article IV, if any Regulatory
Change after the Effective Date affects the amount of capital required to be
maintained by any Lender or any Person controlling such Lender, and such Lender
determines (in its sole and absolute discretion) that the rate of return on its
or such controlling Person’s capital as a consequence of its Commitments or the
Loans made by such Lender is reduced as a result of such Regulatory Change to a
level below that which such Lender or such controlling Person could have
achieved but for the occurrence of such Regulatory Change, then, in any such
case upon notice from time to time by such Lender to the Borrower, the Borrower
shall within thirty (30) days after its receipt thereof, pay directly to such
Lender additional amounts (after taking into account such Lender’s estimates,
which shall be conclusive if made in good faith, of the net tax benefit, if
any, realized by such Lender resulting from such Regulatory Change) sufficient
to compensate such Lender or such controlling Person for such reduction in rate
of return.  A statement of such Lender as
to any such additional amount or amounts (including calculations thereof in
reasonable detail) shall, in the absence of manifest error, be conclusive and,
if made in good faith, binding on the Borrower. 
In determining such amount, such Lender may use any method of averaging
and attribution that it (in its sole and absolute discretion) shall deem
applicable.

 

SECTION 4.6  Period of Liability; Lender Substitution.

 

(a)                                  The
Borrower shall not be liable to any Lender pursuant to Sections 4.3, 4.4,
4.5 or 4.7
in respect of such compensation for any period commencing more than 180 days
before the delivery of any notice pursuant to Sections
4.3, 4.4, 4.5, or 4.7,
except that, with respect to Sections 4.3,
4.4 or 4.5,
the Borrower may be liable for an earlier period if the Regulatory Change
resulting in such notice shall have been given retroactive effect affecting any
period beginning more than 180 days prior to such notice.

 

(b)                                 If
(i) the obligation of any Lender to make or convert or continue outstanding
Loans as or into LIBOR Loans has been suspended pursuant to Section 4.1 or (ii) any Lender has demanded
compensation under Section 4.3, 4.5 or 4.7,
the Borrower shall have the right, with the assistance of the Administrative
Agent, to designate a substitute lender or lenders (which may be one or more of
the Lenders) mutually satisfactory to the Borrower and the Administrative Agent
to purchase for cash, pursuant to a Assignment and Assumption Agreement, the
outstanding Loans of such Lender and assume the Commitment of such Lender,
without recourse to or warranty by, or expense to, such Lender, for a purchase
price equal to the principal amount of all of such Lender’s outstanding Loans plus any accrued but unpaid interest thereon
and the accrued but unpaid fees for the account of such Lender hereunder plus such amount, if any, as would be payable
pursuant to Section 4.4 if the
outstanding Loans of such Lender were prepaid in their entirety on the date of
consummation of such assignment.

 

46

 

SECTION 4.7  Taxes.

 

(a)                                  All
payments by the Borrower of principal of, and interest on, the Loans and all
other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future Taxes. 
In the event that any withholding or deduction from any payment to a
Lender to be made by the Borrower hereunder is required in respect of any Taxes
pursuant to any applicable law, rule or regulation, then the Borrower will (i)
pay directly to the relevant authority the full amount required to be so
withheld or deducted, (ii) promptly forward to the Administrative Agent an
official receipt or other documentation satisfactory to the Administrative
Agent evidencing such payment to such authority, and (iii) pay to the
Administrative Agent for the account of such Lender such additional amount or
amounts as is necessary to ensure that the net amount actually received by such
Lender will equal the full amount such Lender would have received had no such withholding
or deduction been required.

 

(b)                                 If
the Borrower is required to pay additional amounts to or for the account of any
Lender pursuant to this Section as a result of a change in law or treaty
occurring after such Lender first became a party to this Agreement, then such
Lender will, at the Borrower’s request, use reasonable efforts to change the
jurisdiction of its lending office if, in the judgment of such Lender, such
change  will eliminate or reduce any such
additional payment which may thereafter accrue and is not otherwise
disadvantageous to such Lender.

 

(c)                                  Any
Foreign Lender that is entitled to an exemption from or reduction of U.S.
withholding tax, with respect to payments under this Agreement shall deliver to
the Borrower (with a copy to the Administrative Agent), at the time or times
prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.

 

SECTION 4.8  Payments, Computations, etc.  Unless otherwise expressly provided, all
payments by the Borrower pursuant to this Agreement, the Notes or any other
Loan Document shall be made by the Borrower to the Administrative Agent for the
pro  rata
account of the Lenders entitled to receive such payment.  The Borrower shall make each payment required
to be made to the Administrative Agent not later than 11:00 a.m., Central Time,
on the date due, in same day or immediately available funds, to such account as
the Administrative Agent shall specify from time to time by notice to the
Borrower.  Funds received after that time
shall be deemed to have been received by the Administrative Agent on the next
succeeding Business Day.  The Administrative
Agent shall promptly remit in same day funds to each Lender its share, if any,
of such payments received by the Administrative Agent for the account of such
Lender.  All interest on LIBOR Loans and
all fees shall be computed on the basis of the actual number of days (including
the first day but excluding the last day) occurring during the period for which
such interest or fee is payable over a year comprised of 360 days and in the
case of interest on a Prime Rate Loan, 365 days or, if appropriate, 366
days.  Whenever any payment to be made
shall otherwise be due on a day which is not a Business Day, such payment shall
be made on the next

 

47

 

succeeding Business Day
and such extension of time shall be included in computing interest, if any, in
connection with such payment.

 

SECTION 4.9  Sharing of Payments.  If any Lender shall obtain any payment or
other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of Sections 4.3, 4.4,
4.5 and 4.7)
in excess of its pro  rata share of payments then or therewith
obtained by all Lenders, such Lender shall purchase from the other Lenders such
participations in Loans made by them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and each Lender which has sold a
participation to the purchasing Lender shall repay to the purchasing Lender the
purchase price to the ratable extent of such recovery together with an amount
equal to such selling Lender’s ratable share (according to the proportion
of  the amount of such selling Lender’s
required repayment to the purchasing Lender to
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered.  The Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section may, to the fullest extent permitted by law, exercise all its
rights of payment (including pursuant to Section
4.10) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrower in the amount of such
participation.  If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders entitled under this Section
to share in the benefits of any recovery on such secured claim.

 

SECTION 4.10  Setoff. 
Each Lender shall, upon the occurrence of any Event of Default, have the
right to the extent permitted by applicable law to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due), any and all
balances, credits, deposits, accounts or moneys of the Borrower then or
thereafter maintained with such Lender; provided,
however, that no such balances,
credits, deposits, accounts or moneys shall include suspense funds held by the
Borrower for the account of a third party. Any such appropriation and
application shall be subject to the provisions of Section
4.9.  Each Lender agrees
promptly to notify the Borrower and the Administrative Agent after any such
setoff and application made by such Lender; provided,
however, that the failure to give such
notice to the extent permitted by applicable law shall not affect the validity
of such setoff and application.  The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff under applicable law or otherwise)
which such Lender may have.

 

SECTION 4.11  Use of Proceeds.  The Borrower will, and will cause each
Subsidiary to, use the proceeds of the Loans and the Letters of Credit (a) to
refinance existing Indebtedness of Borrower and its Subsidiaries, (b) to
reimburse each Issuing Bank for LC Disbursements in accordance with Section 2.3.5 or to repay Swing Line
Advances, or (c) for Borrower’s and its Subsidiaries’ general corporate
purposes (other than any hostile acquisitions). 
No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the regulations
of the Board, including Regulation U.

 

48

 

ARTICLE V

CONDITIONS TO BORROWING

 

SECTION 5.1  Initial Borrowing.  The obligations of the Lenders to fund the
initial Borrowing and of the Issuing Bank to issue any Letter of Credit after
the date hereof shall be subject to the prior or concurrent satisfaction of
each of the conditions precedent set forth in this Section
5.1.

 

SECTION 5.1.1  Organizational
Documents.  The Administrative
Agent shall have received a certificate of an Authorized Person of the Borrower
dated as of the date of the initial satisfaction of the conditions set forth in
Article V, certifying:

 

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

 

(b)                                 that
attached to such certificate is a true and complete copy of resolutions duly
adopted by the board of directors of the Borrower authorizing the execution,
delivery and performance of the Loan Documents, and

 

(c)                                  as
to the incumbency and specimen signature of each officer of the Borrower
executing the Loan Documents;

 

upon which certificate each Lender may conclusively rely until it shall
have received a further certificate of an Authorized Person of the Borrower
canceling or amending such prior certificate.

 

SECTION 5.1.2  Compliance with
Representations and Warranties. 
The Administrative Agent shall have received a certificate from an
Authorized Person of the Borrower confirming compliance with Section 5.2.1 and stating that:

 

(a)                                  the
Reserve Report of July 1, 2004, previously delivered to the Lenders, includes
as a basis for Future Net Income only Proved Reserves located on Borrowing Base
Properties; and

 

(b)                                 there
has been no material adverse change in the respective properties or
consolidated financial condition or results of operations of the Borrower and
its consolidated Subsidiaries and Consolidated Affiliates (the Borrower and
such Subsidiaries and Consolidated Affiliates taken as a whole) since September
30, 2004, the date of the most recent financial statements for such entities
delivered to the Lenders.

 

49

 

SECTION 5.1.3  Delivery of Loan
Documents.  The Administrative
Agent (or its counsel) shall have received either (i) a counterpart of this
Agreement and each other Loan Document executed by the Borrower, the Agents and
the Lenders or (ii) written evidence satisfactory to the Administrative Agent
(which may include telecopy transmission of a signed signature page of this
Agreement and each other Loan Document) that the applicable party has signed a
counterpart of this Agreement and each other Loan Document.

 

SECTION 5.1.4  No Liens.  The Borrowing Base Properties shall be free
and clear of all Liens, except Liens permitted by Section
8.2.

 

SECTION 5.1.5  Approvals and Consents.  The Administrative Agent shall have received
copies of all Governmental Approvals necessary in connection with the Financing
Transactions, and all applicable waiting periods and appeal periods shall have
expired, in each case without the imposition of any burdensome conditions.  There shall be no actual government or
judicial action restraining, preventing or imposing burdensome conditions on
the Financing Transactions.

 

SECTION 5.1.6  Termination of
Existing Credit Facility.  The
Administrative Agent shall have received a certificate, signed by an Authorized
Person of the Borrower, stating that the Borrower or its Subsidiaries have
repaid in full and terminated the Existing Credit Facility contemporaneously
with the initial Loans under this Agreement. 
The Administrative Agent shall have received evidence satisfactory to it
that all Liens associated with the Existing Credit Facility have been released
or terminated contemporaneously with the making of such payments and that
arrangements satisfactory to the Administrative Agent has been made for
recording and filing of such releases.

 

SECTION 5.1.7  Opinions of
Counsel.  The Administrative
Agent shall have received opinions, dated the date of the initial Borrowing and
addressed to the Agents and the Lenders, from

 

(a)                                  Michael
J. Killelea, Esq., Vice President and General Counsel to the Borrower,
substantially in the form of Exhibit E-1
hereto; and

 

(b)                                 Baker
Botts L.L.P., special New York counsel to the Borrower, substantially in the
form of Exhibit E-2 hereto.

 

SECTION 5.1.8  Closing Fees,
Expenses, etc.  The
Administrative Agent shall have received for its own account, or for the
account of each Lender, as the case may be, all fees, costs, and expenses due
and payable pursuant to Section 3.3 and
Section 11.3, if then invoiced.

 

SECTION 5.2  Conditions Precedent to Credit Event.  The obligation of each Lender to fund any
Loan (including the initial Borrowing), of the Swing Line Lender to make Swing
Line Advances  or of the Issuing Bank to
issue, renew, extend or amend any Letter of Credit shall be subject to the
satisfaction of each of the conditions precedent set forth in this Section 5.2.

 

50

 

SECTION 5.2.1  Representations
and Warranties, No Default, etc. 
The following statements shall be true and correct both before and after
giving effect to any Credit Event, including the application of the proceeds
thereof:

 

(a)                                  the
representations and warranties set forth in Article
VI will be true and correct in all material respects with the same
effect as if then made (unless stated to relate solely to an earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date);

 

(b)                                 the
aggregate Credit Exposures outstanding will not exceed (i) in the event that
availability under this Agreement is governed by the Borrowing Base, the lesser
of (A) the Commitment Amount and (B) the Applicable Borrowing Base then in
effect or (ii) otherwise, the Commitment Amount; and

 

(c)                                  no
Default shall have then occurred and be continuing.

 

SECTION 5.2.2  Borrowing
Request.  The Administrative
Agent shall have received a Borrowing Request for such Borrowing, a Request for
Swing Line Advance or a request for the issuance of a Letter of Credit, as
applicable.  Each of the delivery of a
Borrowing Request, Request for Swing Line Advance or a request for the issuance
of a Letter of Credit, as applicable, and the acceptance by the Borrower of the
proceeds of such Borrowing, Swing Line Advance or the Letter of Credit shall
constitute a representation and warranty by the Borrower that on the date of
such Credit Event (both immediately before and after giving effect to such
Credit Event and the application of the proceeds thereof) the statements made
in Section 5.2.1 are true and
correct.

 

SECTION 5.2.3  Satisfactory
Legal Form.  All documents
executed or submitted pursuant hereto by or on behalf of the Borrower or any of
its Subsidiaries shall be satisfactory in form and substance to the
Administrative Agent and its counsel; the Administrative Agent and its counsel
shall have received all information, approvals, opinions, documents or
instruments of the Borrower as the Administrative Agent or its counsel may
reasonably request.

 

The Administrative Agent shall notify Borrower, the other Agents and
the Lenders of the date of the initial satisfaction of the conditions set forth
in Article V, and such notice shall be
conclusive and binding.  Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless
each of the foregoing conditions is satisfied (or waived pursuant to Section 11.1) at or prior to 3:00 p.m., New
York City time, on January 31, 2005 (and, in the event such conditions are not
so satisfied or waived, the Commitments shall terminate at such time).

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

 

In order to induce the Lenders and the Administrative
Agent to enter into this Agreement and to make Loans and issue the Letters of
Credit hereunder, the Borrower represents and warrants unto the Administrative
Agent and each Lender as set forth in this Article
VI.

 

51

 

SECTION 6.1  Organization, etc.  The Borrower and each of its Restricted
Subsidiaries which is a corporation is validly organized and existing and in
good standing under the laws of the State, or country, of its incorporation,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its business requires such
qualification, except where failure to qualify could not reasonably be expected
to have a Material Adverse Effect. Each of the Borrower’s Restricted
Subsidiaries which is a partnership or a limited liability company is validly
formed or organized and existing and in good standing under the laws of the
state of its formation or organization, and is duly qualified to do business
and is in good standing as a foreign partnership or limited liability company
where the nature of its business requires such qualification, except where
failure to qualify could not reasonably be expected to have a Material Adverse
Effect.  The Borrower has full corporate
power and authority and holds all requisite Governmental Approvals to enter
into and perform its obligations in respect of the Financing Transactions and
to own and hold under lease its property and to conduct its business
substantially as currently conducted by it, except where the failure to have
such Governmental Approvals could not reasonably be expected to have a Material
Adverse Effect.

 

SECTION 6.2  Due Authorization, Non-Contravention, etc.  The execution, delivery and performance by
the Borrower of this Agreement, the Notes and each other Loan Document executed
or to be executed by it, are within the Borrower’s corporate powers, have been
duly authorized by all necessary corporate action, as the case may be, and do
not:

 

(a)                                  contravene
the Borrower’s Organic Documents;

 

(b)                                 contravene
any contractual restriction, law or governmental regulation or court decree or
order binding on or affecting the Borrower; or

 

(c)                                  result
in, or require the creation or imposition of, any Lien on any properties of the
Borrower.

 

SECTION 6.3  Government Approval, Regulation, etc.  No Governmental Approval or other action by
any Governmental Authority is required for the due execution, delivery or
performance by the Borrower of this Agreement, the Notes or any other Loan Document
executed or to be executed by it, except for the filing of this Agreement with
the SEC as a material document under Rule 601(b)(iv) of Regulation S-K.  Neither the Borrower nor any of its
Subsidiaries is an “investment company” within the meaning of the Investment
Company Act of 1940, as amended, or 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.

 

SECTION 6.4  Validity, etc.  This Agreement and the Notes constitute, and
each other Loan Document executed by the Borrower will, on the due execution
and delivery thereof, constitute, the legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their
respective terms except as such enforceability is subject to the effect of (i)
any applicable bankruptcy, insolvency, reorganization or other similar law
relating to or affecting creditors’ rights generally and (ii) general
principles of equity (regardless of whether

 

52

 

such enforceability is
considered in a proceeding in equity or at law), including concepts of
materiality, reasonableness, good faith and fair dealing.

 

SECTION 6.5  Financial Information.  The consolidated balance sheets of the
Borrower and its consolidated Subsidiaries and Consolidated Affiliates, as at
December 31, 2003 and September 30, 2004 and the related consolidated
statements of income and cash flow of the Borrower and its consolidated
Subsidiaries and Consolidated Affiliates, for the periods then ended, copies of
which have been furnished to the Administrative Agent and each Lender, have
been prepared in accordance with GAAP consistently applied, and present fairly
in all material respects the consolidated financial condition of the Borrower
and its consolidated Subsidiaries and Consolidated Affiliates as at the dates
thereof and the results of their operations for the periods then ended subject,
in the case of the consolidated balance sheet of September 30, 2004 and the
related consolidated statements of income and cash flow as of such date, to the
making of normal year-end audit adjustments and the year-end addition of notes
required pursuant to GAAP.

 

SECTION 6.6  No Material Adverse Change.  Except as disclosed to the Administrative
Agent in writing, since September 30, 2004, there has been no material adverse
change in the consolidated financial condition or results of operations,
business or properties of the Borrower and its consolidated Subsidiaries and
Consolidated Affiliates taken as a whole; provided,
however, that such determination shall
not be deemed to include any changes or effects arising out of any effects of
FAS 133 or FAS 143 or other changes in GAAP or in the generally applicable
interpretation thereof.

 

SECTION 6.7  Litigation, etc.  There is no pending or, to the knowledge of
the Borrower, threatened labor controversy, litigation, action, or proceeding
against the Borrower or any of its consolidated Subsidiaries or Consolidated
Affiliates, or any of their respective properties or revenues, which has a
significant probability of consequences that could reasonably be expected to have
a Material Adverse Effect, except as disclosed in Item
6.7 (“Litigation”) of the Disclosure Schedule, or which purports to
affect the legality, validity or enforceability of this Agreement, the Notes,
or any other Loan Document; provided,
Borrower’s representation with respect to the absence of pending litigation
against its Consolidated Affiliates is limited to Borrower’s knowledge.  Neither the Borrower nor any of its
Subsidiaries is in default with respect to any judgment, order, writ,
injunction, decree, rule or regulation of any Governmental Authority applicable
to or binding on it, which default could reasonably be expected to have a
Material Adverse Effect.

 

SECTION 6.8  Subsidiaries. 
As of the Closing Date, the Borrower has no Subsidiaries or Consolidated
Affiliates, except those which are identified in Item
6.8 of the Disclosure Schedule. 
As of the Closing Date, each Subsidiary of the Borrower is either a
Restricted Subsidiary or an Unrestricted Subsidiary as identified in Item 6.8 (“Existing Subsidiaries and
Affiliates”) of the Disclosure Schedule. 
As of the Closing Date, the Borrower is the record or beneficial owner
of the ownership interest of each such Subsidiary which is identified in Item 6.8 of the Disclosure Schedule.  Such ownership interests are free and clear
of any Liens, including, without limitation, claims arising out of any
preemptive rights granted in connection with the issuance of any such ownership
interests, except for inchoate Liens existing at law.  All ownership interests

 

53

 

are duly issued, fully
paid and nonassessable and there are no outstanding options, warrants or other
rights entitling the holder thereof to purchase any of the ownership interests
of any such Subsidiary except as disclosed in Item
6.8 of the Disclosure Schedule.

 

SECTION 6.9  Ownership of Properties.  The Borrower and each of its Restricted
Subsidiaries has marketable title to all of its real properties and good title
to, or has the right to use, all of its personal property, tangible and
intangible, of any nature whatsoever (including concession agreements, patents,
trademarks, trade names, service marks and copyrights), and all properties and
assets and all revenues (present and future) of the Borrower and its Restricted
Subsidiaries are free and clear of all Liens or other charges or claims
(including infringement claims with respect to patents, trademarks, copyrights
and the like), except (i) as to any such charges or claims are disclosed
in the Borrower’s most recent Form 10-K filed with the SEC and (ii) other Liens
permitted under Section 8.2.

 

SECTION 6.10  Taxes. 
The Borrower and each of its Subsidiaries has filed all tax returns and
reports required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been
set aside on its books.

 

SECTION 6.11  Pension and Welfare Plans.  During the twelve-consecutive-month period
prior to the date of the execution and delivery of this Agreement and prior to
the date of any Credit Event hereunder, no steps have been taken to terminate
any Pension Plan, and no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a Lien under section 302(f) of
ERISA.  No condition exists or event or
transaction has occurred with respect to any Pension Plan which could reasonably
be expected to result in the incurrence by the Borrower or any member of the
Controlled Group of any material liability, fine or penalty.

 

SECTION 6.12  Environmental Warranties.  Except as set forth in Item 6.12 (“Environmental Matters”) of
the Disclosure Schedule:

 

(a)                                  to
the best actual knowledge of the Borrower, all facilities and property
(including underlying groundwater) owned, leased or operated by the Borrower or
any of its Subsidiaries have been and are owned, leased or operated by the
Borrower and its Subsidiaries in compliance with all Environmental Laws, except
where the failure to comply with which could not be reasonably expected to have
a Material Adverse Effect;

 

(b)                                 to
the best actual knowledge of the Borrower, there are no pending or threatened

 

(i)                                     claims,
complaints, or notices received by the Borrower or any of its Subsidiaries with
respect to any alleged violation of any Environmental Law, or

 

(ii)                                  claims,
complaints, notices or inquiries to, or requests for information received by,
the Borrower or any of its Subsidiaries regarding potential liability under any
Environmental Law relating to operations of the

 

54

 

Borrower or its Subsidiaries or the condition of any
facilities or property (including underlying groundwater) owned, leased or
operated by the Borrower or any of its Subsidiaries,

 

in either case that, singly or in the aggregate, could reasonably be
expected to have a Material Adverse Effect;

 

(c)                                  to
the best actual knowledge of the Borrower, there have been no Releases of
Hazardous Materials at, on or under any property now or previously owned,
leased or operated by the Borrower or any of its Subsidiaries that, singly or
in the aggregate, could reasonably be expected to have a Material Adverse
Effect;

 

(d)                                 to
the best actual knowledge of Borrower, the Borrower and its Subsidiaries have
been issued and are in compliance with all Governmental Approvals relating to
environmental matters that are necessary for their businesses, except where the
failure to have or to comply with such Governmental Approvals could not be
reasonably expected to have a Material Adverse Effect;

 

(e)                                  neither
the Borrower nor any Subsidiary has actual knowledge that any property now or
previously owned, leased or operated by the Borrower or any of its Subsidiaries
is listed or proposed for listing (with respect to owned property only) on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar
state list of sites requiring investigation or clean-up where the anticipated
costs to the Borrower and its Subsidiaries to bring such property into
compliance with CERCLA could reasonably expected to have a Material Adverse
Effect;

 

(f)                                    to
the best actual knowledge of the Borrower, there are no underground storage
tanks, active or abandoned, including petroleum storage tanks, on or under any
property now or previously owned, leased or operated by the Borrower or any of
its Subsidiaries where the anticipated costs to the Borrower and its Subsidiaries
to bring such property into compliance could reasonably expected to have a
Material Adverse Effect;

 

(g)                                 to
the best actual knowledge of the Borrower, neither the Borrower nor any of its
Subsidiaries has directly transported or directly arranged for the
transportation of any Hazardous Material to any location which is listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar state list or a site which currently is the subject
of enforcement actions or other investigations by a Governmental Authority
which could reasonably be expected to lead to claims against the Borrower or
such Subsidiary under any Environmental Law which claims could reasonably be
expected to have a Material Adverse Effect;

 

(h)                                 to
the best actual knowledge of the Borrower, there are no polychlorinated
biphenyls or friable asbestos present at any property now or previously owned,
leased or operated by the Borrower or any Subsidiary of the Borrower that,
singly or in the aggregate, could reasonably be expected to have a Material
Adverse Effect; and

 

55

 

(i)                                     to
the best actual knowledge of the Borrower, no conditions exist at, on or under
any property now or previously owned, leased or operated by the Borrower which,
with the passage of time, or the giving of notice or both, would give rise to
liability under any Environmental Law which could reasonably be expected to
have a Material Adverse Effect.

 

SECTION 6.13  Regulation U. 
The proceeds of the Loans shall be used for the general corporate
purposes of the Borrower.  The Borrower
is not engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Loans will be used
for a purpose which violates, or would be inconsistent with, Regulation U.  Terms for which meanings are provided in
Regulation U or any regulations substituted therefor, as from time to time in
effect, are used in this Section with such meanings.

 

SECTION 6.14  Absence of Defaults.  No Default exists. As of the Closing Date,
neither the Borrower nor any of its Restricted Subsidiaries is in default under
any material agreement or instrument governing Indebtedness to which any of
them is a party.

 

SECTION 6.15  Information Memorandum.  To the best of the Borrower’s knowledge, the
information contained in the Information Memorandum (other than any based on or
constituting pro forma financial
statements, forecasts, budgets or projections) does not contain on the date
hereof any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements contained therein not materially
misleading in light of the circumstances under which they were made.  With respect to any such information that is
based on or constitutes pro forma
financial statements or a forecast or projection prepared by the Borrower, the
Borrower represents that in the preparation thereof it acted in good faith and
utilized information available to it at the time the Information Memorandum was
prepared and assumptions believed by it to be reasonable in light of the then
current and foreseeable business conditions of the Borrower and its
Subsidiaries.

 

ARTICLE VII

AFFIRMATIVE COVENANTS

 

The Borrower agrees with the Administrative Agent and
each Lender that, until all Commitments have terminated and the Notes and all
other payment Obligations that have then become due and payable have been paid
and performed in full, the Borrower will perform the obligations set forth in
this Article.

 

SECTION 7.1  Financial Information, Reports, Notices, etc.  The Borrower will furnish, or will cause to
be furnished, to each Lender and the Administrative Agent copies of the
following financial statements, reports, notices and information:

 

(a)                                  as
soon as available and in any event within 45 days after the end of each of the
first three Fiscal Quarters of each Fiscal Year of the Borrower, consolidated
balance sheets of the Borrower and its consolidated Subsidiaries and
Consolidated Affiliates as of the end of such Fiscal Quarter and consolidated
statements of income and cash flows of the Borrower and its consolidated
Subsidiaries and Consolidated Affiliates for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal

 

56

 

Year and ending with the end of such Fiscal Quarter,
certified by the principal financial officer of the Borrower;

 

(b)                                 as
soon as available and in any event within 90 days after the end of each Fiscal
Year of the Borrower, a copy of the annual audit report for such Fiscal Year
for the Borrower and its consolidated Subsidiaries and Consolidated Affiliates,
including therein consolidated balance sheets of the Borrower and its
consolidated Subsidiaries and Consolidated Affiliates as of the end of such
Fiscal Year and consolidated statements of income and cash flows of the
Borrower and its consolidated Subsidiaries and Consolidated Affiliates for such
Fiscal Year, in each case certified by PricewaterhouseCoopers, LLP or other
independent public accountants reasonably acceptable to the Administrative
Agent and the Required Lenders; provided
that, if such accountants’ opinion
contains an Impermissible Qualification, the Borrower must satisfy the Administrative
Agent and the Required Lenders that the Impermissible Qualification does not
reflect a condition that materially impairs the timely collectibility by the
Lenders of any monetary Obligations then outstanding;

 

(c)                                  as
soon as available and in any event within the time limits set for submission of
the statements submitted under clauses (a)
and (b) above, a certificate signed by
an Authorized Person of the Borrower (i) to the effect that a review of the
activities of the Borrower during the subject Fiscal Year or Fiscal Quarter, as
the case may be, has been made under his supervision with a view to determining
whether the Borrower has fulfilled all of its obligations to be fulfilled
during such period under this Agreement and the Notes and the other Loan
Documents to which it is a party and, to the best of his knowledge, no Default
exists, or if a Default does exist, specifying the nature and extent thereof
and the nature of any corrective action taken or proposed to be taken to cure
such Default and (ii) showing in reasonable detail and with appropriate
calculations and computations in all respects reasonably satisfactory to the
Administrative Agent compliance with the financial covenants set forth in Section 8.3;

 

(d)                                 as
soon as possible and in any event within five (5) Business Days after the Chief
Executive Officer, the President, any Vice President or the Treasurer of the
Borrower learns of the occurrence of any Default, a statement of an Authorized
Person of the Borrower setting forth details of such Default and the action
which the Borrower has taken or proposes to take with respect thereto;

 

(e)                                  in
the event that availability under this Agreement is governed by the Borrowing
Base, (i) as soon as available, but in no event later than 90 days after the
close of each Fiscal Year of the Borrower, commencing with the Fiscal Year
ended December 31, 2004, Reserve Reports as of January 1 of the next
succeeding year, and (ii) as soon as available, but in no event later than 90
days after each June 30, commencing June 30, 2005, at the Borrower’s
discretion, Reserve Reports or Alternate Reserve Reports dated as of
July 1;

 

(f)                                    notice
thereof, promptly, and in any event within five (5) Business Days, after
(i) the commencement of any labor controversy, litigation, action or
proceeding which has a significant probability of consequences that could
reasonably be expected to

 

57

 

have a Material Adverse Effect or (ii) the receipt of
any claim, complaint, notice, inquiry or request for information  in respect of an alleged violation of or
liability under any Environmental Law, which claim, complaint, notice, inquiry
or request has a significant probability of consequences that could reasonably
be expected to have a Material Adverse Effect;

 

(g)                                 without
duplication of any other reports required under this Agreement, promptly after
the sending or filing thereof, copies of all reports which the Borrower sends
generally to its security holders, and all reports and registration statements
which the Borrower or any of its Subsidiaries files with the SEC or any
national securities exchange;

 

(h)                                 with
each report submitted under clause (e)
above, a certificate signed by an Authorized Person of the Borrower certifying,
as of the date of such Reserve Report or Alternate Reserve Report, (i) the name
and location of each property to which Proved Reserves included in the Reserve
Report or Alternate Reserve Report, as the case may be, are attributable and
(ii) that each such property is either (A) owned by the Borrower,
(B) owned by a Restricted Subsidiary or (C) a Qualified Partnership
Property;

 

(i)                                     as
soon as possible and in any event within five (5) Business Days after Borrower
receives notice of a change in the rating of its Index Debt by S&P or
Moody’s;

 

(j)                                     notice
thereof, promptly after becoming aware of the institution of any steps by the
Borrower or any other Person to terminate any Pension Plan, or the failure to
make a required contribution to any Pension Plan if such failure is sufficient
to give rise to a Lien under section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the requirement
that the Borrower furnish a bond or other security to the PBGC or such Pension
Plan, or the occurrence of any event with respect to any Pension Plan which
could result in the incurrence by the Borrower of any material liability, fine
or penalty, or any material increase in the contingent liability of the
Borrower with respect to any post-retirement Welfare Plan benefit;

 

(k)                                  as
soon as available, and in any event within 90 days after the end of each Fiscal
Year, or at other times as the Administrative Agent may reasonably request, a
certificate from the Borrower’s risk manager setting forth the nature and
extent of all insurance maintained by the Borrower and its Restricted
Subsidiaries;

 

(l)                                     in
the event that availability under the Agreement is governed by the Borrowing
Base, notice thereof, as soon as reasonably possible and in any event within
ten (10) Business Days, if the aggregate Credit Exposures outstanding exceed
the Applicable Borrowing Base then in effect;

 

(m)                               in
the event that availability under the Agreement is governed by the Borrowing
Base, as soon as available, and in any event within five (5) Business Days
after any disposition of (i) Borrowing Base Properties, in one transaction or a
series of related transactions, which generate net proceeds in excess of ten
percent (10%) of the Applicable Borrowing Base then in effect, or (ii) other assets
of the type described in

 

58

 

Section 2.8(c)
of the Borrower or any of its Restricted Subsidiaries, in one transaction or a
series of related transactions, which generate net proceeds in excess of $20,000,000,
in either case written notice of such disposition;

 

(n)                                 as
soon as possible and in any event within five (5) Business Days after any
Restricted Subsidiary enters into a Guarantee of Indebtedness, notice of such
Guarantee; and

 

(o)                                 such
other information respecting the condition or operations, financial or
otherwise, of the Borrower or any of its Subsidiaries or Consolidated
Affiliates as any Lender through the Administrative Agent may from time to time
reasonably request.

 

Information required to be delivered pursuant to Section 7.1(a), 7.1(b),
7.1(g) or 7.1(i) shall be deemed
to have been delivered on the date on which the Borrower provides notice to the
Administrative Agent that such information has been posted on a website on the
Internet at the website identified in such notice, which shall be accessible by
the Lenders without charge, which notice may be included in a certificate
delivered pursuant to Section 7.1(c).  The Borrower shall deliver paper copies of
the information referred to in Sections 7.1(a),
7.1(b), 7.1(g)
and 7.1(i) to any Lender which requests the same.

 

SECTION 7.2  Compliance with Laws; Taxes.  The Borrower will, and will cause each of its
Subsidiaries:

 

(a)                                  to
comply in all material respects with all applicable laws, rules, regulations
and orders of any Governmental Authority, except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect; and

 

(b)                                 to
pay, before the same become delinquent, all taxes, assessments and governmental
charges imposed upon it or upon its property, except to the extent being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books or except where the failure to do so could not reasonably be expected to
have a Material Adverse Effect.

 

SECTION 7.3  Maintenance of Properties.  The Borrower will, and will cause each of its
Restricted Subsidiaries to, maintain, preserve, protect and keep its
properties, whether owned in fee or leased, in good repair, working order and
condition, and make necessary and proper repairs, renewals and replacements so
that its business carried on in connection therewith may be properly conducted
unless the Borrower determines in good faith that the continued maintenance of
any of its properties is no longer economically desirable.

 

SECTION 7.4  Insurance. 
The Borrower will, and will cause each of its Restricted Subsidiaries
to, maintain or cause to be maintained with responsible insurance companies
insurance with respect to its properties and business (excluding business
interruption insurance) against such casualties and contingencies and of such
types and in such amounts as is customary in the case of similar businesses.

 

59

 

SECTION 7.5  Books and Records.  The Borrower will, and will cause each of its
Subsidiaries to, keep books and records which accurately reflect all of its
material business affairs and transactions and permit the Administrative Agent
or any of its representatives, at reasonable times and intervals, to visit all
of its offices, to discuss its financial matters with its officers and
independent public accountant (and the Borrower hereby authorizes such
independent public accountant to discuss the Borrower’s financial matters with
the Administrative Agent or its representatives whether or not any
representative of the Borrower is present) and to examine (and, at the expense
of the Borrower, photocopy extracts from) any of its books or other corporate
or partnership records.  The Borrower
shall pay any fees of such independent public accountant incurred in connection
with the Administrative Agent’s exercise of its rights pursuant to this Section.

 

SECTION 7.6  Environmental Covenant.  The Borrower will, and will cause each of its
Subsidiaries to, (i) use, operate and maintain all facilities and properties
under its control in compliance with all Environmental Laws, (ii) keep all
necessary permits, approvals, certificates, licenses and other authorizations
relating to environmental matters in effect and remain in compliance therewith,
and (iii) handle all Hazardous Materials in compliance with all applicable
Environmental Laws, except, in each case, where the failure to do so could not
be reasonably expected to have a Material Adverse Effect.

 

SECTION 7.7  Performance Under Material Operating Contracts.  The Borrower will,  and will cause each of its Restricted
Subsidiaries to, perform their respective obligations under all operating contracts,
licenses, permits and concession agreements to which they are a party and which
relate to (i) in the event that availability under this Agreement is governed
by  the Borrowing Base, Borrowing Base
Properties or (ii) otherwise, Properties, except where the failure to so
perform could not be reasonably expected to have a Material Adverse Effect.

 

SECTION 7.8  Designation
and Conversion of Restricted and Unrestricted Subsidiaries.

 

(a)                                  Unless
designated as an Unrestricted Subsidiary on Item 6.8 of the Disclosure Schedule
as of the date of this Agreement or thereafter in writing to the Administrative
Agent, any Person that becomes a Subsidiary of the Borrower or any of its
Restricted Subsidiaries shall be classified as a Restricted Subsidiary.

 

(b)                                 The
Borrower may designate any Subsidiary (including a newly formed or newly
acquired Subsidiary) as an Unrestricted Subsidiary if (i) the representations
and warranties of the Borrower and its Restricted Subsidiaries contained in
each of the Loan Documents are true and correct in all material respects on and
as of such date as if made on and as of the date of such designation (or, if
stated to have been made expressly as of an earlier date, were true and correct
in all material respects as of such date), (ii) after giving effect to such
designation, no Default or Event of Default would exist, and (iii) in the case
of a Subsidiary which is already classified as a Restricted Subsidiary, the
Borrower has obtained the prior written consent of the Administrative Agent and
the Required Lenders.  Except as provided
in this Section, no Restricted Subsidiary may be redesignated as an
Unrestricted Subsidiary.

 

60

 

(c)                                  The
Borrower may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary if after giving effect to such designation, (i) the representations
and warranties of the Borrower and its Restricted Subsidiaries contained in
each of the Loan Documents are true and correct in all material respects on and
as of such date as if made on and as of the date of such redesignation (or, if
stated to have been made expressly as of an earlier date, were true and correct
in all material respects as of such date), and (ii) after giving effect to
such designation, no Default or Event of Default would exist.

 

SECTION 7.9  Subsidiary
Guaranty.  In the event that any
Restricted Subsidiary of the Borrower shall Guarantee any Indebtedness of the
Borrower or any other Subsidiary of the Borrower (“Other Guaranty”),
such Restricted Subsidiary shall deliver promptly, and in any event within 10
days of delivery of such Guarantee, to the Administrative Agent a Subsidiary
Guaranty; provided that any such Subsidiary Guaranty shall automatically
terminate upon the termination of such Other Guaranty.

 

ARTICLE VIII

NEGATIVE COVENANTS

 

The Borrower agrees with the Administrative Agent and
each Lender that, until all Commitments have terminated and the Notes and all
other payment Obligations that have then become due and payable have been paid
and performed in full, the Borrower will perform the obligations set forth in
this Article.

 

SECTION 8.1  Limitations on Indebtedness.  The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, create, incur, assume or otherwise become
liable in respect of any Indebtedness if, after giving effect thereto, a
Default or an Event of Default shall have occurred and be continuing or been
caused thereby or if the incurrence of such Indebtedness would result in the
existence of a Borrowing Base Deficiency; provided that this Section 8.1
shall not prohibit the Borrower and its Restricted Subsidiaries from creating
or incurring, even if a Borrowing Base Deficiency or any Default or Event of
Default shall have occurred, (i) Indebtedness evidenced by bonds or surety
obligations, in each case required by any Governmental Authority, (ii)
obligations to pay into escrow accounts or establish other reserves, in each
case under this clause (ii) only in amounts necessary to cover costs of
abandonment of oil and gas wells or drilling sites, and (iii) obligations
described in clause (e) of the definition of “Indebtedness” that arise
after the occurrence of a Borrowing Base Deficiency or Default pursuant to a
Hedging Agreements entered into prior to such occurrence; provided  further
that Indebtedness (other than Guarantees) of Restricted Subsidiaries shall not
exceed $25,000,000 in the aggregate at any time.

 

SECTION 8.2  Liens. 
The Borrower will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of
its property, revenues or assets, including the capital stock of any Subsidiary
or Affiliate owned by the Borrower or a Restricted Subsidiary, whether now
owned or hereafter acquired, except:

 

61

 

(a)           Liens on pipeline or pipeline
facilities which arise out of operation of law; Liens arising under operating
agreements, joint venture agreements, partnership agreements, oil and gas
leases, farm-out agreements, division orders, contracts for the sale, purchase,
transportation, processing or exchange of oil, gas or other hydrocarbons,
unitization and pooling declarations and agreements, area of mutual interest
agreements, development agreements, joint ownership arrangements and other
agreements which are customary in the oil and gas business; and Liens reserved
in oil and gas mineral leases for bonus or rental payments and form compliance
with the terms of such lease;

 

(b)           Liens on any Borrowing Base Property
or other asset of Borrower or any Restricted Subsidiary granted prior to the
Closing Date to secure payment of Indebtedness which is set forth in Item 8.2 (“Existing Liens”) of
the Disclosure Schedule, provided that
(i) such Lien shall not apply to any other Borrowing Base Property or other
asset of Borrower or any Restricted Subsidiary and (ii) such Lien shall secure
only those obligations which it secures on the Closing Date;

 

(c)           Liens in respect of Capitalized Lease
Liabilities and Liens on the subject assets in respect of purchase money Senior
Debt permitted by Section 8.1;

 

(d)           Liens in respect of rights of first
refusal, purchase options and similar rights granted pursuant to joint
operating agreements, joint ownership agreements, stockholders agreements,
Organic Documents and other similar agreements and documents;

 

(e)           Liens for taxes, assessments or other
governmental charges or levies not at the time delinquent or thereafter payable
without penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books;

 

(f)            Liens of carriers, warehousemen,
mechanics, materialmen and landlords incurred in the ordinary course of
business for sums not overdue or being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;

 

(g)           Liens incurred in the ordinary course
of business in connection with workmen’s compensation, unemployment insurance
or other forms of governmental insurance or benefits, or to secure performance
of tenders, statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business (including
lessee and operator obligations under statute, governmental regulations or
instruments related to the ownership, exploration and production of oil, gas
and minerals on state, federal or foreign lands or waters) or to secure
obligations on surety or appeal bonds;

 

(h)           pre-judgment Liens and judgment Liens
in existence less than 15 days after the entry thereof or with respect to which
execution has been stayed or the payment of which is covered in full (subject
to a customary deductible) by insurance;

 

62

 

(i)            Liens on cash or Cash Equivalent
Investments which are collateral for letters of credit in an aggregate amount
not to exceed $20,000,000 at any time;

 

(j)            statutory Liens and easements or
other servitudes arising in the ordinary course of business and minor
irregularities of title which do not materially impair the ownership or use of
the property subject thereto for the purposes for which such property is owned
and held;

 

(k)           Liens which do not encumber Borrowing
Base Properties and which secure or relate to Non-Recourse Indebtedness;

 

(l)            any
Liens in favor of any counterparty to Commodity Hedging Contracts or Hedging
Agreements and which counterparty is (i) any Lender or any Affiliate of such
Lender, or (ii) any other Person, provided
that the aggregate value of the obligation secured by all such Liens permitted
by this clause (ii) shall not exceed
U.S.$25,000,000 in the aggregate at any one time outstanding;

 

(m)          Liens on oil and gas stored on board
floating production and/or storage and offloading facilities utilized by the
Borrower and its Subsidiaries and Affiliates which are granted to the lessor
and operator thereof and deposit arrangements required under the bareboat
charters and operating agreements relating to those facilities;

 

(n)           Liens resulting from the deposit of
funds or evidences of Indebtedness in trust for the purpose of defeasing
Indebtedness of the Borrower or any of its Subsidiaries to the extent any such
defeasance is not prohibited by this Agreement; customary Liens for the fees,
costs and expenses of trustees and escrow agents pursuant to the indenture,
escrow agreement or other similar agreement establishing such trust or escrow
arrangement; and Liens pursuant to merger agreements, stock purchase
agreements, asset sale agreements and similar agreements (i) limiting the
transfer of properties and assets pending consummation of the subject
transaction and (ii) in respect of earnest money deposits, good faith deposits,
purchase price adjustment escrows and similar deposits and escrow arrangements
made or established thereunder;

 

(o)           rights reserved to or vested in any
municipality or governmental, statutory or public authority by the terms of any
right, power, franchise, grant, license or permit, or by any provision of law,
to terminate such right, power, franchise, grant, license or permit or to
purchase, condemn, expropriate or recapture or to designate a purchaser of any
of the property of such Person; rights reserved to or vested in any
municipality or governmental, statutory or public authority to control or
regulate any property of such Person, or to use such property in a manner which
does not materially impair the use of such property for the purposes for which
it is held by such Person; any obligation or duties affecting the property of
such Person to any municipality or governmental, statutory or public authority
with respect to any franchise, grant, license or permit;

 

(p)           Liens arising under or expressly
permitted by the Loan Documents; and

 

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(q)           Liens existing on any asset of any
Person prior to the acquisition thereof by the Borrower or any Restricted
Subsidiary or existing on any asset of any Person that becomes a Restricted
Subsidiary of the Borrower after the Effective Date; provided
that (i) such Liens are not created in contemplation of or in connection
with such acquisition or such Person becoming a Restricted Subsidiary,
(ii) such Liens do not apply to any other assets of Borrower or any other
Subsidiary, and (iii) such Liens shall secure only those obligations which they
secure on the date of such acquisition or the date such Person becomes a
Restricted Subsidiary, as the case may be.

 

SECTION 8.3  Financial Condition.  The Borrower will not permit:

 

(a)           its Total Debt to Capitalization
Ratio, expressed as a percentage, to exceed 60% at any time; or

 

(b)           its Fixed Charge Coverage Ratio to be
equal to or less than 2.5 to 1.0 at the end of any Fiscal Quarter;

 

provided
that (i) the effects of FAS 133 and FAS 143 and any non-cash writedowns will be
disregarded for purposes of calculating the foregoing ratios and (ii) no
Default in respect of clauses (a) or (b)
shall be deemed to have occurred unless and until financial statements for such
Fiscal Quarter are available to the Borrower that reflect such Default.

 

SECTION 8.4  Investments.

 

SECTION 8.4.1  At any time when the Applicable Rating Level
is “Level I”, then the Borrower will not, and will not permit any of its
Restricted Subsidiaries to, make, incur or assume any Investment in any other
Person if, after giving effect thereto, a Default or an Event of Default shall
have occurred and be continuing or been caused thereby; provided, however,
that notwithstanding the foregoing, the Borrower and any Restricted Subsidiary
may make Investments in (i) Cash Equivalent Investments and (ii) Investments
committed to by the Borrower or such Restricted Subsidiary prior to the
occurrence of such Default or Event of Default.

 

SECTION 8.4.2 
At all times when the Applicable Rating Level is not “Level I”, the
Borrower will not, and will not permit any of its Restricted Subsidiaries to,
make, incur, assume or suffer to exist any Investment in any other Person,
except:

 

(a)           Investments not otherwise permitted
in this Section which exist on the Effective Date so long as such Investments
are not increased, extended or renewed;

 

(b)           Cash Equivalent Investments;

 

(c)           Investments by the Borrower in any of
its Subsidiaries (or any Person that becomes a Subsidiary as a result of such
Investment), or by any Subsidiary in the Borrower or any other Subsidiary,
whether or not existing on the date hereof (including the Borrower and Thaipo
Limited’s Guarantee of the bareboat charter and operating agreement relating to
the FPSO “Tantawan Explorer”);

 

64

 

(d)           if such Investment shall not result
in any violation of Regulation U, other equity Investments of a class
registered pursuant to Section 12 of the Securities Exchange Act of 1934 provided that the Borrower’s ownership
interest will not exceed 5% of the issuer’s outstanding shares entitled to
vote, unless such ownership interest is acquired pursuant to a merger agreement
between the Borrower and such issuer;

 

(e)           loans and advances in the ordinary
course of business and stock, obligations, securities or other assets received
in settlement of debts so created and owing to the Borrower or any Restricted
Subsidiary of the Borrower; or

 

(f)            Investments by the
Borrower in any of its Affiliates, whether or not existing on the date hereof, provided
such Investments in Affiliates do not exceed in the aggregate at any one time
outstanding $25,000,000;

 

provided,
however, that no Investment in
Subsidiaries or Affiliates of the Borrower otherwise permitted by the immediately
preceding clauses (c) and (f) and no Investment otherwise permitted by
the immediately preceding clause (d)
shall be permitted to be made if, immediately before or after giving effect
thereto, any Default shall have occurred and be continuing.

 

SECTION 8.5  Restricted Payments, etc.  On and at all times after the Effective Date,
the Borrower will not declare, pay or make any dividend or distribution (in
cash, property or obligations) on any shares of any class of capital stock (now
or hereafter outstanding) of the Borrower or on any warrants, options or other
rights with respect to any shares of any class of capital stock (now or
hereafter outstanding) of the Borrower (other than dividends or distributions
payable in its common stock or warrants to purchase its common stock or
splitups or reclassifications of its stock into additional or other shares of
its common stock) or apply, or permit any of its Restricted Subsidiaries to
apply, any of its funds, property or assets to the purchase, redemption,
sinking fund or other retirement of, or agree or permit any of its Restricted
Subsidiaries to purchase or redeem, any shares of any class of capital stock
(now or hereafter outstanding) of the Borrower, or warrants, options or other
rights with respect to any shares of any class of capital stock (now or
hereafter outstanding) of the Borrower, if, after giving effect thereto, a
Default or an Event of Default shall have occurred and be continuing or been
caused thereby; provided, that notwithstanding any restriction contained
in this Section, the Borrower may redeem any of its shares of capital stock in
exchange for, or out of the proceeds of the substantially concurrent sale of,
shares of capital stock, and any dividend otherwise permitted under the terms of
this Section on the date of such dividend’s declaration shall be payable
notwithstanding that on the date of payment, such dividend would not be
permitted under this Section; and provided, further, that Hybrid
Preferred Securities shall not be treated as capital stock of the Borrower for
purposes of this Section.

 

SECTION 8.6  Consolidation, Merger, etc.  The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, liquidate, wind up or dissolve,
consolidate with, or merge into or with, any other corporation, or purchase or
otherwise acquire all or substantially all the assets of any Person or of any
division of any Person except as set forth below and so long as the Borrower
(if the Borrower is a party thereto) is the surviving entity:

 

65

 

(a)           any Restricted Subsidiary may
liquidate or dissolve into, and may consolidate or merge with and into, the
Borrower or any other Restricted Subsidiary; and

 

(b)           B8/32 Partners may liquidate or
dissolve voluntarily into, and may merge with and into, the Borrower, any other
Restricted Subsidiary or any other Person; provided
that either (i) the Borrower’s equity interest in the surviving Person (in the
case of a dissolution into, or consolidation or merger with and into a Person
other than the Borrower or a Restricted Subsidiary) is not less than its equity
interest in B8/32 Partners immediately prior to such dissolution, consolidation
or merger or (ii) all of the Borrower’s pro rata share of the Borrowing Base
Properties in the event that availability under this Agreement is governed by
the Borrowing Base owned by B8/32 Partners, or the proceeds upon liquidation
thereof, become the property of the Borrower or any Restricted Subsidiary.

 

(c)           so long as no Default has occurred
and is continuing or would occur after giving effect thereto, the Borrower or
any Restricted Subsidiary may purchase all or substantially all of the assets
of any Person (other than the Borrower) or any division of any Person, or acquire
any Person (other than the Borrower) by merger.

 

SECTION 8.7  Modification of Certain Agreements.  The Borrower will not consent to any
amendment, supplement or other modification of any of the terms or provisions
contained in any document or instrument evidencing or governing any existing
Subordinated Indebtedness which (a) accelerates the date of or increases the
amount of any repayment or redemption required pursuant to such agreements,
prior to December 16, 2009, (b) contains covenants regarding the matters set
forth in, and that are materially more restrictive than, Section 8.3, (c) increases the rate of
interest or increases or provides for fees or other compensation, except, with
respect to such fees and other compensation, to the extent the same are usual
and customary for transactions of such type, or (d) results in subordination
terms materially less favorable to the Lenders as holders of the Notes, without
obtaining the prior approval of the Required Lenders.

 

SECTION 8.8  Transactions with Affiliates.  The Borrower will not, and will not permit
any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any
arrangement or contract with any of its Affiliates unless such arrangement or
contract, as of the date it was entered into, is fair and equitable to the
Borrower or such Subsidiary and is (as of such date) not of a sort which would
not be entered into by a prudent Person in the position of the Borrower or such
Subsidiary with, or which is on terms which are less favorable than are
obtainable from, any Person which is not one of its Affiliates; provided, that the foregoing provisions of
this Section shall not prohibit any payment permitted by Section 8.5 or in respect of any Hybrid
Preferred Securities or any transaction between or among the Borrower and its
Subsidiaries and other of its Subsidiaries.

 

SECTION 8.9  Negative Pledges, etc.  The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, enter into any agreement (i) prohibiting
the creation of any Lien upon any of its properties, revenues or assets,
whether now owned or hereafter acquired, (ii) restricting the ability of
such Restricted Subsidiary to pay dividends or make other distributions in
respect of such Subsidiary’s share of net profits to the Borrower,
(iii) restricting the ability of any Restricted Subsidiary to make
payments of principal or interest on any loan 

 

66

 

from the Borrower or any other
Subsidiary or (iv) restricting the ability of the Borrower to amend or
otherwise modify this Agreement or any other Loan Document, except for: (A)
this Agreement, any other Loan Document and, with respect to Liens, the
Subordinated Indebtedness and any agreement governing Capitalized Lease
Liabilities or other Indebtedness incurred to lease or finance acquisitions of
assets as to the assets so leased or financed, (B) any agreement of any Person
acquired by the Borrower or any Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which prohibition or
restriction is not applicable to any other Person, other than the Person and
the Subsidiaries of that Person, so acquired, (C) with respect to Liens, merger
agreements, stock purchase agreements, asset sale agreements and similar
agreements limiting the encumbrance of properties, revenues and assets pending
consummation of the subject transaction, (D) with respect to Liens on assets of
a partnership or joint venture that is such a Subsidiary, partnership or  joint venture agreement provisions consistent
with the past practices of the Borrower and its Subsidiaries and Affiliates,
(E) agreements that extend, renew or refinance or replace agreements
described in clauses (A) and (B) above, provided, that the restrictions contained
therein are not materially less favorable to the Lenders than those under or
pursuant to the agreements being so extended, renewed or refinanced or
replaced.

 

SECTION 8.10  Speculative Hedging.  The Borrower will not, and will not permit
any of its Subsidiaries to, enter into (i) Commodity Hedging Contracts or
Hedging Agreements which hedge or mitigate risks to which the Borrower or any
Restricted Subsidiary does not have actual exposure or (ii) Commodity Hedging
Contracts or Hedging Agreements with counterparties whose senior, unsecured,
long-term indebtedness for borrowed money which is not guaranteed by any other
Person or subject to any other credit enhancement is rated at the time such
Commodity Hedging Contract or Hedging Agreement is entered into less than “BBB-”
by S&P or “Baa3” by Moody’s.

 

ARTICLE IX

EVENTS OF DEFAULT

 

SECTION 9.1  Listing of Events of Default.  Each of the following events or occurrences
described in this Section 9.1 shall
constitute an “Event of Default”.

 

SECTION 9.1.1  Non-Payment of Obligations.  The Borrower shall default in the payment or
prepayment, including any mandatory prepayment pursuant to Section 3.1.2., when due of any
principal of any Loan or of any reimbursement obligation with respect to any
Letter of Credit, or the Borrower shall default (and such default shall
continue unremedied for a period of five (5) days) in the payment when due of
interest on any Loan, any Commitment Fee, any Upfront Fee, or other payment
obligation provided for in this Agreement or any other Loan Document.

 

SECTION 9.1.2  Breach of Warranty.  Any representation or warranty of the
Borrower or any Subsidiary made or deemed to be made hereunder or in any other
Loan Document or in any other writing or certificate furnished by or on behalf
of the Borrower (including any certificate delivered pursuant to Article VII) to the Administrative Agent or
any Lender for the purposes of or in connection with this Agreement or any such
other Loan 

 

67

 

Document (including any
certificates delivered pursuant to Article V)
is incorrect when made in any material respect.

 

SECTION 9.1.3  Non-Performance of Certain Covenants and Obligations.  The Borrower shall default in the due
performance and observance of any of its obligations under Article VIII (excluding Section 8.3) and, with respect to Section 8.2, 8.4
or 8.5, such default shall continue
unremedied for a period of five (5) Business Days after notice thereof shall
have been given to the Borrower by the Administrative Agent.

 

SECTION 9.1.4  Non-Performance of Other Covenants and Obligations.  The Borrower or any Subsidiary shall default
in the due performance and observance of any other covenant or agreement
contained herein, including Section 8.3,
or in any other Loan Document, and such default shall continue unremedied for a
period of 30 days after notice thereof shall have been given to the Borrower by
the Administrative Agent.

 

SECTION 9.1.5  Default on Other Indebtedness.  The Borrower or any Restricted Subsidiary
shall default in the payment when due or within any applicable grace
period,  whether by acceleration or
otherwise, of any of its Indebtedness (other than Indebtedness described in Section 9.1.1 or Non-Recourse
Indebtedness) in excess in principal amount of $25,000,000, or any default
shall occur in the performance or observance of any other obligation or
condition with respect to any such Indebtedness if the effect of such default
is to accelerate the maturity of such Indebtedness or to permit the holder or
holders thereof, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed maturity.

 

SECTION 9.1.6  Judgments. 
Any judgments or orders for the payment of money which are, in
aggregate, in excess of $25,000,000 at any one time outstanding shall be
rendered against the Borrower or any of its Restricted Subsidiaries and the
same shall remain undischarged and either

 

(a)           enforcement proceedings shall have
been commenced in respect of such judgments or orders; or

 

(b)           there shall be any period of 30
consecutive days during which enforcement of such judgments or orders is not
stayed, by reason of a pending appeal or otherwise.

 

SECTION 9.1.7  Pension Plans.  Any of the following events shall occur with
respect to any Pension Plan:

 

(a)           the institution of any steps by the
Borrower, any member of its Controlled Group or any other Person to terminate a
Pension Plan if, as a result of such termination, the Borrower or any such
member could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension Plan, in
excess of $25,000,000; or

 

(b)           a contribution failure occurs with
respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA.

 

68

 

SECTION 9.1.8  Control of the Borrower.  Any Change in Control shall occur.

 

SECTION 9.1.9  Bankruptcy, Insolvency, etc.  The Borrower or any of its Significant
Subsidiaries shall

 

(a)           generally fail to pay, or admit in
writing its inability or unwillingness to pay, its debts as they become due;

 

(b)           apply for, consent to, or acquiesce
in, the appointment of a trustee, receiver, sequestrator or other custodian for
the Borrower or any of its Significant Subsidiaries or any property of any
thereof, or make a general assignment for the benefit of creditors;

 

(c)           in the absence of such application,
consent or acquiescence, permit or suffer to exist the appointment of a
trustee, receiver, sequestrator or other custodian for the Borrower or any of
its Significant Subsidiaries or for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other custodian shall not
be discharged within 60 days;

 

(d)           permit or suffer to exist the
commencement of any bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding (except the voluntary dissolution, not
under any bankruptcy or insolvency law, of a Significant Subsidiary pursuant to
Section 8.6), in respect of the
Borrower or any of its Significant Subsidiaries, and, if any such case or
proceeding is not commenced by the Borrower or such Subsidiary, such case or
proceeding shall be consented to or acquiesced in by the Borrower or such
Subsidiary or shall result in the entry of an order for relief or shall remain
for 60 days undismissed; or

 

(e)           take any corporate, or in the case of
a Significant Subsidiary organized as a partner, partnership action
authorizing, or in furtherance of, any of the foregoing.

 

SECTION 9.2  Action if Bankruptcy.  If any Event of Default described in clauses
(a) through (d) of Section 9.1.9 shall occur with respect to
the Borrower, the outstanding principal amount of all outstanding Loans and all
other Obligations shall automatically be and become immediately due and
payable, without notice or demand.

 

SECTION 9.3 
Action if Other Event of Default. 
If any Event of Default (other than any Event of Default described in clauses
(a) through (d) of Section 9.1.9 with respect to the
Borrower) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by notice to the Borrower declare the outstanding principal
amount of the Loans and other payment Obligations to be due and payable,
whereupon the full unpaid amount of such Loans and other payment Obligations
shall be and become immediately due and payable, without further notice, demand
or presentment.

 

69

 

ARTICLE X

THE AGENTS

 

SECTION 10.1  Actions.  Each Agent, Lender and Issuing Bank hereby
appoints Bank of Montreal as Administrative Agent, Bank of America, N.A.,
Toronto Dominion (Texas) LLC and BNP Paribas as Co-Syndication Agents, Wachovia
Bank, National Association as Documentation Agent, Citibank, N.A. as a Managing
Agent, and The Bank of Nova Scotia as a Managing Agent under and for purposes
of this Agreement, the Notes and each other Loan Document.  Each Lender authorizes each of the Agents to
act on behalf of such Lender and to exercise such powers as are delegated to
such Agent under this Agreement, the Notes and each other Loan Document and, in
the absence of other written instructions from the Required Lenders received
from time to time by the Agents (with respect to which each Agent agrees that
it will comply, except as otherwise provided in this Section or as otherwise
advised by counsel), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of such Agent by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto.  Each Lender hereby indemnifies (which
indemnity shall survive any termination of this Agreement) each of the Agents, pro  rata
according to such Lender’s Percentage, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any kind
or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, the Agents in any way relating to or arising out of this
Agreement, the Notes and any other Loan Document, including reasonable
attorneys’ fees, and as to which any Agent is not reimbursed by the Borrower; provided, however,
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, claims, costs or expenses which are
determined by a court of competent jurisdiction in a final proceeding to have
resulted solely from such Agent’s gross negligence or willful misconduct.  No Agent shall be required to take any action
hereunder, under the Notes or under any other Loan Document, or to prosecute or
defend any suit in respect of this Agreement, the Notes or any other Loan
Document, unless it is indemnified hereunder to its satisfaction.  If any indemnity in favor of any Agent shall
be or become, in such Agent’s determination, inadequate, such Agent may call
for additional indemnification from the Lenders and cease to do the acts
indemnified against hereunder until such additional indemnity is given.

 

SECTION 10.2  Funding Reliance, etc.  Unless the Administrative Agent shall have
been notified by telephone, confirmed in writing, by any Lender by 5:00 p.m.,
Central Time, on the day prior to a Borrowing in the case of LIBOR Loans, or by
11:00 a.m., Central Time, on the day of any Borrowing in the case of Prime Rate
Loans, that such Lender will not make available the amount which would
constitute its Percentage of such Borrowing on the date specified therefor, the
Administrative Agent may assume that such Lender has made such amount available
to the Administrative Agent and, in reliance upon such assumption, make
available to the Borrower a corresponding amount.  If and to the extent that such Lender shall
not have made such amount available to the Administrative Agent, such Lender
and the Borrower severally agree to repay the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon, for each day
from the date the Administrative Agent made such amount available to the
Borrower to the date such amount is repaid to the Administrative Agent, at the
Federal Funds Rate at that time.

 

70

 

SECTION 10.3  Exculpation.  No Agent nor any of its directors, officers,
employees or agents shall be liable to any Lender for any action taken or
omitted to be taken by it under this Agreement or any other Loan Document, or
in connection herewith or therewith, except for its own willful misconduct or
gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution
of this Agreement or any other Loan Document, nor the validity, genuineness,
enforceability, existence, value or sufficiency of any collateral nor to make
any inquiry respecting the performance by the Borrower of its obligations
hereunder or under any other Loan Document. 
Each Agent shall be entitled to rely upon advice of counsel concerning
legal matters and upon any notice, consent, certificate, statement or writing
which such Agent believes to be genuine and to have been presented by a proper
Person.

 

SECTION 10.4  Successor to Administrative Agent.  The Administrative Agent may resign as such
at any time upon at least 30 days’ prior notice to the Borrower, the other
Agents and all Lenders.  If the
Administrative Agent at any time shall resign, the Required Lenders, with the
consent of the Borrower, may appoint another Lender or a commercial banking
institution organized under the laws of the U.S. (or any state thereof) or a
U.S. branch or agency of a commercial banking institution, and having a
combined capital and surplus of at least $500,000,000 as a successor
Administrative Agent which shall thereupon become the Administrative Agent
hereunder.  If no successor
Administrative Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent’s giving notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be one of the Lenders or a commercial banking
institution organized under the laws of the U.S. (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, and having a
combined capital and surplus of at least $500,000,000.  Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations under this Agreement.  After any retiring Administrative Agent’s
resignation hereunder as the Administrative Agent, the provisions of

 

(a)           this Article
X shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was the Administrative Agent under this Agreement; and

 

(b)           Section
11.3 shall continue to inure to its benefit.

 

 

SECTION 10.5  Loans by the Agents.  Each of the Agents shall have the same rights
and powers with respect to (x) the Loans made by it or any of its Affiliates,
and (y) the Notes held by it or any of its Affiliates as any other Lender and
may exercise the same as if it were not an Agent.

 

SECTION 10.6  Credit Decisions.  Each Lender acknowledges that it has,
independently of any Agent and each other Lender, and based on such Lender’s
review of the financial information of the Borrower and such other documents,
information and investigations as such 

 

71

 

Lender has deemed
appropriate, made its own credit decision to extend its Commitments.  Each Lender also acknowledges that it will,
independently of any Agent and each other Lender, and based on such other
documents, information and investigations as it shall deem appropriate at any
time, continue to make its own credit decisions as to exercising or not
exercising from time to time any rights and privileges available to it under
this Agreement or any other Loan Document.

 

SECTION 10.7  Copies, etc.  The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by the Borrower pursuant to the terms of this
Agreement (unless concurrently delivered to the Lenders by the Borrower).  The Administrative Agent will distribute to
each Lender each document or instrument received for its account and copies of
all other communications received by the Administrative Agent from the Borrower
for distribution to the Lenders by the Administrative Agent.

 

ARTICLE XI

MISCELLANEOUS PROVISIONS

 

SECTION 11.1  Waivers, Amendments, etc.  The provisions of this Agreement and of each
other Loan Document may from time to time be amended, modified or waived, if
such amendment, modification or waiver is in writing and consented to by the
Borrower and the Required Lenders; provided,
however, that no such amendment,
modification or waiver which would:

 

(a)           modify any requirement hereunder that
any particular action be taken by all the Lenders, the Required Lenders or the
Required Borrowing Base Lenders shall be effective unless consented to by each
Lender;

 

(b)           modify this Section 11.1, change the definition of “Required Lenders”, “Required Borrowing Base Lenders” or “Restricted Subsidiary”, other than as
permitted under Section 2.8, eliminate the Borrowing Base, increase the
Commitment Amount or the Percentage of any Lender, change the definition of “Prime Rate” or “LIBOR”
to reduce interest or the Applicable Margin payable by the Borrower, reduce any
fees described in Article III, release
any Subsidiary Guaranty required by Section 7.9 unless Section 7.9
no longer requires such Subsidiary Guaranty, or extend any Commitment
Termination Date, without the consent of each Lender;

 

(c)           reduce the amount of any mandatory
prepayment (whether pursuant to Section 3.1.2
or otherwise) or of any interest payment due to any Lender on any Loan (or
reduce the principal amount of or rate of interest on any Loan) shall be made
without the consent of the applicable Lender; or

 

(d)           affect adversely the interests,
rights or obligations of the Administrative Agent without consent of the
Administrative Agent.

 

No failure or delay on the part of any Agent or any
Lender in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall 

 

72

 

any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right.  No notice to or
demand on the Borrower in any case shall entitle it to any notice or demand in
similar or other circumstances.  No
waiver or approval by any Agent or any Lender under this Agreement or any other
Loan Document shall, except as may be otherwise stated in such waiver or
approval, be applicable to subsequent transactions.  No waiver or approval hereunder shall require
any similar or dissimilar waiver or approval thereafter to be granted
hereunder.

 

SECTION 11.2  Notices.  All notices and other communications provided
to any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party
at its address or facsimile number designated as such in its Administrative
Questionnaire or set forth in the Assignment and Assumption Agreement or at
such other address or facsimile number as may be designated by such party in a
notice to the other parties in accordance with this Section.  Any notice, if mailed and properly addressed
with postage prepaid, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given when transmitted and, in the
case of facsimiles, transmission confirmed.

 

SECTION 11.3  Payment of Costs and Expenses.  The Borrower agrees to promptly pay all
reasonable expenses of the Administrative Agent (including the reasonable fees
and out-of-pocket expenses of counsel to the Administrative Agent) in
connection with:

 

(a)           the negotiation, preparation,
execution and delivery of this Agreement and of each other Loan Document,
including schedules and exhibits, and any amendments, waivers, consents,
supplements or other modifications to this Agreement or any other Loan Document
as may from time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and

 

(b)           the preparation and review of the
form of any document or instrument relevant to this Agreement or any other Loan
Document.

 

Without duplication of any payments made pursuant to Section 4.07(a), the Borrower further agrees
to pay, and to save each Agent and the Lenders harmless from all liability for,
Other Taxes which may be payable in connection with the execution or delivery
of this Agreement, the Borrowings, or the issuance of the Notes or any other
Loan Documents.  The Borrower also agrees
to reimburse the Administrative Agent and each Lender upon demand for all
reasonable out-of-pocket expenses (including the reasonable fees and
out-of-pocket expenses of counsel to the Administrative Agent and of local
counsel, if any, who may, following reasonable notice to the Borrower, be
retained by counsel to the Administrative Agent) incurred by the Administrative
Agent or such Lender in connection with the enforcement of any Obligations
after the occurrence and during the continuation of an Event of Default.

 

SECTION 11.4  Indemnification.  In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Administrative Agent,
each other Agent, each Lender and each of their respective officers, directors,
employees and agents (collectively, the “Indemnified
Parties”) free and harmless from and against any and all actions,
causes of action, suits, losses, 

 

73

 

costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of whether
any such Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys’ fees and disbursements
(collectively, the “Indemnified Liabilities”),
incurred by the Indemnified Parties or any of them as a result of, or arising
out of, or relating to

 

(a)           any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of any
Loan or Letter of Credit;

 

(b)           the entering into and performance of
this Agreement and any other Loan Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Borrower as the result of
any determination by the Required Lenders pursuant to Article V not to fund any Borrowing);

 

(c)           any investigation, litigation or
proceeding related to any acquisition or proposed acquisition by the Borrower
or any of its Subsidiaries of any portion of the stock or assets of any Person,
whether or not the Administrative Agent or such Lender is party thereto;

 

(d)           any investigation, litigation or
proceeding related to any environmental cleanup, audit, compliance or other
matter relating to the protection of the environment or the Release by the
Borrower or any of its Subsidiaries of any Hazardous Material; or

 

(e)           the presence on or under, or the
escape, seepage, leakage, spillage, discharge, emission or release from, any
real property owned or operated by the Borrower or any Subsidiary thereof of
any Hazardous Material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the Borrower or such
Subsidiary,

 

except for any such Indemnified Liabilities arising
for the account of a particular Indemnified Party by reason of the activities
of the Indemnified Party on the property of the Borrower conducted subsequent
to a foreclosure on such property by the Lenders or by reason of the relevant
Indemnified Party’s gross negligence or willful misconduct or breach of this
Agreement, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.  The Borrower shall be obligated to indemnify
the Indemnified Parties for all Indemnified Liabilities subject to and pursuant
to the foregoing provisions, regardless of whether the Borrower or any of its
Subsidiaries had knowledge of the facts and circumstances giving rise to such
Indemnified Liability.

 

Promptly after the receipt by an Indemnified Party of
notice of the commencement of any action, such Indemnified Party will, if a
claim for indemnity in respect thereof is to be made against the Borrower,
notify the Borrower of the commencement thereof.  If the Borrower will have acknowledged in
writing that this Section 11.4
will cover any Indemnified Liabilities in any such action, suit, proceeding or
investigation, and, in the sole determination of the Indemnified 

 

74

 

Party, the Borrower has the
financial ability to pay such Indemnified Liabilities, then the Borrower will
have the right, on behalf of such Indemnified Party, but at the Borrower’s
expense, to defend such action, suit or proceeding, or participate in such
investigation, with counsel selected by it, and will have sole discretion as to
whether to litigate, appeal or settle.

 

Notwithstanding the foregoing, nothing in this Section 11.4 is intended to expand upon the
obligations of the Borrower under Article IV
in respect of Additional Costs, funding losses, increased capital costs or
Taxes, which obligations are created under and subject to the terms and
conditions of the relevant Sections of that Article.

 

SECTION 11.5  Survival.  The obligations of the Borrower under Sections 4.3, 4.4,
4.5, 4.7,
11.3 and 11.4,
and the obligations of the Lenders under Section
10.1 and of the Agents and the Lenders under Section 11.12, shall in each case
survive any termination of this Agreement. 
The representations and warranties made by the Borrower in this
Agreement and in each other Loan Document shall survive the execution and
delivery of this Agreement and each such other Loan Document.

 

SECTION 11.6  Severability.  Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.

 

SECTION 11.7  Headings.  The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.

 

SECTION 11.8  Execution in Counterparts, Effectiveness,
etc.  This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement.  This Agreement shall become
effective when counterparts hereof executed on behalf of the Borrower and each
Lender (or notice thereof satisfactory to the Administrative Agent) shall have
been received by the Administrative Agent (or Administrative Agent’s counsel)
and notice thereof shall have been given by the Administrative Agent to the
Borrower and each Lender.

 

SECTION 11.9  Governing
Law; Entire Agreement.  THIS AGREEMENT,
THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT
MADE UNDER, GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

 

SECTION 11.10  Successors
and Assigns.  This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided,
however, that:

 

(a)           the Borrower may not assign or
transfer its rights or obligations hereunder without the prior written consent
of the Administrative Agent and all Lenders (and any

 

75

 

attempted assignment or
transfer by the Borrower without such consent shall be null and void); and

 

(b)           the rights of sale, assignment and
transfer of the Lenders are subject to Section
11.11.

 

(c)           Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the
parties hereto, their respective successors and assigns permitted hereby and,
to the extent expressly contemplated hereby, the Affiliates of each of the
Administrative Agent and the Lenders) any legal or equitable right, remedy or
claim under or by reason of this Agreement.

 

SECTION 11.11  Assignments and Participations.

 

(a)           Any Lender may assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment, Loans and LC Exposure
at the time owing to it); provided that
(i) except in the case of an assignment of the entire remaining amount of the
assigning Lender’s Commitment, Loans and LC Exposure or in the case of an
assignment to a Lender or an Affiliate of a Lender or an Approved Fund with
respect to a Lender, the aggregate amount of the Commitment (which for this
purpose includes Loans and LC Exposure outstanding thereunder) of the assigning
Lender subject to each such assignment (determined as of the date the
Assignment and Assumption Agreement with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000 and
increments of $1,000,000, unless each of the Administrative Agent and, so long
as no Event of Default has occurred and is continuing, the Borrower otherwise
consent (each such consent not to be unreasonably withheld or delayed), (ii)
each partial assignment shall be made as an assignment of a proportionate part
of all the assigning Lender’s rights and obligations under this Agreement and
(iii) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption Agreement, together with a
processing and recordation fee of $3,500, and the Eligible Assignee, if it
shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire.  Subject to
acceptance and recording thereof by the Administrative Agent pursuant to paragraph (b) of this Section, from and after
the effective date specified in each Assignment and Assumption Agreement, the
Eligible Assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption Agreement, have the rights
and obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption Agreement, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption Agreement covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 4.3, 4.4, 4.5,
4.7, 11.3
and 11.4).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a 

 

76

 

participation in such
rights and obligations in accordance with paragraph (c)
of this Section.

 

(b)           The Administrative Agent shall
maintain at one of its offices in Chicago, Illinois a copy of each Assignment
and Assumption Agreement delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments of, and principal
amount of the Loans and LC Exposure owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”).  The entries in the Register shall be
conclusive, absent manifest error, and the Borrower, the Administrative Agent
and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Borrower and any Lender, at any reasonable time and from time
to time upon reasonable prior notice.

 

(c)           Any Lender may, without the consent
of, or notice to, the Borrower or the Administrative Agent, sell participations
to one or more banks or other entities (a “Participant”)
in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans or LC
Exposure owing to it); provided that
(i) such Lender’s obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (iii) the Borrower, the Administrative
Agent and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this
Agreement.  Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any 
provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, modification or
waiver with respect to Sections 11.1(b)
or (c) that affects such
Participant.  Subject to paragraph (d) of this Section, the Borrower
agrees that each Participant shall be entitled to the benefits of Sections 4.3, 4.4,
4.5 and 4.7
to the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to paragraph (b) of this Section.

 

(d)           A Participant shall not be entitled
to receive any greater payment under Section 4.3,
4.4, 4.5
or 4.7 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower’s prior written consent. 
A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 4.7
unless the Borrower is notified of the participation sold to such Participant
and such Participant agrees, for the benefit of the Borrower, to comply with Section 4.7 as though it were a Lender.

 

(e)           Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender;

 

77

 

provided
that no such pledge or assignment of a security interest shall release a Lender
from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

 

SECTION 11.12  Confidentiality.  The Agents and the Lenders shall hold all
non-public information obtained pursuant to the requirements of this Agreement
as follows:

 

(a)           may not disclose or discuss such
information with any other persons except that any Person may disclose such
information (i) to any bank regulatory authority at the request of such
authority or in connection with an examination of such Person by any such
authority, (ii) pursuant to subpoena, other court process or as otherwise
required by law, (iii) at the express direction of any other agency of any
State of the United States, (iv) to such Person’s independent auditors,
counsel or independent petroleum engineers retained by such Person or
(v) to any Assignee Lender or proposed Assignee Lender of all or any
portion of any Lender’s interests, rights and obligations under this Agreement
and any participant or proposed participant in all or a portion of a Lender’s
obligations under the Agreement, in each case, only if such Assignee Lender or
proposed Assignee Lender or participant or proposed participant shall execute
and deliver to the Borrower prior to any disclosure of information or
conclusions based on such information a confidentiality letter reasonably
acceptable to the Borrower and the Administrative Agent;

 

(b)           the obligation of confidentiality
shall not apply to such portions of the information which any such Person
establishes (i) are in the public domain, (ii) hereafter become part
of the public domain without breach of this Section 11.12
or any confidentiality letter, (iii) are previously known from some source
other than the Borrower, (iv) are developed without using the Borrower’s
information or (v) are hereafter obtained from a third party who owes no
obligation of confidence to the Borrower with respect to such information;

 

(c)           unless prohibited by applicable law
or court order, each such Person will promptly notify the Borrower (in advance,
if practicable) if it is required to disclose any such information or
conclusions pursuant to clause (a)(ii)
above;

 

(d)           each such Person agrees that it will
not use any information obtained, inspected or reviewed by it in connection
with the Agreement for the purpose of bidding, or in any manner advising or
assisting in the bidding (including advising or assisting in advising in the
nomination of tracts to be leased), on future lease sales of tracts in offset
tracts or in drainage tracts to the Borrower’s interests or for the purpose of
purchasing, selling, offering to purchase or offering to sell, directly or
indirectly, any equity securities of the Borrower (or assisting or advising
others in connection therewith);

 

(e)           all obligations of each such Person
pursuant to this Section 11.12
shall terminate on the second anniversary of the date on which all Obligations
of the Borrower to such Person under the Agreement and the Notes have been
fulfilled;

 

78

 

(f)            each such Person agrees that it
shall be responsible for the compliance with this Agreement by all its officers
and employees to the same extent as if they were parties hereto; and

 

(g)           notwithstanding anything to the
contrary in this Agreement, this Section 11.12
is in addition to and shall not supercede any existing confidentiality
agreements between the Borrower and any other party to this Agreement, provided that such existing confidentiality
agreements, if any, shall not be a part of this Agreement.

 

SECTION 11.13  Other Transactions.  Nothing contained herein shall preclude the
Agents or any Lender from engaging in any transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Borrower or
any of its Subsidiaries or Affiliates in which the Borrower or such Subsidiary
or Affiliate is not restricted hereby from engaging with any other Person.

 

SECTION 11.14  USA
Patriot Act Notice.  Each Lender and
the Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies the Borrower that pursuant to the requirements of the USA Patriot Act,
it is required to obtain, verify and record information that identifies the
Borrower, which information includes the name and address of the Borrower and
other information that will allow such Lender or the Administrative Agent, as
applicable, to identify the Borrower in accordance with the USA Patriot Act.

 

SECTION 11.15  NO ORAL AGREEMENTS.  THIS WRITTEN LOAN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.

 

[SIGNATURES BEGIN
ON FOLLOWING PAGE]

 

79

 

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

 

	
   

  	
  POGO PRODUCING
  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  James
  P. Ulm, II

  
	
   

  	
  Title:

  	
  Senior
  Vice President and Chief

  Financial Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  5 Greenway
  Plaza, Suite 2700

  
	
   

  	
   

  	
  Houston,
  Texas 77046-0504

  
	
   

  	
   

  
	
   

  	
  Attention:

  	
  James P.
  Ulm, II

  
	
   

  	
  Telephone
  No.:

  	
  (713)
  297-5152

  
	
   

  	
  Telecopy
  No.:

  	
  (713)
  297-4954

  
							

 

[Signature Page - Pogo Producing

Company Credit Agreement

 

S -1

 

	
   

  	
  BANK OF
  MONTREAL, acting through its U.S.

  branches and agencies, including initially its Chicago, Illinois branch, as
  Administrative Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 2

 

	
   

  	
  BANK OF
  AMERICA, N.A., as a Co-Syndication

  Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 3

 

	
   

  	
  TORONTO
  DOMINION (TEXAS) LLC, as a

  Co-Syndication Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 4

 

	
   

  	
  BNP PARIBAS,
  as a Co-Syndication Agent and as

  a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 5

 

	
   

  	
  WACHOVIA
  BANK, NATIONAL

  ASSOCIATION, as Documentation Agent and as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 6

 

	
   

  	
  CITIBANK,
  N.A., as a Managing Agent and as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 7

 

	
   

  	
  THE BANK
  OF NOVA SCOTIA, as a Managing

  Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  SCOTIABANC
  INC., as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 8

 

	
   

  	
  THE BANK
  OF NEW YORK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 9

 

	
   

  	
  FORTIS
  CAPITAL CORP., as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 10

 

	
   

  	
  UFJ BANK,
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Clyde
  L. Redford

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  
					

 

S - 11

 

	
   

  	
  UNION
  BANK OF CALIFORNIA, N.A., as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 12

 

	
   

  	
  THE
  ROYAL BANK OF SCOTLAND plc, as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 13

 

	
   

  	
  SOCIETE
  GENERALE, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 14

 

	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION, as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 15

 

	
   

  	
  COMERICA
  BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 16

 

	
   

  	
  COMPASS
  BANK, as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 17

 

	
   

  	
  NATEXIS
  BANQUES POPULAIRES, as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 18

 

	
   

  	
  SOUTHWEST
  BANK OF TEXAS, N.A., as a

  Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

S - 19

SCHEDULE I

 

DISCLOSURE SCHEDULE

 

ITEM 6.7                Litigation.

 

NONE.

 

ITEM 6.8                Existing Subsidiaries and Affiliates.

 

	
  Name and Type of Entity

  	
   

  	
  Ownership

  Percentage

  (Direct and

  Indirect)

  	
   

  	
  Jurisdiction of

  Organization

  	
   

  	
  Restricted/

  Unrestricted Subsidiary

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Arch Petroleum Inc. (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Restricted
  Subsidiary

  	
   

  
	
  B8/32 Partners Ltd. (limited company)

  	
   

  	
  46.34

  	
  %

  	
  Thailand

  	
   

  	
  Restricted
  Subsidiary

  	
   

  
	
  Countertrey, Inc. (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  North Central Oil Corporation (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Restricted
  Subsidiary

  	
   

  
	
  Pogo Denmark ApS (limited liability
  company)

  	
   

  	
  100

  	
  %

  	
  Denmark

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Pogo Hungary Oil and Gas Exploration and
  Exploitation Limited Liability Company (limited liability company)

  	
   

  	
  100

  	
  %

  	
  Hungary

  	
   

  	
  Restricted
  Subsidiary

  	
   

  
	
  Pogo New Zealand (unlimited company)

  	
   

  	
  100

  	
  %

  	
  New Zealand

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Pogo North Sea Limited (corporation)

  	
   

  	
  100

  	
  %

  	
  United
  Kingdom

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Pogo Offshore Pipeline Company (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Pogo Onshore Pipeline Company (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Pogo Overseas Production B.V. (private
  company with limited liability)

  	
   

  	
  100

  	
  %

  	
  Netherlands

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Pogo Services and Technology Corporation
  (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Ponzea B.V. (private company)

  	
   

  	
  100

  	
  %

  	
  Netherlands

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Sampack, Inc. (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Tantawan Services, LLC (limited liability
  company)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Texakoma Oil & Gas Corporation
  (corporation)

  	
   

  	
  100

  	
  %

  	
  Texas

  	
   

  	
  Restricted
  Subsidiary

  	
   

  
	
  Texakoma Partners, Inc. (corporation)

  	
   

  	
  100

  	
  %

  	
  Texas

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Thailand Finance Company (corporation)

  	
   

  	
  100

  	
  %

  	
  Delaware

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  
	
  Thaipo Limited (limited company)

  	
   

  	
  100

  	
  %

  	
  Thailand

  	
   

  	
  Restricted
  Subsidiary

  	
   

  
	
  Van Apeldoorn Crystal Holding B.V. (private
  company with limited liability)

  	
   

  	
  100

  	
  %

  	
  Netherlands

  	
   

  	
  Unrestricted
  Subsidiary

  	
   

  

 

ITEM 6.12              Environmental Matters.

 

NONE.

 

1

 

ITEM 8.2                Existing Liens.

 

NONE.

 

2

 

SCHEDULE 2.1

 

COMMITMENTS

 

	
  Lender

  	
   

  	
  Commitments

  	
   

  	
  Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bank of Montreal

  	
   

  	
  $

  	
  60,000,000

  	
   

  	
  8.0000000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  60,000,000

  	
   

  	
  8.0000000000

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Toronto Dominion (Texas) LLC

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  7.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BNP Paribas

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  7.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Wachovia Bank, National Association

  	
   

  	
  $

  	
  55,000,000

  	
   

  	
  7.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Citibank, N.A.

  	
   

  	
  $

  	
  50,000,000

  	
   

  	
  6.6666666667

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Bank of Nova Scotia

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Scotiabanc Inc.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Bank of New York

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  5.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fortis Capital Corp.

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  5.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UFJ Bank

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  5.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Union Bank of California, N.A.

  	
   

  	
  $

  	
  40,000,000

  	
   

  	
  5.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Royal Bank of Scotland plc

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  4.6666666667

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Société Générale

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  4.6666666667

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  U.S. Bank National Association

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  4.6666666667

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Comerica Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Compass Bank

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Natexis Banques Populaires

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Southwest Bank of Texas, N.A.

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  3.3333333333

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  $

  	
  750,000,000

  	
   

  	
  100

  	
  %

  

 

1

 

EXHIBIT A

 

[Form of]

 

NOTE

 

	
  $______________________________

  	
   

  	
  December 16, 2004

  

 

FOR VALUE RECEIVED, POGO PRODUCING COMPANY, a
Delaware corporation (the “Borrower”),
hereby promises to pay to the order of                               
(the “Lender”), at the Principal Office
of BANK OF MONTREAL, acting through its
Chicago, Illinois branch as the administrative agent (the “Administrative Agent”) for the Lenders, at
115 South LaSalle Street, Chicago, Illinois 60603, the principal sum of                        
Dollars ($                       )
(or such lesser amount as shall equal the aggregate unpaid principal amount of
the Loans made by the Lender to the Borrower under the Credit Agreement, as
hereinafter defined), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
each such Loan, at such office, in like money and funds, for the period commencing
on the date of such Loan until such Loan shall be paid in full, at the rates
per annum and on the dates provided in the Credit Agreement.

 

The date, amount, Type, interest rate, Interest Period
and maturity of each Loan made by the Lender to the Borrower, and each payment
made on account of the principal thereof, shall be recorded by the Lender on
its books and, prior to any transfer of this Note, endorsed by the Lender on
the schedules attached hereto or any continuation thereof.

 

This Note is one of the Notes referred to in the
Credit Agreement dated as of December 16, 2004 among the Borrower, the
Administrative Agent, and the Lenders and other Agents which are or become
parties thereto (including the Lender), (as the same may be amended or supplemented
from time to time, the “Credit Agreement”),
and evidences Loans made by the Lender thereunder. Capitalized terms used in
this Note have the respective meanings assigned to them in the Credit
Agreement.

 

This Note is issued pursuant to the Credit Agreement
and is entitled to the benefits provided for in the Credit Agreement and the
other Loan Documents. The Credit Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events, for prepayments of
Loans upon the terms and conditions specified therein and other provisions
relevant to this Note.

 

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

 

	
   

  	
  POGO
  PRODUCING COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

1

 

LOANS AND PRINCIPAL PAYMENTS

 

 

	
  Amount of Loan Made

  	
   

  	
  Interest

  Period

  (if

  applicable)

  	
   

  	
  Amount of

  Principal Repaid

  	
   

  	
  Unpaid Principal Balance

  	
   

  	
  Notation Made By

  	
   

  
	
  Prime Rate

  	
   

  	
  LIBOR

  	
   

  	
  Prime Rate

  	
   

  	
  LIBOR

  	
   

  	
  Prime Rate

  	
   

  	
  LIBOR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2

 

EXHIBIT B

 

BORROWING REQUEST

 

Bank of Montreal, as Administrative Agent

700 Louisiana Street, Suite 4400

Houston, Texas  77002

Attention:                                               

 

Pogo Producing Company

 

Gentlemen and Ladies:

 

This Borrowing Request is delivered to you pursuant to
Section 2.5 of that certain Credit Agreement, dated as of December 16,
2004 (together with all amendments, if any, from time to time made thereto, the
“Credit Agreement”), among POGO
PRODUCING COMPANY, a Delaware corporation (the “Borrower”),
BANK OF MONTREAL, acting through its Chicago, Illinois branch, as
administrative agent (the “Administrative Agent”)
for the Lenders, and the Lenders and other Agents which are or become parties
thereto.  Unless otherwise defined herein
or the context otherwise requires, terms used herein have the meanings provided
in the Credit Agreement.

 

The Borrower hereby requests that Revolving Loans be
made in the aggregate principal amount of $                  
on                    ,
200      as [LIBOR Loans having an Interest Period of      
days] [Prime Rate Loans].

 

The Borrower hereby certifies and warrants that on the
date of this Borrowing Request and on the date of the Borrowing requested
herein (after giving effect to such Borrowing, including the application of the
proceeds thereof) the following statements shall be true and correct on both
such dates:

 

(a)           the representations and warranties
set forth in Article VI of the Credit Agreement are true and correct in all
material respects with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and warranties
were true and correct in all material respects as of such earlier date);

 

(b)           the aggregate Credit Exposures
outstanding will not exceed (i) in the event that availability under this
Agreement is governed by the Borrowing Base, the lesser of (A) the Commitment
Amount and (B) the Applicable Borrowing Base then in effect or (ii) otherwise,
the Commitment Amount; and

 

(c)           No Default had then occurred or has
occurred and is continuing.

 

1

 

The Borrower agrees that if prior to the time of the
Borrowing requested hereby any matter certified to herein by it will not be
true and correct at such time as if then made, it will immediately so notify
the Administrative Agent.  Except to the
extent that prior to the time of the Borrowing requested hereby the
Administrative Agent shall receive written notice to the contrary from the
Borrower, each matter certified to herein shall be deemed once again to be
certified as true and correct at the date of such Borrowing as if then made.

 

Please wire transfer the proceeds of the Borrowing to
the accounts of the following person(s) at the financial institution(s)
indicated respectively:

 

	
  Amount to be

  Transferred

  	
   

  	
  Person to be Paid

  	
   

  	
  Name, Address, etc.

  of Transferee Lender

  	
   

  
	
   

  	
  Name

  	
   

  	
  Account No.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance of such proceeds

  	
   

  	
  The Borrower

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
											

 

The Borrower has caused this Borrowing Request to be
executed and delivered, and the certification and warranties contained herein
to be made, by its duly Authorized Person this      
day of                 ,
200     .

 

	
   

  	
  POGO PRODUCING
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

2

 

EXHIBIT C

 

CONTINUATION/CONVERSION
NOTICE

 

Bank of Montreal, as Administrative Agent

700 Louisiana Street, Suite 4400

Houston, Texas  77002

Attention:                                   

 

Pogo Producing Company

 

Gentlemen and Ladies:

 

This Continuation/Conversion Notice is delivered to
you pursuant to Section 2.6 of that certain Credit Agreement, dated as of
December 16, 2004 (together with all amendments, if any, from time to time made
thereto, the “Credit Agreement”), among
POGO PRODUCING COMPANY, a Delaware corporation (the “Borrower”),
BANK OF MONTREAL, acting through its Chicago, Illinois branch, as
administrative agent (the “Administrative Agent”)
for the Lenders, and the Lenders and other Agents which are or become parties
thereto.  Unless otherwise defined herein
or the context otherwise requires, terms used herein have the meanings provided
in the Credit Agreement.

 

The Borrower hereby requests that on                      ,
200   ,

 

(1)                                  $                     
of the presently outstanding principal amount of the Revolving Loans originally
made on                ,
200   ,

 

(2)                                  and
all presently being maintained as (1)[Prime Rate Loans] [LIBOR Loans],

 

(3)                                  be
[converted into] [continued as],

 

(4)                                  (2)[LIBOR
Loans having an Interest Period of                      
[months]] [Prime Rate Loans].

 

The Borrower hereby:

 

(a)           certifies and warrants that no
Default has occurred and is continuing; and

 

(b)           agrees that if prior to the time of
such continuation or conversion any matter certified to herein by it will not
be true and correct at such time as if then made, it will immediately so notify
the Administrative Agent.

 

1.     Select appropriate interest rate option.

2.     Insert appropriate interest rate option.

 

1

 

Except to the extent, if any, that prior to the time
of the continuation or conversion requested hereby the Administrative Agent
shall receive written notice to the contrary from the Borrower, each matter
certified to herein shall be deemed to be certified at the date of such
continuation or conversion as if then made.

 

The Borrower has caused this Continuation/Conversion
Notice to be executed and delivered, and the certification and warranty
contained herein to be made, by its Authorized Person this     
day of                 ,
200     .

 

	
   

  	
  POGO PRODUCING
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

2

 

EXHIBIT D

 

ASSIGNMENT AND
ASSUMPTION AGREEMENT

 

This Assignment and Assumption Agreement (the “Assignment”) is dated as of the Effective
Date set forth below and is entered into by and between [Insert name of
Assignor] (the “Assignor”)
and [Insert
name of Assignee] (the “Assignee”).  Capitalized terms used but not defined herein
shall have the meanings given to them in the Credit Agreement identified below
(the “Credit Agreement”), receipt of a
copy of which is hereby acknowledged by the Assignee.  The Standard Terms and Conditions set forth
in Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby
irrevocably sells and assigns to the Assignee, and the Assignee hereby
irrevocably purchases and assumes from the Assignor, subject to and in
accordance with the Standard Terms and Conditions and the Credit Agreement, as
of the Effective Date inserted by the Administrative Agent as contemplated
below, the interest in and to all of the Assignor’s rights and obligations
under the Credit Agreement and any other documents or instruments delivered
pursuant thereto that represents the amount and Percentage identified below of
all of the Assignor’s outstanding rights and obligations under the respective
facilities identified below (including, to the extent included in any such
facilities, letters of credit and Swing Line Loans) (the “Assigned Interest”).  Such sale and assignment is without recourse
to the Assignor and, except as expressly provided in this Assignment, without
representation or warranty by the Assignor.

 

	
  1.

  	
  Assignor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Assignee:

  	
   

  	
  [and is an
  Affiliate/Approved Fund]

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Borrower:

  	
  POGO PRODUCING COMPANY,
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Administrative Agent:

  	
  BANK OF MONTREAL,
  acting through its Chicago, Illinois branch, as Administrative Agent under
  the Credit Agreement

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Credit Agreement:

  	
  Credit Agreement, dated
  as of December 16, 2004, among the Borrower, the Administrative Agent, and
  the Lenders and other Agents which are or become parties thereto.

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Assigned Interest:

  	
   

  

 

	
  Aggregate Amount of

  Commitment/Loans/LC Exposure

  for all Lenders

  	
   

  	
  Amount of Commitment/Loans/LC

  Exposure Assigned

  	
   

  	
  Percentage Assigned of

  Commitment/Loans/LC Exposure

  	
   

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  
	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  %

  

 

1

 

 

Effective
Date:                                                                                             
     , 200     [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

 

The terms set forth in this Assignment are hereby
agreed to:

 

	
   

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
  [NAME
  OF ASSIGNOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  
	
   

  	
  [NAME
  OF ASSIGNEE]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

2

 

	
  Consented to
  and Accepted:

  	
   

  
	
   

  	
   

  
	
  BANK OF MONTREAL, as

  Administrative Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  [Consented
  to:]

  	
   

  
	
   

  	
   

  
	
  [POGO
  PRODUCING COMPANY]

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

3

 

ANNEX 1

 

Credit Agreement, dated as of December 16, 2004, among
Pogo Producing Company, Bank of Montreal, as Administrative Agent, and the
Lenders and other Agents parties thereto

 

STANDARD TERMS
AND CONDITIONS FOR ASSIGNMENT

AND ASSUMPTION AGREEMENT

 

1.             Representations
and Warranties.

 

1.1           Assignor.  The Assignor (a) represents and warrants that
(i) it is the legal and beneficial owner of the Assigned Interest, (ii) the
Assigned Interest is free and clear of any lien, encumbrance or other adverse
claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with
respect to (i) any statements, warranties or representations made in or in
connection with any Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document delivered pursuant thereto, other than this Assignment
(herein collectively the “Loan Documents”),
or any collateral thereunder, (iii) the financial condition of the Borrower,
any of its Subsidiaries or Affiliates or any other Person obligated in respect
of any Loan Document or (iv) the performance or observance by the Borrower, any
of its Subsidiaries or Affiliates or any other Person of any of their respective
obligations under any Loan Document.

 

1.2           Assignee.  The Assignee (a) represents and warrants that
(i) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
meets all requirements of an Eligible Assignee under the Credit Agreement,
(iii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, (iv) it has received a copy
of the Credit Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 7.1 thereof, as applicable, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision,
and (v) if it is a Foreign Lender, it is entitled to an exemption from U.S.
withholding tax and attached hereto is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement in connection
with such exemption, duly completed and executed by the Assignee; and (b)
agrees that (i) it will, independently and without reliance on the
Administrative Agent, the Assignor, any Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, and (ii) it will perform in accordance with their terms all
of the obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.

 

2.             Payments.  From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignor for amounts which have accrued to but excluding the 

 

4

 

Effective Date and to the
Assignee for amounts which have accrued from and after the Effective Date.

 

3.             General
Provisions. This Assignment shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.  This Assignment may be executed
in any number of counterparts, which together shall constitute one instrument.  Delivery of an executed counterpart of a
signature page of this Assignment by telecopy shall be effective as delivery of
a manually executed counterpart of this Assignment.  This Assignment shall be governed by, and
construed in accordance with, the law of the State of New York.

 

5

 

EXHIBIT E-1

 

[Form of]

 

Opinion of
Michael J. Killelea, Esq., Vice President and General Counsel to the Borrower

 

[INTENDED
TO BE SUBSTANTIAL SIMILAR TO OPINION DELIVERED

IN CONNECTION WITH 2001 CREDIT FACILITY]

 

1

 

EXHIBIT E-2

 

[Form of]

 

Opinion of
Baker Botts L.L.P., special New York Counsel to Borrower

 

[INTENDED
TO BE SUBSTANTIAL SIMILAR TO OPINION DELIVERED

IN CONNECTION WITH 2001 CREDIT FACILITY]

 

1

 

EXHIBIT F

 

[Form of]

 

LENDER
CERTIFICATE

 

          ,
200     

 

To:                              BANK OF MONTREAL,

as Administrative Agent

 

Reference is made to that certain Credit Agreement,
dated as of December 16, 2004 (together with all amendments, if any, from time
to time made thereto, the “Credit Agreement”),
among POGO PRODUCING COMPANY, a Delaware corporation (the “Borrower”), BANK OF MONTREAL, acting through
its Chicago, Illinois branch, as administrative agent (the “Administrative Agent”) for the Lenders, and
the Lenders and other Agents which are or become parties thereto.  Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in the
Credit Agreement.

 

[Language for Existing Lender]

 

[                                            Please
be advised that the undersigned has agreed to increase effective                 ,
200      its Commitment under the Credit Agreement
from $                           
to $                
and (b) that it shall continue to be a party in all respects to the Credit
Agreement and the other Loan Documents.]

 

[Language for New Lender]

 

[                                            Please
be advised that the undersigned has agreed effective                 ,
200      (a) to become a Lender under the Credit
Agreement with a Commitment of $                    
and (b) that it shall be deemed to be a party in all respects to the
Credit Agreement and the other Loan Documents.]

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
				

 

1

 

	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
  BANK OF MONTREAL, as Administrative Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
  POGO PRODUCING COMPANY

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
	
  Title:

  	
   

  

 

2

 

EXHIBIT G

 

[Form of]

 

REQUEST FOR SWING
LINE ADVANCE

 

VIA
FACSIMILE #                         

 

Bank of Montreal, as Administrative Agent

700 Louisiana Street, Suite 4400

Houston, Texas  77002

Attention:                                       

 

Pogo Producing Company

 

Gentlemen and Ladies:

 

This Request for Swing Line Advance is delivered to
you pursuant to Section 2.2.1 of that certain Credit Agreement, dated as
of December 16, 2004 (together with all amendments, if any, from time to time
made thereto, the “Credit Agreement”),
among POGO PRODUCING COMPANY, a Delaware corporation (the “Borrower”), BANK OF MONTREAL, acting through
its Chicago, Illinois branch, as administrative agent (the “Administrative Agent”) for the Lenders, and
the Lenders and other Agents which are or become parties thereto.  Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in the
Credit Agreement.

 

The Borrower hereby requests that a Swing Line Advance
be made today,                ,
200    , in the principal amount of $               .  We request this advance be for a period of         
day(s), maturing on                      .

 

Please wire transfer the proceeds of the borrowing to
the account(s) of the following person(s) at the financial institution(s) indicated
respectively:

 

	
  Amount to be

  Transferred

  	
   

  	
  Person to be Paid

  	
   

  	
  Name, Address, etc.

  of Transferee Lender

  	
   

  
	
   

  	
  Name

  	
   

  	
  Account No.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance of such proceeds

  	
   

  	
  The Borrower

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
											

 

1

 

The Borrower has caused this Request for Swing Line
Advance to be executed and delivered by its duly Authorized Person this     
day of                   ,
200    .

 

	
   

  	
  POGO PRODUCING
  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

2

 

EXHIBIT H

 

[Form of]

SWING LINE
NOTE

 

	
  $10,000,000

  	
  December 16,
  2004

  

 

FOR VALUE RECEIVED, POGO PRODUCING COMPANY, a
Delaware corporation (the “Borrower”),
hereby promises to pay to the order of BANK OF MONTREAL,
acting through its Chicago, Illinois branch as the swing line lender (the “Swing Line Lender”), at 115 South LaSalle
Street, Chicago, Illinois 60603, the principal sum of TEN MILLION AND NO/100
Dollars ($10,000,000) (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Swing Line Loans made by the Swing Line Lender
to the Borrower under the Credit Agreement, as hereinafter defined), in lawful
money of the United States of America and in immediately available funds, on
the dates and in the principal amounts provided in the Credit Agreement, and to
pay interest on the unpaid principal amount of each such Swing Line Loan, at
such office, in like money and funds, for the period commencing on the date of
such Swing Line Loan until such Swing Line Loan shall be paid in full, at the
rates per annum and on the dates provided in the Credit Agreement.

 

The date, amount, Type, interest rate, Interest Period
and maturity of each Swing Line Loan made by the Swing Line Lender to the
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Swing Line Lender on its books and, prior to any transfer of
this Note, endorsed by the Swing Line Lender on the schedules attached hereto
or any continuation thereof.

 

This Swing Line Note is the Swing Line Note referred
to in the Credit Agreement dated as of December 16, 2004 among the Borrower,
the Administrative Agent, and the Lenders and other Agents which are or become
parties thereto (as the same may be amended or supplemented from time to time,
the “Credit Agreement”), and evidences
Swing Line Loans made by the Swing Line Lender thereunder. Capitalized terms
used in this Swing Line Note have the respective meanings assigned to them in
the Credit Agreement.

 

This Swing Line Note is issued pursuant to the Credit
Agreement and is entitled to the benefits and security provided for in the
Credit Agreement and the other Loan Documents. The Credit Agreement provides
for the acceleration of the maturity of this Swing Line Note upon the
occurrence of certain events, for prepayments of Swing Line Loans upon the
terms and conditions specified therein and other provisions relevant to this
Swing Line Note.

 

THIS SWING LINE NOTE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

	
   

  	
  POGO PRODUCING
  COMPANY

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

1

 

SWING LINE LOANS AND PRINCIPAL PAYMENTS

 

 

	
  Amount of Swing Line

  Loan Made

  	
   

  	
  Interest

  Period

  (if

  applicable)

  	
   

  	
  Amount of

  Principal Repaid

  	
   

  	
  Unpaid Principal Balance

  	
   

  	
  Notation Made By

  	
   

  
	
  Prime Rate

  	
   

  	
  LIBOR

  	
   

  	
  Prime Rate

  	
   

  	
  LIBOR

  	
   

  	
  Prime Rate

  	
   

  	
  LIBOR

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2

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