Document:

Exhibit 10.1

     

    Exhibit
      10.1

     

    SECOND
      AMENDMENT TO CREDIT AGREEMENT

     

    SECOND
      AMENDMENT (this “Amendment”),
      dated
      as of October 31, 2006 (the “Effective
      Date”),
      to
      the Credit Agreement, dated as of May 11, 2005 (as heretofore amended,
      supplemented or otherwise modified, the “Credit
      Agreement”),
      among
      BOIS D’ARC ENERGY, INC., a Nevada corporation (“Borrower”),
      the
      banks and other financial institutions from time to time parties thereto (the
      “Lenders”),
      CALYON NEW YORK BRANCH, as syndication agent (in such capacity, the
“Syndication
      Agent”),
      THE
      BANK OF NOVA SCOTIA, as administrative agent (in such capacity, the
“Administrative
      Agent”),
      and
      AMSOUTH BANK, as documentation agent (in such capacity, the “Documentation
      Agent”).

     

    W
      I T
      N E S S E T H :

     

    WHEREAS,
      Borrower, the Lenders, the Syndication Agent, the Administrative Agent and
      the
      Documentation Agent are parties to the Credit Agreement; and

     

    WHEREAS,
      Borrower has requested to increase the Borrowing Base from $150,000,000 to
      $200,000,000 in accordance with Section 2.8 of the Credit Agreement, and
      the Lenders and the Administrative Agent are agreeable to such request upon
      the
      terms and subject to the conditions set forth herein;

     

    NOW,
      THEREFORE, in consideration of the premises herein contained and for other
      good
      and valuable consideration, the receipt of which is hereby acknowledged, the
      parties hereto agree as follows:

     

    1.  Defined
      Terms.
      Unless
      otherwise defined herein, capitalized terms used herein which are defined in
      the
      Credit Agreement are used herein as therein defined; provided that the
      definition of “Maximum Loan Amount” is hereby amended to read as
      follows:

     

    “Maximum
      Loan Amount”
means
      $200,000,000 as such amount may be reduced from time to time pursuant to
Section 2.5.

     

    2.  Determination
      of the Borrowing Base.
      In
      accordance with the procedure set forth in Section 2.8 of the Credit
      Agreement, the Borrowing Base is increased from $150,000,000 to $200,000,000,
      such increase to be effective as of the Closing Date (as defined
      below).

     

    3.  Amendment
      to Section 10.1(h).
      Section
      10.1(h) of the Credit Agreement is hereby amended by deleting it and
      substituting it with the new Section 10.1(h) as follows:

     

    (a)  release
      any collateral under any of the Security Documents, or permit any termination
      or
      release of any Security Document, provided that, notwithstanding the foregoing,
      the consent of the Lenders shall not be required for any release of any
      collateral under any of the Security Documents in connection with a Disposition
      by the Borrower or any Guarantor if such Disposition is permitted by
Section 7.5
      hereof;

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.  Amendment
      to Schedule 2.1 (Commitments and Percentage Shares).
      Schedule 2.1 of the Credit Agreement is hereby amended by deleting it and
      substituting it with the new Schedule 2.1 attached to this Amendment as
Exhibit A.

     

    5.  Conditions
      to Effectiveness.
      This
      Amendment shall become effective as of the date (the “Closing Date”) on which
      the following conditions precedent shall be deemed satisfied in the sole
      discretion of the Lenders and the Administrative Agent, provided that such
      conditions precedent shall be satisfied by no later than November 30,
      2006:

     

    (a)  The
      Administrative Agent shall have received the following, each of which shall
      be
      originals or facsimiles (followed promptly by originals) unless otherwise
      specified, each properly executed by a Responsible Officer of the signing Loan
      Party, each dated as of the Effective Date (or, in the case of certificates
      of
      governmental officials, a recent date before the Effective Date) and each in
      form and substance satisfactory to the Administrative Agent and its legal
      counsel:

     

    (i)  executed
      counterparts of this Amendment;

     

    (ii)  Pledged
      Notes executed by each of the Loan Parties and payable to the Borrower, each
      in
      an aggregate principal amount equal to the Maximum Loan Amount, pledged to
      the
      Administrative Agent for the benefit of the Lenders and the Issuing Bank,
      together with transfer powers or instruments executed in blank for each such
      certificate, interest or security;

     

    (iii)  Notes
      executed by the Borrower in favor of each Lender, each in an aggregate principal
      amount equal to such Lender’s Percentage Share of the Maximum Loan
      Amount;

     

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

     

    (v)  such
      evidence as the Administrative Agent may reasonably require to verify that
      each
      Loan Party is duly organized or formed, validly existing, in good standing
      and
      qualified to engage in business in each jurisdiction in which it is required
      to
      be qualified to engage in business, including certified copies of each Loan
      Party’s Organization Documents, certificates of good standing and/or
      qualification to engage in business and tax clearance certificates;

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (vi)  a
      certificate signed by a Responsible Officer of the Borrower certifying that
      (A) the conditions specified in Section 5 of this Amendment have been
      satisfied, (B) no change, event or circumstance has occurred or exists
      (individually or in the aggregate) since December 31, 2005 that has or
      could be reasonably expected to have a Material Adverse Effect, (C) no
      change, event or circumstance has occurred in the properties described in the
      latest Engineering Report dated December 31, 2005 delivered pursuant to
Section
      6.2(g)
      of the
      Credit Agreement has or could be reasonably expected to have a Material Adverse
      Effect, (D) there shall exist no action, suit, investigation, litigation or
      proceeding pending or threatened in any court or before any arbitrator or
      Governmental Authority that (x) would reasonably be expected to have a
      Material Adverse Effect or (y) restrains, prevents or imposes or can
      reasonably be expected to impose materially adverse conditions upon the Credit
      Agreement, this Amendment or the transactions contemplated by the Credit
      Agreement or by this Amendment; (E) the Borrower and its Subsidiaries shall
      not have any Indebtedness or Liens on the Closing Date other than permitted
      under the Credit Agreement; and (F) the Security Documents create, grant
      and perfect first and prior liens or security interests in favor of the
      Administrative Agent to secure the Obligation encumbering at least eighty
      percent (80%) of the present value of the Borrower’s and the Guarantors’ Oil and
      Gas Properties constituting proved reserves to which value is given in the
      determination of the then current Borrowing Base;

     

    (vii)  an
      opinion of counsel to each Loan Party substantially in the form of delivered
      in
      connection with the First Amendment to the Credit Agreement dated as of May
      8,
      2006, and otherwise covering the transactions contemplated by this
      Amendment;

     

    (viii)  a
      certificate of insurance of the Borrower and its Subsidiaries evidencing that
      the Borrower and its Subsidiaries are carrying insurance in accordance with
      Section 6.7
      of the
      Credit Agreement and that such insurance is in full force and
      effect;

     

    (ix)  copies
      of
      lien search reports in the Offices of the Secretary of State of the States
      of
      Texas and Nevada and such other jurisdictions as the Administrative Agent may
      reasonably request, listing all effective financing statements that name any
      of
      the Borrower or the Guarantors as debtor and showing no Liens other than the
      Liens permitted under Section 7.1
      of the
      Credit Agreement; and any other documents or instruments as may be necessary
      or
      desirable (in the opinion of the Administrative Agent) to perfect the
      Administrative Agent’s interest in the Collateral;

     

    (x)  a
      certificate of the chief financial officer of the Borrower, stating that
      (A) the Borrower is solvent and (B) the Loan Parties, taken as a
      whole, are solvent, in each case, after giving effect to Loans and Letters
      of
      Credit, the transactions contemplated by this Amendment and the payment of
      all
      estimated legal, accounting and other fees related hereto and
      thereto;

     

    (xi)  evidence
      that each of the Borrower and its Subsidiaries shall have received all consents
      and authorizations required pursuant to any material contractual obligation
      with
      any other Person and shall have obtained all permits, licenses and other
      approvals of, and effected all notices to and filings with, any Governmental
      Authority, in each case, as may be necessary to allow each of the Borrower
      and
      its Subsidiaries lawfully (A) to execute, deliver and perform, in all
      material respects, their respective obligations under the Loan Documents and
      the
      related documents to which each of them, respectively, is, or shall be, a party
      and each other agreement or instrument to be executed and delivered by each
      of
      them, respectively, pursuant thereto or in connection therewith and (B) to
      create and perfect the Liens on the Collateral to be owned by each of them
      in
      the manner and for the purpose contemplated by the Loan Documents, and all
      such
      matters are in full force and effect; and

     

    (xii)  such
      other assurances, certificates, documents, consents or opinions as the
      Administrative Agent, the Issuing Bank or the Majority Lenders reasonably may
      require.

     

    (b)  All
      fees
      required to be paid on or before the Closing Date pursuant to any of the Loan
      Documents, including any fees required to be paid in connection with issuance
      of
      commitment letters by Lenders with respect to the transactions contemplated
      under this Amendment, shall have been paid.

    
      
        

      

    

    
    

    (c)  Unless
      waived by the Administrative Agent, the Borrower shall have paid all costs
      and
      expenses payable to the Administrative Agent pursuant to Section 10.4
      of the
      Credit Agreement to the extent invoiced prior to or on the Closing Date,
plus
      such
      additional amounts of costs and expenses as shall constitute the Administrative
      Agent’s reasonable estimate of the costs and expenses described in Section 10.4
      of the
      Credit Agreement incurred or to be incurred by it through the closing
      proceedings in connection with this Amendment (provided that such estimate
      shall
      not thereafter preclude a final settling of accounts between the Borrower and
      the Administrative Agent).

     

    (d)  There
      shall exist no pending or threatened litigation, proceedings or investigations
      which could reasonably be expected to have a material adverse effect on the
      financial condition, operations, assets, business, properties or prospects
      of
      the Borrower or any of its Subsidiaries or the transactions contemplated
      hereby.

     

    (e)  The
      Administrative Agent and Lenders shall have completed review of the latest
      Engineering Report submitted in accordance with Section 6.2(g)
      of the
      Credit Agreement and determined that the form, substance and content thereof
      are
      satisfactory.

     

    (f)  The
      representations and warranties of the Borrower contained in Section 8 of
      this Amendment, Article V
      of the
      Credit Agreement, and in any document furnished at any time under or in
      connection herewith, shall be true and correct on and as of the date of such
      Credit Extension, except to the extent that such representations and warranties
      specifically refer to an earlier date, in which case they shall be true and
      correct as of such earlier date.

     

    (g)  No
      Default or Event of Default shall exist, or would result from the transactions
      contemplated by this Amendment.

     

    (h)  All
      corporate and other proceedings, and all documents, instruments and other legal
      matters in connection with this Amendment shall be in form and substance
      reasonably satisfactory to the Administrative Agent.

     

    6.  A
      new
      Section 6.17 is hereby added to the Credit Agreement to read as
      follows:

     

    6.17 Collateral
      Verification.
      No
      later than November 30, 2006, the Borrower shall deliver to the
      Administrative Agent such evidence as the Administrative Agent may reasonably
      require to verify that the Security Documents create, grant and perfect first
      and prior liens or security interests in favor of the Administrative Agent
      to
      secure the Obligation encumbering at least eighty percent (80%) of the present
      value of the Borrower’s and the Guarantors’ Oil and Gas Properties constituting
      proved reserves to which value is given in the determination of the then current
      Borrowing Base.

     

    7.  Reference
      to and Effect on the Loan Documents; Limited Effect.  
      On and after the date hereof, each reference in the Credit Agreement to “this
      Agreement”, “hereunder”, “hereof” or words of like import referring to the
      Credit Agreement, and each reference in the other Loan Documents to “the Credit
      Agreement”, “thereunder”, “thereof” or words of like import referring to the
      Credit Agreement, shall mean and be a reference to the Credit Agreement as
      amended hereby. The execution, delivery and effectiveness of this Amendment
      shall not, except as expressly provided herein, operate as a waiver of any
      right, power or remedy of any Lender or the Administrative Agent under any
      of
      the Loan Documents, nor constitute a waiver of any provisions of any of the
      Loan
      Documents. Except as expressly amended herein, all of the provisions and
      covenants of the Credit Agreement and the other Loan Documents are and shall
      continue to remain in full force and effect in accordance with the terms thereof
      and are hereby in all respects ratified and confirmed.

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      8.  Representations
        and Warranties.
        Each of
        the Borrower and the other Loan Parties represents and warrants to the
        Administrative Agent and Lenders as follows: 

    

     

    (a)  all
      representations and warranties set forth in the Credit Agreement and the other
      Loan Documents are true and correct in all material respects with the same
      effect as though such representations and warranties have been made on and
      as of
      the date hereof, except to the extent that any such representation or warranty
      relates solely to an earlier date, in which case it shall have been true and
      correct in all material respects as of such earlier date;

     

    (b)  no
      Default or Event of Default has occurred and is continuing on the date
      hereof;

     

    (c)  since
      December 31, 2005, there has been no change, event or occurrence
      (individually or in the aggregate) that has had or could reasonably be expected
      to have a Material Adverse Effect;

     

    (d)  each
      Loan
      Party has the power and authority to make, deliver and perform this Amendment
      and has taken any and all necessary action to authorize the execution, delivery
      and performance of this Amendment and no consent or authorization of, or filing
      with, any Person (including, without limitation, any governmental authority),
      is
      required in connection with the execution, delivery or performance by the Loan
      Parties, or the validity or enforceability against the Loan Parties, of this
      Amendment, other than such consents, authorizations or filings which have been
      made or obtained;

     

    (e)  this
      Amendment has been duly executed and delivered by the Loan Parties and this
      Amendment constitutes the legal, valid and binding obligation of the Loan
      Parties, enforceable against the Borrower in accordance with its
      terms;

     

    (f)  none
      of
      Borrower or its Subsidiaries has made or permitted to exist any Dispositions
      or
      Lien on all Properties purported to be included in the Borrowing Base since
      the
      delivery of the evidence of such person’s title to such properties delivered
      pursuant to Section 4.1(a)(vii) of the Credit Agreement other than
      permitted under the Credit Agreement;

     

    (g)  on
      the
      date hereof and after giving effect to the increase in the Commitment and the
      other transactions contemplated by this Amendment, each Security Document has
      been duly executed and delivered on behalf of such Loan Party that is a party
      thereto and is the legal, valid and binding obligations of such Loan Party,
      enforceable against such Loan Party in accordance with its terms and secures
      the
      obligations and liabilities of the Borrower and the other Loan Parties to the
      Lenders pursuant to the Credit Agreement, the Note, including extensions of
      credit up to an aggregate principal amount not to exceed $200,000,000, and
      the
      other Loan Documents, as amended by this Amendment;

     

    (h)  on
      the
      date hereof and after giving effect to the increase in the Commitment and the
      other transactions contemplated by this Amendment, each of the Mortgage and
      the
      Subordinate Mortgage complies with all applicable recording and filing laws
      of
      the States of Louisiana and Texas, and creates, under the laws of the States
      of
      Louisiana and Texas, a legally valid perfected mortgage lien in favor of the
      Administrative Agent for the benefit of the Lenders, in the case of the
      Mortgage, or Bois d’Arc Energy, Inc., in the case of the Subordinate Mortgage,
      on all right, title and interest of Bois d’Arc Energy, L.P. in and to the
      Mortgaged Property (as defined therein), including all property purported to
      be
      included in the Borrowing Base, to secure the obligations and liabilities of
      the
      Borrower to the Lenders pursuant to the Credit Agreement, the Note, including
      extensions of credit up to an aggregate principal amount not to exceed
      $200,000,000, and the other Loan Documents, as amended by this Amendment;
      and

     

    (i)  the
      increases in the Commitments contemplated by this Amendment and any additional
      increases in such Commitments that shall be approved subject to and in
      accordance with the terms of the Credit Agreement, up to an aggregate principal
      amount of $350,000,000 outstanding at any time, are reasonably within the
      contemplation of the parties at the time of the execution and delivery of the
      Mortgage, the increases in the Pledged Notes contemplated by this Amendment
      and
      any additional increases in such Pledged Notes that shall be approved subject
      to
      and in accordance with the terms of the Credit Agreement, up to an aggregate
      principal amount of $350,000,000 outstanding at any time, are reasonably within
      the contemplation of the parties at the time of the execution and delivery
      of
      the Subordinate Mortgage.

    
      
        

      

    

    
    

    9.  Liens
      and Security Interests.
      Borrower and each Guarantor, as of the Effective Date and after giving effect
      to
      the amendments contained herein, hereby ratify and confirm all Liens and
      security interests granted by Borrower and each Guarantor to Lenders to secure
      Borrower’s prompt payment and performance of all obligations of Borrower arising
      under the Loan Documents, including each Note and Guarantee. Borrower hereby
      agrees that the Pledged Notes delivered pursuant to Section 5(a)(ii) of
      this Amendment constitute Collateral (as defined in the Pledge Agreement
      executed and delivered by the Borrower) and that Attachment 1 to such
      Pledge Agreement is hereby amended to include such Pledged Notes.

     

    10.  Counterparts.
      This
      Amendment may be executed by one or more of the parties hereto in any number
      of
      separate counterparts (which may include counterparts delivered by facsimile
      transmission) and all of said counterparts taken together shall be deemed to
      constitute one and the same instrument. Any executed counterpart delivered
      by
      facsimile transmission shall be effective as an original for all purposes
      hereof. The execution and delivery of this Amendment by any Lender shall be
      binding upon each of its successors and assigns (including transferees or
      Participants of its Commitments and Loans in whole or in part prior to
      effectiveness hereof) and binding in respect of all of its Commitments and
      Loans, including any acquired subsequent to its execution and delivery hereof
      and prior to the effectiveness hereof.

     

    11.  GOVERNING
      LAW.

     

    (a)  THIS
      AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
      THE
      STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN
      SUCH STATE (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICT
      OF LAW; PROVIDED
      THAT THE
      ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER
      FEDERAL LAW).

     

    (b)  ANY
      LEGAL
      ACTION OR PROCEEDING WITH RESPECT TO THIS AMENDMENT OR ANY OTHER LOAN DOCUMENT
      MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS SITTING IN HOUSTON, TEXAS
      OR
      OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION
      AND DELIVERY OF THIS AGREEMENT, THE BORROWER, THE ADMINISTRATIVE AGENT AND
      EACH
      LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
      JURISDICTION OF THOSE COURTS. THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH
      LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
      OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
      CONVENIENS,
      WHICH
      IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN
      SUCH
      JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO.
      THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER WAIVES PERSONAL SERVICE
      OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER
      MEANS
      PERMITTED BY THE LAW OF SUCH STATE.

     

    12.  Waiver
      of Right to Trial by Jury.
      EACH
      PARTY TO THIS AMENDMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
      OF
      ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT
      OR
      IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
      PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE
      TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
      ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
      HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
      ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
      THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
      ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
      WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     

    13.  ENTIRE
      AGREEMENT.
      The
      Credit Agreement, as amended by this Agreement, together with the other Loan
      Documents, comprises the complete and integrated agreement of the parties on
      the
      subject matter hereof and thereof and supersedes all prior agreements, written
      or oral, on such subject matter. THE
      CREDIT AGREEMENT, AS AMENDED BY THIS AGREEMENT, AND THE OTHER LOAN DOCUMENTS
      REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
      BY
      EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
      PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
      PARTIES.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    
      	 	 BOIS
              D'ARC ENERGY, INC.
	 	 
	 	 
	 	
               By:   
                /s/ ROLAND O. BURNS

            
	 	
              Name: 
                Roland O. Burns

            
	 	
              Title: 
                Senior Vice President

            

    

    

     

    
      	 	 THE
              BANK OF NOVA SCOTIA, as
	 	Administrative
              Agent, Lead Arranger and Lender
	 	 
	 	 
	 	
               By:   
                /s/ NADINE BELL

            
	 	
              Name: 
                Nadine Bell

            
	 	
              Title: 
                Senior Manager

            

    

     

     

    
      	 	 CALYON
              NEW YORK BRANCH, as
	 	 Syndication
              Agent and Lender
	 	 
	 	 
	 	
               By:   
                /s/ TOM BYARGEON

            
	 	
              Name: 
                Tom Byargeon

            
	 	
              Title: 
                Managing Director

            

     

    
      	 	 AMSOUTH
              BANK, as
	 	 Documentation
              Agent and Lender
	 	 
	 	 
	 	
               By:   
                /s/ W. A. PHILIP

            
	 	
              Name: 
                W. A. Philip

            
	 	
              Title: 
                Vice President

            

     

    
      	 	 NATEXIS
              BANQUES POPULAIRES, as Lender
	 	 
	 	 
	 	
               By:   
                /s/ DONOVAN C. BROUSSARD

            
	 	
              Name: 
                Donovan C. Broussard

            
	 	
              Title: 
                Vice President and Group Manager

            
	 	 

    

     

    
      	 	
               By:   
                /s/ TIMOTHY L. POLVADO

            
	 	
              Name: 
                Timothy L. Polvado

            
	 	
              Title: 
                Vice President and Group Manager

            

    

    
       

      
        
          

        

      

      
        
        

      

    

     

    
      	 	 UNION
              BANK OF CALIFORNIA, N.A., as Lender
	 	 
	 	 
	 	
               By:   
                /s/ SEAN MURPHY

            
	 	
              Name: 
                Sean Murphy

            
	 	
              Title: 
                Vice President

            
	 	 

    

     

     

    
      	 	 BMO
              Capital Markets Financing, Inc., f/k/a Lender
	 	 Harris
              Nesbitt Financing, Inc., as Lender
	 	 
	 	 
	 	
               By:   
                /s/ MARY LOU ALLEN

            
	 	
              Name: 
                Mary Lou Allen

            
	 	
              Title: 
                Vice President

            
	 	 

 

    
      	 	 BANK
              OF AMERICA, N.A., as Lender
	 	 
	 	 
	 	
               By:   
                /s/ JEFFREY H. RATHKAMP

            
	 	
              Name: 
                Jeffrey H. Rathkamp

            
	 	
              Title: 
                Director

            
	 	 

     

    
      	 	 COMERICA
              BANK, as Lender
	 	 
	 	 
	 	
               By:   
                /s/ PETER L. SEFZIK

            
	 	
              Name: 
                Peter L. Sefzik

            
	 	
              Title: 
                Vice President

            
	 	 

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

    ACKNOWLEDGMENT
      BY GUARANTORS

     

    Each
      of
      the undersigned Guarantors hereby (i) consents to the terms and conditions
      of that certain Second Amendment dated as of October 31, 2006 (the
“Amendment”), to the Credit Agreement, dated as of May 11, 2005 as
      heretofore amended, (ii) acknowledges and agrees that its consent is not
      required for the effectiveness of the Amendment, (iii) ratifies and
      acknowledges its respective Obligations under each Loan Document to which it
      is
      a party, (iv) grants to the Administrative Agent for its benefit and the
      ratable benefit of each of the Lenders, a lien and a continuing security
      interest in the Collateral (as such term is defined in the respective Security
      Agreements and the Pledge Agreements) to secure the Secured Obligations (as
      defined therein), and (v) represents and warrants that (a) no Default
      or Event of Default has occurred and is continuing, (b) it is in full
      compliance with all covenants and agreements pertaining to it in the Loan
      Documents, (c) it has reviewed a copy of the Amendment and (d) its
      Pledged Note delivered pursuant to Section 5(a)(ii) of the Amendment
      constitutes its legal, valid and binding obligation, enforceable against it
      in
      accordance with its terms.

     

    
      	 	 BOIS
              D'ARC OIL & GAS COMPANY LLC,
	 	 as
              Guarantor
	 	 
	 	 
	 	
               By:   
                /s/ ROLAND O. BURNS

            
	 	
              Name: 
                Roland O. Burns

            
	 	    Title: 
              Senior Vice President
	 	
              Date:  October
                31, 2006

            

    

     

     

    
      	 	 BOIS
              D'ARC HOLDINGS, LLC, as Guarantor
	 	 
	 	 
	 	
               By:   
                /s/ ROLAND O. BURNS

            
	 	
              Name: 
                Roland O. Burns

            
	 	    Title: 
              Senior Vice President
	 	
              Date:  October
                31, 2006

            

    

    

    

     

    
      	 	
              BOIS
                D'ARC OFFSHORE LTD., as Guarantor

            
	 	 
	 	 
	 	
              By: /s/
                ROLAND O. BURNS 

            
	 	
              Name: Roland
                O. Burns

            
	 	
              Title: Senior
                Vice President

            
	 	
              Date: October
                31, 2006

            

    

    

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    
      	 	
              BOIS
                D'ARC PROPERTIES, LP, as Guarantor

            
	 	 
	 	 
	 	
              By: /s/
                ROLAND O. BURNS 

            
	 	
              Name: Roland
                O. Burns

            
	 	
              Title: Senior
                Vice President

            
	 	
              Date: October
                31, 2006

            

    

    

    

    
      	 	
              BOIS
                D'ARC ENERGY, INC., as Guarantor

            
	 	 
	 	 
	 	
              By: /s/
                ROLAND O. BURNS 

            
	 	
              Name: Roland
                O. Burns

            
	 	
              Title: Senior
                Vice President

            
	 	
              Date: October
                31, 2006Line of Credit Note

                Line of Credit Note

EXHIBIT 10.1

                    $20,000,000.00

                                                Date:   September 29, 2006

Promise to Pay. On or before March 31, 2007, for value received, Madison Gas and Electric Company (the "Borrower") promises to pay to JPMorgan Chase Bank, N.A., whose address is 111 E. Wisconsin Ave, Milwaukee, WI 53202 (the "Bank") or order, in lawful money of the United States of America, the sum of Twenty Million and 00/100 Dollars ($20,000,000.00) or such lesser sum as is indicated on Bank records, plus interest computed on the basis of the actual number of days elapsed in a year of 360 days at "the Adjusted LIBOR Rate" (the "Note Rate") and at the rate of 3.00% per annum above the Note Rate, at the Bank's option, upon the occurrence of any default under this Note, whether or not the Bank elects to accelerate the maturity of this Note, from the date such increased rate is imposed by the Bank.

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

"Applicable Margin" means 0.40% per annum.

“Business Day” means a day (other than a Saturday or Sunday) on which banks generally are open in Wisconsin and/or New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market.  

"Interest Period" means each consecutive one month period, the first of which shall commence on the date of this Note, ending on the day which corresponds numerically to such date one (1) month thereafter, provided, however, that if there is no such numerically corresponding day in such first succeeding month, such Interest Period shall end on the last Eurodollar Day of such first succeeding month. If an Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next succeeding Business Day, provided, however, that if said next succeeding Business Day falls in a new calendar month, such Interest Period shall end on the immediately preceding Business Day.

"LIBOR Rate" means, with respect to any LIBOR advance for any Interest Period, the interest rate determined by the Bank by reference to Page 3750 of the Moneyline Telerate Service (“MTS”) (or on any successor or substitute page of the MTS, or any successor to or substitute for the MTS, providing rate quotations comparable to those currently provided on Page 3750 of the MTS, as determined by the Bank from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market)  to be the rate at approximately 11:00 a.m. London time, two Business Days prior to the commencement of the Interest Period for the offering by the Bank’s London office, of dollar deposits in an amount comparable to such LIBOR advance with a maturity equal to such Interest Period.  If no LIBOR Rate is available to the Bank, the applicable LIBOR Rate for the relevant interest period shall instead be the rate determined by the Bank to be the rate at which the Bank offers to place deposits in U.S. dollars with first-class banks in the London interbank market at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, in the approximate amount of the principal amount outstanding on such date and having a maturity equal to such Interest Period.

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

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

If any applicable domestic or foreign law, treaty, rule or regulation now or later in effect (whether or not it now applies to the Bank) or the interpretation or administration thereof by a governmental authority charged with such interpretation or administration, or compliance by the Bank with any guideline, request or directive of such an authority (whether or not having the force of law), shall make it unlawful or impossible for the Bank to maintain or fund the advances evidenced by this Note, then, upon notice to the Borrower by the Bank, the outstanding principal amount, together with accrued interest and any other amounts payable to the Bank under this Note or the Related Documents shall be repaid (a) immediately upon the Bank's demand if such change or compliance with such requests, in the Bank's judgment, requires immediate repayment, or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request.

If the Bank determines that quotations of interest rates for the relevant deposits referred to in the definition of Adjusted LIBOR Rate are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the interest rate as provided in this Note, then the Bank shall forthwith give notice of such circumstances to the Borrower, whereupon (i) the obligation of the Bank to make advances evidenced by this Note shall be suspended until the Bank notifies the Borrower that the circumstances giving rise to the suspension no longer exists, and (ii) the Borrower shall repay in full the then outstanding principal amount of each advance evidenced by this Note, together with accrued interest, on the last day of the then current Interest Period.  

In no event shall the interest rate exceed the maximum rate allowed by law. Any interest payment that would for any reason be unlawful under applicable law shall be applied to principal.  

Interest will be computed on unpaid principal balance from the date of each borrowing. 

Until maturity, the Borrower will pay consecutive monthly installments of interest only commencing October 31, 2006.

The Borrower will pay, without setoff, deduction, or counterclaim, the Bank at the Bank's address above or at such other place as the Bank may designate in writing. If any payment of principal or interest on this Note shall become due on a day that is not a Business Day, the payment will be made on the next succeeding Business Day. The term "Business Day" in this Note means a day other than a Saturday, Sunday or any other day on which national banking associations are authorized to be closed.  Payments shall be allocated among principal, interest and fees at the discretion of the Bank unless otherwise agreed or required by applicable law. Acceptance by the Bank of any payment that is less than the payment due at that time shall not constitute a waiver of the Bank's right to receive payment in full at that time or any other time.

Authorization for Direct Payments (ACH Debits). To effectuate any payment due under this Note, the Borrower hereby authorizes the Bank to initiate debit entries to Account Number ######### at the Bank and to debit the same to such account. This authorization to initiate debit entries shall remain in full force and effect until the Bank has received written notification of its termination in such time and in such manner as to afford the Bank a reasonable opportunity to act on it. The Borrower represents that the Borrower is and will be the owner of all funds in such account. The Borrower acknowledges (1) that such debit entries may cause an overdraft of such account which may result in the Bank’s refusal to honor items drawn on such account until adequate deposits are made to such account; (2) that the Bank is under no duty or obligation to initiate any debit entry for any purpose; and (3) that if a debit is not made because the above-referenced account does not have a sufficient available balance, or otherwise, the payment may be late or past due.

Business Loan. The Borrower acknowledges and agrees that this Note evidences a loan for a business, commercial, agricultural or similar commercial enterprise purpose, and that all advances made under this Note shall not be used for any personal, family or household purpose.

Credit Facility. The Bank has approved a credit facility to the Borrower in a principal amount not to exceed the face amount of this Note. The credit facility is in the form of advances made from time to time by the Bank to the Borrower. This Note evidences the Borrower's obligation to repay those advances. The aggregate principal amount of debt evidenced by this Note is the amount reflected from time to time in the records of the Bank. Until the earliest of maturity, the occurrence of any default, or the occurrence of any event that would constitute a default but for the giving of notice or the lapse of time or both until the end of any grace or cure period, the Borrower may borrow, pay down and reborrow under this Note subject to the terms of the Related Documents.

Non Usage Fee. The Borrower shall pay to the Bank a non-usage fee (the “Non-usage Fee”) with respect to each calendar quarter during the term of Facility B, based on the unused amount of Facility B.  The Non-usage Fee shall be an amount equal to A x (B –C) x (D/E), where A equals 0.075%; B equals the maximum amount of Facility B; C equals the average outstanding principal balance of Facility B during the calendar quarter; D equals the actual number of days elapsed during the calendar quarter; and E equals 360.  Each Non-usage Fee shall be due and payable to the Bank quarterly, in arrears, within fifteen (15) days after the Borrower’s receipt of an invoice for the Non-usage Fee from the Bank.  The Bank may begin to accrue the foregoing fee on the date the Borrower signs or otherwise authenticates this agreement.  

Liabilities. The term "Liabilities" in this Note means all debts, obligations, and liabilities of every kind and character of the Borrower whether individual, joint and several, contingent or otherwise, now or hereafter existing in favor of the Bank, including without limitation, all liabilities, interests, costs and fees, arising under or from any note, open account, overdraft, credit card, lease, letter of credit application, endorsement, surety agreement, guaranty, Rate Management Transaction, acceptance, foreign exchange contract or depository service contract, whether payable to the Bank or to a third party and subsequently acquired by the Bank, any monetary obligations (including interest) incurred or accrued during the pendency of any bankruptcy, insolvency, receivership or other similar proceedings, regardless of whether allowed or allowable in such proceeding, and all renewals, extensions, modifications, proceedings, consolidations, rearrangements, restatements, replacements or substitutions of any of the foregoing.  The term “Rate Management Transaction” in this Note means any transaction (including an agreement with respect thereto) that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option, derivative transaction or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.  

Related Documents. The term "Related Documents" in this Note means this Note, all loan agreements, credit agreements, reimbursement agreements, security agreements, mortgages, deeds of trust, pledge agreements, assignments, guaranties, and any other instrument or document executed in connection with this Note or in connection with any of the Liabilities.

Security. The term "Collateral" in this Note means all real or personal property described in all security agreements, pledge agreements, mortgages, deeds of trust, assignments, or other instruments now or hereafter executed in connection with this Note or in connection with any of the Liabilities. If applicable, the Collateral secures the payment of this Note and the Liabilities.

Bank's Right of Setoff. In addition to the Collateral, if any, the Borrower grants to the Bank a security interest in, and the Bank is authorized to setoff and apply, all Accounts, Securities and Other Property, and Bank Debt against any and all Liabilities of the Borrower. This right of setoff may be exercised at any time and from time to time, and without prior notice to the Borrower. This security interest in the Accounts and right of setoff may be enforced or exercised by the Bank regardless of whether or not the Bank has made any demand under this paragraph or whether the Liabilities are contingent, matured, or unmatured.  Any delay, neglect or conduct by the Bank in exercising its rights under this paragraph will not be a waiver of the right to exercise this right of setoff or enforce this security interest in the Accounts. The rights of the Bank under this paragraph are in addition to other rights the Bank may have in the Related Documents or by law. In this paragraph: (a) the term "Accounts" means any and all accounts and deposits of the Borrower (whether general, special, time, demand, provisional or final) at any time held by the Bank (including all Accounts held jointly with another, but excluding any IRA or Keogh Account, or any trust Account in which a security interest would be prohibited by law); (b) the term "Securities and Other Property" means any and all financial assets, securities entitlements, securities accounts, investment property and other personal property of the Borrower in the custody, possession or control of the Bank, JPMorgan Chase & Co. and their respective subsidiaries and affiliates (other than property held by the Bank in a fiduciary capacity); and (c) the term "Bank Debt" means all indebtedness at any time owing by the Bank, to or for the credit or account of the Borrower and any claim of the Borrower (whether individual, joint and several or otherwise) against the Bank now or hereafter existing. 

Representations by Borrower. Each Borrower represents that each of the following is and will remain true and correct until the later of maturity or the date on which all Liabilities evidenced by this Note are paid in full: (a) the execution and delivery of this Note and the performance of the obligations it imposes do not violate any law, conflict with any agreement by which it is bound, or require the consent or approval of any governmental authority or other third party; (b) this Note is a valid and binding agreement of the Borrower, enforceable according to its terms, (c) all balance sheets, profit and loss statements, and other financial statements and applications for credit furnished to the Bank in connection with the Liabilities are accurate and fairly reflect the financial condition of the organizations and persons to which they apply on their effective dates, including contingent liabilities of every type, which financial condition has not materially and adversely changed since those dates; and, if the Borrower is not a natural person (i) it is duly organized, and validly existing under the laws of the state where it is organized and is in good standing in each state where it is doing business; and (ii) the execution and delivery of this Note and the performance of the obligations it imposes (A) are within its powers and have been duly authorized by all necessary action of its governing body, and (B) do not contravene the terms of its articles of incorporation or organization, its by-laws, regulations or any partnership, operating or other agreement governing its organization and affairs.

Events of Default/Acceleration. If any of the following events occurs this Note shall become due immediately, without notice, at the Bank's option:

1. The Borrower, or any guarantor of any of the Liabilities (the "Guarantor"), fails to pay when due any amount payable under this Note, under any of the Liabilities, or under any agreement or instrument evidencing debt to any creditor.

2. The Borrower or any Guarantor (a) fails to observe or perform or otherwise violates any other term, covenant, condition or agreement of any of the Related Documents; (b) makes any materially incorrect or misleading representation, warranty, or certificate to the Bank; (c) makes any materially incorrect or misleading representation in any financial statement or other information delivered to the Bank; or (d) defaults under the terms of any agreement or instrument relating to any debt for borrowed money (other than the debt evidenced by this Note) and the effect of such default will allow the creditor to declare the debt due before its maturity.

3. In the event (a) there is a default under the terms of any Related Document, (b) any guaranty of the loan evidenced by this Note is terminated or becomes unenforceable in whole or in part, (c) any Guarantor fails to promptly perform under its guaranty, or (d) the Borrower fails to comply with, or pay, or perform under any agreement, now or hereafter in effect, between the Borrower and JPMorgan Chase & Co., or any of its subsidiaries or affiliates or their successors.

4. There is any loss, theft, damage, or destruction of any Collateral not covered by insurance.

5. A "reportable event" (as defined in the Employee Retirement Income Security Act of 1974 as amended) occurs that would permit the Pension Benefit Guaranty Corporation to terminate any employee benefit plan of the Borrower or any affiliate of the Borrower.

6. The Borrower or any Guarantor becomes insolvent or unable to pay its debts as they become due.

7. The Borrower or any Guarantor (a) makes an assignment for the benefit of creditors; (b) consents to the appointment of a custodian, receiver, or trustee for itself or for a substantial part of its assets; or (c) commences any proceeding under any bankruptcy, reorganization, liquidation, insolvency or similar laws of any jurisdiction.

8. A custodian, receiver, or trustee is appointed for the Borrower or any Guarantor or for a substantial part of its assets.

9. Proceedings are commenced against the Borrower or any Guarantor under any bankruptcy, reorganization, liquidation, or similar laws of any jurisdiction, and they remain undismissed for thirty (30) days after commencement; or the Borrower or the Guarantor consents to the commencement of those proceedings.

10. Any judgment is entered against the Borrower or any Guarantor, or any attachment, levy, or garnishment is issued against any property of the Borrower or any Guarantor.

11. The Borrower or any Guarantor dies, or a guardian or conservator is appointed for the Borrower or any Guarantor or all or any portion of the Borrower's assets, any Guarantor's assets, or the Collateral.

12. The Borrower or any Guarantor, without the Bank's written consent (a) is dissolved, (b) merges or consolidates with any third party, (c) leases, sells or otherwise conveys a material part of its assets or business outside the ordinary course of its business, (d) leases, purchases, or otherwise acquires a material part of the assets of any other business entity, except in the ordinary course of its business, or (e) agrees to do any of the foregoing (notwithstanding the foregoing, any subsidiary may merge or consolidate with any other subsidiary, or with the Borrower, so long as the Borrower is the survivor).

13. Any material adverse change occurs in the business, assets, affairs, prospects or financial condition of the Borrower or any Guarantor or any subsidiary of the Borrower.  

Remedies. If this Note is not paid at maturity, whether by acceleration or otherwise, the Bank shall have all of the rights and remedies provided by any law or agreement. The Bank is authorized to cause all or any part of the Collateral to be transferred to or registered in its name or in the name of any other person or business entity, with or without designating the capacity of that nominee. Without limiting any other available remedy, the Borrower is liable for any deficiency remaining after disposition of any Collateral. The Borrower is liable to the Bank for all reasonable costs and expenses of every kind incurred (or charged by internal allocation) in connection with the negotiation, preparation, execution, filing, recording, modification, supplementing and waiver of this Note or the Related Documents, both before and after judgment, including without limitation reasonable attorneys' fees and court costs. These costs and expenses include without limitation any costs or expenses incurred by the Bank in any bankruptcy, reorganization, insolvency or other similar proceeding.

Waivers. Any party liable on this Note waives (a) to the extent permitted by law, all rights and benefits under any laws or statutes regarding sureties, as may be amended; (b) any right to receive notice of the following matters before the Bank enforces any of its rights: (i) the Bank's acceptance of this Note, (ii) any credit that the Bank extends to the Borrower, (iii) the Borrower's default, (iv) any demand, diligence, presentment, dishonor and protest, or (v) any action that the Bank takes regarding the Borrower, anyone else, any Collateral, or any of the Liabilities, that it might be entitled to by law or under any other agreement; (c) any right to require the Bank to proceed against the Borrower, any other obligor or guarantor of the Liabilities, or any Collateral, or pursue any remedy in the Bank's power to pursue; (d) any defense based on any claim that any endorser or other parties' obligations exceed or are more burdensome than those of the Borrower; (e) the benefit of any statute of limitations affecting liability of any endorser or other party liable hereunder or the enforcement hereof; (f) any defense arising by reason of any disability or other defense of the Borrower or by reason of the cessation from any cause whatsoever (other than payment in full) of the obligation of the Borrower for the Liabilities; and (g) any defense based on or arising out of any defense that the Borrower may have to the payment or performance of the Liabilities or any portion thereof. Any party liable on this Note consents to any extension or postponement of time of its payment without limit as to the number or period, to any substitution, exchange or release of all or any part of the Collateral, to the addition of any other party, and to the release or discharge of, or suspension of any rights and remedies against, any person who may be liable for the payment of this Note. The Bank may waive or delay enforcing any of its rights without losing them. Any waiver affects only the specific terms and time period stated in the waiver. No modification or waiver of any provision of this Note is effective unless it is in writing and signed by the party against whom it is being enforced. 

Cooperation.  The Borrower agrees to fully cooperate with the Bank and not to delay, impede or otherwise interfere with the efforts of the Bank to secure payment from the assets which secure the Liabilities including actions, proceedings, motions, orders, agreements or other matters relating to relief from automatic stay, abandonment of property, use of cash collateral and sale of the Bank’s collateral free and clear of all liens.  

Rights of Subrogation. Any party liable on this Note waives and agrees not to enforce any rights of subrogation, contribution or indemnification that it may have against the Borrower, any person liable on the Liabilities, or the Collateral, until the Borrower and such party liable on this Note have fully performed all their obligations to the Bank, even if those obligations are not covered by this Note. 

Reinstatement. All parties liable on this Note agree that to the extent any payment is received by the Bank in connection with the Liabilities evidenced by this Note, and all or any part of such payment is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be transferred or repaid by the Bank or transferred or paid over to a trustee, receiver or any other entity, whether under any bankruptcy act or otherwise (any such payment is hereinafter referred to as a "Preferential Payment"), then this Note shall continue to be effective or shall be reinstated, as the case may be, even if all those Liabilities have been paid in full and whether or not the Bank is in possession of this Note, or whether this Note has been marked paid, released or cancelled, or returned to the Borrower and, to the extent of the  payment, repayment or other transfer by the Bank, the Liabilities or part thereof intended to be satisfied by such Preferential Payment shall be revived and continued in full force and effect as if said Preferential Payment had not been made.

Governing Law and Venue. This Note shall be governed by and construed in accordance with the laws of the State of Wisconsin (without giving effect to its laws of conflicts). The Borrower agrees that any legal action or proceeding with respect to any of its obligations under this Note may be brought by the Bank in any state or federal court located in the State of Wisconsin, as the Bank in its sole discretion may elect. By the execution and delivery of this Note, the Borrower submits to and accepts, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of those courts. The Borrower waives any claim that the State of Wisconsin is not a convenient forum or the proper venue for any such suit, action or proceeding.

Miscellaneous.  Each Borrower is liable jointly and severally for the obligations represented by this Note, the term "Borrower" means any one or more of them, and the receipt of value by any one of them constitutes the receipt of value by the others. This Note binds the Borrower and its successors, and benefits the Bank, its successors and assigns. Any reference to the Bank includes any holder of this Note. This Note is issued pursuant and entitled to the benefits of that certain Credit Agreement by and between the Borrower and the Bank, dated March 1, 1999, and all replacements thereof (the “Credit Agreement”) to which reference is hereby made for a more complete statement of the terms and conditions under which the loan evidenced hereby is made and is to be repaid.  The terms and provisions of the Credit Agreement are hereby incorporated and made a part hereof by this reference thereto with the same force and effect as if set forth at length herein.  No reference to the Credit Agreement and no provisions of this Note or the Credit Agreement shall alter or impair the absolute and unconditional obligation of the Borrower to pay the principal and interest on this Note as herein prescribed.  Capitalized terms not otherwise defined herein shall have the meaning assigned to such terms in the Credit Agreement.  Section headings are for convenience of reference only and do not affect the interpretation of this Note. Any notices and demands under or related to this document shall be in writing and delivered to the intended party at its address stated herein, and if to the Bank, at its main office if no other address of the Bank is specified herein, by one of the following means: (a) by hand, (b) by a nationally recognized overnight courier service, or (c) by certified mail, postage prepaid, with return receipt requested. Notice shall be deemed given: (a) upon receipt if delivered by hand, (b) on the Delivery Day after the day of deposit with a nationally recognized courier service, or (c) on the third Delivery Day after the notice is deposited in the mail. "Delivery Day" means a day other than a Saturday, a Sunday, or any other day on which national banking associations are authorized to be closed. Any party may change its address for purposes of the receipt of notices and demands by giving notice of such change in the manner provided in this provision. This Note and any Related Documents embody the entire agreement between the Borrower and the Bank regarding the terms of the loan evidenced by this Note and supercede all oral statements and prior writings relating to that loan. If any provision of this Note cannot be enforced, the remaining portions of this Note shall continue in effect. The Borrower agrees that the Bank may provide any information or knowledge the Bank may have about the Borrower or about any matter relating to this Note or the Related Documents to JPMorgan Chase & Co., or any of its subsidiaries or affiliates or their successors, or to any one or more purchasers or potential purchasers of this Note or the Related Documents. The Borrower agrees that the Bank may at any time sell, assign or transfer one or more interests or participations in all or any part of its rights and obligations in this Note to one or more purchasers whether or not related to the Bank.

Government Regulation. Borrower shall not (a) be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S. Office of Foreign Asset Control list) that prohibits or limits Bank from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower, or (b) fail to provide documentary and other evidence of Borrower's identity as may be requested by Bank at any time to enable Bank to verify Borrower's identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

USA PATRIOT ACT NOTIFICATION. The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for Borrower: When Borrower opens an account, if Borrower is an individual Bank will ask for Borrower's name, taxpayer identification number, residential address, date of birth, and other information that will allow Bank to identify Borrower, and if Borrower is not an individual Bank will ask for Borrower's name, taxpayer identification number, business address, and other information that will allow Bank to identify Borrower. Bank may also ask, if Borrower is an individual to see Borrower's driver’s license or other identifying documents, and if Borrower is not an individual to see Borrower's legal organizational documents or other identifying documents. 

WAIVER OF SPECIAL DAMAGES. THE BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT THE UNDERSIGNED MAY HAVE TO CLAIM OR RECOVER FROM THE BANK IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

JURY WAIVER. THE BORROWER AND THE BANK (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN THE BORROWER AND THE BANK ARISING OUT OF OR IN ANY WAY RELATED TO THIS NOTE OR THE OTHER RELATED DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO PROVIDE THE FINANCING EVIDENCED BY THIS NOTE.

Borrower:

Address: 133 S. Blair St. 

Madison Gas and Electric Company

Madison, WI 53703

By: /s/ Jeffrey C. Newman

       Jeffrey C. Newman

       Vice President and Treasurer

                         

        

Date Signed: September 29, 2006

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