Document:

Exhibit 10.1

 

	
   

  	
   

  	
   

  

THIRD AMENDED AND RESTATED
CREDIT AGREEMENT

 

Dated as of December 21,
2009

 

among

 

VENOCO, INC.,

as Borrower,

 

the Guarantors from Time to
Time Parties Hereto,

 

The Several Lenders from
Time to Time Parties Hereto,

 

BANK OF MONTREAL,

as Administrative Agent,

 

BMO CAPITAL MARKETS,

as Lead Arranger,

 

THE BANK OF NOVA SCOTIA

and

THE ROYAL BANK OF SCOTLAND PLC,

as Co-Syndication Agents

 

and

 

KEY BANK NATIONAL ASSOCIATION

and

UNION BANK, N.A.

as Co-Documentation Agents

	
   

  	
   

  	
   

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Article I DEFINITIONS

  	
  2

  
	
  1.1

  	
  Certain Defined Terms

  	
  2

  
	
  1.2

  	
  Other Interpretive Provisions

  	
  27

  
	
  1.3

  	
  Accounting Principles

  	
  27

  
	
   

  	
   

  	
   

  
	
  Article II THE CREDIT

  	
  28

  
	
  2.1

  	
  Amounts and Terms of the
  Commitments

  	
  28

  
	
  2.2

  	
  Procedure for Borrowing

  	
  29

  
	
  2.3

  	
  Conversion and Continuation
  Elections

  	
  29

  
	
  2.4

  	
  Voluntary Termination or Reduction

  	
  30

  
	
  2.5

  	
  Optional Prepayments

  	
  30

  
	
  2.6

  	
  Borrowing Base Determinations,
  Mandatory Prepayments

  	
  31

  
	
  2.7

  	
  Repayment

  	
  34

  
	
  2.8

  	
  Fees

  	
  35

  
	
  2.9

  	
  Computation of Fees and Interest

  	
  36

  
	
  2.10

  	
  Payments by the Company; Borrowings
  Pro Rata

  	
  36

  
	
  2.11

  	
  Payments by the Lenders to the
  Administrative Agent

  	
  37

  
	
  2.12

  	
  Sharing of Payments, Etc.

  	
  38

  
	
  2.13

  	
  Issuing the Letters of Credit

  	
  38

  
	
  2.14

  	
  Cash Collateralization for
  Defaulting Lenders

  	
  41

  
	
   

  	
   

  	
   

  
	
  Article III TAXES, YIELD PROTECTION AND
  ILLEGALITY

  	
  42

  
	
  3.1

  	
  Taxes

  	
  42

  
	
  3.2

  	
  Illegality

  	
  43

  
	
  3.3

  	
  Increased Costs and Reduction of
  Return

  	
  43

  
	
  3.4

  	
  Funding Losses

  	
  44

  
	
  3.5

  	
  Inability to Determine Rates

  	
  44

  
	
  3.6

  	
  Certificates of Lenders

  	
  44

  
	
  3.7

  	
  Substitution of Lenders

  	
  45

  
	
  3.8

  	
  Survival

  	
  45

  
	
   

  	
   

  	
   

  
	
  Article IV SECURITY

  	
  45

  
	
  4.1

  	
  The Security

  	
  45

  
	
  4.2

  	
  Agreement to Deliver Security
  Documents

  	
  45

  
	
  4.3

  	
  Perfection and Protection of
  Security Interests and Liens

  	
  46

  
	
  4.4

  	
  Offset

  	
  46

  
	
  4.5

  	
  Guaranty

  	
  46

  
	
  4.6

  	
  Production Proceeds

  	
  47

  
	
   

  	
   

  	
   

  
	
  Article V CONDITIONS PRECEDENT

  	
  48

  
	
  5.1

  	
  Conditions of the Effective Date
  and Initial Credit Extensions

  	
  48

  
	
  5.2

  	
  Conditions to All Credit Extensions

  	
  50

  

 

i

 

	
  Article VI REPRESENTATIONS AND WARRANTIES

  	
  51

  
	
  6.1

  	
  Organization, Existence and Power

  	
  51

  
	
  6.2

  	
  Corporate Authorization; No
  Contravention

  	
  52

  
	
  6.3

  	
  Governmental Authorization

  	
  52

  
	
  6.4

  	
  Binding Effect

  	
  52

  
	
  6.5

  	
  Litigation

  	
  52

  
	
  6.6

  	
  No Default

  	
  52

  
	
  6.7

  	
  ERISA Compliance

  	
  53

  
	
  6.8

  	
  Use of Proceeds; Margin Regulations

  	
  53

  
	
  6.9

  	
  Title to Properties

  	
  53

  
	
  6.10

  	
  Oil and Gas Reserves

  	
  54

  
	
  6.11

  	
  Reserve Report

  	
  54

  
	
  6.12

  	
  Gas Imbalances

  	
  54

  
	
  6.13

  	
  Taxes

  	
  54

  
	
  6.14

  	
  Financial Statements and Condition

  	
  55

  
	
  6.15

  	
  Environmental Matters

  	
  55

  
	
  6.16

  	
  Regulated Entities

  	
  55

  
	
  6.17

  	
  No Burdensome Restrictions

  	
  56

  
	
  6.18

  	
  Copyrights, Patents, Trademarks and
  Licenses, etc.

  	
  56

  
	
  6.19

  	
  Subsidiaries

  	
  56

  
	
  6.20

  	
  Insurance

  	
  56

  
	
  6.21

  	
  Full Disclosure

  	
  56

  
	
  6.22

  	
  Solvency

  	
  56

  
	
  6.23

  	
  Labor Matters

  	
  57

  
	
  6.24

  	
  Downstream Contracts

  	
  57

  
	
  6.25

  	
  Derivative Contracts

  	
  57

  
	
  6.26

  	
  Ellwood Subsidiary

  	
  57

  
	
  6.27

  	
  Senior Notes Indenture

  	
  57

  
	
  6.28

  	
  Existing Indebtedness

  	
  57

  
	
  6.29

  	
  Security Documents

  	
  57

  
	
   

  	
   

  	
   

  
	
  Article VII AFFIRMATIVE COVENANTS

  	
  58

  
	
  7.1

  	
  Financial Statements

  	
  58

  
	
  7.2

  	
  Certificates; Other Production and
  Reserve Information

  	
  59

  
	
  7.3

  	
  Notices

  	
  60

  
	
  7.4

  	
  Preservation of Company Existence,
  Etc.

  	
  61

  
	
  7.5

  	
  Maintenance of Property

  	
  61

  
	
  7.6

  	
  Insurance

  	
  61

  
	
  7.7

  	
  Payment of Obligations

  	
  62

  
	
  7.8

  	
  Compliance with Laws

  	
  62

  
	
  7.9

  	
  Compliance with ERISA

  	
  62

  
	
  7.10

  	
  Inspection of Property and Books
  and Records

  	
  62

  
	
  7.11

  	
  Environmental Laws

  	
  62

  
	
  7.12

  	
  New Subsidiary Guarantors

  	
  63

  
	
  7.13

  	
  Use of Proceeds

  	
  63

  
	
  7.14

  	
  Further Assurances

  	
  63

  
	
  7.15

  	
  Hedging Program

  	
  64

  

 

ii

 

	
  7.16

  	
  Agreements Regarding Unrestricted
  Subsidiaries

  	
  65

  
	
  7.17

  	
  Delivery of Account Control
  Agreements

  	
  65

  
	
   

  	
   

  	
   

  
	
  Article VIII NEGATIVE COVENANTS

  	
  65

  
	
  8.1

  	
  Limitation on Liens

  	
  65

  
	
  8.2

  	
  Disposition of Assets

  	
  66

  
	
  8.3

  	
  Consolidations and Mergers

  	
  67

  
	
  8.4

  	
  Loans and Investments

  	
  68

  
	
  8.5

  	
  Limitation on Indebtedness

  	
  68

  
	
  8.6

  	
  Transactions with Affiliates

  	
  69

  
	
  8.7

  	
  Margin Stock

  	
  69

  
	
  8.8

  	
  Contingent Obligations

  	
  69

  
	
  8.9

  	
  Restricted Payments

  	
  70

  
	
  8.10

  	
  Derivative Contracts

  	
  70

  
	
  8.11

  	
  Sale Leasebacks

  	
  71

  
	
  8.12

  	
  Consolidated Leverage Ratio

  	
  72

  
	
  8.13

  	
  Current Ratio

  	
  72

  
	
  8.14

  	
  Change in Business

  	
  72

  
	
  8.15

  	
  Accounting Changes

  	
  72

  
	
  8.16

  	
  Certain Contracts; Amendments;
  Multiemployer ERISA Plans

  	
  72

  
	
  8.17

  	
  Senior Notes

  	
  73

  
	
  8.18

  	
  Second Lien Term Loan Agreement

  	
  73

  
	
  8.19

  	
  Forward Sales, Production Payments,
  Etc.

  	
  74

  
	
  8.20

  	
  Use of Proceeds

  	
  74

  
	
  8.21

  	
  New Bank Accounts

  	
  74

  
	
   

  	
   

  	
   

  
	
  Article IX EVENTS OF DEFAULT

  	
  74

  
	
  9.1

  	
  Event of Default

  	
  74

  
	
  9.2

  	
  Remedies

  	
  77

  
	
  9.3

  	
  Application of Proceeds

  	
  77

  
	
  9.4

  	
  Rights Not Exclusive

  	
  78

  
	
   

  	
   

  	
   

  
	
  Article X THE ADMINISTRATIVE AGENT

  	
  78

  
	
  10.1

  	
  Appointment and Authorization;
  Limitation of Agency

  	
  78

  
	
  10.2

  	
  Delegation of Duties

  	
  79

  
	
  10.3

  	
  Liability of Administrative Agent

  	
  79

  
	
  10.4

  	
  Reliance by Administrative Agent

  	
  79

  
	
  10.5

  	
  Notice of Default

  	
  80

  
	
  10.6

  	
  Credit Decision

  	
  80

  
	
  10.7

  	
  Indemnification

  	
  81

  
	
  10.8

  	
  Administrative Agent in Individual
  Capacity

  	
  81

  
	
  10.9

  	
  Successor Administrative Agent

  	
  81

  
	
  10.10

  	
  Withholding Tax

  	
  82

  
	
  10.11

  	
  Arranger; Syndication Agents

  	
  83

  
	
  10.12

  	
  Release of Collateral

  	
  83

  
	
   

  	
   

  	
   

  
	
  Article XI MISCELLANEOUS

  	
  83

  

 

iii

 

	
  11.1

  	
  Amendments and Waivers

  	
  83

  
	
  11.2

  	
  Notices

  	
  85

  
	
  11.3

  	
  No Waiver; Cumulative Remedies

  	
  85

  
	
  11.4

  	
  Costs and Expenses

  	
  85

  
	
  11.5

  	
  Indemnity

  	
  86

  
	
  11.6

  	
  Payments Set Aside

  	
  86

  
	
  11.7

  	
  Successors and Assigns

  	
  87

  
	
  11.8

  	
  Assignments, Participations,
  Confidentiality, etc.

  	
  87

  
	
  11.9

  	
  Interest

  	
  89

  
	
  11.10

  	
  Indemnity and Subrogation

  	
  90

  
	
  11.11

  	
  Automatic Debits of Fees

  	
  91

  
	
  11.12

  	
  Notification of Addresses, Lending
  Offices, Etc.

  	
  91

  
	
  11.13

  	
  Counterparts

  	
  91

  
	
  11.14

  	
  Severability

  	
  91

  
	
  11.15

  	
  No Third Parties Benefited

  	
  91

  
	
  11.16

  	
  Governing Law, Jurisdiction

  	
  91

  
	
  11.17

  	
  Submission To Jurisdiction; Waivers

  	
  91

  
	
  11.18

  	
  Entire Agreement

  	
  92

  
	
  11.19

  	
  NO ORAL AGREEMENTS

  	
  92

  
	
  11.20

  	
  Accounting Changes

  	
  92

  
	
  11.21

  	
  WAIVER OF JURY TRIAL, PUNITIVE
  DAMAGES, ETC.

  	
  93

  
	
  11.22

  	
  Intercreditor Agreement

  	
  93

  
	
  11.23

  	
  Amendment and Restatement

  	
  93

  
	
  11.24

  	
  USA PATRIOT Act

  	
  94

  
	
  11.25

  	
  Acknowledgments

  	
  94

  
	
  11.26

  	
  Survival of Representations and
  Warranties

  	
  95

  
	
  11.27

  	
  Release of Collateral and Guarantee
  Obligations

  	
  95

  
	
  11.28

  	
  Agreement Regarding Intercreditor
  Agreement

  	
  96

  
	
  11.29

  	
  Assignment by Exiting Lenders

  	
  96

  

 

iv

 

SCHEDULES

 

	
  Schedule 1.1(a)

  	
  Commitments and
  Pro Rata Shares

  
	
  Schedule 6.5

  	
  Litigation

  
	
  Schedule 6.7

  	
  ERISA Compliance

  
	
  Schedule 6.14(a)

  	
  Material
  Indebtedness

  
	
  Schedule 6.15

  	
  Environmental
  Matters

  
	
  Schedule 6.17

  	
  Burdensome
  Restrictions

  
	
  Schedule 6.19

  	
  Subsidiaries and
  Minority Interests

  
	
  Schedule 6.24

  	
  Downstream
  Contracts

  
	
  Schedule 6.25

  	
  Existing
  Derivative Contracts

  
	
  Schedule
  6.29(a)-1

  	
  Security
  Agreement UCC Filing Jurisdictions

  
	
  Schedule
  6.29(a)-2

  	
  UCC Financing
  Statements to Remain on File

  
	
  Schedule
  6.29(a)-3

  	
  UCC Financing
  Statements to be Terminated

  
	
  Schedule 6.29(b)

  	
  Mortgage Filing
  Jurisdictions

  
	
  Schedule 8.1

  	
  Permitted Liens

  
	
  Schedule
  8.6

  	
  Transactions
  with Affiliates

  

 

EXHIBITS

 

	
  Exhibit A

  	
  Form of
  Notice of Borrowing

  
	
  Exhibit B

  	
  Form of
  Notice of Conversion/Continuation

  
	
  Exhibit C

  	
  Form of
  Compliance Certificate

  
	
  Exhibit D

  	
  Form of Assignment
  and Acceptance

  
	
  Exhibit E

  	
  Form of Note

  

 

v

 

THIRD
AMENDED AND RESTATED CREDIT AGREEMENT

 

This
THIRD AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of December 21,
2009, among VENOCO, INC., a Delaware corporation, as borrower (the “Company”), the GUARANTORS (defined below) from time to
time party hereto, each of the financial institutions which is or which may
from time to time become a party hereto (individually, a “Lender” and collectively, the “Lenders”),
the EXITING LENDER (defined below), BANK OF MONTREAL, a Canadian chartered bank
acting through certain of its United States branches and agencies, including
its Chicago, Illinois branch, as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Administrative Agent”), BMO CAPITAL MARKETS, as arranger
(in such capacity, the “Arranger”),
The Bank of Nova Scotia as Co-Syndication Agent (in such capacity, a “Co-Syndication Agent”), The
Royal Bank of Scotland plc, as Co-Syndication Agent (in such capacity, a “Co-Syndication Agent”), Key
Bank National Association as Co-Documentation Agent (in such capacity, a “Co-Documentation  Agent”),
and Union Bank, N.A., as Co-Documentation Agent (in such capacity, a “Co-Documentation Agent”).

 

RECITALS

 

WHEREAS,
the Company, certain Guarantors, the lenders party thereto, and Bank of
Montreal, as a Lender and Administrative Agent entered into the Second Amended
and Restated Credit Agreement dated March 30, 2006, as amended by the First
Amendment to Second Amended and Restated Credit Agreement dated as of May 2,
2006, the Second Amendment to Second Amended and Restated Credit Agreement
dated as of October 25, 2006, the Third Amendment to Second Amended and
Restated Credit Agreement dated as of November 29, 2006, the Fourth Amendment
to Second Amended and Restated Credit Agreement dated as of March 1, 2007, the
Fifth Amendment to Second Amended and Restated Credit Agreement dated as of May
7, 2007, the Sixth Amendment to Second Amended and Restated Credit Agreement
dated as of May 9, 2008, the Seventh Amendment to Second Amended and Restated
Credit Agreement dated as of June 18, 2009, and the Eighth Amendment to Second
Amended and Restated Credit Agreement dated as of  October 7, 2009 (as so amended, the “Existing Credit
Agreement”);

 

WHEREAS,
the Company has requested that the Existing Credit Agreement be amended and
restated to provide for certain amendments on the terms set forth in this
Agreement, which Agreement shall be effective upon satisfaction of certain
conditions precedent set forth in this Agreement;

 

WHEREAS,
the Lenders are willing to amend and restate the Existing Credit Agreement to
provide for certain amendments on the terms set forth in this Agreement, which
Agreement shall be effective upon satisfaction of certain conditions precedent
set forth in this Agreement;

 

WHEREAS,
the Company desires to refinance, renew, extend and continue the Existing
Revolving Credit Obligations (defined below), including the Existing Revolving
Credit Loans (defined below), with the proceeds of Loans hereunder, which initially
shall be Base Rate Loans; and

 

1

 

WHEREAS,
it is the intent of the parties hereto that this Agreement not constitute a
novation of the obligations and liabilities existing under the Existing Loan Documents
(defined below) or evidence payment of all or any of such obligations and
liabilities; that this Agreement amend and restate in its entirety the Existing
Credit Agreement and renew and extend the extensions of credit under the
Existing Credit Agreement, as so amended and restated; and that from and after
the Effective Time (defined below) the Existing Credit Agreement be of no
further force or effect except to evidence the incurrence of the obligations of
the Company and its Subsidiaries thereunder and the representations and
warranties made and the actions or omissions performed or required to be
performed thereunder, in each case prior to the Effective Time.

 

NOW,
THEREFORE, in consideration of the mutual agreements, provisions and covenants
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree that the
Existing Credit Agreement shall be and hereby is amended and restated in its
entirety as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1           Certain Defined
Terms.  The following terms have the
following meanings:

 

“Account Control Agreement” means a Deposit
Account Control Agreement or an Account Control Agreement to be executed and
delivered among any Loan Party, the Administrative Agent and each bank at which
such Loan Party maintains any bank account, in each case, in the form approved
by the Administrative Agent, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

“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 (or similar entity), which stock has
ordinary voting power for the election of the members of such entity’s board of
directors or persons exercising similar functions (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 equity of any Person not a
corporation which acquisition gives the acquiring Person the power to direct or
cause the direction of the management and policies of such Person, or (c) a
merger or consolidation or any other combination with another Person (other
than a Person that is a Subsidiary) provided that the Company or a Subsidiary
of the Company is the surviving entity.

 

“Adjusted Base Rate” shall mean, for any day and any Base Rate Loan, an
interest rate per annum equal to the greater of (a) the Federal Funds Rate for
such day plus one-half of one percent (0.5%) and (b) the Base Rate for such
day; such rate to be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day) during the period for which payable, but in no event shall such rate
at any time exceed the maximum rate of interest permitted by applicable law.

 

2

 

“Administrative Agent” has the meaning specified in the
introductory clause hereto.

 

“Administrative Agent-Related Persons” means
Administrative Agent, its Affiliates, and the officers, directors, employees,
agents and attorneys-in-fact of the Administrative Agent and its Affiliates.

 

“Affected Lender” has the
meaning specified in Section 3.7.

 

“Affiliate” means, as to any Person, any other Person
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the power
to direct or cause the direction of the management and policies of the other
Person, whether through the ownership of voting securities, by contract, or
otherwise.

 

“Agent Fee Letter” means the
letter agreement dated as of December 16, 2009 among the Company, BMO Capital
Markets and/or Bank of Montreal, as amended, restated, supplemented or
otherwise modified from time to time.

 

“Agent-Related Persons”
means with respect to each Agent, such Agent, its Affiliates, and each of the
officers, directors, employees, agents and attorneys-in-fact of it and its Affiliates.

 

“Agents” means, collectively,
the Administrative Agent, BMO Capital Markets, in its capacity as Arranger, The
Bank of Nova Scotia and The Royal Bank of Scotland plc, in their capacities as
Co-Syndication Agents, and Key Bank National Association and Union Bank, N.A.,
in their capacities as and Co-Documentation Agents.

 

“Agent’s Payment Office” means the address set forth on
the signature pages hereto in relation to the Administrative Agent, or such
other address as the Administrative Agent may from time to time specify.

 

“Agreement” means this Third Amended and Restated Credit
Agreement, as amended, restated, amended and restated, supplemented or
otherwise modified from time to time pursuant to the terms hereof and of the
Intercreditor Agreement.

 

“Annual Proposed Borrowing Base”
has the meaning specified in Section 2.6(b).

 

“Applicable Margin” means, with respect to any Base Rate
Loan or LIBO Rate Loan on any day, an amount equal to the percentage for such
day under the Pricing Grid for such type of Loan; provided, however, during the
period of any Deficiency, the Applicable Margin for Base Rate Loans and LIBO
Rate Loans shall be increased by 75.0 basis points.

 

“Applicable Percentage” means eighty percent
(80%).

 

“Arranger” has the meaning
specified in the introductory clause hereto.

 

“Assignee” has the meaning specified in Section 11.8(a).

 

“Assigned Interest” has the
meaning set forth in Section 11.29.

 

3

 

“Assignment and Acceptance”
has the meaning specified in Section 11.8(a).

 

“Attorney Costs” means and includes all reasonable fees
and disbursements of any law firm or other external counsel, the allocated cost
of reasonable internal legal services and all disbursements of internal
counsel.

 

“Audited Financial Statements”
means the Company’s consolidated financial statements as of and for the years
ended December 31, 2008, 2007 and 2006, together with the unqualified
independent auditors’ report and opinion of Deloitte & Touche LLP thereon,
all in form and substance satisfactory to the Administrative Agent.

 

“Available Borrowing Base” means, at the particular time
in question, the Borrowing Base in effect at such time minus the applicable
Effective Amount at such time.

 

“Bankruptcy Code” means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C. §101, et seq.).

 

“Base Rate” means, for any day
and with respect to all Base Rate Loans, a fluctuating rate of interest per
annum equal to the greatest of (a) the rate of interest most recently announced
by Bank of Montreal at its Chicago, Illinois office as its “base rate” for
Dollar advances made in the United States, (b) the Federal Funds Rate most
recently determined by the Administrative Agent plus 1/2% (0.5%) per annum and (c)
the LIBO Rate for a one-month Interest Period plus 1.5%.  The Base Rate is not necessarily intended to
be the lowest rate of interest determined by Bank of Montreal or any Lender in
connection with extensions of credit. Changes in the rate of interest on that
portion of any Loans maintained as Base Rate Loans shall be effective from and
including the effective date of such change in the Base Rate.  The Administrative Agent will give notice to
the Company of changes in the Base Rate due to a change in the rate of interest
described in clause (a) of this definition promptly upon receipt of notice of
any such change from Bank of Montreal.

 

“Base Rate Loan” means a Loan that bears interest based
at the Adjusted Base Rate, plus the Applicable Margin.

 

“Borrowing” means a borrowing hereunder consisting of
Loans of the same Interest Rate Type made to the Company on the same day by the
Lenders under Article II, and, other than
in the case of Base Rate Loans, having the same Interest Period.

 

“Borrowing Base” means at the particular time in question,
the amount provided for in Section 2.6.

 

“Borrowing Base Period” means the period from the
Effective Time until May 1, 2010 and each six-month period commencing May 1,
2010 and each subsequent November 1 and May 1 thereafter.

 

“Borrowing Date” means any date on which a Borrowing
occurs under Section 2.2 or an Issuance of a Letter of Credit occurs
under Section 2.13.

 

4

 

“Business Day” means any day other than a Saturday,
Sunday or other day on which commercial banks in Chicago, Illinois are
authorized or required by law to close and, if the applicable Business Day
relates to any LIBO Rate Loan, means such a day on which dealings are carried
on in the applicable offshore dollar interbank market.

 

“Capital Adequacy Regulation” means any guideline,
request or directive of any central bank or other Governmental Authority, or
any other law, rule or regulation, whether or not having the force of law, in
each case, regarding capital adequacy of any bank or of any corporation
controlling a bank.

 

“Capital Lease” means, when used with respect to any
Person, any lease in respect of which the obligations of such Person constitute
Capitalized Lease Obligations.

 

“Capital Stock” means any and
all shares, interests, participations or other equivalents (however designated)
of capital stock of a corporation, any and all equivalent ownership interests
in a Person (other than a corporation) and any and all warrants, rights or
options to purchase any of the foregoing.

 

“Capitalized Lease Obligations”
means, when used with respect to any Person, without duplication, all
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) Property, or a combination
thereof, which obligations shall have been or should be, in accordance with
GAAP, capitalized on the books of such Person.

 

“Cash Dividends” means with
respect to the Company, at any time, the distribution of earnings in Dollars to
shareholders of the Company, determined in conformity with GAAP.

 

“Cash Equivalents” means: 
(a) securities issued or fully guaranteed or insured by the United
States Government or any agency thereof and backed by the full faith and credit
of the United States having maturities of not more than twelve (12) months from
the date of acquisition; (b) certificates of deposit, time deposits, Eurodollar
time deposits, or bankers’ acceptances having in each case a tenor of not more
than twelve (12) months from the date of acquisition issued by and demand
deposits with any U.S. commercial bank or any branch or agency of a non-U.S.
commercial bank licensed to conduct business in the U.S. having combined
capital and surplus of not less than Five Hundred Million Dollars
($500,000,000) whose long term securities are rated at least A (or then
equivalent grade) by S&P and A2 (or then equivalent grade) by Moody’s at
the time of acquisition; (c) commercial paper of an issuer rated at least A-1
by S&P or P-1 by Moody’s at the time of acquisition, and in either case
having a tenor of not more than twelve (12) months; (d) repurchase agreements
with a term of not more than seven days for underlying securities of the types
described in clauses (a) and (b) above; and (e) money market mutual or similar
funds having assets in excess of $100,000,000.

 

“Catco” means Catco Energy, LLC, a Delaware limited
liability company.

 

“Change of Control” means (a) a purchase or acquisition,
directly or indirectly, by any “person” or “group” within the meaning of Section
13(d)(3) and 14(d)(2) of the Exchange Act (a “Group”),
other than a Permitted Holder, of “beneficial ownership” (as such term is
defined in Rule 13d-3 under the Exchange Act) of securities of the Company
which, together with any

 

5

 

securities owned beneficially by any “affiliates” or “associates” of
such Group (as such terms are defined in Rule 12b-2 under the Exchange Act),
shall represent more than thirty percent (30%)
of the combined voting power of the Company’s securities which are
entitled to vote generally in the election of directors and which are
outstanding on the date immediately prior to the date of such purchase or
acquisition; provided, however, that no such “Change
of Control” shall be deemed to have occurred under this clause (a)
if, and for so long as, Permitted Holders have “beneficial ownership” (as such
term is defined in Rule 13d-3 under the Exchange Act) of more than fifty
percent (50%) of the combined voting power of the Company’s securities which
are entitled to vote generally in the election of directors and which are
outstanding on the date of determination; (b) a sale of all or substantially
all of the assets of the Company and its Subsidiaries taken as a whole to any
Person or Group; (c) the liquidation or dissolution of the Company; or (d) the
first day on which a majority of the Board of Directors of the Company are not
Continuing Directors (as herein defined). 
As herein defined, “Continuing Directors”
means any member of the Board of Directors of the Company who (x) is a member
of such Board of Directors as of the Effective Date or (y) was nominated for
election or elected to such Board of Directors with the affirmative vote of
two-thirds of the Continuing Directors who were members of such Board of
Directors at the time of such nomination or election.

 

“Co-Documentation
Agent” has the meaning specified in the introductory clause
hereto.

 

“Co-Syndication Agent” has the
meaning specified in the introductory clause hereto.

 

“Code” means the Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.

 

“Collateral” means all Property which is subject to a
Lien in favor of Administrative Agent or which under the terms of any Security
Document is purported to be subject to such Lien.

 

“Commitment” means as to each
Lender, such Lender’s obligation to make or continue Loans and to incur or
participate in the LC Obligation in an aggregate principal amount at any one
time outstanding up to but not exceeding the lesser of (a) the Borrowing Base
multiplied by such Lender’s Pro Rata Share and (b) the amount set forth
opposite the name of such Lender on Schedule 1.1(a) hereto under the
heading “Maximum Loan Amount”, or if
such Lender is a party to an Assignment and Acceptance, the amount set forth on
the most recent Assignment and Acceptance of such Lender, as that amount may be
reduced or terminated pursuant to this Agreement.

 

“Commitment Fee” means the fee payable pursuant to Section 2.8(a).

 

“Company” has the meaning
specified in the introductory clause hereto.

 

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

 

“Consolidated EBITDA” means
with respect to the Company and its Restricted Subsidiaries on a consolidated
basis for any fiscal period, without duplication, (a) Consolidated Net Income
plus (b) depreciation, depletion, amortization, adjustments resulting from the
application of FAS 123R and other non-cash items reducing Consolidated Net
Income plus (c)

 

6

 

Consolidated Interest Expense plus (d) income tax expense minus (e) any
non-cash items increasing Consolidated Net Income, all determined in accordance
with GAAP.  For purposes of Section 8.12,
Consolidated EBITDA shall be calculated to give pro forma effect to
Acquisitions and Dispositions as if such Acquisition(s) or Disposition(s) had
been consummated on the first day of the period of four consecutive fiscal
quarters ending on the relevant date of calculation.

 

“Consolidated Interest Expense” means, with respect to
the Company and its Restricted Subsidiaries on a consolidated basis for any
fiscal period, total interest expenses (including that portion attributable to
Capitalized Lease Obligations and capitalized interest) of the Company and its
Restricted Subsidiaries in such fiscal period which are classified as interest
expense on the consolidated financial statements of the Company and its
Restricted Subsidiaries, all as determined in conformity with GAAP.  Consolidated Interest Expense shall be calculated
to give pro forma effect to financing transactions as if such financing had
been consummated on the first day of the period of four consecutive fiscal
quarters ending on the relevant date of calculation.

 

“Consolidated Leverage Ratio”
means as at the last day of any period of four consecutive fiscal quarters of
the Company, commencing with the fiscal quarter ended September 30, 2009 as the
last quarter in the initial period of four consecutive fiscal quarters
contemplated hereby, the ratio of (a) Consolidated Total Debt to (b) Consolidated
EBITDA for such period.

 

“Consolidated Net Income” means, with respect to the
Company and its Restricted Subsidiaries on a consolidated basis, for any fiscal
period, the net income (or net loss) of the Company and its Subsidiaries for
such period determined in accordance with GAAP, but excluding (a) the effects
of the application of FAS 133 and 143 and any expensing of capitalized costs
required by Rule 4-10 of Regulation S-X promulgated by the SEC as applied to reporting
entities employing the full cost method and (b) income resulting from transfers
of assets (other than cash) between the Company or any of its Restricted
Subsidiaries, on the one hand, and an Unrestricted Subsidiary, on the other
hand.

 

“Consolidated
Total Debt” means, at any date, the aggregate principal amount
of all Indebtedness of the Company and its Restricted Subsidiaries at such
date, determined on a consolidated basis in accordance with GAAP.

 

“Contingent Obligation” means, as to any Person without
duplication, any direct or indirect liability of that Person with or without
recourse, (a) with respect to any Indebtedness, dividend, letter of credit or
other similar obligation (the “primary obligations”)
of another Person (the “primary obligor”),
including any obligation of that Person (i) to purchase, repurchase or
otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase Property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a “Guaranty Obligation”); (b) with
respect to any Surety Instrument issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of drawings or
payments; (c) to purchase any materials,

 

7

 

supplies or other Property from, or to obtain the services of, another
Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other Property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other Property is ever made or tendered, or such services are ever
performed or tendered, or (d) in respect of any Derivative Contract.  The amount of any Contingent Obligation
shall, in the case of Guaranty Obligations, be deemed equal to the lesser of (i)
the stated maximum amount, if any, of such Contingent Obligation and (ii) the
maximum stated or determinable amount of the primary obligation in respect of which
such Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and in the case of
other Contingent Obligations, shall be equal to the lesser of (i) the stated
maximum amount, if any, of such Contingent Obligation and (ii) the maximum
reasonably anticipated liability in respect thereof.

 

“Contractual Obligation” means, as to any Person, any
provision of any security issued by such Person or of any agreement,
undertaking, contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it or any of
its Property is bound.

 

“Conversion/Continuation Date” means any date on which,
under Section 2.3, the Company (a) converts Loans of one Interest Rate
Type to another Interest Rate Type, or (b) continues as Loans of the same
Interest Rate Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.

 

“Credit Extension” means and includes the making,
conversion or continuation of any Loan and the Issuance of any Letter of Credit
hereunder.

 

“Current Assets” means, for any Person, all assets of
such Person that, in accordance with GAAP, would be included as current assets
on a balance sheet as of a date of calculation; provided, however, an amount
equal to the Available Borrowing Base shall be included as current assets.

 

“Current Liabilities” means, for any Person, all
liabilities of such Person that, in accordance with GAAP, would be included as
current liabilities on a balance sheet as of the date of calculation; provided,
however, the current portion of the Loans which are not past due may be
excluded from Current Liabilities.

 

“Deficiency” has the meaning specified in Section 2.6(f).

 

“Default” means any event or circumstance which, with the
giving of notice, the lapse of time, or both, would (if not cured or otherwise
remedied during such time) constitute an Event of Default.

 

“Default Rate” has the meaning specified in Section 2.7(b)(iii).

 

“Defaulting Lender” means any
Lender, as determined by the Administrative Agent, that has (a) failed to fund
any portion of its Loans or participations in Letters of Credit within three
Business Days of the date required to be funded by it hereunder, (b) notified
the Company, the Administrative Agent, the Issuing Bank or any Lender in
writing that it does not intend to

 

8

 

comply with any of its funding obligations under this Agreement or has
made a public statement to the effect that it does not intend to comply with
its funding obligations under this Agreement, (c) failed, within three Business
Days after request by the Administrative Agent, to confirm that it will comply
with the terms of this Agreement relating to its obligations to fund
prospective Loans and participations in then outstanding Letters of Credit, (d)
otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within three Business Days
of the date when due, unless the subject of a good faith dispute, or (e) (i) becomes
or is insolvent or has a parent company that has become or is insolvent or (ii)
becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee or custodian appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in
any such proceeding or appointment or has a parent company that has become the
subject of a bankruptcy or insolvency proceeding, or has had a receiver,
conservator, trustee or custodian appointed for it, or has taken any action in
furtherance of, or indicating its consent to, approval of or acquiescence in
any such proceeding or appointment; provided, however, that a Lender shall not
become a Defaulting Lender solely as the result of the acquisition or
maintenance of an ownership interest in such Lender or Person controlling such
Lender or the exercise of control over a Lender or Person controlling such
Lender by a Governmental Authority or an instrumentality thereof.

 

“Derivative Contract” means all futures contracts,
forward contracts, swap, put, cap or collar contracts, option contracts,
hedging contracts or other derivative contracts or similar agreements covering
oil and gas commodities or prices or financial, monetary or interest rate
instruments.

 

“Disposition” has the meaning specified in Section 8.2.

 

“Disqualified Stock” means, as to any Person, any
Capital Stock of such Person that by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable) or otherwise
(including upon the occurrence of an event) requires the payment of dividends
(other than dividends payable solely in Capital Stock which does not otherwise
constitute Disqualified Stock) or matures or is required to be redeemed
(pursuant to any sinking fund obligation or otherwise) or is convertible into
or exchangeable for Indebtedness or is redeemable at the option of the holder
thereof, in whole or in part, at any time on or prior to  the date six (6) months after the Maturity
Date.

 

“Dollars”, “dollars” and “$” each mean lawful money of the United States.

 

“Effective Amount” means on any date, the aggregate
outstanding principal amount of all Loans after giving effect to any
prepayments or repayments of such Loans occurring on such date plus the LC
Obligation on such date.

 

“Effective Date” means the
date on which the Effective Time occurs.

 

“Effective Time” means the time as of which all conditions
precedent set forth in Section 5.1 are satisfied or waived by all
Lenders.

 

“Eligible Assignee” means (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000;

 

9

 

(b) a commercial bank organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and Development,
or a political subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is acting through
a branch or agency located in the United States; (c) a financial institution
with a net worth in excess of $100,000,000; and (d) a Person with a combined
capital and surplus of at least $100,000,000 that is primarily engaged in the
business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a
Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of
which a Lender is a Subsidiary.

 

“Ellwood” means Ellwood Pipeline, Inc., a California
corporation and a wholly owned Restricted Subsidiary of the Company.

 

“Environmental Claims” means all material claims by any
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.

 

“Environmental Laws” means all federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, requests, licenses, authorizations and
permits of, and agreements with, any Governmental Authorities, in each case
relating to environmental, health, and safety matters.

 

“ERISA” means the Employee Retirement Income Security Act
of 1974, as amended, and regulations promulgated thereunder.

 

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

 

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

 

“Eurodollar Reserve Percentage” has the meaning specified
in the definition of “LIBO Rate”.

 

“Event of Default” means any of the events or
circumstances specified in Section 9.1.

 

10

 

“Exchange Act” means the Securities and Exchange Act of
1934.

 

“Existing Credit Agreement”
has the meaning specified in the recitals hereto.

 

“Existing Derivative Contracts”
means the contracts listed on Schedule 6.25
hereto.

 

“Existing Loan Documents” means
the “Loan  Documents”
as defined in the Existing Credit Agreement.

 

“Existing Revolving Credit
Loans” means the aggregate $61,860,500 principal
amount of “Revolving  Credit  Loans” as defined in the
Existing Credit Agreement outstanding at the Effective Time.

 

“Existing Revolving Credit Outstandings”
means the sum of (a) the Existing Revolving Credit Loans and (b) the “LC Obligations” as defined in the Existing Credit Agreement
outstanding at the Effective Time.

 

“Exiting Lender” means each of
Lehman Commercial Paper Inc. and Allied Irish Bank.

 

“FAS 123R”
means Financial Accounting Statement 123R promulgated by the Financial
Accounting Standards Board.

 

“FAS 133” means Financial Accounting Statement 133
promulgated by the Financial Accounting Standards Board.

 

“FAS 143” means Financial Accounting Statement 143
promulgated by the Financial Accounting Standards Board.

 

“FDIC” means the Federal Deposit Insurance Corporation,
and any Governmental Authority succeeding to any of its principal functions.

 

“Federal Funds Rate” means, for any day, the rate set
forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New York
(including any such successor, “H.15(519)”) on
the preceding Business Day opposite the caption “Federal
Funds (Effective)”; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York, New York time) on that day by each of three leading brokers of Federal
funds transactions in New York, New York selected by the Administrative Agent.

 

“Fiscal Quarter”
means each of the three-month periods coinciding with the fiscal quarters
adopted by the Company for financial reporting purposes.

 

“FRB” means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its principal
functions.

 

11

 

“GAAP” means generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of
the date of determination.

 

“Governmental Authority” means any nation or government,
any state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

 

“Guarantor” means (i) each of Catco, TexCal LP, TexCal
GP, TexCal STX and Whittier, and (ii) any new Restricted Subsidiary of the
Company which is required to execute the Guaranty under Section
7.12 upon the execution and delivery by such entity of the Guaranty.

 

“Guaranty” means the Third Amended and Restated Guaranty
Agreement dated as of the date hereof executed by each Guarantor in favor of
the Administrative Agent and the Lenders, as the same may be amended,
supplemented or otherwise modified from time to time pursuant to the terms
hereof (including, in the case of any Subsidiary required to execute the
Guaranty pursuant to Section 7.12, by
execution and delivery of a joinder thereto in the form of Annex 1 thereto).

 

“Guaranty Obligation” has the meaning specified in the
definition of “Contingent Obligation.”

 

“Highest Lawful Rate” means, as of a particular date, the
maximum nonusurious interest rate that under applicable federal and state law
may then be contracted for, charged or received by the Lenders in connection
with the Obligations.

 

“Hydrocarbon Interests” means leasehold and other
interests in or under oil, gas and other liquid or gaseous hydrocarbon leases,
mineral fee interests, overriding royalty and royalty interests, net profit
interests, production payment interests relating to oil, gas or other liquid or
gaseous hydrocarbons wherever located including any reserved or residual
interest of whatever nature, covering lands in or offshore the continental
United States.

 

“Indebtedness” of any Person means, without duplication, (a)
all indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of Property or services (other than
trade payables entered into in the ordinary course of business on ordinary
terms and not past due for more than 90 days after the due date thereof, other
than those trade payables disputed in good faith); (c) all non-contingent
reimbursement or payment obligations with respect to Surety Instruments; (d) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of Property, assets or businesses; (e) all indebtedness created or arising
under any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to Property acquired by the Person (even
though the rights and remedies

 

12

 

of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such Property) including, without
limitation, production payments, net profit interests and other Hydrocarbon
Interests subject to repayment out of future Oil and Gas production; (f) all
obligations with respect to Capital Leases; (g) all non-contingent net
obligations with respect to Derivative Contracts; (h) gas imbalances or
obligations under take-or-pay or prepayment contracts with respect to any of
the Oil and Gas Properties which would require the Company or any of its
Subsidiaries to deliver Oil and Gas from any of the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor; (i)
all indebtedness referred to in clauses (a) through (g) above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in Property (including accounts
and contracts rights) owned by such Person, even though such Person has not
assumed or become liable for the payment of such Indebtedness; and (j) all
Guaranty Obligations in respect of indebtedness or obligations of others of the
kinds referred to in clauses (a) through (g) above.

 

“Indemnified Liabilities” has the meaning specified in Section 11.5.

 

“Indemnified Person” has the meaning specified in Section 11.5.

 

“Independent Auditor” has the meaning specified in Section 7.1(a).

 

“Independent Engineer” has the meaning specified in Section 7.2(c).

 

“Initial Borrowing Base” has the meaning specified in Section 2.6(a).

 

“Initial Reserve Report” has the meaning specified in Section 6.11.

 

“Insolvency Proceeding” means (a) any case, action or
proceeding relating to bankruptcy, reorganization, insolvency, liquidation,
receivership, dissolution, winding-up or relief of debtors, or (b) any general
assignment for the benefit of creditors, composition, marshaling of assets for
creditors, or other, similar arrangement in respect of its creditors generally
or any substantial portion of its creditors; undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.

 

“Intercreditor Agreement” means that certain Amended and Restated Intercreditor
Agreement dated as of May 7, 2007 among the Administrative Agent, as first lien
collateral agent, and Credit Suisse, Cayman Islands Branch, as second lien
collateral trustee, as amended, restated, supplemented or otherwise modified
from time to time pursuant to the terms hereof and thereof.

 

“Interest Payment Date” (a) as to any Base Rate Loan,
means January 1, 2010 and the first day of each month thereafter prior to the
Termination Date and each date on which such a Base Rate Loan is converted into
another Interest Rate Type of Loan, and (b) as to any LIBO Rate Loan, the last
day of the Interest Period applicable to such Loan; provided, however, that if
any Interest Period for an LIBO Rate Loan exceeds three months, the date that
falls three months after the beginning of such Interest Period is also an
Interest Payment Date.

 

13

 

“Interest Period” means, as to any LIBO Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which such Loan is converted into or continued
as LIBO Rate Loan, and ending on the date one week, or one, two, three or six
months thereafter (or such greater number of months as may be requested by the
Company and determined to be available by the Administrative Agent) as selected
by the Company in its Notice of Borrowing or Notice of Conversion/Continuation;
provided, however, that:  (a) if any
Interest Period would otherwise end on a day that is not a Business Day, that
Interest Period shall be extended to the following Business Day unless, in the
case of an LIBO Rate Loan, the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the preceding Business Day; (b) any Interest Period
pertaining to an LIBO Rate Loan that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and (c) no
Interest Period for any Loan shall extend beyond the Termination Date.

 

“Interest Rate Type” means, with respect to any Loan, the
interest rate, being either the Base Rate or the LIBO Rate forming the basis
upon which interest is charged against such Loan hereunder.

 

“IRS” means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal functions under the
Code.

 

“Issue” means with respect to any Letter of Credit, to
issue or extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms “Issued,” “Issuing” and “Issuance”
have corresponding meanings.

 

“Issuing Lender” means any Affiliate, unit or agency of
Bank of Montreal.

 

“LC Application” means an application or agreement for a
standby Letter of Credit in the Issuing Lender’s current form with appropriate
insertions duly executed by the Company pursuant to Section
2.13(a).

 

“LC Collateral” means any amounts, plus interest accrued
thereon, held by the Administrative Agent as security for the LC Obligation.

 

“LC Obligation” means, at the time in question, the sum
of the Matured LC Obligation plus the aggregate amount outstanding under all
Letters of Credit then outstanding.

 

“LC Related Document” means the Letters of Credit, LC
Applications and any other document relating to any Letter of Credit including
any of the Issuing Lender’s standard form documents for letter of credit
issuances.

 

“Lender Fee Letter” means the
letter agreement dated as of December 16, 2009 among the Company, BMO Capital
Markets and/or Bank of Montreal, as amended, restated, supplemented or
otherwise modified from time to time.

 

“Lenders” has the
meaning specified in the introductory clause hereto.

 

14

 

“Lending Office” means, as to any Lender, the office or
offices of such Lender specified as its “Lending
Office” or “Domestic Lending Office”
or “Offshore Lending Office,” as
the case may be, on the signature pages hereof, or such other office or offices
as such Lender may from time to time notify the Company and the Administrative
Agent.

 

“Letter of Credit” means any stand-by letter of credit
issued by the Issuing Lender pursuant to this Agreement and upon an LC
Application.

 

“LIBO Rate” means, for any Interest Period, with respect
to LIBO Rate Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded upward to the next 1/16th of 1%) determined by the
Administrative Agent as follows:

 

	
  LIBO Rate =

  	
   

  	
  LIBOR

  	
   

  
	
   

  	
   

  	
  1.00 - Eurodollar Reserve Percentage

  	
   

  
	
   

  	
   

  	
   

  
	
  where,

  	
   

  	
  “Eurodollar Reserve Percentage” means for any day for
  any Interest Period the maximum reserve percentage (expressed as a decimal,
  rounded upward to the next 1/100th of 1%) in effect on such day (whether or
  not applicable to any Lender) under regulations issued from time to time by
  the FRB for determining the maximum reserve requirement (including any
  emergency, supplemental or other marginal reserve requirement) with respect
  to Eurocurrency funding (currently referred to as “Eurocurrency
  liabilities”); and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “LIBOR” means relative to any Interest Period for LIBO
  Rate Loans:

  

 

(a)           the rate per annum equal to
the rate determined by the Administrative Agent to be the offered rate that
appears on the page, currently page 3750, of the Telerate screen (or any
successor thereto or substitute therefor) that displays an average British
Bankers Association Interest Settlement Rate for deposits in Dollars (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period, determined as of approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period, or

 

(b)           if the rate referenced in the
preceding clause (a) does not appear on such page or service or such page or
service shall not be available, the rate per annum equal to the rate determined
by the Administrative Agent to be the offered rate on such other page or other
service that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of such
Interest Period) with a term equivalent to such Interest Period, determined as
of approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, or

 

(c)           if the rates referenced in
the preceding clauses (a) and (b) are not available, the rate per annum
determined by the Administrative Agent as the rate of interest at which
deposits in Dollars for delivery on the first day of such Interest Period in
same day funds in the approximate amount of the LIBO Rate Loan being made,
continued or converted by Bank of Montreal and with a term equivalent to such
Interest Period would be offered by Bank of

 

15

 

Montreal’s London Branch to major banks in the London interbank
eurodollar market at their request at approximately 4:00 p.m. (London time) two
Business Days prior to the first day of such Interest Period.

 

The
LIBO Rate shall be adjusted automatically as to all LIBO Rate Loans then
outstanding as of the effective date of any change in the Eurodollar Reserve
Percentage.

 

“LIBO Rate Loan” means a Loan that bears interest based
on the LIBO Rate plus the Applicable Margin.

 

“Lien” means any security interest, mortgage, deed of
trust, pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of any kind
or nature whatsoever in respect of any Property (including those created by,
arising under or evidenced by any conditional sale or other title retention
agreement and the interest of a lessor under a Capital Lease), any financing
lease having substantially the same economic effect as any of the foregoing, or
the filing of any financing statement naming the owner of the asset to which
such lien relates as debtor, under the Uniform Commercial Code or any
comparable law and any contingent or other agreement to provide any of the
foregoing, but not including (a) the interest of a lessor under a lease on Oil
and Gas Properties or (b) the interest of a lessor under an Operating Lease.

 

“Loan Documents” means this Agreement, the Notes, each
Guaranty, the Security Documents, any Qualifying Derivative Contracts, each LC
Application, each Letter of Credit, the Agent Fee Letter, the Lender Fee
Letter, and all other documents delivered to the Administrative Agent or any
Lender in connection herewith.

 

“Loans” has the meaning
specified in Section 2.1(a).

 

“Loan Parties” means the
Company and each Guarantor.

 

“Margin Stock” means “margin stock” as such term is
defined in Regulation T, U or X of the FRB.

 

“Material Adverse Effect” means (a) a material adverse
change in, or a material adverse effect upon, the operations, business,
properties or financial condition of the Company and its Subsidiaries, taken as
a whole; (b) a material impairment of the ability of the Company or any
Restricted Subsidiary to perform under any material Loan Document and to avoid
any Default; or (c) a material adverse effect upon the legality, validity,
binding effect or enforceability against the Company or any Restricted
Subsidiary of any material Loan Document.

 

“Matured LC Obligation” means the aggregate amount of
payments theretofore made by the Issuing Lender in respect of Letters of Credit
and not theretofore reimbursed by the Company to the Issuing Lender or deemed
Loans pursuant to Section 2.13(d).

 

“Maturity Date” means January 15,
2013.

 

“Maximum Loan Amount” means an aggregate amount of
$300,000,000.  Each Lender’s Maximum Loan
Amount is set forth on Schedule 1.1(a) hereto
under the heading “Maximum

 

16

 

Loan
Amount” (which, for the avoidance of doubt gives effect to
the assignment by the Exiting Lenders pursuant to Section 11.29), or if
such Lender is a party to an Assignment and Acceptance, the amount set forth on
the most recent Assignment and Acceptance of such Lender, as that amount may be
reduced or terminated pursuant to this Agreement.

 

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

 

“Mortgages” means the Mortgages, Deeds of Trust, Security
Agreements, Assignments of Production and Financing Statements from the Loan
Parties, as applicable, in favor of the Administrative Agent, for the benefit
of the Secured Parties, covering the Oil and Gas Properties of the Loan Parties
and all supplements, assignments, assumptions, amendments and restatements
thereto (or any agreement in substitution therefor) which are executed and
delivered to the Administrative Agent for benefit of the Lenders pursuant to Article IV of this Agreement.

 

“Mortgaged Properties” means such Oil and Gas Properties
upon which the Loan Parties have granted the Administrative Agent for the
benefit of the Lenders a valid, first Lien pursuant to the Mortgages, subject
to Permitted Liens.

 

“Multiemployer Plan” means a “multiemployer plan”, within
the meaning of Section 4001(a)(3) of ERISA, to which the Company or any ERISA
Affiliate makes, is making, or is obligated to make contributions or, during
the preceding three calendar years, has made, or been obligated to make,
contributions.

 

“Net Cash
Proceeds” means (a) in connection with any Disposition or any
Recovery Event, all proceeds thereof in the form of cash and Cash Equivalents
of such Disposition or Recovery Event, net of reasonable and customary Attorney
Costs, accountants’ fees, investment banking fees, amounts required to be
applied to the repayment of Indebtedness secured by a Lien expressly permitted
hereunder on any Property which is the subject of such Disposition or Recovery
Event and other reasonable and customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to be
payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements) and (b) in connection
with any issuance or sale of equity securities or debt securities or
instruments or the incurrence of loans, the cash proceeds received from such
issuance or incurrence (other than the exercise price of stock options issued
for compensatory purposes), net of Attorney Costs, investment banking fees,
accountants’ fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith.

 

“Net Present Value” means the
PV 10 Value of the Oil and Gas Properties and adjusted at the date of
determination on the same basis as the most recent Reserve Report previously
delivered pursuant to Section 6.11 or Section 7.2(c)  was prepared
for Dispositions and purchases of Hydrocarbon Interests occurring since the
date of such report.  The Net Present
Value shall be calculated by the Company as of each date of determination.

 

“Net Proceeds of Production” means the amounts
attributable to the Company’s and its Subsidiaries’ interest in the proceeds
received from the sale of Oil and Gas produced from Mortgaged Properties after
deduction of (a) royalties existing as of the effective date on which

 

17

 

the Company or its Subsidiaries first mortgaged its interests in such
Mortgaged Properties in favor of the Lenders or their predecessors; (b) third
party pipeline and transportation charges; (c) production, ad valorem and
severance taxes chargeable against such production; (d) marketing costs; (e) overriding
royalties existing as of the effective date on which the Company or its
Subsidiaries first mortgaged its interests in such Mortgaged Properties in
favor of the Lenders or their predecessors; (f) other interests in and measured
by production burdening the Mortgaged Properties existing as of the effective
date on which the Company or its Subsidiaries first mortgaged its interests in
such Mortgaged Properties in favor of the Lenders or their predecessors; and (g)
the current portion of direct operating or production costs which is allocable
to such interest in such Mortgaged Properties.

 

“Non-Recourse Obligations” means Indebtedness, Guaranty
Obligations, and other obligations or commitments of any type as to which (a) no
Loan Party (i) is obligated to provide credit support in any form (including
any undertaking, agreement or instrument that would constitute Indebtedness) or
(ii) is or becomes directly or indirectly liable and (b) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of such Indebtedness or Guaranty
Obligations (other than Indebtedness or Guaranty Obligations included in the
Obligations of a Loan Party) to declare a default on such Indebtedness,
Guaranty Obligations, obligations or commitments of such Loan Party or cause
the payment of any such Indebtedness to be accelerated or payable prior to its
stated maturity or cause any such Guaranty Obligations, obligations or other
commitments to become payable.

 

“Notes” means the promissory
notes, whether one or more, specified in Section 2.1(b),
substantially in the same form as Exhibit E,
including any amendments, modifications, renewals or replacements of such
promissory notes.

 

“Notice of Borrowing” means a notice in substantially the
form of Exhibit A.

 

“Notice of Conversion/Continuation” means a notice in
substantially the form of Exhibit B.

 

“NYMEX” means the New York
Mercantile Exchange.

 

“Obligations” means the unpaid
principal of and interest (including interest accruing at the then applicable
rate provided herein after the maturity of the Loans and interest accruing at
the then applicable rate provided herein after the filing of any petition for
an Insolvency Proceeding, or the commencement of any Insolvency Proceeding,
whether or not a claim for post-filing or post-petition interest is allowed in
such proceeding) on the Loans and all other advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing by the
Company to any Lender, the Issuing Lender, the Administrative Agent, any
Qualifying Derivative Contract Counterparty or any Indemnified Person, whether
direct or indirect (including those acquired by assignment), absolute or contingent,
due or to become due, now existing or hereafter arising, whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including all fees, charges and disbursements of counsel) or
otherwise.

 

18

 

“Oil and Gas” means petroleum, natural gas and other
related hydrocarbons or minerals or any of them and all other substances
produced or extracted in association therewith.

 

“Oil and Gas Liens”  means
(a) Liens arising under oil and gas leases, overriding royalty agreements, net
profits agreements, royalty trust agreements, farm-out agreements, division
orders, contracts for the sale, purchase, exchange, transportation, gathering
or processing of oil, gas or other hydrocarbons, unitizations and pooling
designations, declarations, orders and agreements, development agreements,
operating agreements, production sales contracts, area of mutual interest
agreements, gas balancing or deferred production agreements, injection, repressuring
and recycling agreements, salt water or other disposal agreements, seismic or
geophysical permits or agreements, and other agreements that are customary in
the oil and gas business and are entered into by the Company in the ordinary
course of business; provided, however, in all instances that such Liens are
limited to the assets that are the subject of the relevant agreement; and (b) Liens
on pipelines or pipeline facilities that arise by operation of law.

 

“Oil and Gas Properties” means Hydrocarbon Interests now
or hereafter owned by the Loan Parties and contracts executed in connection
therewith and all tenements, hereditaments, appurtenances, and properties
belonging, affixed or incidental to such Hydrocarbon Interests, including,
without limitation, any and all Property, now owned by the Loan Parties and
situated upon or to be situated upon, and used, built for use, or useful in
connection with the operating, working or developing of such Hydrocarbon
Interests, including, without limitation, any and all petroleum or natural gas
wells, buildings, structures, field separators, liquid extractors, plant
compressors, pumps, pumping units, field gathering systems, tank and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
apparatus, equipment, appliances, tools, implements, cables, wires, towers,
taping, tubing and rods, surface leases, rights of way, easements and
servitudes, and all additions, substitutions, replacements for, fixtures and
attachments to any and all of the foregoing owned directly or indirectly by the
Loan Parties.

 

“Operating Agreements” mean those agreements now or
hereafter executed in connection with the operation of the Oil and Gas
Properties.

 

“Operating Lease” means an operating lease determined in
accordance with GAAP.

 

“Optionee Payment” means cash
bonus payments in the aggregate amount not to exceed $1,500,000 that certain
existing holders of options outstanding under the Company’s 2000 Stock
Incentive Plan are entitled to receive upon the declaration and payment  of any dividends paid by the Company on its
common stock (including the non-cash dividends described on Schedule 8.6).

 

“Organization Documents” means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate of
determination or instrument relating to the rights of preferred shareholders of
such corporation, any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee thereof) of such
corporation; for any limited liability company, the certificate of formation or
organization, the limited liability company agreement or operating agreement,
initial resolution of members and all other documents filings and instruments
necessary to create and constitute such company; and for any

 

19

 

limited partnership, the certificate of formation or organization and
the agreement of limited partnership, in each case, as amended from time to
time.

 

“Originating Lender” has the
meaning specified in Section 11.8(d).

 

“Other Taxes” means any present or future stamp or
documentary taxes or any other excise or Property Taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or
any other Loan Documents.

 

“Participant” has the meaning specified in Section 11.8(d).

 

“PBGC” means the Pension Benefit Guaranty Corporation, or
any Governmental Authority succeeding to any of its principal functions under
ERISA.

 

“Pension Plan” means a pension plan (as defined in Section
3(2) of ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan,
which the Company or any of its Subsidiaries sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.

 

“Permitted Holder” means
Timothy M. Marquez and Bernadette B. Marquez, individually or as Trustees of
the Marquez Trust dated February 26, 2002 (a trust of which Timothy M. Marquez
and Bernadette B. Marquez have sole discretionary authority), and any entity of
which any such Person owns, directly or indirectly, and exercises voting power
with respect to, 80% or more of the capital stock, partnership or membership
interests or other ownership interests entitled (without regard to the
occurrence of any contingency, to vote in the election of (a) the board of
directors of such entity, if such entity is a corporation, (b) the board of
directors of its general partner, if such entity is a limited partnership or (c)
the board or committee of such entity serving a function comparable to that to
the board of directors of a corporation, if such entity is neither a
corporation nor limited partnership.

 

“Permitted Liens” means the
collective reference to (i) in the case of Collateral other than Pledged Stock,
Liens permitted by Section 8.1 and (ii) in
the case of Collateral consisting of Pledged Stock, (A) Liens permitted by Sections 8.1(b)  and (j)  and (B) non-consensual Liens permitted
by Section 8.1 to the extent arising by
operation of law.

 

“Permitted Indebtedness” has
the meaning specified in Section 8.5.

 

“Person” means an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.

 

“Plan” means an employee benefit plan (as defined in Section
3(3) of ERISA) which is subject to ERISA, other than a Multiemployer Plan.

 

20

 

“Pledged Stock” means “Pledged Stock” as such term is defined in the Security
Agreement.

 

“Pricing Grid” means the annualized rates (stated in
terms of basis points (“bps”)) set forth
below, which shall be computed as of each day during the term hereof for the
Applicable Margin (and Letter of Credit Rate) and Commitment Fee based upon the
Utilization Percentage on such day as follows:

 

	
   

  	
   

  	
   

  	
   

  	
  Applicable
  Margin

  	
   

  	
   

  	
   

  
	
  Pricing
 Level

  	
   

  	
  Utilization

  Percentage

  	
   

  	
  Base Rate Loan

  (bps)

  	
   

  	
  LIBO
  Rate

  Loan/Letter of 

  Credit Rate
 (bps)

  	
   

  	
  Commitment
  

  Fee
 (bps)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Level IV

  	
   

  	
  90% or more

  	
   

  	
  150.0

  	
   

  	
  300.0

  	
   

  	
  50.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Level III

  	
   

  	
  60% or more but less than 90%

  	
   

  	
  125.0

  	
   

  	
  275.0

  	
   

  	
  50.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Level II

  	
   

  	
  30% or more but
  less than 60%

  	
   

  	
  100.0

  	
   

  	
  250.0

  	
   

  	
  50.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Level I

  	
   

  	
  less than 30%

  	
   

  	
  75.0

  	
   

  	
  225.0

  	
   

  	
  50.0

  	
   

  

 

“Principal Business” means the business of the
exploration for, and development, acquisition, production, and upstream
marketing and transportation of Oil and Gas, and all activities and operations
incidental thereto, including all general and administrative activities, and
the leasing, operation or ownership of any office buildings or other real
property related to such business.

 

“Projected Oil and Gas Production”
has the meaning specified in Section 7.15.

 

“Pro Rata Share” means, as to any Lender at any time, the
percentage equivalent (expressed as a decimal, rounded to the ninth decimal
place) at such time of such Lender’s Maximum Loan Amount divided by the
combined Maximum Loan Amounts of all Lenders.

 

“Production Sales Contracts” mean those agreements now or
hereafter executed in connection with the sale of Oil and Gas attributable to
the Oil and Gas Properties.

 

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

 

“Proved Developed Producing Reserves”
means those Oil and Gas Properties designated as proved developed producing (in
accordance with the Definitions for Oil and Gas Reserves approved by the Board
of Directors of the Society of Petroleum Engineers, Inc. from time to
time) in the Reserve Report.

 

21

 

“Proved Reserves” means those
Oil and Gas Properties designated as proved (in accordance with the Definitions
for Oil and Gas Reserves approved by the Board of Directors of the Society of
Petroleum Engineers, Inc. from time to time) in the Reserve Report.

 

“PV 10 Value” means, as of any
date of determination, the present value of future cash flows from Proved
Reserves included in the Company’s and its Subsidiaries’ Oil and Gas Properties
as set forth in the most recent Reserve Report delivered pursuant to Section 6.11 or 7.2(c),
utilizing the average of the Three-Year Strip Price for crude oil (WTI Cushing)
and natural gas (Henry Hub), quoted on the New York Mercantile Exchange (or its
successor) and utilizing a 10% discount rate. 
The PV-10 Value shall be adjusted to give effect to the Company’s and
its Subsidiaries’ Derivative Contracts for the purpose of hedging prices of Oil
and Gas.  The PV 10 Value shall be
calculated by the Company as of each date of determination.

 

“Qualifying Derivative Contract”
means any Derivative Contract between any Loan Party and any Qualifying
Derivative Contract Counterparty.

 

“Qualifying Derivative Contract Counterparty”
means, with respect to a Qualifying Derivative Contract, any Person that was a
Lender or an Affiliate thereof at the time such Qualifying Derivative Contract
was originally entered into.

 

“Quarterly Status Report” means a status report prepared
quarterly by the Company in form, scope and content acceptable to the
Administrative Agent for such quarter then ended (a) detailing production
from the Mortgaged Properties, the volumes of Oil and Gas produced and saved,
the volumes of Oil and Gas sold, gross revenue, net income, related leasehold
operating expenses, severance taxes, other taxes, capital costs and any
production imbalances incurred during such period, (b) describing the
Company’s position regarding its Derivative Contracts including, as of the last
Business Day of such quarter, a summary of its hedging positions under its
Derivative Contracts, including the type, term, price, effective date and
notional principal amount or volumes (in total and as a percentage of the
Company’s total anticipated production), “mark to market” and margin
calculations, the hedged price(s), interest rate(s) or exchange rate(s),
as applicable, and any collateral therefor and credit support agreements
relating thereto and the counterparty to each Derivative Contract, (c) containing
a table that demonstrates the Company’s compliance with the requirements set
forth in Section 8.10 and (d) containing
such additional information with respect to any of Company’s Oil and Gas
Properties as may be reasonably requested by Administrative Agent.

 

“Real Estate Contingent Obligations”
means the Contingent Obligations of the Company under the Guaranty and
Indemnity (Third Party-Unsecured) and the Environmental Indemnity Agreement
(Third Party-Unsecured), each dated December 8, 2004 and made in favor of
German American Capital Corporation and as in effect at the Effective Time.

 

“Recovery Event” means any
settlement of or payment in respect of any Property of the Company or any
Restricted Subsidiary arising from a casualty insurance claim or any
condemnation proceeding.

 

22

 

“Regulation U” and “Regulation
X” means Regulation U and Regulation X, respectively, of the FRB
from time to time in effect and shall include any successor or other regulations
or official interpretations of the FRB relating to the subject matter addressed
therein.

 

“Related Funds” means, with respect to any
Lender that is a fund or combined investment vehicle that invests in bank
loans, any other fund that invests in bank loans and is managed or advised by
the same investment advisor as such Lender or by an Affiliate of such
investment advisor.

 

“Replacement Lender” has the
meaning specified in Section 3.7.

 

“Reportable Event” means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.

 

“Required Lenders” means, at any time, subject to Section 11.1, the Administrative Agent and
the Lenders holding at least 50% of the sum of the Effective Amount at such
time or, if there is no Effective Amount at such time, the Administrative Agent
and the Lenders holding at least 50% of the aggregate Commitments at such time;
provided,
however, that the Effective Amount, the aggregate
Commitments, and the principal amount of the Loans and participation interests
in Letters of Credit of the Defaulting Lenders shall be excluded from the
determination of Required Lenders; and provided, further, however, that for purposes of any
determination under Section 2.6(b) or 2.6(c) as to
any increase in the amount of the Borrowing Base, “Required
Lenders” means
all of the Lenders other than the Defaulting Lenders, if any.

 

“Requirement of Law” means, as to any Person, any law
(statutory or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to or
binding upon the Person or any of its Property or to which the Person or any of
its Property is subject.

 

“Reserve Report” means the Initial Reserve Report, and
each subsequent report delivered pursuant to Section 7.2(c),
each of which shall be a report, in form, scope and content acceptable to the
Administrative Agent, covering proved developed and proved undeveloped reserves
attributable to the Company’s and its Restricted Subsidiaries’ Oil and Gas
Properties and setting forth with respect thereto, (a) the total quantity
of proved developed and proved undeveloped Oil and Gas reserves (separately
classified as to producing, shut in, behind pipe, and undeveloped), (b) the
estimated future net revenues and cumulative estimated future net revenues, (c) the
present discounted value of future net revenues, and (d) such other
information and data with respect to the Mortgaged Properties as the
Administrative Agent may reasonably request.

 

“Responsible Officer” means, with respect to any Person,
the chief executive officer, president, chief financial officer or treasurer of
the Person.

 

“Restricted Payments” has the
meaning specified in Section 8.9.

 

“Restricted Subsidiary” means
any Subsidiary of the Company other than an Unrestricted Subsidiary.  Subject to the right to redesignate certain
Restricted Subsidiaries as Unrestricted Subsidiaries in accordance with the
definition of “Unrestricted  Subsidiary,” all of

 

23

 

the Subsidiaries as of the date hereof are Restricted
Subsidiaries.  Any Subsidiary designated
as an Unrestricted Subsidiary may be redesignated as a Restricted Subsidiary;
provided, however, that after giving effect to such redesignation, (a) no
Default or Event of Default shall have occurred and be continuing and (b) the
Company shall be in pro forma compliance with Sections
8.12 and 8.13.

 

“S&P” means Standard &
Poor’s Rating Services.

 

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

 

“Second Lien Debt Documents”
means each of the Second Lien Loan Documents and the Senior Notes Debt
Documents.

 

“Second Lien Debt Instruments”
means each of the Second Lien Term Loan Agreement and the Senior Notes
Indenture.

 

“Second
Lien Loan Documents” has the meaning ascribed to such term in
the Intercreditor Agreement.

 

“Second Lien Obligations” has
the meaning ascribed to such term in the Intercreditor Agreement.

 

“Second Lien Term Loan
Agreement” means that certain Term Loan Agreement dated as of May 7,
2007, as amended by the First Amendment to Term Loan Agreement dated November 7,
2007, among the Company, the Guarantors party thereto, the several lenders from
time to time party thereto, Credit Suisse, Cayman Islands Branch, as
Administrative Agent, Credit Suisse Securities (USA) LLC and UBS Securities
LLC, as Joint Lead Arrangers, and Lehman Brothers Inc. and BMO Capital Markets
Corp., as Co-Arrangers, as such may be further amended, restated, supplemented
or otherwise modified in accordance with the terms hereof.

 

“Second Lien Term Loans”
means “Loans” (as defined in the Second Lien Term Loan Agreement).

 

“Secured Parties”
has the meaning ascribed thereto in the Security Agreement.

 

“Security
Agreement” means the Third Amended and Restated
Security Agreement dated as of the date hereof executed by the Loan Parties
pledging to the Administrative Agent for benefit of the Secured Parties all of
the Property of the Loan Parties, as the same may be amended, restated, amended
and restated, supplemented or otherwise modified from time to time pursuant to
the terms hereof (including, in the case of any Restricted Subsidiary required
to execute the Security Agreement pursuant to Section 7.12,
by execution and delivery of a joinder thereto in the form of Annex 2 thereto).

 

“Security Documents” means the Intercreditor Agreement,
the Mortgages, the Security Agreement, each Account Control Agreement and
related financing statements as same may be amended from time to time and any
and all other instruments or agreements now or hereafter executed in connection
with or as security for the payment of the Indebtedness.

 

24

 

“Semi-Annual Proposed Borrowing Base”
has the meaning specified in Section 2.6(c).

 

“Senior
Notes Debt Documents” has the meaning ascribed to such term in
the Intercreditor Agreement.

 

“Senior Note Lien Termination Time”
has the meaning ascribed to such term in the Intercreditor Agreement.

 

“Senior Notes”  means the 11.5% Senior Notes
due 2017 originally issued in aggregate principal amount of $150,000,000 under
the Senior Notes Indenture.

 

“Senior Notes Indenture” means
that certain indenture dated as of October 7, 2009 among the Company, the
Guarantors and U.S. Bank National Association, as Trustee.

 

“Solvent” means, as to any Person at any time, that (a) the
fair value of all of the Property of such Person is greater than the amount of
such Person’s liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purposes of Section 101(32) of the Bankruptcy Code; (b) the present
fair salable value of all of the Property of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person does not
intend to, and does not believe that it will, incur debts or liabilities beyond
such Person’s ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person’s Property would constitute
unreasonably small capital.

 

“Special Damages” has the
meaning specified in Section 11.21.

 

“Subsidiary” of a Person means any corporation,
association, partnership, joint venture or other business entity of which more
than 50% of the voting stock or other equity interests (in the case of Persons
other than corporations), is owned or controlled directly or indirectly, at the
relevant time, by the Person, or one or more of the Subsidiaries of the Person,
or a combination thereof.  Unless the
context otherwise clearly requires, references herein to a “Subsidiary” refer to a Subsidiary of the Company, except
that for purposes of Article IV only, “Subsidiary” excludes Ellwood and any Unrestricted
Subsidiary.

 

“Supermajority Lenders” means, at any time, subject to Section 11.1, the Administrative Agent and
the Lenders holding at least 662/3% of the sum of the Effective Amount at such time or, if there is no
Effective Amount at such time, the Administrative Agent and the Lenders holding
at least 662/3% of the aggregate
Commitments at such time;
provided, however, that the Effective Amount, the
aggregate amount of the Commitments and the principal amount of the Loans and
participation interests in Letters of Credit of the Defaulting Lenders shall be
excluded from the determination of Supermajority Lenders; and provided, further, however, that for purposes of
any determination under Section 2.6(b) or 2.6(c) as
to any increase in the amount of the Borrowing Base, “Supermajority
Lenders” means
all of the Lenders other than the Defaulting Lenders, if any.

 

25

 

“Surety Instruments” means all letters of credit
(including standby), banker’s acceptances, bank guaranties, shipside bonds,
surety bonds, performance bonds (including plugging and abandonment bonds) and
similar instruments.

 

“Taxes” means any and all present or future taxes,
levies, imposts, deductions, charges or withholdings which arise from any
payment made hereunder, and all liabilities with respect thereto, excluding, in
the case of each Lender and the Administrative Agent, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by each Lender’s
net income, gross receipts or capital by the jurisdiction (or any political
subdivision thereof) under the laws of which such Lender or the Administrative
Agent, as the case may be, is organized or maintains a lending office or
conducts business (other than solely by reason of the transactions evidenced
hereby or taking any action contemplated by the Loan Documents).

 

“Termination Date” means the earlier of (a) the
Maturity Date or (b) the date on which all Obligations (other than those
to Qualified Derivative Contract Counterparties in respect of Qualified
Derivative Contracts) have been satisfied and all Commitments have terminated,
in each case in accordance with the provisions of this Agreement.

 

“TexCal GP” means TexCal Energy (GP) LLC, a Delaware
limited liability company.

 

“TexCal LP” means TexCal Energy (LP) LLC, a Delaware
limited liability company.

 

“TexCal STX” means TexCal Energy South Texas L.P., a
Texas limited partnership.

 

“Three-Year Strip Price” shall
mean, as of any date of determination, (a) for the 36-month period
commencing with the month immediately following the month in which the date of
determination occurs, the monthly futures contract prices for crude oil and
natural gas for the 36 succeeding months as quoted on the applicable
commodities exchange as contemplated in the definition of “PV-10 Value” and (b) for periods after such
36-month period, the average of such quoted prices for the period from and
including the 25th month in such 36-month period through the 36th month in such
period.

 

“UCC” means the Uniform Commercial Code as adopted and in
effect in any applicable jurisdiction.

 

“UCP” has the meaning
specified in Section 2.13(b).

 

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

 

“United States” and “U.S.”
each means the United States of America.

 

“Unrestricted Subsidiary”
means any Subsidiary of the Company (a) that becomes a Subsidiary after
the date hereof and, at the time it becomes a Subsidiary, is designated as an
Unrestricted Subsidiary, in each case pursuant to a written notice from the
Company to the Administrative Agent, (b) which has not acquired any assets
(other than cash made available

 

26

 

pursuant to this Agreement) from the Company or any Restricted
Subsidiary, and (c) that has no Indebtedness, Guaranty Obligations or
other obligations other than Non-Recourse Obligations.  Any Restricted Subsidiary may be redesignated
as an Unrestricted Subsidiary; provided, however, that after giving effect to
such redesignation, (i) no Default or Event of Default shall have occurred
and be continuing and (ii) the Company shall be in pro forma compliance
with Sections 8.12 and 8.13.

 

“Utilization Percentage”
means, at any time, the percentage obtained by dividing (a) the Effective
Amount at such time by (b) the Borrowing Base at such time.

 

“Whittier” means Whittier Pipeline Corporation, a
Delaware corporation.

 

1.2           Other
Interpretive Provisions.  The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.  Unless
otherwise specified or the context clearly requires otherwise, the words “hereof”,
“herein”,
“hereunder”
and similar words refer to this Agreement as a whole and not to any particular
provision of this Agreement; and, subsection, Section, Schedule and Exhibit references
are to this Agreement.  The term “documents”
includes any and all instruments, documents, agreements, certificates,
indentures, notices and other writings, however evidenced.  The term “including” is not limiting
and means “including without limitation.”  The term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or”.  In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from and
including”; the words “to” and “until” each mean “to but
excluding”, and the word “through” means “to and
including.”  Unless
otherwise expressly provided herein, (a) references to agreements
(including this Agreement) and other contractual instruments shall be deemed to
include all subsequent amendments and other modifications thereto, but only to
the extent such amendments and other modifications are not prohibited by the
terms of any Loan Document, and (b) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting
the statute or regulation.  The recitals,
captions and headings of this Agreement are for convenience of reference only
and shall not affect the interpretation of this Agreement.  This Agreement and other Loan Documents may
use several different limitations, tests or measurements to regulate the same
or similar matters.  All such
limitations, tests and measurements are cumulative and shall each be performed
in accordance with their terms.  This
Agreement and the other Loan Documents are the result of negotiations among and
have been reviewed by counsel to the Administrative Agent, the Company and the
other parties, and are the products of all parties.  Accordingly, they shall not be construed
against the Lenders or the Administrative Agent merely because of the
Administrative Agent’s or Lenders’ involvement in their preparation.  The terms “Lender”
and “Administrative  Agent”
include their respective successors.

 

1.3           Accounting
Principles.

 

(a)           Unless the context
otherwise clearly requires, all accounting terms not expressly defined herein
shall be construed, and all financial computations required under this
Agreement shall be made, in accordance with GAAP, consistently applied.  References to “consolidated”, when it
precedes any accounting term, means such term as it would apply to the Company
and its Subsidiaries on a consolidated basis, determined in accordance with
GAAP.

 

27

 

(b)           References herein to
“fiscal
year” and “fiscal quarter” refer to such fiscal
periods of the Company.

 

ARTICLE II

 

THE
CREDIT

 

2.1           Amounts and Terms
of the Commitments.

 

(a)           Each Lender
severally agrees, on the terms and conditions set forth herein, to make
revolving credit loans to the Company from time to time on any Business Day
during the period from the Effective Time to the Termination Date (together
with any conversions or continuations thereof, “Loans”), so long as, as of the time at which the
requested Loan is to be made and after giving effect to such Borrowing, (i) the
aggregate amount of all Loans by such Lender at such time does not exceed such
Lender’s Pro Rata Share of the aggregate amount of Loans of all Lenders at such
time, and (ii) the aggregate amount of such Lender’s Loans and such Lender’s
Pro Rata Share of the LC Obligation outstanding at such time does not exceed
such Lender’s Commitment.  Subject to the
terms and conditions hereof, until the Termination Date, the Company may
borrow, repay, and reborrow Loans hereunder.

 

(b)           If requested by any
Lender, the obligation of the Company to repay to such Lender the aggregate
amount of all Loans made by such Lender, together with interest accruing in
connection therewith, shall be evidenced by a single Note made by the Company
payable to the order of such Lender.  The
amount of principal owing on any Lender’s Note at any given time shall be the
aggregate amount of all Loans theretofore made by such Lender minus all
payments of principal theretofore received by such Lender on such Note.  Interest on each Note shall accrue and be due
and payable as provided herein and therein.

 

(c)           Subject to the terms
and conditions of Section 2.13 below
and relying upon the representations and warranties herein set forth, the
Issuing Lender for the account of the Lenders agrees to issue or renew Letters
of Credit in accordance with the applicable Notice of Borrowing and LC
Application therefor.  No Letter of
Credit will be issued or renewed in a face amount which, after giving effect to
the issuance or renewal of such Letter of Credit, would cause either (x) the
LC Obligation to exceed $20,000,000  or
(y) the Effective Amount to exceed the Borrowing Base then in effect. Each
Letter of Credit shall by its terms be stated to expire on a date no later than
the earlier of (i) one year after its Issuance (or, if renewed, one year
after the renewal date) and (ii) the seventh Business Day  prior to the Termination Date.  If any Letter of Credit has been drawn upon
and the amount so drawn has not been reimbursed to the Issuing Lender, the
Revolving Credit Commitment of each Lender shall be deemed to be utilized for
all purposes hereof in an amount equal to such Lender’s Pro Rata Share of the
LC Obligation.  If, for any reason, any
Letter of Credit remains outstanding as of the Termination Date, the Company
shall cause such Letter of Credit to be collateralized with cash in an amount
at least equal to 105% of the undrawn face amount thereof under arrangements
satisfactory to the Administrative Agent or to be secured by back-to-back
letters of credit issued by banks, and in form and substance, satisfactory to
the Administrative Agent and the Issuing Lender.

 

28

 

(d)           At the Effective
Time, and subject to satisfaction of the conditions precedent set forth in Section 5.1, the outstanding aggregate
amount of Existing Revolving Credit Outstandings shall be refinanced, renewed,
and extended, and such amount shall be, and shall be deemed to be, Loans or LC
Obligations (as applicable) made by the Lenders and held by the Issuing Lender
(as applicable) hereunder.

 

2.2           Procedure for
Borrowing.

 

(a)           Each Borrowing of
Loans shall be made upon the Company’s irrevocable written notice delivered to
the Administrative Agent in the form of a Notice of Borrowing duly completed
which notice must be received by the Administrative Agent prior to 12:00 p.m.
(Chicago, Illinois time) (i) three Business Days prior to the requested
Borrowing Date, in the case of LIBO Rate Loans; and (ii) on the requested
Borrowing Date, in the case of Base Rate Loans.

 

(b)           Each Notice of
Borrowing shall specify (i) the amount of the Borrowing, which shall be in
an aggregate minimum amount (A) for Base Rate Loans equal to the lesser of
(x) $500,000 or any multiple integrals of $100,000 in excess thereof or (y) the
unadvanced portion of the applicable Available Borrowing Base and (B) for
LIBO Rate Loans $1,000,000 or any multiple integrals of $1,000,000 in excess
thereof (if the Available Borrowing Base as of such Borrowing Date will be less
than $1,000,000, then the Company may not request an LIBO Rate Loan); (ii) the
requested Borrowing Date, which shall be a Business Day; (iii) the Company’s
calculation of the current Applicable Margin; (iv) the Interest Rate Type
of Loans comprising the Borrowing; and (v) for LIBO Rate Loans the
duration of the Interest Period applicable to such Loans.  If the Notice of Borrowing fails to specify
the duration of the Interest Period for any Borrowing comprised of LIBO Rate
Loans, such Interest Period shall be three months.

 

(c)           The number of
tranches outstanding of LIBO Rate Loans, whether under a Borrowing, conversion
or continuation, shall not exceed eight (8) at any one time.

 

(d)           The Administrative
Agent will promptly notify each Lender of its receipt of any Notice of
Borrowing and of the amount of such Lender’s Pro Rata Share of that Borrowing.

 

(e)           Provided the
applicable conditions in Article V are
met, each Lender will make the amount of its Pro Rata Share of each Borrowing
available to the Administrative Agent for the account of the Company at the
Agent’s Payment Office by 12:00 p.m. 
(Chicago, Illinois time) on the Borrowing Date requested by the Company
in funds immediately available to the Administrative Agent.  The proceeds of all such Loans will then be
made available to the Company by the Administrative Agent by wire transfer to
the account(s) specified by the Company in the related Notice of
Borrowing.

 

2.3           Conversion and
Continuation Elections.

 

(a)           Prior to the
Termination Date, the Company may, upon irrevocable written notice to the
Administrative Agent in accordance with Section 2.3(b) (i) elect,
as of any Business Day in the case of Base Rate Loans, or as of the last day of
the applicable Interest Period in the

 

29

 

case
of LIBO Rate Loans, to convert any such Loans into Loans of any other Interest
Rate Type; or (ii) elect as of the last day of the applicable Interest
Period, to continue any Loans having Interest Periods expiring on such day; provided,
however, that  if at any time an LIBO Rate Loan in respect of any
Borrowing is reduced, by payment, prepayment, or conversion of part thereof to
less than $1,000,000, such LIBO Rate Loan shall automatically convert into a
Base Rate Loan.

 

(b)           The Company shall
deliver a Notice of Conversion/Continuation to be received by the
Administrative Agent not later than 12:00 p.m. (Chicago, Illinois time) at
least three Business Days in advance of the Conversion/Continuation Date, if
the Loans are to be converted into or continued as LIBO Rate Loans; and (ii) on
the Conversion/Continuation Date, if the Loans are to be converted into Base
Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the
aggregate amount of Loans to be converted or continued; (C) the Interest
Rate Type of Loans resulting from the proposed conversion or continuation; and (D) other
than in the case of conversions into Base Rate Loans, the duration of the
requested Interest Period.

 

(c)           If, upon the
expiration of any Interest Period applicable to LIBO Rate Loans, the Company
has failed to select in a timely manner a new Interest Period to be applicable
to LIBO Rate Loans, or if any Default or Event of Default then exists, the
Company shall be deemed to have elected to convert such LIBO Rate Loans into
Base Rate Loans effective as of the expiration date of such Interest Period.

 

(d)           The Administrative
Agent will promptly notify each Lender of its receipt of a Notice of
Conversion/Continuation, or, if no timely notice is provided by the Company,
the Administrative Agent will promptly notify each Lender of the details of any
automatic conversion.  All conversions
and continuations shall be made ratably according to the respective Lender’s
Pro Rata Share of outstanding principal amounts of the Loans with respect to
which the notice was given.

 

2.4           Voluntary
Termination or Reduction.  The
Company may, upon not less than five Business Days’ prior notice to the
Administrative Agent, permanently terminate the Commitments (in whole or in
part) or reduce the aggregate Maximum Loan Amount by an aggregate minimum
amount of $500,000 or any integral multiple thereof; unless, after giving
effect thereto and to any prepayments of Loans made on the effective date
thereof, the Effective Amount exceeds the aggregate Commitments then in
effect.  Once reduced in accordance with
this Section 2.4, the aggregate
Maximum Loan Amount may not be increased. 
Any reduction of the aggregate Maximum Loan Amount shall be applied to
the respective Maximum Loan Amount of each Lender according to its Pro Rata
Share.  All accrued commitment fees to,
but not including, the effective date of any reduction of the aggregate Maximum
Loan Amount or a termination of the Commitments, shall be paid on the effective
date of such reduction or termination.

 

2.5           Optional
Prepayments.  Subject to Section 3.4, the Company may, at any time or
from time to time,

 

(a)           prepay Base Rate
Loans upon irrevocable notice to the Administrative Agent, ratably as to each
Lender, in whole or in part, in aggregate minimum principal amounts of

 

30

 

$100,000
or integral multiples thereof (unless the Effective Amount is less than
$500,000, then such prepayments shall be equal to the Effective Amount) and

 

(b)           prepay LIBO Rate
Loans upon irrevocable notice to the Administrative Agent not less than three (3) Business
Days, ratably as to each Lender, in whole or in part, in aggregate minimum
principal amounts of $500,000 or integral multiples thereof plus
all interest and expenses then outstanding on such LIBO Rate Loans.

 

Such notice of prepayment shall specify the date and amount of such
prepayment and the Interest Rate Type(s) of Loans to be prepaid.

 

The
Administrative Agent will promptly notify each Lender of its receipt of any
such notice, and of such Lender’s Pro Rata Share of such prepayment.  The payment amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest to each such date on the amount prepaid and any amounts required
pursuant to Section 3.4.

 

2.6           Borrowing Base
Determinations, Mandatory Prepayments.

 

(a)           Scheduled
Borrowing Base Determinations. 
At all times prior to the Termination Date the Company shall not permit
the Effective Amount to exceed the Borrowing Base then in effect.  The initial Borrowing Base hereunder shall be
$125,000,000 (the “Initial Borrowing Base”).

 

(b)           Annual
Borrowing Base Determinations. 
Upon receipt by the Administrative Agent of each Reserve Report
described in Section 7.2(c)(i), the
Administrative Agent shall make a determination by May 1, or, if later,
within 25 days of the receipt of such report (such determination, the “Annual Proposed Borrowing Base”)
of the amount of the borrowing base (herein as determined and redetermined from
time to time and in effect on any date called the “Borrowing
Base”) on account of such reserves as of the preceding January 1,
subject to the approval of all of the Lenders other than the Defaulting
Lenders, if any, or the Supermajority Lenders (as applicable) as provided in
this Section 2.6(b), and the
Administrative Agent shall promptly notify the Lenders in writing of the Annual
Proposed Borrowing Base once determined. 
The Annual Proposed Borrowing Base shall be so made by the
Administrative Agent in accordance with the Administrative Agent’s normal and
customary practices and standards for oil and gas loans (including
consideration of the Company’s liquidity, Derivative Contracts, market interest
rates, commodity prices, permitted Indebtedness and capital expenditure
requirements).  Any Annual Proposed
Borrowing Base that would increase the Borrowing Base then in effect must be
approved or deemed to have been approved by all of the Lenders other than the
Defaulting Lenders, if any, and any Annual Proposed Borrowing Base that would
decrease or maintain the Borrowing Base then in effect must be approved or
deemed to have been approved by the Supermajority Lenders, in each case as
provided in this Section 2.6(b).  The Lenders other than the Defaulting
Lenders, if any, or the Supermajority Lenders (as applicable) may approve the
Annual Proposed Borrowing Base by written notice to the Administrative Agent
within 15 days of the Administrative Agent’s notice of the Annual Proposed
Borrowing Base.  Any Lender that

 

31

 

fails to respond to any
notice of the Annual Proposed Borrowing Base by the Administrative Agent
pursuant to this Section 2.6(b) within
such 15 days shall be deemed to have approved such Annual Proposed Borrowing
Base.  If the Lenders other than the
Defaulting Lenders, if any, or the Supermajority Lenders (as applicable) fail
to approve the Annual Proposed Borrowing Base within such 15 days, then no
later than five days after the end of such 15-day period, the Lenders shall
submit to the Administrative Agent in writing, or the Administrative Agent
shall poll the Lenders other than the Defaulting Lenders, if any, for, their
individual recommendations for the redetermined Borrowing Base in accordance
with their respective normal and customary practices and standards for oil and
gas loans (including consideration of the Company’s liquidity, Derivative
Contracts, market interest rates, commodity prices, permitted Indebtedness and
capital expenditure requirements), whereupon the Administrative Agent shall
designate the Borrowing Base at the largest amount approved by the Lenders
other than the Defaulting Lenders, if any, or the Supermajority Lenders (as
applicable); provided, however, that it is expressly understood that the Lenders and
Administrative Agent have no obligation to agree upon or designate the
Borrowing Base at any particular amount. 
If any Lender refuses to accept an Annual Proposed Borrowing Base
pursuant to this Section 2.6(b), the
Company shall have the right, without the consent of the Lenders but with the
prior written consent of the Administrative Agent, which consent shall not be
unreasonably withheld, to cause the Commitment of such dissenting Lender to be
replaced pursuant to Section 3.7.

 

(c)           Semi-Annual Borrowing Base
Determinations.  In addition, upon
the receipt by the Administrative Agent of each Reserve Report described in Section 7.2(c)(ii), the
Administrative Agent shall make a determination by November 1, or, if
later, within 25 days of the receipt of such report (such determination, the “Semi-Annual Proposed Borrowing Base”)
of the Borrowing Base as of the preceding July 1.  The Semi-Annual Proposed Borrowing Base shall
be determined in the same manner and be subject to the same approvals as
prescribed with respect to the Annual Proposed Borrowing Base set forth in Section 2.6(b), and likewise the
Administrative Agent shall notify the Lenders in writing of the Semi-Annual
Proposed Borrowing Base once determined. 
The Lenders other than the Defaulting Lenders, if any, or the
Supermajority Lenders (as applicable) may approve the Semi-Annual Proposed
Borrowing Base by written notice to the Administrative Agent within 15 days of
the Administrative Agent’s notice of the Semi-Annual Proposed Borrowing
Base.  Any Lender that fails to respond
to any notice of the Semi-Annual Proposed Borrowing Base by the Administrative
Agent pursuant to this Section 2.6(c) within
such 15 days shall be deemed to have approved such Semi-Annual Proposed
Borrowing Base.  If the Lenders other
than the Defaulting Lenders, if any, or the Supermajority Lenders (as
applicable) fail to approve the Semi-Annual Proposed Borrowing Base within such
15 days, then no later than five days after the end of such 15-day period, the
Lenders shall submit to the Administrative Agent in writing, or the
Administrative Agent shall poll the Lenders other than the Defaulting Lenders,
if any, for, their individual recommendations for the redetermined Borrowing
Base in accordance with their respective normal and customary practices and
standards for oil and gas loans (including consideration of the Company’s
liquidity, Derivative Contracts, market interest rates, commodity prices,
permitted Indebtedness and capital expenditure requirements), whereupon the
Administrative Agent shall designate the

 

32

 

Borrowing Base at the
largest amount approved by the Lenders other than the Defaulting Lenders, if
any, or the Supermajority Lenders (as applicable);  provided, however, that it is
expressly understood that the Lenders and Administrative Agent have no
obligation to agree upon or designate the Borrowing Base at any particular
amount.  If any Lender refuses to accept
the Semi-Annual Proposed Borrowing Base pursuant to this Section 2.6(c),
the Company shall have the right, without the consent of the Lenders but with
the prior written consent of the Administrative Agent, which consent shall not
be unreasonably withheld, to cause the Commitment of such dissenting Lender to
be replaced pursuant to Section 3.7.

 

(d)           Other Determinations.  In addition, the Administrative Agent shall,
in the normal course of business following a request of the Company,
redetermine the Borrowing Base (in the same manner and subject to the same
approvals as prescribed in Section 2.6(b) for
the redetermination of the Borrowing Base); provided, however, (i) the Administrative
Agent and the Lenders shall not be obligated to respond to more than one such
request during any calendar year in addition to each scheduled annual and
semi-annual redeterminations provided for above, and (ii) the Company
shall have paid to the Administrative Agent a $20,000 engineering fee in
connection with such requested redetermination of the Borrowing Base,
regardless of whether or not such redetermination results in any increase to
the Borrowing Base.  Notwithstanding the
foregoing, the Administrative Agent may, at the request of the  Supermajority Lenders, redetermine the
Borrowing Base (in the same manner and subject to the same approvals as
prescribed in Section 2.6(b) for
the redetermination of the Borrowing Base) at any other time and from time to
time; provided, however,
the Administrative Agent and the Lenders may not redetermine the Borrowing Base
under this second sentence of this Section 2.6(d) 
more than two times during any calendar year.

 

(e)           Lenders’
Discretion.  If the Company
does not furnish the Reserve Reports or all such other information and data by
the date required, the Required Lenders may nonetheless determine a new
Borrowing Base.  It is expressly
understood that the Lenders shall have no obligation to determine the Borrowing
Base at any particular amount, either in relation to the Maximum Loan Amount or
otherwise.  Furthermore, the Company
acknowledges that the Lenders have no obligation to increase the Borrowing Base
and may reduce the Borrowing Base at any time and that any increase in the
Borrowing Base is subject to the credit approval processes of all of the
Lenders subject to the terms hereof.

 

(f)                                    Mandatory Action.

 

(i)            If on any date the Effective Amount
shall exceed the Borrowing Base (a “Deficiency”), then
the Company shall cure the Deficiency, and except as provided in paragraph (ii) below,
may effect such cure through any of the following means or any combination
thereof:  (A) the making of a lump
sum principal prepayment on the Loans within 30 days of the occurrence of such
Deficiency (and, if any Deficiency remains after prepayment of all Loans, cash
collateralization of the LC Obligation to the extent required to eliminate the
Deficiency); (B) the making of a principal prepayment on the Loans (and,
if any

 

33

 

Deficiency remains after
prepayment of all Loans, cash collateralization of the LC Obligation to the
extent required to eliminate the Deficiency) in three equal monthly
installments commencing thirty 30 days from the date the Deficiency occurs and
continuing on the same day of the next two succeeding months thereafter; or (C) the
pledge within ten Business Days of the occurrence of such Deficiency of
additional unencumbered Collateral of sufficient value and character (as
determined by the Required Lenders in their sole discretion) that when added to
the Borrowing Base shall equal the applicable Effective Amount.

 

(ii)           Notwithstanding the foregoing
paragraph (i), upon any reduction to the Borrowing Base provided for in any of Section 8.2(f), if a Deficiency shall exist
or the Company or any Restricted Subsidiary shall have incurred any early
termination or similar payment Obligation(s) to any Qualifying Derivative
Contract Counterparty as a result of the Disposition and termination or
modification of any related Derivative Contract(s), the Company shall
contemporaneously with such Disposition (x) make, or cause to be made, a
principal prepayment on the Loans in an amount equal to the Deficiency and (y) satisfy
in full all such Obligation(s) to any affected Qualifying Derivative
Contract Counterparty.

 

(iii)          Unless the Required Lenders shall
otherwise agree, if the Company or any of its Subsidiaries shall receive Net
Cash Proceeds from any Disposition described in any of Section 8.2(f) or
Recovery Event (A) during the continuance of an Event of Default, the
Company shall cause the Loans to be prepaid or the outstanding Letters of
Credit cash collateralized (at 105% of their respective face amounts) in an
amount equal to the entirety of such Net Cash Proceeds and (B) if no Event
of Default exists or is continuing, and subject to compliance with Section 2.6(f)(ii) and Section 8.9, the Company shall apply such
proceeds as and to the extent required by the Second Lien Term Loan Agreement,
or in any other manner permitted under Section 7.13.  The provisions of this Section 2.6(f)(iii) do
not constitute a consent to the consummation of any Disposition not permitted
by any of Sections 8.2(f) or
otherwise requiring the prior written consent of the Required Lenders.

 

2.7           Repayment.

 

(a)           Principal. 
The Company shall repay to the Administrative Agent for the benefit of
the Lenders the outstanding principal balance of the Loans (and the outstanding
principal of the Loans shall be due and payable) on the Termination Date.

 

(b)                                 Interest.

 

(i)            Each Loan shall bear interest on the
principal amount thereof from the applicable Borrowing Date or date of
conversion or continuation pursuant to Section 2.3,
as the case may be, at a rate per annum equal to the lesser of (A) the
LIBO Rate or the Adjusted Base Rate, as the case may be, plus
the Applicable Margin and (B) the Highest Lawful Rate.

 

34

 

(ii)           Interest on each Loan shall be paid
in arrears on each Interest Payment Date. 
Interest shall also be paid on the date of any prepayment of Loans under
Section 2.5(b) or 2.6 for the portion of the Loans so prepaid and
upon payment (including prepayment) in full thereof and, during the existence
of any Event of Default, interest shall be paid on demand of the Administrative
Agent.

 

(iii)          Notwithstanding paragraph (i) of
this Section 2.7(b), while any Event
of Default exists or after acceleration, the Company shall pay interest (after
as well as before entry of judgment thereon to the extent permitted by law) on
the principal amount of all outstanding Loans, at a rate per annum equal to the
lesser of (A) the Highest Lawful Rate and (B) the rate otherwise
applicable plus two percent (2%) (“Default Rate”).

 

2.8           Fees.

 

(a)           Commitment Fees. 
The Company shall pay to the Administrative Agent for the account of the
Lenders an aggregate commitment fee on the actual daily amount of the Available
Borrowing Base at a per annum rate equal to the amount set forth on the Pricing
Grid.  Such commitment fee shall accrue
from the Effective Time to the Termination Date and shall be due and payable
quarterly in arrears on the first day of the month following the last Business
Day of each quarter commencing on January 1, 2010 through the Termination
Date, with the final payment to be made on the Termination Date; provided,
however, that in connection with any reduction of the aggregate Maximum Loan
Amount or termination of the aggregate Commitments under Section 2.4,
the accrued commitment fee calculated for the period ending on such date shall
also be paid on the date of such reduction or termination, with the following
quarterly payment being calculated on the basis of the period from such
reduction or termination date to such quarterly payment date.  The commitment fees provided in this Section 2.8(a) shall
accrue at all times after the Effective Time, up to the Termination Date
including at any time during which one or more conditions in Article V are not met.

 

(b)           Letter of Credit Fees. The Company agrees to pay (i) to
the Administrative Agent for the account of the Lenders a Letter of Credit fee
for each Letter of Credit, due and payable quarterly on the first day of the
month following the last Business Day of each quarter  and at the Termination Date, in arrears from the date of
Issuance in an amount per annum equal to the product equal to the Letter of
Credit Rate set forth on the Pricing Grid multiplied by the aggregate amount
available under each Letter of Credit from the date of Issuance thereof to the
date on which such Letter of Credit expires or is terminated (such fees shall
be prorated for any period less than a full year but shall not be refunded in
the event any such Letter of Credit is terminated prior to its expiry date), (ii) to
the Issuing Lender for its account a fee, due and payable quarterly on the
first day of the month following the last Business Day of each quarter  and at the Termination Date, for the
Issuance of each Letter of Credit in an amount per annum (calculated on the
basis of a year of 360 days) equal to 0.00125 multiplied by the aggregate
amount available under each Letter of Credit from the date of Issuance thereof
to the date on which such Letter of Credit expires or is terminated (such fees
shall be prorated for any period less than a full year but shall not be
refunded in the event any such Letter of Credit is terminated prior to its
expiry date) and (iii) to the Issuing Lender, for its account on demand
its customary letter of credit transactional fees and out-of-pocket expenses
for each Letter of Credit Issued by

 

35

 

it,
including amendment fees, payable with respect to each such Letter of Credit.
The Administrative Agent shall pay to each Lender its pro-rata share of the
Letter of Credit fees paid pursuant to this Section 2.8(b)(i).  The Administrative Agent shall pay to the
Issuing Lender the Letter of Credit fees paid pursuant to this Section 2.8(b)(ii) and (iii).

 

(c)           Other Fees. In addition to all other amounts due
to the Administrative Agent under the Loan Documents, the Company will pay fees
to the parties and in the amounts specified in the Agent Fee Letter and the
Lender Fee Letter.

 

(d)           Defaulting Lender
Fees.  The Company shall not be
obligated to pay the Administrative Agent any Defaulting Lender’s ratable share
of the fees described in Sections 2.8(a) and
2.8(b)(i) for the
period commencing on the day such Defaulting Lender becomes a Defaulting Lender
and continuing for so long as such Lender continues to be a Defaulting Lender.

 

2.9           Computation of
Fees and Interest.

 

(a)           All computations of
interest for Base Rate Loans shall be made on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed.  All other computations of fees and interest
shall be made on the basis of a 360-day year and actual days elapsed (which
results in more interest being paid than if computed on the basis of a 365 day
year).  Interest and fees shall accrue
during each period during which interest or such fees are computed from the
first day thereof to the last day thereof.

 

(b)           Each determination
of an interest rate by the Administrative Agent shall be conclusive and binding
on the Company and the Lenders in the absence of manifest error.

 

2.10         Payments by the
Company; Borrowings Pro Rata.

 

(a)           All payments to be
made by the Company shall be made without set off, recoupment or
counterclaim.  Except as otherwise
expressly provided herein, all payments by the Company shall be made to the Administrative
Agent for the account of the Lenders at the Agent’s Payment Office, and shall
be made in dollars and in immediately available funds, no later than 12:00 p.m.
(Chicago, Illinois time) on the date specified herein.  Except to the extent otherwise expressly
provided herein, (i) each payment by the Company of fees shall be made for
the account of the Lenders pro rata in accordance with their respective Pro
Rata Shares, (ii) each payment of principal of Loans shall be made for the
account of the Lenders pro rata in accordance with their respective outstanding
principal amount of such Loans, and (iii) each payment of interest on
Loans shall be made for the account of the Lenders pro rata in accordance with
their respective shares of the aggregate amount of interest due and payable to
the Lenders.  The Administrative Agent
will promptly distribute to each Lender its applicable share of such payment in
like funds as received.  Any payment
received by the Administrative Agent later than 12:00 p.m. (Chicago,
Illinois time) shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.

 

(b)           If at any time prior
to the acceleration or maturity of the Loans, the Administrative Agent shall
receive any payment in respect of principal of a Loan or a reimbursement of an
LC Obligation while one or more Defaulting Lenders shall be party to this

 

36

 

Agreement,
the Administrative Agent shall apply such payment first to the Borrowing(s) for
which such Defaulting Lender(s) shall have failed to fund its Pro Rata
Share until such time as such Borrowing(s) are paid in full or until such
time as each Lender (including each Defaulting Lender) is owed its Pro Rata
Share of all Loans then outstanding.

 

(c)           Subject to the
provisions set forth in the definition of “Interest
Period” herein, whenever any payment is due on a day other than
a Business Day, such payment shall be made on the following Business Day, and
such extension of time shall in such case be included in the computation of
interest or fees, as the case may be.

 

(d)           Unless the
Administrative Agent receives notice from the Company prior to the date on
which any payment is due to the Lenders that the Company will not make such
payment in full as and when required, the Administrative Agent may assume that
the Company has made such payment in full to the Administrative Agent on such
date in immediately available funds and the Administrative Agent may (but shall
not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such
Lender.  If and to the extent the Company
has not made such payment in full to the Administrative Agent, each Lender
shall repay to the Administrative Agent on demand such amount distributed to
such Lender, together with interest thereon at the Federal Funds Rate for each
day from the date such amount is distributed to such Lender until the date
repaid.

 

(e)           Except to the extent
otherwise expressly provided herein, each Borrowing hereunder shall be from the
Lenders pro rata in accordance with their respective Pro Rata Shares.

 

2.11         Payments by the
Lenders to the Administrative Agent.

 

(a)           Unless the
Administrative Agent (i) receives notice from a Lender on or prior to the
Effective Time or, with respect to any Borrowing after the Effective Time, at
least one Business Day prior to the date of such Borrowing, that such Lender
will not make available as and when required hereunder to the Administrative
Agent for the account of the Company the amount of that Lender’s Pro Rata Share
of the Borrowing or (ii) knows that a Lender is a Defaulting Lender, the
Administrative Agent may assume that each Lender has made such amount available
to the Administrative Agent in immediately available funds on the Borrowing
Date and the Administrative Agent may (but shall not be so required), in
reliance upon such assumption, make available to the Company on such date a
corresponding amount.  If and to the
extent any Lender shall not have made its full amount available to the
Administrative Agent in immediately available funds and the Administrative
Agent in such circumstances has made available to the Company such amount, that
Lender shall on the Business Day following such Borrowing Date make such amount
available to the Administrative Agent, together with interest at the Federal
Funds Rate for each day during such period. 
A notice of the Administrative Agent submitted to any Lender with respect
to amounts owing under this Section 2.11(a) shall
be conclusive, absent manifest error.  If
such amount is so made available, such payment to the Administrative Agent
shall constitute such Lender’s Loan on the date of Borrowing for all purposes
of this Agreement.  If such amount is not
made available to the Administrative Agent on the Business Day following the
Borrowing Date, the Administrative Agent will notify the Company of such
failure to fund and, upon demand by the Administrative Agent, the Company shall
pay such amount to the Administrative Agent for the Administrative Agent’s
account,

 

37

 

together
with interest thereon for each day elapsed since the date of such Borrowing, at
a rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.

 

(b)           The existence of a
Defaulting Lender or the failure of any Lender to make any Loan on any
Borrowing Date shall not relieve any other Lender of any obligation hereunder
to make a Loan on such Borrowing Date, but no Lender shall be responsible for
the failure of any other Lender to make the Loan to be made by such other
Lender on any Borrowing Date.

 

2.12         Sharing
of Payments, Etc.  If any Lender
shall obtain on account of the Obligations held by it any payment (whether
voluntary, involuntary, through the exercise of any right of set off, or
otherwise) or receive any collateral in respect thereof in excess of the amount
such Lender was entitled to receive pursuant to the terms hereof, such Lender
shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase
from the other Lenders such participations in the Loans made by them as shall
be necessary to cause such purchasing Lender to share the excess payment
according to the terms hereof; provided, however, that if all or any portion of
such excess payment is thereafter recovered from the purchasing Lender, such
purchase shall to that extent be rescinded and each other Lender shall repay to
the purchasing Lender the purchase price paid therefor, together with an amount
equal to such paying Lender’s ratable share (according to the proportion of (i) the
amount of such paying Lender’s required repayment to (ii) 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 Company agrees that any
Lender so purchasing a participation from another Lender may, to the fullest
extent permitted by law, exercise all its rights of payment (including the
right of set off, but subject to Section 11.9)
with respect to such participation as fully as if such Lender were the direct
creditor of the Company in the amount of such participation.  The Administrative Agent will keep records
(which shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section 2.12
and will in each case notify the Lenders following any such purchases or
repayments.

 

2.13                           Issuing the
Letters of Credit.

 

(a)           In order to effect
the issuance of a Letter of Credit, the Company shall submit a Notice of
Borrowing and LC Application in writing by telecopy to the Administrative Agent
(who shall promptly notify the Issuing Lender) not later than 12:00 p.m.,
Chicago, Illinois time, three (3) Business Days before the requested date
of issuance of such Letter of Credit. 
Each such Notice of Borrowing and LC Application shall be signed by the
Company, specify the Business Day on which such Letter of Credit is to be
issued, the purpose for the requested Letter of Credit, specify the
availability for Letters of Credit under the Borrowing Base, and the
$20,000,000  aggregate LC
Obligation limitation as of the date of issuance of such Letter of Credit and
the expiry date thereof which shall not be later than the earlier of (i) twelve
(12) months from the date of Issuance of such Letter of Credit and (ii) the
seventh Business Day prior to Termination Date. 
If requested by the Company not later than three (3) Business Days
prior to expiration of any Letter of Credit, any Letter of Credit may be
renewed for the additional period specified in Section 2.1(c).

 

(b)           Upon satisfaction of
the applicable terms and conditions set forth in Article V,
the Issuing Lender shall issue such Letter of Credit to the specified
beneficiary not

 

38

 

later
than the close of business, Chicago, Illinois time, on the date so
specified.  The Administrative Agent
shall provide the Company and each Lender with a copy of each Letter of Credit
so issued.  Each such Letter of Credit
shall (i) provide for the payment of drafts, presented for honor
thereunder by the beneficiary in accordance with the terms thereon, at sight
when accompanied by the documents described therein and (ii) be subject to
the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 (and any subsequent
revisions thereof approved by a Congress of the International Chamber of
Commerce) (the “UCP”) and shall, as to
matters not governed by the UCP, be governed by, and construed and interpreted
in accordance with, the laws of the State of New York.

 

(c)           Upon the Issuance of
each Letter of Credit, the Issuing Lender shall be deemed, without further
action by any party hereto, to have sold to each other Lender, and each other
Lender shall be deemed, without further action by any party hereto, to have
purchased from the Issuing Lender, a participation, to the extent of such
Lender’s Pro Rata Share, in such Letter of Credit, the obligations thereunder
and in the reimbursement obligations of the Company due in respect of drawings
made under such Letter of Credit.  If
requested by the Issuing Lender, the other Lenders will execute any other
documents reasonably requested by the Issuing Lender to evidence the purchase
of such participation.

 

(d)           Upon the presentment
of any draft for honor under any Letter of Credit by the beneficiary thereof
which the Issuing Lender determines is in compliance with the conditions for
payment thereunder, the Issuing Lender shall promptly notify the Company, the
Administrative Agent and each Lender of the intended date of honor of such
draft and the Company hereby promises and agrees, at the Company’s option, to
either (i) pay to the Administrative Agent for the account of the Issuing
Lender, by 2:00 p.m., Chicago, Illinois time, on the date payment is due
as specified in such notice, the full amount of such draft in immediately
available funds or (ii) request a Loan pursuant to the provisions of Sections 2.1(a) and 2.2
of this Agreement in the full amount of such draft, which request shall specify
that the Borrowing Date is to be the date payment is due under the Letter of
Credit as specified in the Issuing Lender’s notice.  If the Company fails timely to make such
payment because a Loan cannot be made pursuant to Section 2.1(a) or
Section 5.2, each Lender shall,
notwithstanding any other provision of this Agreement (including the occurrence
and continuance of a Default or an Event of Default), make available to the
Administrative Agent for the benefit of the Issuing Lender an amount equal to
its Pro Rata Share of the presented draft on the day the Issuing Lender is
required to honor such draft.  If such
amount is not in fact made available to the Administrative Agent by such Lender
on such date, such Lender shall pay to the Administrative Agent for the account
of the Issuing Lender, on demand made by the Issuing Lender, in addition to
such amount, interest thereon at the Federal Funds Rate for the first two days
following demand and thereafter until paid at the Adjusted Base Rate.  Upon receipt by the Administrative Agent from
the Lenders of the full amount of such draft, notwithstanding any other
provision of this Agreement (including the occurrence and continuance of a Default
or an Event of Default) the full amount of such draft shall automatically and
without any action by the Company, be deemed to have been a Base Rate Loan as
of the date of payment of such draft. 
Nothing in this Section 2.13(d) or
elsewhere in this Agreement shall diminish the Company’s obligation under this
Agreement to provide the funds for the payment of, or on demand to reimburse
the Issuing Lender for payment of, any draft presented to, and duly honored by,
the Issuing Lender under 

 

39

 

any
Letter of Credit, and the automatic funding of a Loan as provided in this Section 2.13(d) shall not
constitute a cure or waiver of the Event of Default for failure to provide
timely such funds as agreed in this Section 2.13(d).

 

(e)           In order to induce
the issuance of Letters of Credit by the Issuing Lender and the purchase of
participations therein by the other Lenders, the Company agrees with the
Administrative Agent, the Issuing Lender and the other Lenders that neither the
Administrative Agent nor any Lender (including the Issuing Lender) shall be
responsible or liable (except as provided in the following sentence) for, and
the Company’s unconditional obligation to reimburse the Issuing Lender through
the Administrative Agent for amounts paid by the Issuing Lender, as provided in
Section 2.13(d) above, on
account of drafts so honored under the Letters of Credit shall not be affected
by, any circumstance, act or omission whatsoever (whether or not known to the
Administrative Agent or any Lender (including the Issuing Lender)) other than a
circumstance, act or omission resulting from the gross negligence or willful
misconduct of the Administrative Agent or any Lender, including the Issuing
Lender.  The Company agrees that any
action taken or omitted to be taken by the Administrative Agent or any Lender
(including the Issuing Lender) under or in connection with any Letter of Credit
or any related draft, document or Property shall be binding on the Company and
shall not put the Administrative Agent or any Lender (including the Issuing
Lender) under any resulting liability to the Company, unless such action or
omission is the result of the gross negligence or willful misconduct of the
Administrative Agent or any such Lender (including the Issuing Lender).  The Company hereby waives presentment for
payment (except the presentment required by the terms of any Letter of Credit)
and notice of dishonor, protest and notice of protest with respect to drafts
honored under the Letters of Credit.  The
Issuing Lender agrees promptly to notify the Company whenever a draft is
presented under any Letter of Credit, but failure to so notify the Company
shall not in any way affect the Company’s obligations hereunder.  Subject to Section 3.7,
if while any Letter of Credit is outstanding, any law, executive order or
regulation is enforced, adopted or interpreted by any public body, governmental
agency or court of competent jurisdiction so as to affect any of the Company’s
obligations or the compensation to any Lender in respect of the Letters of
Credit or the cost to such Lender of establishing or maintaining the Letters of
Credit (or any participation therein), such Lender shall promptly notify the
Company thereof in writing and within ten Business Days after receipt by the Company
of such Lender’s request (through the Administrative Agent) for reimbursement
or indemnification or within 30 days after receipt of a notice in respect of
Taxes or Other Taxes, the Company shall reimburse or indemnify such Lender, as
the case may be, with respect thereto so that such Lender shall be in the same
position as if there had been no such enforcement, adoption or
interpretation.  The foregoing agreement
of the Company to reimburse or indemnify the Lenders shall apply in (but shall
not be limited to) the following situations: 
an imposition of or change in reserve, capital maintenance or other
similar requirements or in excise or similar Taxes or monetary restraints,
except a change in franchise Taxes imposed on such Lender or in Tax on the net income
of such Lender.

 

(f)            In the event that
any provision of a LC Application is inconsistent with, or in conflict of, any
provision of this Agreement, including provisions for the rate of interest
applicable to drawings thereunder or rights of setoff or any representations,
warranties, covenants or any events of default set forth therein, the
provisions of this Agreement shall govern.

 

40

 

(g)           If the
Obligations, or any part thereof, become immediately due and payable pursuant
to Article IX of this Agreement, then
the entirety of the LC Obligation shall become immediately due and payable
without regard for actual drawings or payments on the Letters of Credit, and
the Company shall be obligated to pay to the Administrative Agent immediately
an amount equal to the entirety of the LC Obligation.  All amounts made due and payable by the
Company under this Section 2.13(g) may
be applied as the Issuing Lender and the Lenders elect to any of the various LC
Obligation; provided, however, that such amounts applied by the Issuing Lender
and the Lenders to the LC Obligation shall be (i) first applied to the
Matured LC Obligation, and (ii) second held by the Administrative Agent in
an interest bearing account for the benefit of the Issuing Lender and the
Lenders as LC Collateral, such LC Collateral to be held in an account with the
Administrative Agent or an Affiliate thereof, until such remaining portion of
the LC Obligation has either (i) become a portion of the Matured LC
Obligation, at which time such LC Collateral paid to the Administrative Agent
shall be applied to such Matured LC Obligation, or (ii) expired undrawn,
at which time an amount of such LC Collateral equal to such expired and undrawn
LC Obligation, plus accrued interest thereon, shall be applied as otherwise
required or permitted under Article IX.  This Section 2.13(g) shall
not limit or impair any rights which the Administrative Agent, the Issuing
Lender or any of the Lenders may have under any other document or agreement
relating to any Letter of Credit or portion of the LC Obligation, including
without limitation, any LC Application.

 

2.14         Cash Collateralization for
Defaulting Lenders. Notwithstanding any provision of this Agreement to the
contrary, if any Lender becomes a Defaulting Lender, then the following
provisions shall apply for so long as such Lender is a Defaulting Lender:

 

(a)           if
any LC Obligations exist at the time a Lender is a Defaulting Lender, then the
Company shall within one Business Day following notice by the Administrative
Agent cash collateralize 100% of such Defaulting Lender’s Pro Rata Share
of the LC Obligation for so long as such LC
Exposure is outstanding and under arrangements satisfactory to the
Administrative Agent;

 

(b)           if
any Defaulting Lender’s Pro Rata Share of the LC Obligation is not cash collateralized as required in Section 2.14(a) above,
then, without prejudice to any other rights or remedies of the Issuing Bank or
any Lender hereunder, all letter of credit fees payable under Section 2.8(b) with
respect to such Defaulting Lender’s Pro Rata Share of the LC
Obligation shall be payable to the
Issuing Bank until such Defaulting Lender’s Pro Rata Share of the LC
Obligation is cash collateralized;

 

(c)           so
long as any Lender is a Defaulting Lender, the Issuing Bank shall not be
required to issue, amend or increase any Letter of Credit, unless it is
satisfied that cash collateral will be provided by the Company in accordance
with Section 2.14(a) above; and

 

(d)           for
the avoidance of doubt, the Company shall retain and reserve its other rights
and remedies respecting each Defaulting Lender.

 

41

 

ARTICLE III

 

TAXES,
YIELD PROTECTION AND ILLEGALITY

 

3.1           Taxes.

 

(a)           Any and all payments
by the Company to each Lender or the Administrative Agent under this Agreement
and any other Loan Document shall be made free and clear of, and without
deduction or withholding for any Taxes. 
In addition, the Company shall pay all Other Taxes.

 

(b)           Subject to Section 3.1(f), the Company agrees to
indemnify and hold harmless each Lender and the Administrative Agent for the
full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed
by any jurisdiction on amounts payable under this Section 3.1)
paid by the Lender or the Administrative Agent and any liability (including
penalties, interest, additions to Tax and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted.  Payment under this
indemnification shall be made within 30 days after the date the affected Lender
or the Administrative Agent makes written demand therefor.

 

(c)           If the Company shall
be required by law to deduct or withhold any Taxes or Other Taxes from or in
respect of any sum payable hereunder to any Lender or the Administrative Agent,
then: (i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section 3.1), such Lender or the
Administrative Agent, as the case may be, receives an amount equal to the sum
it would have received had no such deductions or withholdings been made; (ii) the
Company shall make such deductions and withholdings; (iii) the Company
shall pay the full amount deducted or withheld to the relevant taxing authority
or other authority in accordance with applicable law; and (iv) the Company
shall also pay to each affected Lender or the Administrative Agent for the
account of such Lender, at the time interest is paid, all additional amounts
which such Lender specifies as necessary to preserve the after-tax yield such
Lender would have received if such Taxes or Other Taxes had not been imposed.

 

(d)           Within 30 days after
the date of any payment by the Company of Taxes or Other Taxes under Section 3.1(c) above, the
Company shall furnish the Administrative Agent the original or a certified copy
of a receipt evidencing payment thereof, or other evidence of payment
satisfactory to the Administrative Agent.

 

(e)           If the Company is
required to pay additional amounts to any Lender or the Administrative Agent
pursuant to Section 3.1(c), then upon
written request of the Company such Lender shall use reasonable efforts
(consistent with legal and regulatory restrictions) to change the jurisdiction
of its Lending Office so as to eliminate any such additional payment by the
Company which may thereafter accrue, if such change in the judgment of such
Lender is not otherwise disadvantageous to such Lender.

 

(f)            No Lender that is
required to comply with Section 10.10
shall be entitled to any indemnification under this Section 3.1
if the obligation with respect to which indemnification is sought would not
have arisen but for a failure of the affected Lender to comply with such Section 10.10.

 

42

 

3.2           Illegality.

 

(a)           If any Lender
determines that the introduction of any Requirement of Law, or any change in
any Requirement of Law, or in the interpretation or administration of any
Requirement of Law, has made it unlawful, or that any central bank or other
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make LIBO Rate Loans, then, on notice thereof by
the Lender to the Company through the Administrative Agent, any obligation of
that Lender to make LIBO Rate Loans shall be suspended until such Lender
notifies the Administrative Agent and the Company that the circumstances giving
rise to such determination no longer exist.

 

(b)           If a Lender
determines that it is unlawful to maintain any LIBO Rate Loan, the Company
shall, upon its receipt of notice of such fact and demand from such Lender
(with a copy to the Administrative Agent), prepay in full such LIBO Rate Loans
of that Lender then outstanding, together with interest accrued thereon and
amounts required under Section 3.4,
either on the last day of the Interest Period thereof, if the Lender may
lawfully continue to maintain such LIBO Rate Loans to such day, or immediately,
if the Lender may not lawfully continue to maintain such LIBO Rate Loan.  If the Company is required to so prepay any
LIBO Rate Loan, then concurrently with such prepayment, the Company shall
borrow from the affected Lender, in the amount of such repayment, a Base Rate
Loan.

 

(c)           If the obligation of
any Lender to make or maintain LIBO Rate Loans has been so terminated or
suspended, all Loans which would otherwise be made by the Lender as LIBO Rate
Loans shall be instead Base Rate Loans.

 

(d)           Before giving any
notice to the Administrative Agent under this Section 3.2,
the affected Lender shall designate a different Lending Office with respect to
its LIBO Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of such Lender, be
illegal or otherwise disadvantageous to such Lender.

 

3.3           Increased
Costs and Reduction of Return.

 

(a)           If any Lender
determines that, due to either (i) the introduction of or any change
(other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the LIBO Rate) in or in the
interpretation of any law or regulation or (ii) the compliance by that
Lender with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to such Lender of agreeing to make or making, funding
or maintaining any LIBO Rate Loans, then the Company shall be liable for, and
shall from time to time, upon demand (with a copy of such demand to be sent to
the Administrative Agent), pay to the Administrative Agent for the account of
such Lender, additional amounts as are sufficient to compensate such Lender for
such increased costs.

 

(b)           If any Lender shall
have determined that (i) the introduction of any Capital Adequacy
Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any
change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) 

 

43

 

compliance
by such Lender (or its Lending Office) or any Affiliate controlling such Lender
with any Capital Adequacy Regulation, affects or would affect the amount of
capital required or expected to be maintained by such Lender or any Affiliate
controlling such Lender and (taking into consideration such Lender’s or such
Affiliate’s policies with respect to capital adequacy and such Lender’s desired
return on capital) determines that the amount of such capital is increased as a
consequence of its Commitment, Loans, other Credit Extensions, or Obligations
under this Agreement, then, upon demand of such Lender to the Company through
the Administrative Agent, the Company shall pay to such Lender, from time to
time as specified by such Lender, additional amounts sufficient to compensate
such Lender for such increase.

 

3.4           Funding
Losses.  The Company shall reimburse
each Lender and hold each Lender harmless from any loss or expense which the
Lender may sustain or incur as a consequence of (a) the failure of the
Company to make on a timely basis any payment of principal of any LIBO Rate
Loan; (b) the failure of the Company to borrow or continue a LIBO Rate
Loan or to convert a Base Rate Loan to a LIBO Rate Loan after the Company has
given (or is deemed to have given) a Notice of Borrowing or a Notice of
Conversion/Continuation (including by reason of the failure to satisfy any
condition precedent thereto); (c) the failure of the Company to make any
prepayment in accordance with any notice delivered under Section 2.5;
(d) the prepayment (including pursuant to Section 2.6)
or other payment (including after acceleration thereof) of a LIBO Rate Loan on
a day that is not the last day of the relevant Interest Period; or (e) the
automatic conversion under Section 2.3
of any LIBO Rate Loan to a Base Rate Loan on a day that is not the last day of
the relevant Interest Period; including any such loss or expense arising from
the liquidation or reemployment of funds obtained by it to maintain its LIBO
Rate Loans or from fees payable to terminate the deposits from which such funds
were obtained.  For purposes of
calculating amounts payable by the Company to the Lenders under this Section 3.4 and under Section 3.3(a),
each LIBO Rate Loan made by a Lender (and each related reserve, special deposit
or similar requirement) shall be conclusively deemed to have been funded at the
LIBOR used in determining the LIBO Rate for such LIBO Rate Loan by a matching
deposit or other borrowing in the interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such LIBO Rate Loan is in
fact so funded.

 

3.5           Inability
to Determine Rates.  If the
Administrative Agent determines that for any reason adequate and reasonable
means do not exist for determining the LIBO Rate for any requested Interest
Period with respect to a proposed LIBO Rate Loan, or that the LIBO Rate
applicable pursuant to Section 2.7(b) for
any requested Interest Period with respect to a proposed LIBO Rate Loan does
not adequately and fairly reflect the cost to the Lenders of funding such Loan,
the Administrative Agent will promptly so notify the Company and each
Lender.  Thereafter, the obligation of
the Lenders to make or maintain LIBO Rate Loans hereunder shall be suspended
until the Administrative Agent upon the instruction of the Lenders revokes such
notice in writing.  Upon receipt of such
notice, the Company may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. 
If the Company does not revoke such notice, the Lenders shall make,
convert or continue the Loans, as proposed by the Company, in the amount
specified in the applicable notice submitted by the Company, but such Loans
shall be made, converted or continued as Base Rate Loans instead of LIBO Rate
Loans.

 

3.6           Certificates
of Lenders.  Any Lender claiming
reimbursement or compensation under this Article III
shall deliver to the Company (with a copy to the 

 

44

 

Administrative Agent) a certificate setting forth in reasonable detail
the amount payable to such Lender hereunder and such certificate shall be
conclusive and binding on the Company in the absence of manifest error;
provided, however, that such Lender shall only be entitled to collect amounts
incurred within 180 days of such notice.

 

3.7           Substitution
of Lenders.  Upon (i) the
receipt by the Company from any Lender of a claim for compensation under this Article III, (ii) the refusal of a
Lender to accept the Annual Proposed Borrowing Base pursuant to Section 2.6(b) or
Semi-Annual Proposed Borrowing Base pursuant to Section 2.6(c) (as
applicable) or (iii) a Lender becoming a Defaulting Lender, and, as a
result, the Company elects by written notice to the Administrative Agent to
replace such Lender pursuant to this Section 3.7
(such Lender, an “Affected Lender”), the Company
may:  (a) obtain a replacement bank
or financial institution satisfactory to the Administrative Agent to acquire
and assume all or a ratable part of all of such Affected Lender’s Loans and
Commitment (a “Replacement Lender”); or (b) request
one more of the other Lenders to acquire and assume all or part of such
Affected Lender’s Loans and Commitment but none of the Lenders shall have any
obligation to do so.  Any such
designation of a Replacement Lender under clause (a) shall be subject to
the prior written consent of the Administrative Agent, which consent shall not
be unreasonably withheld.

 

3.8           Survival.  The agreements and obligations of the Company
in this Article III shall survive the
payment of all other Obligations.

 

ARTICLE IV

 

SECURITY

 

4.1           The
Security.  The Obligations will be
secured by the Security Documents. 
Certain of the Security Documents are amendments and restatements of
Security Documents (as defined in the Existing Credit Agreement), and as such,
are granted by the Company, or its Restricted Subsidiaries, as applicable, in
assumption, renewal, extension, amendment and restatement of such prior liens
and security interests securing the Existing Credit Agreement and are entitled
to the priority and perfection relating back to the date originally granted and
assigned to the greatest extent possible. 
Each of the Company and its Restricted Subsidiaries hereby adopts,
assumes, ratifies, and reaffirms such prior Liens and security interests and
confirms that such Liens and security interests secure the Obligations as a
continuation of the original “Obligations”
described in the Existing Credit Agreement.

 

4.2           Agreement
to Deliver Security Documents.  The
Company shall, and shall cause its Restricted Subsidiaries to, deliver, to
further secure the Obligations whenever requested by the Administrative Agent
in its sole and absolute discretion, deeds of trust, mortgages, chattel
mortgages, security agreements, account control agreements, financing
statements and other Security Documents in form and substance satisfactory to
the Administrative Agent for the purpose of granting, confirming, and
perfecting first and prior Liens or security interests in any Property now
owned or hereafter acquired by the Company or any of its Restricted
Subsidiaries (excluding the Capital Stock of any Unrestricted Subsidiary held
by the Company or any of its Restricted Subsidiaries), as applicable, subject
only to Permitted Liens.  The Company
shall, and shall cause its Restricted Subsidiaries to, deliver, and cause its
Restricted Subsidiaries, where 

 

45

 

applicable, to deliver whenever requested by the Administrative Agent,
favorable title opinions from legal counsel acceptable to the Administrative
Agent, title insurance policies, or such other evidence of title satisfactory
to the Administrative Agent with respect to the Mortgaged Properties designated
by the Administrative Agent, based upon abstract or record examinations
acceptable to the Administrative Agent and (a) stating that the Company or
its Restricted Subsidiary, as applicable, has good and marketable title to the
Mortgaged Properties, free and clear of all Liens except Permitted Liens, (b) confirming
that such Mortgaged Properties are subject to Security Documents securing the
Obligations that constitute and create legal, valid and duly perfected deed of
trust or mortgage Liens in such Mortgaged Properties and interests, and
assignments of and security interests in the Oil and Gas attributable to such
Mortgaged Properties comprised of Oil and Gas Properties and interests and the
proceeds thereof, in each case subject only to Permitted Liens, and (c) covering
such other matters as the Administrative Agent may reasonably request.

 

4.3           Perfection
and Protection of Security Interests and Liens.  The Company shall, and shall cause its
Restricted Subsidiaries to, from time to time deliver to the Administrative
Agent any financing statements, amendment, assignment and continuation
statements, extension agreements and other documents, properly completed and
executed (and acknowledged when required) by the Company or its Restricted
Subsidiary, as applicable, in form and substance satisfactory to the
Administrative Agent, which the Administrative Agent reasonably requests for
the purpose of perfecting, confirming, or protecting any Liens or other rights
in Collateral securing any Obligations.

 

4.4           Offset.  To secure the repayment of the Obligations,
the Company hereby grants the Administrative Agent and each Lender a security
interest, a Lien, and a right of offset, each of which shall be in addition to
all other interests, Liens, and rights of the Administrative Agent and the
Lenders at common law, under the Loan Documents, or otherwise, and each of
which shall be upon and against (a) any and all moneys, securities or
other Property (and the proceeds therefrom) of the Company now or hereafter
held or received by or in transit to the Administrative Agent or any Lender
from or for the account of the Company, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, (b) any and all deposits
(general or special, time or demand, provisional or final) of the Company with
the Administrative Agent or any Lender, and (c) any other credits and
claims of the Company at any time existing against the Administrative Agent or
any Lender, including claims under certificates of deposit. During the
existence of any Event of Default, the Administrative Agent or any Lender is
hereby authorized to foreclose upon, offset, appropriate, and apply, at any
time and from time to time, without notice to the Company, any and all items
hereinabove referred to against the Obligations then due and payable.

 

4.5           Guaranty.

 

(a)           Each Guarantor has
executed and delivered to the Administrative Agent, and each Restricted
Subsidiary of the Company now existing or created, acquired or coming into
existence after the date hereof shall, promptly upon request by the
Administrative Agent, execute and deliver to the Administrative Agent, a
Guaranty setting forth therein an absolute and unconditional guaranty of the
timely repayment of, and the due and punctual performance of the Obligations of
the Company hereunder, which Guaranty shall be satisfactory to the Lenders in 

 

46

 

form
and substance.  The Company will cause
each of its Restricted Subsidiaries to deliver to the Administrative Agent,
simultaneously with its delivery of such a Guaranty, written evidence
satisfactory to the Administrative Agent and its counsel that such Restricted
Subsidiary has taken all corporate, limited liability company or partnership
action necessary to duly approve and authorize its execution, delivery and
performance of such Guaranty and any Security Documents and other documents
which it is required to execute.

 

(b)           Guaranty
Representations.  To induce the
Lenders, the Issuing Lender and the Administrative Agent to enter into this
Agreement, each Loan Party represents and warrants to each such Person at the
Effective Time:

 

(i)            Benefit to
Guarantors.  The Loan Parties
are mutually dependent on each other in the conduct of their respective
businesses, with the credit needed from time to time by each often being
provided by another or by means of financing obtained by one such Affiliate
with the support of the other for their mutual benefit and the ability of each
to obtain such financing is dependent on the successful operations of the
other.  The board of directors, manager
or general partner, where applicable, of each Guarantor has determined that
such Guarantor’s execution, delivery and performance of this Agreement may
reasonably be expected to directly or indirectly benefit such Guarantor and is
in the best interests of such Guarantor.

 

(ii)           Reasonable
Consideration for Guaranties. 
The direct or indirect value of the consideration received and to be
received by such Guarantor in connection herewith is reasonably worth at least
as much as the liability and obligations of each Guarantor hereunder and its
Guaranty, and the incurrence of such liability and obligations in return for
such consideration may reasonably be expected to benefit such Guarantor,
directly or indirectly.

 

(iii)          No
Insolvencies.  No Loan Party
is “insolvent” (that is, the sum of such Person’s absolute and contingent
liabilities, including the Obligations, does not exceed the fair market value
of such Person’s assets, including any rights of contribution, reimbursement or
indemnity).  Each Loan Party has capital
which is adequate for the businesses in which such Person is engaged and
intends to be engaged.  No Loan Party has
incurred (whether hereby or otherwise), nor does any Loan Party intend to incur
or believe that it will incur, liabilities which will be beyond its ability to
pay as such liabilities mature.

 

4.6           Production
Proceeds.  Notwithstanding that, by
the terms of the various Security Documents, the Company is and will be
assigning to the Administrative Agent all of the Net Proceeds of Production
accruing to the Mortgaged Properties covered thereby, so long as no Event of
Default has occurred and is continuing, the Administrative Agent, on behalf of
the Lenders, grants each of the Company and its Subsidiaries a revocable
license to continue to receive from the purchasers of production all such Net Proceeds
of Production, subject, however, to the Liens created under the Security
Documents, which Liens are hereby affirmed and ratified.  During the continuance of an Event of Default
described under Sections 9.1(g) or (h),
this license shall be automatically revoked, and during the continuance of any
other Event of Default, this 

 

47

 

license shall be revocable in the sole discretion of the Administrative
Agent, by notice to the Company, and the Administrative Agent may exercise all
rights and remedies granted under the Security Documents, including the right
to obtain possession of all Net Proceeds of Production then held by the Loan
Parties or to receive directly from the purchasers of production all other Net
Proceeds of Production.  In no case shall
any failure, whether purposeful or inadvertent, by the Administrative Agent to
collect directly any such Net Proceeds of Production constitute in any way a
waiver, remission or release of any of its rights under the Security Documents,
nor shall any release of any Net Proceeds of Production by the Administrative
Agent to the Loan Parties constitute a waiver, remission, or release of any
other Net Proceeds of Production or of any rights of the Administrative Agent to
collect other Net Proceeds of Production thereafter.

 

ARTICLE V

 

CONDITIONS
PRECEDENT

 

5.1           Conditions
of the Effective Date and Initial Credit Extensions.  The effectiveness of this Agreement, and each
Lender’s obligation to lend money and otherwise extend credit to the Company to
refinance, renew and extend the Existing Revolving Credit Outstandings are
subject to the condition that on or before the Effective Time the
Administrative Agent shall have received all of the following, in form and
substance satisfactory to the Administrative Agent and each Lender, and in
sufficient copies for each Lender (or, in the case of clauses (f), (h) or
(p), the conditions specified therein shall have been satisfied):

 

(a)           Credit Agreement and Related Documents.  This Agreement, the Notes, the Guaranty and
the Security Documents (other than the Account Control Agreement), duly
executed and delivered by each Loan Party party thereto;

 

(b)           Resolutions; Incumbency; Organization Documents.  (i) Resolutions of the board of directors
of the Company and members or the board of directors of each Guarantor or its
general partner, as applicable, authorizing the transactions contemplated
hereby, certified as of the Effective Time by the Secretary or an Assistant
Secretary of such Person; (ii) Certificates of the Secretary of the
Company and the Secretary of each Guarantor certifying the names and true
signatures of the officers of such Person authorized to execute, deliver and
perform, as applicable, this Agreement, the Security Documents, the Guaranty,
and all other Loan Documents to be delivered by it hereunder; and (iii) the
Organization Documents of each Loan Party as in effect on the Effective Time,
certified by the Secretary or Assistant Secretary of the such Person as of the
Effective Time;

 

(c)           Good Standing. 
A good standing certificate for each Loan Party from its state of
incorporation or formation, and evidencing its qualification to do business in
each other jurisdiction where its ownership, lease or operation of properties
or the conduct of its business requires such qualification, in each case as of
a recent date;

 

(d)           Payment of Fees. 
Evidence of payment by the Company of all accrued and unpaid fees, costs
and expenses owed pursuant to the Existing Credit Agreement and under this
Agreement, Agent Fee Letter and the Lender Fee Letter, in
each case to the extent then due

 

48

 

and
payable at the Effective Time, including any such costs, fees and expenses
arising under or referenced in Sections 2.8
and 11.4;

 

(e)           Certificate. 
A certificate signed by a Responsible Officer, dated as of the Effective
Time, stating that (i) the representations and warranties contained in Article VI
and Section 4.5(b) are true and correct on and as of the
Effective Date, as though made on and as of such date; (ii) no litigation
is pending or threatened against the Company or any Subsidiary in which there
is a reasonable probability of an adverse decision which would result in a
Material Adverse Effect; and (iii) there has occurred no event or
circumstance that has resulted or would reasonably be expected to result in a
Material Adverse Effect since December 31, 2008;

 

(f)            Due Diligence. 
The Administrative Agent shall have completed a due diligence review
satisfactory to the Administrative Agent on behalf of the Required Lenders,
including as to the legal structure, capital budgets, tax position, hedging
strategy and hedging position of the Company and its Subsidiaries;

 

(g)           Title. 
Evidence that the Company and its Restricted Subsidiaries have good and
marketable title on at least 85% of the Net Present Value of the Proved Oil and
Gas Reserves subject to no other Liens, other than Permitted Liens, evidenced
by title information satisfactory to the Administrative Agent and the Lenders;

 

(h)           Environmental. 
The Administrative Agent shall have completed a review satisfactory to
the Administrative Agent of current public environmental data sources,
registers and lists regarding each Loan Party and their respective Oil and Gas
Properties and the Administrative Agent and the Lenders shall be satisfied with
all environmental matters;

 

(i)            Insurance Certificates.  Insurance certificates in form and substance
reasonably satisfactory to the Administrative Agent, from the Company’s
insurance carriers reflecting the current insurance policies required under Section 7.6 (such insurance will be primary
and not contributing) including any necessary endorsements to reflect the
Administrative Agent as loss payee for the ratable benefit of the Lenders, with
the right to receive at least 30 days prior notice of cancellation of any such
policy;

 

(j)            Other Documents. 
Such other approvals, opinions, documents or materials as the
Administrative Agent or any Lender may request;

 

(k)           Opinions of Counsel.  (i) An opinion of Davis Graham &
Stubbs LLP covering such matters as the Administrative Agent may require and in
form and substance satisfactory to the Administrative Agent dated as of the
Effective Time, (ii) an opinion of Bracewell & Giuliani LLP
covering such matters of New York law as the Administrative Agent may require
in form and substance satisfactory to the Administrative Agent dated as of the
Effective Time and (iii) opinions of Bracewell & Giuliani LLP and
Downey Brand LLP as to the enforceability and perfection of the Liens and
security interests created under the Mortgages filed or to be filed in Texas
and California, respectively;

 

(l)            Initial Reserve Report, Financial Statements and  Pro Forma Financial Statements.  The Initial Reserve Report, the Audited
Financial Statements, the Company’s 

 

49

 

unaudited
consolidated financial statements as of and for the nine month period ending September 30,
2009, each in form and substance satisfactory to the Administrative Agent;

 

(m)          Lien Searches.  Evidence of the results of a recent lien
search in each of the jurisdictions in which UCC financing statements or other
filings or recordations should be made to evidence or perfect security
interests in any assets of the Loan Parties, and such search shall reveal no
Liens on any of the Property of the Loan Parties, except for Permitted Liens;

 

(n)           MMS Operational
Matters.  Evidence that the Company
is qualified by the Minerals Management Service of the United States Department
of Interior to operate its Hydrocarbon Interests comprised of leases covering
submerged lands on the federal Outer Continental Shelf;

 

(o)           Filings, Registrations and Recordings.  Each document (including, without limitation,
any UCC financing statement) required by the Security Documents or under law or
reasonably requested by the Administrative Agent to be filed, registered or
recorded in order to create in favor of the Administrative Agent, for the
benefit of the Lenders, a first priority perfected Lien on the Collateral
described in any Security Document to which the Company or any Guarantor is a
party, prior and superior in right to any other Person (other than with respect
to Permitted Liens (other than Liens described in (j) of such
definition)), shall have been filed, registered or recorded or shall have been
delivered to the Administrative Agent in proper form for filing, registration
or recordation;

 

(p)           Approvals.  All government and third party approvals
(including any consents) necessary in connection with continuing operations of
the Company and its Subsidiaries and the transactions contemplated by the Loan
Documents shall have been obtained and be in full force and effect, and all
applicable waiting periods shall have expired without any action being taken or
threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on the financing contemplated hereby;

 

(q)           Solvency.  A certificate from a Responsible Officer of
the Company and each Subsidiary certifying that the Company and each Subsidiary
(i) as of the Effective Time, is, and (ii) after giving effect to the
transactions contemplated hereby, will be, Solvent; and

 

(r)            Pledged Stock;
Stock Powers; Acknowledgment and Consent; Pledged Notes.  The Administrative Agent shall have received (i) the
certificates representing the shares of Capital Stock of the Company’s
Restricted Subsidiaries pledged pursuant to the Security Agreement, together
with an undated stock power for each such certificate executed in blank by a
duly authorized officer of the pledgor thereof, and (ii) each promissory
note pledged by the Loan Parties pursuant to the Security Agreement endorsed
(without recourse) in blank (or accompanied by an executed transfer form in
blank satisfactory to the Administrative Agent) by the pledgor thereof.

 

5.2           Conditions
to All Credit Extensions.  The obligation
of each Lender to make any Loan or to continue or convert any Loan under Section 2.3 (but specifically excluding the
conversion of LIBO Rate Loans on the last day of the Interest Period therefor
into Base Rate Loans), and of the obligation of the Issuing Lender to issue any
Letters of Credit, in each case 

 

50

 

from and after the Effective Time, is subject to the satisfaction of
the following conditions precedent on the relevant Borrowing Date or Conversion/Continuation
Date:

 

(a)           Notice. 
The Administrative Agent shall have received a Notice of Borrowing or a
Notice of Conversion/Continuation, as applicable;

 

(b)           Continuation of Representations and Warranties.  The representations and warranties in Article VI and Section 4.5(b) shall
be true and correct in all material respects on and as of such Borrowing Date
or Conversion/Continuation Date with the same effect as if made on and as of
such Borrowing Date or Conversion/Continuation Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they shall be true and correct as of such earlier date);

 

(c)           No Existing Default.  No Default or Event of Default shall exist or
shall result from such Borrowing, continuation or conversion or Issuance;

 

(d)           No Event or Condition of Material Adverse Effect.  No event or condition having a Material
Adverse Effect shall have occurred since December 31, 2008, or if
applicable the date of the most recent annual audited consolidated financial
statements of the Company delivered to the Administrative Agent pursuant to Section 7.1(a);
and

 

(e)           Mortgaged Properties.  The Administrative Agent shall be satisfied
that the Loan Parties have granted to it, at such time, first priority
perfected Liens on Oil and Gas Properties that are Mortgaged Properties,
subject only to Permitted Liens, sufficient to cause the Mortgaged Properties
to include eighty-five percent (85%) of the Net Present Value of the Proved
Reserves and at least ninety-five percent (95%) of the Net Present Value of the
Proved Developed Producing Reserves.

 

Each
Notice of Borrowing or Notice of Conversion/Continuation submitted by the
Company hereunder shall constitute a representation and warranty by the Company
hereunder, as of the date of each such notice and as of each Borrowing Date or
Conversion/Continuation Date, as applicable, that the conditions in this Section 5.2 are satisfied.

 

ARTICLE VI

 

REPRESENTATIONS
AND WARRANTIES

 

To
induce the Lenders, the Issuing Lender and the Administrative Agent to enter
into this Agreement, the Loan Parties represent and warrant, jointly and
severally, to each such Person, as of the Effective Time:

 

6.1           Organization,
Existence and Power.  Each Loan
Party: (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation; (b) has the power and
authority and all material governmental licenses, authorizations, consents and
approvals to own its assets, carry on its business and to execute, deliver, and
perform its obligations under the Loan Documents; (c) is duly qualified as
a foreign corporation, limited partnership or limited liability company and is
licensed and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of Property or the 

 

51

 

conduct of its business requires such qualification or license, except
where failure to do so would not reasonably be expected to have a Material
Adverse Effect; and (d) is in compliance in all material respects with all
Requirements of Law.

 

6.2           Corporate
Authorization; No Contravention.  The
execution, delivery and performance by the Loan Parties of this Agreement and
each other Loan Document to which such Person is a party have been duly
authorized by all necessary organizational action, and do not and will not: (a) contravene
the terms of any of that Person’s Organization Documents; (b) contravene
any Second Lien Debt Instrument; (b) conflict with or result in any breach
or contravention of, or the creation of any Lien under, any document evidencing
any material Contractual Obligation to which such Person is a party that would
be prior to the Liens granted to the Administrative Agent for the benefit of
the Lenders or otherwise that would constitute a Material Adverse Effect, or
any order, injunction, writ or decree of any Governmental Authority to which
such Person or its material Property is subject; or (c) violate in any
material respect any Requirement of Law.

 

6.3           Governmental
Authorization.  No approval, consent,
exemption, authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary in connection with the execution, delivery
or performance by, or enforcement against, the Company or any other Loan Party
of this Agreement or any other Loan Document to which it is a party, except for
filings necessary to obtain and maintain perfection of Liens; routine filings
related to the Company and the operation of its business; and such filings as
may be necessary in connection with the Lenders’ exercise of remedies
hereunder.

 

6.4           Binding
Effect.  This Agreement and each
other Loan Document to which the Company or any Restricted Subsidiary is a
party constitute the legal, valid and binding obligations of the Company and
such Restricted Subsidiaries to the extent it is a party thereto, enforceable
against such Person in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors’ rights generally or by equitable
principles relating to enforceability.

 

6.5           Litigation.  Unless specifically disclosed in Schedule 6.5 attached hereto, there are no
actions, suits, proceedings, claims or disputes pending, or to the best
knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company or its
Subsidiaries or any of their respective Properties which (i) purport to
affect or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby or thereby; or (ii) if determined
adversely to the Company or its Subsidiaries, would reasonably be expected to
have a Material Adverse Effect.  No
injunction, writ, temporary restraining order or any order of any nature has
been issued by any court or other Governmental Authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided for herein or
therein not be consummated as herein or therein provided.

 

6.6           No
Default.  No Default or Event of
Default exists or would be reasonably expected to result from the incurring of
any Obligations by the Company.  No “Default”
or “Event of Default” (as those terms are defined in the Second Lien Debt
Instruments) exists under any Second Lien Debt Instrument.  Neither the Company nor any Subsidiary is in
default under 

 

52

 

or with respect to any other Contractual Obligation in any respect
which, individually or together with all such defaults, would reasonably be
expected to have a Material Adverse Effect.

 

6.7           ERISA Compliance.  Except as specifically disclosed in Schedule 6.7:

 

(a)           Each Plan is in
compliance in all material respects with the applicable provisions of ERISA,
the Code and other federal or state law. 
Each Plan that is intended to be qualified under Code Section 401(a) is
either (i) a prototype plan entitled to rely on the opinion letter issued
by the IRS as to the qualified status of such plan under Section 401 of
the Code to the extent provided in Revenue Procedure 2005-16, or (ii) the
recipient of a determination letter from the IRS to the effect that such Plan
is qualified, and the plans and trusts related thereto are exempt from federal
income Taxes under Sections 401(a) and 501(a), respectively, of the
Code.  To the best knowledge of the
Company, nothing has occurred which would cause the loss of such
qualification.  The Company and each
ERISA Affiliate have made all required contributions to any Plan subject to Section 412
of the Code, and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been made with
respect to any Plan.

 

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

 

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

 

6.8           Use
of Proceeds; Margin Regulations.  The
proceeds of the Loans shall be used solely for the purposes set forth in and
permitted by Section 7.13.  Neither the Company nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.

 

6.9           Title
to Properties.  The Company and each
Restricted Subsidiary have good and marketable title to the Mortgaged
Properties subject only to Permitted Liens, and, except for such defects in
title as would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, have good and marketable title to, or valid
leasehold interests in, all other Property necessary or used in the ordinary
conduct of their respective businesses. 
The Mortgaged Properties of the Company and its Restricted Subsidiaries
are subject to no Liens, other than Permitted Liens.

 

53

 

6.10         Oil
and Gas Reserves.  The Company and
each Restricted Subsidiary is and will hereafter be, in all material respects,
the owner of the Oil and Gas that it purports to own from time to time in and
under its Oil and Gas Properties, together with the right to produce the
same.  Such Oil and Gas Properties are
not subject to any Lien other than as set forth in the financial statements
referred to in Section 6.14, as
disclosed in such financial statements to the Lenders in writing prior to the
Effective Time and Permitted Liens.  All
such Oil and Gas has been and will hereafter be produced, sold and delivered by
the Company and its Restricted Subsidiaries in accordance in all material respects
with all applicable laws and regulations of every Governmental Authority; each
of the Company and its Restricted Subsidiaries has complied in all material
respects (from the time of acquisition by the Company or a Restricted
Subsidiaries) and will hereafter use commercially reasonable efforts to comply
with all material terms of each oil, gas and mineral lease comprising its Oil
and Gas Properties; and all such material oil, gas and mineral leases under
which the Company or a Restricted Subsidiaries is a lessee or co-lessee have
been and will hereafter be maintained in full force and effect; provided,  however,  that nothing in this Section 6.10
shall prevent the Company or its Restricted Subsidiaries from abandoning any
well or forfeiting, surrendering or releasing any lease in the ordinary course
of business which is not materially disadvantageous in any way to the Lenders
and which, in the opinion of the Company or its Restricted Subsidiaries, is in
its best interest, and following which the Company and its Restricted
Subsidiaries are and will hereafter be in compliance with all obligations
hereunder and the other Loan Documents. 
To the best of the knowledge of the Company and its Restricted
Subsidiaries, all of the Hydrocarbon Interests comprising its Oil and Gas
Properties are and will hereafter be enforceable in all material respects in
accordance with their terms, except as such may be modified by applicable
bankruptcy law or an order of a court in equity.

 

6.11         Reserve
Report.  The Company has heretofore
delivered to the Administrative Agent a true and complete copy of a report,
dated effective as of January 1, 2009, prepared by DeGolyer &
MacNaughton   (the “Initial Reserve Report”) covering certain of the Company’s
Oil and Gas Properties located in Texas and in or offshore California relating
to an evaluation of the Oil and Gas attributable to certain of the Mortgaged
Properties described therein.  To the
best knowledge of the Company, (i) the assumptions stated or used in the
preparation of any Reserve Report are reasonable, (ii) all information
furnished by any Loan Party to the Independent Engineer for use in the
preparation of any Reserve Report was accurate in all material respects, (iii) there
has been no material adverse change in the amount of the estimated Oil and Gas
reserves shown in any Reserve Report since the date thereof, except for changes
which have occurred as a result of production in the ordinary course of
business, and (iv) each Reserve Report does not, in any case, omit any
material statement or information necessary to cause the same not to be
misleading to the Lenders.

 

6.12         Gas
Imbalances.  Except as disclosed to
the Lenders in writing prior to the Effective Time, there are no gas
imbalances, take or pay or other prepayments with respect to any of the Oil and
Gas Properties in excess of $400,000 in the aggregate which would require the
Company or its Restricted Subsidiaries to deliver Oil and Gas produced from any
of the Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor.

 

6.13         Taxes.  The Company and its Subsidiaries have filed
all federal Tax returns and reports required to be filed, and have paid all
federal Taxes, assessments, fees and 

 

54

 

other governmental charges levied or imposed upon them or their
Properties, income or assets otherwise due and payable, except those which are
being contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP.  The Company and its Subsidiaries have filed
all state and other non-federal Tax returns and reports required to be filed,
and have paid all state and other non-federal Taxes, assessments, fees and
other governmental charges levied or imposed upon them or their Properties,
income or assets prior to delinquency thereof, except those which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP.  To the Company’s knowledge, there is no proposed
Tax assessment against the Company or any Subsidiary that would, if made,
reasonably be expected to have a Material Adverse Effect.

 

6.14         Financial
Statements and Condition.

 

(a)           The Audited
Financial Statements, the Company’s unaudited consolidated financial statements
referred to in Section 5.1(l) (i) were
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby, except as otherwise expressly noted therein; (ii) fairly
present in all material respects the consolidated financial condition of the
Company and its Subsidiaries as of the dates thereof and results of operations
for the periods covered thereby (subject, in the case of the Company’s
unaudited consolidated financial statements referred to in Section 5.1(l), to normal and immaterial
audit adjustments); and (iii) except as specifically disclosed in Schedule
6.14(a)  or in the Audited Financial Statements or the Company’s
unaudited consolidated financial statements referred to in Section 5.1(l), neither the Company
nor any of its Subsidiaries, has any material Indebtedness or other material
liabilities, direct or contingent, as of the date hereof, including liabilities
for Taxes, material commitments or Contingent Obligations.

 

(b)           During the period
from December 31, 2008 to and including the date hereof there has been no
Disposition by the Company or any Subsidiaries of any material part of its
business or Property, other than Dispositions permitted by Section 8.2(a), (b),
(c), (d) or
(e).

 

(c)           Since December 31,
2008 through the Effective Time, there has been no Material Adverse Effect.

 

6.15         Environmental
Matters.  Each of the Company and its
Subsidiaries conducts in the ordinary course of business a review of the effect
of existing Environmental Laws and existing Environmental Claims on its
business, operations and Properties, and such Properties which it is acquiring
or planning to acquire and as a result thereof the Company has reasonably
concluded that, unless specifically disclosed in Schedule
6.15, such Environmental Laws and Environmental Claims would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.

 

6.16         Regulated
Entities.  None of the Company, its
Subsidiaries, any Person controlling the Company, or any Subsidiary, is an “investment
company” within the meaning of the Investment Company Act of 1940.  None of the Company, any Person controlling
the Company or any Subsidiary (other than Ellwood), is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act,
the Interstate Commerce Act, any 

 

55

 

state public utilities code, or any other federal or state statute or
regulation limiting its ability to incur Indebtedness.

 

6.17         No
Burdensome Restrictions.  Except as
set forth on Schedule 6.17, neither the
Company nor any Subsidiary is a party to or bound by any Contractual
Obligation, or subject to any restriction in any Organization Document, or any
Requirement of Law, which would reasonably be expected to have a Material
Adverse Effect.

 

6.18         Copyrights,
Patents, Trademarks and Licenses, etc. 
The Company and each Restricted Subsidiary own or are licensed or
otherwise have the right to use all of the material patents, trademarks,
service marks, trade names, copyrights, contractual franchises, authorizations
and other rights that are reasonably necessary for the operation of their
respective businesses, without material conflict with the rights of any other
Person.  To the best knowledge of the
Company, no slogan or other advertising device, product, process, method,
substance, part or other material now employed, or now contemplated to be
employed, by the Company or any Restricted Subsidiary infringes upon any rights
held by any other Person.  Except as
specifically disclosed in Schedule 6.5, no
claim or litigation regarding any of the foregoing is pending or, to the
knowledge of the Company, threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either
case, would reasonably be expected to have a Material Adverse Effect.

 

6.19         Subsidiaries.  As of the Effective Time, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.19 hereto and has no material equity
investments in any other Person other than those specifically disclosed in part
(b) of Schedule 6.19.

 

6.20         Insurance.  The Properties of the Company and each
Restricted Subsidiary are insured with financially sound and reputable
insurance companies that are not Affiliates of the Company, in such amounts,
with such deductibles and covering such risks as are customarily carried by
companies engaged in similar businesses and owning similar Properties in
localities where the Company or such Subsidiary operates.   Such insurance is primary and not
contributing.

 

6.21         Full
Disclosure.  None of the
representations or warranties made by the Company or any Restricted Subsidiary
in the Loan Documents as of the date such representations and warranties are
made or deemed made, and none of the statements contained in any exhibit,
report, written statement or certificate furnished by or on behalf of the
Company or any Restricted Subsidiary in connection with the Loan Documents,
taken as whole, contains any untrue statement of a material fact known to the
Company or omits any material fact known to the Company required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when
made or delivered.

 

6.22         Solvency.  The Company and its Subsidiaries, taken as a
whole are, and the Company, individually, and each Guarantor, individually, is,
and after giving effect to the incurrence of all Indebtedness and obligations
being incurred in connection herewith and 

 

56

 

therewith, and all rights of contribution of such Person against other
Loan Parties under the Guaranty, at law, in equity or otherwise,  will be and will continue to be, Solvent.

 

6.23         Labor
Matters.  Except to the extent such
matters do not to constitute a Material Adverse Effect, (a) no actual or
threatened strikes, labor disputes, slowdowns, walkouts, work stoppages, or
other concerted interruptions of operations that involve any employees employed
at any time in connection with the business activities or operations at the
Property of the Company or any Subsidiary exist, (b) hours worked by and
payment made to the employees of the Company have not been in violation of the Fair Labor Standards
Act
or any other applicable laws pertaining to labor matters, (c) all payments
due from the Company or any Subsidiary for employee health and welfare
insurance, including, without limitation, workers compensation insurance, have
been paid or accrued as a liability on its books, and (d) the business
activities and operations of the Company and each Subsidiary are in compliance
with the Occupational Safety and Health Act and other applicable health and
safety laws.

 

6.24         Downstream
Contracts.  The Company’s marketing,
gathering, transportation, processing and treating facilities and equipment,
together with any marketing, gathering, transportation, processing and treating
contracts in effect among, inter alia, Company and any other Person, are,
except as set forth on Schedule 6.24
sufficient to market, gather, transport, process or treat, as applicable,
reasonably anticipated volumes of production of Oil and Gas from the Company’s
Oil and Gas Properties.  Any such
contracts with Affiliates are disclosed on Schedule
6.24 hereto.

 

6.25         Derivative
Contracts.  Neither the Company nor
any Restricted Subsidiary is party to any Derivative Contract other than (a) as
of the Effective Time, the Existing Derivative Contracts or (b) after the
Effective Time, Derivative Contracts permitted by Sections
7.15 or 8.10.

 

6.26         Ellwood
Subsidiary.  Ellwood (a) has not
engaged in any business other than the ownership and operation of common
carrier crude oil pipelines and (b) as a result of Requirements of Law in
effect as of the Effective Date, is prevented from duly executing and
delivering to the Administrative Agent and the Lenders a Guaranty (or a joinder
thereto) or the Security Agreement (or a joinder thereto).

 

6.27         Senior
Notes Indenture.  The Obligations
incurred in connection with the Loan Documents, after giving effect to the
transactions and extensions of credit contemplated hereby, (a) constitute “Senior Debt”, as defined in the Senior Notes Indenture, (b) constitute
“Permitted Debt”, under and as defined in
Section 3.3(b) of the
Senior Notes Indenture and (c) are secured by Liens created by the Loan
Documents that are “Permitted Liens”
under and as defined in clause (1) of the definition thereof.

 

6.28         Existing
Indebtedness.  Other than Permitted
Indebtedness, after giving effect to the transactions contemplated hereby, no
Loan Party has any Indebtedness or Disqualified Stock outstanding.

 

6.29         Security Documents.

 

57

 

(a)           The Security Agreement is
effective to create in favor of the Administrative Agent, for the benefit of
the Secured Parties, a legal, valid, binding and enforceable security interest
in the Collateral described therein and proceeds and products thereof.  In the case of the Pledged Stock described in
the Security Agreement, when any stock certificates representing such Pledged
Stock are delivered to the Administrative Agent, and in the case of the other
Collateral described in the Security Agreement, when financing statements in
appropriate form are filed in the offices specified on Schedule 6.29(a)-1
(which financing statements may be filed by the Administrative Agent) at any
time and such other filings as are specified on Schedule 3 to the Security Agreement
have been completed (all of which filings may be filed by the Administrative
Agent) at any time, the Security Agreement shall constitute a fully perfected
Lien on, and security interest in, all right, title and interest of the Loan
Parties in such Collateral and the proceeds and products thereof, as security
for the Obligations, in each case prior and superior in right to any other
Person (except Permitted Liens).  Schedule 6.29(a)-2 lists each UCC financing
statement that (i) names any Loan Party as debtor and (ii) will
remain on file after the Effective Time. 
Schedule 6.29(a)-3 lists each UCC
financing statement that (i) names any Loan Party as debtor and (ii) will
be terminated on or prior to the Effective Time.

 

(b)           Each of the Mortgages is
effective to create in favor of the Administrative Agent, for the benefit of
the Secured Parties, a legal, valid, binding and enforceable Lien on the
Mortgaged Properties described therein and proceeds and products thereof; and
when the Mortgages are filed in the offices specified on Schedule 6.29(b) (in
the case of Mortgages to be executed and delivered on the Effective Date) or in
the recording office designated by the Company (in the case of any Mortgage to
be executed and delivered pursuant to Section 7.14(b)),
each Mortgage shall constitute a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in the Mortgaged
Properties described therein and the proceeds and products thereof, as security
for the Obligations, in each case prior and superior in right to any other
Person (other than Persons holding Liens or other encumbrances or rights
permitted by the relevant Mortgage).

 

ARTICLE VII

 

AFFIRMATIVE
COVENANTS

 

So
long as the Issuing Lender or any Lender shall have any Commitment hereunder,
or any Loan or other Obligation shall remain unpaid or unsatisfied:

 

7.1           Financial Statements.  The Company and each Guarantor shall, and
shall cause each of its Subsidiaries to, (i) maintain for itself and each of
its respective Restricted Subsidiaries, on a consolidated basis a system of
accounting established and administered in accordance with GAAP and (ii) deliver
to the Administrative Agent who will deliver to each Lender:

 

(a)           as soon as available, but
not later than April 30, 2010 and not later than 90 days after the end of
each fiscal year ending thereafter, a copy of the annual audited consolidated
balance sheet of the Company and its Restricted Subsidiaries as at December 31,
2009 and as at the end of such year ending thereafter, respectively, and the
related consolidated statements of operations and retained earnings,
comprehensive income and cash flows for such year, setting

 

58

 

forth
in each case in comparative form the figures for the previous fiscal year; the
Company’s financial statements shall be accompanied by the unqualified opinion
(or, if qualified, of a non-material nature (e.g. FASB changes of accounting
principles) or nothing indicative of going concern or material
misrepresentation nature) and a copy of the management letter of Deloitte &
Touche LLP or other nationally recognized independent public accounting firm
acceptable to the Administrative Agent (the “Independent
Auditor”), which report shall state that such consolidated
financial statements present fairly in all material respects the consolidated
financial position of the Company and its Restricted Subsidiaries at the end of
such periods and the results of their operations and their cash flows for the periods
indicated in conformity with GAAP; and

 

(b)           as soon as available, but
not later than 60 days after the close of each of the first three quarterly
periods, a copy of the unaudited consolidated balance sheet of the Company as
of the end of such quarter and the related consolidated statements of
operations and retained earnings, comprehensive income and cash flows for the
period commencing on the first day and ending on the last day of such period,
setting forth in each case in comprehensive form the figures for the comparable
period in the previous fiscal year and certified by a Responsible Officer as
fairly presenting in all material respects, in accordance with GAAP (subject to
normal and recurring year-end audit adjustments), the consolidated financial
position of the Company and its Restricted Subsidiaries at the end of such
periods and the results of their operations and their cash flows.

 

7.2           Certificates;
Other Production and Reserve Information.  The Company shall furnish to the
Administrative Agent and each Lender:

 

(a)           as soon as available, but
not later than 60 days after the close of each quarter, a Quarterly Status
Report in a form reasonably acceptable to the Lenders, as of the last day of
the immediately preceding quarter;

 

(b)           concurrently with the
delivery of the financial statements referred to in Sections
7.1(a) and (b),
and the reports referred to in Section 7.2(a),
a Compliance Certificate executed by a Responsible Officer;

 

(c)           on or before (i) April 1,
effective as of January 1, of each year during the term of this Agreement,
a Reserve Report prepared by Ryder Scott Co. L.P., Netherland Sewell &
Associates, Inc., DeGolyer and MacNaughton or other independent petroleum
engineer acceptable to the Administrative Agent (the “Independent
Engineer”) and (ii) October 1, effective as of July 1,
of each year during the term of this Agreement, a Reserve Report prepared by
the Company in substantially the same form as the January 1 Reserve Report
and certified by a Responsible Officer as true and correct in all material
respects, in each case in form and substance reasonably acceptable to the
Administrative Agent;

 

(d)           promptly upon the request of
the Administrative Agent, at the request of any Lender, such copies of all
geological, engineering and related data contained in the Company’s files or
readily accessible to the Company relating to its and its Subsidiaries’ Oil and
Gas Properties as may reasonably be requested;

 

59

 

(e)           on request by the Administrative
Agent, based upon the Administrative Agent’s or the Required Lenders’ good
faith belief that the Company’s or its Restricted Subsidiaries’ title to the
Mortgaged Properties or the Administrative Agent’s Lien thereon is subject to
claims of third parties, or if required by regulations to which the
Administrative Agent or any of the Lenders is subject, title and mortgage Lien
evidence satisfactory to the Administrative Agent covering such Mortgaged
Property as may be designated by the Administrative Agent, covering the Company’s
or its Restricted Subsidiaries’ title thereto and evidencing that the
Obligations are secured by Liens and security interests as provided in this
Agreement and the Security Documents;

 

(f)            promptly upon its completion
in each fiscal year of the Company commencing with the 2009 fiscal year through
and including the 2012 fiscal year, and not later than January 30
of each such fiscal year, a copy of the annual budget of the Company and its
Restricted Subsidiaries on a consolidated basis for such fiscal year,
projecting total Oil and Gas revenue, total revenue, total operating costs and
expenses, Consolidated Net Income, Consolidated Interest Expense, Consolidated
EBITDA and total capital expenditures, by fiscal quarter; and

 

(g)           promptly, such additional
information regarding the business, financial or corporate affairs of the
Company or any Restricted Subsidiary as the Administrative Agent, at the
request of any Lender, may from time to time reasonably request.

 

7.3           Notices.  The Company shall promptly notify the
Administrative Agent and each Lender in writing:

 

(a)           of the occurrence of any
Default or Event of Default, and of the occurrence or existence of any event or
circumstance that would reasonably be expected to become a Default or Event of
Default;

 

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

 

(c)           of any material change in
accounting policies or financial reporting practices by the Company or any of
its consolidated Restricted Subsidiaries;

 

(d)           of the formation or
acquisition of any Subsidiary; and

 

(e)           of any new plugging bond or
performance bond issued for the account of the Company or any of its Restricted
Subsidiaries if the uninsured portion of the obligation underlying such bond is
greater than or equal to $6,000,000.

 

60

 

Each
notice under this Section 7.3 shall be
accompanied by a written statement by a Responsible Officer setting forth
details of the occurrence referred to therein, and stating what action the
Company or any affected Restricted Subsidiary proposes to take with respect
thereto and at what time.  Each notice
under Section 7.3(a) shall
describe with particularity any and all clauses or provisions of this Agreement
or other Loan Document that have been (or foreseeably will be) breached or
violated.

 

7.4           Preservation of
Company Existence, Etc.  The
Company and each Guarantor shall, and shall cause each of their respective
Restricted Subsidiaries to:

 

(a)           preserve and maintain in
full force and effect its legal existence, and maintain its good standing under
the laws of its state or jurisdiction of formation except where the failure to
do so would not reasonably be expected to have a Material Adverse Effect;

 

(b)           preserve and maintain in
full force and effect all governmental rights, privileges, qualifications,
permits, licenses and franchises necessary or desirable in the normal conduct
of its business except where the failure to do so would not reasonably be
expected to have a Material Adverse Effect;

 

(c)           use reasonable efforts, in
the ordinary course of business, to preserve its business organization and
goodwill except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect; and

 

(d)           preserve or renew all of its
registered patents, trademarks, trade names and service marks, the non
preservation of which would reasonably be expected to have a Material Adverse
Effect.

 

7.5           Maintenance of
Property.  The Company
and each Guarantor shall, and shall cause each of their respective Restricted
Subsidiaries to, maintain and preserve all its Property which is used or useful
in its business in good working order and condition, ordinary wear and tear
excepted and to use the standard of care typical in the industry in the
operation and maintenance of its facilities except where the failure to do so
would not reasonably be expected to have a Material Adverse Effect; provided,
however, that nothing in this Section 7.5
shall prevent the Company or any of its Restricted Subsidiaries from abandoning
any well or forfeiting, surrendering or releasing any lease in the ordinary
course of business which is not materially disadvantageous in any way to the
Lenders and which, in its opinion, is in the best interest of the Company, and
following which the Company and each of its Restricted Subsidiaries is and will
hereafter be in compliance with all obligations hereunder and the other Loan
Documents.

 

7.6           Insurance.  The Company and each Guarantor shall, and
shall cause each of their respective Restricted Subsidiaries to, maintain, with
financially sound and reputable independent insurers, insurance with respect to
its Properties and business against loss or damage of the kinds customarily
insured against by Persons engaged in the same or similar business, of such
types and in such amounts as are customarily carried under similar
circumstances by such other Persons except where the failure to do so would not
reasonably be expected to have a Material Adverse Effect.  Such insurance will be primary and not
contributing.

 

61

 

7.7           Payment of
Obligations.  Unless
being contested in good faith by appropriate proceedings and adequate reserves
in accordance with GAAP are being maintained by the Company or such Restricted
Subsidiary, the Company and each Guarantor shall, and shall cause each of their
respective Restricted Subsidiaries to, pay and discharge prior to delinquency, all
their respective obligations and liabilities, including: (a) all Tax
liabilities, assessments and governmental charges or levies upon it or its
Properties or assets; (b) all lawful claims which, if unpaid, would by law
become a Lien upon its Property; and (c) all Indebtedness, as and when due
and payable, but subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness; except where the failure
to do so would not reasonably be expected to have a Material Adverse Effect.

 

7.8           Compliance with
Laws.  The Company and each Guarantor
shall, and shall cause each of their respective Subsidiaries to, comply in all
material respects with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the Federal Fair Labor
Standards Act) except (a) such as may be contested in good faith or as to
which a bona fide dispute may exist or (b) where the failure to do so
would not reasonably be expected to have a Material Adverse Effect.

 

7.9           Compliance with
ERISA.  The Company and each Guarantor
shall, and shall cause each of the Company’s ERISA Affiliates to: (a) maintain
each Plan in compliance in all material respects with the applicable provisions
of ERISA, the Code and other federal or state law; (b) cause each Plan
which is qualified under Section 401(a) of the Code to maintain such
qualification; and (c) make all required contributions to any Plan subject
to Section 412 of the Code.

 

7.10         Inspection of
Property and Books and Records.  The Company and each Guarantor shall, and
shall cause each of their respective Restricted Subsidiaries to, maintain
proper books of record and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of the Company and
such Subsidiaries.  The Company and each
Guarantor shall, and shall cause each of their respective Restricted Subsidiaries
to, permit representatives and independent contractors of the Administrative
Agent or any Lender to visit and inspect any of their respective Properties, to
examine their respective corporate, financial and operating records, and make
copies thereof or abstracts therefrom, and to discuss the Company’s affairs,
finances and accounts with their respective managers, directors, officers, and
independent public accountants, all at the expense of the Company and at such
reasonable times during normal business hours and as often as may be reasonably
desired, upon reasonable advance notice to the Company; provided, however, when
an Event of Default exists the Administrative Agent or any Lender may do any of
the foregoing at the expense of the Company at any time during normal business
hours and without advance notice.

 

7.11         Environmental
Laws.  The Company and each Guarantor
shall, and shall cause each of their respective Restricted Subsidiaries to,
conduct its respective operations and keep and maintain their respective
Properties in compliance with all Environmental Laws, except where the failure
to do so would not reasonably be expected to have a Material Adverse Effect.

 

62

 

7.12         New Subsidiary
Guarantors.  If, at any
time after the date of this Agreement, there exists any Restricted Subsidiary
with total assets with a book value of $100,000 or more, then the Company and
each Guarantor shall, and shall cause each of their respective Subsidiaries to,
on the date any such Restricted Subsidiary is acquired or acquires or otherwise
becomes possessed of such amount of total assets, (i) cause each such
Restricted Subsidiary (excluding Ellwood) to execute and deliver the Guaranty
to the Administrative Agent, (ii) pledge to the Administrative Agent for
the benefit of the Lenders all of the outstanding Capital Stock of such
Restricted Subsidiary or held by such Restricted Subsidiary (excluding the
Capital Stock of any Unrestricted Subsidiary held by such Restricted
Subsidiary) pursuant to a Security Document satisfactory to the Administrative
Agent and (iii) cause such Subsidiary to execute and deliver such Security
Documents as may be required pursuant to Sections 4.2,
4.5(a) or 7.14(b).  
Upon the execution and delivery by any Restricted Subsidiary of a Guaranty,
such Subsidiary shall automatically and immediately, and without any further
action on the part of any Person, (x) become a Guarantor for all purposes
of this Agreement and (y) be deemed to have made the representations and
warranties, as applied to and including such new Subsidiary, set forth in this
Agreement.

 

7.13         Use of Proceeds.  The Company and each Guarantor shall, and
shall cause each of their respective Restricted Subsidiaries to, use the
proceeds of the Loans only for the following purposes: (i) at the
Effective Time, to refinance, renew and extend the Existing Revolving Credit
Loans (which the Company agrees to do); (ii) to pay fees and expenses
incurred in connection with the Loan Documents; (iii) to fund the
acquisition, exploration and development of Hydrocarbon Interests; and (iv) for
working capital and other general corporate purposes.  The Company and each Guarantor shall, and
shall cause each of their respective Subsidiaries to, use the Letters of Credit
solely as support for obligations in the ordinary course of business, and for
other purposes approved by the Administrative Agent.

 

7.14         Further
Assurances.

 

(a)           The Company and each
Guarantor shall, and shall cause each of their respective Restricted
Subsidiaries to, promptly (and in no event later than twenty (20) days after
becoming aware of the need therefor) cure any defects in the creation and
issuance of any Notes and the execution and delivery of this Agreement, the
Security Documents or any other instruments referred to or mentioned herein or
therein.  The Company and each Guarantor
shall, and shall cause each of their respective Restricted Subsidiaries to, at
the Company’s expense, promptly (and in no event later than twenty (20) days
after becoming aware of the need therefor) do all acts and things, and will
execute and file or record, all instruments reasonably requested by the
Administrative Agent, to establish, perfect, maintain and continue the
perfected security interest of the Lenders in or the Lien of the Lenders on the
Mortgaged Properties.

 

(b)           The Company shall promptly
(and in no event later than ten Business Days after the need arises) execute
and cause the Restricted Subsidiaries (other than Ellwood) to execute such
additional Security Documents in form and substance satisfactory to
Administrative Agent, granting to Administrative Agent first priority perfected
Liens on Oil and Gas Properties (subject only to Permitted Liens) that are not
then part of the Mortgaged Properties, sufficient to cause the Mortgaged Properties
to include at all times eighty-five percent (85%) of the Net Present Value of
the Proved Reserves and at least ninety-five percent (95%) of the Net Present

 

63

 

Value of the Proved Developed
Producing Reserves, in each case as set forth in the most recent Reserve
Report. 
In addition, the Company and each
Guarantor shall, and shall cause each of the Restricted Subsidiaries to, furnish
to the Administrative Agent title due diligence in form and substance satisfactory
to the Administrative Agent and will furnish all other documents and
information relating to such Mortgaged Properties as the Administrative Agent
may reasonably request.  The Company
shall pay the costs and expenses of all filings and recordings and all searches
deemed necessary by the Administrative Agent to establish and determine the
validity and the priority of the Liens created or intended to be created by the
Security Documents; and the Company and each Guarantor shall, and
shall cause each of the Restricted Subsidiaries to, satisfy all other claims and
charges which in the reasonable opinion of the Administrative Agent might
prejudice, impair or otherwise affect any of the Mortgaged Properties or the
Lenders’ Lien thereon.

 

(c)           With respect to any Property
(other than the Capital Stock of any Unrestricted Subsidiary) acquired after
the Effective Date by the Company or any of its Restricted Subsidiaries (other
than Ellwood) as to which the Administrative Agent, for the benefit of the
Secured Parties, does not otherwise have a first priority perfected Lien,
promptly (and in no event later than twenty (20) days after becoming aware of
the need therefor) take all actions necessary or advisable to grant to the
Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority security interest in such Property, subject only to Permitted Liens,
including without limitation, the execution and delivery by all necessary third parties
of any Account Control Agreements and the filing of UCC financing
statements in such jurisdictions as may be required by the Security Documents
or by law or as may be requested by the Administrative Agent.

 

7.15         Hedging Program.  The Company has entered into or caused its
Restricted Subsidiaries to enter into, and shall maintain at all times
thereafter during the relevant period, Derivative Contracts for the purpose of
hedging prices on the Oil and Gas thereafter expected to be produced by the
Company or any of its Restricted Subsidiaries which contracts shall (a) at
all times through the Maturity Date cover not less than 50% of the Company’s
and its Restricted Subsidiaries’ aggregate Projected Oil and Gas Production
anticipated to be sold in the ordinary course of such Persons’ business during
such period, (b) thereafter, roll forward on a semi-annual basis in order
to cover not less than 50% of the Company’s and its Restricted Subsidiaries’
aggregate Projected Oil and Gas Production anticipated to be sold in the
ordinary course of such Persons’ business during the ensuing four fiscal
quarters and (c) otherwise be in form and substance reasonably acceptable
to the Administrative Agent.  As used in
this Section 7.15, the term “Projected Oil and Gas Production”
means the projected production of oil or gas (measured by volume unit or BTU
equivalent, not sales price) for the term of the contracts or a particular
half-year, as applicable, from Oil and Gas Properties and interests owned by
the Company and its Restricted Subsidiaries which have attributable to them
Proved Developed Producing Reserves, as such production is projected in the
most recent Reserve Report delivered pursuant to Section 7.2(c),
after deducting projected production from any Oil and Gas Properties sold or
under contract for sale that had been included in such report and after adding
projected production from any Oil and Gas Properties or Hydrocarbon Interests
that had not been reflected in such report but that are reflected in a separate
or supplemental reports prepared on the same basis as the reports delivered
pursuant to Section 7.2(c) 
above and otherwise are satisfactory to the Administrative Agent.  The Company shall provide copies to the
Administrative Agent of all

 

64

 

Derivative Contracts then in effect not later than January 1 and July 1
of each year beginning January 1, 2010.

 

7.16         Agreements
Regarding Unrestricted Subsidiaries.

 

(a)        The Company will operate each Unrestricted Subsidiary as a
legal entity separate and distinct from the Company or any Restricted
Subsidiary.

 

(b)        The Company will, in
connection with any Indebtedness or Guaranty Obligations incurred by each
Unrestricted Subsidiary, (i) cause such Unrestricted Subsidiary to incur
such Indebtedness only as a Non-Recourse Obligation, and (ii) cause such
Unrestricted Subsidiary to incur any such Indebtedness or Guaranty Obligations
relating to borrowed money only under a loan agreement, note, lease, instrument
or other agreement that expressly states that such Indebtedness is being
incurred by such Unrestricted Subsidiary as a Non-Recourse Obligation (for the
avoidance of doubt, this clause (ii) is not intended to limit any
restrictions set forth elsewhere in the Loan Documents). 

 

7.17         Delivery of
Account Control Agreements.  (a).
Each Loan Party shall deliver to Administrative Agent within forty-five (45)
days after the date hereof, an Account Control Agreement for each deposit
account  established by
it with a financial institution, in which at least $100,000 was held at any time
during the 180 days prior to the date hereof, other than payroll,
withholding tax and other fiduciary deposit accounts, duly executed by Borrower
or the applicable Guarantor and the financial institution with which such
deposit account is held.

 

ARTICLE VIII

 

NEGATIVE
COVENANTS

 

So
long as the Issuing Lender or any Lender shall have any Commitment hereunder,
or any Loan or other Obligation shall remain unpaid or unsatisfied:

 

8.1           Limitation on
Liens.  The Company and each Guarantor
shall not, and shall not permit any of the Restricted Subsidiaries to, directly
or indirectly, make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its Property, whether now owned or hereafter
acquired, other than the following:

 

(a)           any Lien on Property of the
Company or any Restricted Subsidiary as set forth in Schedule
8.1 securing Indebtedness outstanding on such date;

 

(b)           any Lien created under any
Loan Document;

 

(c)           Liens for Taxes, fees,
assessments or other governmental charges which are not delinquent or remain
payable without penalty, or to the extent that non payment thereof is permitted
by Section 7.7;

 

(d)           carriers’, warehousemen’s,
mechanics’, landlords’, materialmen’s, repairmen’s or other similar Liens
arising in the ordinary course of business (whether by law or by contract)
which are not delinquent or remain payable without penalty or which are being

 

65

 

contested
in good faith and by appropriate proceedings, which proceedings have the effect
of preventing the forfeiture or sale of the Property subject thereto;

 

(e)           Liens consisting of pledges
or deposits required in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation;

 

(f)            easements, rights of way,
restrictions, defects or other exceptions to title and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, are not incurred to secure
Indebtedness, and which do not in any case materially detract from the value of
the Property subject thereto or interfere with the ordinary conduct of the
businesses of the Company, the Guarantors and the Restricted Subsidiaries;

 

(g)           Liens on the Property of the
Company, any Guarantor or any Restricted Subsidiary of such Person securing (i) the
non-delinquent performance of bids, trade contracts (other than for borrowed
money) or statutory obligations, (ii) Contingent Obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like nature;
in each case, incurred in the ordinary course of business;

 

(h)           Liens arising solely by
virtue of any statutory or common law provision relating to banker’s liens,
rights of set-off or similar rights and remedies as to deposit accounts or
other funds maintained with a creditor depository institution or under any
deposit account agreement entered into in the ordinary course of business;
provided, however, that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by the
Company, (ii) the Company (or applicable Restricted Subsidiary) maintains
(subject to such right of set off) dominion and control over such account(s),
and (iii) such deposit account is not intended by the Company, any
Guarantor or any Restricted Subsidiary to provide cash collateral to the
depository institution;

 

(i)            Oil and Gas Liens to secure
obligations which are not delinquent and which do not in any case materially
detract from the value of the Oil and Gas Property subject thereto; and

 

(j)            Liens on (x) the
Collateral securing Second Lien Obligations; provided, however, that such Liens
are subject in priority to the Liens securing the Obligations pursuant to the
Intercreditor Agreement and (y) the Term Loan Cash Collateral securing the
Second Lien Obligations.

 

8.2           Disposition of
Assets.  The Company and each Guarantor
shall not, and shall not permit any of the Restricted Subsidiaries to, directly
or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of transactions) (collectively, “Dispositions”) any Property (including accounts and
notes receivable, with or without recourse) or enter into any agreement to do
any of the foregoing, except:

 

(a)           as permitted under Sections 6.10, 7.5,
8.3, 8.4,
or 8.10;

 

66

 

(b)           Dispositions of inventory
including produced Oil and Gas in the ordinary course of business;

 

(c)           Dispositions among the
Company and wholly-owned Restricted Subsidiaries which are Guarantors;

 

(d)           used, worn out or surplus
equipment in the ordinary course of business;

 

(e)           Dispositions of accounts and
notes receivable in the ordinary course of business consistent with past
practices;

 

(f)            Dispositions of interests in
Oil and Gas Properties, or portions thereof, that are sold for fair cash
consideration (considering any net production proceeds from the effective date
of any such Disposition to the closing thereof that are credited against the
purchase price payable at such closing as Net Cash Proceeds received by the
Company or such Guarantor); provided, however, that the aggregate  sales prices (as of the effective date of
each particular Disposition) for Dispositions made pursuant to this Section 8.2(f) during any
Borrowing Base Period shall not exceed 10% of the Borrowing Base; provided further,  however, that any such aggregate
Disposition of Oil and Gas Properties in any Borrowing Base Period which result
in the receipt on a cumulative basis in such period of Net Cash Proceeds in
excess of 5% of the Borrowing Base (considering any net production proceeds
from the effective date of any Disposition to the closing thereof that are
credited against the purchase price payable at such closing as Net Cash
Proceeds received by the Company or such Guarantor) shall immediately and
automatically, and without the need for further act or evidence, reduce the
Borrowing Base on a dollar-for-dollar basis (based on the amount attributable
by the Administrative Agent to the sold Oil and Gas Properties in the most
recent Borrowing Base determination under Section 2.6)
and any resulting Deficiency shall be immediately cured by the Company pursuant
to Section 2.7(f)(ii); and

 

(g)           the sale or other
disposition of any Unrestricted Subsidiary.

 

8.3           Consolidations
and Mergers.  The Company
and each Guarantor shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly, merge, consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person, except:

 

(a)           any Guarantor may merge with
the Company or another Guarantor; provided, however, that the Company shall be
the continuing or surviving corporation in the case of a merger involving the
Company;

 

(b)           any Subsidiary that is not a
Guarantor may merge with the Company or a Guarantor; provided, however, that
the Company or such Guarantor shall be the continuing or surviving corporation
in the case of a merger involving the Company or a Guarantor; and

 

(c)           any Guarantor or other
Subsidiary may make Dispositions to the Company or another Guarantor.

 

67

 

8.4           Loans and
Investments.  The Company
and each Guarantor shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly, purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person,
including any Affiliate of the Company, except for:

 

(a)           investments in Cash
Equivalents;

 

(b)           extensions of credit in the
nature of accounts receivable or notes receivable arising from the sale or
lease of goods or services in the ordinary course of business;

 

(c)           investments in Guarantors
that are directly or indirectly wholly-owned Subsidiaries of the Company;

 

(d)           investments in Derivative
Contracts permitted under Section 8.10;

 

(e)           investments resulting from
transactions specifically permitted under Section 8.3;

 

(f)            investments with third
parties that are (i) customary in the oil and gas business, (ii) made
in the ordinary course of the Company’s business, and (iii) made in the
form of or pursuant to operating agreements, processing agreements, farm-in
agreements, farm-out agreements, joint venture agreements, development
agreements, unitization agreements, pooling agreements, joint bidding
agreements, service contracts and other similar agreements, that do not, in any
case, (x) constitute an investment in any state law partnership or other
Person or (y) involve the Disposition of any Mortgaged Property covering
Proved Reserves;

 

(g)           advances by the Company to
any of its full-time employees for housing loans and for the payment of
relocation expenses which do not exceed $2,000,000 at any time outstanding in
the aggregate to all such employees;

 

(h)           acquisitions of proved
Hydrocarbon Interests and related assets;

 

(i)            provided that there shall
not have occurred and be continuing a Default hereunder, and no such Default would
result therefrom, the Company and the Guarantors may make cash investments in
Ellwood not to exceed an aggregate amount of $2,000,000 in any fiscal year; and

 

(j)            provided that there shall
not have occurred and be continuing a Default hereunder, and no such Default
would result therefrom, the Company and the Guarantors may make cash
investments in Unrestricted Subsidiaries in an amount not to exceed $10,000,000
in the aggregate during the term of this Agreement.

 

8.5           Limitation on
Indebtedness.  The Company
and each Guarantor shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly, create, incur, assume, suffer to
exist, or otherwise become or remain liable with respect to, any Indebtedness,
except (collectively, “Permitted Indebtedness”):

 

68

 

(a)           Indebtedness incurred
pursuant to this Agreement;

 

(b)           Indebtedness incurred
pursuant to the Second Lien Term Loan Agreement in an aggregate principal
amount not to exceed $500,000,000;

 

(c)           Indebtedness consisting of
Contingent Obligations permitted pursuant to Section 8.8;

 

(d)           Indebtedness incurred under
Derivative Contracts permitted under Section 8.10(a)(v)(A)(2) hereof;

 

(e)           in addition to the
Indebtedness otherwise permitted under this Section 8.5,
Indebtedness of the Loan Parties not to exceed $5,000,000 in the aggregate at
any time outstanding; and

 

(f)            Indebtedness represented by
the Senior Notes.

 

8.6           Transactions
with Affiliates.  Except as
set forth on Schedule 8.6 and for the
Optionee Payment, the Company and each Guarantor shall not, and shall not
permit any of their respective Restricted Subsidiaries to, directly or
indirectly, enter into any transaction with or make any payment or transfer to
any Affiliate of the Company or its shareholders, except in the ordinary course
of business and upon fair and reasonable terms no less favorable to the
Company, such Guarantor or such Subsidiary than would obtain in a comparable
arm’s length transaction with a Person not an Affiliate of the Company, such
Guarantor or such Subsidiary or to the extent permitted under Section 8.9.

 

8.7           Margin Stock.  The Company and each Guarantor shall not, and
shall not permit any of their respective Restricted Subsidiaries to, directly
or indirectly, suffer or permit any Subsidiary to, use any portion of the
proceeds of the Loans (i) to purchase or carry Margin Stock, (ii) to
repay or otherwise refinance Indebtedness of the Company or others incurred to
purchase or carry Margin Stock, (iii) to extend credit for the purpose of
purchasing or carrying any Margin Stock, or (iv) to acquire any security
in any transaction that is subject to Section 13 or 15(d) of the
Exchange Act.

 

8.8           Contingent
Obligations.  No Loan
Party shall, directly or indirectly, create, incur, assume or suffer to exist
any Contingent Obligations except:

 

(a)           endorsements for collection
or deposit in the ordinary course of business;

 

(b)           Derivative Contracts
permitted under Section 8.10 hereof;

 

(c)           obligations under plugging
bonds, performance bonds and fidelity bonds issued for the account of the
Company or its Subsidiaries, obligations to indemnify or make whole any surety
and similar agreements incurred in the ordinary course of business and
obligations of the Company under the Purchase and Sale Agreement dated November 4,
1998, as amended by the First Amendment to Purchase and Sale Agreement dated January 13,
1999, among the Company, Ellwood, Chevron U.S.A., Inc. and Chevron
Pipeline Company;

 

69

 

(d)           this Agreement and each
Guaranty;

 

(e)           the Real Estate Contingent
Obligations;

 

(f)            Guaranty Obligations of the
Guarantors under or in respect of (i) the Second Lien Debt Documents and (ii) Indebtedness
incurred pursuant to Section 8.5(e);
and

 

(g)           obligations of TexCal LP,
TexCal GP or TexCal STX in respect of “Assumed
Liabilities” as such term is defined in the Purchase and Sale
Agreement dated as of August 20, 2004 among Tri-Union Development
Corporation and Tri-Union Operating Company, as Sellers and Texcal Energy, as
Purchaser.

 

8.9           Restricted
Payments.  The Company
and each Guarantor shall not, and shall not permit any of the Restricted
Subsidiaries to, directly or indirectly, (i) purchase, redeem or otherwise
acquire for value any membership interests, partnership interests, capital
accounts, shares of its capital stock or any warrants, rights or options to
acquire such membership interests, partnership interests or shares, now or
hereafter outstanding from its members, partners or stockholders (other than
from its members, partners or stockholders that are Loan Parties); (ii) declare
or pay any distribution, dividend or return capital to its members, partners or
stockholders (other than to its members, partners or stockholders that are Loan
Parties), or make any distribution of assets in cash or in kind to its members,
partners or stockholders (other than members, partners or stockholders that are
Loan Parties); or (iii) make any payment or prepayment of principal of,
premium, if any, or interest on, or redemption, purchase, retirement,
defeasance (including in-substance or legal defeasance), sinking fund or
similar payment with respect to, any Indebtedness outstanding under or in
respect of any Second Lien Debt Instrument  (collectively “Restricted Payments”);
provided,
however,
that the Company may (x) following delivery to the Administrative Agent of
the Company’s audited consolidated financial statements pursuant to Section 7.1(a), declare and pay in any
fiscal year commencing with the 2010 fiscal year regular Cash Dividends that do
not exceed the greater of (A) $500,000 and (B) an aggregate amount
equal to  25% of Consolidated Net Income for the
prior fiscal year; (y) make regularly scheduled payments of interest or
mandatory prepayments in respect of Indebtedness under or in respect of any Second Lien Debt
Instrument in accordance with the terms of the
applicable Second Lien Debt Instrument and the Intercreditor Agreement,
but only to the extent required by the applicable Second Lien Debt Instrument;
and (z) make optional prepayments, redemptions, purchases or other
defeasances in respect of any Second Lien Debt Instrument using the Net Cash
Proceeds of an “Equity Offering” as defined in
the Senior Notes Indenture, or the issuance of debt securities or instruments
or the incurrence of loans; provided, further, however, that (A) no
Default has occurred and is continuing, (B) no such Restricted Payment
shall cause a Default, and (C) at the time any such Restricted Payment is
made by the Company, and giving pro forma effect to such payment, the ratio of
the Effective Amount to the Borrowing Base does not exceed .75 to 1.00.

 

8.10         Derivative
Contracts.

 

(a)           No Loan Party shall,
directly or indirectly, enter into or in any manner be liable on any Derivative
Contract except:

 

70

 

(i)            Derivative
Contracts entered into with the purpose and effect of fixing prices on oil or
gas expected to be produced by such Person; provided, however, that at all
times (a) no such contract shall be for speculative purposes; (b) as
of any date (the “Calculation
Date”) no such contract, when aggregated with all Derivative
Contracts permitted under this Section 8.10(a)(i),
shall cover a notional volume in excess of the Applicable Percentage of the
total Projected Oil and Gas Production to be produced in  any  month
from the Proved Developed Producing Reserves reflected in the most recent
Reserve Report; (c) each such contract (excluding Derivative Contracts
offered by national commodity exchange) shall be with the Administrative Agent,
or any of the Lenders, or with a counterparty or have a guarantor of the
obligation of the counterparty which, at the time the contract is made, has
long-term obligations rated BBB+ or Baa1 or better, respectively, by S&P or
Moody’s; and (d) no such contract requires the Company to put up money,
assets, letters of credit or other security against the event of its
non-performance prior to actual default by the Company in performing its
obligations thereunder, except Liens in favor of the Administrative Agent for
the benefit of the Lenders under the Security Documents

 

(ii)           The Existing
Derivative Contracts; provided, however, that no Existing Derivative Contract
may be amended, restated, supplemented or otherwise modified or extended
without the prior written consent of the Administrative Agent; or

 

(iii)          Derivative
Contracts entered into with the purpose and effect of fixing interest rates on
a principal amount of Indebtedness of the Company that is accruing interest at
a variable rate; provided,
however, that (i) no such contract shall be for
speculative purposes; (ii) the floating rate index of each such contract
generally matches the index used to determine the floating rates of interest on
the corresponding Indebtedness of the Company to be hedged by such contract, (iii) no
such contract requires the Company to put up money, assets, letters of credit,
or other security against the event of its non-performance prior to actual
default by the Company in performing its obligations thereunder, and (v) each
such contract shall be with a Lender or with a counterparty or have a guarantor
of the obligation of the counterparty who, at the time the contract is made,
has long-term obligations rated BBB+ or Baa1 or better, respectively, by
S&P or Moody’s.

 

(b)           In the event the Company
enters into a Derivative Contract with any Lender, the Contingent Obligation
evidenced under such Derivative Contract shall not be applied against such
Lender’s Commitment nor against the Effective Amount.  The benefits of the Security Documents and of
the provisions of the Loan Documents relating to the Collateral shall also
extend to and be available on a pro rata basis to each Qualifying Derivative
Contract Counterparty in respect to all Obligations with respect to the related
Qualifying Derivative Contract.

 

8.11         Sale Leasebacks.  No Loan Party shall, directly or indirectly,
become liable, directly or by way of any Guaranty Obligation, with respect to
any lease of any Property (whether real, personal or mixed) whether now owned
or hereafter acquired, (a) which the Loan

 

71

 

Party has sold or transferred (excluding transfers effected by means of
dividends of Property or Capital Stock permitted hereunder) or is to sell or
transfer to any other Person or (b) which the Loan Party intends to use
for substantially the same purposes as any other Property which has been or is
to be sold or transferred (excluding transfers effected by means of dividends
of Property or Capital Stock permitted hereunder) by the Loan Party to any
other Person in connection with such lease.

 

8.12         Consolidated
Leverage Ratio.  The Company
shall not permit the Consolidated Leverage Ratio to exceed 4.00 to 1.00 for any
fiscal quarter.

 

8.13         Current Ratio.  The Company shall not permit the ratio of
Current Assets to Current Liabilities to be less than 1.00 to 1.00; provided,
however, that for purposes of such ratio, assets or liabilities required by FAS
133 and 143 shall be excluded from current assets and current liabilities,
respectively.

 

8.14         Change in
Business.

 

(a)           The Company and each
Guarantor shall not, and shall not permit any Restricted Subsidiaries to,
directly or indirectly, engage in any business or activity other than the
Principal Business.  The Company and each
Guarantor shall not permit Ellwood to, directly or indirectly, engage in any
business other than the ownership and operation of common carrier crude oil
pipelines.  The Company and each
Guarantor shall not, and shall not permit any Unrestricted Subsidiaries to,
directly or indirectly, engage in any business or activity other than the
Principal Business.

 

(b)           The Company and each
Guarantor will not permit any Restricted Subsidiary which is a general partner
in or owner of a general partnership interest in an Unrestricted Subsidiary to
own or acquire any other Property except for distributions made to it by such
Unrestricted Subsidiary or other rights or interests relating to such Unrestricted
Subsidiary; or permit any Restricted Subsidiary which is a general partner in
or owner of a general partnership interest in an Unrestricted Subsidiary to
engage in any business or activity other than holding the Equity Interest in
and other rights or interests relating to such Unrestricted Subsidiary.   With respect to Unrestricted Subsidiaries,
the Company and each Guarantor will not permit any Restricted Subsidiary to be
the general partner in or owner of a general partnership interest in an Unrestricted
Subsidiary, unless such Restricted Subsidiary is a corporation or a limited
liability company.

 

8.15         Accounting
Changes.  The Company and each Guarantor
shall not, and shall not permit any of its respective Subsidiaries to, directly
or indirectly, make any significant change in accounting treatment or reporting
practices, except as required by GAAP, or change the fiscal year of the Company
or of any Subsidiary.

 

8.16         Certain
Contracts; Amendments; Multiemployer ERISA Plans.  Except for the restrictions expressly set
forth in the Loan Documents and the Second Lien Debt Documents, the Company and
each Guarantor shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into, create, or otherwise allow to exist any
contract or other consensual restriction on the ability of any Restricted
Subsidiary of the Company to: (a) pay

 

72

 

dividends or make other distributions to the Company, (b) redeem
equity interests held in it by the Company, (c) repay loans and other
Indebtedness owing by it to the Company, or (d) transfer any of its assets
to the Company.  The Company and each
Guarantor shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, enter into any “take-or-pay” contract or other contract
or arrangement for the purchase of goods or services which obligates it to pay
for such goods or service regardless of whether they are delivered or furnished
to it, except as permitted by Section 8.5(e).  The Company and each Guarantor shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, amend or
permit any amendment to any other contract or lease which releases, qualifies,
limits, makes contingent or otherwise detrimentally affects the rights and
benefits of the Administrative Agent or any Lender under or acquired pursuant
to any Security Documents.  The Company
and each Guarantor shall not, and shall not permit any ERISA Affiliate to, incur
any obligation to contribute to any Multiemployer Plan.

 

8.17         Senior Notes.  The
Company and each Guarantor shall not, and shall not permit any of its
respective Subsidiaries to, directly or indirectly:

 

(a)           amend or modify any of the
terms or provisions of the Senior Notes Indenture or the Senior Notes, if such
amendment or modification would have the effect of (i) accelerating the
maturity date of the principal amount thereof, or any scheduled interest
payment thereon; (ii) increasing the principal amount thereof or interest
rate thereon; (iii) causing, or purporting to cause, the Liens securing
the Obligations to cease to be “Permitted Liens”
(as defined in the Senior Notes Indenture); or (iv) requiring the Company
to grant any Lien for the benefit of the holders thereof, except to the extent
described in Section 3.5 of the Senior
Notes Indenture (it being understood in all events that no Lien which would
cause the Company to be required to grant any such Lien may be granted if
prohibited by any term of this Agreement);

 

(b)           amend or modify any other
term or provision of the Senior Notes Indenture or the Senior Notes, if such
amendment or modification would be materially adverse to the Lenders; or

 

(c)           prepay, redeem,
purchase or defease any Senior Notes, except with proceeds of (x) an “Equity
Offering” as defined in the Senior Notes Indenture or (y) the issuance debt
securities or instruments or the incurrence of loans and subject to compliance
with Section 8.9.

 

8.18         Second Lien
Term Loan Agreement.  The Company
and each Guarantor shall not, and shall not permit any of its respective
Subsidiaries to, directly or indirectly:

 

(a)           amend or modify any of the
terms or provisions of the Second Lien Term Loan Agreement if such amendment or
modification would have the effect of (i) accelerating the maturity date
of the principal amount thereof, or any scheduled interest payment thereon; (ii) increasing
the principal amount thereof or interest rate thereon; (iii) causing, or
purporting to cause, the Liens securing the Obligations to cease to be Permitted
Liens as defined therein; or (iv) requiring the Company to grant any Lien
for the benefit of the lenders thereunder, except to the extent permitted
hereunder; or

 

73

 

(b)           amend or modify any other
term or provision of the Second Lien Term Loan Agreement if such amendment or
modification would be materially adverse to the Lenders.

 

8.19         Forward Sales,
Production Payments, Etc.  The
Company and each Guarantor shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly:

 

(a)           enter into any forward sales
transaction or agreement with respect to physical deliveries of Oil and Gas
outside the ordinary course of business as conducted prior to the Effective
Time; or

 

(b)           sell or convey any production
payment, term overriding interest, net profits interest or any similar interest  (except for overriding royalty or net profits
interests granted to employees or consultants of the Company or
any Restricted Subsidiary in the ordinary course of business in connection with the generation of
prospects or the development of Oil and Gas Properties).

 

8.20         Use of Proceeds.  The Company and each Guarantor shall not, and
shall not permit any of its respective Restricted Subsidiaries to, directly or
indirectly, use or permit the use of all or any portion of the Loans or any
Letters of Credit for any purpose other than those set forth in Section 7.13.

 

8.21         New Bank
Accounts.  The Company
and each Guarantor shall not, and shall not permit any of its respective
Restricted Subsidiaries to, open or otherwise establish, or deposit or
otherwise transfer funds into, any bank account in the name or otherwise for
the benefit of the Company or such Subsidiary, unless the Administrative Agent
shall have received an Account Control Agreement, in form and substance
satisfactory to the Administrative Agent in its sole discretion, executed and
delivered by Borrower and the bank or other financial institution at which such
account is maintained, unless such requirement is waived by the Administrative
Agent in writing.

 

ARTICLE IX

 

EVENTS
OF DEFAULT

 

9.1           Event of
Default.  Any of the following shall
constitute an “Event of Default”:

 

(a)           Principal Non
Payment.  The Company
fails to pay, when and as required to be paid herein, any amount of scheduled
principal payment of any Loan, including any mandatory prepayment under Section 2.6(f) of this
Agreement;

 

(b)           Interest and
Expense Non-Payment.  Any Loan Party fails to pay, when and as
required to be paid herein, any interest due on any Interest Payment Date, any
other payments for fees, expenses, or other amount payable hereunder or under
any other Loan Document within three (3) Business Days after the same
becomes due and payable;

 

(c)           Representation
or Warranty.  Any written
representation or warranty by the Company, any Guarantor or any Restricted
Subsidiary made or deemed made herein, in any

 

74

 

other
Loan Document, or which is contained in any certificate, document or financial
or other statement by the Company, any Guarantor, any Restricted Subsidiary, or
any Responsible Officer, furnished at any time under this Agreement, or in or
under any other Loan Document, is incorrect in any material respect on or as of
the date made or deemed made;

 

(d)           Specific
Defaults.  Any Loan
Party fails to perform or observe any term, covenant or agreement contained in Sections 7.3(a), 7.6,
7.12, 7.13
or 7.15, in Article VIII,
or in the Agent Fee Letter or in the Lender Fee Letter;

 

(e)           Other Defaults.  The Company, any Guarantor or any Restricted
Subsidiary fails to perform or observe any other term or covenant contained in
this Agreement or any other Loan Document, and such default shall continue
unremedied for a period of (i) 15 days, in the case of Sections 7.1 and 7.14
and (ii) 30 days, in all other cases after the earlier of (x) the
date upon which a Responsible Officer knew or reasonably should have known of
such default or (y) the date upon which written notice thereof is given to
the Company by the Administrative Agent or any Lender;

 

(f)            Cross Default.  The Company, any Guarantor or any Restricted
Subsidiary (i) fails to make any payment of more than $5,000,000 in
respect of any Indebtedness or Contingent Obligation when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise) and such
failure continues after the applicable grace or notice period, if any,
specified in the relevant document on the date of such failure; or (ii) fails
after the applicable grace or notice period, if any, specified in the relevant
document on the date of such failure to perform or observe any other condition
or covenant, or any other event shall occur or condition exist, under any
agreement or instrument relating to any such Indebtedness or Contingent
Obligation having an aggregate principal amount of more than $5,000,000 if the
effect of such failure, event or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness
(or a trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be due and payable
prior to its stated maturity, or such Contingent Obligation to become payable
or cash collateral in respect thereof to be demanded; or (iii) any
Indebtedness or Contingent Obligation of the Company, any Guarantor or any
other Restricted Subsidiary in excess of $5,000,000 shall be declared due and
payable prior to its stated maturity or cash collateral is demanded in respect
of such Contingent Obligation; or (iv) an “Event of Default” as defined in
any Second Lien Debt Instrument as in effect on the Closing Date, or any other
or additional “Event of Default” which may be added to or otherwise be included
or exist after the Effective Date in any Second Lien Debt Instrument, shall
occur and be continuing;

 

(g)           Insolvency;
Voluntary Proceedings.  The Company, any Guarantor or any Restricted
Subsidiary (i) generally fails to pay, or admits in writing its inability
to pay, its debts as they become due, subject to applicable grace periods, if
any, whether at stated maturity or otherwise; (ii) commences any
Insolvency Proceeding with respect to itself; or (iii) takes any action to
effectuate or authorize any of the foregoing;

 

(h)           Involuntary
Proceedings. (i) Any involuntary Insolvency Proceeding is
commenced or filed against the Company, any Guarantor or any Restricted
Subsidiary, or any writ, judgment, warrant of attachment, execution or similar
process, is issued or levied against all

 

75

 

or
a substantial part of the Company’s, any Guarantor’s or any Restricted
Subsidiary’s Properties, and any such proceeding or petition shall not be
dismissed, or such writ, judgment, warrant of attachment, execution or similar
process shall not be released, vacated or fully bonded within 60 days after
commencement, filing or levy; (ii) the Company, any Guarantor or any
Restricted Subsidiary admits the material allegations of a petition against it
in any Insolvency Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the
Company, any Guarantor or any Restricted Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefor), or other similar Person for itself
or a substantial portion of its Property or business;

 

(i)            Monetary
Judgments.  One or more
non-interlocutory judgments, non-interlocutory orders, decrees or arbitration
awards is entered against the Company, any Guarantor or any other Restricted
Subsidiary involving in the aggregate a liability (to the extent not covered by
independent third-party insurance as to which the insurer does not dispute
coverage) as to any single or related series of transactions, incidents or
conditions, of $5,000,000 or more, and the same shall remain unsatisfied,
unvacated and unstayed pending appeal for a period of 30 days after the entry thereof;

 

(j)            Change of
Control.  There
occurs any Change of Control;

 

(k)           Loss of Permit.  Any Governmental Authority revokes or fails
to renew any material license, permit or franchise of the Company, any
Guarantor or any other Restricted Subsidiary, or the Company, any Guarantor or
any other Restricted Subsidiary for any reason loses any material license,
permit or franchise, or the Company, any Guarantor or any other Restricted
Subsidiary suffers the imposition of any restraining order, escrow, suspension or
impound of funds in connection with any proceeding (judicial or administrative)
with respect to any material license, permit or franchise and, in each case,
such revocation, failure or loss could reasonably be expected to have a
Material Adverse Effect; and such default remains unremedied for a period of 30
days after the earlier of (i) the date upon which a Responsible Officer
knew or reasonably should have known of such default or (ii) the date upon
which written notice thereof is given to the Company by the Administrative
Agent or any Lender;

 

(l)            Adverse Change.  There occurs a Material Adverse Effect;

 

(m)          Guaranty
Default.  A Guaranty
is for any reason partially (including with respect to future advances) or
wholly revoked or invalidated, or otherwise ceases to be in full force and
effect, or such Guarantor or any other Person contests in any manner the
validity or enforceability thereof or denies that it has any further liability
or obligation thereunder;

 

(n)           Enforceability
or Perfection of Loan Documents.  (i) Any Loan Document shall, at any time
after its execution and delivery and for any reason, cease to be in full force
and effect or shall be declared to be null and void, the validity or
enforceability thereof shall be contested by any Person party thereto (other
than the Administrative Agent or any Lender) or any such Person party thereto
(other than the Administrative Agent or any Lender) shall deny that it has any
or further liability or obligation thereunder, or the Obligations shall be subordinated
for any reason (other than by the consent of the Lenders); or (ii) any
Lien created

 

76

 

under
any Loan Document shall fail to constitute a first priority, perfected Lien in
a material portion of the Collateral, subject only to Permitted Liens, and such
failure shall continue for at least 30 days after the earlier of (A) the
date upon which a Responsible Officer knew or reasonably should have known of
such default or (B) the date upon which written notice thereof is given to
the Company by the Administrative Agent or any Lender;

 

(o)           Material
Agreements.  The
Company, any Guarantor or any other Restricted Subsidiary fails to duly
observe, perform or comply with any agreement with any Person or any term or
condition of any instrument, if such failure is not remedied within the
applicable period of grace (if any) provided in such agreement or instrument
and the termination of the instrument or agreement would have a Material
Adverse Effect;

 

(p)           ERISA.  Either (i) any “accumulated funding
deficiency” (as defined in Section 412(a) of the Code) in excess of
$100,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (ii) the Company or any
ERISA Affiliate institutes steps to terminate any ERISA Plan and the then
current value of such ERISA Plan’s benefit liabilities exceeds the then current
value of such ERISA Plan’s assets available for the payment of such benefit
liabilities by more than $100,000; or

 

9.2           Remedies.  If any Event of Default occurs and is
continuing, the Administrative Agent shall, at the request of, or may, with the
consent of, the Required Lenders:

 

(a)           declare the Commitment, if
any, of each Lender to make Loans or participate in Issuances of Letters of
Credit to be terminated, or declare all or any part of the unpaid principal of
the Loans, all interest accrued and unpaid thereon and all other amounts
payable under the Loan Documents to be immediately due and payable, whereupon the
same shall, without presentment, demand, protest, notice of intention to
accelerate, notice of acceleration, or any other notice of any kind, all of
which are hereby expressly waived by the Company and each Guarantor; and

 

(b)           exercise on behalf of itself
and the Lenders all rights and remedies available to it and the Lenders under
the Loan Documents or applicable law; provided,
however,
that upon the occurrence of any event specified in Section 9.1(g) or
(h) (in the
case of clause (i) of Section 9.1(h) upon
the expiration of the 60-day period mentioned therein), the obligation of each
Lender to make Loans or participate in Issuances of Letters of Credit shall
automatically terminate and the unpaid principal amount of all outstanding
Loans and all interest and other amounts as aforesaid shall automatically
become due and payable without further act of the Administrative Agent, or any
Lender and without presentment, demand, protest, notice of intention to
accelerate, notice of acceleration or any other notice of any kind, all of
which are hereby expressly waived by the Company and each Guarantor.

 

9.3           Application of
Proceeds.  The
proceeds received by the Administrative Agent in respect of any sale of,
collection from or other realization upon all or any part of the Collateral
pursuant to the exercise by the Administrative Agent of its remedies shall be
applied, in full or in part, together with any other sums then held by the
Administrative Agent pursuant to this Agreement, promptly by the Administrative
Agent as follows:

 

77

 

(a)                                  first, to the payment or reimbursement of the
Administrative Agent for all costs, expenses, disbursements and losses incurred
by the Administrative Agent and which any Loan Party is required to pay or
reimburse pursuant to the Loan Documents, together with interest on each such
amount at the highest rate then in effect under this Agreement from and after
the date such amount is due, owing or unpaid until paid in full;

 

(b)                                 second, to the payment or reimbursement of the Lenders and
each Qualified Derivative Contract Counterparty for all costs, expenses,
disbursements and losses incurred by such Persons and which any Loan Party is
required to pay or reimburse pursuant to the Loan Documents, together with
interest on each such amount at the highest rate then in effect under this
Agreement from and after the date such amount is due, owing or unpaid until
paid in full;

 

(c)                                  third, to the payment of interest on the Loans which is
then due;

 

(d)                                 fourth, to the payment of principal of the Loans which is
then due and to the payment or prepayment to the Lenders and each Qualified
Derivative Contract Counterparty of all other Obligations; and

 

(e)                                  fifth, to whomsoever shall be legally entitled thereto.

 

In the event that any such
proceeds are insufficient to pay in full the items described in clauses (a) through
(f) of this Section 9.3, the Loan Parties shall remain liable,
jointly and severally, for any deficiency. 
Each Loan Party acknowledges the relative rights, priorities and
agreements of the Administrative Agent, the Lenders and the Qualified
Derivative Contract Counterparty, as set forth in this Agreement, including as
set forth in this Section 9.3.

 

9.4                                 Rights Not
Exclusive.  The rights
provided for in this Agreement and the other Loan Documents are cumulative and
are not exclusive of any other rights, powers, privileges or remedies provided
by law or in equity, or under any other instrument, document or agreement now
existing or hereafter arising.

 

ARTICLE X

 

THE
ADMINISTRATIVE AGENT

 

10.1                           Appointment and
Authorization; Limitation of Agency.

 

(a)                                  Each Lender
hereby irrevocably (subject to Section 10.9)
appoints, designates and authorizes the Administrative Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto.  The duties of the Administrative Agent shall
be administrative and mechanical in nature; notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other Loan
Document, the Administrative Agent shall not have any duty or responsibility,
except those expressly set forth herein, nor shall the Administrative Agent,
under any circumstances, have or be deemed to have any fiduciary relationship
with any Person, and no implied covenants, functions, 

 

78

 

responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent.

 

(b)                                 The Issuing
Lender shall have all of the benefits and immunities (i) provided to the
Agent in this Article X with respect
to any acts taken or omissions suffered by the Issuing Lender in connection
with Letters of Credit Issued by it or proposed to be Issued by it and the
application and agreements for letters of credit pertaining to the Letters of
Credit as fully as if the term “Administrative Agent,”
as used in this Article X, included
the Issuing Lender with respect to such acts or omissions, and (ii) as
additionally provided in this Agreement with respect to the Issuing Lender.

 

10.2                           Delegation of
Duties.  The Administrative Agent may
execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys in fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties.  The Administrative Agent shall not be
responsible for the negligence or misconduct of any agent or attorney in fact
that it selects with reasonable care.

 

10.3                           Liability of
Administrative Agent.  None of the
Administrative Agent-Related Persons shall (i) be liable for any action
taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby
(except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by the Company, any Guarantor or any Subsidiary
or Affiliate of the Company, or any officer thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness (other than such Administrative
Agent-Related Person’s own due execution and delivery), genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
for any failure of the Company, any Guarantor or any other party to any Loan
Document to perform its obligations hereunder or thereunder.  No Administrative Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the Properties,
books or records of the Company or any of the Company’s Subsidiaries or
Affiliates.

 

10.4                           Reliance by
Administrative Agent.

 

(a)                                  The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message, statement or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Administrative Agent. The Administrative Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or concurrence of the
Lenders as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or 

 

79

 

continuing to take any such
action.  The Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.

 

(b)                                 For purposes of
determining compliance with the conditions specified in Section 5.1,
each Lender that has made available to the Administrative Agent its Pro Rata
Share of the initial Credit Extension or subsequent Credit Extension, as the
case may be, shall be deemed to have consented to, approved or accepted or to
be satisfied with, each document or other matter either sent by the
Administrative Agent to such Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by or
acceptable or satisfactory to the Lender as a condition precedent to such
initial Credit Extension or subsequent Credit Extension, as applicable.

 

10.5                           Notice of
Default.  The Administrative Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to Defaults in the payment of principal,
interest and fees required to be paid to the Administrative Agent for the
account of the Lenders, unless the Administrative Agent shall have received
written notice from a Lender or the Company referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a “notice
of default”.  The Administrative Agent
will notify the Lenders of its receipt of any such notice.  Subject to Section 10.4(a),
the Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Lenders in accordance with Article IX; provided, however, that unless
and until the Administrative Agent has received any such request, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Lenders.

 

10.6                           Credit Decision.  Each Lender acknowledges that no
Administrative Agent-Related Person has made any representation or warranty to
it, and that no act by any Administrative Agent-Related Person hereafter taken,
including any review of the affairs of the Company, any Guarantor or their
respective Subsidiaries, shall be deemed to constitute any representation or
warranty by any Administrative Agent-Related Person to any Lender.  Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon any Administrative
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, Property, financial and other condition and
creditworthiness of the Company, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to the Company hereunder.  Each Lender also represents that it will,
independently and without reliance upon any Administrative Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to
the business, prospects, operations, Property, financial and other condition
and creditworthiness of the Company. 
Except for notices, reports and other documents expressly herein
required to be furnished to the Lenders by the Administrative Agent, the
Administrative Agent shall not have 

 

80

 

any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, Property, financial
and other condition or creditworthiness of the Company which may come into the possession
of any of the Administrative Agent-Related Persons.

 

10.7                           Indemnification.  Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Administrative Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Company and without limiting the obligation of the Company to do
so), pro rata according to each respective Lender’s Pro Rata Share, each
Administrative Agent-Related Person from and against any and all Indemnified
Liabilities INCLUDING SUCH INDEMNIFIED LIABILITIES AS MAY ARISE OR BE
CAUSED BY THE NEGLIGENCE, SOLE, JOINT, CONCURRENT, COMPARATIVE OR OTHERWISE OF
SUCH ADMINISTRATIVE AGENT-RELATED PERSONS; provided, however, that no Lender
shall be liable for the payment to any Administrative Agent-Related Persons of
any portion of such Indemnified Liabilities to the extent the same arise from (i) the
gross negligence or willful misconduct of any Administrative Agent-Related
Person or (ii) a claim or action asserted by one or more other
Administrative Agent-Related Persons. 
Without limitation of the foregoing, each Lender shall reimburse the
Administrative Agent upon demand for its ratable share of any costs or out of
pocket expenses (including Attorney Costs) incurred by the Administrative Agent
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document or any document
contemplated by or referred to herein, to the extent that the Administrative
Agent is not reimbursed for such expenses by or on behalf of the Company.  The undertaking in this Section 10.7 shall survive the payment of
all Obligations hereunder and the resignation or replacement of the
Administrative Agent.

 

10.8                           Administrative
Agent in Individual Capacity.  Bank of Montreal and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire or underwrite equity or debt securities of and generally engage in any
kind of banking, investment banking, trust, financial advisory, underwriting or
other business with the Company and its Affiliates as though Bank of Montreal
were not the Administrative Agent hereunder and without notice to or consent of
the Lenders.  The Lenders acknowledge
that, pursuant to such activities, Bank of Montreal or its Affiliates may
receive information regarding the Company or its Affiliates (including
information that may be subject to confidentiality obligations in favor of the
Company or such Affiliate) and acknowledge that the Administrative
Agent-Related Persons shall be under no obligation to provide such information
to them.  With respect to Obligations
held by it, Bank of Montreal shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
the Administrative Agent or the Issuing Lender.

 

10.9                           Successor
Administrative Agent.  The
Administrative Agent may resign as Administrative Agent upon 30 days’ notice to
the Lenders.  If the Administrative Agent
resigns under this Agreement, the Lenders shall appoint from among the Lenders
a successor administrative agent for the Lenders.  If no successor administrative agent is
appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Lenders,
a successor administrative agent from among the 

 

81

 

Lenders.  Upon the acceptance of its appointment as
successor administrative agent hereunder, such successor administrative agent
shall succeed to all the rights, powers and duties of the retiring Administrative
Agent and the term “Administrative Agent” shall
mean such successor administrative agent and the retiring Administrative Agent’s
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent’s resignation hereunder as
Administrative Agent, the provisions of this Article X
and Sections 11.4 and 11.5 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement.  If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent’s notice of resignation, the retiring
Administrative Agent’s resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Lenders appoint a successor
administrative agent as provided for above.

 

10.10                     Withholding Tax.

 

(a)                                  If any Lender
is a “foreign
corporation, partnership or trust” within the meaning of the
Code and such Lender claims exemption from, or a reduction of, U.S. withholding
Tax under Sections 1441 or 1442 of the Code, such Lender agrees with and in
favor of the Administrative Agent, to deliver to the Administrative Agent:

 

(i)                                     if such Lender
claims an exemption from, or a reduction of, withholding Tax under a United
States Tax treaty, properly completed IRS Forms 1001 and W 8 before the payment
of any interest in the first calendar year and before the payment of any
interest in each third succeeding calendar year during which interest may be
paid under this Agreement;

 

(ii)                                  if such Lender
claims that interest paid under this Agreement is exempt from United States
withholding Tax because it is effectively connected with a United States trade
or business of such Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of such
Lender and in each succeeding taxable year of such Lender during which interest
may be paid under this Agreement, and IRS Form W 9; and

 

(iii)                               such other form
or forms as may be required under the Code or other laws of the United States
as a condition to exemption from, or reduction of, United States withholding
Tax.

 

Such Lender agrees to
promptly notify the Administrative Agent of any change in circumstances which
would modify or render invalid any claimed exemption or reduction.

 

(b)                                 If any Lender
claims exemption from, or reduction of, withholding Tax under a United States
Tax treaty by providing IRS Form 1001 and such Lender sells, assigns,
grants a participation in, or otherwise transfers all or part of the
Obligations held by such Lender, such Lender agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations held by such Lender.  To the extent of such 

 

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percentage amount, the
Administrative Agent will treat such Lender’s IRS Form 1001 as no longer
valid.

 

(c)                                  If any Lender
claiming exemption from United States withholding Tax by filing IRS Form 4224
with the Administrative Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations held by such Lender, such
Lender agrees to undertake sole responsibility for complying with the
withholding Tax requirements imposed by Sections 1441 and 1442 of the Code.

 

(d)                                 If any Lender
is entitled to a reduction in the applicable withholding Tax, the Administrative
Agent may withhold from any interest payment to such Lender an amount
equivalent to the applicable withholding Tax after taking into account such
reduction.  If the forms or other
documentation required by Section 10.10(a) of
this Section are not delivered to the Administrative Agent, then the
Administrative Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding Tax.

 

(e)                                  If the IRS or
any other Governmental Authority of the United States or other jurisdiction
asserts a claim that the Administrative Agent did not properly withhold Tax
from amounts paid to or for the account of any Lender (because the appropriate
form was not delivered, was not properly executed, or because such Lender
failed to notify the Administrative Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding Tax ineffective, or
for any other reason) such Lender shall indemnify the Administrative Agent
fully for all amounts paid, directly or indirectly, by the Administrative Agent
as Tax or otherwise, including penalties and interest, and including any Taxes
imposed by any jurisdiction on the amounts payable to the Administrative Agent
under this Section 10.10(e), together
with all costs and expenses (including Attorney Costs).  The obligation of the Lenders under this Section 10.10(e) shall
survive the payment of all Obligations and the resignation or replacement of
the Administrative Agent.

 

10.11                     Arranger;
Syndication Agents.  The
Arranger and each of the Syndication Agents, in their respective capacities as
such, shall have no duties or responsibilities, and shall incur no liability,
under this Agreement or the other Loan Documents.

 

10.12                     Release of
Collateral.  The
Administrative Agent is hereby irrevocably authorized by each of the Lenders to
effect any release of Liens or guarantee obligations contemplated by Section 11.27.

 

ARTICLE XI

 

MISCELLANEOUS

 

11.1                           Amendments and
Waivers.  No amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, and no consent with respect to any departure by the Company, any
Guarantor or any applicable Subsidiary therefrom, shall be effective unless the
same shall be in writing and signed by the Required Lenders (or by the
Administrative Agent at the written request of the Required Lenders) and the
Company and 

 

83

 

acknowledged
by the Administrative Agent, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it is given;  provided, however, that no such
agreement shall waive or amend Section 2.14 or change the
definition of “Defaulting Lender” without
the written consent of the Administrative Agent and the Issuing Bank; and  provided further, however, that no
such waiver, amendment, modification, termination or consent shall, unless in
writing and signed by all the Lenders, and the Company and acknowledged by the
Administrative Agent, do any of the following:

 

(a)                                  increase or
extend the Commitment of any Lender (including without limitation by means of
any amendment purporting to remove or change the requirement that such
Commitment not exceed the Borrowing Base), or increase the maximum amount of
Letters of Credit;

 

(b)                                 postpone the
final maturity date of any Loan, or postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees or other amounts due to the Lenders (or any of them) hereunder (including
any mandatory prepayments thereof or prepayments otherwise required to be made
on the Loans should a Deficiency occur) or under any other Loan Document;

 

(c)                                  reduce the
principal of, or the rate of interest specified herein on any Loan, or (subject
to clause (ii) below) any fees or other amounts payable hereunder
(including any mandatory prepayments thereof or prepayments otherwise required
to be made on the Loans should a Deficiency occur) or under any other Loan
Document;

 

(d)                                 change the Pro
Rata Shares or change in any manner the definition of “Required
Lenders” or the Lenders required to rescind or annul an
acceleration;

 

(e)                                  amend this Section 11.1, or Section 9.1,
or any provision of this Agreement which, by its terms, expressly requires the
approval or concurrence of all Lenders;

 

(f)                                    release all,
substantially all, or any material portion of the Collateral (except for
releases in connection with Dispositions which are permitted hereunder or under
any Loan Document), or release any Guarantor from any Guaranty; or

 

(g)                                 reduce the
amount or postpone the due date of any amount payable in respect of, or extend
the required expiration date of, any Letter of Credit, or change in any manner
the obligations of the Lenders relating to the purchase of participations in
Letters of Credit;

 

provided  further, however, that
(i) any amendment, modification, termination or waiver of any of the
provisions contained in Article V
shall be effective only if evidenced by a writing signed by or on behalf of the
Administrative Agent and the Required Lenders, (ii) no amendment, waiver
or consent shall, unless in writing and signed by the Issuing Lender in
addition to the Required Lenders or all the Lenders, as the case may be, affect
the rights or duties of the Issuing Lender under this Agreement or any LC
Related Document relating to any Letter of Credit Issued or to be Issued by it,
and (iii) no amendment, waiver or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Required Lenders or all
the Lenders, as the case may 

 

84

 

be,
affect the rights or duties of the Administrative Agent under this Agreement or
any other Loan Document.

 

11.2                           Notices.

 

(a)                                  All notices,
requests and other communications shall be in writing and mailed, faxed or
delivered, to the address or facsimile number specified for notices on the
signature pages hereof; or, as directed to the Company or the Administrative
Agent, to such other address as shall be designated by such party in a written
notice to the other parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice to the Company
and the Administrative Agent.

 

(b)                                 All such
notices, requests and communications shall, when transmitted by overnight
delivery, or faxed, be effective when delivered for overnight (next-day)
delivery, or transmitted in legible form by facsimile machine, respectively, or
if mailed, upon the third Business Day after the date deposited into the U.S.
mail, or if delivered, upon delivery; except that notices pursuant to Article II or IX
shall not be effective until actually received by the Administrative Agent.

 

(c)                                  Any agreement
of the Administrative Agent and the Lenders herein to receive certain notices
by telephone or facsimile is solely for the convenience and at the request of
the Company.  The Administrative Agent
and the Lenders shall be entitled to rely on the authority of any Person
purporting to be a Person authorized by the Company to give such notice and the
Administrative Agent and the Lenders shall not have any liability to the
Company or other Person on account of any action taken or not taken by the Administrative
Agent or the Lenders in reliance upon such telephonic or facsimile notice.  The obligation of the Company to repay the
Loans shall not be affected in any way or to any extent by any failure by the
Administrative Agent and the Lenders to receive written confirmation of any
telephonic or facsimile notice or the receipt by the Administrative Agent and
the Lenders of a confirmation which is at variance with the terms understood by
the Administrative Agent and the Lenders to be contained in the telephonic or
facsimile notice.

 

11.3                           No Waiver;
Cumulative Remedies.  No failure
to exercise and no delay in exercising, on the part of the Administrative Agent
or any Lender, any right, remedy, power or privilege hereunder, shall operate
as a waiver thereof;  nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege.

 

11.4                           Costs and
Expenses.  The Company
shall:

 

(a)                                  whether or not
the transactions contemplated hereby are consummated, pay or reimburse the
Administrative Agent within five Business Days after demand (subject to Section 5.1(d)) for all reasonable costs and
expenses incurred by the Administrative Agent or any other Agent, the Issuing
Lender, the Lenders or any of their Affiliates in connection with the
syndications of the extensions of credit hereunder (other than fees payable to
syndicate members) and the development, preparation, delivery, administration
and execution of, and any amendment, supplement, waiver or modification to (in
each case, whether or not consummated), 

 

85

 

this Agreement, any Loan
Document and any other documents prepared in connection herewith or therewith,
the consummation of the transactions contemplated hereby and thereby, and the
syndication of the credit facilities provided herein, including Attorney Costs
incurred by the any such Person with respect thereto except such costs and
expenses as may be incurred by the assignor Lenders or Assignee under Section 11.8(c); and

 

(b)                                 pay or
reimburse the Administrative Agent, any other Agent, the Issuing Lender and
each Lender within five Business Days after demand (subject to Section 5.1(d)) for all costs and expenses
(including Attorney Costs) incurred by each of them in connection with the
enforcement, attempted enforcement, or preservation of any rights or remedies
under this Agreement or any other Loan Document during the existence of an Event
of Default or after acceleration of the Loans (including in connection with any
“workout” or restructuring regarding the Loans, and including in any Insolvency
Proceeding or appellate proceeding).

 

11.5                           Indemnity.  Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify and hold each Agent-Related
Person, the Issuing Lender and each Lender and each of their respective
Affiliates, successors and assignors and its and their respective officers,
directors, employees, counsel, agents, advisors, controlling Persons, members
and attorneys in fact (each, an “Indemnified Person”)
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans, and the
termination, resignation or replacement of the Administrative Agent or
replacement of any Lender) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or any
document contemplated by or referred to herein, including any of the Loan
Documents, or the transactions contemplated hereby, or any action taken or
omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding
(including any Insolvency Proceeding or appellate proceeding) related to or
arising out of this Agreement, any Transaction Agreement, the Loans or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the “Indemnified
Liabilities”), WHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARISE
OUT OF OR AS A RESULT OF ANY INDEMNIFIED PARTY’S NEGLIGENCE IN WHOLE OR IN
PART, INCLUDING, WITHOUT LIMITATION, THOSE CLAIMS WHICH RESULT FROM THE SOLE,
JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED PARTY, OR ANY
ONE OR MORE OF THEM; provided,
however, that the Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities to the extent same arise from
the gross negligence or willful misconduct of any Indemnified Person.  No Indemnified Person shall be liable for any
damages arising from the use by unauthorized Persons of information or other
materials sent through electronic, telecommunications or other information
transmission systems that are intercepted by such Persons or for any special,
indirect, consequential or punitive damages in connection with this
Agreement.  All amounts due under this Section shall
be payable not later than thirty (30) days after written demand therefor.  The agreements in this Sections
11.4 and 11.5 shall survive
payment of all other Obligations.

 

11.6                           Payments Set
Aside.  To the extent that the Company
makes a payment to the Administrative Agent or the Lenders, or the
Administrative Agent or the Lenders exercise 

 

86

 

their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required (including pursuant to any settlement
entered into by the Administrative Agent or such Lender in its discretion) to
be repaid to a trustee, debtor-in-possession, receiver or any other Person, in
connection with any Insolvency Proceeding or otherwise, then (a) to the
extent of such recovery the obligation or part thereof originally intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each
Lender severally agrees to pay to the Administrative Agent or such Lender upon
demand its Pro Rata Share of any amount so recovered from or repaid by the
Administrative Agent or such Lender.

 

11.7                           Successors and
Assigns.  This Agreement shall become
effective at the Effective Time after it shall have been executed by the Company,
each Guarantor and the Administrative Agent and after the Administrative Agent
shall have been notified by each Lender and Issuing Lender that such Lender or
Issuing Lender has executed it and thereafter this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Company may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Administrative Agent and each Lender.

 

11.8                           Assignments,
Participations, Confidentiality, etc.

 

(a)                                  Any Lender may
upon written consent of the Administrative Agent and the Company, not to be
unreasonably withheld, at any time assign and delegate to one or more Eligible
Assignees (provided
that no written consent of the Administrative Agent
shall be required in connection with any assignment and delegation by any
Lender to an Eligible Assignee that is an Affiliate of such Lender and provided further
that no written consent of the Company shall be required in connection with any
assignment and delegation by any Lender to an Eligible Assignee in the event a
Default has occurred and is continuing) (each an “Assignee”)
all, or any ratable part of all in a minimum commitment amount of at least
$1,000,000 or in $1,000,000 increments in excess thereof, of the Loans, the
Commitments, and the other rights and obligations of such Lender hereunder;
provided, however, that the Company and the Administrative Agent may continue
to deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee, shall have been given to the Company and the
Administrative Agent by such Lender and the Assignee; (ii) such Lender and
its Assignee shall have delivered to the Company and the Administrative Agent
an Assignment and Acceptance in the form of Exhibit E
(“Assignment and Acceptance”)
together with any Note or Notes subject to such assignment and (iii) the assignor Lender or Assignee has paid to the
Administrative Agent a processing and recordation fee in the amount of
$3,500.00 (which fee may be waived or reduced in the sole discretion of the
Administrative Agent), provided, however, that only one such fee shall be
payable in the case of concurrent assignments to Persons that, after giving
effect to such assignments, will be Related Funds.

 

(b)                                 From and after
the date that the Administrative Agent notifies the assignor Lender that it has
received an executed Assignment and Acceptance and payment of the above-

 

87

 

referenced processing fee, (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assignor Lender shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.

 

(c)                                  Within five
Business Days after its receipt of notice by the Administrative Agent that it
has received an executed Assignment and Acceptance and payment of the
processing fee, and provided
that it consents to such assignment in accordance with Section 11.8(a), the Company shall execute and
deliver to the Administrative Agent a new Note evidencing such Assignee’s
assigned Loans and Maximum Loan Amount and, if the assignor Lender has retained
a portion of its Loans and its Commitment, a replacement Note in the principal
amount equal to the Maximum Loan Amount retained by the assignor Lender (such
Note to be in exchange for, but not in payment of, the Note held by such
Lender).  Immediately upon each Assignee’s
making its processing fee payment under the Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only to the extent,
necessary to reflect the addition of the Assignee and the resulting adjustment
of the Lenders’ respective Maximum Loan Amounts and Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitment of the assigning Lender pro tanto.

 

(d)                                 Any Lender may
at any time sell to one or more commercial banks or other Persons not
Affiliates of the Company (a “Participant”)
participating interests in any Loans, the Commitment of that Lender and the
other interests of that Lender (the “Originating Lender”) hereunder and under
the other Loan Documents; provided,
however,
that (i) the Originating Lender’s obligations under this Agreement shall
remain unchanged, the Originating Lender shall remain a Lender for all purposes
hereof and the other Loan Documents to which such Originating Lender is a
party, and the Participant may not become a Lender for purposes hereof or for
any other of the Loan Documents, (ii) the Originating Lender shall remain
solely responsible for the performance of such obligations, (iii) the
Company and the Administrative Agent shall continue to deal solely and directly
with the Originating Lender in connection with the Originating Lender’s rights
and obligations under this Agreement and the other Loan Documents, and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the
extent such amendment, consent or waiver would require unanimous consent of the
Lenders. In the case of any such participation, the Participant shall not have
any rights under this Agreement, or any of the other Loan Documents (the
Participant’s rights against the Originating Lender in respect of such
participation being those set forth in the agreement creating or evidencing
such participation with such Lender), and all amounts payable by the Company
hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.

 

88

 

(e)                                  Each Lender
agrees to take normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as “confidential”
or “secret”  by the Company and provided to it by the
Company or any of its Subsidiaries, or by the Administrative Agent on such
Company’s or Subsidiary’s behalf, under or in connection with this Agreement or
any other Loan Document, and neither it nor any of its Affiliates shall use any
such information other than in connection with or in enforcement of this
Agreement and the other Loan Documents, except to the extent such information (i) was
or becomes generally available to the public other than as a result of
disclosure by such Lender, or (ii) was or becomes available on a non
confidential basis from a source other than the Company, provided,  however, that such
source is not bound by a confidentiality agreement with the Company known to
the Lender; provided
further, however,
that any Lender may disclose such information (A) at the request or
pursuant to any requirement of any Governmental Authority to which such Lender
is subject or in connection with an examination of such Lender by any such
authority; (B) pursuant to subpoena or other court process; (C) when
required to do so in accordance with the provisions of any applicable
Requirement of Law; (D) to the extent reasonably required in connection
with any litigation or proceeding to which the Administrative Agent, any Lender
or their respective Affiliates may be party; (E) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Loan Document; (F) to such Lender’s independent auditors and other
professional advisors; (G) to any Affiliate of such Lender, or to any
Participant or Assignee, actual or potential, provided that such Affiliate,
Participant or Assignee agrees to keep such information confidential to the
same extent required of the Lenders hereunder; and (H) as to any Lender,
as expressly permitted under the terms of any other document or agreement
regarding confidentiality to which the Company is party or is deemed party with
such Lender.

 

(f)                                    Notwithstanding
any other provision in this Agreement, any Lender may at any time create a
security interest in, or pledge, all or any portion of its rights under and
interest in this Agreement and the Notes held by it in favor of any Federal
Reserve Lender in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR §203.14, and such Federal Reserve Lender may enforce such pledge
or security interest in any manner permitted under applicable law.

 

(g)                                 Notwithstanding
anything to the contrary in Section 11.8(e) or
any other provision of this Agreement or any other Loan Document, any party
hereto or thereto (and each employee, representative, or other agent of such
party) may disclose to any and all Persons, without limitation of any kind, the
Tax treatment and Tax structure of the transactions contemplated herein and
therein and all materials of any kind in each case within the meaning of United
States Treasury Regulation Section 1.6011-4 (including opinions or other
Tax analyses) that are provided to such party relating to such Tax treatment
and Tax structure; provided, however, that with respect to any document or
similar item that in either case contains information concerning Tax treatment
or Tax structure of the transactions contemplated by this Agreement as well as
other information, this Section 11.8(g) shall
only apply to such portions of the document or similar item that relate to such
Tax treatment or Tax structure.

 

11.9                           Interest.  It is the intention of the parties hereto to
comply with applicable usury laws, if any; accordingly, notwithstanding any
provision to the contrary in this Agreement, the Notes or in any of the other
Loan Documents securing the payment hereof or otherwise 

 

89

 

relating
hereto, in no event shall this Agreement, the Notes or such other Loan
Documents require or permit the payment, taking, reserving, receiving,
collection, or charging of any sums constituting interest under applicable laws
which exceed the Highest Lawful Rate.  If
any such excess interest is called for, contracted for, charged, taken, reserved,
or received in connection with the Loans evidenced by the Notes or in any of
the Loan Documents securing the payment thereof or otherwise relating thereto,
or in any communication by the Administrative Agent, the Issuing Lender, or the
Lenders or any other Person to the Company or any other Person, or in the event
all or part of the principal or interest thereof shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
reserved, or received on the amount of principal actually outstanding from time
to time under the Notes or any other Loan Document shall exceed the Highest
Lawful Rate, then in any such event it is agreed as follows:  (i) the provisions of this Section 11.9 shall govern and control, (ii) neither
any Company nor any other Person now or hereafter liable for the payment of the
Notes shall be obligated to pay the amount of such interest to the extent such
interest is in excess of the Highest Lawful Rate, (iii) any such excess
which is or has been received notwithstanding this Section 11.9
shall be credited against the then unpaid principal balance of the Notes or, if
the Notes have been or would be paid in full, refunded to the Company, and (iv) the
provisions of this Agreement, the Notes and the other Loan Documents securing
the payment thereof and otherwise relating thereto, and any communication to
the Company, shall immediately be deemed reformed and such excess interest
reduced, without the necessity of executing any other document, to the Highest
Lawful Rate as now or hereafter construed by courts having jurisdiction hereof
or thereof.  Without limiting the
foregoing, all calculations of the rate of the interest contracted for, charged,
collected, taken, reserved, or received in connection with the Notes, this
Agreement or any other Loan Document which are made for the purpose of
determining whether such rate exceeds the Highest Lawful Rate shall be made to
the extent permitted by applicable laws by amortizing, prorating, allocating
and spreading during the period of the full term of the Loans, including all
prior and subsequent renewals and extensions, all interest at any time
contracted for, charged, taken, collected, reserved, or received.  The terms of this Section 11.9
shall be deemed to be incorporated in every document and communication relating
to the Notes, the Loans or any other Loan Document.

 

11.10                     Indemnity and
Subrogation.  In addition
to all such rights of indemnity and subrogation as any Guarantor may have under
applicable law, the Company agrees that in the event a payment shall be made by
a Guarantor under a Guaranty in respect of a Credit Extension to the Company,
the Company shall indemnify such Guarantor for the full amount of such payment
and such Guarantor shall be subrogated to the rights of the Person to whom such
payment shall have been made to the extent of such payment subject to the
provisions of the Guaranty executed by such Guarantor.  Notwithstanding any provision of this
Agreement to the contrary, all rights of the Guarantors under this Section 11.10 and all other rights of
indemnity, contribution or subrogation under applicable law or otherwise shall
be fully subordinated to the indefeasible payment in full of the Obligations,
and no payments may be made in respect of such rights of indemnity,
contribution or subrogation until all the Obligations have been paid in full
and the Commitment shall have expired. 
No failure on the part of the Company to make the payments required by
this Section 11.10 (or any other
payments required under applicable law or otherwise) shall in any respect limit
the obligations and liabilities of the Guarantors with respect to any Guaranty,
and each Guarantor shall remain liable for the full amount of the obligation of
the Guarantors under each such Guaranty in accordance therewith.

 

90

 

11.11                     Automatic
Debits of Fees.  With
respect to any commitment fee, arrangement fee, Letter of Credit fee or other
fee, or any other cost or expense (including Attorney Costs) due and payable to
the Administrative Agent under the Loan Documents, the Company hereby
irrevocably authorizes the Administrative Agent, after giving reasonable prior
notice to the Company, to debit any deposit account of the Company with the
Administrative Agent in an amount such that the aggregate amount debited from
all such deposit accounts does not exceed such fee or other cost or
expense.  If there are insufficient funds
in such deposit accounts to cover the amount of the fee or other cost or
expense then due, such debits will be reversed (in whole or in part, in the
Administrative Agent’s sole discretion) and such amount not debited shall be
deemed to be unpaid.  No such debit under
this Section 11.11 shall be deemed a
set-off.

 

11.12                     Notification of
Addresses, Lending Offices, Etc.  Each Lender shall notify the Administrative
Agent in writing of any changes in the address to which notices to the Lender
should be directed, of addresses of any Lending Office, of payment instructions
in respect of all payments to be made to it hereunder and of such other
administrative information as the Administrative Agent shall reasonably
request.

 

11.13                     Counterparts.  This Agreement may be executed in any number
of separate counterparts, no one of which need be signed by all parties; each
of which, when so executed, shall be deemed an original, and all of such
counterparts taken together shall be deemed to constitute but one and the same
instrument.  A fully executed counterpart
of this Agreement by facsimile signatures shall be binding upon the parties
hereto.

 

11.14                     Severability.  The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or any instrument or agreement required
hereunder.

 

11.15                     No Third
Parties Benefited.  This
Agreement is made and entered into for the sole protection and legal benefit of
the Company, the Guarantors, the Lenders, the Administrative Agent, the
Administrative Agent-Related Persons and the Indemnified Persons, and their
permitted successors and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any of the other Loan Documents.

 

11.16                     Governing Law,
Jurisdiction.  THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.

 

11.17                     Submission To
Jurisdiction; Waivers.  Each
of the Company and each Guarantor hereby irrevocably and unconditionally, and
shall cause each of their respective Subsidiaries to irrevocably and
unconditionally:

 

(a)                                  submit, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States 

 

91

 

District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State
or, to the extent permitted by law, in such Federal court. Each of the parties hereto
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law. Nothing in this Agreement shall affect
any right that the Administrative Agent may otherwise have to bring any action
or proceeding relating to this Agreement against the Company and each Guarantor
or its properties in the courts of any jurisdiction.

 

(b)                                 waive, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (a) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.

 

(c)                                  consent to
service of process in the manner provided for notices herein. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.

 

11.18                     Entire
Agreement.  This
Agreement, together with the other Loan Documents, embodies the entire
agreement and understanding among the Company, the Guarantors, the Lenders and
the Administrative Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, oral or written, relating to the
subject matter hereof and thereof.

 

11.19                     NO ORAL
AGREEMENTS.  THIS
WRITTEN THIRD AMENDED AND RESTATED CREDIT AGREEMENT, TOGETHER WITH THE OTHER
WRITTEN LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.

 

11.20                     Accounting
Changes.  In the event that any “Accounting Change” (as defined below) shall occur and
such change results in a change in the method of calculation of financial
covenants, standards or terms in this Agreement, then the Company and the
Administrative Agent agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Change
with the desired result that the criteria for evaluating the Company’s
financial condition shall be the same after such Accounting Change as if such
Accounting Change had not been made. 
Until such time as such an amendment shall have been executed and
delivered by the Company, the Administrative Agent and the Required Lenders,
all financial covenants, standards and terms in this Agreement shall continue
to be calculated or construed as if such Accounting Change had not occurred.  “Accounting Change”
refers to any change in accounting principles required by the 

 

92

 

promulgation
of any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants or,
if applicable, the SEC.

 

11.21                     WAIVER OF JURY
TRIAL, PUNITIVE DAMAGES, ETC.  THE COMPANY AND EACH LENDER HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY
TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY;
(B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE
TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY “SPECIAL
DAMAGES”, AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES
THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 11.21.  AS USED IN THIS SECTION 11.21,
“SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE
DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS
WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER
PARTY HERETO.

 

11.22                     Intercreditor
Agreement.  Each Lender
(a) hereby agrees that it will be bound by and take no actions contrary to
the Intercreditor Agreement and (b) hereby irrevocably authorizes and
instructs the Administrative Agent to enter into the Intercreditor Agreement on
its behalf.

 

11.23                     Amendment and
Restatement.

 

(a)                                  From and after
the Effective Time, this Agreement amends and restates in its entirety the
Existing Credit Agreement; the Notes issued under this Agreement, if any, amend
and restate the “Notes” (as defined in the Existing Credit Agreement) issued
under the Existing Credit Agreement; and the Existing Credit Agreement shall
thereafter be of no further force and effect except to evidence (i) the
incurrence by any Company of the “Obligations” under and as defined therein
(whether or not such “Obligations” are contingent as of the Effective Time), (ii) the
representations and warranties made by any Loan Party prior to the Effective Time
and (iii) any action or omission performed or required to be performed
pursuant to the Existing Credit Agreement prior to the Effective Time (including
any failure, prior to the Effective Time, to comply with the covenants
contained in such Existing Credit Agreement). 
The amendments and restatements set forth herein shall not cure any
breach thereof or any “Default” or “Event of Default” under and as defined in the Existing
Credit Agreement existing prior to the Effective

 

93

 

Time.  This Agreement and the Notes, if any, issued
do not constitute and shall not be construed to evidence a novation of or a
payment and readvance of any of the “Obligations” (as defined in the Existing
Credit Agreement) heretofore outstanding under the Existing Credit Agreement,
it being the intention of the parties hereto that this Agreement provide for
the terms and conditions of, and the Notes issued, if any, evidence, at such
time, the same “Obligations” as were then outstanding under the Existing Credit
Agreement.  Each Lender shall surrender
the “Notes” outstanding on the Effective Date issued to it under the Existing Credit
Agreement.

 

(b)                                 The terms and
conditions of this Agreement and the Administrative Agent’s, the Lenders’ and
the Issuing Lender’s rights and remedies under this Agreement and the other
Loan Documents shall apply to all of the “Obligations” incurred under the
Existing Credit Agreement and the Notes issued thereunder.

 

(c)                                  The Company
reaffirms the Liens granted pursuant to the Existing Loan Documents to the
Administrative Agent for the benefit of the Lenders and the Issuing Lenders,
which Liens shall continue in full force and effect during the term of this
Agreement and any renewals or extensions thereof and shall continue to secure
the Obligations hereunder.

 

(d)                                 From and after
the Effective Time, (i) all references to the Existing Credit Agreement
(or to any amendment, supplement, modification or amendment and restatement
thereof) in the Loan Documents (other than this Agreement) shall be deemed to
refer to the Existing Credit Agreement as amended and restated hereby, (ii) all
references to any section (or subsection) of the Existing Credit Agreement in
any Loan Document (but not herein) shall be amended to become mutatis mutandis, references to the corresponding provisions
of this Agreement and (iii) except as the context otherwise provides, from
or after the Effective Time, all references to this Agreement herein (including
for purposes of indemnification and reimbursement of fees) shall be deemed to
be references to the Existing Credit Agreement as amended and restated hereby.

 

(e)                                  This amendment
and restatement is limited as written and is not a consent to any other
amendment, restatement, waiver or other modification, whether or not similar,
and, except as expressly provided herein or in any other Loan Document, all
terms and conditions of the Loan Documents remain in full force and effect
unless otherwise specifically amended by this Agreement or any other Loan
Document.

 

11.24                     USA PATRIOT Act.  Each Lender hereby notifies each Loan Party
that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)), it is required to obtain,
verify and record information that identifies each Loan Party, which
information includes the name and address of such Loan Party and other
information that will allow such Lender to identify such Loan Party in
accordance with said Act.

 

11.25                     Acknowledgments.  Each of the Company and each Guarantor hereby
acknowledges that:

 

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

 

94

 

(b)                                 neither the
Administrative Agent nor the Issuing Lender nor the other Agents nor any Lender
has any fiduciary relationship with or duty to the Company or any Guarantor arising
out of or in connection with this Agreement or any of the other Loan Documents,
and the relationship between the Administrative Agent, the Issuing Lender, the
other Agents and the Lenders, on one hand, and the Loan Parties, on the other
hand, in connection herewith or therewith is solely that of debtor and
creditor; and

 

(c)                                  no joint
venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Administrative Agent,
the Issuing Lender, the other Agents and the Lenders or among the Loan Parties
and the Lenders.

 

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

 

11.27                     Release of Collateral and Guarantee Obligations.

 

(a)                                  Notwithstanding
anything to the contrary contained herein or in any other Loan Document, but
subject to Sections 5.1(e) and 5.4 (e) of the Intercreditor
Agreement, upon request of the Company in connection with any Disposition of
Property permitted by the Loan Documents, the Administrative Agent shall
(without notice to, or vote or consent of, any Lender or any Qualified
Derivative Contract Counterparty) take such actions as shall be required to
release its security interest in any Collateral being Disposed of in such
Disposition, and to release any guarantee obligations under any Loan Document
of any Person being Disposed of in such Disposition, to the extent necessary to
permit consummation of such Disposition in accordance with the Loan Documents;
provided, however,  that the Company
shall have delivered to the Administrative Agent, at least ten Business Days
prior to the date of the proposed release (or such shorter period agreed to by
the Administrative Agent), a written request for release identifying the
relevant Collateral being Disposed of in such Disposition and the terms of such
Disposition in reasonable detail, including the date thereof, the price thereof
and any expenses in connection therewith, together with a certification by the
Company stating that such transaction is in compliance with this Agreement and
the other Loan Documents and that the proceeds of such Disposition will be
applied in accordance with this Agreement and the other Loan Documents.

 

(b)                                 Notwithstanding
anything to the contrary contained herein or any other Loan Document, when all
Obligations (other than obligations in respect of any Qualified Derivative
Contract) have been paid in full, all Commitments have terminated or expired
and no Letter of Credit shall be outstanding, but subject to Sections 5.1(e) and
5.4(e) of the Intercreditor Agreement, upon request of the Company, the
Administrative Agent shall (without notice to, or vote or consent of, any
Lender, or any Qualified Derivative Contract Counterparty) take such actions as
shall be required to release its security interest in all Collateral, and to
release all guarantee obligations provided for in any Loan Document, whether or
not on the date of such release there may be outstanding Obligations in respect
of the Qualified Derivative Contracts.

 

95

 

Any such release of
guarantee obligations shall be deemed subject to the provision that such
guarantee obligations shall be reinstated if after such release any portion of
any payment in respect of the Obligations guaranteed thereby shall be rescinded
or must otherwise be restored or returned upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or any Guarantor, or
upon or as a result of the appointment of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Company or any Guarantor or any
substantial part of its property, or otherwise, all as though such payment had
not been made.

 

11.28                     Agreement
Regarding Intercreditor Agreement.   In accordance with the terms of the
Intercreditor Agreement, each of the Lenders executing this Agreement agrees to
be bound to and by the terms of the Intercreditor Agreement, and hereby
instructs the Administrative Agent to execute and deliver (on behalf of each
Lender) a notice (with a copy of this Agreement) to the Second Lien Collateral
Agent and the Second Lien Secured Parties (each as defined in the Intercreditor
Agreement) evidencing such agreement.

 

11.29                     Assignment by
Exiting Lenders.

 

(a)                                  Each Exiting
Lender hereby sells, transfers and assigns to the Lenders, and each Lender
severally hereby purchases, assumes and accepts from the Exiting
Lenders without recourse and without representation or warranty (except as
provided herein) such Lender’s Pro Rata Share of all of such Exiting Lender’s “Pro
Rata Share” (as defined in the Existing Credit Agreement) immediately prior to
the Effective Time  of (i) the
Commitments under the Existing Credit Agreement, (ii) the outstanding
Existing Revolving Credit Outstandings and (ii) all related rights,
benefits, obligations (including the Exiting Lenders’
Commitments), liabilities and indemnities of the Exiting Lenders under and in
connection with the Existing Credit Agreement, each Existing Loan Document and
all Collateral and other security for the Obligations (the “Assigned Interest”).  For the avoidance of doubt, the Assigned
Interest in the aggregate equals 100% of each of the Exiting Lenders’ rights
and obligations under the Existing Credit Agreement.

 

(b)                                 Each Exiting Lender (i) represents
and warrants that (A) it is the legal and beneficial owner of its Assigned
Interest, (B) such Assigned Interest is free and clear of any lien,
encumbrance or other adverse claim, and (C) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Agreement and to consummate the transactions contemplated hereby; (ii) makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Existing Credit Agreement or with respect to the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Existing Credit
Agreement, any other Existing Loan Document or any other instrument or document
furnished pursuant thereto; (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Company, any of its Subsidiaries or any other obligor or the performance or
observance by the Company, any of its Subsidiaries or any other obligor of any
of their respective obligations under the Existing Credit Agreement or any
other Existing Loan Document or any other instrument or document furnished
pursuant hereto or thereto; and (iv) delivers any Note held by it
evidencing the Assigned Interest.

 

96

 

(c)                                  The Administrative Agent and the Company hereby consent to
such assignment.

 

[THE REMAINDER OF THIS PAGE
IS LEFT BLANK]

 

97

 

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

 

	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  VENOCO, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy M. Marquez

  
	
   

  	
   

  	
  Timothy M.
  Marquez

  
	
   

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for
  Notice to the Loan Parties:

  
	
   

  	
  Principal Place
  of Business and Chief Executive Office:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  370 17th Street, Suite 2950

  
	
   

  	
   

  	
  Denver, Colorado
  80202-1370

  
	
   

  	
   

  	
  Attention:  Chief Financial Officer

  
	
   

  	
   

  	
  Facsimile
  No.:  (303) 626-8315

  
				

 

Third Amended and Restated Credit Agreement Signature Page

 

 

	
   

  	
  GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  WHITTIER
  PIPELINE CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy M. Marquez

  
	
   

  	
   

  	
  Timothy M.
  Marquez

  
	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  TEXCAL
  ENERGY (LP) LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  VENOCO, INC., its Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy M. Marquez

  
	
   

  	
   

  	
  Timothy M.
  Marquez

  
	
   

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  TEXCAL
  ENERGY (GP) LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  VENOCO, INC., its Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy M. Marquez

  
	
   

  	
   

  	
  Timothy M.
  Marquez

  
	
   

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  TEXCAL
  ENERGY SOUTH TEXAS L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  TEXCAL ENERGY (GP)
  LLC,

  as general partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  VENOCO, INC., its Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Timothy M. Marquez

  
	
   

  	
   

  	
   

  	
  Timothy M.
  Marquez

  
	
   

  	
   

  	
   

  	
  Chief Executive
  Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  CATCO
  ENERGY LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  VENOCO, INC., its Manager

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy M.
  Marquez

  
	
   

  	
   

  	
  Timothy M.
  Marquez

  
	
   

  	
   

  	
  Chief Executive
  Officer

  

 

Third
Amended and Restated Credit Agreement Signature Page

 

 

	
   

  	
  ADMINISTRATIVE AGENT
  AND A LENDER:

  
	
   

  	
   

  
	
   

  	
  BANK OF MONTREAL, acting through its U.S. branches and
  agencies, including its Chicago, Illinois branch, as Administrative Agent and
  as a Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph A.
  Bliss

  
	
   

  	
   

  	
  Joseph A. Bliss

  
	
   

  	
   

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  Bank of Montreal

  
	
   

  	
   

  	
  Houston Agency

  
	
   

  	
   

  	
  700 Louisiana
  Street

  
	
   

  	
   

  	
  4400 Bank of
  America Center

  
	
   

  	
   

  	
  Houston, Texas
  77002

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (713) 223-4007

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Jim Ducote

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  115 South
  LaSalle Street

  
	
   

  	
   

  	
  17th Floor West

  
	
   

  	
   

  	
  Chicago,
  Illinois 60603

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (312) 765-8078

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Angelina
  Monarrez

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Applicable
  Lending Office

  
	
   

  	
  for Base Rate
  Loans and

  
	
   

  	
  LIBO Rate Loans:

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  115 South
  LaSalle Street,

  
	
   

  	
   

  	
  17th Floor West

  
	
   

  	
   

  	
  Chicago,
  Illinois 60603

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (312) 765-8078

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Angelina Monarrez

  
				

 

Venoco
Third Amended and Restated Credit Agreement

Signature
Page

 

 

	
   

  	
  CO-SYNDICATION
  AGENT AND

  
	
   

  	
  A
  LENDER:

  
	
   

  	
   

  
	
   

  	
  THE
  BANK OF NOVA SCOTIA

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donovan
  Crandall

  
	
   

  	
  Name: Donovan
  Crandall

  
	
   

  	
  Title: Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  [711 Louisiana
  St. Suite 1400]

  
	
   

  	
   

  	
  [Houston,
  Texas]

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  [(713)
  752-2425]

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  [Justin Bellamy]

  
				

 

Venoco Third Amended and
Restated Credit Agreement

Signature Page

 

 

	
   

  	
  CO-SYNDICATION
  AGENT AND

  
	
   

  	
  A
  LENDER:

  
	
   

  	
   

  
	
   

  	
  THE
  ROYAL BANK OF SCOTLAND PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Lucy Walker

  
	
   

  	
  Name: Lucy
  Walker

  
	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  600
  Travis

  
	
   

  	
   

  	
  Houston,
  TX 77002

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  713-221-2430

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Scott Donaldson

  
				

 

Venoco Third Amended and
Restated Credit Agreement

Signature Page

 

 

	
   

  	
  CO-DOCUMENTATION
  AGENT AND

  A LENDER:

  
	
   

  	
   

  
	
   

  	
  KEYBANK
  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Todd Coker

  
	
   

  	
  Name: Todd Coker

  
	
   

  	
  Title: Assistant
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  8115 Preston
  Road, Suite 500

  
	
   

  	
   

  	
  Dallas, TX 75225

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (214) 414-2610

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Todd Coker

  
				

 

Venoco Third
Amended and Restated Credit Agreement

Signature Page

 

 

	
   

  	
  CO-DOCUMENTATION
  AGENT AND

  A LENDER:

  
	
   

  	
   

  	
   

  
	
   

  	
  UNION
  BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Douglas Gale

  
	
   

  	
  Name: Douglas
  Gale

  
	
   

  	
  Title: Vide
  President

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  500 North
  Akard, Suite 4200

  
	
   

  	
   

  	
  Dallas,
  Texas 75201

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  214-922-4209

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Melisa
  Owens

  
				

 

Venoco Third
Amended and Restated Credit Agreement

Signature Page

 

 

	
   

  	
  A
  LENDER:

  
	
   

  	
   

  
	
   

  	
  CREDIT SUISSE AG,
  CAYMAN ISLANDS BRANCH

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nupur Kumar

  
	
   

  	
  Name:  Nupur Kumar

  
	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kevin
  Buddhdew

  
	
   

  	
  Name:  Kevin Buddhdew

  
	
   

  	
  Title:  Associate

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  Eleven Madison
  Avenue

  
	
   

  	
   

  	
  New York, NY
  10010

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.1:

  	
  (212) 448-3755

  
	
   

  	
  Facsimile No.2:

  	
  (212) 322-0419

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Nupur Kumar

  
	
   

  	
   

  	
   

  
	
   

  	
  with copy to:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  Credit Suisse

  
	
   

  	
   

  	
  Transaction
  Management Group

  
	
   

  	
   

  	
  Eleven Madison
  Avenue

  
	
   

  	
   

  	
  New York, NY
  10010

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (212) 322-0486

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Kevin Buddhdew

  
				

 

Venoco Third
Amended and Restated Credit Agreement

Signature Page

 

 

	
   

  	
  A
  LENDER:

  
	
   

  	
   

  
	
   

  	
  FORTIS
  CAPITAL CORP.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michaela
  Braun

  
	
   

  	
  Name: 

  	
  Michaela Braun

  
	
   

  	
  Title: 

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chad Clark

  
	
   

  	
  Name: 

  	
  Chad Clark

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

   

  
	
   

  	
  Address:

  	
  1200 Smith St.,
  Suite 3100

  
	
   

  	
   

  	
  Houston, Texas
  77002

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (713) 659-6915

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Russell Otts

  
					

 

Venoco Third
Amended and Restated Credit Agreement

Signature Page

 

 

	
   

  	
  A
  LENDER:

  
	
   

  	
   

  
	
   

  	
  AMEGY
  BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory J.
  Petruska

  
	
   

  	
  Name: Gregory J.
  Petruska

  
	
   

  	
  Title: Senior
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  1001 17th
  Street, Suite 1160

  
	
   

  	
   

  	
  Denver, Colorado

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (720) 947-7440

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Gregory J.
  Petruska

  
				

 

Venoco Third
Amended and Restated Credit Agreement

Signature Page

 

 

	
   

  	
  A
  LENDER:

  
	
   

  	
   

  
	
   

  	
  BANK
  OF OKLAHOMA,

  
	
   

  	
  NATIONAL
  ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas M.
  Foncannon

  
	
   

  	
  Name: 

  	
  Thomas M.
  Foncannon

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  1675
  Broadway, Suite 1650

  
	
   

  	
   

  	
  Denver,
  CO 80202

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  (303)
  864-7349

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Guy C.
  Evangelista

  
					

 

Venoco Third
Amended and Restated Credit Agreement

Signature Page

 

 

	
   

  	
  A
  LENDER:

  
	
   

  	
   

  
	
   

  	
  RZB
  FINANCE LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Shirley
  Ritch

  
	
   

  	
  Name: Shirley
  Ritch

  
	
   

  	
  Title: Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicolas M.
  Moriatis

  
	
   

  	
  Name: Nicolas M.
  Moriatis

  
	
   

  	
  Title: Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  24
  Grassy Plain Street

  
	
   

  	
   

  	
  Bethel,
  Connecticut 06801

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile No.:

  	
  203-744-6474

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Shirley
  Ritch

  
					

 

Venoco Third
Amended and Restated Credit Agreement

Signature Page

 

 

	
   

  	
  EXITING
  LENDER:

  
	
   

  	
   

  
	
   

  	
  LEHMAN COMMERCIAL PAPER
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steve
  Shirreffs

  
	
   

  	
  Name:  

  	
  Steve Shirreffs

  
	
   

  	
  Title:

  	
  Authorized
  Signatory

  
				

 

 

	
   

  	
  EXITING
  LENDER:

  
	
   

  	
   

  
	
   

  	
  ALLIED IRISH BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark
  Connelly

  
	
   

  	
  Name:  Mark
  Connelly

  
	
   

  	
  Title: Senior
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David
  O’Driscoll

  
	
   

  	
  Name:  David
  O’Driscoll

  
	
   

  	
  Title: Assistant Vice
  PresidentExhibit 10.29

 

Execution Version

 

FIRST AMENDMENT TO LOAN
AGREEMENT

 

THIS
FIRST AMENDMENT TO LOAN AGREEMENT dated as of December 18, 2009 (this
“Amendment”), is between the SENECA GAMING CORPORATION (together with
its successors and assigns, the “Borrower”), a corporation formed under
the laws of and wholly owned by the Seneca Nation of Indians (the “Nation”),
a federally recognized Indian tribe, and KEYBANK NATIONAL ASSOCIATION (the “Lender”),
a national banking association.

 

RECITALS

 

The
Borrower and the Lender are parties to a Loan Agreement dated as of June 19,
2008 (as the same may be amended, modified, supplemented, renewed or restated
from time to time, the “Loan Agreement”).

 

The
Borrower has requested that the Lender make certain amendments to the Loan
Agreement, and the Lender has agreed to make such amendments subject to the
terms and conditions of this Amendment.

 

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

 

1.                                       Defined Terms. Capitalized
terms used in this Amendment which are defined in the Loan Agreement shall have
the same meanings as defined therein, unless otherwise defined herein.

 

2.                                       Amendments.

 

(a)                                  The definition of “Agreement”
in Section 1.1 of the Loan Agreement is hereby amended in its entirety and
replaced with the following:

 

““Agreement” means this Loan Agreement, as
the same may be amended, modified or amended and restated from time to time in
accordance with the terms hereof.”

 

(b)                                 The definition
of “Maturity Date” in Section 1.1 of the Loan Agreement is hereby amended
in its entirety and replaced with the following:

 

““Maturity Date” means December 31,
2011.”

 

 

(c)                                  The definition
of “Obligations” in Section 1.1 of the Loan Agreement is hereby amended to
add the word “modifications” to the phrase “renewals, extensions or refundings
of any of the foregoing” at the end of the definition, such phrase, as amended,
to read as follows:

 

“renewals, extensions, refundings or modifications
of any of the foregoing”

 

1

 

(d)                                 The definition
of “Revolving Commitment” in Section 1.1 of the Loan Agreement is hereby
amended in its entirety and replaced with the following:

 

““Revolving Commitment” means $50,000,000, or
such lesser sum to which the Revolving Commitment may be reduced as provided in
this Agreement, including, without limitation, in Section 2.4 and Section 2.12.”

 

(e)                                  Section 1.1
of the Loan Agreement is hereby amended by including the following defined
term:

 

““Short-Term Equipment Financings” means any
Indebtedness of the Borrower or any Guarantor used to finance the acquisition
or refinancing of equipment incident to and useful in any Gaming Business and
having a term of one year or less (determined by giving effect to any option(s) to
extend within the sole discretion of such Borrower or Guarantor, as
applicable).”

 

(f)                                    The definition
of “Total Funded Debt” in Section 1.1 of the Loan Agreement is hereby
amended in its entirety and replaced with the following:

 

““Total Funded Debt” as of any date means (a) the
sum of (without duplication) the then outstanding principal balance of the
Advances and all other outstanding obligations for borrowed money (regardless
of priority or security), all obligations under Capital Leases, the aggregate
amount drawn under letters of credit and other similar instruments not then
reimbursed, and all Contingent Obligations, whether the foregoing are obligations
of the Borrower or any Guarantor, but, as to all of the foregoing, only so long
as the creditor or obligee thereof has Recourse to Gaming Assets, and inclusive
in each case of any direct or indirect liability or obligation (whether as the
primary obligor or as a surety, and irrespective of whether the Borrower or any
Guarantor is the nominal obligor with respect thereto), minus (b) the
amount, if any, then credited to the Debt Repayment Reserve Account.  Notwithstanding anything to the contrary in
the preceding sentence, in determining “Total Funded Debt” the sum of the
aggregate amount undrawn under letters of credit and other similar instruments
and all obligations under Short-Term Equipment Financings shall be
excluded.  For the avoidance of doubt,
the Borrower’s distribution obligations under the Distribution Agreement and
the Excluded Distributions shall not be deemed Recourse to the Gaming Assets.”

 

(g)                                 Article II
of the Loan Agreement is hereby amended by including the following as Section 2.12
thereof:

 

“2.12.                  Reduction of Revolving
Commitment; Debt Repayment Reserve Account.

 

(a)                                  The amount of the Revolving
Commitment will be reduced from time to time by the amount of any reduction in
the credit amount of the 

 

2

 

Irrevocable
Letter of Credit Number XXXXXXX issued on October 7, 2005 (the “ESDC
Letter of Credit”), as amended, issued by KeyBank National Association for
the benefit of the New York State Urban Development Corporation d/b/a Empire
State Development Corporation (the “ESDC”); provided, however, that the
aggregate amount of any such reductions of the Revolving Commitment pursuant to
this subsection (a) shall not exceed $10,000,000.  The Borrower will promptly request that the
credit amount of the ESDC Letter of Credit be reduced from time to time to the
extent any such reductions are permitted by the ESDC.

 

(b)                                 On and after June 18,
2010, if the applicable Revolving Commitment is greater than $40,000,000, the
Borrower will continue to maintain a Deposit Account (as defined in the
Security Agreement) with the Lender pursuant to arrangements reasonably
satisfactory to the Lender and consistent with the terms hereof (the “Debt
Repayment Reserve Account”) in the name of the Borrower but under the control
of the Lender and shall cause funds to be maintained in such Debt Repayment
Reserve Account in an amount not less than the amount by which the then
applicable Revolving Commitment exceeds $40,000,000 (the “Debt Repayment
Reserve Account Requirement”). 
Amounts credited to the Debt Repayment Reserve Account equal to the then
applicable Debt Repayment Reserve Account Requirement” shall constitute cash
under the exclusive control of Lender and amounts credited to the Debt
Repayment Reserve Account in excess of the then applicable Debt Repayment
Reserve Account Requirement shall not be under the exclusive control of the
Lender unless an Event of Default shall have occurred and be continuing.

 

(h)                                 Section 4.9
of the Loan Agreement is hereby amended in its entirety and replaced with the
following:

 

“Section 4.9 
Use of Proceeds. Use the proceeds of the Advances and any Letters
of Credit only for purposes related to any Gaming Business and for funding
Distributions permitted by the terms of this Agreement.”

 

(i)                                     Article IV
of the Loan Agreement is hereby amended by including the following as Section 4.12
thereof:

 

“Section 4.12 
Maintenance of Deposit Accounts and Securities Accounts with Lender.  Establish and maintain all Deposit Accounts
(as defined in the Security Agreement) and Securities Accounts (as defined in Article 8-501
of the UCC (as defined in the Security Agreement)) with the Lender, other than (a) the
securities account maintained with Merrill Lynch with account number XXX-XXXXX
(the “Merrill Lynch Account”) and (b) the Deposit Account
maintained with Royal Bank of Canada with account number XXX-XXXXXX (the “RBC
Account”); provided, however,
that the fair market value of the assets from time to time credited to the
Merrill Lynch Account as set forth in account statements for such Securities
Account shall not exceed $6,500,000, and the amount of funds from time to time
on deposit in the RBC Account shall not exceed $1,000,000; 

 

3

 

provided, further, that notwithstanding the foregoing covenant
or any other covenant in any Loan Document, the Deposit Accounts with financial
institutions to be closed consistent with the foregoing covenant shall not be
required to be formally closed until such time as formal closure is permitted
under the applicable account agreements, as required to accommodate such
matters as the clearance of outstanding checks. 
Borrower agrees that if the aggregate value of Borrower’s and Guarantors
assets maintained with Lender (a) is less than $40,000,000, all of such
assets will be credited to Deposit Accounts and (b) is equal to or greater
than $40,000,000, at least $40,000,000 will be credited to Deposit
Accounts.  Lender agrees that if the
Borrower’s and Guarantors’ Deposit Accounts maintained with Lender are not
fully protected by FDIC Insurance and Lender’s debt ratings from S&P or
Moody’s shall cease to be investment grade, Lender will fully collateralize
with “Eligible Collateral” (defined below) the Borrower’s and Guarantors’
Deposit Accounts maintained with Lender and will provide Borrower with a
perfection legal opinion with respect to Borrower’s security interest in such
collateral.  Lender agrees to take such
actions and execute such documents as Borrower may reasonably request to carry
out and facilitate its collateralization and opinion obligations in the
preceding sentence, such obligations to be complied with on or before the date
of the occurrence of the two events specified in the preceding sentence which
trigger such obligations.  All
documentation entered into in connection with the foregoing Lender obligations
shall contain customary terms and shall be satisfactory to Borrower.  For purposes of this Section 4.12, “Eligible
Collateral” means, at Lender’s option, either (a) U.S. treasury
securities with maturities of 90 days or less or (b) an irrevocable letter
of credit issued in favor of the Borrower and/or one or more Guarantors, as
applicable, by either (i) a bank, other than the Lender, whose commercial
paper and other unsecured short-term debt obligations (or in the case of a bank
which is the principal subsidiary of a holding company, whose holding company’s
commercial paper and other unsecured short-term debt obligations) are rated in
one of the three highest rating categories based on the credit of such bank or
holding company by at least one nationally recognized statistical rating
organization or (ii) a bank, other than the Lender, which is in compliance
with applicable Federal minimum risk-based capital requirements.  For the avoidance of doubt, Lender’s
obligation to “fully collateralize” requires that the Borrower’s and Guarantor’s
Deposit Accounts be continuously collateralized with Eligible Collateral with a
value at least equal to the aggregate amount credited to such Deposit
Accounts.  Lender will provide advance
written notice to Borrower of any event or circumstance reasonably likely to (a) result
in its debt ratings from S&P or Moody’s ceasing to be investment grade or (b) otherwise
materially adversely affect Lender.” 
Lender represents and warrants to Borrower that it has the power to
perform its obligations under this Section 4.12 and that such obligations
are valid and binding obligations of the Lender, enforceable against Lender in
accordance with their terms; and that Lender’s performance of its obligations
under this Section 4.12 will not violate any law, rule or regulation
applicable to Lender.

 

4

 

(j)                                     Section 5.9
of the Loan Agreement is hereby amended in its entirety and replaced with the
following:

 

“Section 5.9 Leverage Ratio. Permit the
Leverage Ratio on any Covenant Calculation Date to exceed 3.5 to 1.0.”

 

(k)                                  Section 5.11
of the Loan Agreement is hereby amended in its entirety and replaced with the
following:

 

“Section 5.11 Fixed Charge Coverage Ratio.
Permit the Fixed Charge Coverage Ratio on any Covenant Calculation Date to be
less than 1.20 to 1.”

 

(l)                                     Section 5.12
of the Loan Agreement is hereby amended in its entirety and replaced with the
following:

 

“Section 5.12 Minimum EBITDA. Permit
EBITDA on any Covenant Calculation Date to be less than $145,000,000.”

 

3.                                       Representations
and Warranties. The Borrower hereby represents and warrants to the
Lender as follows:

 

(a)                                  the Borrower has all
requisite power and authority to execute this Amendment and to perform all of
its obligations hereunder, this Amendment has been duly executed and delivered
by the Borrower and this Amendment and the Loan Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors’ rights generally
and except as enforcement thereof is subject to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or
at law) and except as the ability to waive exhaustion of tribal court remedies
may be limited by applicable law;

 

(b)                                 the execution, delivery and
performance by the Borrower of this Amendment and the borrowings and issuance
of Letters of Credit from time to time under the Loan Agreement as amended
hereby have been duly authorized by all necessary action and do not and will
not (i) require any authorization, consent or approval by, or
registration, declaration or filing with, or notice to, the Nation or any governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval,
registration, declaration, filing or notice as has been obtained, accomplished
or given prior to the date hereof; (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree presently in effect
having applicability to the Borrower or any Guarantor or of the Borrower’s or
any Guarantor’s Constituent Documents; (iii) result in a breach of or
constitute a default under any material Contractual Obligation to which the
Borrower or 

 

5

 

any
Guarantor is a party or by which it or its properties may be bound or subject;
or (iv) result in, or require, the creation or imposition of any Lien
(other than the Security Interest) upon or with respect to any of the
properties now owned or hereafter acquired by the Borrower or any Guarantor;
and

 

(c)                                  except as noted on
Schedule 3(c) attached hereto, all of the representations and
warranties contained in Article III of the Loan Agreement are true and
correct in all material respects on and as of the date hereof as though made on
and as of such date, except to the extent that such representations and
warranties relate solely to an earlier date.

 

4.                                       Conditions to
Effectiveness of this Amendment.  Unless waived by the Lender in writing, the
effectiveness of this Amendment is subject to the satisfaction of the following
conditions precedent :

 

(a)                                  Documents. The Lender
shall have received all of the following, each of which shall be an original
(except where only evidence is required) unless otherwise specified, each duly
executed and delivered by each party thereto, each dated as of the date hereof,
and each in form and substance satisfactory to the Lender and its legal counsel
(unless otherwise specified or, in the case of the date of any of the
following, unless the Lender otherwise agrees or directs):

 

(i)                                     four executed
counterparts of this Amendment;

 

(ii)                                  four
counterparts of the Acknowledgement, Reaffirmation and Agreement dated as of
the date hereof executed by each of the Borrower and the Guarantors in favor of
the Lender;

 

(iii)                               the favorable written legal opinion of counsel to the
Borrower and the Guarantors (which counsel shall be satisfactory to the
Lender), together with copies of all factual certificates and legal opinions
upon which such counsel have relied;

 

(iv)                              such documentation as the Lender may require to
establish (A) federal recognition of the Nation as an Indian tribe within
the meaning of IGRA, (B)  the Borrower’s and the Guarantors’ authority to
execute, deliver and perform the Loan Documents to be delivered on the date
hereof to which they are a party, and (C) the identity, authority and
capacity of each Senior Officer authorized to act on the Borrower’s and each
Guarantor’s behalf, including certified copies of the actions of the Borrower’s
governing body, incumbency certificates and the like;

 

(v)                                 evidence that all Nation and Borrower actions have
been taken to permit the Borrower’s limited waiver of sovereign immunity,
waiver of rights to tribal court, consent to federal and certain state courts
in the State, and arbitration of disputes, all as provided in this Amendment
and the other Loan Documents;

 

(vi)                              certificates signed by the Secretary of the Borrower
and each Guarantor, and by the Clerk of the Nation, attaching true, correct and
complete 

 

6

 

copies of the applicable
approvals (authorizing resolutions) of this Amendment and the Acknowledgement,
Reaffirmation and Agreement attached hereto, 
and true, correct and complete copies of the Constituent Documents of
the Borrower, each Guarantor and the Nation (including, in each case, any
amendments or modifications of the terms thereof entered into as of the date
hereof);

 

(vii)                           evidence that the Lender has all Permits required by
Law with respect to the transactions contemplated in this Amendment and in the
other Loan Documents; and

 

(viii)                        such other assurances, certificates, documents,
consents or opinions as the Lender may reasonably require.

 

(b)                                 Perfection of Security
Interests in Collateral.  The
Lender shall hold a valid, perfected first priority security interest in all
Collateral (subject to Permitted Liens).

 

(c)                                  Fee.  An up-front fee of $7,500 shall have been
paid.

 

(d)                                 Costs and Expenses.  The Borrower shall have paid the costs and
expenses required by Section 5 hereof.

 

(e)                                  Due Diligence. The Lender
shall have completed its review of all business and credit matters concerning
the extension of credit under the Loan Agreement as amended hereby, and the
security therefor, as the Lender deems appropriate.

 

(f)                                    Financial Statements. The Lender
shall have received the consolidated Financial Statements, including the
consolidated balance sheet, statements of income and retained earnings and
statement of cash flow of Borrower and the Guarantors, for the third quarter
ended June 30, 2009 and, to the extent filed with the SEC prior to the
date hereof, for the fiscal year ended September 30, 2009.

 

(g)                                 Miscellaneous. The Lender
shall have received such other instruments, agreements, certificates, opinions,
statements, documents and information relating to the operations or condition
(financial or otherwise) of the Borrower, and compliance by the Borrower with
the terms of the Loan Agreement as amended hereby and the other Loan Documents
as the Lender may reasonably request.

 

5.                                       Costs and
Expenses.  The
Borrower will pay on demand all reasonable costs and expenses of the Lender
incurred in connection with the negotiation, preparation, closing, execution
and delivery of this Amendment (including, but not limited to, reasonable
attorneys’ fees in an amount not to exceed $25,000), and any other costs and
expenses incurred by the Lender in connection with the Loan Documents, which
the Borrower is required to pay under the Loan Documents which remain unpaid as
of the date hereof.

 

6.                                       References. All
references in the Loan Agreement to “this Agreement” shall be deemed to refer
to the Loan Agreement as amended hereby; and any and all references in any
other Loan Documents shall be deemed to refer to the Loan Agreement as amended
hereby.

 

7

 

7.                                       No Waiver. The execution
of this Amendment and any documents related hereto shall not be deemed to be a
waiver of any Default or any Event of Default under the Loan Agreement or any
breach, default or event of default under any other Loan Document, whether or
not known to the Lender and whether or not existing on the date of this
Amendment.

 

8.                                       Counterparts. This
Amendment may be executed in any number of counterparts, each of which when so
executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same agreement.

 

9.                                       Governing Law. This
Amendment shall be governed by and construed in accordance with the substantive
law of the State of New York.

 

10.                                 No Further Amendments.  Except as amended hereby, the Loan Agreement
shall remain unmodified and in full force and effect.  Each other Loan Document to which Borrower is
a party shall remain in full force and effect and shall continue to evidence,
secure or otherwise guarantee and support the obligations owing by the Borrower
to the Lender pursuant thereto.

 

11.                                 Miscellaneous. The limited
waiver of sovereign immunity, jurisdictional, dispute resolution, arbitration,
and other provisions contained in Article IX of the Loan Agreement are incorporated
herein, mutatis mutandis, by this reference.

 

[Signature Page Follows]

 

8

 

IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date
first above written.

 

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  SENECA
  GAMING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Catherine Walker

  
	
   

  	
  Name: Catherine Walker

  
	
   

  	
  Title: Chief Operating Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  KEYBANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terence E. O’Farrell

  
	
   

  	
  Name: Terence E.
  O’Farrell

  
	
   

  	
  Title: Senior Vice President

  

 

 

Schedule 3(c)

to First Amendment to Loan Agreement

 

1.               The representation in Section 3.7
of the Loan Agreement is modified to reflect the dissolution of Seneca
Massachusetts Gaming Corporation, as previously disclosed in the Borrower’s 34
Act reports filed with the SEC.

 

2.               The representation in the
last sentence of Section 3.8 of the Loan Agreement is modified by all
financial statements contained in 34 Act reports filed with the SEC subsequent
to August 1, 2008 and available to Lender.

 

3.               The representation in Section 3.9
of the Loan Agreement is modified by the disclosures pertaining to legal
proceedings contained in the Borrower’s annual reports on Form 10-K filed
with the SEC subsequent to December 1, 2008 and available to Lender.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]