Document:

EXHIBIT 10.4

                              SUBSIDIARY GUARANTEE

         SUBSIDIARY GUARANTEE, dated as of October 27, 2005 (this "Guarantee"),
made by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, (the "Guarantors"), in favor of the
purchasers signatory (the "Purchasers") to that certain Securities Purchase
Agreement, dated as of the date hereof, between Velocity Asset Management Inc.,
a Delaware corporation (the "Company"), J. Holder Inc. (collectively with the
Company, "the Borrowers"), a New Jersey corporation and the Purchasers.

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Securities Purchase Agreement, dated
as of the date hereof, by and between the Borrowers and the Purchasers (the
"Purchase Agreement"), the Borrowers have agreed to sell and issue to the
Purchasers, and the Purchasers have agreed to purchase from the Borrowers, the
Borrower's Secured Convertible Debentures, due April 27, 2007 (the
"Debentures"), subject to the terms and conditions set forth therein; and

         WHEREAS, each Guarantor will directly benefit from the extension of
credit to the Borrowers represented by the issuance of the Debentures; and

         NOW, THEREFORE, in consideration of the premises and to induce the
Purchasers to enter into the Purchase Agreement and to carry out the
transactions contemplated thereby, each Guarantor hereby agrees with the
Purchasers as follows:

         1.       Definitions. Unless otherwise defined herein, terms defined in
the Purchase Agreement and used herein shall have the meanings given to them in
the Purchase Agreement. The words "hereof," "herein," "hereto" and "hereunder"
and words of similar import when used in this Guarantee shall refer to this
Guarantee as a whole and not to any particular provision of this Guarantee, and
Section and Schedule references are to this Guarantee unless otherwise
specified. The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms. The following
terms shall have the following meanings:

                  "Guarantee" means this Subsidiary Guarantee, as the same may
         be amended, supplemented or otherwise modified from time to time.

                  "Obligations" means the collective reference to all
         obligations and undertakings of the Borrowers of whatever nature,
         monetary or otherwise, under the Debentures, the Purchase Agreement,
         the Security Agreement, the Warrants, the Registration Rights Agreement
         or any other future agreement or obligations undertaken by the
         Borrowers to the Purchasers, together with all reasonable attorneys'
         fees, disbursements and all other costs and expenses of collection
         incurred by Purchasers in enforcing any of such Obligations and/or this
         Guarantee.

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         2.       Guarantee.
                  ---------

                  (a)      Guarantee.

                           (i)      The Guarantors hereby, jointly and
                                    severally, unconditionally and irrevocably,
                                    guarantee to the Purchasers and their
                                    respective successors, indorsees,
                                    transferees and assigns, the prompt and
                                    complete payment and performance by the
                                    Borrowers when due (whether at the stated
                                    maturity, by acceleration or otherwise) of
                                    the Obligations.

                           (ii)     Anything herein or in any other Transaction
                                    Document to the contrary notwithstanding,
                                    the maximum liability of each Guarantor
                                    hereunder and under the other Transaction
                                    Documents shall in no event exceed the
                                    amount which can be guaranteed by such
                                    Guarantor under applicable federal and state
                                    laws, including laws relating to the
                                    insolvency of debtors, fraudulent conveyance
                                    or transfer or laws affecting the rights of
                                    creditors generally (after giving effect to
                                    the right of contribution established in
                                    Section 2(b)).

                           (iii)    Each Guarantor agrees that the Obligations
                                    may at any time and from time to time exceed
                                    the amount of the liability of such
                                    Guarantor hereunder without impairing the
                                    guarantee contained in this Section 2 or
                                    affecting the rights and remedies of the
                                    Purchasers hereunder.

                           (iv)     The guarantee contained in this Section 2
                                    shall remain in full force and effect until
                                    all the Obligations and the obligations of
                                    each Guarantor under the guarantee contained
                                    in this Section 2 shall have been satisfied
                                    by payment in full.

                           (v)      No payment made by the Borrowers, any of the
                                    Guarantors, any other guarantor or any other
                                    Person or received or collected by the
                                    Purchasers from the Borrowers, any of the
                                    Guarantors, any other guarantor or any other
                                    Person by virtue of any action or proceeding
                                    or any set-off or appropriation or
                                    application at any time or from time to time
                                    in reduction of or in payment of the
                                    Obligations shall be deemed to modify,
                                    reduce, release or otherwise affect the
                                    liability of any Guarantor hereunder which
                                    shall, notwithstanding any such payment

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                                    (other than any payment made by such
                                    Guarantor in respect of the Obligations or
                                    any payment received or collected from such
                                    Guarantor in respect of the Obligations),
                                    remain liable for the Obligations up to the
                                    maximum liability of such Guarantor
                                    hereunder until the Obligations are paid in
                                    full.

                           (vi)     Notwithstanding anything to the contrary in
                                    this Agreement, with respect to any
                                    defaulted non-monetary Obligations the
                                    specific performance of which by the
                                    Guarantors is not reasonably possible (e.g.
                                    the issuance of the Borrowers' Common
                                    Stock), the Guarantors shall only be liable
                                    for making the Purchasers whole on a
                                    monetary basis for the Borrowers' failure to
                                    perform such Obligations in accordance with
                                    the Transaction Documents.

                  (b)      Right of Contribution. Each Guarantor hereby agrees
         that to the extent that a Guarantor shall have paid more than its
         proportionate share of any payment made hereunder, such Guarantor shall
         be entitled to seek and receive contribution from and against any other
         Guarantor hereunder which has not paid its proportionate share of such
         payment. Each Guarantor's right of contribution shall be subject to the
         terms and conditions of Section 2(c). The provisions of this Section
         2(b) shall in no respect limit the obligations and liabilities of any
         Guarantor to the Purchasers, and each Guarantor shall remain liable to
         the Purchasers for the full amount guaranteed by such Guarantor
         hereunder.

                  (c)      No Subrogation. Notwithstanding any payment made by
         any Guarantor hereunder or any set-off or application of funds of any
         Guarantor by the Purchasers, no Guarantor shall be entitled to be
         subrogated to any of the rights of the Purchasers against the Borrowers
         or any other Guarantor or any collateral security or guarantee or right
         of offset held by the Purchasers for the payment of the Obligations,
         nor shall any Guarantor seek or be entitled to seek any contribution or
         reimbursement from the Borrowers or any other Guarantor in respect of
         payments made by such Guarantor hereunder, until all amounts owing to
         the Purchasers by the Borrowers on account of the Obligations are paid
         in full. If any amount shall be paid to any Guarantor on account of
         such subrogation rights at any time when all of the Obligations shall
         not have been paid in full, such amount shall be held by such Guarantor
         in trust for the Purchasers, segregated from other funds of such
         Guarantor, and shall, forthwith upon receipt by such Guarantor, be
         turned over to the Purchasers in the exact form received by such
         Guarantor (duly indorsed by such Guarantor to the Purchasers, if
         required), to be applied against the Obligations, whether matured or
         unmatured, in such order as the Purchasers may determine.

                  (d)      Amendments, Etc. With Respect to the Obligations.
         Each Guarantor shall remain obligated hereunder notwithstanding that,
         without any reservation of rights against any Guarantor and without

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         notice to or further assent by any Guarantor, any demand for payment of
         any of the Obligations made by the Purchasers may be rescinded by the
         Purchasers and any of the Obligations continued, and the Obligations,
         or the liability of any other Person upon or for any part thereof, or
         any collateral security or guarantee therefor or right of offset with
         respect thereto, may, from time to time, in whole or in part, be
         renewed, extended, amended, modified, accelerated, compromised, waived,
         surrendered or released by the Purchasers, and the Purchase Agreement
         and the other Transaction Documents and any other documents executed
         and delivered in connection therewith may be amended, modified,
         supplemented or terminated, in whole or in part, as the Purchasers may
         deem advisable from time to time, and any collateral security,
         guarantee or right of offset at any time held by the Purchasers for the
         payment of the Obligations may be sold, exchanged, waived, surrendered
         or released. The Purchasers shall have no obligation to protect,
         secure, perfect or insure any Lien at any time held by them as security
         for the Obligations or for the guarantee contained in this Section 2 or
         any property subject thereto.

                  (e)      Guarantee Absolute and Unconditional. Each Guarantor
         waives any and all notice of the creation, renewal, extension or
         accrual of any of the Obligations and notice of or proof of reliance by
         the Purchasers upon the guarantee contained in this Section 2 or
         acceptance of the guarantee contained in this Section 2; the
         Obligations, and any of them, shall conclusively be deemed to have been
         created, contracted or incurred, or renewed, extended, amended or
         waived, in reliance upon the guarantee contained in this Section 2; and
         all dealings between the Borrowers and any of the Guarantors, on the
         one hand, and the Purchasers, on the other hand, likewise shall be
         conclusively presumed to have been had or consummated in reliance upon
         the guarantee contained in this Section 2. Each Guarantor waives to the
         extent permitted by law diligence, presentment, protest, demand for
         payment and notice of default or nonpayment to or upon the Borrowers or
         any of the Guarantors with respect to the Obligations. Each Guarantor
         understands and agrees that the guarantee contained in this Section 2
         shall be construed as a continuing, absolute and unconditional
         guarantee of payment without regard to (a) the validity or
         enforceability of the Purchase Agreement or any other Transaction
         Document, any of the Obligations or any other collateral security
         therefor or guarantee or right of offset with respect thereto at any
         time or from time to time held by the Purchasers, (b) any defense,
         set-off or counterclaim (other than a defense of payment or performance
         or fraud or misconduct by Purchasers) which may at any time be
         available to or be asserted by the Borrowers or any other Person
         against the Purchasers, or (c) any other circumstance whatsoever (with
         or without notice to or knowledge of the Borrowers or such Guarantor)
         which constitutes, or might be construed to constitute, an equitable or
         legal discharge of the Borrowers for the Obligations, or of such
         Guarantor under the guarantee contained in this Section 2, in
         bankruptcy or in any other instance. When making any demand hereunder
         or otherwise pursuing its rights and remedies hereunder against any

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         Guarantor, the Purchasers may, but shall be under no obligation to,
         make a similar demand on or otherwise pursue such rights and remedies
         as they may have against the Borrowers, any other Guarantor or any
         other Person or against any collateral security or guarantee for the
         Obligations or any right of offset with respect thereto, and any
         failure by the Purchasers to make any such demand, to pursue such other
         rights or remedies or to collect any payments from the Borrowers, any
         other Guarantor or any other Person or to realize upon any such
         collateral security or guarantee or to exercise any such right of
         offset, or any release of the Borrowers, any other Guarantor or any
         other Person or any such collateral security, guarantee or right of
         offset, shall not relieve any Guarantor of any obligation or liability
         hereunder, and shall not impair or affect the rights and remedies,
         whether express, implied or available as a matter of law, of the
         Purchasers against any Guarantor. For the purposes hereof, "demand"
         shall include the commencement and continuance of any legal
         proceedings.

                  (f)      Reinstatement. The guarantee contained in this
         Section 2 shall continue to be effective, or be reinstated, as the case
         may be, if at any time payment, or any part thereof, of any of the
         Obligations is rescinded or must otherwise be restored or returned by
         the Purchasers upon the insolvency, bankruptcy, dissolution,
         liquidation or reorganization of the Borrowers 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 Borrowers or any
         Guarantor or any substantial part of its property, or otherwise, all as
         though such payments had not been made.

                  (g)      Payments. Each Guarantor hereby guarantees that
         payments hereunder will be paid to the Purchasers without set-off or
         counterclaim in U.S. dollars at the address set forth or referred to in
         the Purchase Agreement.

         3.       Representations and Warranties. Each Guarantor hereby makes
the following representations and warranties to Purchasers as of the date
hereof:

                  (a)      Organization and Qualification. The Guarantor is a
         corporation, duly incorporated, validly existing and in good standing
         under the laws of the applicable jurisdiction set forth on Schedule 1,
         with the requisite corporate power and authority to own and use its
         properties and assets and to carry on its business as currently
         conducted. The Guarantor has no subsidiaries other than those
         identified as such on the Disclosure Schedules to the Purchase
         Agreement. The Guarantor is duly qualified to do business and is in
         good standing as a foreign corporation in each jurisdiction in which
         the nature of the business conducted or property owned by it makes such
         qualification necessary, except where the failure to be so qualified or
         in good standing, as the case may be, could not, individually or in the
         aggregate, (x) adversely affect the legality, validity or
         enforceability of any of this Guaranty in any material respect, (y)
         have a material adverse effect on the results of operations, assets,
         prospects, or financial condition of the Guarantor or (z) adversely
         impair in any material respect the Guarantor's ability to perform fully

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         on a timely basis its obligations under this Guaranty (a "Material
         Adverse Effect").

                  (b)      Authorization; Enforcement. The Guarantor has the
         requisite corporate power and authority to enter into and to consummate
         the transactions contemplated by this Guaranty, and otherwise to carry
         out its obligations hereunder. The execution and delivery of this
         Guaranty by the Guarantor and the consummation by it of the
         transactions contemplated hereby have been duly authorized by all
         requisite corporate action on the part of the Guarantor. This Guaranty
         has been duly executed and delivered by the Guarantor and constitutes
         the valid and binding obligation of the Guarantor enforceable against
         the Guarantor in accordance with its terms, except as such
         enforceability may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium, liquidation or similar laws relating to, or
         affecting generally the enforcement of, creditors' rights and remedies
         or by other equitable principles of general application.

                  (c)      No Conflicts. The execution, delivery and performance
         of this Guaranty by the Guarantor and the consummation by the Guarantor
         of the transactions contemplated thereby do not and will not (i)
         conflict with or violate any provision of its Certificate of
         Incorporation or By-laws or (ii) conflict with, constitute a default
         (or an event which with notice or lapse of time or both would become a
         default) under, or give to others any rights of termination, amendment,
         acceleration or cancellation of, any agreement, indenture or instrument
         to which the Guarantor is a party, or (iii) result in a violation of
         any law, rule, regulation, order, judgment, injunction, decree or other
         restriction of any court or governmental authority to which the
         Guarantor is subject (including Federal and state securities laws and
         regulations), or by which any material property or asset of the
         Guarantor is bound or affected, except in the case of each of clauses
         (ii) and (iii), such conflicts, defaults, terminations, amendments,
         accelerations, cancellations and violations as could not, individually
         or in the aggregate, have or result in a Material Adverse Effect. The
         business of the Guarantor is not being conducted in violation of any
         law, ordinance or regulation of any governmental authority, except for
         violations which, individually or in the aggregate, do not have a
         Material Adverse Effect.

                  (d)      Consents and Approvals. The Guarantor is not required
         to obtain any consent, waiver, authorization or order of, or make any
         filing or registration with, any court or other federal, state, local,
         foreign or other governmental authority or other person in connection
         with the execution, delivery and performance by the Guarantor of this
         Guaranty.

                  (e)      Purchase Agreement. The representations and
         warranties of the Borrowers set forth in the Purchase Agreement as they
         relate to such Guarantor, each of which is hereby incorporated herein
         by reference, are true and correct as of each time such representations
         are deemed to be made pursuant to such Purchase Agreement, and the

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         Purchasers shall be entitled to rely on each of them as if they were
         fully set forth herein, provided, that each reference in each such
         representation and warranty to the Borrowers's knowledge shall, for the
         purposes of this Section 3, be deemed to be a reference to such
         Guarantor's knowledge.

                  (f)      Foreign Law. Each Guarantor has consulted with
         appropriate foreign legal counsel with respect to any of the above
         representations for which non-U.S. law is applicable. Such foreign
         counsel have advised each applicable Guarantor that such counsel knows
         of no reason why any of the above representations would not be true and
         accurate. Such foreign counsel were provided with copies of this
         Subsidiary Guarantee and the Transaction Documents prior to rendering
         their advice.

         4.       Covenants.
                  ---------

                  (a)      Each Guarantor covenants and agrees with the
         Purchasers that, from and after the date of this Guarantee until the
         Obligations shall have been paid in full, such Guarantor shall take,
         and/or shall refrain from taking, as the case may be, each commercially
         reasonable action that is necessary to be taken or not taken, as the
         case may be, so that no Event of Default is caused by the failure to
         take such action or to refrain from taking such action by such
         Guarantor.

                  (b)      So long as any of the Obligations are outstanding,
         each Guarantor will not directly or indirectly on or after the date of
         this Guarantee:

                           i.      except with the prior written consent of the
                  Agent (as defined in the Security Agreement), enter into,
                  create, incur, assume or suffer to exist any indebtedness for
                  borrowed money of any kind, including but not limited to, a
                  guarantee, on or with respect to any of its property or assets
                  now owned or hereafter acquired or any interest therein or any
                  income or profits therefrom that is senior to, or pari passu
                  with, in any respect, such Guarantor's obligations hereunder;

                           ii.      enter into, create, incur, assume or suffer
                  to exist any liens of any kind, on or with respect to any of
                  its property or assets now owned or hereafter acquired or any
                  interest therein or any income or profits therefrom that is
                  senior to, in any respect, such Guarantor's obligations
                  hereunder;

                           iii.     amend its certificate of incorporation,
                  bylaws or other charter documents so as to adversely affect
                  any rights of the Holder hereunder;

                           iv.      repay, repurchase or offer to repay,
                  repurchase or otherwise acquire more than a de minimis number
                  of shares of its Common Stock or Common Stock Equivalents;

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                           v.       enter into any agreement with respect to any
                  of the foregoing; or

                           vi.      pay cash dividends on any equity securities
                  of the Borrowers.

         5.       Miscellaneous.
                  -------------

                  (a)      Amendments in Writing. None of the terms or
         provisions of this Guarantee may be waived, amended, supplemented or
         otherwise modified except in writing by the Purchasers.

                  (b)      Notices. All notices, requests and demands to or upon
         the Purchasers or any Guarantor hereunder shall be effected in the
         manner provided for in the Purchase Agreement; provided that any such
         notice, request or demand to or upon any Guarantor shall be addressed
         to such Guarantor at its notice address set forth on Schedule 5(b).

                  (c)      No Waiver By Course Of Conduct; Cumulative Remedies.
         The Purchasers shall not by any act (except by a written instrument
         pursuant to Section 5(a)), delay, indulgence, omission or otherwise be
         deemed to have waived any right or remedy hereunder or to have
         acquiesced in any default under the Transaction Documents or Event of
         Default. No failure to exercise, nor any delay in exercising, on the
         part of the Purchasers, any right, power or privilege hereunder shall
         operate as a waiver thereof. No single or partial exercise of any
         right, power or privilege hereunder shall preclude any other or further
         exercise thereof or the exercise of any other right, power or
         privilege. A waiver by the Purchasers of any right or remedy hereunder
         on any one occasion shall not be construed as a bar to any right or
         remedy which the Purchasers would otherwise have on any future
         occasion. The rights and remedies herein provided are cumulative, may
         be exercised singly or concurrently and are not exclusive of any other
         rights or remedies provided by law.

                  (d)      Enforcement Expenses; Indemnification.
                           -------------------------------------

                           (i)      Each Guarantor agrees to pay, or reimburse
                                    the Purchasers for, all its costs and
                                    expenses incurred in collecting against such
                                    Guarantor under the guarantee contained in
                                    Section 2 or otherwise enforcing or
                                    preserving any rights under this Guarantee
                                    and the other Transaction Documents to which
                                    such Guarantor is a party, including,
                                    without limitation, the reasonable fees and
                                    disbursements of counsel to the Purchasers.

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                           (ii)     Each Guarantor agrees to pay, and to save
                                    the Purchasers harmless from, any and all
                                    liabilities with respect to, or resulting
                                    from any delay in paying, any and all stamp,
                                    excise, sales or other taxes which may be
                                    payable or determined to be payable in
                                    connection with any of the transactions
                                    contemplated by this Guarantee.

                           (iii)    Each Guarantor agrees to pay, and to save
                                    the Purchasers harmless from, any and all
                                    liabilities, obligations, losses, damages,
                                    penalties, actions, judgments, suits, costs,
                                    expenses or disbursements of any kind or
                                    nature whatsoever with respect to the
                                    execution, delivery, enforcement,
                                    performance and administration of this
                                    Guarantee to the extent the Borrowers would
                                    be required to do so pursuant to the
                                    Purchase Agreement.

                           (iv)     The agreements in this Section shall survive
                                    repayment of the Obligations and all other
                                    amounts payable under the Purchase Agreement
                                    and the other Transaction Documents.

                  (e)      Successor and Assigns. This Guarantee shall be
         binding upon the successors and assigns of each Guarantor and shall
         inure to the benefit of the Purchasers and their respective successors
         and assigns; provided that no Guarantor may assign, transfer or
         delegate any of its rights or obligations under this Guarantee without
         the prior written consent of the Purchasers.

                  (f)      Set-Off. Each Guarantor hereby irrevocably authorizes
         the Purchasers at any time and from time to time while an Event of
         Default under any of the Transaction Documents shall have occurred and
         be continuing, without notice to such Guarantor or any other Guarantor,
         any such notice being expressly waived by each Guarantor, to set-off
         and appropriate and apply any and all deposits, credits, indebtedness
         or claims, in any currency, in each case whether direct or indirect,
         absolute or contingent, matured or unmatured, at any time held or owing
         by the Purchasers to or for the credit or the account of such
         Guarantor, or any part thereof in such amounts as the Purchasers may
         elect, against and on account of the obligations and liabilities of
         such Guarantor to the Purchasers hereunder and claims of every nature
         and description of the Purchasers against such Guarantor, in any
         currency, whether arising hereunder, under the Purchase Agreement, any
         other Transaction Document or otherwise, as the Purchasers may elect,
         whether or not the Purchasers have made any demand for payment and
         although such obligations, liabilities and claims may be contingent or
         unmatured. The Purchasers shall notify such Guarantor promptly of any
         such set-off and the application made by the Purchasers of the proceeds
         thereof, provided that the failure to give such notice shall not affect
         the validity of such set-off and application. The rights of the
         Purchasers under this Section are in addition to other rights and
         remedies(including, without limitation, other rights of set-off) which
         the Purchasers may have.

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                  (g)      Counterparts. This Guarantee may be executed by one
         or more of the parties to this Guarantee on any number of separate
         counterparts (including by telecopy), and all of said counterparts
         taken together shall be deemed to constitute one and the same
         instrument.

                  (h)      Severability. Any provision of this Guarantee which
         is prohibited or unenforceable in any jurisdiction shall, as to such
         jurisdiction, be ineffective to the extent of such prohibition or
         unenforceability without invalidating the remaining provisions hereof,
         and any such prohibition or unenforceability in any jurisdiction shall
         not invalidate or render unenforceable such provision in any other
         jurisdiction.

                  (i)      Section Headings. The Section headings used in this
         Guarantee are for convenience of reference only and are not to affect
         the construction hereof or be taken into consideration in the
         interpretation hereof.

                  (j)      Integration. This Guarantee and the other Transaction
         Documents represent the agreement of the Guarantors and the Purchasers
         with respect to the subject matter hereof and thereof, and there are no
         promises, undertakings, representations or warranties by the Purchasers
         relative to subject matter hereof and thereof not expressly set forth
         or referred to herein or in the other Transaction Documents.

                  (k)      Governing Law. THIS GUARANTEE SHALL BE GOVERNED BY,
         AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE
         OF NEW YORK WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS.

                  (l)      Submission to Jurisdictional; Waiver. Each Guarantor
         hereby irrevocably and unconditionally:

                           (i)      submits for itself and its property in any
                                    legal action or proceeding relating to this
                                    Guarantee and the other Transaction
                                    Documents to which it is a party, or for
                                    recognition and enforcement of any judgment
                                    in respect thereof, to the non-exclusive
                                    general jurisdiction of the Courts of the
                                    State of New York, located in New York
                                    County, New York, the courts of the United
                                    States of America for the Southern District
                                    of New York, and appellate courts from any
                                    thereof;

                           (ii)     consents that any such action or proceeding
                                    may be brought in such courts and waives any
                                    objection that it may now or hereafter have

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                                    to the venue of any such action or
                                    proceeding in any such court or that such
                                    action or proceeding was brought in an
                                    inconvenient court and agrees not to plead
                                    or claim the same;

                           (iii)    agrees that service of process in any such
                                    action or proceeding may be effected by
                                    mailing a copy thereof by registered or
                                    certified mail (or any substantially similar
                                    form of mail), postage prepaid, to such
                                    Guarantor at its address referred to in the
                                    Purchase Agreement or at such other address
                                    of which the Purchasers shall have been
                                    notified pursuant thereto;

                           (iv)     agrees that nothing herein shall affect the
                                    right to effect service of process in any
                                    other manner permitted by law or shall limit
                                    the right to sue in any other jurisdiction;
                                    and

                           (v)      waives, to the maximum extent not prohibited
                                    by law, any right it may have to claim or
                                    recover in any legal action or proceeding
                                    referred to in this Section any special,
                                    exemplary, punitive or consequential
                                    damages.

                  (m)      Acknowledgements. Each Guarantor hereby acknowledges
         that:

                           (i)      it has been advised by counsel in the
                                    negotiation, execution and delivery of this
                                    Guarantee and the other Transaction
                                    Documents to which it is a party;

                           (ii)     the Purchasers have no fiduciary
                                    relationship with or duty to any Guarantor
                                    arising out of or in connection with this
                                    Guarantee or any of the other Transaction
                                    Documents, and the relationship between the
                                    Guarantors, on the one hand, and the
                                    Purchasers, on the other hand, in connection
                                    herewith or therewith is solely that of
                                    debtor and creditor; and

                           (iii)    no joint venture is created hereby or by the
                                    other Transaction Documents or otherwise
                                    exists by virtue of the transactions
                                    contemplated hereby among the Guarantors and
                                    the Purchasers.

                  (n)      Additional Guarantors. The Borrowers shall cause each
         of its subsidiaries formed or acquired on or subsequent to the date
         hereof to become a Guarantor for all purposes of this Guarantee by
         executing and delivering an Assumption Agreement in the form of Annex 1
         hereto.

                                       11
<PAGE>

                  (o)      Release of Guarantors. Subject to Section 2.6, each
         Guarantor will be released from all liability hereunder concurrently
         with the repayment in full of all amounts owed under the Purchase
         Agreement, the Debentures and the other Transaction Documents.

                  (p)      Seniority. The Obligations of each of the Guarantors
         hereunder rank senior in priority to any other unsecured Debt (as
         defined in the Debentures) of such Guarantor.

                  (q)      Waiver of Jury Trial. EACH GUARANTOR AND, BY
         ACCEPTANCE OF THE BENEFITS HEREOF, THE PURCHASERS, HEREBY IRREVOCABLY
         AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
         PROCEEDING RELATING TO THIS GUARANTEE AND FOR ANY COUNTERCLAIM THEREIN.

                                       12
<PAGE>

         IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
to be duly executed and delivered as of the date first above written.

TLOP Acquisition Company, LLC

By:  /s/ JAMES J. MASTRIANI
     ----------------------------------
     Name: James J. Mastriani
     Title: CFO and Chief Legal Officer

VOM, LLC

By:  /s/ W. PETER RAGAN, SR.
     ----------------------------------
     Name: W. Peter Ragan, Sr.
     Title: President

SH Sales, Inc.

By:  /s/ W. PETER RAGAN, SR.
     ----------------------------------
     Name: W. Peter Ragan, Sr.
     Title: President

                                       13
<PAGE>

                                   SCHEDULE 1

                                   GUARANTORS

         The following are the names, notice addresses and jurisdiction of
organization of each Guarantor.

                                                     COMPANY
                       JURISDICTION OF               OWNED BY
                       INCORPORATION                 PERCENTAGE
                       -------------                 ----------

                                       14
<PAGE>

                                   Annex 1 to
                              SUBSIDIARY GUARANTEE

ASSUMPTION AGREEMENT, dated as of ____ __, ______ made by
______________________________, a ______________ corporation (the "Additional
Guarantor"), in favor of the Purchasers pursuant to the Purchase Agreement
referred to below. All capitalized terms not defined herein shall have the
meaning ascribed to them in such Purchase Agreement.

                              W I T N E S S E T H :

         WHEREAS, Velocity Asset Management Inc., a Bermuda corporation (the
"Company") and the Purchasers have entered into a Securities Purchase Agreement,
dated as of ____________, 2005 (as amended, supplemented or otherwise modified
from time to time, the "Purchase Agreement");

         WHEREAS, in connection with the Purchase Agreement, the Borrowers and
its Subsidiaries (other than the Additional Guarantor) have entered into the
Subsidiary Guarantee, dated as of [______________ ____, 2005 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee") in favor
of the Purchasers;

         WHEREAS, the Purchase Agreement requires the Additional Guarantor to
become a party to the Guarantee; and

         WHEREAS, the Additional Guarantor has agreed to execute and deliver
this Assumption Agreement in order to become a party to the Guarantee;

                          NOW, THEREFORE, IT IS AGREED:

         1.       Guarantee. By executing and delivering this Assumption
Agreement, the Additional Guarantor, as provided in Section 5.14 of the
Guarantee, hereby becomes a party to the Guarantee as a Guarantor thereunder
with the same force and effect as if originally named therein as a Guarantor
and, without limiting the generality of the foregoing, hereby expressly assumes
all obligations and liabilities of a Guarantor thereunder. The information set
forth in Annex 1-A hereto is hereby added to the information set forth in
Schedule 1 to the Guarantee. The Additional Guarantor hereby represents and
warrants that each of the representations and warranties contained in Section 3
of the Guarantee is true and correct on and as the date hereof as to such
Additional Guarantor (after giving effect to this Assumption Agreement) as if
made on and as of such date.

         2.       Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.

                                       15
<PAGE>

         IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                       [ADDITIONALGUARANTOR]

                                        By: ____________________________________
                                            Name:
                                            Title:

                                       16QuickLinks
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Exhibit 10.5    
    

 
  Execution Version    
    

THIRD AMENDMENT  

TO  

CREDIT AGREEMENT  

AMONG  

LINN ENERGY, LLC,  

AS BORROWER,  

THE GUARANTORS,  

BNP PARIBAS,  

AS ADMINISTRATIVE AGENT,  

AND  

THE LENDERS PARTY HERETO  

Dated as of October 27, 2005  

 
  
 

    THIRD AMENDMENT TO CREDIT AGREEMENT    
    

        THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third Amendment")
dated as of October 27, 2005, is among LINN ENERGY, LLC (formerly known as Linn Energy Holdings, LLC), a Delaware limited liability company (the
"Borrower"); each of the lenders party to the Credit Agreement referred to below (collectively, the
"Lenders"); and BNP PARIBAS, as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the
"Administrative Agent"). 

R E C I T A L S

        A.    The
Borrower, the Administrative Agent and the Lenders are parties to that certain Credit Agreement dated as of April 13, 2005 (as amended by that certain First
Amendment to Credit Agreement and Consent, dated as of May 3, 2005, and by that certain Second Amendment to Credit Agreement dated as of August 12, 2005, and as amended, supplemented or
otherwise modified prior to the date hereof, the "Credit Agreement"), pursuant to which the Lenders have made certain credit available to and on behalf
of the Borrower. 

        B.    The
Borrower has proposed to acquire certain Properties pursuant to that certain Purchase and Sale Agreement, dated effective as of October 27, 2005, by and among
Exploration Partners, Inc. and Linn Energy Holdings, LLC, Linn Operating, Inc. and Mid Atlantic Well Service, Inc. (together with the other documents and agreements relating
thereto, the "Purchase Agreement"; the transactions contemplated thereby are herein referred to as the
"Acquisition"; and the Properties to be acquired by the Borrower pursuant to the Acquisition are referred to herein as the
"Acquisition Properties"). 

        C.    To
provide a portion of the financing for the Acquisition, the Borrower has proposed to enter into that certain Senior Subordinated Term Loan Credit Agreement, dated of
even date herewith (the "Subordinated Credit Agreement"), among the Borrower, the several lenders from time to time parties thereto (the
"Subordinated Lenders"), and Royal Bank of Canada, as administrative agent for the Subordinated Lenders (the "Subordinated
Administrative Agent"). 

        D.    The
Credit Agreement restricts the Borrower from entering into the Subordinated Credit Agreement and the granting of proposed second priority Liens securing the
obligations of the Borrower under the Subordinated Credit Agreement. 

        E.    The
Borrower has requested and the Administrative Agent and the Lenders have agreed to certain modifications as set forth herein in order to facilitate the Acquisition
and the Borrower's entry into the Subordinated Credit Agreement. 

        F.     NOW,
THEREFORE, to induce the Administrative Agent and the Lenders to enter into this Third Amendment and in consideration of the premises and the mutual covenants herein
contained, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

 
 

           Section 1.    Defined Terms.     Each capitalized term used herein but not otherwise defined herein has
the meaning given such term in the Credit Agreement, as amended by this Third Amendment.
Unless otherwise indicated, all section references in this Third Amendment refer to sections of the Credit Agreement. 

 
 

           Section 2.    Amendments to Credit Agreement.     

        2.1   Amendments to Section 1.02. 

        (a)   The
following definitions are hereby added where alphabetically appropriate to read as follows: 

        "Additional Lender" has the meaning assigned to such term in Section 2.06(c)(i). 

2

 

        "Additional Lender Certificate" has the meaning assigned to such term in Section 2.06(c)(ii)(F). 

        "Equity Offering" shall mean a primary offering for cash, whether public or private, of any Equity Interests (other than Disqualified
Capital Stock) of the Borrower; provided that issuances of securities pursuant to employee benefit plans shall not be considered to be "Equity
Offerings". 

        "Facility Amount" means $400,000,000. 

        "Intercreditor Agreement" means that certain Intercreditor and Subordination Agreement, dated of even date herewith, by and among the
Administrative Agent, the Subordinated Administrative Agent, the Borrower and each Guarantor pursuant to which the Debt, Liens and obligations of the Borrower and Guarantors arising pursuant to the
Subordinated Loan Documents are subordinated to the Indebtedness, Liens and obligations of the Borrower and the Guarantors arising pursuant to the Credit Agreement." 

        "Maximum Credit Amount Increase Certificate" has the meaning assigned to such term in Section 2.06(c)(ii)(E). 

        "Permitted Refinancing Debt" means Debt (for purposes of this definition, "new Debt")
incurred in exchange for, or proceeds of which are used to refinance, all of any other Debt (the "Refinanced
Debt"); provided that (a) such new Debt is in an aggregate principal amount not in excess of the sum of (i) the aggregate principal amount then outstanding of the
Refinanced Debt (or, if the Refinanced Debt is exchanged or acquired for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser
amount) and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such exchange or refinancing; (b) such new Debt has a stated maturity no earlier than
the later of (i) the day 180 days after the Maturity Date or (ii) the stated maturity of the Refinanced Debt and an average life no shorter than the longer of (i) five
years or (ii) the average life of the Refinanced Debt; (c) such new Debt does not have a stated interest rate in excess of a comparable high yield take-out refinancing rate
for a similar company with the same credit rating, (d) such new Debt does not contain any covenants which are more onerous to the Borrower and its Subsidiaries than those imposed by the
Refinanced Debt; and (e) such new Debt (and any guarantees thereof) is subordinated in right of payment to the Indebtedness (or, if applicable, the Guaranty Agreement) to at least the same
extent as the Refinanced Debt and is otherwise subordinated on terms substantially reasonably satisfactory to the Administrative Agent. 

        "Subordinated Administrative Agent" means Royal Bank of Canada, as administrative agent for the lenders (in such capacity, together with
its successors and assigns). 

        "Subordinated Credit Agreement" means that certain Senior Subordinated Term Loan Credit Agreement, dated as of October 27, 2005, by
and among the Borrower, the several lenders from time to time parties thereto, and the Subordinated Administrative Agent, as the same shall be amended, supplemented or otherwise modified from time to
time in accordance with Section 9.04(b). 

        "Subordinated Debt" means any Debt incurred pursuant to Section 9.02(f) and all Debt and other obligations under the Subordinated
Loan Documents. 

        "Subordinated Loan Documents" means the Subordinated Credit Agreement and the other Loan Documents (as defined in the Subordinated Credit
Agreement) as the same shall be amended, supplemented or otherwise modified from time to time in accordance with Section 9.04(b). 

3

 

        "Subordinated Security Instruments" has the meaning assigned to "Security Instruments" in the Subordinated Credit Agreement. 

        "Third Amendment" means that certain Third Amendment to Credit Agreement, dated as of October 27, 2005, among the Borrower, the
Guarantors, the Administrative Agent and the Lenders party thereto. 

        (b)   The
following definitions are hereby amended to read as follows: 

        "Lenders" means the Persons listed on Annex I, any Person that shall have become a party hereto pursuant to an Assignment and Assumption,
other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption, and any Person that shall have become a party hereto as an Additional Lender pursuant to
Section 2.06(c). 

        "Material Domestic Subsidiary" means, as of any date, any Domestic Subsidiary that (a) both (i) is a Wholly-Owned Subsidiary
and (ii) together with its Subsidiaries, owns Property having a fair market value of $1,000,000 or more or (b) guarantees any of the Subordinated Debt. 

        "Maximum Credit Amount" means, as to each Lender, the amount set forth opposite such Lender's name on Annex I under the caption "Maximum
Credit Amounts", as the same may be (a) reduced or terminated from time to time in connection with a reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b), (b) increased from time to time pursuant to Section 2.06(c) or (c) modified from time to time pursuant to any assignment permitted by
Section 12.04(b); provided, however, that with respect to Royal Bank of Canada, its Maximum Credit Amount is fixed at $65,000,000 and will not be increased unless it advises the Borrower and
Administrative Agent in writing that it has agreed to increase its Maximum Credit Amount and specifying the amount of any such increase. 

        2.2   Amendment to Section 2.06(b). Section 2.06 is hereby amended by amending and restating the fourth sentence
of Section 2.06(b)(ii) as follows: 

"Any
termination or reduction of the Aggregate Maximum Credit Amounts shall be permanent and may not be reinstated except pursuant to Section 2.06(c)." 

        2.3   Amendment to Section 2.06. Section 2.06 is hereby amended by inserting the following
Section 2.06(c): 

"(c)
Optional Increase in Aggregate Maximum Credit Amounts. 

        (i)    Subject
to the conditions set forth in Section 2.06(c)(ii), the Borrower may increase the Aggregate Maximum Credit Amounts then in effect with the prior written
consent of the Administrative Agent by increasing the Maximum Credit Amount of a Lender or by causing a Person that at such time is not a Lender to become a Lender (an
"Additional Lender"). 

        (ii)   Any
increase in the Aggregate Maximum Credit Amounts shall be subject to the following additional conditions: 

        (A)  such
increase shall not be less than $25,000,000 unless the Administrative Agent and the Co-Administrative Agent otherwise consent, and no such increase
shall be permitted if after giving effect thereto the Aggregate Maximum Credit Amounts would exceed the Facility Amount; 

        (B)  no
Default shall have occurred and be continuing at the effective date of such increase; 

        (C)  on
the effective date of such increase, no Eurodollar Borrowings shall be outstanding or if any Eurodollar Borrowings are outstanding, then the effective date of 

4

 

such
increase shall be the last day of the Interest Period in respect of such Eurodollar Borrowings unless the Borrower pays compensation required by Section 5.02; 

        (D)  no
Lender's Maximum Credit Amount may be increased without the consent of such Lender; 

        (E)  if
the Borrower elects to increase the Aggregate Maximum Credit Amounts by increasing the Maximum Credit Amount of a Lender, the Borrower and such Lender shall execute
and deliver to the Administrative Agent a certificate substantially in the form of Exhibit E-1 (a "Maximum
Credit Amount Increase Certificate"), and the Borrower shall deliver a new Note payable to the order of such Lender in a principal amount equal to its Maximum Credit Amount
after giving effect to such increase, and otherwise duly completed, and such Lender agrees to promptly thereafter return the previously issued Note held by such Lender marked canceled or otherwise
similarly defaced; and 

        (F)  If
the Borrower elects to increase the Aggregate Maximum Credit Amounts by causing an Additional Lender to become a party to this Agreement, then the Borrower and such
Additional Lender shall execute and deliver to the Administrative Agent a certificate substantially in the form of Exhibit E-2 (an
"Additional Lender Certificate"), together with an Administrative Questionnaire and a processing and recordation fee of $3,500, and the Borrower shall
deliver a Note payable to the order of such Additional Lender in a principal amount equal to its Maximum Credit Amount, and otherwise duly completed. 

        (iii)  Subject
to acceptance and recording thereof pursuant to Section 2.06(c)(iv), from and after the effective date specified in the Maximum Credit Amount Increase
Certificate or the Additional Lender
Certificate (or if any Eurodollar Borrowings are outstanding, then the last day of the Interest Period in respect of such Eurodollar Borrowings, unless the Borrower has paid compensation required by
Section 5.02): (A) the amount of the Aggregate Maximum Credit Amounts shall be increased as set forth therein, and (B) in the case of an Additional Lender Certificate, any
Additional Lender party thereto shall become a party to this Agreement and have the rights and obligations of a Lender under this Agreement and the other Loan Documents. In addition, the Lender or the
Additional Lender, as applicable, shall purchase a pro rata portion of the outstanding Loans (and participation interests in Letters of Credit) of each of the other Lenders (and such Lenders hereby
agree to sell and to take all such further action to effectuate such sale) such that each Lender (including any Additional Lender, if applicable) shall hold its Applicable Percentage of the
outstanding Loans (and participation interests) after giving effect to the increase in the Aggregate Maximum Credit Amounts. 

        (iv)  Upon
its receipt of a duly completed Maximum Credit Amount Increase Certificate or an Additional Lender Certificate, executed by the Borrower and the Lender or the
Borrower and the Additional Lender party thereto, as applicable, the processing and recording fee referred to in Section 2.06(c)(ii)(F), the Administrative Questionnaire referred to in
Section 2.06(c)(ii)(F), if applicable, and the written consent of the Administrative Agent to such increase required by Section 2.06(c)(i), the Administrative Agent shall accept such
Maximum Credit Amount Increase Certificate or Additional Lender Certificate and record the information contained therein in the Register required to be maintained by the Administrative Agent pursuant
to Section 12.04(b)(iv)." 

        2.4   Additional Representation. Article VII is hereby amended by adding the following Section 7.24: 

"Section 7.24
Specified Senior Indebtedness. The Indebtedness of the Borrower constitutes "Senior Indebtedness" as defined in the Intercreditor
Agreement." 

5

 

        2.5   Amendment to Section 8.01. Section 8.01 is hereby amended by inserting the following
Section 8.01(r): 

        (r)   Acquisition Notices. In the event that after the effective date of the Third Amendment: (i) the Borrower (or one
of its Subsidiaries) is required or decides to purchase any of the Properties which had previously been excluded from the Acquisition Properties (as defined in the Third Amendment) in accordance with
Section 3.3 of the Purchase Agreement (as defined in the Third Amendment), (ii) the Borrower (or one of its Subsidiaries) is required to honor any preferential purchase right in respect
of any Acquisition Property which has not been waived in accordance with Section 3.3 of the Purchase Agreement, (iii) any matter is disputed in accordance with the terms of the Purchase
Agreement or any such disputed matter is resolved, (iv) any material notices are received or delivered by the Borrower (or one of its Subsidiaries) pursuant to the Purchase Agreement, or
(v) the Borrower (or one of its Subsidiaries) and the sellers calculate and agree upon the "Settlement Statement" as defined in
Section 3.6(A) of the Purchase Agreement, then, in each such case, the Borrower shall promptly give the Administrative Agent notice in reasonable detail of such circumstances. 

        2.6   Amendment to Section 8.14. Section 8.14 is hereby amended by inserting the following
Section 8.14(c): 

        "(c)
Prior to or contemporaneously with the granting of any Lien on any Property to or for the benefit of any agent or lender under the Subordinated Credit Agreement pursuant to any
Subordinated Security Instrument or otherwise, the Borrower or applicable Subsidiary shall grant to the Administrative Agent a first priority Lien interest (subject only to Excepted Liens of the type
described in clauses (a) to (d) and (f) in the definition thereof, but subject to the provisos at the end of such definition) on such Property for the benefit of the Lenders to
secure the Indebtedness. All such Liens will be created and perfected by and in accordance with the provisions of deeds of trust, security agreements and financing statements or other Security
Instruments, all in form and substance reasonably satisfactory to the Administrative Agent and in a sufficient number of executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes. In order to comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas Properties and such Subsidiary is not a Guarantor, then it shall become a Guarantor and
comply with Section 8.14(b)." 

        2.7   Amendment to Section 8.17. Section 8.17 is hereby amended and restated in its entirety to read as follows: 

"Section 8.17
Initial Public Offering. In the event the Borrower completes an Initial Public Offering, it will issue sufficient new units to
generate net proceeds available to the Borrower of not less than $100,000,000.00." 

        2.8   Amendment to Section 9.02. Section 9.02 is hereby amended by inserting the following subsection (f): 

        (f)    Debt
incurred by the Borrower pursuant to the Subordinated Credit Agreement and any guarantees thereof by any of the Guarantors; provided
that, without the prior written consent of all of the Lenders, (i) the aggregate principal amount of such Debt shall not exceed $60,000,000, (ii) the maturity
date of such Debt shall not be prior to the date that is April 30, 2006, (iii) such Debt does not have any scheduled amortization, (iv) such Debt and the holders thereof shall at
all times be subject to the Intercreditor Agreement, and (v) such Debt is structured as a term loan; and any Permitted Refinancing Debt in respect of Debt permitted pursuant to this
Section 9.02(f). 

6

 

        2.9   Amendment to Section 9.03. Section 9.03 is hereby amended by inserting the following
Section 9.03(d): 

        "(d)
Liens securing the obligations of the Borrower and the Guarantors under the Subordinated Credit Agreement and the other Subordinated Loan Documents; provided
that, such Liens shall not encumber any Property that is not subject to a first priority Lien in favor of, or for the benefit of, the Lenders to secure the Indebtedness." 

        2.10 Amendment to Section 9.04. Section 9.04 is hereby amended in its entirety to read as follows: 

"Section 9.04
Dividends, Distributions and Redemptions. 

        (a)   Restricted Payments. The Borrower will not, and will not permit any of its Subsidiaries to, declare or make, or agree to
pay or make, directly or indirectly, any Restricted Payment, return any capital to its stockholders or make any distribution of their Property to their respective Equity Interest holders, except
(i) the Borrower may declare and pay dividends or distributions with respect to its Equity Interests payable solely in additional shares of its Equity Interests (other than Disqualified Capital
Stock), (ii) Subsidiaries may declare and pay dividends or distributions ratably with respect to their Equity Interests and (iii) after consummation of the Initial Public Offering so
long as no Borrowing Base Deficiency, Default or Event of Default has occurred and is continuing or would result therefrom, and subject to the proviso in Section 7.22(e), the Borrower may
declare and pay quarterly cash dividends to its members of Available Cash in accordance with the Operating Agreement. 

        (b)   Redemption or Repayment of Subordinated Debt. The Borrower will not, and will not permit any Subsidiary to:
(i) call, make or offer to make any Redemption of or otherwise Redeem (whether optional or mandatory and whether in whole or in part) or repay any Subordinated Debt except with the proceeds of
an Equity Offering or Permitted Refinancing Debt; (ii) amend, modify, waive or otherwise change, consent or agree to any amendment, modification, waiver or other change to, any of the terms of
any notes evidencing any Subordinated Debt or any indenture, agreement, instrument, certificate or other document (including the Subordinated Credit Agreement, any Subordinated Loan Document and any
other document or agreement relating thereto) relating to any Subordinated Debt if (A) the effect of such amendment, modification or waiver is to shorten the final maturity, create amortization
of principal thereof, or increase the amount of any payment of principal thereof or increase the rate or shorten any period for payment of interest thereon or modify the method of calculating the
interest rate, (B) such action requires the payment of a consent, amendment, waiver or other similar fee on the stated principal amount thereof, (C) such action adds covenants, events of
default or other agreements to the extent more restrictive than those contained in this Agreement, or (D) such action adds collateral unless the Loan Documents are being amended at the same
time to reflect such new collateral, the execution of agreements in connection with the issuance of Permitted Refinancing Debt or the addition of guarantors if required by the terms thereof;
(iii) designate any Debt (other than obligations of the Borrower and the Subsidiaries pursuant to the Loan Documents) as "Specified Senior Indebtedness" or "Specified Guarantor Senior
Indebtedness" or give any such other Debt any other similar designation for the purposes of any indentures or other documents relating to any Subordinated Debt; or (iv) permit the principal
amount of the Debt incurred pursuant to the
Subordinated Credit Agreement or Permitted Refinancing Debt in respect thereof to exceed $60,000,000." 

        2.11 Amendments to Section 10.01. Section 10.01 is hereby amended by: 

        (a)   amending
and restating Section 10.01(b) in its entirety as follows: 

"(b)
the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in Section 10.01(a)) payable under any Loan Document, 

7

 

when
and as the same shall become due and payable, and such failure shall continue unremedied for a period of three Business Days." 

        (b)   adding
the following new Section 10.01(o): 

"(o)
The Subordinated Debt under the Subordinated Credit Agreement and all interest, fees and other amounts due thereunder or in respect thereof shall not have been paid in full on or prior to
March 31, 2006 with either (i) the cash proceeds of one or more Equity Offerings or (ii) the Permitted Refinancing Debt. 

        2.12 Amendment to Section 12.02. Section 12.02(b)(i) is hereby amended and restated in its entirety to
read as follows: 

"(i) increase
the Commitment, the Facility Amount or the Maximum Credit Amount of any Lender without the written consent of such Lender," 

        2.13 Annex I. Annex I is hereby amended and restated in its entirety as shown on the attached Annex I. 

        2.14 Amendment to Exhibits. Exhibits E-1 and  E-2 are hereby added to read as set forth in Exhibits
E-1A and  E-2A attached hereto. 

        2.15 Amendment to Schedules. Schedule 7.15 is hereby amended in its entirety to read as set forth in
Schedule 7.15A hereto. 

 
 

           Section 3.    Redetermination of Borrowing Base.     Subject to adjustments pursuant to
Section 4.13 of this Third Amendment, the parties hereto hereby specify the amount of the Borrowing Base to be
$225,000,000, which amount shall be the new Borrowing Base effective and applicable to the Borrower, the Administrative Agent and the Lenders until the next redetermination or adjustment to the
Borrowing Base pursuant to and in accordance with the terms of the Credit Agreement. 

 
 

           Section 4.    Conditions Precedent.     This Third Amendment shall not become effective until the date
on which each of the following conditions is satisfied (or waived in accordance with
Section 12.02 of the Credit Agreement) (the "Effective Date"): 

        4.1   The
Administrative Agent shall have received from the Administrative Agent, all of the Lenders and each of the Obligors, counterparts (in such number as may be requested
by the Administrative Agent) of this Third Amendment signed on behalf of such Person. 

        4.2   The
Administrative Agent and the Lenders shall have received all fees and other amounts due and payable on or prior to the date hereof, including a borrowing base
increase fee to the Administrative Agent for the account of each Lender in an amount equal to 0.25% of its final allocation of the $75,000,000 increase in the Borrowing Base. 

        4.3   The
Administrative Agent shall have received counterparts of the Intercreditor Agreement from each Person party thereto. 

        4.4   The
Administrative Agent shall have received from each party thereto duly executed counterparts (in such number as may be requested by the Administrative Agent) of the
Security Instruments described in Exhibit A hereto. In connection with the execution and delivery of such Security Instruments, the
Administrative Agent shall be reasonably satisfied that the Security Instruments create first priority, perfected Liens (subject only to Excepted Liens identified in clauses (a) to
(d) and (f) of the definition thereof, but subject to the provisos at the end of such definition) on (a) at least 80% of the total value of the Oil and Gas Properties evaluated in
the most recently delivered Reserve Report and the reserve report with respect to the Acquisition Properties and (b) all of the Properties subject to a Lien pursuant to any Subordinated
Security Instrument. 

8

 

        4.5   The
Administrative Agent shall have received title information as they may reasonably require setting forth the status of title to at least 64% of the total value of the
Acquisition Properties. 

        4.6   The
Borrower or one or more Subsidiaries, as applicable, shall purchase one or more commodity price floors or collars or enter into one or more commodity price swaps
with one or more Approved Counterparties having a minimum floor strike price, minimum notational amounts and durations reasonably acceptable to the Administrative Agent to hedge the projected
production from the Acquisition Properties from commodity price risk. To the extent the Swap Agreements executed in connection with this Section 4.6 are not reasonably acceptable to the
Administrative Agent, the Administrative Agent will give written notice to the Borrower and the Lenders, and the Majority Lenders shall have the right to adjust the amount of the Borrowing Base to
reflect the incurrence of such Debt utilizing the most recently delivered Reserve Reports. 

        4.7   The
Administrative Agent shall be reasonably satisfied with the environmental condition of the Acquisition Properties. 

        4.8   The
Administrative Agent and the Lenders shall have received Engineering Reports regarding the Acquisition Properties. 

        4.9   The
Administrative Agent shall have received an opinion dated as of the date hereof of Andrews Kurth, LLP, special counsel to the Borrower, in form and substance
reasonably satisfactory to the Administrative Agent. 

        4.10 The
Administrative Agent shall have received a certificate of the Borrower and of each Guarantor setting forth the resolutions of the managers, board of directors or
other managing body with respect to the authorization of the Borrower or such Guarantor to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated
in those documents. 

        4.11 The
Administrative Agent shall have received a certificate of insurance coverage of the Borrower evidencing that the Borrower is carrying insurance in accordance with
Section 7.13 of the Credit Agreement. 

        4.12 The
Administrative Agent shall have received copies of the Subordinated Credit Agreement and all other Subordinated Loan Documents (which shall be in form and substance
reasonably satisfactory to the Administrative Agent), together with a certificate of a Responsible Officer that (a) such documents are true and complete copies of the foregoing and
(b) that contemporaneously with the effectiveness of the Third Amendment, the loans to be made under the Subordinated Credit Agreement have been funded resulting in gross cash proceeds to the
Borrower of $60,000,000. 

        4.13 The
Administrative Agent shall have received (a) a certificate of a Responsible Officer of the Borrower certifying: (i) that the Borrower (through its
Subsidiaries) is concurrently consummating the Acquisition in accordance with the terms of the Purchase Agreement (with all of the material conditions precedent thereto having been satisfied in all
material respects by the parties thereto) and acquiring substantially all of the Acquisition Properties contemplated thereby; (ii) as to the final purchase price for the Acquisition Properties
after giving effect to all adjustments as of the closing date contemplated by the Purchase Agreement and specifying, by category, the amount of such adjustment; (iii) that attached thereto is a
true and complete list of all amounts placed in escrow pursuant to the Purchase Agreement and a description of the affected Properties and the circumstances relating to the placement of such funds in
escrow; (iv) that attached thereto is a true and complete list of the Acquisition Properties which have been excluded from the Acquisition pursuant to the terms of the Purchase Agreement,
specifying with respect thereto the basis of exclusion as (A) title defect, (B) preferential purchase right or (C) environmental concern; (v) that attached thereto is a
true and complete list of all Properties for which any seller has elected to cure a title defect, (vi) that attached thereto is a true and complete list of all Acquisition Properties for which
the Borrower has elected to remediate an adverse environmental condition, and (vii) that attached thereto is a true and complete 

9

 

list
of all Acquisition Properties which are currently pending final decision by a third party regarding purchase of such property in accordance with any preferential right; (b) a true and
complete executed copy of the Purchase Agreement and each other agreement or document relating thereto; (c) original counterparts or copies, certified as true and complete, of the assignments,
deeds and leases for all of the Acquisition Properties; and (d) such other related documents and information as the Administrative Agent shall have reasonably requested. 

        The
Borrower recognizes and agrees that it shall have delivered to the Administrative Agent a preliminary draft of the certificate described herein not less than three
(3) Business Days prior to the date hereof identifying which Acquisition Properties will be excluded from the Acquisition. The Administrative Agent shall allocate a Borrowing Base value for
each such excluded Property and shall, promptly upon making such allocation, notify the Borrower and each Lender of such allocation. If the aggregate value as reflected in the applicable Reserve
Report of Acquisition Properties excluded under clause (iv) of the preceding paragraph is less than or equal to $4,000,000, the Borrowing Base will not
be adjusted. If either the aggregate value as reflected in the applicable Reserve Report for the Acquisition Properties excluded under clause (iv) of the preceding paragraph is greater than
$4,000,000 or any Acquisition Properties are excluded for other reasons or any seller in respect thereof makes any adjustment to the purchase price under the Acquisition Documents, then the
Administrative Agent shall suggest to the Lenders a Borrowing Base value for each such excluded Property or such Property subject of such adjustment and the Required Lenders shall reach a consensus as
to all allocation of value for such Property. Promptly upon the making by the Required Lenders of such allocation, the Administrative Agent shall notify the Borrower and each Lender of such
allocation. 

        4.14 No
Default shall have occurred and be continuing as of the date hereof, after giving effect to the terms of this Third Amendment. 

        4.15 The
Administrative Agent shall have received such other documents as the Administrative Agent or their special counsel may reasonably require. 

 
 

           Section 5.    Miscellaneous.     

        5.1   Confirmation. The provisions of the Credit Agreement, as amended by this Third Amendment, shall remain in full force and
effect following the effectiveness of this Third Amendment. 

        5.2   Ratification and Affirmation; Representations and Warranties. Each Obligor hereby (a) acknowledges the terms of
this Third Amendment; (b) ratifies and affirms its obligations under, and acknowledges, renews and extends its continued liability under, each Loan Document to which it is a party and agrees
that each Loan Document to which it is a party remains in full force and effect, except as expressly amended hereby, notwithstanding the amendments contained herein and (c) represents and
warrants to the Lenders that as of the date hereof, after giving effect to the terms of this Third Amendment: (i) all of the representations and warranties contained in each Loan Document to
which it is a party are true and correct, except to the extent any such representations and warranties are expressly limited to an earlier date, in which case, such representations and warranties
shall continue to be true and correct as of such specified earlier date, (ii) no Default or Event of Default has occurred and is continuing and (iii) no event or events have occurred
which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect. The Borrower and each other Loan Party hereby (A) represents and warrants to the
Administrative Agent, each other Agent and each Lender that the Lenders have a first priority Lien on, and security interest in, Oil and Gas Properties of the Borrower constituting (i) at least
80% of the total value of the Oil and Gas Properties of the Borrower and its consolidated Subsidiaries as reflected in the Reserve Reported delivered pursuant to Section 4.8 of this Third
Amendment or (ii) all of the Oil and Gas Properties and other Properties subject to a Lien pursuant to any Subordinated Security Instrument, (B) confirms that it has heretofore provided
to the Administrative Agent a schedule listing the Mortgaged Properties and the total value of each such Property. 

10

 

        5.3   Counterparts. This Third Amendment may be executed by one or more of the parties hereto in any number of separate
counterparts, and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of this Third Amendment by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof. 

        5.4   No Oral Agreement. This Third Amendment, the Credit Agreement and the other Loan Documents executed in connection
herewith and therewith represent the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or unwritten oral agreements of the parties. There are no
subsequent oral agreements between the parties. 

        5.5   GOVERNING LAW. THIS THIRD AMENDMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF) SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. 

        5.6   Payment of Expenses. In accordance with Section 12.03 of the Credit Agreement, the Borrower agrees to pay or
reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and reasonable expenses incurred in connection with this Third Amendment, any other documents
prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent. 

        5.7   Severability. Any provision of this Third Amendment which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 

        5.8   Authorization to Sign Intercreditor Agreement. Each Lender hereby authorizes the Administrative Agent to execute and
deliver on its behalf the Intercreditor Agreement, substantially in the form of Exhibit B hereto. 

        5.9   Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. 

[SIGNATURES
BEGIN NEXT PAGE] 

11

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

	BORROWER:	 	LINN ENERGY, LLC
	

 	
 	

By:	

/s/  KOLJA ROCKOV      
 Kolja Rockov
 Executive Vice President & Chief Financial
Officer

Third Amendment

Signature Page-1

 

Guarantors are signing solely for purposes of Section 5.2 of this Third Amendment Agreement to ratify their obligations under the Guaranty and Pledge
Agreement.

	

GUARANTORS:	
 	

LINN ENERGY HOLDINGS, L.L.C.
	

 	
 	

By:	

/s/  KOLJA ROCKOV      
 Kolja Rockov
 Executive Vice President & Chief Financial
Officer
	

 	
 	

LINN OPERATING, INC.
	

 	
 	

By:	

/s/  KOLJA ROCKOV      
 Kolja Rockov
 Executive Vice President & Chief Financial
Officer
	

 	
 	

MID ATLANTIC WELL SERVICE, INC.
	

 	
 	

By:	

/s/  KOLJA ROCKOV      
 Kolja Rockov
 Executive Vice President & Chief Financial
Officer

Third Amendment

Signature Page-2

 

	ADMINISTRATIVE AGENT:	 	BNP PARIBAS,

as Administrative Agent
	

 	
 	

By:	

/s/  DOUGLAS R. LIFTMAN      

	 	 	Name: Douglas R. Liftman
	 	 	Title: Managing Director
	

 	
 	

By:	

/s/  BETSY JOCHER      

	 	 	Name: Betsy Jocher
	 	 	Title: Vice President
	

LENDERS:	
 	

BNP PARIBAS
	

 	
 	

By:	

/s/  DOUGLAS R. LIFTMAN      

	 	 	Name: Douglas R. Liftman
	 	 	Title: Managing Director
	

 	
 	

By:	

/s/  BETSY JOCHER      

	 	 	Name: Betsy Jocher
	 	 	Title: Vice President
	

 	
 	

ROYAL BANK OF CANADA
	

 	
 	

By:	

/s/  LORNE A. GARTNER      

	 	 	Name: Lorne A. Gartner
	 	 	Title: Authorized Signatory
	

 	
 	

COMERICA BANK
	

 	
 	

By:	

/s/  HUMA VADGAMA      

	 	 	Name: Huma Vadgama
	 	 	Title: Vice President
	

 	
 	

SOCIETE GENERALE
	

 	
 	

By:	

/s/  GRAEME R. BULLEN      

	 	 	Name: Graeme R. Bullen
	 	 	Title: Director

Third Amendment

Signature Page-3

 
 

ANNEX I
  LIST OF MAXIMUM CREDIT AMOUNTS    
    

 
 

Aggregate Maximum Credit Amounts    
    

	Name of Lender
 
	 	Applicable Percentage
 
	 	Maximum Credit Amount
 

	BNP Paribas	 	28.89	%	$	86,666,666.67
	Royal Bank of Canada	 	28.89	%	$	86,666,666.67
	Societe Generale	 	28.89	%	$	86,666,666.66
	Comerica Bank	 	13.33	%	$	40,000,000.00
	 	 	
	 	

	TOTAL	 	100	%	$	300,000,000.00
	 	 	
	 	

Schedule
7.15A 

QuickLinks

Exhibit 10.5

Execution Version

THIRD AMENDMENT TO CREDIT AGREEMENT

Section 1. Defined Terms.

Section 2. Amendments to Credit Agreement.

Section 3. Redetermination of Borrowing Base.

Section 4. Conditions Precedent.

Section 5. Miscellaneous.

ANNEX I LIST OF MAXIMUM CREDIT AMOUNTS

Aggregate Maximum Credit Amounts

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