-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KvKytXRgKrAo6qp1qqyg+JWRMzxIKfmrxANIa+HhfUXmkhLDcCSQ1ScOYZ7c493L y1dpIRKjSBoKjugrErupLg== 0000950129-04-002119.txt : 20040415 0000950129-04-002119.hdr.sgml : 20040415 20040415162910 ACCESSION NUMBER: 0000950129-04-002119 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040415 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSION RESOURCES CORP CENTRAL INDEX KEY: 0000319459 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760437769 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-09498 FILM NUMBER: 04736149 BUSINESS ADDRESS: STREET 1: 1331 LAMAR STREET 2: SUITE 1455 CITY: HOUSTON STATE: TX ZIP: 77010 BUSINESS PHONE: 7134953000 MAIL ADDRESS: STREET 1: 1221 LAMAR STREET 2: STE 1600 CITY: HOUSTON STATE: TX ZIP: 77010-3039 FORMER COMPANY: FORMER CONFORMED NAME: BELLWETHER EXPLORATION CO DATE OF NAME CHANGE: 19920703 8-K/A 1 h14499ae8vkza.txt MISSION RESOURCES CORP.- APRIL 15, 2004 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 8-K/A (Amendment No. 1 to Form 8-K filed April 8, 2004) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): APRIL 15, 2004 (APRIL 8, 2004) MISSION RESOURCES CORPORATION (Exact Name of Registrant as Specified in Charter) DELAWARE 000-09498 76-0437769 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 1331 LAMAR SUITE 1455 HOUSTON, TEXAS 77010-3039 (Address and Zip Code of Principal Executive Offices) (713) 495-3000 (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS AND REQUIRED REGULATION FD DISCLOSURE. On April 8, 2004, Mission Resources Corporation (the "Company") issued a press release, pursuant to Rule 135c under the Securities Act of 1933, announcing that it has completed its private offering of $130 million of 9 7/8% Senior Notes due 2011. A copy of this press release is being filed as Exhibit 99.1 to this report and is incorporated herein by reference. On April 8, 2004, the Company issued a second press release announcing that it has entered into a new senior secured revolving credit facility with a syndicate of lenders led by Wells Fargo Bank, N.A., and has also entered into a new second lien term loan with a group of lenders arranged by Guggenheim Corporate Funding, LLC. A copy of this press release is being filed as Exhibit 99.2 to this report and is incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of business acquired. None. (b) Pro Forma Financial Information. None. (c) Exhibits. 4.1 Purchase Agreement dated April 1, 2004, among the Company, the Guarantors named therein and the Initial Purchasers named therein relating to the Company's 9 7/8% Senior Notes due 2011. 4.2 Indenture dated as of April 8, 2004, among the Company, the Guarantors named therein and The Bank of New York, as Trustee, relating to the Company's 9 7/8% Senior Notes due 2011. 4.3 Exchange and Registration Rights Agreement dated as of April 8, 2004, among the Company, the Guarantors named therein and the Initial Purchasers named therein relating to the Company's 9 7/8% Senior Notes due 2011. 10.1 Credit Agreement dated as of April 8, 2004, among the Company, as Borrower, Wells Fargo Bank, National Association, as Lead Arranger and Administrative Agent, and the Lenders signatory thereto. 10.2 Term Loan Agreement dated as of April 8, 2004, among the Company, as Borrower, Guggenheim Corporate Funding, LLC, as Collateral Agent, and the Lenders signatory thereto. 10.3 Intercreditor Agreement dated as of April 8, 2004, by and between the Company, the Company's Subsidiaries, Wells Fargo Bank, National Association and Guggenheim Corporate Funding LLC. 99.1 Press Release (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Commission on April 8, 2004). 99.2 Press Release (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed with the Commission on April 8, 2004). SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MISSION RESOURCES CORPORATION Date: April 15, 2004 By: /s/ Ann Kaesermann ---------------------------- Name: Ann Kaesermann Title: Vice President Accounting and INDEX TO EXHIBITS
Exhibits. Description - --------- ----------- 4.1 Purchase Agreement dated April 1, 2004, among the Company, the Guarantors named therein and the Initial Purchasers named therein relating to the Company's 9 7/8% Senior Notes due 2011. 4.2 Indenture dated as of April 8, 2004, among the Company, the Guarantors named therein and The Bank of New York, as Trustee, relating to the Company's 9 7/8% Senior Notes due 2011. 4.3 Exchange and Registration Rights Agreement dated as of April 8, 2004, among the Company, the Guarantors named therein and the Initial Purchasers named therein relating to the Company's 9 7/8% Senior Notes due 2011. 10.1 Credit Agreement dated as of April 8, 2004, among the Company, as Borrower, Wells Fargo Bank, National Association, as Lead Arranger and Administrative Agent, and the Lenders signatory thereto. 10.2 Term Loan Agreement dated as of April 8, 2004, among the Company, as Borrower, Guggenheim Corporate Funding, LLC, as Collateral Agent, and the Lenders signatory thereto. 10.3 Intercreditor Agreement dated as of April 8, 2004, by and between the Company, the Company's Subsidiaries, Wells Fargo Bank, National Association and Guggenheim Corporate Funding LLC. 99.1 Press Release (incorporated by reference to Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the Commission on April 8, 2004). 99.2 Press Release (incorporated by reference to Exhibit 99.2 to the Company's Current Report on Form 8-K filed with the Commission on April 8, 2004).
EX-4.1 3 h14499aexv4w1.txt PURCHASE AGREEMENT DATED APRIL 1, 2004 EXHIBIT 4.1 MISSION RESOURCES CORPORATION $130,000,000 9 7/8% SENIOR NOTES DUE 2011 PURCHASE AGREEMENT April 1, 2004 Guggenheim Capital Markets, LLC 135 East 57th Street 9th Floor New York, NY 10022 Ladies and Gentlemen: Mission Resources Corporation, a Delaware corporation, (the "COMPANY"), proposes to issue and sell $130,000,000 aggregate principal amount of its 9 7/8% Senior Notes due 2011 (the "NOTES" and, together with the Guarantees (as defined below), the "SECURITIES"). The Securities will be issued pursuant to an Indenture to be dated as of April 8, 2004 (the "INDENTURE") between the Company, the subsidiaries of the Company listed on SCHEDULE 1 hereto (each a "GUARANTOR" and together, the "GUARANTORS") and The Bank of New York, as trustee (the "Trustee"). The Notes will be guaranteed by a guarantee (each, a "GUARANTEE", and, collectively with the Guarantees of each of the other Guarantors, the "GUARANTEES") of each of the Guarantors. The Company hereby confirms its agreement with Guggenheim Capital Markets, LLC ("GUGGENHEIM") and the other initial purchasers named on SCHEDULE 2 hereto, each an "INITIAL PURCHASER" and collectively, the "INITIAL PURCHASERS") concerning the purchase of the Securities from the Company by the Initial Purchasers. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offering Memorandum (as defined below). The Securities will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), in reliance upon an exemption therefrom. The Company will prepare a final offering memorandum dated the date hereof (the "OFFERING MEMORANDUM") setting forth information concerning the Company and the Securities. Copies of the Offering Memorandum will be delivered by the Company to the Initial Purchasers pursuant to the terms of this Agreement. Any references herein to the Offering Memorandum shall be deemed to include any information incorporated by reference therein and all amendments and supplements thereto, unless otherwise noted. The Company hereby confirms that it has authorized the use of the Offering Memorandum in connection with the offering and resale of the Securities by the Initial Purchasers in accordance with Section 2. Holders of the Securities (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights Agreement, substantially in the form attached hereto as ANNEX A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company will agree to file with the Securities and Exchange Commission (the "COMMISSION") a registration statement under the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") registering an issue of 9 7/8% Senior Notes due 2011 (the "Exchange Notes") of the Company and guarantees of such 9 7/8% Senior Notes due 2011 by each of the Guarantors (the "Exchange Guarantees," and together with the Exchange Notes, the "EXCHANGE SECURITIES") that are identical in all material respects to the Securities (except that the Exchange Securities will not contain terms with respect to transfer restrictions) and, under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION STATEMENT"). 1. Representations, Warranties and Agreements of the Company and the Guarantors. The Company and the Guarantors jointly and severally represent and warrant to, and agree with, the several Initial Purchasers on and as of the date hereof and the Closing Date (as defined in Section 3) that: (a) The Offering Memorandum, as of its date, did not, and on the Closing Date the Offering Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Guarantors make no representation or warranty as to information contained in or omitted from the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Company by or on behalf of any Initial Purchaser specifically for use therein as specified in Section 16 hereof (the "INITIAL PURCHASERS' INFORMATION"). (b) The Offering Memorandum incorporates by reference the most recent Annual Report of the Company on Form 10-K filed with the Commission and each Quarterly Report of the Company on Form 10-Q and each Current Report of the Company on Form 8-K filed with the Commission since the end of the fiscal year to which such Annual Report relates. The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum at the time they were or hereafter are filed with the Commission complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 ACT REGULATIONS"), and when read together with the other information in the Offering Memorandum, at the time the Offering Memorandum was issued and at Closing Date, did not and will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Offering Memorandum, as of its date, contains all of the information that, if requested by a prospective purchaser of the Securities, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act. (d) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 2 and their compliance with the agreements set forth 2 therein, it is not necessary, in connection with the issuance and sale of the Securities to the Initial Purchasers and the offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum, to register the Securities under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "TRUST INDENTURE ACT"). (e) The Company has been duly organized and is a validly existing corporation in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing as a foreign entity in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the business in which it is engaged, except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, have a material adverse effect on the Company's or any Guarantor's ability to perform its obligations under the Indenture, the Notes, the Guarantees or the Registration Rights Agreement, as applicable, or on the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business (a "MATERIAL ADVERSE EFFECT"); all of the outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; and none of the outstanding shares of capital stock of the Company was issued in violation of any preemptive or similar rights of any securityholder of the Company. (f) Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X) and each Guarantor (each, a "DESIGNATED SUBSIDIARY" and collectively, the "DESIGNATED SUBSIDIARIES") has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its formation, has power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect; except as otherwise disclosed in the Offering Memorandum, all of the issued and outstanding capital stock or member interests or partnership interests of each Designated Subsidiary has been duly authorized and validly issued, are fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim, equity, restriction upon voting or transfer; none of the outstanding shares of capital stock or member interests or partnership interests of the Designated Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Designated Subsidiary. The other subsidiaries of the Company other than the Designated Subsidiaries, considered in the aggregate as a single subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (g) The Company will, on the Closing Date, have an authorized capitalization of 65,000,000 shares, of which 60,000,000 are shares of common stock, par value $0.01 per 3 share, and 5,000,000 are shares of preferred stock, par value $0.01 per share. As of March 30, 2004, 40,267,636 shares of common stock were issued and outstanding, 389,000 shares of common stock were held as treasury shares, and 7,225,000 shares of common stock were reserved for issuance under our stock incentive plans. As of March 30, 2004, there were no shares of our preferred stock outstanding. (h) The Company and each of the Guarantors has full right, power and authority to execute and deliver this Agreement, the Indenture, the Registration Rights Agreement, the Escrow Agreement and the Notes and Guarantees (collectively, the "TRANSACTION DOCUMENTS"), as applicable, and to perform its obligations hereunder and thereunder; and all corporate action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby will have been duly and validly taken by each of the Company and the Guarantors, as applicable. (i) This Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors and constitutes a valid and legally binding agreement of the Company and each of the Guarantors. (j) The Registration Rights Agreement has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. (k) The Indenture has been duly authorized by the Company and each of the Guarantors and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). On the Closing Date, the Indenture will conform in all material respects to the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. (l) The Notes have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture (assuming the Indenture is the valid and legally binding obligation of the Trustee and due authentication of the Securities by the Trustee) and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the 4 Company, entitled to the benefits of the Indenture and enforceable against the Company, in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (m) The Guarantees have been duly authorized by each of the Guarantors and, when the Guarantees have been duly executed, authenticated, issued and delivered as provided in the Indenture and when the Securities have been paid for as provided herein (assuming due authorization, execution and delivery of the Indenture by the Trustee and due authentication of the Securities by the Trustee), will constitute valid and legally binding obligations of the related Guarantor, enforceable against each such Guarantor in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and to general equitable principles (whether considered in a proceeding in equity or at law). (n) The Exchange Notes have been duly authorized by the Company and the related Exchange Guarantees have been duly authorized by each of the Guarantors and, when duly executed, authenticated, issued and delivered as provided in the Indenture and the Registration Rights Agreement (assuming the Indenture is the valid and legally binding obligation of the Trustee) the Exchange Securities will constitute a valid and legally binding obligation of the Company, as issuer of the Notes, and each of the Guarantors, as guarantors, enforceable against the Company, as issuer of the Notes, and each of the Guarantors, as guarantors, in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (o) The Escrow Agreement has been duly authorized by the Company and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. (p) Each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum. (q) The execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which it is a party, the issuance, authentication, sale and delivery of the Securities and performance the Company and each of the Guarantors with the terms thereof and the consummation of the transactions 5 contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets; and no consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance, authentication, sale and delivery of the Securities and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications which shall have been obtained or made prior to the Closing Date and as may be required to be obtained or made under the Securities Act, the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and applicable state securities laws as provided in the Registration Rights Agreement. (r) KPMG LLP is the independent certified public accountant with respect to the Company and its subsidiaries (i) as required by the Securities Act and the rules and regulations of the Commission thereunder and (ii) within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The historical financial statements (including the related notes) contained in the Offering Memorandum comply as to form in all material respects with the requirements applicable to a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); such financial statements have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby (except as otherwise stated therein), and fairly present in all material respects the financial position of the entities purported to be covered thereby at the respective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained in or incorporated by reference into the Offering Memorandum under the headings and "-Summary Historical Financial Data", "--Ratio of Earnings to Fixed Charges" "--Summary Operating Data" and "Capitalization", and in the most recent Annual Report of the Company on Form 10-K, "Management's Discussion and Analysis of Financial Condition and Results of Operations" are derived from the accounting records of the Company and its subsidiaries and fairly present in all material respects the information purported to be shown thereby. The pro forma financial information contained in the Offering Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Offering Memorandum (except for the pro forma adjustments specified therein), includes 6 all material adjustments to the historical financial information required by Rule 11-02 of Regulation S-X under the Securities Act and the Exchange Act to reflect the transactions described in the Offering Memorandum, gives effect to assumptions made on a reasonable basis and fairly presents in all material respects the historical and proposed transactions contemplated by the Offering Memorandum and the Transaction Documents. The other historical financial and statistical information and data included in the Offering Memorandum are, in all material respects, fairly presented. (s) Except as otherwise disclosed in the Offering Memorandum, there are no legal or governmental proceedings pending to which the Company (including any predecessor entity) or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect, and to the best knowledge of the Company and the Guarantors, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (t) No action has been taken and no statute, rule, regulation or order has been enacted, adopted or issued by any governmental agency or body that prevents the issuance of the Securities or suspends the sale of the Securities in any jurisdiction; no injunction, restraining order or order of any nature by any federal or state court of competent jurisdiction has been issued with respect to the Company or any of its subsidiaries that would prevent or suspend the issuance or sale of the Securities or the use of the Offering Memorandum in any jurisdiction; no action, suit or proceeding is pending against or, to the best knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries before any court or arbitrator or any governmental agency, body or official, domestic or foreign, that could reasonably be expected to interfere with or adversely affect the issuance of the Securities or in any manner draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto; and the Company has complied with any and all requests by any securities authority in any jurisdiction for additional information to be included in the Offering Memorandum. (u) Neither the Company nor any of its subsidiaries is (i) in violation of its charter or bylaws (or other comparable organizational documents), (ii) in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except in the case of items (ii) and (iii) where such default, occurrence or violation would not have a Material Adverse Effect. (v) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency is necessary or required for the performance by the Company or any Guarantor of its obligations 7 hereunder, in connection with the offering, issuance or sale of the Securities hereunder or the consummation of the transactions contemplated by this Agreement or the Registration Rights Agreement or for the due execution, delivery or performance of the Indenture by the Company or any Guarantor, except (A) with respect to the performance by the Company of the Registration Rights Agreement, the registration with the Commission of the Securities under the Shelf Registration Statement and/or the registration of the Exchange Offer with the Commission, and, in each case, registration or qualification under applicable securities or "Blue Sky" laws of the various states, (B) those required in connection with the qualification of the Indenture under the 1939 Act, (C) those required in connection with arranging for the Securities to be designated eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market or for the Securities to be eligible for clearance and settlement through The Depository Trust Company ("DTC") and (D) such as have already been obtained. (w) The Company and each of its subsidiaries possess all licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate federal, state or foreign regulatory agencies or bodies that are necessary or desirable for the ownership of their respective properties or the conduct of their respective businesses as described in the Offering Memorandum, except where the failure to possess or make the same would not, singularly or in the aggregate, have a Material Adverse Effect, and neither the Company nor any of its subsidiaries has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course. (x) The Company and each of its subsidiaries have filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due thereon other than those being contested in good faith and for which reserves have been provided in accordance with generally accepted accounting principles and those currently payable without penalty or interest or the nonpayment of which would not have a Material Adverse Effect, and no tax deficiency has been determined adversely to the Company or any of its subsidiaries that has had (nor does the Company or any of its subsidiaries have any knowledge of any tax deficiency that, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have) a Material Adverse Effect. (y) Neither the Company nor any of its subsidiaries is an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT"), and the rules and regulations of the Commission thereunder or a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended. (z) The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. 8 (aa) The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (bb) Except as otherwise disclosed in the Offering Memorandum, the Company and each of its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, which insurance is in amounts and insures against such losses and risks as are standard in the oil and gas industry for similarly situated companies. Neither the Company nor any of its subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance. (cc) Neither the Company nor any affiliate of the Company has taken, nor will the Company or any affiliate take, directly or indirectly, any action which is designed to or which has constituted or which would be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities. (dd) The Company and each of its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses; and, to the knowledge of the Company, the conduct of their respective businesses will not conflict in any material respect with, and the Company and its subsidiaries have not received any notice of any claim of conflict with, any such rights of others. (ee) Except as otherwise disclosed in the Offering Memorandum, the Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property which are material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except such as do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or could not reasonably be expected to have a Material Adverse Effect. (ff) No labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened. 9 (gg) No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "CODE")) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Company or any of its subsidiaries which could reasonably be expected to have a Material Adverse Effect; each such employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; the Company and each of its subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the Company or any of its subsidiaries would have any liability; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification. (hh) The Company and its subsidiaries are (i) in material compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("ENVIRONMENTAL LAWS"), (ii) have received and are in material compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received notice of any actual or potential liability for (x) any actual or alleged violation of Environmental Laws, or (y) investigation or any other action (including, but not limited to, remediation) in response to, or personal injury (including death) or property damage in connection with, any actual or alleged disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except where such notice has been resolved or is no longer outstanding or except where the actual or potential liability is not reasonably expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has been named as a "potentially responsible party" under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Sections 9601 et seq., as amended. The Company and its subsidiaries have not entered into any agreement, and are not subject to any order, pursuant to which they currently have any ongoing obligations to investigate or take any other action (including, but not limited to, remediation) in response to any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants. (ii) Neither the Company nor any of its subsidiaries nor, to the best knowledge of the Company, any director, officer, agent, employee or other person associated with or acting on behalf of the Company or any of its subsidiaries, (A) has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity, made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds, (B) violated or is in violation of any provisions of the Foreign Corrupt Practices Act of 1977, or (C) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. 10 (jj) Neither the Company nor any of its respective subsidiaries owns any "margin securities" as that term is defined in Regulations T and U of the Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE BOARD"), and the offer, issuance, sale of the Securities and the application of the net proceeds therefrom will not violate Regulations T, U or X of the Federal Reserve Board. (kk) Except as otherwise disclosed in the Offering Memorandum, neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Securities. (ll) The Securities satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (mm) Except with respect to the Initial Purchasers, neither the Company nor any of its affiliates has, directly or through any agent, sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as such term is defined in the Securities Act), which is or will be integrated with the sale of the Securities in a manner that would require registration of the Securities under the Securities Act. (nn) Except with respect to the Initial Purchasers, neither the Company nor any of its affiliates or any other person acting on its or their behalf has engaged, in connection with the offering of the Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (oo) Neither the Company nor any of its affiliates has taken and none of them will take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (pp) Since the date as of which information is given in the Offering Memorandum (exclusive of amendments or supplements thereto), except as otherwise stated therein, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business, (ii) neither the Company nor any of its subsidiaries has incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) neither the Company nor any of its subsidiaries has entered into any material transaction other than in the ordinary course of business and (iv) there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, or any redemption in respect thereof. (qq) Netherland Sewell & Associates, Inc. is an independent petroleum engineering firm with respect to the Company. 11 2. Purchase and Resale of the Securities. On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions set forth herein, the Company and each of the Guarantors agrees to issue and sell to each of the Initial Purchasers, severally and not jointly, and each of the Initial Purchasers, severally and not jointly, agrees to purchase from the Company and the Guarantors, the principal amount of Securities set forth opposite the name of such Initial Purchaser on Schedule 2 hereto at a purchase price equal to 97.00% of the principal amount thereof. The Company and the Guarantors shall not be obligated to deliver any of the Securities except upon payment for all of the Securities to be purchased as provided herein. (a) The Initial Purchasers have advised the Company that they propose to offer the Securities for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents, warrants to and agrees with the Company that: (i) it is purchasing the Securities pursuant to a private sale exempt from registration under the Securities Act, (ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Securities by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act ("REGULATION D") or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act, and (iii) it has solicited and will solicit offers for the Securities only from, and has offered or sold and will offer, sell or deliver the Securities, as part of their initial offering, only to persons whom it reasonably believes to be qualified institutional buyers ("QUALIFIED INSTITUTIONAL BUYERS"), as defined in Rule 144A under the Securities Act ("RULE 144A"), or if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and in each case, in transactions in accordance with Rule 144A. (b) Each Initial Purchaser will take reasonable steps to inform persons acquiring Securities from such Initial Purchaser that the Securities (i) have not been and will not be registered under the Securities Act, (ii) are being sold to them without registration under the Securities Act in reliance on Rule 144A or in accordance with another exemption from registration under the Securities Act, as the case may be, and (iii) may not be offered, sold or otherwise transferred except (A) to the Company, or (B) in accordance with (x) Rule 144A to a person whom the seller reasonably believes is a Qualified Institutional Buyer that is purchasing such Securities for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (y) pursuant to another available exemption from registration under the Securities Act. (c) Each Initial Purchaser, severally and not jointly, agrees that, prior to or simultaneously with the confirmation of sale by such initial Purchaser to any purchaser of any of the securities purchased by such Initial Purchaser from the Company pursuant hereto, such Initial Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and any amendment or supplement thereto that the Company shall have furnished to such Initial Purchaser prior to the date of such confirmation of sale). In 12 addition to the foregoing, each Initial Purchaser acknowledges and agrees that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Section 5(d), (e) and (f), counsel for the Company and for the Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers and their compliance with their agreements contained in this Section 2, and each Initial Purchaser hereby consents to such reliance. (d) The Company acknowledges and agrees that the Initial Purchasers may sell securities to any affiliate of an Initial Purchaser and that any such affiliate may sell Securities purchased by it to an Initial Purchaser. 3. Delivery of and Payment for the Securities. (a) Delivery of and payment for the Securities shall be made at the offices of Sidley Austin Brown & Wood LLP, 787 Seventh Ave., New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Company, at 10:00 A.M., New York City time, on April 8, 2004, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Initial Purchasers and the Company (such date and time of payment and delivery being referred to herein as the "CLOSING DATE"). (b) On the Closing Date, payment of the purchase price for the Securities shall be made to the Company by wire or book-entry transfer of same-day funds to such account or accounts as the Company shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against delivery to the Initial Purchasers of the certificates evidencing the Securities. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchasers hereunder. Upon delivery, the Securities shall be in global form, registered in such names and in such denominations as Guggenheim on behalf of the Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Company agrees to make one or more global certificates evidencing the Securities available for inspection by Guggenheim on behalf of the Initial Purchasers in New York, New York at least 24 hours prior to the Closing Date. 4. Further Agreements of the Company and the Guarantors. The Company and each of the Guarantors agrees with each of the Initial Purchasers: (a) to advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (exclusive of any amendments or supplements thereto) in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (b) to furnish promptly to each of the Initial Purchasers and counsel for the Initial Purchasers, without charge, as many copies of the Offering Memorandum (and any amendments or supplements thereto) as may be reasonably requested; 13 (c) prior to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to each of the Initial Purchasers and counsel for the Initial Purchasers and not to effect any such amendment or supplement to which the Initial Purchasers shall reasonably object by notice to the Company after a reasonable period to review; (d) if, at any time prior to completion of the resale of the Securities by the Initial Purchasers, any event shall occur or condition exist as a result of which it is necessary, in the reasonable opinion of counsel for the Initial Purchasers or counsel for the Company, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; (e) that it will not and will cause its affiliates not to, directly or indirectly, solicit any offer to buy, sell or make any offer or sale of, or otherwise negotiate in respect of, securities of the Company of any class if, as a result of the doctrine of "integration" referred to in Rule 502 under the Securities Act, such offer or sale would render invalid (for the purpose of (i) the sale of the offered Securities by the Company and the Guarantors to the Initial Purchasers, (ii) the resale of the offered Securities by the Initial Purchasers to subsequent purchasers or (iii) the resale of the offered Securities by such subsequent purchasers to others) the exemption from the registration requirements of the Securities Act provided by Section 4(2) thereof or by Rule 144A thereunder or otherwise; (f) for so long as the Securities are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to furnish to holders of the Securities and prospective purchasers of the Securities designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being for the benefit of the holders from time to time of the Securities and prospective purchasers of the Securities designated by such holders); (g) to promptly take from time to time such actions as the Initial Purchasers may reasonably request to qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may designate and to continue such qualifications in effect for so long as required for the resale of the Securities; and to arrange for the determination of the eligibility for investment of the Securities under the laws of such jurisdictions as the Initial Purchasers may reasonably request; provided, however, that the Company and its subsidiaries shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction; 14 (h) to take all reasonable action necessary to enable Standard & Poor's Ratings Services, a division of McGraw Hill, Inc. ("S&P"), and Moody's Investors Service Inc. ("MOODY'S") to provide their respective credit ratings of the Securities; (i) to assist the Initial Purchasers in arranging for the Securities to be designated PORTAL Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for the Securities to be eligible for clearance and settlement through DTC; (j) until the offering of the Securities is complete, to file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and the 1934 Act Regulations; (k) except following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and to cause its affiliates not to, and not to authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Securities by means of any form of general solicitation or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Securities as contemplated by this Agreement and the Offering Memorandum; (l) except as otherwise disclosed in the Offering Memorandum, for a period of 90 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of any debt securities issued or guaranteed by the Company or any of its subsidiaries (other than the Securities) without the prior written consent of the Initial Purchasers; (m) until consummation of the Exchange Offer, without the prior written consent of the Initial Purchasers, not to, and not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Securities that have been reacquired by them, except for Securities purchased by the Company or any of its affiliates and resold in a transaction in compliance with the Securities Act; (n) in connection with the offering of the Securities, until Guggenheim on behalf of the Initial Purchasers shall have notified the Company (which Guggenheim shall do as soon as reasonably practicable) of the completion of the distribution of the Securities, not to, and to cause its affiliated purchasers (as defined in Regulation M under the Exchange Act) not to, either alone or with one or more other persons, bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Securities, or attempt to induce any person to purchase any Securities; and not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose of creating 15 actual, or apparent active trading in or of raising the price of the Securities; provided, however, that notwithstanding any other provision of this Agreement, the initial purchaser shall not be prohibited from market-making, stabilization, covering or overallotment transactions as contemplated by the Offering Memorandum; (o) in connection with the offering of the Securities, to make its officers, employees, independent accountants, independent petroleum engineers and legal counsel reasonably available upon request by the Initial Purchasers; (p) to furnish to each of the Initial Purchasers on the date hereof a copy of the independent accountants' report included in the Offering Memorandum signed by the accountants rendering such report; (q) to do and perform all things required to be done and performed by it under this Agreement that are within its control prior to or after the Closing Date, and to use its reasonable efforts to satisfy all conditions precedent on its part to the delivery of the Securities; (r) to not take any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the covenants contained in the Indenture; (s) to not take any action prior to the Closing Date which would require the Offering Memorandum to be amended or supplemented pursuant to Section 4(d); (t) prior to the Closing Date, not to issue any press release or other communication directly or indirectly or hold any press conference with respect to the Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Initial Purchasers are notified), without consulting and obtaining the consent of the Initial Purchasers (which consent shall not be unreasonably withheld), unless in the judgment of the Company and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; and (u) to apply the net proceeds from the sale of the Securities as set forth in the Offering Memorandum under the heading "Use of Proceeds". 5. Conditions of Initial Purchasers Obligations. The respective obligations of the several Initial Purchasers hereunder are subject to the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of the Company and the Guarantors contained herein, to the accuracy of the statements of the Company, the Guarantors and their respective officers made in any certificates delivered pursuant hereto, to the performance by the Company and the Guarantors of their obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchasers as promptly as 16 practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers may agree; and no stop order suspending the sale of the Securities in any jurisdiction shall have been issued and no proceedings for the purpose shall have been commenced or shall be pending or threatened. (b) None of the Initial Purchasers shall have either discovered or disclosed to the Company on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Initial Purchasers, is material or omits to state any fact which, in the opinion of such counsel is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Initial Purchasers, and the Company shall have furnished to the Initial Purchasers all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (d) Porter & Hedges, L.L.P. shall have furnished to the Initial Purchasers a written opinion, as counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date substantially in the form set forth in ANNEX B. (e) Nixon Peabody LLP, shall have furnished to the Initial Purchasers a written opinion, as special New York counsel to the Company, addressed to the Initial Purchasers and dated the Closing Date substantially in the form set forth in ANNEX C. (f) The Initial Purchasers shall have received from Sidley Austin Brown & Wood LLP, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as they may request for the purpose of enabling them to pass upon such matters. (g) The Company shall have furnished to the Initial Purchasers a letter (the "INITIAL COMFORT LETTER") of KPMG LLP, addressed to the Initial Purchasers and dated the date hereof, in form and substance satisfactory to the Initial Purchasers. (h) The Company shall have furnished to the Initial Purchasers a letter (the "BRING-DOWN COMFORT LETTER") of KPMG LLP, addressed to the Initial Purchasers and dated the Closing Date in form and substance satisfactory to the Initial Purchasers. (i) The Company shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, of its chief executive officer and its chief financial officer stating that (A) such officers have carefully examined the Offering Memorandum, (B) in their opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under 17 which they were made, not misleading, and since the date of the Offering Memorandum, no event has occurred that should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (C) as of the Closing Date, the representations and warranties of the Company and the Guarantors in this Agreement are true and correct in all material respects, the Company and the Guarantors have complied with all agreements and satisfied all conditions on their part to be performed or satisfied hereunder on or prior to the Closing Date in all material respects, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum, there has been no material adverse change, or any development including a prospective change, in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business, except as set forth in the Offering Memorandum (exclusive of any amendments or supplements thereto). (j) The Initial Purchasers shall have received a counterpart of the Registration Rights Agreement that shall have been executed and delivered by a duly authorized officer of the Company and of each of the Guarantors. (k) The Indenture shall have been duly executed and delivered by the Company, each of the Guarantors and the Trustee, and the Securities shall have been duly executed and delivered by the Company, each of the Guarantors and duly authenticated by the Trustee. (l) The Securities shall have been approved by the NASD for trading in the PORTAL Market. (m) If any event shall have occurred that requires the Company under Section 4(d) to prepare an amendment or supplement to the Offering Memorandum, such amendment or supplement shall have been prepared, the Initial Purchasers shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchasers reasonably in advance of the Closing Date. (n) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the commission or any amendment or proposed amendment thereof by the Commission which in the judgment of the Initial Purchasers would materially impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Securities contemplated hereby. (o) Subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change in the capital stock or long-term debt or any change, or any development involving a prospective 18 change, in or affecting the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company and its subsidiaries, considered as one enterprise, whether arising in the ordinary course of business, the effect of which, in any such case described above, is, in the judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Securities on the terms and in the manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). (p) No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Securities; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Securities. (q) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Securities or any of the Company's other debt securities or preferred stock by a "nationally recognized statistical rating organization", as such term is defined by the Commission for purposes of Rule 436(g)(2) of the rules and regulations of the Commission under the Securities Act and (ii) no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Securities or any of the Company's or other debt securities or preferred stock. (r) The Company shall have furnished to the Initial Purchasers a letter (the "INITIAL RYDER SCOTT LETTER") of Ryder Scott Company Petroleum Engineers, addressed to the Initial Purchasers and dated the date hereof, in form and substance satisfactory to the Initial Purchasers. (s) The Company shall have furnished to the Initial Purchasers a letter (the "INITIAL T.J. SMITH LETTER") of T.J. Smith & Company, Inc., addressed to the Initial Purchasers and dated the date hereof, in form and substance satisfactory to the Initial Purchasers. (t) The Company shall have furnished to the Initial Purchasers a letter (the "INITIAL NETHERLAND SEWELL LETTER") of Netherland Sewell & Associates, Inc., addressed to the Initial Purchasers and dated the date hereof, in form and substance satisfactory to the Initial Purchasers. (u) The Company shall have furnished to the Initial Purchasers a letter (the "RYDER SCOTT BRING-DOWN LETTER") of Ryder Scott Company Petroleum Engineers, addressed to the Initial Purchasers and dated the Closing Date confirming in all material respects the conclusions and findings set forth in the Initial Ryder Scott Letter. 19 (v) The Company shall have furnished to the Initial Purchasers a letter (the "T.J. SMITH BRING-DOWN LETTER") of T.J. Smith & Company, Inc., addressed to the Initial Purchasers and dated the Closing Date confirming in all material respects the conclusions and findings set forth in the Initial T.J. Smith Letter. (w) The Company shall have furnished to the Initial Purchasers a letter (the "NETHERLAND SEWELL BRING-DOWN LETTER") of Netherland Sewell & Associates, Inc., addressed to the Initial Purchasers and dated the Closing Date confirming in all material respects the conclusions and findings set forth in the Initial Netherland Sewell Letter. (x) The Company shall have, simultaneously with the execution of the Indenture, executed a senior secured revolving credit facility with a syndicate of lenders led by Wells Fargo Bank, N.A. and a second lien term loan with a syndicate of lenders arranged by Guggenheim Corporate Funding, LLC. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to Sidley Austin Brown & Wood LLP. 6. Termination. (a) If any condition specified in Section 5 shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by Guggenheim on behalf of the Initial Purchasers by notice to the Company at any time at or prior to Closing Date, and such termination shall be without liability of any party to any other party except as provided in Section 9 and 13 and except that certain provisions of this Agreement shall survive any such termination and remain in full force and effect in accordance with Section 14 hereof; (b) Guggenheim on behalf of the Initial Purchasers may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Date (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the Offering Memorandum (exclusive of any amendments or supplements thereto subsequent to the date of this Agreement), any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of Guggenheim, impracticable or inadvisable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the NASDAQ System, or if trading generally on the American Stock Exchange or the New York Stock Exchange or in the NASDAQ System has been suspended or materially limited, or minimum or maximum prices for trading 20 have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, or (iv) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States or (v) if a banking moratorium has been declared by either Federal or New York authorities. 7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the non-defaulting Initial Purchasers may make arrangements for the purchase of the Securities which such defaulting Initial Purchaser agreed but failed to purchase by other persons satisfactory to the Company and the non-defaulting Initial Purchasers, but if no such arrangements are made within 24 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers, the Company and the Guarantors, except that the Company and the Guarantors will continue to be liable for the payment of expenses to the extent set forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement, the term "Initial Purchasers" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule 2 hereto that, pursuant to this Section 7, purchases Securities which a defaulting Initial Purchaser agreed but failed to purchase. (b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company, the Guarantors or any non-defaulting Initial Purchaser for damages caused by its default. If other persons are obligated or agree to purchase the Securities of a defaulting Initial Purchaser, either the non-defaulting Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Offering Memorandum or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Offering Memorandum that effects any such changes. 8. Reimbursement of Initial Purchasers, Expenses. If (a) this Agreement shall have been terminated pursuant to Section 6, (b) the Company shall fail to tender the Securities for delivery to the Initial Purchasers for any reason permitted under this Agreement or (c) the Initial Purchasers shall decline to purchase the Securities for any reason permitted under this Agreement, the Company and each of the Guarantors shall reimburse the Initial Purchasers for such out-of-pocket expenses (including reasonable fees and disbursements of counsel) as shall have been reasonably incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase and resale of the Securities; provided, however, if this Agreement is terminated pursuant to Section 7 by reason of the default of an Initial Purchaser, the Company and the Guarantors shall not be obligated to reimburse such Initial Purchaser for such expenses. 9. Indemnification. (a) The Company and each of the Guarantors shall jointly and severally indemnify and hold harmless each Initial Purchaser, its affiliates, its officers, directors, employees, representatives and agents, and each person, if any, who controls 21 such Initial Purchasers within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Securities), to which the Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum or in any amendment or supplement thereto or in any information provided by the Company or any Guarantor pursuant to Section 4(f) or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that neither the Company nor any Guarantor shall be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Initial Purchasers' Information. (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Company and each of the Guarantors and their respective affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(b) and Section 10 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided, however, in each case, only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Initial Purchasers' Information provided by such Initial Purchaser, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 22 9(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under this Section 9 except to the extent that it has been materially prejudiced by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon written advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon written advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. (d) Settlement without Consent if Failure to Reimburse. The Company shall not be liable for any settlement of any proceedings effected without its written consent (which consent shall not be unreasonably withheld). Notwithstanding the immediately preceding sentence, if at any time an indemnified party shall have requested the Company to reimburse such indemnified party for legal or other expenses in connection with investigating, responding to or defending any proceedings as contemplated by Section 9(a), the Company shall be liable for any settlement of any proceedings effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by the Company of such request for the reimbursement, (ii) the Company shall 23 not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement and (iii) the Company shall not have responded in writing to such request, specifying those expenses that it has chosen not to reimburse and the reason for such non-reimbursement, prior to the date of such settlement. The Company shall not, without the prior written consent of an indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceedings in respect of which indemnity could have been sought hereunder by such indemnified party unless such settlement (x) includes an unconditional release of such indemnified party in form and substance satisfactory to such indemnified party from all liability on claims that are the subject matter of such proceedings and (y) does not include any statement as to or any admission of fault, culpability or failure to act by or on behalf of any indemnified party. In addition, except as otherwise set forth in this paragraph, an indemnified party shall not, without the prior written consent of the Company (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceedings in respect of which indemnity could have been sought hereunder by such indemnified party unless such settlement (x) includes an unconditional release of the Company in form and substance satisfactory to the Company from all liability on claims that are the subject matter of such proceedings and (y) does not include any statement as to or any admission of fault, culpability or failure to act by or on behalf of the Company. The obligations of the Company, each of the Guarantors and each of the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Company, each of the Guarantors or any Initial Purchaser, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 10. Contribution. If the indemnification provided for in Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors on the one hand and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by or on behalf of the Company and the Guarantors, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Securities purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the Securities under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the 24 omission or alleged omission to state a material fact relates to the Company, the Guarantors or information supplied by the Company and the Guarantors on the one hand or to any Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omissions. The Company, the Guarantors and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 10 were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discounts and commissions received by such Initial Purchaser with respect to the Securities purchased by it under this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers obligations to contribute as provided in this Section 10 are several in proportion to their respective purchase obligations and not joint. 11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company each of the Guarantors and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided in Sections 9 and 10 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Company, each of the Guarantors and the Initial Purchasers and in Section 4(f) with respect to holders and prospective purchasers of the Securities. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. Expenses. The Company and the Guarantors agree with the Initial Purchasers to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Securities, including stamp duties and transfer taxes, if any, payable upon issuance of the Securities; (e) the fees and expenses of the Company's counsel and independent accountants; (f) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in Section 4(g) and of preparing, printing and distributing Blue Sky Memoranda (including related fees and expenses of counsel for the Initial Purchasers); (g) any fees charged by rating agencies for rating the Securities; (h) the fees and expenses of the Trustee and any paying agent (including related fees and expenses of any counsel to such 25 parties); (i) all expenses and application fees incurred in connection with the application for the inclusion of the Securities on the PORTAL Market and the approval of the Securities for book-entry transfer by DTC; (j) all travel expenses of the Company's officers and employees and other expenses of the Company in connection with attending or hosting meetings with prospective purchasers of the Securities from the Initial Purchasers; and (k) all other costs and expenses incident to the performance of the obligations of the Company and the Guarantors under this Agreement that are not otherwise specifically provided for in this Section 12; provided, however, that except as provided in Sections 8, 9 and in this Section 12, the Initial Purchasers shall pay their own costs and expenses. 13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company, the Guarantors and the Initial Purchasers contained in this Agreement or made by or on behalf of the Company, the Guarantors or the Initial Purchasers pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers, directors, employees, representatives, agents or controlling persons. 14. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail or telecopy transmission to Guggenheim Capital Markets, LLC, 135 East 57th Street 9th Floor, New York, NY 10022, Attention: Todd Boehly (facsimile no.: (212) 644-8396 ); or (b) if to the Company or the Guarantors, shall be delivered or sent by mail or telecopy transmission to the address of the Company set forth in the Offering Memorandum, Attention: Richard Piacenti (facsimile no.: (713) 495-3114). Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by Guggenheim. 15. Definition of Terms. For purposes of this Agreement, (a) the term "BUSINESS DAY" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "SUBSIDIARY" has the meaning set forth in Rule 405 under the Securities Act and, (c) except where otherwise expressly provided, the term "AFFILIATE" has the meaning set forth in Rule 405 under the Securities Act. 16. Initial Purchasers' Information. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the Initial Purchasers' Information consists solely of the following information in the Offering Memorandum: the statements concerning the Initial Purchasers contained in fifth and sixth sentences of the seventh paragraph and first, second, penultimate and last sentences of the eighth paragraph under the heading "Plan of Distribution". 17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 26 18. Counterparts. This Agreement may be executed in one or more counterparts (which may include counterparts delivered by telecopier) and, if executed in more than one counterpart, the executed agreement, counterparts shall each be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 19. Amendments. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 20. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 27 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Company, the Guarantors and the Initial Purchasers in accordance with its terms. Very truly yours, MISSION RESOURCES CORPORATION By: /s/ Richard W. Piacenti ------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer BLACK HAWK OIL COMPANY By: /s/ Richard W. Piacenti ------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer MISSION HOLDINGS LLC By: /s/ Richard W. Piacenti ------------------------------------- Name: Richard W. Piacenti Title: Manager MISSION E&P LIMITED PARTNERSHIP By: Black Hawk Oil Company General Partner By: /s/ Richard W. Piacenti ------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer 28 Accepted: GUGGENHEIM CAPITAL MARKETS, LLC By: /s/ Jeffrey Lewis ------------------------------------ Name: Jeffrey Lewis Title: Managing Director 29 SCHEDULE 1 GUARANTORS BLACK HAWK OIL COMPANY MISSION HOLDINGS LLC MISSION E&P LIMITED PARTNERSHIP 1 SCHEDULE 2 INITIAL PURCHASERS
PRINCIPAL AMOUNT OF INITIAL PURCHASERS SECURITIES - ------------------------------- ------------ Guggenheim Capital Markets, LLC $108,000,000 Petrie Parkman & Co., Inc. 22,000,000 ------------ Total $130,000,000
ANNEX A [FORM OF EXCHANGE AND REGISTRATION RIGHTS AGREEMENT] ANNEX B FORM OF OPINION OF PORTER & HEDGES, L.L.P. Pursuant to Section 5(d) of the Purchase Agreement 1. The Company has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Delaware, is duly qualified to do business and is in good standing as a foreign entity in the jurisdictions on Exhibit A, and has all power and authority necessary to own, lease and operate its properties and to conduct the business in which it is engaged; no holder of securities of the Company has any right which has not been fully exercised or waived to require the Company to register the offer or sale of any securities owned by such holder under the Securities Act under, or as a result of the filing of the registration statement to be filed by the Company pursuant to the terms of the Registration Rights Agreement. 2. Each Guarantor has been duly incorporated and is validly existing in good standing under the laws of the jurisdiction of its formation, has power and authority to own, lease and operate its properties and to conduct its business as described in the Offering Memorandum and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction on Exhibit A; except as described in the Offering Memorandum, all of the issued and outstanding capital stock or member interests or partnership interests of each Guarantor has been duly authorized and validly issued, are fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim, equity, restriction upon voting or transfer; to our knowledge, none of the outstanding shares of capital stock or member interests or partnership interests of the Designated Subsidiaries was issued in violation of any preemptive or similar rights of any securityholder of such Guarantor. 3. The Company has an authorized capitalization as set forth in the Offering Memorandum under the heading "Capitalization". The Company has an authorized capitalization of 65,000,000 shares, of which 60,000,000 are shares of common stock, par value $0.01 per share, and 5,000,000 are shares of preferred stock, par value $0.01 per share. 4. The statements in the Offering Memorandum under the heading "Certain United States Federal Tax Consequences," and "Description of Other Indebtedness," and in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003 under "Business and Properties - Applicable Laws and Regulations," "-Risk Factors--Compliance with environmental and other government regulations is costly and could negatively impact production," "--Risk Factors--We may have claims asserted against us to plug and abandon wells and restore the surface," "--Risk Factors--We may have claims asserted against us to plug and abandon wells and restore the surface," "--Risk Factors--Our certificate of incorporation, bylaws, rights plan and Delaware law have provisions that discourage corporate takeovers and could prevent stockholders from realizing a premium on their investment," and "Legal Proceedings," to the extent that such information summarizes legal matters, legal proceedings, or legal conclusions, has been reviewed by us and, insofar as such information purports to describe or summarize the legal matters, documents, statutes, B-1 regulations, proceedings or conclusions referred to therein, fairly summarize or describe the matters described therein in all material respects. 5. All descriptions in the Offering Memorandum of contracts and other documents to which the Company or any of its subsidiaries are a party are accurate in all material respects; to the best of our knowledge, there are no franchises, contracts, indentures, mortgages, loan agreements, notes, leases or other instruments that would be required to be described or referred to in the Offering Memorandum that are not described or referred to in the Offering Memorandum other than those described or referred to therein or incorporated by reference thereto, and the descriptions thereof or references thereto are correct in all material respects. 6. The documents incorporated by reference in the Offering Memorandum (other than the financial statements and supporting schedules therein, as to which no opinion need be rendered), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder. 7. The Indenture conforms in all material respects with the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. 8. The Purchase Agreement has been duly authorized, executed and delivered by the Company and each of the Guarantors. 9. The Securities have been duly authorized, executed and delivered by the Company and each of the Guarantors and, when paid for as provided in the Purchase Agreement, will be duly and validly issued and outstanding. The Exchange Securities have been duly authorized by the Company and each of the Guarantors. 10. Each Transaction Document other than the Securities and the Exchange Securities has been duly authorized, executed and delivered by the Company and each of the Guarantors, as the case may be, and (assuming the due authorization, execution and delivery thereof by the parties thereto) constitutes a valid and legally binding obligation of the Company and each of the Guarantors. Each of the Transaction Documents conforms in all material respects to the description thereof contained in the Offering Memorandum. 11. The execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which it is a party, the issuance, authentication, sale and delivery of the Securities and performance the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject that is filed as an exhibit to the Company's B-2 most recent Annual Report on Form 10-K, nor will such actions result in any violation of (A) the provisions of the charter or by-laws of the Company or any of its subsidiaries or (B) any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets known by us to be generally applicable to similar transactions. 12. No consent, approval, authorization or order of, or filing or registration with, any such court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Company and each of the Guarantors of each of the Transaction Documents to which each is a party, the issuance, authentication, sale and delivery of the Securities and compliance by the Company and each of the Guarantors with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except (A) with respect to the performance by the Company of the Registration Rights Agreement, the registration with the Commission of the Securities under the Shelf Registration Statement and/or the registration of the Exchange Offer with the Commission, and, in each case, registration or qualification under applicable securities or "Blue Sky" laws of the various states, (B) those required in connection with the qualification of the Indenture under the 1939 Act, (C) those required in connection with arranging for the Securities to be designated eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market or for the Securities to be eligible for clearance and settlement through The Depository Trust Company ("DTC"), and (D) such as have already been obtained. 13. Neither the Company nor any of its subsidiaries is, and will not after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the Prospectus be (A) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder, without taking account of any exemption thereunder arising out of the number of holders of the Company's securities or (B) a "holding company" or a "subsidiary company" of a holding company or an "affiliate" thereof within the meaning of the Public Utility Holding Company Act of 1935, as amended. 14. Except as described in the Offering Memorandum, to our knowledge, there are no legal or governmental proceedings pending to which the Company (including any predecessor entity) or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a material adverse effect on the Company's or any Guarantor's ability to perform its obligations under the Indenture, the Notes, the Guarantees, the Purchase Agreement, the Registration Rights Agreement or the Escrow Agreement, as applicable, or on the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Company and its subsidiaries, considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), and no such proceedings are threatened or contemplated by governmental authorities or threatened by others. B-3 15. Neither the consummation of the transactions contemplated by the Purchase Agreement nor the sale, issuance, execution or delivery of the Securities and the application of the proceeds as described in the Offering Memorandum will violate Regulation T, U or X of the Federal Reserve Board. 16. Assuming the accuracy of the representations and warranties of the Company, the Guarantors and the Initial Purchasers, and the performance of their respective agreements and covenants contained in the Purchase Agreement, no registration of the Securities under the Securities Act or qualification of the Indenture under the Trust Indenture Act is required in connection with the issuance and sale of the Securities by the Company to the Initial Purchasers and the initial offer, resale and delivery of the Securities by the Initial Purchasers in the manner contemplated by the Purchase Agreement and the Offering Memorandum. Nothing has come to our attention that would lead us to believe that the Offering Memorandum (excluding any amendment or supplement thereto) or any amendment or supplement thereto (except for (i) financial statements and the notes and schedules thereto and (ii) any reserve, production, acreage, productive well, title or other oil and gas data, or financial or statistical data included or incorporated by reference therein or omitted therefrom as to which we need make no statement), at the time the Offering Memorandum was issued, at the time any such amended or supplemented Offering Memorandum was issued or at Closing Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely, as to matters of fact (but not as to legal conclusions), to the extent they deem proper, on certificates of responsible officers of the Company and public officials. Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991). B-4 ANNEX C FORM OF OPINION OF NIXON PEABODY LLP Pursuant to Section 5(e) of the Purchase Agreement 1. The Registration Rights Agreement (assuming the due authorization, execution and delivery thereof by the Initial Purchasers) constitutes an obligation of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. 2. The Indenture(assuming the due authorization, execution and delivery thereof by the Trustee) constitutes an obligation of the Company and each of the Guarantors enforceable against the Company and each of the Guarantors in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. 3. The Notes (assuming the due authentication and delivery thereof by the Trustee), when paid for as provided in the Purchase Agreement, constitute obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company, in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. 4. The Guarantees (assuming the due authorization, execution and delivery thereof by the Trustee) will constitute obligations of the related Guarantor, enforceable against each such Guarantor in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and to general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. 5. The Exchange Securities (assuming the due execution, authentication and delivery, as the case may be, of the Exchange Notes by the Company and the Trustee and the due execution and delivery of the Exchange Guarantees by the Company and the Trustee, all in accordance with the terms of the Indenture) will constitute obligations of the Company, as issuer of the Notes, and each of the Guarantors, as guarantors, enforceable against the Company, as issuer of the Notes, and each of the Guarantors, as guarantors, in accordance with its terms, except C-1 to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. 6. The Escrow Agreement (assuming the due authorization, execution and delivery thereof by the Escrow Agent) constitutes an obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and except as rights to indemnification and contribution set forth therein may be limited by applicable law. Nothing has come to our attention that would lead us to believe that the Offering Memorandum (excluding any amendment or supplement thereto) or any amendment or supplement thereto (except for (i) financial statements and the notes and schedules thereto and (ii) any reserve, production, acreage, productive well, title or other oil and gas data, or financial or statistical data included or incorporated by reference therein or omitted therefrom as to which we need make no statement), at the time the Offering Memorandum was issued, at the time any such amended or supplemented Offering Memorandum was issued or at Closing Date, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may rely, as to matters of fact (but not as to legal conclusions), to the extent they deem proper, on certificates of responsible officers of the Company and public officials. Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991). C-2 EX-4.2 4 h14499aexv4w2.txt INDENTURE DATED APRIL 8, 2004 EXHIBIT 4.2 MISSION RESOURCES CORPORATION each SUBSIDIARY GUARANTOR Named Herein and THE BANK OF NEW YORK Trustee INDENTURE Dated as of April 8, 2004 $130,000,000 9 7/8% Senior Notes due 2011 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION....................................... 1 1.1 DEFINITIONS.............................................................................. 1 1.2 OTHER DEFINITIONS........................................................................ 23 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT........................................ 24 1.4 RULES OF CONSTRUCTION.................................................................... 24 1.5 ONE CLASS OF SECURITIES.................................................................. 25 ARTICLE 2 [RESERVED] ................................................................................... 25 ARTICLE 3 THE NOTES .................................................................................... 25 3.1 TITLE AND TERMS; FORM AND DATING......................................................... 25 3.2 DENOMINATIONS............................................................................ 27 3.3 EXECUTION AND AUTHENTICATION............................................................. 27 3.3.1 SECURITY REGISTRAR AND PAYING AGENT...................................................... 28 3.4 PERSONS DEEMED OWNERS AND HOLDERS LISTS.................................................. 29 3.5 TRANSFER AND EXCHANGE.................................................................... 29 3.6 REPLACEMENT SECURITIES................................................................... 43 3.7 OUTSTANDING SECURITIES................................................................... 44 3.8 TREASURY SECURITIES...................................................................... 44 3.9 TEMPORARY SECURITIES..................................................................... 44 3.10 CANCELLATION............................................................................. 45 3.11 DEFAULTED INTEREST....................................................................... 45 3.12 CUSIP NUMBERS............................................................................ 46 3.13 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY................................................ 46 3.14 COMPUTATION OF INTEREST.................................................................. 47
i ARTICLE 4 SATISFACTION AND DISCHARGE.................................................................... 47 4.1 SATISFACTION AND DISCHARGE OF INDENTURE.................................................. 47 4.2 APPLICATION OF TRUST MONEY............................................................... 48 ARTICLE 5 REMEDIES ..................................................................................... 49 5.1 EVENTS OF DEFAULT AND REMEDIES........................................................... 49 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT....................................... 50 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.......................... 52 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM......................................................... 52 5.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.............................. 53 5.6 APPLICATION OF MONEY COLLECTED........................................................... 53 5.7 LIMITATION ON SUITS...................................................................... 54 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PAYMENT........................................ 54 5.9 RESTORATION OF RIGHTS AND REMEDIES....................................................... 54 5.10 RIGHTS AND REMEDIES CUMULATIVE........................................................... 55 5.11 DELAY OR OMISSION NOT WAIVER............................................................. 55 5.12 CONTROL BY HOLDERS....................................................................... 55 5.13 WAIVER OF PAST DEFAULTS.................................................................. 55 5.14 WAIVER OF STAY........................................................................... 56 ARTICLE 6 THE TRUSTEE .................................................................................. 56 6.1 DUTIES OF TRUSTEE........................................................................ 56 6.2 CERTAIN RIGHTS OF TRUSTEE................................................................ 57 6.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES........................... 59 6.4 MAY HOLD SECURITIES...................................................................... 59
ii 6.5 MONEY HELD IN TRUST...................................................................... 59 6.6 COMPENSATION AND REIMBURSEMENT........................................................... 59 6.7 CORPORATE TRUSTEE REQUIRED: ELIGIBILITY................................................. 60 6.8 CONFLICTING INTERESTS.................................................................... 60 6.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR........................................ 60 6.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR................................................... 62 6.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.............................. 62 6.12 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY........................................ 62 6.13 NOTICE OF DEFAULTS....................................................................... 63 ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY............................................. 63 7.1 HOLDERS' LISTS; HOLDER COMMUNICATIONS; DISCLOSURES RESPECTING HOLDERS.................... 63 7.2 REPORTS BY TRUSTEE....................................................................... 63 7.3 REPORTS BY COMPANY....................................................................... 64 ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OF OR LEASE....................................... 64 8.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS..................................... 64 8.2 SUCCESSOR SUBSTITUTED.................................................................... 66 ARTICLE 9 SUPPLEMENTAL INDENTURES....................................................................... 67 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS....................................... 67 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.......................................... 68 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES..................................................... 69 9.4 EFFECT OF SUPPLEMENTAL INDENTURES........................................................ 69 9.5 CONFORMITY WITH TRUST INDENTURE ACT...................................................... 69 9.6 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES....................................... 69
iii 9.7 NOTICE OF SUPPLEMENTAL INDENTURES AND WAIVERS............................................ 70 ARTICLE 10 COVENANTS ................................................................................... 70 10.1 PAYMENT OF SECURITIES.................................................................... 70 10.2 MAINTENANCE OF OFFICE OR AGENCY.......................................................... 70 10.3 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST.......................................... 70 10.4 CORPORATE EXISTENCE...................................................................... 72 10.5 PAYMENT OF TAXES AND OTHER CLAIMS........................................................ 72 10.6 MAINTENANCE OF PROPERTIES................................................................ 72 10.7 INSURANCE ............................................................................... 72 10.8 STATEMENT BY OFFICER AS TO DEFAULT....................................................... 73 10.9 REPORTS. ................................................................................ 73 10.10 LIMITATION ON RESTRICTED PAYMENTS........................................................ 74 10.11 LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK AND REDEEMABLE CAPITAL STOCK................................................................. 78 10.12 LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES...................... 78 10.13 LIMITATION ON ISSUANCE, SALE AND OWNERSHIP OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES... 79 10.14 LIMITATION ON LIENS...................................................................... 80 10.15 PURCHASE OF SECURITIES UPON CHANGE OF CONTROL............................................ 80 10.16 LIMITATION OF ASSET SALES................................................................ 82 10.17 LIMITATION ON TRANSACTIONS WITH AFFILIATES............................................... 84 10.18 LIMITATION ON SALE-LEASEBACK TRANSACTIONS................................................ 85 10.19 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES............................................................................. 86 10.20 WAIVER OF CERTAIN COVENANTS.............................................................. 86 10.21 LIMITATION ON RESTRICTIVE COVENANTS...................................................... 87
iv ARTICLE 11 REDEMPTION OF SECURITIES..................................................................... 87 11.1 RIGHT OF REDEMPTION...................................................................... 87 11.2 APPLICABILITY OF ARTICLE................................................................. 87 11.3 ELECTION TO REDEEM; NOTICE TO TRUSTEE.................................................... 87 11.4 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED........................................ 88 11.5 NOTICE OF REDEMPTION..................................................................... 88 11.6 DEPOSIT OF REDEMPTION PRICE.............................................................. 89 11.7 SECURITIES PAYABLE ON REDEMPTION DATE.................................................... 89 11.8 SECURITIES REDEEMED IN PART.............................................................. 89 ARTICLE 12 DEFEASANCE AND DISCHARGE..................................................................... 90 12.1 COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE............................. 90 12.2 DEFEASANCE AND DISCHARGE................................................................. 90 12.3 COVENANT DEFEASANCE...................................................................... 90 12.4 CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.......................................... 91 12.5 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS................................................................. 93 12.6 REINSTATEMENT............................................................................ 93 ARTICLE 13 SUBSIDIARY GUARANTEES........................................................................ 94 13.1 UNCONDITIONAL GUARANTEE.................................................................. 94 13.2 SUBSIDIARY GUARANTOR MAY CONSOLIDATE, ETC., ON CERTAIN TERMS............................. 95 13.3 RELEASE OF SUBSIDIARY GUARANTORS......................................................... 96 13.4 LIMITATION OF SUBSIDIARY GUARANTORS' LIABILITY........................................... 96 13.5 CONTRIBUTION............................................................................. 97 13.6 EXECUTION AND DELIVERY OF NOTATIONS OF SUBSIDIARY GUARANTEES............................. 97
v 13.7 SEVERABILITY............................................................................. 97 13.8 ARTICLE XIII NOT TO PREVENT EVENTS OF DEFAULT............................................ 98 13.9 PAYMENT. ................................................................................ 98 ARTICLE 14 MISCELLANEOUS ............................................................................... 98 14.1 COMPLIANCE CERTIFICATES AND OPINIONS..................................................... 98 14.2 FORM OF DOCUMENTS DELIVERED TO TRUSTEE................................................... 99 14.3 ACTS OF HOLDERS.......................................................................... 99 14.4 NOTICES, ETC. TO TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS.............................. 100 14.5 NOTICE TO HOLDERS; WAIVER................................................................ 100 14.6 EFFECT OF HEADINGS AND TABLE OF CONTENTS................................................. 101 14.7 SUCCESSORS AND ASSIGNS................................................................... 101 14.8 SEPARABILITY CLAUSE...................................................................... 101 14.9 BENEFITS OF INDENTURE.................................................................... 101 14.10 GOVERNING LAW; TRUST INDENTURE ACT CONTROLS.............................................. 101 14.11 LEGAL HOLIDAYS........................................................................... 102 14.12 NO RECOURSE AGAINST OTHERS............................................................... 102 14.13 DUPLICATE ORIGINALS...................................................................... 102 14.14 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS............................................ 103 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER............................................................... 2
EXHIBITS A-1 Specimen of Rule 144A Global Note for Notes due 2011 A-2 Specimen of Regulation S Global Notes for Note due 2011 A-3 Specimen of Institutional Accredited Investor Certificated Note for Notes due 2011 B Form of Certificate of Transfer C Form of Certificate of Exchange vi Reconciliation and Tie between Trust Indenture Act of 1939 and Indenture, dated as of April 8, 2004
Trust Indenture Indenture Act Section Section Section 310 (a)(1)............................................................... 6.7 (a)(2)............................................................... 6.7 (b).................................................................. 6.7, 6.8, 6.9 Section 311 (a).................................................................. 6.12 (b).................................................................. 6.12 Section 312 ..................................................................... 7.1 Section 313 ..................................................................... 7.2 Section 314 (a).................................................................. 7.3 (a)(4)............................................................... 10.8(1) (c)(1)............................................................... 15.1 (c)(2)............................................................... 15.1 (d).................................................................. 15.1 Section 315 (a).................................................................. 6.1 (b).................................................................. 6.13 (c).................................................................. 6.1 (e).................................................................. 6.1 Section 316 (a)(last............................................................. 1.1 sentence)............................................................ ("Outstanding") (a)(1)(A)............................................................ 5.2, 5.12 (a)(1)(B)............................................................ 5.13 (b).................................................................. 5.8 (c).................................................................. 15.3(iv) Section 317 (a)(1)............................................................... 5.3 (a)(2)............................................................... 5.4 (b).................................................................. 10.3 Section 318 (a).................................................................. 15.10(ii)
vii THIS INDENTURE, dated as of April 8, 2004, is among MISSION RESOURCES CORPORATION, a Delaware corporation (hereinafter called the "Company"), the SUBSIDIARY GUARANTORS (as defined hereinafter) and The Bank of New York, a New York banking corporation (hereinafter called the "Trustee"). RECITALS The Company has duly authorized the creation of an issue of 9 7/8% Senior Notes due 2011 herein, as amended or supplemented from time to time in accordance with the terms hereof, of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. The Company owns, directly or indirectly, all of the equity ownership of the outstanding Voting Stock of each initial Subsidiary Guarantor, and each initial Subsidiary Guarantor is a member of the Company's consolidated group of companies that are engaged in related businesses. Each initial Subsidiary Guarantor will derive direct and indirect benefit from the issuance of the Notes; accordingly, each initial Subsidiary Guarantor has authorized its guarantee of the Company's obligations under this Indenture and the Notes, and to provide therefor the initial Subsidiary Guarantors have duly authorized the execution and delivery of this Indenture. This Indenture is subject to the provisions of the Trust Indenture Act of 1939, as amended, that are required to be part of this Indenture and will, to the extent applicable, be governed by such provisions. All things necessary have been done to make the Notes, when issued and executed by the Company and authenticated and delivered by the Trustee as herein provided, the valid obligations of the Company, to make the Subsidiary Guarantees, when the notations thereof on the Notes are executed by the initial Subsidiary Guarantors, the valid obligation of the initial Subsidiary Guarantors and to make this Indenture a valid agreement of the Company, the initial Subsidiary Guarantors and the Trustee, in accordance with their respective terms. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Notes (together with the related Subsidiary Guarantees) by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes (together with the related Subsidiary Guarantees), as follows: ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1.1 DEFINITIONS. "144A Global Note" means a Global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Securities initially sold in reliance on Rule 144A. "2001 Indenture" means the Indenture dated as of May 29, 2001 among the Company, as issuer, subsidiaries of the Company named in the Indenture, as Subsidiary Guarantors, and Bank of New York, as Trustee, as amended, supplemented or otherwise modified from time to time. "2001 Note Issue Date" means May 29, 2001. "2001 Notes" means the Company's 10?% Senior Subordinated Notes due 2007 issued pursuant to the 2001 Indenture. "2004 Credit Facility" means that certain Credit Agreement, dated as of the Closing Date among the Company, certain Subsidiaries of the Company, the Credit Facility Agent, and certain lenders named therein, as the same may be amended, modified, supplemented, extended, restated, replaced, renewed or refinanced from time to time. "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in connection with an acquisition of Properties from such Person or (b) outstanding at the time such Person becomes a Subsidiary of any other Person (in either case other than any Indebtedness incurred in connection with, or in contemplation of, such acquisition or such Person becoming such a Subsidiary). Acquired Indebtedness will be deemed to be incurred on the date, of the related acquisition of Properties from any Person or the date the acquired Person becomes a Subsidiary. "Act," when used with respect to any Holder, has the meaning specified in Section 14.3. "Adjusted Net Assets" of a Subsidiary Guarantor at any date means the amount by which the fair value of the Properties of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under its Subsidiary Guarantee, of such Subsidiary Guarantor at such date. "Affiliate" of any specified Person means (i) any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person or (ii) any other Person who is a director or executive officer of (a) such specified Person or (b) any Person described in the preceding clause (i). For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, will mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. "Agent" means any Note Registrar, Paying Agent, co-registrar, authenticating agent or securities custodian. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means any sale, issuance, conveyance, transfer, lease or other disposition by the Company or any Subsidiary (including, without limitation, by way of merger or consolidation) (collectively, for purposes of this definition, a "transfer"), to any Person other 2 than the Company or any of its Restricted Subsidiaries and other than the sale and issuance of director's qualifying shares, directly or indirectly, in one or a series of related transactions, of (i) any Capital Stock (other than Redeemable Capital Stock) of any Restricted Subsidiary held by the Company or any Restricted Subsidiary, (ii) all or substantially all of the Properties of the Company or any of its Restricted Subsidiaries or (iii) any other Properties of the Company or any of its Restricted Subsidiaries (including Production Payments and Reserve Sales) other than (a) a disposition of hydrocarbons or other mineral products (other than Production Payments and Reserve Sales), inventory, accounts receivable, cash, Cash Equivalents, Oil and Gas Hedging Contracts, Interest Rate Protection Obligations, or other property in the ordinary course of business, (b) any lease, abandonment, disposition, relinquishment or farm-out of any developed or undeveloped oil and gas Property in the ordinary course of business, (c) the liquidation of Property received in settlement of debts owing to the Company or any Restricted Subsidiary as a result of foreclosure, perfection or enforcement of any Lien or debt, which debts were owing to the Company or any Restricted Subsidiary in the ordinary course of business of the Company or such Restricted Subsidiary, (d) any transfer of Properties that are governed by, and made in accordance with, the provisions of Article 8 hereof, (e) any transfer of Properties if permitted under Section 10.10 hereof, (f) any Production Payment and Reserve Sales created, incurred, issued, assumed or guaranteed in connection with the financing of, and within 60 days after, the acquisition of the Property that is subject thereto, where the holder of such interest has recourse solely to such production or proceeds of production, subject to the obligation of the grantor or transferor to operate and maintain, or cause the subject interest to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental, title or other matters customary in the Oil and Gas Business, (g) swaps or exchanges by the Company or a Restricted Subsidiary of leases or producing properties and related or associated equipment, to the extent such swaps or exchanges are for equivalent values; or (h) any transfer, in one or a series of related transactions, of Properties having an aggregate Fair Market Value of less than $1,000,000 in any fiscal year. "Attributable Indebtedness" in respect of a Sale-Leaseback Transaction means, at the time of determination, the present value of such obligations implicit in such transaction, determined in accordance with GAAP. "Authorized Officers" means each or any one or more of the Chairman of the Board, the President or any Vice President and solely for purposes of attesting to, or certifying the authenticity of signatures, documents, instruments or agreements, Secretary or Assistant Secretary. "Average Life" means, with respect to any Indebtedness or Preferred Stock, as at any date of determination, the quotient obtained by dividing (i) the sum of the products of (a) the number of years (and any portion thereof rounded up to the nearest month) from the date of determination to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund or mandatory redemption payment requirements) of such Indebtedness or redemption or similar payment with respect to Preferred Stock multiplied by (b) the amount of each such payment by (ii) the sum of all such payments. "Board of Directors" means, with respect to the Company, either the board of directors of the Company or any duly authorized committee of such board of directors and, with respect to 3 any Subsidiary, either the board of directors of such Subsidiary or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by its Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee, and, with respect to a Subsidiary, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Subsidiary to have been duly adopted by its Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Saturday or Sunday, or a day on which banking institutions in The City of New York are authorized or required by law, regulation or executive order to remain closed. "Capitalized Lease Obligation" means, with respect to any Person, any obligation that is required to be classified and accounted for as a capital lease obligation under GAAP, and, for the purpose of this Indenture, the amount of such obligation at any date shall be the capitalized amount thereof at such date, determined in accordance with GAAP; the stated maturity thereof shall be the date of the last payment of any amount due under such obligation prior to the first date upon which such obligation may be terminated by the obligee without payment of penalty. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in or other equivalents in the equity interests (however designated) in such Person, and any rights (other than debt securities convertible into an equity interest), warrants or options exercisable for, exchangeable for or convertible into such an equity interest in such Person. "Cash Equivalents" means: (i) any evidence of Indebtedness with a maturity of 180 days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof); (ii) demand and time deposits and certificates of deposit or acceptances with a maturity of 180 days or less of any financial institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $500,000,000; (iii) commercial paper with a maturity of 180 days or less issued by a corporation that is not an Affiliate of the Company and is organized under the laws of any state of the United States or the District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any commercial bank meeting the specifications of clause (ii) above; (v) overnight bank deposits and bankers' acceptances at any commercial bank meeting the qualifications specified in clause (ii) above; (vi) deposits available for withdrawal on demand with any commercial bank not meeting the qualifications specified in clause (ii) above but which is organized under the laws of any country in which the Company or any Restricted Subsidiary maintains an office or is engaged in the Oil and Gas Business, provided that (A) all such deposits are required to be made in such accounts in the ordinary course of business, (B) such deposits do not at any one time exceed $5,000,000 in 4 the aggregate and (C) no funds so deposited remain on deposit in such bank for more than 30 days; (vii) deposits available for withdrawal on demand with any commercial bank not meeting the qualifications specified in clause (ii) above but which is a lending bank under any of the Company's or any Restricted Subsidiary's Credit Facilities, provided that all such deposits do not exceed $5,000,000 in the aggregate at any one time; and (viii) investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (i) through (v). "Change of Control" means the occurrence of any of the following events: (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of shares representing more than 50% of the total voting power of the then outstanding Voting Stock of the Company; (ii) the Company is merged with or into or consolidated with another Person and, immediately after giving effect to the merger or consolidation, (a) less than 50% of the total voting power of the outstanding Voting Stock of the surviving or resulting Person is then "beneficially owned" (within the meaning of Rule 13d-3 under the Exchange Act) in the aggregate by the stockholders of the Company immediately prior to such merger or consolidation, and (b) any "person" or "group" (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act) has become the direct or indirect "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the total voting power of the Voting Stock of the surviving or resulting Person; (iii) the Company, either individually or in conjunction with one or more Restricted Subsidiaries, sells, assigns, conveys, transfers, leases, or otherwise disposes of, or one or more Restricted Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of, all or substantially all of the Properties of the Company and the Restricted Subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of the Restricted Subsidiaries, to any "person" or "group" (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) (other than the Company or a Wholly Owned Restricted Subsidiary); (iv) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of the Company (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Company then in office; or (v) the liquidation or dissolution of the Company. "Change of Control Offer" means an offer to purchase upon the request of any Holder all or any part of the Notes of such Holder at the Change of Control Purchase Price on the Change of Control Payment Date within 30 days following any Change of Control. "Closing Date" means the date on which Notes are originally issued under the Indenture. "Clearstream" means Clearstream Banking, S.A. "Code" will mean the Internal Revenue Code of 1986, as amended, as now or hereafter in effect, together with all regulations thereunder issued by the Internal Revenue Service. 5 "Commission" or "SEC" means the Notes and Exchange Commission; as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this Indenture such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock" of any Person means Capital Stock of such Person that does not rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding-up of such Person, to shares of Capital Stock of any other class of such Person. "Company" means the Person named as the "Company" in the first paragraph of this Indenture, until a successor Person will have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" will mean such successor Person. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman, its President, any Vice President, its Treasurer or an Assistant Treasurer, and delivered to the Trustee. "Consolidated Fixed Charge Coverage Ratio" means, for any period, the ratio of (i) the sum of Consolidated Net Income, Consolidated Interest Expense, of Consolidated Income Tax Expense and Consolidated Non-cash Charges deducted in computing Consolidated Net Income, in each case, for such period, of the Company and its Restricted Subsidiaries on a consolidated basis, all determined in accordance with GAAP, decreased (to the extent included in determining Consolidated Net Income) by the sum of (a) the amount of deferred revenues that are amortized during such period and are attributable to reserves that are subject to Volumetric Production Payments and (b) amounts recorded in accordance with GAAP as repayments of principal and interest pursuant to Dollar-Denominated Production Payments, to (ii) the Consolidated Interest Expense for such period; provided, however, that: (a) the Consolidated Fixed Charge Coverage Ratio will be calculated on the assumption that (1) any Indebtedness to be incurred (and all other Indebtedness incurred after the first day of such period of four full fiscal quarters referred to in Section 10.11(1) hereof through and including the date of determination) and (if applicable) the application of the net proceeds therefrom (and from any other such Indebtedness), including to refinance other Indebtedness, had been incurred on the first day of such period and, in the case of Acquired Indebtedness or Indebtedness to be incurred in connection with an acquisition or other transaction, on the assumption that the related transaction (whether by means of purchase, merger or otherwise) also had occurred on such date with the appropriate adjustments with respect to such acquisition being included in such pro forma calculation and (2) any acquisition or disposition by the Company or any Restricted Subsidiary of any Properties outside the ordinary course of business, or any repayment of any principal amount of any Indebtedness of the Company or any Restricted Subsidiary prior to the Stated Maturity thereof, in either case since the first day of such period through and including the date of determination, had been consummated on such first day of such period; (b) in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness required to be computed on a pro forma basis in accordance with Section 10.11(1) hereof and (1) bearing a floating interest rate will be computed as if the rate in effect on the date of computation had been the applicable rate for the entire period and (2) which was not outstanding during the period for which the computation is being made but which bears, at the option of the Company, a fixed or floating 6 rate of interest, will be computed by applying, at the option of the Company, either the fixed or floating rate; (c) in making such computation, the Consolidated Interest Expense attributable to interest on any Indebtedness under a revolving credit facility required to be computed on a pro forma basis in accordance with Section 10.11(1) hereof will be computed based upon the average daily balance of such Indebtedness during the applicable period, provided that such average daily balance will be reduced by the amount of any repayment of Indebtedness under a revolving credit facility during the applicable period, which repayment permanently reduced the commitments or amounts available to be reborrowed under such facility; (d) notwithstanding clauses (b) and (c) of this proviso, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Rate Protection Obligations, will be deemed to have accrued at the rate per annum resulting after giving effect to the operation of such agreements; (e) in making such calculation, Consolidated Interest Expense will exclude interest attributable to Dollar-Denominated Production Payments; and (f) if after the first day of the period referred to in clause (i) of this definition the Company has retired any Indebtedness out of the net cash proceeds of the issue and sale of shares of Qualified Capital Stock of the Company within 30 days of such issuance and sale, Consolidated Interest Expense will be calculated on a pro forma basis as if such Indebtedness had been retired on the first day of such period. "Consolidated Income Tax Expense" means, for any period, the provision for federal, state, local and foreign income taxes (including state franchise taxes accounted for as income taxes in accordance with GAAP) of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense" means, for any period, without duplication, (i) the sum of (a) the interest expense of the Company and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP, including, without limitation, (1) any amortization of debt discount, (2) the net cost under Interest Rate Protection Obligations (including any amortization of discounts), (3) the interest portion of any deferred payment obligation constituting indebtedness, (4) all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and (5) all accrued interest, in each case to the extent attributable to such period, (b) to the extent any Indebtedness of any Person (other than the Company or a Restricted Subsidiary) is guaranteed by the Company or any Restricted Subsidiary, the aggregate amount of interest paid (to the extent not accrued in a prior period) or accrued by such other Person during such period attributable to any such Indebtedness, in each case to the extent attributable to that period, (c) the aggregate amount of the interest component of Capitalized Lease Obligations paid (to the extent not accrued in a prior period), accrued and/or scheduled to be paid or accrued by the Company and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP and (d) the aggregate amount of dividends paid (to the extent not accrued in a prior period) or accrued on Redeemable Capital Stock of the Company and its Restricted Subsidiaries, to the extent such Redeemable Capital Stock is owned by Persons other than the Company or its Restricted Subsidiaries and to the extent such dividends are not paid in Common Stock; less (ii) to the extent included in clause (i) above, amortization of capitalized debt issuance costs of the Company and its Restricted Subsidiaries during such period. 7 "Consolidated Net Income" means, for any period, the consolidated net income (or loss) of the Company and its Restricted Subsidiaries for such period as determined in accordance with GAAP, adjusted to the extent included in calculating such net income (or loss) by excluding, without duplication, (i) net after-tax extraordinary gains or losses (less all fees and expenses relating thereto), (ii) net after-tax gains or losses (less all fees and expenses relating thereto) attributable to Asset Sales, (iii) the net income (or net loss) of any Person (other than the Company or any of its Restricted Subsidiaries), in which the Company or any of its Restricted Subsidiaries has an ownership interest, except that the Company's or such Restricted Subsidiary's equity in the net income of such Person shall be included in Consolidated Net Income to the extent of the amount of dividends or other distributions or interest on indebtedness actually paid to the Company or any of its Restricted Subsidiaries in cash by such other Person during such period (regardless of whether such cash dividends, distributions or interest on indebtedness is attributable to net income (or net loss) of such Person during such period or during any prior period) and (iv) the net income of any Subsidiary Guarantor to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary is not at the date of determination permitted, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Worth" means, at any date, the consolidated stockholders' equity of the Company and its Restricted Subsidiaries less (without duplication) the amount of such stockholders' equity attributable to Redeemable Capital Stock or treasury stock of the Company and its Restricted Subsidiaries, as determined in accordance with GAAP. "Consolidated Non-cash Charges" means, for any period, the aggregate depreciation, depletion, amortization and other non-cash expenses of the Company and its Restricted Subsidiaries reducing Consolidated Net Income for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge that requires an accrual of or reserve for cash charges for any future period). "Corporate Trust Office" means the principal corporate trust office of the Trustee at which at any particular time its corporate trust business will be administered, which office at the date of execution of this Indenture is located at 101 Barclay Street, 8 W, New York, New York 10286. "Covenant Defeasance" has the meaning set forth in Section 12.3. "Credit Facilities" means, with respect to the Company, one or more debt facilities or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrower from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded or replaced or refinanced in whole or in part from time to time. "Credit Facility Agent" means the "Agent" or "Agents" under the 2004 Credit Facility or any other Credit Facilities, initially Wells Fargo Bank, N.A., and thereafter any Person 8 succeeding substantially to such function and notified to the Company as the Credit Facility Agent by the Person then acting in such capacity. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Defaulted Interest" has the meaning specified in Section 3.11 hereof. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 3.5 hereof, in the form of Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Disinterested Director" means, with respect to any transaction or series of transactions in respect of which the Board of Directors of the Company is required to deliver a Board Resolution hereunder, a member of the Board of Directors of the Company who does not have any material direct or indirect financial interest (other than in interest arising solely from the beneficial ownership of Capital Stock of the Company) in or with respect to such transaction or series of transactions. "Dollar-Denominated Production Payments" means production payment obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith. "Equity Offering" means a public or private sale for cash by the Company of its common stock, or options, warrants or rights with respect to its common stock, other than public offerings with respect to its common stock, options, warrants or rights, registered on Form S-4 or S-8. "Euroclear" means Euroclear SA/NV, as operator of the Euroclear system. "Event of Default" has the meaning specified in Section 5.1 hereof. "Excess PV-10 Value" means the greater of (i) the difference between (x) the PV-10 Value of the Company and its Subsidiaries as reported in the Company's most recent publicly filed financial statements minus (y) $325.0 million and (ii) 0. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor act thereto. "Exchange Notes" means the notes issued in the Exchange Offer pursuant to Section 3.5 hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. 9 "Exchange Offer Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Fair Market Value" means the fair market value of a Property (including shares of Capital Stock) as determined by the Board of Directors of the Company and evidenced by a Board Resolution in good faith, which determination will be conclusive for purposes of this Indenture; provided, however, that unless otherwise specified herein, the Board of Directors will be under no obligation to obtain any valuation or assessment from any investment banker, appraiser or other third party. "Federal Bankruptcy Code" means the United States Bankruptcy Code of Title 11 of The United States Code, as amended from time to time. "GAAP" means generally accepted accounting principles, consistently applied, that are set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States of America, which were effective as of the Closing Date. "Global Note Legend" means the legend set forth in Section 3.5(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto issued in accordance with Section 3.1, 3.5(b)(iv), 3.5(d)(ii), or 3.5(f) hereof. "Guarantee" means any obligation, contingent or otherwise, of any Person guaranteeing Indebtedness of another Person (including, without limitation, obligations, agreements to purchase assets, securities or services, to take-or-pay, or to maintain financial statement conditions, or similar arrangements or agreements entered into for the purpose of assuring the obligee of such Indebtedness of the payment thereof, including, without limiting the foregoing, the payment of amounts drawn down by letters of credit, or to protect such obligee against loss in respect thereof, in whole or in part), but excluding (i) endorsements of negotiable instruments for collection or deposit in the ordinary course of business, and (ii) contingent obligations in connection with the sale or discount of accounts receivable and similar paper; provided, however, that a Guarantee by any Person shall not include a contractual commitment by one Person to invest in another Person and provided further that such Investment is otherwise permitted by this Indenture. When used as a verb, "Guarantee" shall have a corresponding meaning. "Holder" means a Person in whose name a Note is registered in a Note Register. "Incur" has the meaning set forth in Section 10.11. "Indebtedness" means, with respect to any Person, without duplication: (i) all liabilities of such Person for borrowed money or for the deferred purchase price of Property or services (excluding any trade accounts payable and other accrued current liabilities incurred in the 10 ordinary course of business), and all liabilities of such Person incurred in connection with any letters of credit, bankers' acceptances or other similar credit transactions or any agreement to purchase, redeem, exchange, convert or otherwise acquire for value any Capital Stock of such Person or any warrants, rights or options to acquire such Capital Stock outstanding on the date of this Indenture or thereafter, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP; (ii) all obligations of such Person evidenced by bonds, notes, debentures or other similar instruments, if, and to the extent, any of the foregoing would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP; (iii) all indebtedness of such Person created or arising under any conditional sale, title retention or similar agreement with respect to Property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such Property), but excluding trade accounts payable arising in the ordinary course of business; (iv) all Capitalized Lease Obligations of such Person; (v) all obligations of such Person under or in respect of currency exchange contracts, Oil and Gas Hedging Contracts and Interest Rate Protection Obligations; (vi) all indebtedness referred to in the preceding clauses of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of such Indebtedness has an existing right to be secured by) any Lien upon Property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such Property or the amount of the obligation so secured); (vii) all Redeemable Capital Stock of such Person valued at the greater of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends; (viii) all guarantees by such Person of Indebtedness referred to in this definition (including, with respect to any Production Payment and Reserve Sales, any warranties or guaranties of production or payment by such Person with respect to such Production Payment and Reserve Sales, but excluding other contractual obligations of such Person with respect to such Production Payment and Reserve Sales); and (ix) all obligations of such Person under or in respect of currency exchange contracts, oil and natural gas price hedging arrangements and Interest Rate Protection Obligations. For purposes hereof, the "maximum fixed repurchase price" of any Redeemable Capital Stock which does not have a fixed repurchase price will be calculated in accordance with the terms of such Redeemable Capital Stock as if such Redeemable Capital Stock were purchased on any date on which Indebtedness will be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Redeemable Capital Stock, such Fair Market Value will be determined in good faith by the board of directors of the issuer of such Redeemable Capital Stock; provided, however, that if such Redeemable Capital Stock is not at the date of determination permitted or required to be repurchased, the "maximum fixed repurchase price" will be the book value of such Redeemable Capital Stock. Subject to clause (viii) of the first sentence of this definition, neither Dollar-Denominated Production Payments nor Volumetric Production Payments will be deemed to be Indebtedness. "Indenture" means this instrument as originally executed and as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. 11 "Initial Notes" means the 9 7/8% Senior Notes due 2011 authenticated and delivered under this Indenture. "Insolvency" or "Liquidation Proceeding" mean, with respect to any Person, (i) an insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or similar case or proceeding in connection therewith, relative to such Person or its creditors, as such, or its assets or (ii) any liquidation, dissolution or other winding-up proceeding of such Person, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (iii) any assignment for the benefit of creditors or any other marshaling of assets and liabilities of such Person. "Interest Payment Date" means the Stated Maturity of an installment of interest on the Notes. "Interest Rate Protection Obligations" means the obligations of any Person pursuant to any arrangement with any other Person whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such Person calculated by applying a fixed or a floating rate of interest on the same notional amount and will include, without limitation, interest rate swaps, caps, floors, collars and similar agreements or arrangements designed to protect against or manage such Person's and any of its Subsidiaries' exposure to fluctuations in interest rates. "Investment" means, with respect to any Person, any direct or indirect advance, loan, guarantee of Indebtedness or other extension of credit or capital contribution to (by means of any transfer of cash or other Property to others or any payment for Property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities (including derivatives) or evidences of Indebtedness issued by, any other Person. In addition: (i) the Fair Market Value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary will be deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary at such time; and (ii) the Fair Market Value of Capital Stock retained by the Company or a Restricted Subsidiary in connection with the sale or issuance of Capital Stock of a Restricted Subsidiary in accordance with Section 10.13 hereof that, as a result of such transaction, is no longer a Restricted Subsidiary will be deemed to be an "Investment" made at the time of such transaction. "Investments" will exclude: (a) extensions of trade credit under a joint operating agreement or otherwise in the ordinary course of business, workers' compensation, utility, lease and similar deposits and prepaid expenses in the ordinary course of business; (b) Interest Rate Protection Obligations entered into in the ordinary course of business or as required by any Permitted Indebtedness or any other Indebtedness incurred in compliance with Section 10.11 hereof, but only to the extent that the stated aggregate notional amounts of such Interest Rate Protection Obligations do not exceed 105% of the aggregate principal amount of such Indebtedness to which such Interest Rate Protection obligations relate; (c) bonds, notes, debentures or other securities received as a result of Asset Sales permitted under Section 10.16 hereof; and (d) endorsements of negotiable instruments and documents in the ordinary course of business. 12 "Legal Defeasance" has the meaning set forth in Section 12.2. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Initial Notes for use by such Holders in connection with the Exchange Offer. "Lien" means any mortgage, charge, pledge, lien (statutory or other), security interest, hypothecation, assignment for security, claim, or preference or priority or other encumbrance or similar agreement or preferential arrangement of any kind or nature whatsoever, whether or not filed, recorded or otherwise perfected under applicable law, (including, without limitation, any agreement to give or grant a Lien or any lease, conditional sale, title retention or similar agreement having substantially the same economic effect as any of the foregoing) upon or with respect to any Property of any kind. A Person will be deemed to own subject to a Lien any Property that such Person has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement. "Liquidated Damages" means all additional interest then owing pursuant to Section 3 of the Registration Rights Agreement. "Material Subsidiary" means, at any particular time, any Restricted Subsidiary that, together with its Subsidiaries, (a) accounted for more than 5% of the consolidated revenues of the Company and its Restricted Subsidiaries for the most recently completed fiscal year of the Company, or (b) was the owner of more than 5% of the consolidated assets of the Company and its Restricted Subsidiaries at the end of such fiscal year, all as shown in the case of (a) and (b) on the consolidated financial statements of the Company and its Restricted Subsidiaries for such fiscal year. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, with respect to any Asset Sale by any Person, the aggregate proceeds thereof in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (except to the extent that such obligations are financed or sold with recourse to the Company or any Restricted Subsidiary), pursuant to, or monetization of, a note or installment receivable or otherwise, net of: (i) brokerage commissions and other fees and expenses (including without limitation fees and expenses of legal counsel and investment banks) incurred by such Person related to such Asset Sale; (ii) the amount of any Indebtedness (including Redeemable Capital Stock or Preferred Stock of a subsidiary) that is required to be repaid by such Person or its Affiliates in connection with such Asset Sale; (iii) provisions for all taxes, including income taxes, payable as a result of such Asset Sale or attributable to required prepayments or repayments of Indebtedness with the proceeds of such Asset Sale; (iv) amounts required to be paid to any Person or its Affiliates (other than the Company or any Restricted Subsidiary) owning a beneficial interest in the assets subject to the Asset Sale or to holders of minority interests in a Restricted Subsidiary or other entity as a result of such Asset Sale; and (v) appropriate amounts to be provided by the Company or any Restricted Subsidiary, as the case may be, as a reserve in accordance with GAAP applied against any liabilities associated with such Asset Sale and retained by the Company or any Restricted Subsidiary, as the case may be, 13 after such Asset Sale, including, without limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers' Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Cash Proceeds. "Non-Recourse Indebtedness" means Indebtedness of the Company or any Restricted Subsidiary incurred in connection with the acquisition by the Company or such Restricted Subsidiary of any property with respect to which: (i) the holders of such Indebtedness agree that they will look solely to the property so acquired and securing such indebtedness, and neither the Company nor any Restricted Subsidiary (a) provides direct or indirect credit support, including any undertaking, agreement or instrument that would constitute Indebtedness (other than the grant of a Lien on such acquired property) or (b) is directly or indirectly liable for such indebtedness; and (ii) no default with respect to such Indebtedness would cause, or permit (after notice or passage of time or otherwise), according to the terms thereof, any holder (or any representative of any such holder) of any other Indebtedness of the Company or a Restricted Subsidiary to declare a default on such other indebtedness or cause the payment, repurchase, redemption, defeasance or other acquisition or retirement for value thereof to be accelerated or payable prior to any scheduled principal payment, scheduled sinking fund payment or maturity. "Notes" means the Initial Notes and the Exchange Notes, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Note Register" means the register maintained by or for the Company in which the Company will provide for the registration of the Notes and transfer of the Notes. "Officer" means, with respect to any Person, the Chairman of the Board, the President, any Vice President, the Chief Financial Officer or the Treasurer of such Person. "Officers' Certificate" means a certificate signed by two Authorized Officers of the Company, and delivered to the Trustee. "Oil and Gas Business" means: (i) the acquisition, exploration, development, operation and disposition of interests in oil, gas and other hydrocarbon Properties; (ii) the gathering, marketing, treating, processing, storage, selling and transporting of any production from such interests or Properties; (iii) any business relating to or arising from exploration for or development, production, treatment, processing, storage, transportation or marketing of oil, gas, hydrocarbons and other minerals and products produced in association therewith; (iv) any business relating to oil field sales and service; and (v) any activity necessary, appropriate or incidental to the activities described in the foregoing clauses (i) through (iv) of this definition. "Oil and Gas Hedging Contracts" means, with respect to the Company or its Restricted Subsidiaries, any agreement or arrangement, or any combination thereof, relating to hydrocarbon prices, transportation or basis costs or differentials or other similar financial factors, that is customary in the Oil and Gas Business and is entered into in the ordinary course of business for the purpose of limiting or managing risks associated with fluctuations in such prices, costs, differentials or similar factors and not for the purpose of speculation. 14 "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company (or any Subsidiary Guarantor), including an employee of the Company (or any Subsidiary Guarantor), and who will be reasonably acceptable to the Trustee. "Outstanding," when used with respect to Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except: (a) Notes theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Notes, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company will act as its own Paying Agent) for the Holders of such Notes, provided that, if such Notes are to be redeemed, notice of such redemption has been duly given Pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (c) Notes, except to the extent provided in Sections 12.2 and 12.3 hereof, with respect to which the Company has effected Legal Defeasance or Covenant Defeasance as provided in Article 12 hereof; and (d) Notes which have been paid pursuant to Article 3 hereof or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there will have been presented to the Trustee proof satisfactory to it that such securities are held by a bona fide purchaser in whose hands the Notes are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Notes have given any request, demand, authorization, direction, consent, notice or waiver hereunder, and for the purpose of making the calculations required by TIA Section 313, Notes owned by the Company, any Subsidiary Guarantor or any other obligor upon the Notes or any Affiliate of the Company, any Subsidiary Guarantor or such other obligor will be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee will be protected in making such calculation or in relying upon any such request, demand, authorization, direction, consent, notice or waiver, only Notes which a Responsible Officer of the Trustee actually knows to be so owned will be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Notes and that the pledgee is not the Company, any Subsidiary Guarantor or any other obligor upon the Notes or any Affiliate of the Company, any Subsidiary Guarantor or such other obligor. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Clearstream). "Paying Agent" means any Person (including the Company acting as Paying Agent) authorized by the Company to pay the principal of (and premium, if any, on), interest or Liquidated Damages, if any, on any Notes on behalf of the Company. 15 "Permitted Indebtedness" means any of the following: (a) Indebtedness under the Credit Facilities in an aggregate principal amount at any one time outstanding not to exceed $75,000,000 (less the aggregate amount of all Net Cash Proceeds of Asset Sales applied to repay or prepay permanently any such Indebtedness under the 2004 Credit Facility in accordance with Section 10.16 hereof) plus (ii) 40% of Excess PV-10 Value plus (iii) 40% of PV-10 Value attributable to acquisition since the date of the Company's most recent publicly filed financial statements, and any guarantee of any such Indebtedness (including by any Subsidiary) and any fees, premiums, expenses (including costs of collection), indemnities and other amounts payable in connection with such Indebtedness; (b) Indebtedness under the Notes and the Subsidiary Guarantees; (c) Indebtedness outstanding on the date of this Indenture (and not repaid or defeased with the proceeds of the offering of the Notes) and the 2001 Notes; provided, however that the 2001 Notes shall be repaid or defeased with the proceeds of the offering of the Notes on or prior to the date 90 days after the Closing Date); (d) obligations of the Company or a Restricted Subsidiary pursuant to Interest Rate Protection Obligations, but only to the extent that the stated aggregate notional amounts of such obligations do not exceed 105% of the aggregate principal amount of the Indebtedness covered by such Interest Rate Protection Obligations; obligations under currency exchange contracts entered into in the ordinary course of business; and obligations under Oil and Gas Contracts; (e) Indebtedness of the Company owed to a Wholly Owned Restricted Subsidiary and Indebtedness of a Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary; provided, however, that such Indebtedness is owned beneficially by the Company or such Restricted Subsidiary and constitutes Subordinated Indebtedness; provided further, that the incurrence of such Indebtedness is in accordance with Section 10.10; and provided further, that upon any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Wholly Owned Restricted Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Company or a Wholly Owned Restricted Subsidiary), such Indebtedness will be deemed, in each case, to be incurred and will be treated as an incurrence for purposes of Section 10.10 and Section 10.11 at the time the Wholly Owned Restricted Subsidiary in question ceased to be a Wholly Owned Restricted Subsidiary; (f) in-kind obligations relating to net gas balancing positions arising in the ordinary course of business and consistent with past practice; (g) Indebtedness in respect of bid, performance or surety bonds issued for the account of the Company or any Restricted Subsidiary in the ordinary course of business, including guarantees and letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); (h) any guarantee of Indebtedness incurred in compliance with Section 10.11 hereof, by a Restricted Subsidiary or the Company; 16 (i) any renewals, substitutions, financings or replacements (each, for purposes of this clause, a "refinancing") by the Company or a Restricted Subsidiary of any Indebtedness incurred pursuant to clause (b) or (c) of this definition, including any successive refinancings by the Company or such Restricted Subsidiary not incurred in violation of this Indenture, so long as (1) any such refinancing will be in a principal amount that does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) so refinanced plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company or such Restricted Subsidiary as necessary to accomplish such refinancing, plus the amount of expenses of the Company or such Restricted Subsidiary incurred in connection with such refinancing, and (2) in the case of any refinancing of Indebtedness of the Company that is not Subordinated Indebtedness, such new Indebtedness shall rank no more senior than and shall be at least as subordinated in right of payment to the Notes as the Indebtedness being refinanced and (3) such new Indebtedness has an Average Life equal to or greater than the Average Life of the Indebtedness being refinanced and a final Stated Maturity not earlier than the final Stated Maturity of the Indebtedness being refinanced; and (j) any Indebtedness incurred to finance unpaid insurance premiums, provided, however, that recourse with respect to such Indebtedness is limited to the insurance policies with respect to which premiums have been financed; and (k) any Indebtedness in addition to that described in clauses (a) through (j) above so long as the aggregate principal amount of such Indebtedness incurred is not in excess of $10,000,000 at any one time outstanding. "Permitted Investments" means any of the following: (i) Investments in Cash Equivalents; (ii) Investments in the Company or any of its Restricted Subsidiaries; (iii) Investments by the Company or any of its Restricted Subsidiaries in another Person, if as a result of such Investment (a) such other Person becomes a Restricted Subsidiary or (b) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its Properties to the Company or a Restricted Subsidiary; (iv) Investments and expenditures made in the ordinary course of, and of a nature that is or will have become customary in, the Oil and Gas Business as a means of actively exploiting, exploring for, acquiring, developing, processing, gathering, marketing or transporting oil and gas through agreements, transactions, interests or arrangements which permit a Person to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of the Oil and Gas Business jointly with third parties, including, without limitation, (a) ownership interests in oil and gas properties or gathering systems and (b) Investments and expenditures in the form of or pursuant to operating agreements, processing agreements, farm-in agreements, farm-out agreements, development agreements, area of mutual interest agreements, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, joint venture agreements, partnership agreements (whether general or limited), limited liability company agreements, subscription agreements, stock purchase agreements and other similar agreements with third parties (including Unrestricted Subsidiaries); (v) entry into any hedging arrangements in the ordinary course of business for the purpose of protecting the Company's or 17 any Restricted Subsidiary's production against fluctuations in oil or natural gas prices; (vi) entry into any currency exchange contract in the ordinary course of business; and (vii) Investments in stock, obligations or securities received in settlement of debts owing to the Company or a Restricted Subsidiary as a result of bankruptcy or insolvency proceedings or upon the foreclosure, perfection or enforcement of any Lien in favor of the Company or a Restricted Subsidiary, in each case as to debt owing to the Company or a Restricted Subsidiary that arose in the ordinary course of business of the Company or any such Restricted Subsidiary. "Permitted Liens" means any and all of the following: (a) Liens existing as of the Closing Date; (b) Liens securing the Notes, the Subsidiary Guaranties and other obligations arising under the Indenture; (c) Liens securing Credit Facilities; (d) any Liens existing on any property of a Person at the time such Person is merged or consolidated with or into the Company or a Subsidiary Guarantor or becomes a Restricted Subsidiary that is a Subsidiary Guarantor (and not incurred in anticipation of such transaction), provided that such Liens are not extended to other Property of the Company or the Subsidiary Guarantors; (e) any Lien existing on any Property at the time of the acquisition thereof (and not incurred in anticipation of such transaction), provided that such Liens are not extended to other Property of the Company or the Subsidiary Guarantors; (f) Liens securing the performance of Oil and Gas Hedging Contracts and Interest Rate Protection Obligations; (g) Liens in favor of Persons financing unpaid insurance premiums, provided, however, such Liens are limited to insurance policies with respect to which premiums are financed; (h) Liens to secure any permitted extension, renewal, refinancing, refunding or exchange (or successive extensions, renewals, refinancings, refundings or exchanges), in whole or in part, of or for any indebtedness secured by Liens referred to in clauses (a), (b), (c) and (d) above; provided, however, that (1) such new Lien will be limited to all or part of the same Property that secured the original Lien, plus improvements on such property and (2) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (x) the outstanding principal amount of the indebtedness secured by such original Lien immediately prior to such extension, renewal, refinancing, refunding or exchange and (y) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; and (i) Liens in favor of the Company or a Subsidiary Guarantor. 18 "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Note" of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.3 hereof in exchange for a mutilated Note or in lieu of a lost, destroyed or stolen Note will be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note. "Preferred Stock" as applied to the Capital Stock of any Person, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends or distributions, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of Capital Stock of any other class of such Person. "Private Placement Legend" means the legend set forth in Section 3.5(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Production Payments and Reserve Sales" means the grant and transfer to any Person of a Dollar-Denominated Production Payment, Volumetric Production Payment, royalty, overriding royalty, net profits interest, master limited partnership interest or other interest in oil and natural gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties. "PV-10 Value" means with respect to the properties and assets of the Company and its Restricted Subsidiaries used in the Oil and Gas Business, the sum of the present values of the amount of net revenues before income taxes expected to be received from such properties and assets adjusted as follows: (i) the net revenue amount shall be adjusted to reflect the weighted average fair market value of unrealized losses or gains under Oil and Gas Hedging Contracts, and (ii). the present value of net revenue amounts shall be determined by discounting each such net revenue amount at a rate of 10% per annum in accordance with SEC guidelines. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock in any other Person. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Qualified Capital Stock" of any Person means any and all Capital Stock of such Person other than Redeemable Capital Stock. "Record Date" means a Regular Record Date or a Special Record Date. "Redeemable Capital Stock" means any Capital Stock that, either by its terms, by the terms of any security into which it is convertible or exchangeable or by contract or otherwise, is, or upon the happening of an event or passage of time would be, required to be redeemed prior to the final Stated Maturity of the Notes or is redeemable at the option of the holder thereof at any 19 time prior to such final Stated Maturity, or is convertible into or exchangeable for debt securities at any time prior to such final Stated Maturity. "Redemption Date," when used with respect to any Note to be redeemed, in whole or in part, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Note to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of April 8, 2004, by and among the Company, the Subsidiary Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "Regular Record Date" for the interest payable on any Interest Payment Date means the March 15 or September 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "Regulation S Temporary Global Note" means a temporary global Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Responsible Officer," when used with respect to the Trustee, means any officer in the corporate trust department of the Trustee, and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Period" means the 40-day restricted period as defined in Regulation S. 20 "Restricted Subsidiary" means any Subsidiary of the Company, whether existing on or after the date of this Indenture, unless such Subsidiary of the Company is an Unrestricted Subsidiary or is designated as an Unrestricted Subsidiary pursuant to the terms of this Indenture. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "S&P" means Standard and Poor's Ratings Service, a division of McGraw-Hill, Inc., and its successors. "Second Lien Term Loan Agreement" means that certain second lien term loan agreement, dated as of the Closing Date, among the Company, certain Subsidiaries of the Company, the collateral agent, and certain lenders named therein, as the same may be amended, modified, supplemented, extended, restated, replaced, renewed or refinanced from time to time. "Securities Act" means the Securities Act of 1933, as amended. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Article 3 hereof. "Stated Maturity" means, when used with respect to any Note or any installment of interest thereon, the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable, and, when used with respect to any other Indebtedness or any installment of interest thereon, means the date specified in the instrument evidencing or governing such Indebtedness as the fixed date on which the principal of such Indebtedness or such installment of interest is due and payable. "Subordinated Indebtedness" means Indebtedness of the Company that is expressly subordinated in right of payment to the Notes. "Subsidiary" means, with respect to any Person, (i) a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) including, without limitation, a joint venture, in which such Person, one or more Subsidiaries thereof or such Person and one or more Subsidiaries thereof, directly or indirectly, at the date of determination thereof, have at least majority ownership interest entitled to vote in the election of directors, managers or trustees thereof (or other Persons performing similar functions). 21 "Subsidiary Guarantee" means any Guarantee of the Notes by any Subsidiary Guarantor, as specified in Section 13.1 hereof. "Subsidiary Guarantor" means (i) Black Hawk Oil Company, a Delaware corporation, Mission Holdings LLC, a Delaware limited liability company and Mission E&P Limited Partnership, a Texas limited partnership, (ii) each of the other Restricted Subsidiaries, if any, executing a supplemental indenture in compliance with the provisions of Section 10.12 hereof, and (iii) any Person that becomes a successor guarantor of the Notes in compliance with the provisions of Section 13.2 hereof. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as amended and in force at the date as of which this Indenture was executed, except as provided in Section 9.5 hereof. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee will have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" will mean such successor Trustee. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Global Note" means a permanent global security in the form of Exhibit A-1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Subsidiary" means: (i) any Subsidiary of the Company that at the time of determination is designated an Unrestricted Subsidiary by the Board of Directors of the Company as provided below; and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company may designate any Subsidiary of the Company as an Unrestricted Subsidiary so long as: (a) neither the company nor any Restricted Subsidiary is directly or indirectly liable pursuant to the terms of any Indebtedness of such Subsidiary; (b) no default with respect to any Indebtedness of such Subsidiary would permit (upon notice, lapse of time or otherwise) any holder of any other Indebtedness of the Company or any Restricted Subsidiary to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its Stated maturity; (c) neither the Company nor any Restricted Subsidiary has made an Investment in such Subsidiary unless the aggregate amount of all Investments made in such Subsidiary by the Company and any such Restricted Subsidiary would be permitted to be made on the date of such designation pursuant to, and in accordance with, Section 10.10 hereof (other than Investments in the ordinary course of the Oil and Gas Business as described in clause (iv) of the definition of Permitted Investments); and (d) such designation will not result in the creation or imposition of any Lien on any of the Properties of the Company or any Restricted Subsidiary (other than any Permitted Lien or any Lien the creation or imposition of which will have been in compliance with Section 10.14 hereof); provided, however, that with respect to clause (a), the Company or a Restricted Subsidiary may be liable for Indebtedness of an Unrestricted Subsidiary if (x) such liability constituted a Permitted Investment or a Restricted 22 Payment permitted by Section 10.10 hereof, in each case at the time of incurrence, or (y) the liability would be a Permitted Investment at the time of designation of such Subsidiary as an Unrestricted Subsidiary. Any such designation by the Board of Directors of the Company will be evidenced to the Trustee by filing a Board Resolution with the Trustee giving effect to such designation. The Board of Directors of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary if, immediately after giving effect to such designation, (i) no Default or Event of Default will have occurred and be continuing, (ii) the Company could Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under Section 10.11(1) hereof and (iii) if any of the Properties of the Company or any of its Restricted Subsidiaries would upon such designation become subject to any Lien (other than a Permitted Lien), the creation or imposition of such Lien will have been in compliance with Section 10.14 hereof. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Vice President" when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "Volumetric Production Payments" means production payment obligations recorded as deferred revenue in accordance with GAAP, together with all undertakings and obligations in connection therewith. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes will have, or might have, voting power by reason of the happening of any contingency). "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the extent (i) all of the Capital Stock or other ownership interests in such Restricted Subsidiary, other than any directors' qualifying shares mandated by applicable law, is owned directly or indirectly by the Company or (ii) such Restricted Subsidiary is organized in a foreign jurisdiction and is required by the applicable laws and regulations of such foreign jurisdiction to be partially owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Restricted Subsidiary to transact business in such foreign jurisdiction, provided that the Company, directly or indirectly, owns the remaining Capital Stock or ownership interest in such Restricted Subsidiary and, by contract or otherwise, controls the management and business of such Restricted Subsidiary and derives the economic benefits of ownership of such Restricted Subsidiary to substantially the same extent as if such Restricted Subsidiary were a wholly owned Subsidiary. 1.2 OTHER DEFINITIONS.
DEFINED TERM IN SECTION - ------------ ---------- "Agent Members" 3.13 "Change of Control Notice" 10.15(b)
23
DEFINED TERM IN SECTION - ------------ ---------- "Change of Control Offer" 10.15(a) "Change of Control Payment Date" 10.15(a) "Change of Control Purchase Price" 10.15(a) "Defaulted Interest 3.11 "DTC" 3.3.1 "Excess Proceeds" 10.16(b) "Funding Guarantor" 13.5 "Net Proceeds Deficiency" 10.16(c)(ii) "Net Proceeds Offer" 10.16(c)(i) "Net Proceeds Payment Date" 10.16(c)(iv) "Note Registrar" 3.3.1 "Offered Price" 10.16(c)(ii) "Payment Amount" 10.16(c)(i) "Purchase Notice" 10.16(c)(i) "Restricted Payment" 10.10(a)(v) "Surviving Entity" 8.1(A)(1)(b) "Trigger Date" 10.16(c) "U.S. Government Obligations" 12.4(a)
1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security holder" means a Holder; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the indenture securities means the Company or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rules and not otherwise defined herein have the meanings assigned to them therein. 1.4 RULES OF CONSTRUCTION. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) The terms defined in this Article 1 have the meanings assigned to them in this Article 1, and include the plural as well as the singular; 24 (b) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (c) the words "herein," "hereof," and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (d) the masculine gender includes the feminine and the neuter; (e) provisions apply to successive events and transactions; and (f) references to agreements and other instruments include subsequent amendments and waivers but only to the extent not prohibited by this Indenture. 1.5 ONE CLASS OF SECURITIES The Initial Notes and the Exchange Notes shall vote and consent together on all matters as one class and neither the Initial Notes nor the Exchange Notes shall have the right to vote or consent as a separate class on any matter. ARTICLE 2 [RESERVED] ARTICLE 3 THE NOTES 3.1 TITLE AND TERMS; FORM AND DATING (a) General. The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture for original issue is limited to $130,000,000. The Notes will be known and designated as the "9 7/8% Senior Notes Due 2011," of the Company. The Stated Maturity of the Notes will be April 1, 2011, and they will bear interest at the rate of 9 7/8% per annum from April 8, 2004, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, payable semiannually on April 1 and October 1 in each year, commencing October 1, 2004, and at said Stated Maturity, until the principal thereof is paid or duly provided for. The Notes will be redeemable as provided in Article 11 hereof. The Notes will be subject to defeasance at the option of the Company as provided in Article 12 hereof. The Notes will be guaranteed by the Subsidiary Guarantors as provided in Article 13 hereof. The Notes will be senior in right of payment to the Company's existing and future Subordinated Indebtedness. 25 The Initial Notes and the Exchange Notes (including the notations thereon relating to the Subsidiary Guarantees) and the Trustee's certificate of authentication) will be issued substantially in the form of Exhibit A hereto. Any Note that is a Restricted Definitive Note or a Restricted Global Notes shall bear a Private Placement Legend as set forth in Section [3.5(g)(i)]. Any portion of the text of any Note may be set forth on the reverse thereof. The Notes may also have set forth on the reverse side thereof a form of assignment and forms to elect purchase by the Company pursuant to Section 10.15 or 10.16 hereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Subsidiary Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. The Notes will be printed, lithographed or engraved on steel-engraved borders or may be produced in any other manner, all as determined by the officers executing such Notes, or notations of Subsidiary Guarantees, as the case may be, as evidenced by their execution of such Notes or notations of Subsidiary Guarantees, as the case may be. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A-1 or A-2 (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased (subject to the limitation set forth in Section 3.1(a)), as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee as custodian for the Depositary in accordance with written instructions given by the Holder thereof as required by Section 3.5 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its New York City office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Clearstream, duly executed 26 by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Clearstream certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 3.5(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear, Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream. 3.2 DENOMINATIONS The Notes will be issuable only in denominations of $1,000 and any integral multiple thereof. 3.3 EXECUTION AND AUTHENTICATION The Notes will be executed on behalf of the Company by its Chairman, its President or a Vice President of the Company and attested by its Secretary or an Assistant Secretary of the Company. The signature of any two of these Officers on the Notes may be manual or facsimile signatures of the present or any future such Authorized Officer and may be imprinted or otherwise reproduced on the Notes. Notes bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company will bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. At any time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company and having the notations of Subsidiary Guarantees executed by the Subsidiary Guarantors to the Trustee for authentication, together with a Company Order signed by two officers of the Company (the "Authentication Order") for the authentication and delivery of such Notes, and the Trustee, in accordance with such Company Order, will 27 authenticate and deliver such Notes for original issue up to the aggregate principal amount of $130,000,000 with the notations of Subsidiary Guarantees thereon as provided in this Indenture. No Note will be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Trustee by manual signature of the Trustee and such certificate upon any Note will be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. In case the Company, pursuant to and in compliance with Article 8 hereof, will be consolidated or merged with or into any other Person or will sell, convey, transfer, lease or otherwise dispose of all or substantially all of its Properties to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Company will have been merged, or the Person which will have received a sale, conveyance, transfer, lease or other disposition as aforesaid, will have executed an indenture supplemental hereto with the Trustee pursuant to Article 8 hereof, any of the Notes authenticated or delivered prior to such sale, consolidation, merger, conveyance, transfer, lease or other disposition may, from time to time, at the request of the successor Person be exchanged for other Notes executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the securities surrendered for such exchange and of like principal amount; and the Trustee, upon Company Request of the successor Person, will authenticate and deliver Notes as specified in such request for the purpose of such exchange. If Notes will at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, will provide for the exchange of all Notes at the time Outstanding for Notes authenticated and delivered in such new name. The Trustee may (at the expense of the Company) appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company and has the same protections under Article 6 herein. 3.3.1 NOTE REGISTRAR AND PAYING AGENT The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Note Registrar") and an office or agency where Notes may be presented for payment. The Note Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more paying agents. The term "Note Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Note Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Note Registrar or Paying Agent, the Trustee shall act as such. The 28 Company, any of its Subsidiaries or any Subsidiary Guarantor may act as Paying Agent or Note Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Note Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. 3.4 PERSONS DEEMED OWNERS AND HOLDERS LISTS Prior to the due presentment of a Note for registration of transfer, the Company, the Subsidiary Guarantors, the Note Registrar, the Trustee and any agent of the Company, the Subsidiary Guarantors or the Trustee may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of (and premium, if any, on) and (subject to Section 3.11 hereof) interest and Liquidated Damages, if any, on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and none of the Company, the Subsidiary Guarantors, the Note Registrar, the Trustee or any agent of the Company, the Subsidiary Guarantors or the Trustee will be affected by notice to the contrary. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is not the Note Registrar, the Company shall furnish to the Trustee at least seven Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA (S) 312(a). 3.5 TRANSFER AND EXCHANGE (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes will be exchanged by the Company for Definitive Notes if (i) the Company delivers to the Trustee written notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary or (ii) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; provided that in no event shall the Regulation S Temporary Global Note be exchanged by the Company for Definitive Notes prior to (x) the expiration of the Restricted Period and (y) the receipt by the Note Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the preceding events in (i) or (ii) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee in writing. Global Notes also may be exchanged or replaced, in whole or in part, as provided in 29 Sections 3.6 and 3.9 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 3.5 or Section 3.6 or 3.9 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 3.5(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 3.5(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (i) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend; provided, however, that prior to the expiration of the Restricted Period, transfers of beneficial interests in the Temporary Regulation S Global Note may not be made to a U.S. Person or for the account or benefit of a U.S. Person (other than the Initial Purchaser). Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Note Registrar to effect the transfers described in this Section 3.5(b)(i). (ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 3.5(b)(i) above, the transferor of such beneficial interest must deliver to the Note Registrar either (A) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase or (B) (1) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged and (2) instructions given by the Depositary to the Note Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; provided that in no event shall Definitive securities be issued upon the transfer or exchange of beneficial interests in the Regulation S Temporary Global Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Note Registrar of any 30 certificates required pursuant to Rule 903 under the Securities Act. Upon consummation of an Exchange Offer by the Company in accordance with Section 3.5(f) hereof, the requirements of this Section 3.5(b)(ii) shall be deemed to have been satisfied upon receipt by the Note Registrar of the instructions contained in the Letter of Transmittal delivered by the holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 3.5(h) hereof. (iii) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 3.5(b)(ii) above and the Note Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Temporary Global Note or the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. (iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in the Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 3.5(b)(ii) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Note Registrar receives the following: 31 (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Note Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Note Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 3.3 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (i) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Note Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the 32 Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 3.5(h) hereof, and the Company shall execute and the Trustee shall upon receipt of an Authentication Order authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 3.5(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Note Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall (at the expense of the Company) deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 3.5(c)(i) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (ii) Notwithstanding Sections 3.5(c)(i)(A) and (C) hereof, a beneficial interest in the Regulation S Temporary Global Note may not be exchanged for a Definitive Note or transferred to a Person who takes delivery thereof in the form of a Definitive Note prior to (x) the expiration of the Restricted Period and (y) the receipt by the Note Registrar of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Securities Act other than Rule 903 or Rule 904. (iii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case 33 of a transfer, certifies in the Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Note Registrar receives the following: (1) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (2) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a Definitive Note that does not bear the Private Placement Legend, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof, and, in each such case set forth in this subparagraph (D), if the Note Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Note Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 3.5(b)(ii) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 3.5(h) hereof, and the Company shall execute and the Trustee shall upon receipt of an Authentication Order authenticate and (at the expense of the Company) deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 3.5(c)(iv) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Note Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall (at the expense of the Company) deliver such Definitive Notes to the Persons in whose names such Notes are so registered. 34 Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 3.5(c)(iv) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. (i) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Note Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144 under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (F) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (ii) Restricted Definitive Note to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: 35 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Note Registrar receives the following: (1) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (2) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Note Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Note Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 3.5(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a written request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. 36 If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraph (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 3.3 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 3.5(e), the Note Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Note Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Note Registrar duly executed by such Holder or by his attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 3.5(e). (i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Note Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A under the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person participating in the distribution of the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule 144) of the Company; 37 (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Note Registrar receives the following: (1) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (2) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Note Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Note Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Note Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 3.3, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the Letters of Transmittal that (x) they are not broker-dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and (at the expense of the 38 Company) deliver to the Persons designated by the Holders of Definitive securities so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (i) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE 39 ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S AND THE NOTE REGISTRAR'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraph (b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 3.5 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 3.10 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE 40 HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. PRIOR TO EXPIRATION OF THE 40-DAY DISTRIBUTION COMPLIANCE PERIOD (AS DEFINED IN REGULATION S ("REGULATION S") UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED IN REGULATION S), EXCEPT TO A PERSON REASONABLY BELIEVED TO BE A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ("RULE 144A") UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A AND THE INDENTURE REFERRED TO HEREIN OR AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 3.10 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of securities represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (A) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 3.3 hereof or upon receipt of a written request of the Note Registrar. 41 (B) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.9, 9.6, 10.15, 10.16 and 11.8). (C) The Note Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (D) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (E) The Company shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 11.4 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (F) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (G) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 3.3 hereof. (H) All certifications, certificates and Opinions of Counsel required to be submitted to the Note Registrar pursuant to this Section 3.5 to effect a registration of transfer or exchange may be submitted by facsimile. (I) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required 42 by, and to do so if and when expressly required by the terms of, this Indenture, and to examine the same to determine substantial compliance as to form with the express requirement hereof. 3.6 REPLACEMENT SECURITIES If (i) any mutilated Note is surrendered to the Trustee or (ii) the Company and the Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and there is delivered to the Company, the Subsidiary Guarantors and the Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company will execute, the Subsidiary Guarantors will execute the notation of Subsidiary Guarantees, and upon Company Order the Trustee will authenticate and deliver, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of the tenor and principal amount, having the notation of Subsidiary Guarantees thereon, bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Note, pay such Note. Upon the issuance of any new Note under this Section, the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Note issued pursuant to this section in lieu of any mutilated, destroyed, lost or stolen Note will constitute an original additional continual obligation of the Company and the respective Subsidiary Guarantors, whether or not the mutilated, destroyed, lost or stolen Note will be at any time enforceable by anyone, and will be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. The provisions of this Section are exclusive and will preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company and the Trustee may charge for their expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. 44 3.7 OUTSTANDING SECURITIES The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 3.8 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 3.6 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 10.1 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. 3.8 TREASURY SECURITIES In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or any Subsidiary Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any Subsidiary Guarantor shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. 3.9 TEMPORARY SECURITIES Pending the preparation of Definitive Notes, the Company may execute, and upon Company Order the Trustee will authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the Definitive Notes in lieu of which they are issued and having the notations of Subsidiary Guarantees thereon and with such appropriate insertions, omissions, substitutions and other variations as the Authorized Officers executing such Notes and notations of Subsidiary Guarantees may determine, as conclusively evidenced by their execution of such Notes and notations of Subsidiary Guarantees. If temporary Notes are issued, the Company will cause Definitive Notes to be prepared without unreasonable delay. After the preparation of Definitive Notes, the temporary Notes will be exchangeable for Definitive Notes upon surrender of the temporary Notes at the office or agency of the Company designated for such purpose pursuant to Section 10.2, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Company will execute and the Trustee will authenticate and deliver in exchange therefor a like principal amount of Definitive Notes of authorized denominations having the notations of Subsidiary 44 Guarantees thereon. Until so exchanged, the temporary Notes will in all respects be entitled to the same benefits under this Indenture as Definitive Notes. 3.10 CANCELLATION All Notes surrendered for payment, redemption, registration of transfer or exchange will, if surrendered to any Person other than the Trustee, be delivered to the Trustee and will be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Notes so delivered will be promptly canceled by the Trustee. No Notes will be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section, except as expressly permitted by this Indenture. All Canceled Notes held by the Trustee will be disposed of as directed by a Company Order or in accordance with the Trustee's usual practice; provided, however, that the Trustee will not be required to destroy canceled Notes. 3.11 DEFAULTED INTEREST Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date will be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest at the office or agency of the Company maintained for such purpose pursuant to Section 10.2 hereof. Any interest on any Note which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date will forthwith cease to be payable to the Holder on the Regular Record Date by virtue of having been such Holder, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest therein herein collectively called "Defaulted Interest") may be paid by the Company, at its election in each case, as provided in clause (i) or (ii) below: (i) The Company may elect to make payment of any Defaulted Interest to the persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which will be fixed in the following manner. The Company will notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Company will deposit with the Trustee an amount of money equal in the aggregate amount proposed to be paid in respect of such Defaulted Interest or will make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, and such money when deposited will be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee will fix a Special Record Date for the payment of such Defaulted Interest which will be not more than is 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee will promptly notify the Company of such Special Record Date, and in the name and at the expense of the Company, will cause notice of the proposed payment of such Defaulted 45 Interest and the Special Record Date therefor to be given in the manner provided for in Section 14.5 hereof, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so given, such Defaulted Interest will be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and will no longer be payable pursuant to the following clause (ii). (ii) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment will be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note will carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note. 3.12 CUSIP NUMBERS The Company in issuing the Notes may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders, provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. 3.13 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITY. Each Global Note will be registered in the name of the Depositary for such Global Note or the nominee or such Depositary and be delivered to the Trustee as custodian for such Depositary. Members of, or participants in, the Depositary ("Agent Members") will have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its custodian, or under such Global Note, and the Depositary may be treated by the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company, the Subsidiary Guarantors, or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein will prevent the Company, the Subsidiary Guarantors, or the Trustee or any agent of the Company, the Subsidiary Guarantors, or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or will impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note. 46 Transfers of a Global Note will be limited to transfers of such Global Note in whole, but not in part, to the Depositary, its successors or their respective nominees. Interests of beneficial owners in a Global Note may be transferred or exchanged for Definitive Notes in accordance with the rules and procedures of the Depositary. Definitive Notes will be transferred to all beneficial owners in exchange for their beneficial interests in a Global Note if, and only if, either (i) the Depositary notifies the Company that it is unwilling or unable to continue as depositary for the Global Note and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Note Registrar has received a request from the Depositary to issue Definitive Notes in lieu of all or a portion of the Global Note (in which case the Company will deliver Definitive Notes within 30 days of such request). In connection with the transfer of an entire Global Note to beneficial owners pursuant to this Section, the Global Note will be deemed to be surrendered to the Trustee for cancellation, and the Company will execute, and the Trustee will authenticate and deliver, to each beneficial owner identified by the Depositary, in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations. The Holder of the Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. 3.14 COMPUTATION OF INTEREST. Interest on the Notes will be computed on the basis of a 360-day year comprised of twelve 30-day months. ARTICLE 4 SATISFACTION AND DISCHARGE 4.1 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture will upon Company Request cease to be of further effect (except as to surviving rights of registration of transfer or exchange of Notes, as expressly provided for in this Indenture) as to all outstanding Notes, and the Trustee, at the expense of the Company, will, upon payment of all amounts due the Trustee under Section 6.6 hereof, execute proper instruments acknowledging satisfaction and discharge of this Indenture when (a) either (i) all Notes theretofore authenticated and delivered (other than (1) Notes that have been mutilated, destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 hereof and (2) Notes for whose payment money or United States governmental obligations of the type described in clause (i) of the definition of Cash Equivalents have theretofore been deposited in trust with the Trustee or any Paying Agent or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3 hereof) have been delivered to the Trustee for cancellation, or 47 (b) all such Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the serving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of clause (b)(i), (b)(ii) or (b)(iii) above, has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any, on) and interest on the Notes to the date of such deposit (in the case of Notes which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be, together with instructions from the Company irrevocably directing the Trustee to apply such funds to the Payment thereof at maturity or redemption, as the case may be; (c) the Company has paid or caused to be paid all other sums then due and payable hereunder by the Company; and (d) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein relating to the satisfaction and discharge of this Indenture have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.6 hereof and, if money will have been deposited with the Trustee pursuant to this Section, the obligations of the Trustee under Section 4.2 hereof and the last paragraph of Section 10.3 hereof will survive. 4.2 APPLICATION OF TRUST MONEY. Subject to the provisions of the last paragraph of Section 10.3 hereof, all money deposited with the Trustee pursuant to Section 4.1 hereof will be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whom payment such money has been deposited with the Trustee. 48 ARTICLE 5 REMEDIES 5.1 EVENTS OF DEFAULT AND REMEDIES. "Event of Default," wherever used herein, means any one of the following events: (a) default in the payment when due of the principal of or premium, if any, on any Note when the same becomes due and payable, whether such payment is due at Stated Maturity, upon redemption, upon repurchase pursuant to a Change of Control Offer or a Net Proceeds Offer, upon declaration of acceleration or otherwise; or (b) default in the payment of any installment of interest on, or Liquidated Damages, if any, with respect to any of the Notes, when it becomes due and payable, and the continuance of such default for a period of 30 days; or (c) default in the performance or breach of the provisions of Article 10 hereof, the failure to make or consummate a Change of Control Offer in accordance with the provisions of Section 10.15 or the failure to make or consummate a Net Proceeds Offer in accordance with the provisions of Section 10.16; or (d) failure of the Company or any Subsidiary Guarantor to comply with any other term, covenant or agreement contained in the Notes, any Subsidiary Guarantee or this Indenture (other than a default specified in subparagraph (a), (b) or (c) above) for a period of 60 days after written notice of such failure stating that it is a "notice of default" hereunder and requiring the Company or such Subsidiary Guarantor, as the case may be, to remedy the same will have been given (i) to the Company by the Trustee or (ii) to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Notes then Outstanding; or (e) the occurrence and continuation beyond any applicable grace period of any default in the payment when due on final maturity of the principal of (or premium, if any, on) or interest on any Indebtedness of the Company (other than the Notes) or any Restricted Subsidiary for money borrowed (other than Non-Recourse Indebtedness), or any other default resulting in acceleration of any Indebtedness of the Company or any Restricted Subsidiary for money borrowed (other than Non-Recourse Indebtedness), provided that the aggregate principal amount of such Indebtedness will exceed $5,000,000; or (f) any Subsidiary Guarantee will, for any reason cease to be, or be asserted by the Company or any Subsidiary Guarantor, as applicable, not to be, in full force and effect, enforceable in accordance with its terms (except pursuant to the release or termination of any such Subsidiary Guarantee in accordance with this Indenture); or (g) final judgments or orders rendered against the Company or any Restricted Subsidiary that are unsatisfied and that require the payment in money, either individually or in an aggregate amount, that is more than $5,000,000 over the coverage under applicable insurance policies and either (i) commencement by any creditor of an enforcement proceeding upon such judgment (other than a judgment that is stayed by reason of pending appeal or otherwise) or 49 (ii) the occurrence of a 60-day period during which a stay of such judgment or order, by reason of pending appeal or otherwise, was not in effect; or (h) the entry of a decree or order by a court having jurisdiction in the premises (i) for relief in respect of the Company or any Material Subsidiary in an involuntary case or proceeding under (the Federal Bankruptcy Code or) any other applicable federal or state bankruptcy, insolvency, reorganization or other similar law or (ii) adjudging the Company or any Material Subsidiary bankrupt or insolvent, or approving a petition seeking reorganization, arrangement, adjustment or composition of the Company or any Material Subsidiary under the Federal Bankruptcy Code or any applicable federal or state law, or appointing under any such law a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Material Subsidiary or of a substantial part of its consolidated assets, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (i) the commencement by the Company or any Material Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy Code or any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or any other case or proceeding to be adjudicated bankrupt or insolvent, or the consent by the Company or any Material Subsidiary to the entry of a decree or order for relief in respect thereof in an involuntary case or proceeding under the Federal Bankruptcy Code or any applicable federal or state bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by the Company or any Material Subsidiary of a petition or consent seeking reorganization or relief under any applicable federal or state law, or the consent by it under any such law to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of any of the Company or any Material Subsidiary or of any substantial part of its consolidated assets, or the making by it of an assignment for the benefit of creditors under any such law, or the admission by it in writing of its inability to pay its debts generally as they become due or the taking of corporate action by the Company or any Material Subsidiary in furtherance of any such action. 5.2 ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If any Event of Default (other than an Event of Default specified in Section 5.1(h) or 5.1(i) hereof) occurs and is continuing, the Trustee, by written notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by notice to the Trustee and the Company, may, and the Trustee upon the request of the Holders of not less than 25% in aggregate principal amount of the Outstanding Notes will declare the principal of, premium, if any, and accrued interest on all of the Notes due and payable immediately, upon which declaration all amounts payable in respect of the Notes will be immediately due and payable; if an Event of Default specified in Section 5.1(h) or 5.1(i) hereof occurs and is continuing, then the principal or premium, if any, and accrued interest on all of the Notes will automatically become and be immediately due and payable without any declaration, notice or other act on the part of the Trustee or any Holder. 50 At any time after a declaration of acceleration under this Indenture has been made, but before a judgment or decree for payment of the money due has been obtained by the Trustee or Holders of the Notes as permitted as hereinafter in this Article 5 provided, the Holders of a majority in aggregate principal amount of the Outstanding Notes, by written notice to the Company, the Subsidiary Guarantors and the Trustee, may (A) rescind and annul such declaration and its consequences and (B) on behalf of the holders of all the Notes, waive any existing Event of Default and its consequences, except a continuing Event of Default specified in clause 5.1(a) above, if (a) the Company or any Subsidiary Guarantor has paid or deposited with the Trustee a sum sufficient to pay, (i) all overdue interest on all Outstanding Notes, (ii) all unpaid principal of (and Premium, if any, on) any Outstanding Notes which have become due otherwise than by such declaration of acceleration, including any Notes required to have been purchased on a Change of Control Date or a Net Proceeds Payment Date pursuant to a Change of Control Offer or a Net Proceeds Offer, as applicable, and interest thereon at the rate borne by the Notes, (iii) to the extent that payment of such interest is lawful, interest on overdue interest and overdue principal at the rate borne by the securities (without duplication of any amount paid or deposited pursuant to clauses (i) and (ii) above), and (iv) all sums paid or advanced by the Trustee under this Indenture hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; (b) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction as certified to the Trustee by the Company; and (c) all Events of Default, other than the non-payment of amounts of principal of (or premium, if any, on) or interest on the Notes that have become due solely by such declaration of acceleration, have been cured or waived as provided in this Indenture. Notwithstanding the foregoing, if an Event of Default specified in Section 5.1(e) hereof will have occurred and be continuing, such Event of Default and any consequential acceleration will be automatically rescinded if the Indebtedness that is the subject of such Event of Default has been repaid, or if the default relating to such Indebtedness is waived or cured and if such Indebtedness has been accelerated, then the holders thereof have rescinded their declaration of acceleration in respect of such Indebtedness (provided, in each case, that such repayment, waiver, cure or rescission is effected within a period of 10 days from the continuation of such default beyond the applicable grace period or the occurrence of such acceleration), and written notice of such repayment, or cure or waiver and rescission, as the case may be, will have been given to the Trustee by the Company and countersigned by the holders of such Indebtedness or a trustee, fiduciary or agent for such holders or other evidence satisfactory to the Trustee of such events is provided to the Trustee, within 30 days after any such acceleration in respect of the 51 Notes, and so long as such rescission of any such acceleration of the Notes does not conflict with any judgment or decree as certified to the Trustee by the Company. No such rescission will affect any subsequent default or impair any right consequent thereon. 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE. The Company covenants that if: (a) default is made in the payment of any installment of interest or Liquidated Damages, if any, on any Note when such interest becomes due and payable and such default continues for a period of 30 days, or (b) default is made in the payment of the principal of (or premium, if any, on) any Note at the Maturity thereof or with respect to any Note required to have been purchased by the Company on the Change of Control Payment Date or the Net Proceeds Payment Date pursuant to a Change of Control Offer or Net Proceeds Offer, as applicable, the Company will, upon demand of the Trustee, pay to the Trustee for the benefit of the Holders of such Notes, the whole amount then due and payable on such Notes for principal (and premium, if any) and interest, and interest on any overdue principal (and premium, if any) and, to the extent that payment of such interest will be legally enforceable, upon any overdue installment of interest, at the rate borne by the Notes, and, in addition thereto, such further amount as will be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Notes and collect the money adjudged or decreed to be payable in the manner provided by law out of the Property of the Company or any other obligor upon the Notes, wherever situated. If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders by such appropriate judicial proceedings as the Trustee will deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. 5.4 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company, any Subsidiary Guarantor or any other obligor upon the Notes, their creditors or the Property of the Company, any Subsidiary Guarantor or of such other obligor, the Trustee (irrespective of whether the principal of the Notes will then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee will have made 52 any demand on the Company, the Subsidiary Guarantors or such other obligor for the payment of overdue principal, premium, if any, or interest) will be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal (and premium, if any) and interest owing and unpaid in respect of the Notes and to file such other papers or documents and take any other actions including participation as a full member of any creditor or other committee as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (b) to collect and receive any moneys or other Property payable or deliverable on any such claims and to distribute the same, and any custodian receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee will consent to the making of such payments directly to the Holders, to pay the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.6 hereof. Nothing herein contained will be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the Subsidiary Guarantees or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided however, that the Trustee may, on behalf of such Holders, vote for the election of a trustee in bankruptcy or similar official. 5.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES. All rights of action and claims under this Indenture or the Notes or the Subsidiary Guarantees may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee will be brought in its own name and as trustee of an express trust, and any recovery of judgment will, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered. 5.6 APPLICATION OF MONEY COLLECTED. Any money collected by the Trustee pursuant to this Article 5 will be applied in the following order, at the date or dates fixed by the Trustee and, in the case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid; FIRST: to the payment of all amounts due the Trustee under Section 6.6 hereof; 53 SECOND: to the payment of the amounts then due and unpaid for principal of (and premium, if any, on) and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal (and premium, if any) and interest, respectively; and THIRD: the balance, if any, to the Company. 5.7 LIMITATION ON SUITS. No Holder of any Notes will have any right to institute any proceeding, with respect to this Indenture, or any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Trustee of a continuing Event of Default; (b) the Holders of at least 25% in aggregate principal amount of the Outstanding Notes will have made written request to the Trustee to institute proceedings or pursue such remedy in respect of such Event of Default in its own name as Trustee hereunder and offered to the Trustee reasonable indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with the request; (c) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and no direction inconsistent, in the opinion of the Trustee, with such written request has been given to the Trustee during such 60 day period by the Holders of a majority or more in aggregate principal amount of the Outstanding Notes. (d) It being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. 5.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision in this Indenture, the Holder of any Note will have the right, which is absolute and unconditional, to receive payment, as provided herein and in such Note of the principal of (and premium if any, on) and (subject to Article 3 hereof) interest and Liquidated Damages, if any, on such Note on the respective Stated Maturities expressed in such Note (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights will not be impaired without the consent of such Holder. 5.9 RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or 54 has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Subsidiary Guarantors, the Trustee and the Holders will be restored severally and respectively to their former positions hereunder and thereunder and all rights and remedies of the Trustee and the Holders will continue as though no such proceeding had been instituted. 5.10 RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes described in Article 3 hereof, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy will, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other appropriate right or remedy. 5.11 DELAY OR OMISSION NOT WAIVER. No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy occurring upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article 5 or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. 5.12 CONTROL BY HOLDERS. The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes will, have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, provided that (a) such direction will not be in conflict with any rule of law or with this Indenture; (b) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and (c) the Trustee need not take any action which might involve it in personal liability or be unduly prejudicial to the Holders not joining therein. 5.13 WAIVER OF PAST DEFAULTS. The Holders of not less than a majority in aggregate principal amount of the Outstanding Notes may, on behalf of the Holders of all the Notes, waive any existing Default or Event of Default hereunder and its consequences, except (i) a Default or Event of Default in the payment of principal of, or the premium, if any, or interest or Liquidated Damages, if any, on the Notes, or (ii) in respect of a covenant or provision hereof which under Article 9 hereof cannot be 55 modified or amended without the consent of the Holder of each Outstanding Note affected thereby. Upon any such waiver, such Default or Event of Default will cease to exist for every purpose under this Indenture, but no such waiver will extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. Any such waiver may (but need not) be given in connection with a tender offer or exchange offer for the Notes. 5.14 WAIVER OF STAY. Each of the Company and the Subsidiary Guarantors covenants (to the extent that each may lawfully do so) that it will not at any time insist upon, plead or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension, or usury law or other law wherever enacted, now or at any time hereafter in force, which would prohibit or forgive the Company or any Subsidiary Guarantor from paying all or any portion of the principal of (premium, if any, on) or interest on the Notes as contemplated herein, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) each of the Company and the Subsidiary Guarantors hereby expressly waives all benefit or advantage of any such law, and covenants that they will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE 6 THE TRUSTEE 6.1 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee will exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations will be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, and will be fully protected in so relying, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; provided, however, the Trustee will examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). 56 (iii) No provisions of this Indenture will be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (A) this subsection will not be construed to limit the effect of Section 6.1(a); (B) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; (C) the Trustee will not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.12; and (D) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (iv) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. 6.2 CERTAIN RIGHTS OF TRUSTEE. Subject to the provisions of Section 6.1 hereof: (a) the Trustee may conclusively rely and will be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein will be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee will deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may in the absence of bad faith on its part, conclusively rely upon an Officers' Certificate; (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; 57 (e) the Trustee will be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders will have offered to the Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee will not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may reasonably see fit, and, if the Trustee will determine to make such further inquiry or investigation, it will be entitled to examine, during the business hours and upon reasonable notice the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee, will not be responsible, for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee will not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; (i) the Trustee will not be deemed to have notice or knowledge of any matter (including any Default or Event of Default) unless a Responsible Officer has actual knowledge thereof or unless written notice thereof is received by the Trustee at its Corporate Trust Office and such notice references the Notes generally, the Company or this Indenture; (j) the rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder; and (k) the Trustee may request that the Company deliver an Officers' Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers' Certificate may be signed by any person authorized to sign an Officers' Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded. The Trustee will not be required to advance, expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it will have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 58 6.3 TRUSTEE NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES. The recitals contained herein and in the Notes and the notations of Subsidiary Guarantees thereon, except for the Trustee's certificates of authentication, will be taken as the statements of the Company or the Subsidiary Guarantors, as the case may be, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, the Subsidiary Guarantees or the Notes, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Notes and perform its obligations hereunder, and that the statements made by it in a Statement of Eligibility and Qualification on Form T-1 supplied to the Company are true and accurate, subject to the qualifications set forth therein. The Trustee will not be accountable for the use or application by the Company of Notes or the proceeds thereof. 6.4 MAY HOLD SECURITIES. The Trustee, any Paying Agent, any Note Registrar or any other agent of the Company, the Subsidiary Guarantors or of the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to TIA Sections 310(b) and 311 in the case of the Trustee, may otherwise deal with the Company and the Subsidiary Guarantors with the same rights it would have if it were not the Trustee, Paying Agent, Note Registrar or such other agent. 6.5 MONEY HELD IN TRUST. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee will be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Company or any Subsidiary Guarantor. 6.6 COMPENSATION AND REIMBURSEMENT. The Company agrees: (a) to pay to the Trustee from time to time such compensation as the Company and the Trustee shall from time to time agree in writing for all services rendered by it hereunder (which compensation will not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to the Trustee's willful misconduct, negligence or bad faith; and (c) to indemnify each of the Trustee or any predecessor Trustee and their agents for, and to hold them harmless against, any and all loss, liability, damage, claim or expense, including taxes (other than those based upon, measured by or determined by the income of the 59 Trustee) incurred without willful misconduct, negligence or bad faith on its part, (i) arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim or liability (whether assisted by the Company, any other holder or any other person) in connection with the exercise or performance of any of its powers or duties hereunder or (ii) in connection with enforcing this indemnification provision. The obligations of the Company under this Section 6.6 to compensate the Trustee, to pay or reimburse the Trustee for expenses, disbursements and advances and to indemnify and hold harmless the Trustee will survive the satisfaction and discharge of this Indenture or any other termination under any Insolvency or Liquidation Proceeding and the resignation or removal of the Trustee. As security for the performance of such obligations of the Company, the Trustee will have a claim and lien prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for payment of principal of (and premium, if any, on) or interest on particular Notes. Such lien will survive the satisfaction and discharge of this Indenture or any other termination under any Insolvency or Liquidation Proceeding. When the Trustee incurs expenses or renders services after the occurrence of an Event of Default specified in paragraph (h) or (i) of Section 5.1 of this Indenture, such expenses and the compensation for such services are intended to constitute expenses of administration under any Insolvency or Liquidation Proceeding. 6.7 CORPORATE TRUSTEE REQUIRED: ELIGIBILITY. There will at all times be a Trustee hereunder which will be eligible to act as Trustee, under TIA Section 310(a)(1) and will have a combined capital and surplus of at least $10,000,000 in the case of the initial Trustee hereunder and $50,000,000 in the case of any successor Trustee. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of federal, state, territorial or District of Columbia supervising or examining authority, then for the purposes of this Section 6.7, the combined capital and surplus of such corporation will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee will cease to be eligible in accordance with the provisions of this Section, it will resign immediately in the manner with which the effect hereinafter specified in this Article 6. 6.8 CONFLICTING INTERESTS. The Trustee will comply with the provisions of Section 310(b) of Trust Indenture Act; provided, however, that there will be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. 6.9 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article 6 will become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.10 hereof. 60 (b) The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.10 hereof will not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition, at the Company's expense, any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time by an Act of the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes, delivered to the Trustee and to the Company. (d) If at any time: (i) the Trustee will fail to comply with the provisions of TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months; or (ii) the Trustee will cease to be eligible under Section 6.7 hereof and will fail to resign after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Note for at least six months; or (iii) the Trustee will become incapable of acting or will be adjudged bankrupt or insolvent or a receiver of the Trustee or of its property will be appointed or any public officer will take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (1) the Company, by a Board Resolution, may remove the Trustee, or (2) subject to TIA Section 315(e), any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee will resign, be removed or become incapable of acting, or if a vacancy will occur in the office of Trustee for any cause, the Company, by a Board Resolution, will promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee will be appointed by Act of the Holders of a majority in aggregate principal amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed will, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee will have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. The evidence of such successorship may, but need not be, evidenced by a supplemental indenture. (f) The Company will give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to the Holders of Notes in the manner 61 provided for in Section 14.5 hereof. Each notice will include the name of the successor Trustee and the address of its Corporate Trust Office. 6.10 ACCEPTANCE OF APPOINTMENT BY SUCCESSOR. Every successor Trustee appointed hereunder will execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee will become effective and such successor Trustee, without any further act, deed or conveyance, will become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee will, upon payment of all amounts, due it under Section 6.6 hereof, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and will duly assign, transfer and deliver to such successor Trustee all money and other Property held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company will execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. No successor Trustee will accept its appointment unless at the time of such acceptance such successor Trustee will be qualified and eligible under this Article 6. 6.11 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee will be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, will be the successor of the Trustee hereunder, provided such corporation will be otherwise qualified and eligible under this Article 6, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes will have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such securities; and in case at that time any of the Notes will not have been authenticated, any successor Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates will have the full force which it is anywhere in the securities or in this Indenture; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Notes in the name of any predecessor Trustee will apply only to its successor or successors by merger, conversion or consolidation. 6.12 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. If and when the Trustee will be or become a creditor of the Company (or any other obligor under the Notes), the Trustee will be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor). 62 6.13 NOTICE OF DEFAULTS. Within 60 days after the occurrence of any Default hereunder, the Trustee will transmit in the manner and to the extent provided in TIA Section 313(c), notice of such Default hereunder known to the Trustee, unless such Default will have been cured or waived; provided, however, that, except in the case of a Default in the payment of the principal of (or premium, if any, on) Liquidated Damages, if any, or interest on any Note, the Trustee will be protected in withholding such notice if and so long as the board of directors of the Trustee, committee of its board of directors or a committee of Trust officers determines in good faith that the withholding of such notice is in the interest of the Holders. ARTICLE 7 HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY 7.1 HOLDERS' LISTS; HOLDER COMMUNICATIONS; DISCLOSURES RESPECTING HOLDERS. The Trustee will preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. Neither the Company, any Subsidiary Guarantor nor the Trustee will be under any responsibility with regard to the accuracy of such list. If the Trustee is not the Note Registrar, the Company will furnish to the Trustee semi-annually before each Regular Record Date, and at such other times as the Trustee may reasonably request in writing, a list, in such form as the Trustee may reasonably request, as of such date of the names and addresses of the Holders then known to the Company. The Company and the Trustee will also satisfy any other requirements imposed upon each of them by TIA Section 312(a). Holders may communicate pursuant to Section 312(b) of the TIA with other Holders with respect to their rights under this Indenture or the Notes. Every Holder of Notes, by receiving and holding the same, agrees with the Company, the Subsidiary Guarantors, the Note Registrar and the Trustee that none of the Company, the Subsidiary Guarantors, the Note Registrar or the Trustee, or any agent of any of them, will be held accountable by reason of the disclosure of any information as to the names and addresses of the Holders in accordance with TIA Section 312, regardless of the source from which such information was derived, that each of such Persons will have the protection of TIA Section 312(c) and that the Trustee will not be held accountable by reason of mailing any material pursuant to a request made under TIA Section 312(b). 7.2 REPORTS BY TRUSTEE. Within 60 days after March 31st of each year commencing with March 31, 2005, the Trustee will transmit by mail to the Holders, as their names and addresses appear in the Note Register, a brief report dated as of such in accordance with and to the extent required under TIA Section 313(a). The Trustee will also comply with TIA Sections 313(b) and 313(c). The Company will promptly notify the Trustee in writing if the Notes become listed on any stock exchange or automatic quotation system and of any delisting thereof. 63 A copy of each Trustee's report, at the time of its mailing to Holders of Notes, will be mailed to the Company and filed with the Commission and each stock exchange, if any, on which the Notes are listed. 7.3 REPORTS BY COMPANY. The Company will: (a) file with the Trustee, within 30 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents or reports pursuant to either of said Sections, then the Company will file with the Trustee such information, documents or reports as required pursuant to Section 10.9 hereof; (b) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (c) transmit by mail to all Holders, in the manner and to the extent provided in TIA Section 313(c), such summaries of any information, documents and reports (without exhibits except to the extent required by TIA Section 313(c)) required to be filed by the Company pursuant to paragraph (i) or (ii) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and (d) Delivery of such reports, information and documents to the Trustee pursuant to this Section 7.3 is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). ARTICLE 8 CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OF OR LEASE 8.1 COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS. The Company shall not, in any single transaction or a series of related transactions, merge or consolidate with or into any other Person, or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of the Properties of the Company and its Restricted Subsidiaries on a consolidated basis to any Person or group of Affiliated Persons, and the Company shall not permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions, in the aggregate, would result in a sale, assignment, conveyance, transfer, lease or other disposition of all or substantially all of the Properties of the Company and its Restricted Subsidiaries on a consolidated basis to any other Person or group of Affiliated Persons, unless at the time and after giving effect thereto, either: 64 (A) (1) either (a) if the transaction is a merger or consolidation, the Company will be the surviving Person of such merger or consolidation, or (b) the Person (if other than the Company) formed by such consolidation or into which the Company is merged or to which the Properties of the Company or its Restricted Subsidiaries, as the case may be, are sold, assigned, conveyed, transferred, leased or otherwise disposed of (any such surviving Person or transferee Person being the "Surviving Entity") will be a corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and will, in either case, expressly assume by a supplemental indenture to this Indenture executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and this Indenture, and, in each case, this Indenture will remain in full force and effect; (2) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis (and treating any Indebtedness not previously an obligation of the Company or any of its Restricted Subsidiaries which becomes the obligation of the Company or any of its Restricted Subsidiaries in connection with or as a result of such transaction or transactions as having been incurred at the time of such transaction or transactions), no Default or Event of Default will have occurred and be continuing; (3) except in the case of the consolidation or merger of any Restricted Subsidiary with or into the Company, immediately after giving effect to such transaction or transactions on a pro forma basis, the Consolidated Fixed Charge Coverage Ratio of the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) is at least equal to the Consolidated Fixed Charge Coverage Ratio of the Company immediately before such transaction or transactions; (4) except in the case of the consolidation or merger of the Company with or into a Wholly Owned Restricted Subsidiary or of any Restricted Subsidiary with or into the Company or any Wholly Owned Restricted Subsidiary, immediately before and immediately after giving effect to such transaction or transactions on a pro forma basis (on the assumption that the transaction or transactions occurred on the first day of the period of four full fiscal quarters for which financial statements are available ending immediately prior to the consummation of such transaction or transactions, with the appropriate adjustments with respect to the transaction or transactions being included in such pro forma calculation), the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) could Incur $1.00 of additional Indebtedness (excluding Permitted Indebtedness) under Section 10.11 hereof; (5) if any of the Properties of the Company or any of its Restricted Subsidiaries would, upon such transaction or series of related transactions, become subject to any Lien (other than a Permitted Lien), the creation or imposition of such Lien will have been in compliance with Section 10.14 hereof; (6) if the Company is not the continuing obligor under this Indenture, then any Subsidiary Guarantor, unless it is the Surviving Entity, will have by supplemental indenture to this indenture confirmed that its Subsidiary Guarantee of the Notes will apply to the Surviving Entity's obligations under this Indenture and the Notes; and 65 (7) the Company (or the Surviving Entity if the Company is not the continuing obligor under this Indenture) will have delivered to the Trustee, in form and substance reasonably satisfactory to the Trustee, (a) an Officer's Certificate stating that such transaction or series of related transactions and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Indenture and (b) an Opinion of Counsel stating that the requirements of clause (1) of this paragraph have been satisfied; or (B) the transaction is effected in compliance with Section 10.16 ; provided that all of the Notes then outstanding are paid in full in accordance with such section. 8.2 SUCCESSOR SUBSTITUTED. (a) Upon any consolidation of the Company with or merger of the Company into any other corporation or any sale, assignment, lease, conveyance, transfer or other disposition of all or substantially all of the Properties of the Company and its Restricted Subsidiaries on a consolidated basis in accordance with Section 8.1 hereof, in which the Company is not the continuing corporation, the Surviving Entity will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such Surviving Entity had been named as the Company herein, and in the event of any such sale, assignment, lease, conveyance, transfer or other disposition, the Company (which term will for this purpose mean the Person named as the "Company" in the first paragraph of this Indenture or any successor Person which will theretofore become such in the manner described in Section 8.1 hereof), except in the case of a lease, will be discharged of all obligations and covenants under this Indenture and the Notes and the Company may be dissolved and liquidated and such dissolution and liquidation will not cause a Change of Control under clause (iii) of the definition thereof to occur unless the merger, or the sale, assignment, lease, conveyance, transfer or other disposition of all or substantially all of the Properties of the Company and its Restricted Subsidiaries on a consolidated basis to any Person otherwise results in a Change of Control. (b) The Company will not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to any Person unless: (i) the resulting, surviving or transferee Person (if not such Subsidiary Guarantor) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary Guarantor was organized or under the laws of the United States of America or any State thereof or the District of Columbia, and such Person shall expressly assume, by a Guarantee Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary Guarantor, if any, under its Guarantee; (ii) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default or Event of Default shall have occurred and be continuing; and 66 (iii) the Company delivers to the Trustee an Officer's Certificate and an Opinion of Counsel (in form and substance satisfactory to the Trustee), each stating that such consolidation, merger or transfer and such Guarantee Agreement, if any, complies with the Indenture; provided, however, that (i) and (iii) above shall not apply if such transaction or transactions comply with Section 10.16 and such resulting, surviving or transferee Person is no longer a subsidiary of the Company. ARTICLE 9 SUPPLEMENTAL INDENTURES 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders, the Company, when authorized by a Board Resolution, each of the Subsidiary Guarantors, when authorized by a Board Resolution, and the Trustee upon Company Request, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company contained herein and in the Notes; (b) to add any covenant for the benefit of the Holders and does not adversely affect the interests of any such holders in any material respect or to surrender any right or power herein conferred upon the Company; (c) to add any additional Events of Default; (d) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee pursuant to the requirements of Sections 6.9 and 6.10 hereof, (e) to cure any ambiguity, to correct or supplement any provision herein which may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture provided that such action will not adversely affect the interests of the Holders in any material respect; (f) to secure the Notes pursuant to the requirements of this Indenture; (g) to add any Restricted Subsidiary as an additional Subsidiary Guarantor as provided in Section 10.12(a) hereof or to evidence the succession of another Person to any Subsidiary Guarantor pursuant to Section 13.2(b) hereof and the assumption by any such successor of the covenants and agreements of such Subsidiary Guarantor contained herein, in the securities and in the Subsidiary Guarantee of such Subsidiary Guarantor; (h) to release a Subsidiary Guarantor from its Subsidiary Guarantee pursuant to Section 13.3 hereof; 67 (i) to provide for uncertificated Notes in addition to or in place of certificated Notes, provided such uncertificated Notes are in registered form for the purposes of the Internal Revenue Code of 1986, as amended; (j) provide for the assumption of the Company's obligations to holders of Notes in the case of a merger or consolidation; or (k) to comply with the requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Notes (which consent may, but need not, be given in connection with any tender offer or exchange offer for the Notes), by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, each of the Subsidiary Guarantors, when authorized by a Board Resolution, and the Trustee upon Company Request, may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture will, without the consent of the Holder of each outstanding Note affected thereby: (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the Stated Maturity of the principal of, or any installment of interest on, any Note, reduce the premium payable upon the redemption or repurchase of any Note, change the time at which any Note may be redeemed or alter any other provisions with respect to the redemption of the Notes, except as provided below with respect to Sections 10.15 and 10.16 hereof; (c) reduce the rate of or change the time for payment of interest, including Defaulted Interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest or Liquidated Damages, if any, on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then Outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest or Liquidated Damages, if any, on the Notes; (g) waive a redemption payment with respect to any Note (other than a payment required by Section 10.15 or 10.16 hereof); 68 (h) make any change in the rights of holders to receive payment of principal and interest as provided in Section 5.8, 5.13, or 10.20 hereof or in the foregoing amendment and waiver provisions; or (i) modify any provisions of this Indenture relating to the relative ranking of the Notes or the Subsidiary Guarantees in a manner adverse to the Holders thereof. In addition, any amendment to, or waiver of, the provisions of the Indenture relating to a Change of Control or the Change of Control Offer that adversely affects the rights of the holders of the Notes will require the consent of the holders of at least 75% in aggregate principal amount of Notes then outstanding. It will not be necessary for any Act of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it will be sufficient if such Act will approve the substance thereof. 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article 9 or the modifications thereby of the trusts created by this Indenture, the Trustee will be entitled to receive, and will be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but will not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. 9.4 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article 9, this Indenture will be modified in accordance therewith, and such supplemental indenture will form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder will be bound thereby. 9.5 CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article 9 will conform to the requirements of the Trust Indenture Act as then in effect. 9.6 REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article 9 may, and will if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company will so determine, new Notes so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company, with the notations of Subsidiary Guarantees thereon executed by the Subsidiary Guarantors, and authenticated and delivered by the Trustee in exchange for Outstanding Notes. 69 9.7 NOTICE OF SUPPLEMENTAL INDENTURES AND WAIVERS. Promptly after (i) the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 9.2 hereof or (ii) a waiver under Section 5.13 or 10.20 hereof becomes effective, the Company will give notice thereof to the Holders of each Outstanding Note affected, in the manner provided for in Section 14.5 hereof, setting forth in general terms the substance of such supplemental indenture or waiver, as the case may be. ARTICLE 10 COVENANTS 10.1 PAYMENT OF SECURITIES. The Company covenants and agrees for the benefit of the Holders that it will duly and punctually pay the principal of (and premium, if any, on) and interest and Liquidated Damages, if any, on the Notes in The City of New York, New York in accordance with the terms of the Notes and this Indenture. 10.2 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in The City of New York an office or agency where Notes may be presented or surrendered for payment, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes, the Subsidiary Guarantees and this Indenture may be served. The Corporate Trust Office of the Trustee will be such office or agency of the Company, unless the Company will designate and maintain some other office or agency for one or more of such purposes. The Company will give prompt written notice to the Trustee of any change in the location of any such Office or agency. If at any time the Company will fail to maintain any such required office or agency or will fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Company hereby appoints the Trustee as its agent to receive all such presentation, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation. The Company will give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency. 10.3 MONEY FOR SECURITY PAYMENTS TO BE HELD IN TRUST. If the Company will at any time act as its own Paying Agent, it will, on or before 11:00 a.m. Eastern Time, on each due date of the principal of (and premium, if any, on) or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sum will be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. 70 Whenever the Company will have one or more Paying Agents for the Notes, it will on or before 11:00 a.m. Eastern Time, on each due date of the principal of (and premium, if any, on), or interest on, any Notes, deposit with a Paying Agent immediately available funds in a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such funds to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of such action or any failure so to act. The Company will cause each Paying Agent (other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent will agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all sums held by it for the payment of the principal of (and premium, if any), interest or Liquidated Damages, if any, on Notes in trust for the benefit of the Persons entitled thereto until such sums will be paid to such Persons or otherwise disposed of as herein provided; (b) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal (and premium, if any) or interest; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent will be released from all further liability with respect to such sums. Subject to applicable escheat and abandoned property laws, any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any, on) or interest on any Note and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable will be paid to the Company on Company Request, or (if then held by the Company) will be discharged from such trust; and the Holder of such Note will thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, will thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified herein, which will not be less than 30 days from the date of each publication, any unclaimed balance of such money then remaining will be repaid to the Company. 71 10.4 CORPORATE EXISTENCE. Except as expressly permitted by Article 8 hereof, Section 10.17 hereof or other provisions of this Indenture, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect the corporate existence, rights (charter and statutory) and franchises of the Company and each Restricted Subsidiary; provided, however, that the Company will not be required to preserve any such existence of its Restricted Subsidiaries, rights or franchises, if the preservation thereof is no longer desirable in the conduct of the business of the Company and its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not disadvantageous in any material respect to the Holders. 10.5 PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or cause to be paid or discharged, before the same will become delinquent, (i) all material taxes, assessments and governmental charges levied or imposed upon the Company or any Restricted Subsidiary or upon the income, profits or Property of the Company or any Restricted Subsidiary and (ii) all lawful claims for labor, materials and supplies, which, if unpaid, might by law become a Lien upon the Property of the Company or any Restricted Subsidiary; provided, however, that the Company will not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which appropriate provision has been made in accordance with GAAP. 10.6 MAINTENANCE OF PROPERTIES. The Company will cause all material Properties owned by the Company or any Restricted Subsidiary and used or held for use in the conduct of its business or the business of any Restricted Subsidiary to be maintained and kept in good condition, repair and working order (ordinary wear and tear excepted), all as in the judgment of the Company or such Restricted Subsidiary may be necessary so that its or its Restricted Subsidiary's business may be properly and advantageously conducted at all times; provided, however, that nothing in this Section will prevent the Company or any Restricted Subsidiary from discontinuing the maintenance of any of such Properties if such discontinuance is, in the judgment of the Company or such Restricted Subsidiary, as the case may be, desirable in the conduct of the business of the Company or such Restricted Subsidiary and not disadvantageous in any material respect to the Holders. Notwithstanding the foregoing, nothing contained in this Section 10.6 will limit or impair in any way the right of the Company and its Restricted Subsidiaries to sell, divest and otherwise to engage in transactions that are otherwise permitted by this Indenture. 10.7 INSURANCE The Company will at all times keep all of its, and cause its Restricted Subsidiaries to keep their, Properties which are of an insurable nature insured with insurers, believed by the Company to be responsible, against loss or damage to the extent that property of similar character and in a similar location is usually so insured by corporations similarly situated and owning like Properties. 72 The Company or any Restricted Subsidiary may adopt such other plan or method of protection, in lieu of or supplemental to insurance with insurers, whether by the establishment of an insurance fund or reserve to be held and applied to make good losses from casualties, or otherwise, conforming to the systems of self-insurance maintained by corporations similarly situated and in a similar location and owning like Properties, as may be determined by the Board of Directors of the Company or such Restricted Subsidiary. 10.8 STATEMENT BY OFFICER AS TO DEFAULT. (a) The Company will deliver to the Trustee, within 90 days after the end of each fiscal year of the Company and within 45 days of the end of each of the first, second and third quarters of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its Restricted Subsidiaries during the preceding fiscal quarter or fiscal year, as applicable, has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of such Officer's knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and no Default or Event of Default has occurred and is continuing (or, if a Default or Event of Default will have occurred, describing all such Defaults or Events of Default of which such Officer may have knowledge and what action the Company is taking or proposes to take with respect thereto). Such Officers' Certificate will comply with TIA Section 314(a)(4). For purposes of this Section 10.8(a), such compliance will be determined without regard to any period of grace or requirement of notice under this Indenture. (b) The Company will, so long as any of the securities are outstanding, deliver to the Trustee promptly upon any of its Officers becoming aware of any Default or Event of Default an Officers' Certificate specifying such Default or Event of Default and what action the Company proposes to take with respect thereto. 10.9 REPORTS. Whether required by the rules and regulations of the Commission, so long as any Notes are outstanding, the Company will furnish to the holders of Notes or cause the Trustee to furnish to the holders of Notes, within the time periods specified in the Commission's rules and regulations: (1) all quarterly and annual reports that would be required to be filed with the Commission on Forms 10-Q and 10-K if we were required to file such reports; and (2) all current reports that we would be required to file with the Commission on Form 8-K if we were required to file such reports. All such reports will be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K will include a report on our consolidated financial statements by a firm of certified independent accountants. In addition, following the consummation of the Exchange Offer contemplated by the Registration Rights Agreement, the Company will file a copy of each of the reports referred to in clauses (1) and (2) above with the Commission via the Electronic Data Gathering and Retrieval system ("EDGAR") for public availability within the time periods specified in the rules and 73 regulations applicable to such reports (unless the Commission will not accept such a filing) and will post the reports on the Company's website within those time periods. The filing of such reports with the Commission via EDGAR will satisfy the Company's obligations to furnish such information to the Holders of the Notes. If, at any time, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, it will nevertheless continue to file the reports specified in the preceding paragraphs of this covenant with the Commission within the time periods specified above unless the Commission will not accept such a filing. The Company will not take any action for the purpose of causing the Commission not to accept any such filings. If, notwithstanding the foregoing, the Commission will not accept the Company's filings for any reason, it will post the reports referred to in the preceding paragraphs on its website within the time periods that would apply if the Company were required to file those reports with the Commission. If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by the preceding paragraphs will include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the Company's financial condition and results of operations and those of the Company's Restricted Subsidiaries separate from the financial condition and results of operations of the Company's Unrestricted Subsidiaries. In addition, the Company agrees that, for so long as any Notes remain outstanding, if at any time it is not required to file with the Commission the reports required by the preceding paragraphs, the Company will furnish to the holders of Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. 10.10 LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, take the following actions: (i) declare or pay any dividend or make any distribution on account of the Company's Capital Stock (other than dividends or distributions payable solely in shares of Qualified Capital Stock of the Company or in options, warrants or other rights to purchase Qualified Capital Stock of the Company); (ii) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any Affiliate thereof (other than any Wholly Owned Restricted Subsidiary) or any options, warrants or other rights to acquire such Capital Stock other than the purchase, by the Company of options to acquire Capital Stock from one or more employees of the Company in connection with such employee's termination of employment, provided that the amount paid by the Company with respect to all such purchases does not exceed $500,000 in the aggregate for so long as any Note remains outstanding and provided further that, in the case of such options to acquire Capital 74 Stock, the market price of the Capital Stock for which such options are exercisable is at least 40% lower than the exercise price of such options; (iii) make any principal payment on, or repurchase, redeem, defease or otherwise acquire or retire for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, any Subordinated Indebtedness, except (1) pursuant to a Net Proceeds Deficiency pursuant to Section 10.16 hereof or (2) upon a Change of Control to the extent (and only to the extent) required by the indenture or other agreement or instrument pursuant to which such Subordinated Indebtedness was issued, provided that the Company is then in compliance with its obligations under Section 10.15 hereof or (3) with respect to the 2001 Notes; (iv) declare or pay any dividend on, or make any distribution to the holders of, any shares of Capital Stock of any Restricted Subsidiary (other than payments made pro rata to all holders of such Capital Stock) that is not a Wholly Owned Restricted Subsidiary or purchase, redeem or otherwise acquire or retire for value any Capital Stock of any Restricted Subsidiary or any options, warrants or other rights to acquire any such Capital Stock (other than with respect to any such Capital Stock held by the Company or any Wholly Owned Restricted Subsidiary of the Company); or (v) make any Investment (other than any Permitted Investment); (such payments or other actions described in (but not excluded from) clauses (i) through (v) are collectively referred to as "Restricted Payments"), unless at the time of and after giving effect to the proposed Restricted Payment (the amount of any such Restricted Payment, if other than cash, will be the amount determined by the Board of Directors of the Company, and evidenced by a Board Resolution): (1) no Default or Event of Default will have occurred and be continuing, (2) the Company could Incur $1.00 of additional Indebtedness (excluding Permitted Indebtedness) in accordance with Section 10.12(a) hereof, and (3) the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made after the date of the Indenture will not exceed the sum (without duplication) of the following: (A) 50% of the sum of (1) Consolidated Net Income of the Company plus (2) non-cash asset impairment charges determined pursuant to GAAP (excluding any such non-cash charges to the extent that it represents an accrual of or reserve for cash expenses in any future period) in each case accrued during the period beginning on April 1, 2004 and ending on the last day of the Company's last fiscal quarter ending prior to the date of such proposed Restricted Payment for which internal financial statements are available (or, if such aggregate Consolidated Net Income shall be a loss, minus 100% of such loss), plus (B) 100% of the aggregate Net Cash Proceeds received by the Company after the date of the Indenture by the Company as capital contributions to the Company (other than from any Restricted Subsidiary), plus (C) 100% of the aggregate Net Cash Proceeds received after the date of the Indenture by the Company from the issuance or sale (other than to any of 75 its Restricted Subsidiaries) of shares of Qualified Capital Stock of the Company or any options, warrants or rights to purchase such shares of Qualified Capital Stock of the Company, plus (D) 100% of the aggregate Net Cash Proceeds received after the date of the Indenture by the Company (other than from any of its Restricted Subsidiaries) upon the exercise of any options, warrants or rights to purchase shares of Qualified Capital Stock of the Company, plus (E) 100% of the aggregate Net Cash Proceeds received after the date of the Indenture by the Company from the issuance or sale (other than to any of its Restricted Subsidiaries) of debt securities or shares of Redeemable Capital Stock that have been converted into or exchanged for Qualified Capital Stock of the Company, together with the aggregate net cash received by the Company at the time of such conversion or exchange, plus (F) to the extent not otherwise included in the Company's Consolidated Net Income, an amount equal to the net reduction in any investment made by the Company and its Restricted Subsidiaries subsequent to the date of the Indenture in any Person resulting from (i) payments of interest on Indebtedness, dividends, repayments of loans or advances, or other transfers or distributions of property, in each case to the Company or any Restricted Subsidiary from any Person, and in an amount not to exceed the book value of such investment previously made in such Person that was treated as Restricted Payments, or (ii) the designation of any Unrestricted Subsidiary as a Restricted Subsidiary, in each case in an amount not to exceed the lesser of (x) the book value of such investment previously made in such Unrestricted Subsidiary that was treated as Restricted Payments, and (y) the fair market value of such Unrestricted Subsidiary, plus (G) $10,000,000. (b) Notwithstanding paragraph (a) above, the Company and its Restricted Subsidiaries may take the following actions so long as (in the case of clauses (ii), (iii), (iv) and (v) below no Default or Event of Default will have occurred and be continuing): (i) the payment of any dividend on any Capital Stock of the Company or any Restricted Subsidiary within 60 days after the date of declaration thereof, if at such declaration date such declaration complied with the provisions of paragraph (a) above (and such payment will be deemed to have been paid on such date of declaration for purposes of any calculation required by the provisions of paragraph (a) above); provided, however, that such dividend shall be included in the amount of Restricted Payments; (ii) the repurchase, redemption or other acquisition or retirement of any shares of any class of Capital Stock of the Company or any Restricted Subsidiary, in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent issue and sale (other than to a Restricted Subsidiary) of shares of Qualified Capital Stock of the 76 Company (provided, however, that (1) such acquisition of Capital Stock shall be excluded in the calculation of Restricted Payments and (2) the Net Cash Proceeds from such sale shall be included from the calculation of amounts under clause (3)(C) above); (iii) the repurchase, redemption, repayment, defeasance or other acquisition or retirement for value of any Indebtedness (other than Redeemable Capital Stock) in exchange for or out of the aggregate net cash proceeds of, a substantially concurrent issue and sale (other than to a Restricted Subsidiary) of shares of Qualified Capital Stock of the Company; (iv) the purchase, redemption, repayment, defeasance or other acquisition or retirement for value of Indebtedness in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent incurrence (other than to a Restricted Subsidiary) of, Indebtedness so long as (1) the principal amount of such new Indebtedness does not exceed the principal amount (or, if such Indebtedness being refinanced provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination) of the Indebtedness being so purchased, redeemed, repaid, defeased, acquired or retired, plus the amount of any premium required to be paid in connection with such refinancing pursuant to the terms of the Indebtedness refinanced or the amount of any premium reasonably determined by the Company as necessary to accomplish such refinancing, plus the amount of expenses of the Company incurred in connection with such refinancing, (2) if such Indebtedness so purchased, redeemed, repaid, defeased, acquired or retired was subordinated to the Notes, such new Indebtedness is subordinate to the Notes at least to the same extent, (3) such new Indebtedness has an Average Life to Stated Maturity that is longer than the Average Life to Stated Maturity of the Notes and such new Indebtedness has a Stated Maturity for its final scheduled principal payment that is at least 91 days later than the Stated Maturity for the final scheduled principal payment of the Notes; and (v) the purchase, redemption, repayment, or other acquisition or retirement for value of the 2001 Notes and Notes offered pursuant to this Indenture. The actions described in clauses (i) and (iii) of this paragraph (b) will be Restricted Payments that will be permitted to be taken in accordance with this paragraph (b) but will reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a) (provided that any dividend paid pursuant to clause (i) of this paragraph (b) will reduce the amount that would otherwise be available under clause (3) of paragraph (a) when declared, but not also when subsequently paid pursuant to such clause (i)), and the actions described in clauses (ii), (iv) and (v) of this paragraph (b) will be Restricted Payments that will be permitted to be taken in accordance with this paragraph and will not reduce the amount that would otherwise be available for Restricted Payments under clause (3) of paragraph (a). The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by the Section of the Indenture limiting Restricted Payments shall be determined by the Board of Directors whose 77 resolution with respect thereto shall be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the fair market value exceeds $10,000,000. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payments is permitted and setting forth the basis upon which the required calculations were computed, together with a copy of any fairness opinion or appraisal required hereby. (c) In computing Consolidated Net Income of the Company under paragraph (a) above, (i) the Company will use audited financial statements for the portions of the relevant period for which audited financial statements are available on the date of determination and unaudited financial statements and other current financial data based on the books and records of the Company for the remaining portion of such period and (ii) the Company will be permitted to rely in good faith on the financial statements and other financial data derived from the books and records of the Company that are available on the date of determination. If the Company makes a Restricted Payment which, at the time of the making of such Restricted Payment would in the good faith determination of the Company be permitted under the requirements of this Indenture, such Restricted Payment will be deemed to have been made in compliance with this Indenture notwithstanding any subsequent adjustments made in good faith to the Company's financial statements affecting Consolidated Net Income of the Company for any period. 10.11 LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK AND REDEEMABLE CAPITAL STOCK. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume, guarantee or otherwise become directly or indirectly liable for the payment of (collectively, "Incur") any Indebtedness (including any Acquired Indebtedness), other than Permitted Indebtedness, and that the Company will not issue any Redeemable Capital Stock and will not permit any of its Restricted Subsidiaries to issue any shares of Preferred Stock or Redeemable Capital Stock unless (1) at the time of such event and after giving effect thereto and the receipt and application of the funds therefrom the Company's Consolidated Fixed Charge Coverage Ratio for the four full fiscal quarters immediately preceding such event, taken as one period, would have been at least equal to 2.5 to 1.0 and (2) no Default or Event of Default shall have occurred and be continuing at the time such Indebtedness is Incurred or such Preferred Stock or Redeemable Capital Stock is issued or would occur as a consequence of the Incurrence of the Indebtedness or the issuance of such Preferred Stock or Redeemable Capital Stock. The amount of any guarantees by the Company or any Restricted Subsidiary of any Indebtedness of the Company or one or more Restricted Subsidiaries will not be deemed to be outstanding or Incurred for purposes of this Section 10.11 hereof in addition to the amount of Indebtedness which it guarantees. 10.12 LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED SUBSIDIARIES. (a) The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor to guarantee the payment of any Indebtedness of the Company unless: (a) such 78 Restricted Subsidiary simultaneously executes and delivers a supplemental indenture to this Indenture providing for a Subsidiary Guarantee of the Notes by such Restricted Subsidiary on a senior unsecured basis; (b) such Restricted subsidiary waives and agrees not to claim or take the benefit or advantage of, in any manner whatsoever, any rights of reimbursement, indemnity or subrogation or any other rights against the Company or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Subsidiary Guarantee until such time as the obligations guaranteed thereby are paid in full; and (c) such Restricted Subsidiary will deliver to the Trustee an Opinion of Counsel to the effect that such Subsidiary Guarantee has been duly executed and authorized and constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity; provided that this paragraph (a) will not be applicable to any guarantee of any Restricted Subsidiary that (x) existed at the time such Person became a Restricted Subsidiary of the Company and (y) was not Incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary of the Company. (b) Notwithstanding the foregoing and the other provisions of this Indenture, any Subsidiary Guarantee Incurred by a Restricted Subsidiary pursuant to this Section 10.12 will provide by its terms that it will be automatically and unconditionally released and discharged upon the terms and conditions set forth in Section 13.3 hereof. 10.13 LIMITATION ON ISSUANCE, SALE AND OWNERSHIP OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES. The Company (i) will not permit any Restricted Subsidiary to issue any Capital Stock (other than to the Company or a Restricted Subsidiary) and (ii) will not permit any Person (other than the Company or a Restricted Subsidiary) to own any Capital Stock of any Restricted Subsidiary, except, in each case, for (a) directors' qualifying shares, (b) Capital Stock of a Restricted Subsidiary organized in a foreign jurisdiction required as a legal matter to be issued to, or owned by, the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Restricted Subsidiary to transact business in such foreign jurisdiction, (c) a sale of Capital Stock of a Restricted Subsidiary effected in accordance with Sections 10.10 and 10.16 hereof and only if, immediately after giving effect to such sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such sale would have been permitted under Sections 10.10 and 10.16 hereof, (d) the issuance of Capital Stock by a Restricted Subsidiary to a Person other than the Company or a Restricted Subsidiary which issuance was made in accordance with Sections 10.10 and 10.16 hereof and only if, immediately after giving effect to such issuance, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any Investment in such Person remaining after giving effect to such sale would have been permitted under Sections 10.10 and 10.16 hereof, (e) the Capital Stock of a Restricted Subsidiary owned by a Person at the time such Restricted Subsidiary became a Restricted Subsidiary or acquired by such Person in connection with the formation of the Restricted Subsidiary; provided, however, that any Capital Stock retained by the Company or a Restricted Subsidiary in the case of clause (c), (d) or (e) will be treated as an Investment for purposes of 79 Section 10.10, if the amount of such Capital Stock represents less than a majority of the Voting Stock of such Restricted Subsidiary. 10.14 LIMITATION ON LIENS. The Company will not and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind, except for Permitted Liens, upon any of their respective Properties, whether owned prior to or acquired after the date of the 2001 Indenture, or any income or profits therefrom to secure any Subordinated Indebtedness, unless prior to or contemporaneously therewith the Notes are directly secured equally and ratably, provided that if such secured Indebtedness is Subordinated Indebtedness, the Lien securing such Subordinated Indebtedness will be subordinate and junior to the Lien securing the Notes at least to the same extent as such Subordinated Indebtedness is subordinated to the Notes. 10.15 PURCHASE OF SECURITIES UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral part thereof) of such holder's Notes, pursuant to the offer described in Section 10.15(b) hereof (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any (the "Change of Control Purchase Price"), to the date of purchase (the "Change of Control Payment Date"). The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer at the same or a higher purchase price, at the same times and otherwise in substantial compliance with the requirements applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (b) Within 30 calendar days after the date of any Change of Control, the Company or the Trustee at the request and the expense of the Company, will send to each Holder, in the manner provided in Section 14.5 a notice (the "Change of Control Notice") prepared by the Company describing the transaction or transactions that constitute the Change of Control and stating: (i) that a Change of Control has occurred and a Change of Control Offer is being made pursuant to this Section 10.15, and that all Notes that are timely tendered will be accepted for payment; (ii) the Change of Control Purchase Price and the Change of Control Payment Date, which date will be a Business Day no earlier than 30 calendar days nor later than 60 calendar days subsequent to the date such notice is mailed; (iii) that any Notes or portions thereof not tendered or accepted for payment will continue to accrue interest; (iv) that, unless the Company defaults in the payment of the Change of Control Purchase Price with respect thereto, all Notes or portions thereof accepted for payment 80 pursuant to the Change of Control Offer will cease to accrue interest from and after the Change of Control Payment Date; (v) that any Holder electing to have any Notes or portions thereof purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form to elect purchase by the Company pursuant to this Section 10.15 completed, to the Paying Agent at the address specified in the notice, prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (vi) that any Holder will be entitled to withdraw such election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a facsimile transmission or letter, setting forth the name of the Holder, the principal amount of Notes delivered for purchase and a statement that such Holder is withdrawing such Holder's election to have such Notes or portions thereof purchased pursuant to the Change of Control Offer; (vii) that any Holder electing to have Notes purchased pursuant to the Change of Control Offer must specify the principal amount that is being tendered for purchase, which principal amount must be $1,000 or an integral multiple thereof; (viii) if Definitive Notes have been issued pursuant to Section 3.5, that any Holder of Definitive Notes whose Definitive Notes are being purchased only in part will be issued new Definitive Notes equal in principal amount to the unpurchased portion of the Definitive Notes surrendered, which unpurchased portion will be equal in principal amount to $1,000 or an integral multiple thereof; and (ix) any other information necessary to enable any Holder to tender Notes and to have such Notes purchased pursuant to this Section 10.15. (c) On the Change of Control Payment Date, the Company will, to the extent lawful: (i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer; (ii) irrevocably deposit with the Paying Agent, by 11:00 a.m. Eastern Time, on such date, in immediately available funds, an amount equal to the Change of Control Purchase Price in respect of all Notes or portions thereof so accepted; and (iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail, in the manner provided in Section 14.5, to each Holder of Notes or portions thereof so accepted for payment the Change of Control Purchase Price for such Notes or portions thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. For purposes of this Section 10.15, the Trustee will act as the Paying Agent. (d) Upon surrender and cancellation of a Definitive Note that is purchased in part pursuant to the Change of Control Offer, the Company will promptly issue and the Trustee will authenticate and mail (or cause to be transferred by book entry) to the surrendering Holder of such Definitive Note a new Definitive Note equal in principal amount to any unpurchased 81 portion of the surrendered Definitive Note, if any; provided that each such new Definitive Note will be in a principal amount of $1,000 or an integral multiple thereof. (e) The Company will comply with Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable, in the event that a Change of Control occurs and the Company is required to purchase Notes as described in this Section 10.15. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Change of Control Offer, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 10.15 by virtue thereof. 10.16 LIMITATION OF ASSET SALES. (a) The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale unless: (i) the Company or such Restricted Subsidiary, as the case may be, receives aggregate consideration at the time of such Asset Sale at least equal to the Fair Market Value of the Properties sold or otherwise disposed of pursuant to the Asset Sale (as determined in good faith by the Board of Directors of the Company and evidenced by a Board Resolution or, solely with respect to Asset Sales in an amount not to exceed $5,000,000, as determined in good faith by the chief executive officer of the Company); (ii) at least 80% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, in respect of such Asset Sale consists of cash, Cash Equivalents or properties used in the Oil and Gas Business of the Company and its Restricted Subsidiaries; and (iii) the Company delivers to the Trustee an Officers' Certificate certifying that such Asset Sale complies with clauses (i) and (ii) of this Section 10.16(a). The amount (without duplication) of any unsubordinated Indebtedness of the Company or any Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Company or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness, will be deemed to be cash or Cash Equivalents for purposes of clause (ii) and will also be deemed to constitute a repayment of, and a permanent reduction in, the amount of such Indebtedness for purposes of the following paragraph. (b) If the Company or any Restricted Subsidiary consummates an Asset Sale, the Company or such Restricted Subsidiary may either, no more than 365 days after such Asset Sale, (i) apply all or any of the Net Cash Proceeds therefrom to repay unsubordinated Indebtedness of the Company or any Restricted Subsidiary, provided, however, in each case, that the related loan commitment (if any) is thereby permanently reduced by the amount of such unsubordinated Indebtedness so repaid, or (ii) no more than 365 days before or after such Asset Sale, invest all or any part of the Net Cash Proceeds thereof in properties and assets that will be used in the Oil and Gas Business of the Company or its Restricted Subsidiaries, as the case may be, provided, however, that, if any such property or asset is acquired prior to the occurrence of such Asset Sale, to the extent amounts were drawn under any Credit Facility to pay for such acquisition, contemporaneously with the consummation of the Asset Sale the Company shall use the entire Net Cash Proceeds of such Asset Sale to repay (but not permanently reduce), to the extent of the amount borrowed, such Credit Facility. The amount of such Net Cash Proceeds not applied or invested as provided in this paragraph (after the period specified in this paragraph) will constitute "Excess Proceeds." 82 (c) When the aggregate amount of Excess Proceeds equals or exceeds $10,000,000 (the "Trigger Date"), the Company will make an offer to purchase, from all Holders of the Notes, an aggregate principal amount of Notes equal to such Excess Proceeds as follows: (i) Not later than the 30th day following the Trigger Date, the Company shall give to the Trustee in the manner provided in Section 14.4 hereof and each Holder of the Notes in the manner provided in Section 14.5 hereof, a notice (a "Purchase Notice") offering to purchase (a "Net Proceeds Offer") from all Holders of the Notes the maximum principal amount (expressed as a multiple of $1,000) of Notes that may be purchased out of an amount (the "Payment Amount") equal to such Excess Proceeds (subject to proration in the event such amount is less than the aggregate Offered Price (as hereinafter defined) of all Notes tendered. (ii) The offer price for the Notes will be payable in cash in an amount equal to 100% of the aggregate principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and Liquidated Damages thereon to the date such Net Proceeds Offer is consummated (the "Offered Price"), in accordance with paragraph (iv) of this Section. To the extent that the aggregate Offered Price of the Notes tendered pursuant to a Net Proceeds Offer is less than the Payment Amount relating thereto (such shortfall constituting a "Net Proceeds Deficiency"), the Company may use such Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the limitations of Section 10.10 hereof. (iii) If the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the Payment Amount, Notes to be purchased will be selected on a pro rata basis by the Trustee based on the aggregate principal amount of Notes so tendered. Upon completion of a Net Proceeds Offer, the amount of Excess Proceeds will be reset to zero. (iv) The Purchase Notice will set forth a purchase date (the "Net Proceeds Payment Date"), which will be on a Business Day no earlier than 30 days nor later than 60 days from the Trigger Date. The Purchase Notice will also state (1) that a Trigger Date with respect to one or more Asset Sales has occurred and that such Holder has the right to require the Company to repurchase such Holder's Notes at the Offered Price subject to the limitations described in the foregoing paragraph (iii), (2) any information regarding such Net Proceeds Offer required to be furnished pursuant to Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, (3) that any Note, or portion thereof, not tendered or accepted for payment will continue to accrue interest, (4) that, unless the Company defaults in depositing money with the Paying Agent in accordance with the last paragraph of clause (iv) of this Section 10.16, or payment is otherwise prevented, any Note, or portion thereof, accepted for payment pursuant to the Net Proceeds Offer will cease to accrue interest after the Net Proceeds Payment Date, and (5) the instructions a Holder must follow in order to have his Notes repurchased in accordance with paragraph (iv) of this Section. (d) Holders electing to have Notes purchased will be required to surrender such Notes to the Paying Agent at the address specified in the Purchase Notice prior to the close of business 83 on the third Business Day prior to the Net Proceeds Payment Date. Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day prior to the Net Proceeds Payment Date, a facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes delivered for purchase by the Holder as to which his election is to be withdrawn and a statement that such Holder is withdrawing his election to have such Notes purchased. Holders of Definitive Notes whose Notes are purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion will be equal to $1,000 or an integral multiple thereof. On the Net Proceeds Payment Date, the Company will (1) accept for payment Notes or portions thereof validly tendered pursuant to a Net Proceeds Offer in an aggregate principal amount equal to the Payment Amount or such lesser amount of Notes as has been tendered, (2) irrevocably deposit with the Paying Agent by 11:00 a.m. Eastern Time, immediately available funds sufficient to pay the purchase price of all Notes or portions thereof so tendered in an aggregate principal amount equal to the Payment Amount or such lesser amount and (3) deliver or cause to be delivered to the Trustee the Notes so accepted. The Paying Agent will promptly send, in the manner provided in Section 14.5, to Holders of the Notes so accepted payment in an amount equal to the purchase price, and the Company will execute and the Trustee will authenticate and mail or make available for delivery to such Holders a new Note equal in principal amount to any unpurchased portion of the Note which any such Holder did not surrender for purchase. Any Notes not so accepted will be promptly mailed or delivered to the Holder thereof. The Company will announce the results of a Net Proceeds Offer on or as soon as practicable after the Net Proceeds Payment Date. For purposes of this Section 10.16, the Trustee will act as the Paying Agent. (e) The Company will not and will not permit any Restricted Subsidiary to enter into or suffer to exist any agreement that would place any restriction of any kind (other than pursuant to law or regulation) on the right of the Company to make a Net Proceeds Offer following any Asset Sale. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder, if applicable, in the event that an Asset Sale occurs and the Company is required to purchase Notes as described in this Section 10.16. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Net Proceeds Offer, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section 10.16 by virtue thereof. 10.17 LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or suffer to exist any transaction or series of related transactions (including, without limitation, the sale, purchase, exchange or lease of Property or services) with any Affiliate of the Company (other than the Company or a Restricted Subsidiary) unless: (i) such transaction or series of related transactions is on terms that are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than would be available in a comparable transaction in arm's length dealings with a Person that is not an Affiliate, (ii) with respect to a transaction or series of related transactions involving payments in excess of 84 $1,000,000 in the aggregate, the Company delivers an Officers' Certificate to the Trustee certifying that such transaction complies with clause (i) above, (iii) with respect to a transaction or series of transactions involving payments in excess of $5,000,000 but less than $15,000,000 in the aggregate, the Company delivers an Officers' Certificate to the Trustee certifying that (a) such transaction or series of related transactions complies with clause (i) above and (b) such transaction or series of related transactions will have been approved by a majority of the Disinterested Directors of the Company, and (iv) with respect to a transaction or series of transactions involving payments of $15,000,000 or more in the aggregate, the Company delivers an Officers' Certificate to the Trustee certifying that (a) such transaction or series of related transactions complies with clause (i) above, (b) such transaction or series of related transactions will have been approved by a majority of the Disinterested Directors of the Company and (c) the Company will have received the written opinion of an investment banking firm nationally recognized in the United States that such transaction or series of transactions is fair, from a financial point of view, to the Company or such Restricted Subsidiary; provided, however, that the foregoing restriction will not apply to: (1) transactions between or among the Company and/or any of its Restricted Subsidiaries, (2) the payment of reasonable and customary regular fees to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any Affiliate, (3) payments made under the terms of the Company's employee compensation and other benefit arrangements, (4) indemnities of officers and directors of the Company or any Subsidiary consistent with such Person's bylaws and applicable statutory provisions, or (5) Restricted Payments that are permitted by the provisions of the Indenture. 10.18 LIMITATION ON SALE-LEASEBACK TRANSACTIONS The Company will not, and will not permit any Restricted Subsidiary to, enter into any sale-leaseback transaction involving any of its assets or properties whether now owned or hereafter acquired, whereby the Company or a Restricted Subsidiary sells or transfers such assets or properties and then or thereafter leases such assets or properties or any part hereof or any other assets or properties that the Company or such Restricted Subsidiary, as the case may be, intends to use for substantially the same purpose or purposes as the assets or properties sold or transferred (each, a "Sale-Leaseback Transaction"). The foregoing restriction does not apply to any Sale-Leaseback Transaction if (i) the Company or such Restricted Subsidiary, as applicable, would be entitled to (a) Incur Indebtedness in an amount equal to the Attributable Indebtedness relating to such Sale-Leaseback Transaction under the Consolidated Fixed Charge Coverage Ratio test in Section 10.11 and (b) create a Lien on such Property to secure such Attributable Indebtedness pursuant to Section 10.14; (ii) the gross proceeds of that sale and leaseback transaction are at least equal to the fair market value, as determined in good faith by the Board of Directors and set forth in Board Resolution delivered to the Trustee, of the asset or property that is the subject of such Sale-Leaseback Transaction; and (iii) the transfer of assets in that Sale-Leaseback Transaction is permitted by, and the Company applies the proceeds of such transaction in compliance with, the covenant described under Section 10.16. 85 10.19 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to: (i) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock to the Company or any other Restricted Subsidiary; (ii) pay any Indebtedness owed to the Company or any other Restricted Subsidiary; (iii) make an investment in the Company or any other Restricted Subsidiary; or (iv) transfer any of its Properties to the Company or any other Restricted Subsidiary, except in each instance for such encumbrances or restrictions pursuant to: (a) the Indenture, the Notes, the 2004 Credit Facility, the Second Lien Term Loan Agreement or any other Credit Facility, provided, however, that, in the case of encumbrances or restrictions pursuant to any Credit Facility other than the 2004 Credit Facility or the Second Lien Term Loan Agreement, the encumbrances or restrictions under such Credit Facility shall not be materially more disadvantageous to the holders of the Notes than the encumbrances or restrictions under the 2004 Credit Facility or the Second Lien Term Loan Agreement; (b) any agreement in effect as of the date hereof; (c) any agreement or other instrument in existence at the time of such acquisition (but not created in contemplation thereof) of a Person acquired by the Company or any Restricted Subsidiary, which encumbrance or restriction is not applicable to any other Person, or the Properties of any other Person, other than the Person or the Properties of the Person, so acquired; (d) customary restrictions in leases and licenses relating solely to the Property covered thereby and entered into in the ordinary course of business; (e) any agreement for the sale or other disposition of a Restricted Subsidiary or its assets that restricts transactions by the Restricted Subsidiary pending its disposition, provided that any encumbrances or restrictions pursuant to such agreement by their terms lapse no later than 180 days after the date of such agreement; (f) provisions in joint venture or other similar agreements entered into in the ordinary course of business that restrict the right of participants to dispose or distribute assets as properties owned by the joint venture or other entity; (g) provisions in agreements entered into with respect to Liens that limit our ability or the ability of any Restricted Subsidiary to dispose of assets subject to the Liens; or (h) any agreement that extends, renews, refinances or replaces the agreements containing the restrictions in the foregoing clauses (a) through (g); provided that in the case of such agreements that extend, renew, refinance or replace agreements so described, the terms and conditions of any such restrictions are no less favorable to the holders of the Notes than those under or pursuant to the agreement evidencing such Indebtedness so extended, renewed, refinanced or replaced. 10.20 WAIVER OF CERTAIN COVENANTS. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 10.5 - 10.12, 10.14, 10.15, 10.17, 10.18, and 10.19 hereof if, before or after the time for such compliance, the Holders of at least a majority in aggregate principal amount of the Outstanding Notes and the Subsidiary Guarantors, by Act of such Holders and written agreement of the Subsidiary Guarantors, waive such compliance in such instance with such term, provision or condition, but no such waiver will extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver will 86 become effective, the obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition will remain in full force and effect. 10.21 LIMITATION ON RESTRICTIVE COVENANTS. Notwithstanding any other provision of this Indenture, the restrictive covenants set forth herein, including, without limitation, those described under Section 10.10 hereof, shall be and shall be deemed limited to the extent necessary so that the creation, existence and effectiveness of such restrictive covenants shall not result in a breach of Section 10.19 of the 2001 Indenture, which limits dividend and other payment restrictions affecting certain Subsidiaries of the Company. ARTICLE 11 REDEMPTION OF SECURITIES 11.1 RIGHT OF REDEMPTION. The Notes may be redeemed, at the election of the Company, as a whole or from time to time in part, at any time on or after April 9, 2008, upon not less than 30 nor more than 60 days' notice to each Holder of Notes to be redeemed, subject to the conditions and at the Redemption Prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest and Liquidated Damages, if any, to the applicable Redemption Date.
Year Percentage - ---- ---------- 2008................... 104.93750% 2009................... 102.46875% 2010................... 100.00000%
Notwithstanding the foregoing, at any time after April 9, 2005, and prior to April 9, 2008, we may, subject to any restriction or other provisions relating thereto contained in any of the Company's unsubordinated Indebtedness, on any one or more occasions redeem up to 35% of the original aggregate principal amount of the Notes with the Net Cash Proceeds of one or more Equity Offerings at a redemption price of 109.875%, plus accrued and unpaid interest, to the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date); provided that (i) at least 65% of the original aggregate principal amount of the Notes remains outstanding after each such redemption; and (ii) the redemption occurs within 90 days after the closing of such Equity Offering. 11.2 APPLICABILITY OF ARTICLE. Redemption of securities at the election of the Company or otherwise, as permitted or required by any provision of this Indenture, will be made in accordance with such provision and this Article 11. 11.3 ELECTION TO REDEEM; NOTICE TO TRUSTEE. The election of the Company to redeem any Notes pursuant to Section 11.1 hereof will be evidenced by a Board Resolution. In case of any redemption at the election of the Company, the 87 Company will, at least 60 days prior to the Redemption Date fixed by the Company (unless a shorter notice will be satisfactory to the Trustee), notify the Trustee of such Redemption Date and of the principal amount of Notes to be redeemed and will deliver to the Trustee such documentation and records as will enable the Trustee to select the Notes to be redeemed pursuant to Section 11.4 hereof. Any election to redeem Notes will be revocable until the Company gives a notice of redemption pursuant to Section 11.5 hereof to the Holders of Notes to be redeemed. 11.4 SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED. If less than all the Notes are to be redeemed, the particular Notes to be redeemed will be selected not less than 30 days nor more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Notes not previously called for redemption, pro rata or by any other method as the Trustee will deem fair and appropriate and which may provide for the selection for redemption of portions of the principal of Notes; provided, however, that any such partial redemption will be in integral multiples of $1,000. The Trustee will promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Notes selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to redemption of Notes will relate, in the case of any Note redeemed or to be redeemed only in part, to the portion of the principal amount of such Note which has been or is to be redeemed. 11.5 NOTICE OF REDEMPTION. Notice of redemption will be given in the manner provided for in Section 14.5 hereof not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Notes to be redeemed. All notices of redemption will state: (a) the Redemption Date; (b) the Redemption Price; (c) if less than all Outstanding Notes are to be redeemed, the identification (and, in the case of a partial redemption, the principal amounts) of the particular securities to be redeemed; (d) that on the Redemption Date the Redemption Price (together with accrued interest, if any, to the Redemption Date payable as provided in Section 11.7 hereof) will become due and payable upon each such Note, or the portion thereof, to be redeemed, and that, unless the Company will default in the payment of the Redemption Price and any applicable accrued interest, interest thereon will cease to accrue on and after said date; 88 (e) the place or places where such Notes are to be surrendered for payment of the Redemption Price; and (f) the CUSIP number, if any. Notice of redemption of Notes to be redeemed at the election of the Company will be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. Failure to give such notice by mailing to any Holder of Notes or any defect therein will not affect the validity of any proceedings for the redemption of other securities. 11.6 DEPOSIT OF REDEMPTION PRICE. On or before 11:00 a.m. Eastern Time, on any Redemption Date, the Company will deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.3 hereof) an amount of money sufficient to pay the Redemption Price of, and accrued and unpaid interest on, all the Notes which are to be redeemed on such Redemption Date. 11.7 SECURITIES PAYABLE ON REDEMPTION DATE. Notice of redemption having been given as aforesaid, the Notes so to be redeemed will, on the Redemption Date, become due and payable at the Redemption Price therein specified (together with accrued and unpaid interest, if any, to the Redemption Date), and from and after such date (unless the Company will default in the payment of the Redemption Price and accrued and unpaid interest) such Notes will cease to bear interest. Upon surrender of any such Note for redemption in accordance with said notice, such Note will be paid by the Company at the Redemption Price, together with accrued and unpaid interest, if any, to the Redemption Date; provided, however, that installments of interest whose Stated Maturity is on or prior to the Redemption Date will be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.11 hereof. If any Note called for redemption will not be so paid upon surrender thereof for redemption, the principal (and premium, if any) will, until paid, bear interest from the Redemption Date at the rate borne by the Notes. 11.8 SECURITIES REDEEMED IN PART. Any Note which is to be redeemed only in part will be surrendered at the office or agency of the Company maintained for such purpose pursuant to Section 10.2 hereof (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company will execute, and the Trustee will authenticate and deliver to the Holder of such Note without service charge, a new Note or Notes of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal amount of the Note so surrendered. 89 ARTICLE 12 DEFEASANCE AND DISCHARGE 12.1 COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE. The Company may, at its option by Board Resolution, at any time, elect to have either Section 12.2 or 12.3 hereof be applied to all Outstanding Notes, upon compliance with the conditions set forth below in this Article 12. 12.2 DEFEASANCE AND DISCHARGE. Upon the Company's exercise under Section 12.1 hereof of the option applicable to this Section 12.2, the Company and the Subsidiary Guarantors will be deemed to have been discharged from their respective obligations with respect to all Outstanding Notes on the date the conditions set forth in Section 12.4 hereof are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that the Company and the Subsidiary Guarantors will be deemed (i) to have paid and discharged their respective obligations under the Outstanding Notes; provided, however, that the Notes will continue to be deemed to be "Outstanding" for purposes of Section 12.5 hereof and the other Sections of this Indenture referred to in clauses (a) and (b) below, and (ii) to have satisfied all their other obligations under such Notes and this Indenture insofar as such Notes are concerned (and the Trustee, at the expense and direction of the Company, will execute proper instruments acknowledging the same), except for the following which will survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of Outstanding Notes to receive, solely from the trust fund described in Section 12.4 hereof and as more fully set forth in such Section, payments in respect of the principal of (and premium if any, on), interest and Liquidated Damages, if any, on such Notes when such payments are due (or at such time as the Notes would be subject to redemption at the option of the Company in accordance with this Indenture), (b) the respective obligations of the Company and the Subsidiary Guarantors under Sections 3.3, 3.5, 3.6, 3.9, 3.13, 5.8, 5.14, 6.6, 6.9, 6.10, 10.2, 10.3, 13.1 (to the extent it relates to the foregoing Sections and this Article 12), 13.4 and 13.5 hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder, and (d) the obligations of the Company and the Subsidiary Guarantors under this Article 12. Subject to compliance with this Article 12, the Company may exercise its option under this Section 12.2 notwithstanding the prior exercise of its option under Section 12.3 hereof with respect to the Notes. 12.3 COVENANT DEFEASANCE. Upon the Company's exercise under Section 12.1 hereof of the option applicable to this Section 12.3, the Company and each Subsidiary Guarantor will be released from their respective obligations under any covenant contained in Article 9, in Sections 10.5 - 10.20 and in Section 13.2 hereof with respect to the Outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes will thereafter be deemed not to be "Outstanding" for the purposes of any direction, waiver, consent or declaration or Act of Holders (and the consequences of any thereof) in connection with such covenants, but will continue to be deemed "Outstanding" for all other purposes hereunder. For this purpose, 90 such Covenant Defeasance means that, with respect to the Outstanding Notes, the Company and each Subsidiary Guarantor may omit to comply with and will have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply will not constitute a Default or an Event of Default under Section 5.1(c), 5.1(d), 5.1(e), 5.1(g) hereof, but, except as specified above, the remainder of this Indenture and such Notes will be unaffected thereby. 12.4 CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE. The following will be the conditions to application of either Section 12.2 or 12.3 hereof to the Outstanding Notes: (a) The Company or any Subsidiary Guarantor must irrevocably deposit or cause to be deposited with the Trustee (or another trustee satisfying the requirements of Section 6.7 hereof who will agree to comply with the provisions of this Article 12 applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Notes, (a) cash in U.S. Dollars in an amount, or (b) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (c) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which will be applied by the Trustee (or other qualifying trustee) to pay and discharge, the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Outstanding Notes on the Stated Maturity thereof (or Redemption Date, if applicable), provided that the Trustee will have been irrevocably instructed in writing by the Company to apply such money or the proceeds of such U.S. Government Obligations to said payment with respect to the Notes. Before such a deposit, the Company may give to the Trustee, in accordance with Section 11.3 hereof, a notice of its election to redeem all of the Outstanding Notes at a future date in accordance with Article 13 hereof, which notice will be irrevocable. The Company shall specify whether the Notes are being defeased to maturity or to a particular Redemption Date. Such irrevocable redemption notice, if given, will be given effect in applying the foregoing. For this purpose, "U.S. Government Obligations" means securities that are (1) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and will also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended), as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the amount of the holder of such depositary receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in 91 respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depositary receipt. (b) No Event of Default with respect to the Notes will have occurred and be continuing on the date of such deposit or, insofar as Sections 5.1(h) and 5.1(i) are concerned, at any time during the period ending on the 91st day after the date of such deposit. (c) The Company must deliver to the Trustee an Opinion of Counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally. (d) The Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of hindering, delaying or defrauding, or making preferential payments to the holders of Notes in lieu of payments to, creditors of the Company or its subsidiaries. (e) Such Legal Defeasance or Covenant Defeasance will not cause the Trustee to have a conflicting interest under this Indenture or the Trust Indenture Act with respect to any securities of the Company or any Subsidiary Guarantor. (f) Such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument to which the Company or any Subsidiary Guarantor is a party or by which it is bound, as evidenced to the Trustee in an Officers' Certificate delivered to the Trustee concurrently with such deposit. (g) In the case of an election under Section 12.2 hereof the Company will have delivered to the Trustee an Opinion of Counsel stating that (a) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (b) since the date of this Indenture there has been a change in the applicable federal income tax laws, in either case providing that the Holders of the Outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred (it being understood that (1) such Opinion of Counsel will also state that such ruling or applicable law is consistent with the conclusions reached in such Opinion of Counsel and (2) the Trustee will be under no obligation to investigate the basis of correctness of such ruling). (h) In the case of an election under Section 12.3 hereof, the Company will have delivered to the Trustee an Opinion of Counsel to the effect that the Holders or the Outstanding Notes will not recognize income or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred (in the case of Legal Defeasance, such opinion must refer to and be based upon a published ruling of the Internal Revenue Service or a change in applicable federal income tax laws). 92 (i) The Company will have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the Legal Defeasance under Section 12.2 hereof or the Covenant Defeasance under Section 12.3 (as the case may be) have been satisfied. 12.5 DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS. Subject to the provisions of the last paragraph of Section 10.3 hereof, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee--collectively for purposes of this Section 12.5, the "Trustee") pursuant to Section 12.4 hereof in respect of the Outstanding Notes will be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law. The Company will pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Governmental Obligations deposited pursuant to Section 12.4 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Notes. Anything in this Article 12 to the contrary notwithstanding, the Trustee will deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 12.4 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance, as applicable, in accordance with this Article 12. 12.6 REINSTATEMENT. If the Trustee or any Paying Agent is unable to apply any money in accordance with Section 12.5 hereof by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Subsidiary Guarantors' obligations under this Indenture and the Notes will be revived and reinstated as though no deposit had occurred pursuant to Section 12.2 or 12.3 hereof, as the case may be, until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 12.5 hereof; provided, however, that if the Company or any Subsidiary Guarantor makes any payment of principal of (or premium if any, on), interest or Liquidated Damages, if any, on any Note following the reinstatement of its obligations, the Company or such Subsidiary Guarantor will be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. 93 ARTICLE 13 SUBSIDIARY GUARANTEES 13.1 UNCONDITIONAL GUARANTEE. Each Subsidiary Guarantor hereby unconditionally, jointly and severally, guarantees (each such guarantee being referred to herein as this "Subsidiary Guarantee," with all such guarantees being referred to herein as the "Subsidiary Guarantees") to each Holder of Notes authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, the full and prompt performance of the Company's obligations under this Indenture and the Notes and that: (1) the principal of (and premium, if any, on), interest and Liquidated Damages, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, to the extent lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or of any such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity by acceleration or otherwise; subject however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 13.4 hereof. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Subsidiary Guarantors will be jointly and severally obligated to pay the same immediately. Each Subsidiary Guarantor hereby agrees that its obligations hereunder will, to the extent permitted by law be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Subsidiary Guarantor hereby waives, to the extent permitted by law, diligence, presentment, demand of payment, filing of claim with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that its Subsidiary Guarantee will not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and in this Subsidiary Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Company, any Subsidiary Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or any Subsidiary Guarantor, any amount paid by the Company or any Subsidiary Guarantor to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, will be reinstated in full force and effect. Each Subsidiary Guarantor agrees it will not be entitled to enforce any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Subsidiary Guarantor further agrees that, as between each Subsidiary Guarantor, on the one hand, and the 94 Holders and the Trustee, on the other hand, (a) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 7 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (b) in the event of any acceleration of such obligations as provided in Article 7 hereof, such obligations (whether or not due and payable) will forthwith become due and payable by each Subsidiary Guarantor for the purpose of this Subsidiary Guarantee. 13.2 SUBSIDIARY GUARANTOR MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. (a) Except as set forth in Article 8 hereof, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor or will prevent any sale, conveyance or other disposition of all or substantially all the Properties of a Subsidiary Guarantor to the Company or another Subsidiary Guarantor. (b) Except as set forth in Article 8 hereof, nothing contained in this Indenture or in any of the Notes will prevent any consolidation or merger of a Subsidiary Guarantor with or into a Person other than the Company or another Subsidiary Guarantor (whether or not Affiliated with the Subsidiary Guarantor), or successive consolidations or mergers in which a Subsidiary Guarantor or its successor or successors will be a party or parties, or will prevent any sale, conveyance or other disposition of all or substantially all the Properties of a Subsidiary Guarantor to a Person other than the Company or another Subsidiary Guarantor (whether or not Affiliated with the Subsidiary Guarantor) authorized to acquire and operate the same; provided, however, that (a) immediately after such transaction, and giving effect thereto, no Default or Event of Default will have occurred as a result of such transaction and be continuing, (b) such transaction will not violate any of the covenants of Sections 10.1 - 10.20 hereof and (c) each Subsidiary Guarantor hereby covenants and agrees that, upon any such consolidation, merger, sale, conveyance or other disposition, such Subsidiary Guarantor's Subsidiary Guarantee set forth in this Article 13 and in a notation to the Notes, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by such Subsidiary Guarantor, will be expressly assumed (in the event that the Subsidiary Guarantor is not the surviving corporation in a merger), by supplemental indenture satisfactory in form to the Trustee, executed and delivered to the Trustee, by such Person formed by such consolidation, or into which the Subsidiary Guarantor will have merged, or by the Person that will have acquired such Property (except to the extent the following Section 13.3 would result in the release of such Subsidiary Guarantee, in which case such surviving Person or transferee of such Property will not have to execute any such supplemental indenture and will not have to assume such Subsidiary Guarantor's Subsidiary Guarantee). In the case of any such consolidation, merger, sale, conveyance or other disposition and upon the assumption by the successor Person, by supplemental indenture executed and delivered to the Trustee and satisfactory in form, to the Trustee of the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Subsidiary Guarantor, such successor Person will succeed to and be substituted for the Subsidiary Guarantor with the same effect as if it had been named herein as the initial Subsidiary Guarantor. 95 13.3 RELEASE OF SUBSIDIARY GUARANTORS. Upon the sale or disposition (by merger or otherwise) of a Subsidiary Guarantor (or of all or substantially all of its Properties) to a Person other than the Company or another Subsidiary Guarantor and pursuant to a transaction that is otherwise in compliance with the terms of this Indenture, including but not limited to the provisions of Section 13.2 hereof or pursuant to Article 8 hereof, such Subsidiary Guarantor will be deemed released from its Subsidiary Guarantee and all related obligations under this Indenture; provided, however, that any such termination will occur only to the extent that all obligations of such Subsidiary Guarantor under all of its Guarantees of, and under all of its pledges of assets or other security interests which secure, other Indebtedness of the Company or any other Restricted Subsidiary will also terminate upon such sale or other disposition. The Trustee will deliver an appropriate instrument evidencing such release upon receipt of a Company Request accompanied by an Officers' Certificate and an Opinion of Counsel certifying that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture. Each Subsidiary Guarantor that is designated as an Unrestricted Subsidiary in accordance with the provisions of this Indenture will be released from its Subsidiary Guarantee and all related obligations under this Indenture for so long as it remains an Unrestricted Subsidiary. The Trustee will deliver an appropriate instrument evidencing such release upon its receipt of the Board Resolution designating such Subsidiary Guarantor as an Unrestricted Subsidiary. Notwithstanding any other provision of this Indenture, each Subsidiary Guarantor will be deemed released from its respective Subsidiary Guarantee and all related obligations under this Indenture in the event that all obligations of such Subsidiary Guarantor under the guarantee which resulted in the creation of such Subsidiary Guarantee will also terminate, except a termination, discharge or release of such guarantee by or as a result of, payment under such guarantee. The Trustee will deliver an appropriate instrument evidencing such release upon receipt of a Company Request accompanied by an Officer's Certificate and Opinion of Counsel certifying that all such obligations of such Subsidiary Guarantee have terminated. Any Subsidiary Guarantor not released in accordance with this Section 13.3 will remain liable for the full amount of principal of (and premium, if any, on) and interest on the Notes as provided in this Article 13. 13.4 LIMITATION OF SUBSIDIARY GUARANTORS' LIABILITY. Each Subsidiary Guarantor, and by its acceptance hereof each Holder, hereby confirm that it is the intention of all such parties that the guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. To effectuate the foregoing intention, the Holders and each Subsidiary Guarantor hereby irrevocably agree that the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary 96 Guarantor under its Subsidiary Guarantee or pursuant to Section 13.5 hereof, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee not constituting such a fraudulent conveyance or fraudulent transfer. This Section 13.4 is for the benefit of the creditors of each Subsidiary Guarantor. 13.5 CONTRIBUTION. In order to provide for just and equitable contribution among the Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in the event any payment or distribution is made by any Subsidiary Guarantor (a "Funding Guarantor") under its Subsidiary Guarantee, such Funding Guarantor will be entitled to a contribution from each other Subsidiary Guarantor (if any) in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company's obligations with respect to the Notes or any other Subsidiary Guarantor's obligations with respect to its Subsidiary Guarantee. 13.6 EXECUTION AND DELIVERY OF NOTATIONS OF SUBSIDIARY GUARANTEES. To evidence its Subsidiary Guarantee set forth in Section 13.1 hereof, each Subsidiary Guarantor hereby agrees to execute the notations of Subsidiary Guarantees in substantially the form set forth in Exhibit A hereto to be endorsed on all Notes ordered to be authenticated and delivered by the Trustee and each Subsidiary Guarantor agrees that this Indenture will be executed on behalf of such Subsidiary Guarantor by its President or one of its Vice Presidents. Each Subsidiary Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 13.1 hereof will remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. Each such notation of Subsidiary Guarantee will be signed on behalf of each Subsidiary Guarantor by its President or one of its Vice Presidents (each of whom will, in each case, have been duly authorized by all requisite corporate action) prior to the authentication of the Note on which it is endorsed, and the delivery of such Note by the Trustee, after the authentication thereof hereunder, will constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of such Subsidiary Guarantor. Such signatures upon the notation of Subsidiary Guarantee may be by manual or facsimile signature of such officers and may be imprinted or otherwise reproduced on the Subsidiary Guarantee, and in case any such officer who will have signed the notation of Subsidiary Guarantee will cease to be such officer before the Note on which such notation of Subsidiary Guarantee is endorsed will have been authenticated and delivered by the Trustee or disposed of by the Company, such Note nevertheless may be authenticated and delivered or disposed of as though the Person who signed the notation of Subsidiary Guarantee had not ceased to be such officer of the Subsidiary Guarantor. 13.7 SEVERABILITY. In case any provision of this Subsidiary Guarantee will be invalid, illegal or unenforceable, that portion of such provision that is not invalid, illegal or unenforceable will remain in effect, and the validity, legality, and enforceability of the remaining provisions will not in any way be affected or impaired thereby. 97 13.8 ARTICLE 13 NOT TO PREVENT EVENTS OF DEFAULT. The failure to make a payment on account of the Subsidiary Guarantees by reason of any provision in this Article 13 will not be construed as preventing the occurrence of an Event of Default under this Indenture. 13.9 PAYMENT. For purposes of this Article 13, a payment with respect to any Subsidiary Guarantor or with respect to principal of or interest on the Note or any Subsidiary Guarantee will include, without limitation, payment of principal of and interest on any Note, any payment on account of any repurchase or redemption of any Note and any payment or recovery on any claim (whether for rescission or damages and whether based on contract, tort, duty imposed by law, or any other theory of liability) relating to or arising out of the offer, sale or purchase of any Note. ARTICLE 14 MISCELLANEOUS 14.1 COMPLIANCE CERTIFICATES AND OPINIONS. Upon any application or request by the Company or any Subsidiary Guarantor to the Trustee to take any action under any provision of this Indenture, the Company or such Subsidiary Guarantor, as the case may be, will furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act or this Indenture. Each such certificate and each such opinion will be in the form of an Officers' Certificate or an Opinion of Counsel, as applicable, and will comply with the requirements of this Indenture. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture will include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions, contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. The certificates and opinions provided pursuant to this Section 14.1 and the statements required by this Section 14.1 will comply in all respects with TIA Sections 314(c) and (e). 98 14.2 FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate, or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon an Officer's Certificate, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate with respect to such matters is erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. 14.3 ACTS OF HOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action will become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent will be sufficient for any purpose of this Indenture and conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit will also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership, principal amount and serial numbers of Notes held by any Person, and the date of holding the same, will be proved by the Note Register. 99 (d) If the Company will solicit from the Holders of Notes any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company will have no obligation to do so. Notwithstanding TIA Section 316(c), such record date will be the record date specified in or pursuant to such Board Resolution, which will be a date not earlier than the date 30 days prior to the first solicitation of Holders generally in connection therewith and not later than the date such solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date will be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of Outstanding Notes have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the Outstanding Notes will be computed as of such record date, provided that no such authorization, agreement or consent by the Holders on such record date will be deemed effective unless it will become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Note will bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note. 14.4 NOTICES, ETC. TO TRUSTEE, COMPANY AND SUBSIDIARY GUARANTORS. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to or filed with (a) the Trustee by any Holder or by the Company or any Subsidiary Guarantor will be sufficient for every purpose hereunder if made, given, furnished or filed in writing (in the English language) and delivered in person or mailed by certified or registered mail (return receipt requested) to the Trustee at its Corporate Trust Office; or (b) the Company or any Subsidiary Guarantor by the Trustee or by any Holder will be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing (in the English language) and delivered in person or mailed by certified or registered mail (return receipt requested) to the Company or such Subsidiary Guarantor, as applicable, addressed to it at the Company's principal office located at 1331 Lamar Street, Suite 1455, Houston, Texas 77010, or at any other address otherwise furnished in writing to the Trustee by the Company. 14.5 NOTICE TO HOLDERS; WAIVER. Where this Indenture provides for notice of any event to Holders by the Company, the Trustee or any Paying Agent, such notice will be sufficiently given (unless otherwise herein 100 expressly provided) if in writing (in the English language) and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder will affect the sufficiency of such notice with respect to other Holders. Any notice mailed to a Holder in the manner herein prescribed will be conclusively deemed to have been received by such Holder, whether or not such Holder actually receives such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either herein or after the event, and such waiver will be the equivalent of such notice. Waivers of notice by Holders will be filed with the Trustee, but such filing will not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of or irregularities in regular mail service or by reason of any other cause, it will be impracticable to mail notice of any event to Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as will be satisfactory to the Trustee will be deemed to be a sufficient giving of such notice for every purpose hereunder. 14.6 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and will not affect the construction hereof. 14.7 SUCCESSORS AND ASSIGNS. All caveats and agreements in this Indenture by the Company and the Subsidiary Guarantors will bind their respective successors and assigns, whether so expressed or not. All agreements of the Trustee in this Indenture will bind its successor. 14.8 SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Notes or the Subsidiary Guarantees will be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby, and a Holder will have no claim therefor against any party hereto. 14.9 BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, will give to any Person (other than the parties hereto, any Paying Agent, any Notes Registrar and their successors hereunder, the Holders and, to the extent set forth in Section 13.4 hereof, creditors of Subsidiary Guarantors) any benefit or any legal or equitable right, remedy or claim under this Indenture. 14.10 GOVERNING LAW; TRUST INDENTURE ACT CONTROLS. (a) THIS INDENTURE, THE SUBSIDIARY GUARANTEES AND THE SECURITIES WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH 101 THE LAW OF THE STATE OF NEW YORK. THE COMPANY AND EACH SUBSIDIARY GUARANTOR IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE SECURITIES OR THE SUBSIDIARY GUARANTEES, AND THE COMPANY AND EACH SUBSIDIARY GUARANTOR IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED BY ANY SUCH COURT. (b) This Indenture is subject to the provisions of the Trust Indenture Act that are required to be part of this Indenture and will, to the extent applicable, be governed by such provisions. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with the duties imposed by operation of Section 313(c) of the Trust Indenture Act, or conflicts with any provision (an "incorporated provision") required by or deemed to be included in this Indenture by operation of such Trust Indenture Act section, such imposed duties or incorporated provision will control. 14.11 LEGAL HOLIDAYS. In any case where any Interest Payment Date, Redemption Date, or Stated Maturity or Maturity of any Note will not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Notes or the Subsidiary Guarantee) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or at the Stated Maturity or Maturity; provided, however, that no interest will accrue for the period from and after such Interest Payment Date, Redemption Date, Stated Maturity or Maturity, as the case may be. 14.12 NO RECOURSE AGAINST OTHERS. A director, officer, employee, stockholder, incorporator or Affiliate, as such, past, present or future, of the Company or any Subsidiary Guarantor will not have any personal liability under the Notes or this Indenture by reason of his or its status as a director, officer, employee, stockholder, incorporator or Affiliate or any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder, by accepting any of the Notes, waives and releases all such liability to the extent permitted by applicable law. 14.13 DUPLICATE ORIGINALS. The parties may sign any number of copies or counterparts of this Indenture. Each signed copy will be an original, but all of them together represent the same agreement. 102 14.14 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. 103 IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. ISSUER: MISSION RESOURCES CORPORATION By /s/ Richard W. Piacenti --------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer SUBSIDIARY GUARANTORS: BLACK HAWK OIL COMPANY By /s/ Richard W. Piacenti --------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer MISSION HOLDINGS LLC By /s/ Richard W. Piacenti --------------------------------------- Name: Richard W. Piacenti Title: Manager MISSION E&P LIMITED PARTNERSHIP By: Black Hawk Oil Company General Partner By /s/ Richard W. Piacenti --------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer TRUSTEE: THE BANK OF NEW YORK By: /s/ Beata Hryniewicka ------------------------------------- Name: Beata Hryniewicka Title: Assistant Treasurer EXHIBIT A-1 Specimen of Rule 144A Global Note for Notes due 2011 THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 3.10 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) AND AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. MISSION RESOURCES CORPORATION 9 7/8% Senior Note due 2011 No. A-1 $130,000,000 CUSIP No. 605109AD9 Mission Resources Corporation, a Delaware corporation (herein called the "COMPANY" which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assignee the principal sum of One Hundred Thirty Million Dollars on April 1, 2011 at the office or agency of the Company referred to below, and to pay interest thereon, commencing on October 1, 2004 and continuing semiannually thereafter, on April 1 and October 1 in each year, from April 8, 2004, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 9 7/8% per annum, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Notes from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The Company also hereby promises to pay the Liquidated Damages, if any, payable pursuant to Section 3 of the Registration Rights Agreement on the same dates on which interest is payable as provided herein. The interest and Liquidated Damages, if any, so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered on the Note Register at the close of business on the Regular Record Date for such interest which will be the March 15 or September 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest or Liquidated Damages not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date, and such Defaulted Interest, Liquidated Damages and (to the extent lawful) interest on such Defaulted Interest and Liquidated Damages at the rate borne by the Notes, may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered on the Note Register at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof will be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any, on) and interest and Liquidated Damages, if any, on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest and Liquidated Damages, if any, may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address will appear on the Note Register. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions will for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note will not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed in its corporate name by the signature of its officer thereunto duly authorized. MISSION RESOURCES CORPORATION By: ------------------------------------------ Name: Robert L. Cavnar Title: President and Chief Executive Officer Attested By: --------------------------------- Name: Leslee M. Ranly Title: Secretary This Note is one of a duly authorized issue of securities of the Company designated as its 9 7/8% Senior Notes due 2011 (herein called the "NOTES"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $130,000,000, which may be issued under an indenture (herein called the "INDENTURE") dated as of April 8, 2004 among the Company, the initial Subsidiary Guarantors named therein and The Bank of New York (herein called the "TRUSTEE," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitation of rights, duties, obligations and immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes may be redeemed at the election of the Company, in whole or from time to time in part, at any time after April 8, 2008 and upon not less than 30 nor more than 60 days' notice, at the Redemption Prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest and Liquidated Damages, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on April 9 of the years indicated below:
Year Percentage ---- ---------- 2008...................................... 104.93750% 2009...................................... 102.46875% 2010...................................... 100.00000%
Notwithstanding the foregoing, at any time on or after April 9, 2005, and prior to April 9, 2008, the Company may, subject to any restriction or other provisions relating thereto contained in any of the Company's unsubordinated Indebtedness, on any one or more occasions redeem up to 35% of the original aggregate principal amount of the Notes with the Net Cash Proceeds of one or more Equity Offerings at a Redemption Price of 109.875%, plus accrued and unpaid interest and Liquidated Damages, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date); provided that (1) at least 65% of the original aggregate principal amount of the Notes remains outstanding after each such redemption; and (2) the redemption occurs within 90 days after the closing of such Equity Offering. If less than all the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee on a pro rata basis, provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon surrender of the original Note. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption. If the optional Redemption Date is on or after a Regular Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest will be paid to the person in 3 whose name the Note is registered at the close of business, on such Regular Record Date, and no further interest will be payable to Holders whose Notes will be subject to redemption by the Company. The Notes do not have the benefit of any mandatory redemption or sinking fund obligations. In the event of a Change of Control of the Company, and subject to certain conditions and limitations provided in the Indenture, the Company will be obligated to make an offer to purchase within 30 calendar days following the occurrence of a Change of Control of the Company, all of the then Outstanding Notes at a purchase price equal to 101% of the principal amount thereof, together with accrued and unpaid interest and Liquidated Damages, if any, to the Change of Control Payment Date, all as provided in the Indenture. In the event of Asset Sales, under certain circumstances, the Company will be obligated to make a Net Proceeds Offer to purchase all or a specified portion of each Holder's Notes at a purchase price equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest and Liquidated Damages, if any, to the Net Proceeds Payment Date. As set forth in the Indenture, an Event of Default is generally (i) failure to pay principal upon maturity, redemption or otherwise (including pursuant to a Change of Control Offer or a Net Proceeds Offer), (ii) default for 30 days in payment of interest on any of the Notes, (iii) default in the performance of payments relating to mergers, consolidations and sales of all or substantially all assets or the failure to make or consummate a Change of Control Offer or a Net Proceeds Offer, (iv) failure for 60 days after notice of such failure to comply with any other covenants in the Indenture or the Notes, (v) certain payment defaults under, and the acceleration prior to the maturity of, certain Indebtedness of the Company or any Restricted Subsidiary (other than Non-Recourse Indebtedness) in an aggregate principal amount in excess of $5,000,000, (vi) the failure of any Subsidiary Guarantee to be in full force and effect or otherwise to be enforceable (except as permitted by the Indenture), (vii) certain final judgments or orders against the Company or any Restricted Subsidiary in an aggregate amount of more than $5,000,000 over the coverage under applicable insurance policies which remain unsatisfied and either become subject to commencement of enforcement proceedings or remain unstayed for a period of 60 days and (viii) certain events of bankruptcy, insolvency or reorganization of the Company or any Material Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes may declare the principal amount of all the Notes to be due and payable immediately, except that (i) in the case of an Event of Default arising from certain events of bankruptcy, insolvency or reorganization of the Company or any Material Subsidiary, the principal amount of the Notes will become due and payable immediately without further action or notice, and (ii) in the case of an Event of Default which relates to certain payment defaults or acceleration with respect to certain Indebtedness, any Event of Default and any consequential acceleration of the Notes will be automatically rescinded if any such Indebtedness is repaid or if the default relating to such Indebtedness is cured or waived and if the Holders thereof have accelerated such Indebtedness then such Holders have rescinded their declaration of acceleration. No Holder may pursue any remedy under the Indenture unless the Trustee will have failed to act after notice from such Holder of an Event of Default and written request by Holders of at least 25% in aggregate principal amount of the 4 Outstanding Notes, and the offer to the Trustee of indemnity reasonably satisfactory to it; however, such provision does not affect the right to sue for enforcement of any overdue payment on a Note by the Holder thereof. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except default in payment of principal, premium or interest) if it determines in good faith that withholding the notice is in the interest of the Holders. The Company is required to file annual and quarterly reports with the Trustee as to the absence or existence of defaults. The Indenture contains provisions for (i) defeasance at any time of the entire indebtedness of the Company on this Note and (ii) discharge from certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company and certain conditions set forth therein, which provisions apply to this Note. The Indenture permits, with certain exceptions as therein provided, the amendment therefore and the modification of the rights and obligations of the Company and the Subsidiary Guarantors and the rights of the Holders under the Indenture at any time by the Company, the Subsidiary Guarantors and the Trustee and the consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note will be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof for or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. Without the consent of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to add or release any Subsidiary Guarantor pursuant to the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes and to make certain other specified changes and other changes that do not adversely affect the interests of any Holder in any material respect. No reference herein to the Indenture and no provision of this Note or of the Indenture will alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest and Liquidated Damages on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture, and subject to certain limitations therein set forth, the transfer of this Note is registerable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 5 The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. No director, officer, employee, incorporator, stockholder or Affiliate of the Company or any Subsidiary Guarantor, as such, past, present or future, will have any personal liability under this Note or the Indenture by reason of his, her or its status as such director, officer, employee, incorporator, stockholder or Affiliate, or any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder, by accepting this Note with the notation of Subsidiary Guarantee endorsed hereon, waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of this Note with the notation of Subsidiary Guarantee endorsed hereon. Prior to the time of due presentment of this Note of registration of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Company, the Subsidiary Guarantors, the Trustee nor any agent will be affected by notice to the contrary. All terms used in this Note which are defined in the Indenture will have the meanings assigned to them in the Indenture. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Company at 1331 Lamar, Suite 1455, Houston, Texas 77010. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders thereof. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identifying information printed hereon. Interest on this Note will be computed on the basis of a 360-day year comprised of twelve 30-day months. This Note will be governed by and construed in accordance with the laws of the State of New York. 6 SUBSIDIARY GUARANTEES Subject to the limitations set forth in the Indenture, the initial Subsidiary Guarantors and, if any, all additional Subsidiary Guarantors (as defined in the Indenture referred to in the Note upon which this notation is endorsed and each being hereinafter referred to as a "SUBSIDIARY GUARANTOR," which term includes any additional or successor Subsidiary Guarantor under the Indenture) have, jointly and severally, unconditionally guaranteed (a) the due and punctual payment of the principal of (and premium, if any) and interest, and Liquidated Damages, if any, on the Notes, whether at maturity, acceleration, redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal of and interest, and Liquidated Damages on the Notes, if any, to the extent lawful, (c) the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms set forth in the Indenture, and (d) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. The obligations of each Subsidiary Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor that makes a payment or distribution under a Subsidiary Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor. No member, partner, stockholder, officer, director, manager, employee, incorporator or Affiliate as such, past, present or future, of any Subsidiary Guarantor will have any personal liability under its Subsidiary Guarantee by reason of his, her or its status as such member, partner, stockholder, officer, director, manager, employee, incorporator or Affiliate, or any liability for any obligations of any Subsidiary Guarantor under the Notes or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Any Subsidiary Guarantor may be released from its Subsidiary Guarantee upon the terms and subject to the conditions provided in the Indenture. All terms used in this notation of Subsidiary Guarantee which are defined in the Indenture referred to in this Note upon which this notation of Subsidiary Guarantees is endorsed will have the meanings assigned to them in such Indenture. 7 The Subsidiary Guarantees will be binding upon the Subsidiary Guarantors and will inure to the benefit of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee respecting the Note upon which the foregoing Subsidiary Guarantees are noted, the rights and privileges herein conferred upon that party will automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof and in the Indenture. The Subsidiary Guarantees will not be valid obligations for any purpose until the certificate of authentication on the Note upon which the foregoing Subsidiary Guarantees are noted will have been executed by the Trustee under the Indenture by the manual signature of one of its authorized signatories. BLACK HAWK OIL COMPANY By: -------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer MISSION HOLDINGS LLC By: -------------------------------------- Name: Richard W. Piacenti Title: Manager MISSION E&P LIMITED PARTNERSHIP By: Black Hawk Oil Company General Partner By: -------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer 8 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within mentioned Indenture. Dated:____________ THE BANK OF NEW YORK as Trustee By: ------------------------------------ Authorized Signatory 9 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint __________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: ----------------------- Your signature: ------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ---------------- SIGNATURE GUARANTEE: ------------------------ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 10 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 10.15 or 10.16 of the Indenture, check the box below: [ ] Section 10.15 [ ] Section 10.16 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 10.15 or Section 10.16 of the Indenture, state the amount you elect to have purchased: $_______ Date: ----------------------- Your signature: ------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ---------------- SIGNATURE GUARANTEE: ------------------------ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 11 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of this Global Note Signature of Amount of decrease Amount of increase in following such authorized officer in Principal Amount Principal Amount of decrease (or of Trustee or Date of Exchange of this Global Note this Global Note increase) custodian - ---------------- ------------------- --------------------- ------------------- ------------------
12 EXHIBIT A-2 Specimen of Regulation S Global Notes for Note due 2011 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON. PRIOR TO EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE), THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES (AS DEFINED IN REGULATION S) OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON (AS DEFINED IN REGULATION S), EXCEPT TO A PERSON REASONABLY BELIEVED TO BE (2) A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A ("RULE 144A") UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A AND THE INDENTURE REFERRED TO HEREIN OR (2) AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT. THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.6 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 3.10 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON AND IS ACQUIRING ITS NOTE IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 904 OF REGULATIONS S UNDER THE SECURITIES ACT AND AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(K) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. MISSION RESOURCES CORPORATION 9 7/8% Senior Note due 2011 No. A-1 $0.00 CUSIP No. 605109AE7 Mission Resources Corporation, a Delaware corporation (herein called the "COMPANY" which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assignee the principal sum of Zero Dollars on April 1, 2011 at the office or agency of the Company referred to below, and to pay interest thereon, commencing on October 1, 2004 and continuing semiannually thereafter, on April 1 and October 1 in each year from April 8, 2004, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 9 7/8% per annum, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Notes from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The Company also hereby promises to pay the Liquidated Damages, if any, payable pursuant to Section 3 of the Registration Rights Agreement on the same dates on which interest is payable as provided herein. The interest and Liquidated Damages, if any, so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered on the Note Register at the close of business on the Regular Record Date for such interest which will be the March 15 or September 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest or Liquidated Damages not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date, and such Defaulted Interest, Liquidated Damages and (to the extent lawful) interest on such Defaulted Interest and Liquidated Damages at the rate borne by the Notes, may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered on the Note Register at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof will be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any, on) and interest and Liquidated Damages, if any, on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest and Liquidated Damages, if any, may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address will appear on the Note Register. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions will for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note will not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed in its corporate name by the signature of its officer thereunto duly authorized. MISSION RESOURCES CORPORATION By: ---------------------------------------------- Name: Robert L. Cavnar Title: President and Chief Executive Officer Attested By: -------------------------------------- Name: Leslee M. Ranly Title: Secretary This Note is one of a duly authorized issue of securities of the Company designated as its 9 7/8% Senior Notes due 2011 (herein called the "NOTES"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $130,000,000, which may be issued under an indenture (herein called the "INDENTURE") dated as of April 8, 2004 among the Company, the initial Subsidiary Guarantors named therein and The Bank of New York (herein called the "TRUSTEE," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitation of rights, duties, obligations and immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes may be redeemed at the election of the Company, in whole or from time to time in part, at any time after April 8, 2008 and upon not less than 30 nor more than 60 days' notice, at the Redemption Prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest and Liquidated Damages, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on April 9 of the years indicated below:
Year Percentage ---- ---------- 2008...................................... 104.93750% 2009...................................... 102.46875% 2010...................................... 100.00000%
Notwithstanding the foregoing, at any time on or after April 9, 2005, and prior to April 9, 2008, the Company may, subject to any restriction or other provisions relating thereto contained in any of the Company's unsubordinated Indebtedness, on any one or more occasions redeem up to 35% of the original aggregate principal amount of the Notes with the Net Cash Proceeds of one or more Equity Offerings at a Redemption Price of 109.875%, plus accrued and unpaid interest and Liquidated Damages, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date); provided that (1) at least 65% of the original aggregate principal amount of the Notes remains outstanding after each such redemption; and (2) the redemption occurs within 90 days after the closing of such Equity Offering. If less than all the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee on a pro rata basis, provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon surrender of the original Note. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption. If the optional Redemption Date is on or after a Regular Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest will be paid to the person in 3 whose name the Note is registered at the close of business, on such Regular Record Date, and no further interest will be payable to Holders whose Notes will be subject to redemption by the Company. The Notes do not have the benefit of any mandatory redemption or sinking fund obligations. In the event of a Change of Control of the Company, and subject to certain conditions and limitations provided in the Indenture, the Company will be obligated to make an offer to purchase within 30 calendar days following the occurrence of a Change of Control of the Company, all of the then Outstanding Notes at a purchase price equal to 101% of the principal amount thereof, together with accrued and unpaid interest and Liquidated Damages, if any, to the Change of Control Payment Date, all as provided in the Indenture. In the event of Asset Sales, under certain circumstances, the Company will be obligated to make a Net Proceeds Offer to purchase all or a specified portion of each Holder's Notes at a purchase price equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest and Liquidated Damages, if any, to the Net Proceeds Payment Date. As set forth in the Indenture, an Event of Default is generally (i) failure to pay principal upon maturity, redemption or otherwise (including pursuant to a Change of Control Offer or a Net Proceeds Offer), (ii) default for 30 days in payment of interest on any of the Notes, (iii) default in the performance of payments relating to mergers, consolidations and sales of all or substantially all assets or the failure to make or consummate a Change of Control Offer or a Net Proceeds Offer, (iv) failure for 60 days after notice of such failure to comply with any other covenants in the Indenture or the Notes, (v) certain payment defaults under, and the acceleration prior to the maturity of, certain Indebtedness of the Company or any Restricted Subsidiary (other than Non-Recourse Indebtedness) in an aggregate principal amount in excess of $5,000,000, (vi) the failure of any Subsidiary Guarantee to be in full force and effect or otherwise to be enforceable (except as permitted by the Indenture), (vii) certain final judgments or orders against the Company or any Restricted Subsidiary in an aggregate amount of more than $5,000,000 over the coverage under applicable insurance policies which remain unsatisfied and either become subject to commencement of enforcement proceedings or remain unstayed for a period of 60 days and (viii) certain events of bankruptcy, insolvency or reorganization of the Company or any Material Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes may declare the principal amount of all the Notes to be due and payable immediately, except that (i) in the case of an Event of Default arising from certain events of bankruptcy, insolvency or reorganization of the Company or any Material Subsidiary, the principal amount of the Notes will become due and payable immediately without further action or notice, and (ii) in the case of an Event of Default which relates to certain payment defaults or acceleration with respect to certain Indebtedness, any Event of Default and any consequential acceleration of the Notes will be automatically rescinded if any such Indebtedness is repaid or if the default relating to such Indebtedness is cured or waived and if the Holders thereof have accelerated such Indebtedness then such Holders have rescinded their declaration of acceleration. No Holder may pursue any remedy under the Indenture unless the Trustee will have failed to act after notice from such Holder of an Event of Default and written request by Holders of at least 25% in aggregate principal amount of the 4 Outstanding Notes, and the offer to the Trustee of indemnity reasonably satisfactory to it; however, such provision does not affect the right to sue for enforcement of any overdue payment on a Note by the Holder thereof. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except default in payment of principal, premium or interest) if it determines in good faith that withholding the notice is in the interest of the Holders. The Company is required to file annual and quarterly reports with the Trustee as to the absence or existence of defaults. The Indenture contains provisions for (i) defeasance at any time of the entire indebtedness of the Company on this Note and (ii) discharge from certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company and certain conditions set forth therein, which provisions apply to this Note. The Indenture permits, with certain exceptions as therein provided, the amendment therefore and the modification of the rights and obligations of the Company and the Subsidiary Guarantors and the rights of the Holders under the Indenture at any time by the Company, the Subsidiary Guarantors and the Trustee and the consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note will be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof for or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. Without the consent of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to add or release any Subsidiary Guarantor pursuant to the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes and to make certain other specified changes and other changes that do not adversely affect the interests of any Holder in any material respect. No reference herein to the Indenture and no provision of this Note or of the Indenture will alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest and Liquidated Damages on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture, and subject to certain limitations therein set forth, the transfer of this Note is registerable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 5 The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. No director, officer, employee, incorporator, stockholder or Affiliate of the Company or any Subsidiary Guarantor, as such, past, present or future, will have any personal liability under this Note or the Indenture by reason of his, her or its status as such director, officer, employee, incorporator, stockholder or Affiliate, or any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder, by accepting this Note with the notation of Subsidiary Guarantee endorsed hereon, waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of this Note with the notation of Subsidiary Guarantee endorsed hereon. Prior to the time of due presentment of this Note of registration of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Company, the Subsidiary Guarantors, the Trustee nor any agent will be affected by notice to the contrary. All terms used in this Note which are defined in the Indenture will have the meanings assigned to them in the Indenture. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Company at 1331 Lamar, Suite 1455, Houston, Texas 77010. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders thereof. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identifying information printed hereon. Interest on this Note will be computed on the basis of a 360-day year comprised of twelve 30-day months. This Note will be governed by and construed in accordance with the laws of the State of New York. 6 SUBSIDIARY GUARANTEES Subject to the limitations set forth in the Indenture, the initial Subsidiary Guarantors and, if any, all additional Subsidiary Guarantors (as defined in the Indenture referred to in the Note upon which this notation is endorsed and each being hereinafter referred to as a "SUBSIDIARY GUARANTOR," which term includes any additional or successor Subsidiary Guarantor under the Indenture) have, jointly and severally, unconditionally guaranteed (a) the due and punctual payment of the principal of (and premium, if any) and interest, and Liquidated Damages, if any, on the Notes, whether at maturity, acceleration, redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal of and interest, and Liquidated Damages on the Notes, if any, to the extent lawful, (c) the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms set forth in the Indenture, and (d) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. The obligations of each Subsidiary Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor that makes a payment or distribution under a Subsidiary Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor. No member, partner, stockholder, officer, director, manager, employee, incorporator or Affiliate as such, past, present or future, of any Subsidiary Guarantor will have any personal liability under its Subsidiary Guarantee by reason of his, her or its status as such member, partner, stockholder, officer, director, manager, employee, incorporator or Affiliate, or any liability for any obligations of any Subsidiary Guarantor under the Notes or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Any Subsidiary Guarantor may be released from its Subsidiary Guarantee upon the terms and subject to the conditions provided in the Indenture. All terms used in this notation of Subsidiary Guarantee which are defined in the Indenture referred to in this Note upon which this notation of Subsidiary Guarantees is endorsed will have the meanings assigned to them in such Indenture. 7 The Subsidiary Guarantees will be binding upon the Subsidiary Guarantors and will inure to the benefit of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee respecting the Note upon which the foregoing Subsidiary Guarantees are noted, the rights and privileges herein conferred upon that party will automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof and in the Indenture. The Subsidiary Guarantees will not be valid obligations for any purpose until the certificate of authentication on the Note upon which the foregoing Subsidiary Guarantees are noted will have been executed by the Trustee under the Indenture by the manual signature of one of its authorized signatories. BLACK HAWK OIL COMPANY By: ------------------------------------------ Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer MISSION HOLDINGS LLC By: ------------------------------------------ Name: Richard W. Piacenti Title: Manager MISSION E&P LIMITED PARTNERSHIP By: Black Hawk Oil Company General Partner By: ------------------------------------------ Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer 8 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within mentioned Indenture. Dated: THE BANK OF NEW YORK ----------------- as Trustee By: ----------------------------------- Authorized Signatory 9 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ---------------- to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: -------------------- Your signature: --------------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ------------------------- SIGNATURE GUARANTEE: ------------------------------------------------ Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 10 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 10.15 or 10.16 of the Indenture, check the box below: [ ] Section 10.15 [ ] Section 10.16 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 10.15 or Section 10.16 of the Indenture, state the amount you elect to have purchased: $ -------- Date: -------------------- Your signature: ---------------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ------------------------ SIGNATURE GUARANTEE: ------------------------------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 11 SCHEDULE OF EXCHANGES OF INTERESTS IN THE REGULATION S TEMPORARY GLOBAL NOTE The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of Amount of Amount of this decrease in increase in Regulation S Principal Principal Temporary Amount of this Amount of this Global Note Signature of Regulation S Regulation S following such authorized Date of Temporary Temporary decrease (or officer of Trustee Exchange Global Note Global Note increase) or custodian - -------- -------------- -------------- -------------- ------------------
12 EXHIBIT A-3 Specimen of Institutional Accredited Investor Certificated Note for Notes due 2011 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS NOTE, BY ITS ACCEPTANCE HEREOF REPRESENTS THAT IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000 OF NOTES, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT AND AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE NOTES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE IS COMPLETED AND DELIVERED BY THIS TRANSFEROR TO THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. MISSION RESOURCES CORPORATION 9 7/8% Senior Note due 2011 No. A-1 $0.00 CUSIP No. 605109AF4 Mission Resources Corporation, a Delaware corporation (herein called the "COMPANY" which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to or registered assignee the principal sum of Zero Dollars on April 1, 2011 at the office or agency of the Company referred to below, and to pay interest thereon, commencing on October 1, 2004 and continuing semiannually thereafter, on April 1 and October 1 in each year from April 8, 2004, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, at the rate of 9 7/8% per annum, until the principal hereof is paid or duly provided for, and (to the extent lawful) to pay on demand interest on any overdue interest at the rate borne by the Notes from the date on which such overdue interest becomes payable to the date payment of such interest has been made or duly provided for. The Company also hereby promises to pay the Liquidated Damages, if any, payable pursuant to Section 3 of the Registration Rights Agreement on the same dates on which interest is payable as provided herein. The interest and Liquidated Damages, if any, so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered on the Note Register at the close of business on the Regular Record Date for such interest which will be the March 15 or September 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest or Liquidated Damages not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date, and such Defaulted Interest, Liquidated Damages and (to the extent lawful) interest on such Defaulted Interest and Liquidated Damages at the rate borne by the Notes, may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered on the Note Register at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof will be given to Holders of Notes not less than 10 days prior to such Special Record Date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. Payment of the principal of (and premium, if any, on) and interest and Liquidated Damages, if any, on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest and Liquidated Damages, if any, may be made at the option of the Company by check mailed to the address of the Person entitled thereto as such address will appear on the Note Register. Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions will for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been duly executed by the Trustee referred to on the reverse hereof by manual signature, this Note will not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed in its corporate name by the signature of its officer thereunto duly authorized. MISSION RESOURCES CORPORATION By: ----------------------------------------- Name: Robert L. Cavnar Title: President and Chief Executive Officer Attested By: -------------------------------- Name: Leslee M. Ranly Title: Secretary This Note is one of a duly authorized issue of securities of the Company designated as its 9 7/8% Senior Notes due 2011 (herein called the "NOTES"), limited (except as otherwise provided in the Indenture referred to below) in aggregate principal amount to $130,000,000, which may be issued under an indenture (herein called the "INDENTURE") dated as of April 8, 2004 among the Company, the initial Subsidiary Guarantors named therein and The Bank of New York (herein called the "TRUSTEE," which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitation of rights, duties, obligations and immunities thereunder of the Company, the Subsidiary Guarantors, the Trustee and the Holders of the Notes, and of the terms upon which the Notes are, and are to be, authenticated and delivered. The Notes may be redeemed at the election of the Company, in whole or from time to time in part, at any time after April 8, 2008 and upon not less than 30 nor more than 60 days' notice, at the Redemption Prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest and Liquidated Damages, if any, to the applicable Redemption Date, if redeemed during the twelve-month period beginning on April 9 of the years indicated below:
Year Percentage ---- ---------- 2008....................................... 104.93750% 2009....................................... 102.46875% 2010....................................... 100.00000%
Notwithstanding the foregoing, at any time on or after April 9, 2005, and prior to April 9, 2008, the Company may, subject to any restriction or other provisions relating thereto contained in any of the Company's unsubordinated Indebtedness, on any one or more occasions redeem up to 35% of the original aggregate principal amount of the Notes with the Net Cash Proceeds of one or more Equity Offerings at a Redemption Price of 109.875%, plus accrued and unpaid interest and Liquidated Damages, if any, to the Redemption Date (subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date); provided that (1) at least 65% of the original aggregate principal amount of the Notes remains outstanding after each such redemption; and (2) the redemption occurs within 90 days after the closing of such Equity Offering. If less than all the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee on a pro rata basis, provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon surrender of the original Note. On and after the Redemption Date, interest ceases to accrue on Notes or portions of them called for redemption. If the optional Redemption Date is on or after a Regular Record Date and on or before the related Interest Payment Date, the accrued and unpaid interest will be paid to the person in 5 whose name the Note is registered at the close of business, on such Regular Record Date, and no further interest will be payable to Holders whose Notes will be subject to redemption by the Company. The Notes do not have the benefit of any mandatory redemption or sinking fund obligations. In the event of a Change of Control of the Company, and subject to certain conditions and limitations provided in the Indenture, the Company will be obligated to make an offer to purchase within 30 calendar days following the occurrence of a Change of Control of the Company, all of the then Outstanding Notes at a purchase price equal to 101% of the principal amount thereof, together with accrued and unpaid interest and Liquidated Damages, if any, to the Change of Control Payment Date, all as provided in the Indenture. In the event of Asset Sales, under certain circumstances, the Company will be obligated to make a Net Proceeds Offer to purchase all or a specified portion of each Holder's Notes at a purchase price equal to 100% of the principal amount of the Notes, together with accrued and unpaid interest and Liquidated Damages, if any, to the Net Proceeds Payment Date. As set forth in the Indenture, an Event of Default is generally (i) failure to pay principal upon maturity, redemption or otherwise (including pursuant to a Change of Control Offer or a Net Proceeds Offer), (ii) default for 30 days in payment of interest on any of the Notes, (iii) default in the performance of payments relating to mergers, consolidations and sales of all or substantially all assets or the failure to make or consummate a Change of Control Offer or a Net Proceeds Offer, (iv) failure for 60 days after notice of such failure to comply with any other covenants in the Indenture or the Notes, (v) certain payment defaults under, and the acceleration prior to the maturity of, certain Indebtedness of the Company or any Restricted Subsidiary (other than Non-Recourse Indebtedness) in an aggregate principal amount in excess of $5,000,000, (vi) the failure of any Subsidiary Guarantee to be in full force and effect or otherwise to be enforceable (except as permitted by the Indenture), (vii) certain final judgments or orders against the Company or any Restricted Subsidiary in an aggregate amount of more than $5,000,000 over the coverage under applicable insurance policies which remain unsatisfied and either become subject to commencement of enforcement proceedings or remain unstayed for a period of 60 days and (viii) certain events of bankruptcy, insolvency or reorganization of the Company or any Material Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Notes may declare the principal amount of all the Notes to be due and payable immediately, except that (i) in the case of an Event of Default arising from certain events of bankruptcy, insolvency or reorganization of the Company or any Material Subsidiary, the principal amount of the Notes will become due and payable immediately without further action or notice, and (ii) in the case of an Event of Default which relates to certain payment defaults or acceleration with respect to certain Indebtedness, any Event of Default and any consequential acceleration of the Notes will be automatically rescinded if any such Indebtedness is repaid or if the default relating to such Indebtedness is cured or waived and if the Holders thereof have accelerated such Indebtedness then such Holders have rescinded their declaration of acceleration. No Holder may pursue any remedy under the Indenture unless the Trustee will have failed to act after notice from such Holder of an Event of Default and written request by Holders of at least 25% in aggregate principal amount of the 6 Outstanding Notes, and the offer to the Trustee of indemnity reasonably satisfactory to it; however, such provision does not affect the right to sue for enforcement of any overdue payment on a Note by the Holder thereof. Subject to certain limitations, Holders of a majority in aggregate principal amount of the Outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except default in payment of principal, premium or interest) if it determines in good faith that withholding the notice is in the interest of the Holders. The Company is required to file annual and quarterly reports with the Trustee as to the absence or existence of defaults. The Indenture contains provisions for (i) defeasance at any time of the entire indebtedness of the Company on this Note and (ii) discharge from certain restrictive covenants and the related Defaults and Events of Default, upon compliance by the Company and certain conditions set forth therein, which provisions apply to this Note. The Indenture permits, with certain exceptions as therein provided, the amendment therefore and the modification of the rights and obligations of the Company and the Subsidiary Guarantors and the rights of the Holders under the Indenture at any time by the Company, the Subsidiary Guarantors and the Trustee and the consent of the Holders of a majority in aggregate principal amount of the Notes at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by or on behalf of the Holder of this Note will be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof for or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. Without the consent of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to add or release any Subsidiary Guarantor pursuant to the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes and to make certain other specified changes and other changes that do not adversely affect the interests of any Holder in any material respect. No reference herein to the Indenture and no provision of this Note or of the Indenture will alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any, on) and interest and Liquidated Damages on this Note at the times, place, and rate, and in the coin or currency, herein prescribed. As provided in the Indenture, and subject to certain limitations therein set forth, the transfer of this Note is registerable on the Note Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for such purpose duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. 7 The Notes are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Notes are exchangeable for a like aggregate principal amount of Notes of a different authorized denomination, as requested by the Holder surrendering the same. No service charge will be made for any registration of transfer or exchange of Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. No director, officer, employee, incorporator, stockholder or Affiliate of the Company or any Subsidiary Guarantor, as such, past, present or future, will have any personal liability under this Note or the Indenture by reason of his, her or its status as such director, officer, employee, incorporator, stockholder or Affiliate, or any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder, by accepting this Note with the notation of Subsidiary Guarantee endorsed hereon, waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of this Note with the notation of Subsidiary Guarantee endorsed hereon. Prior to the time of due presentment of this Note of registration of transfer, the Company, the Subsidiary Guarantors, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note is overdue, and neither the Company, the Subsidiary Guarantors, the Trustee nor any agent will be affected by notice to the contrary. All terms used in this Note which are defined in the Indenture will have the meanings assigned to them in the Indenture. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to the Company at 1331 Lamar, Suite 1455, Houston, Texas 77010. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders thereof. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identifying information printed hereon. Interest on this Note will be computed on the basis of a 360-day year comprised of twelve 30-day months. This Note will be governed by and construed in accordance with the laws of the State of New York. 8 SUBSIDIARY GUARANTEES Subject to the limitations set forth in the Indenture, the initial Subsidiary Guarantors and, if any, all additional Subsidiary Guarantors (as defined in the Indenture referred to in the Note upon which this notation is endorsed and each being hereinafter referred to as a "SUBSIDIARY GUARANTOR," which term includes any additional or successor Subsidiary Guarantor under the Indenture) have, jointly and severally, unconditionally guaranteed (a) the due and punctual payment of the principal of (and premium, if any) and interest, and Liquidated Damages, if any, on the Notes, whether at maturity, acceleration, redemption or otherwise, (b) the due and punctual payment of interest on the overdue principal of and interest, and Liquidated Damages on the Notes, if any, to the extent lawful, (c) the due and punctual performance of all other obligations of the Company to the Holders or the Trustee, all in accordance with the terms set forth in the Indenture, and (d) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration or otherwise. The obligations of each Subsidiary Guarantor are limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor that makes a payment or distribution under a Subsidiary Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor. No member, partner, stockholder, officer, director, manager, employee, incorporator or Affiliate as such, past, present or future, of any Subsidiary Guarantor will have any personal liability under its Subsidiary Guarantee by reason of his, her or its status as such member, partner, stockholder, officer, director, manager, employee, incorporator or Affiliate, or any liability for any obligations of any Subsidiary Guarantor under the Notes or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Any Subsidiary Guarantor may be released from its Subsidiary Guarantee upon the terms and subject to the conditions provided in the Indenture. All terms used in this notation of Subsidiary Guarantee which are defined in the Indenture referred to in this Note upon which this notation of Subsidiary Guarantees is endorsed will have the meanings assigned to them in such Indenture. 9 The Subsidiary Guarantees will be binding upon the Subsidiary Guarantors and will inure to the benefit of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee respecting the Note upon which the foregoing Subsidiary Guarantees are noted, the rights and privileges herein conferred upon that party will automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof and in the Indenture. The Subsidiary Guarantees will not be valid obligations for any purpose until the certificate of authentication on the Note upon which the foregoing Subsidiary Guarantees are noted will have been executed by the Trustee under the Indenture by the manual signature of one of its authorized signatories. BLACK HAWK OIL COMPANY By: ------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer MISSION HOLDINGS LLC By: ------------------------------------- Name: Richard W. Piacenti Title: Manager MISSION E&P LIMITED PARTNERSHIP By: Black Hawk Oil Company General Partner By: ------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer 10 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Notes referred to in the within mentioned Indenture. Dated: THE BANK OF NEW YORK ------------------ as Trustee By: --------------------------------- Authorized Signatory 11 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint _________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date: -------------------- Your signature: ------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ---------------- SIGNATURE GUARANTEE: --------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 10.15 or 10.16 of the Indenture, check the box below: [ ] Section 10.15 [ ] Section 10.16 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 10.15 or Section 10.16 of the Indenture, state the amount you elect to have purchased: $_______ Date: -------------------- Your signature: ------------------------ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: ---------------- SIGNATURE GUARANTEE: --------------------------- Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 13 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Mission Resources Corporation 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Attention: Chief Financial Officer The Bank of New York 101 Barclay Street, 21 W New York New York 10286 Attention: Corporate Trust Administration Re: 9 7/8% Senior Subordinated Notes due 2011 Reference is hereby made to the Indenture, dated as of April 8, 2004 (the "Indenture"), among Mission Resources Corporation (the "Company"), the subsidiary guarantors party thereto and The Bank of New York as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _______________ (the "Transferor") owns and proposes to transfer the Securities or interest in such Securities specified in Annex A hereto, in the principal amount of $________ in such Securities or interests (the "Transfer"), to _______________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE SECURITY PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Security is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Security for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Security and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Security and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE IAI CERTIFICATED NOTE OR A DEFINITIVE SECURITY PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Securities and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof, or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Securities and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, 106 an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the IAI Certificated Note and/or the Definitive Securities and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE SECURITY. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Securities and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Securities and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Security will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Securities and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ___________________________________ [Insert Name of Transferor] By: ______________________________ Name: Title: Dated: _________, ___ ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ______), or (ii) [ ] Regulation S Global Note (CUSIP ______), or (iii) [ ] IAI Certificated Note (CUSIP ______); or (b) [ ] a Restricted Definitive Security. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ______), or (ii) [ ] Regulation S Global Note (CUSIP ______), or (iii) [ ] IAI Certificated Note (CUSIP ______), or (iv) [ ] Unrestricted Global Note (CUSIP ______); or (b) [ ] a Restricted Definitive Security; or (c) [ ] an Unrestricted Definitive Security, in accordance with the terms of the Indenture. EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Mission Resources Corporation 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Attention: Chief Financial Officer The Bank of New York 101 Barclay Street, 21 W New York New York 10286 Attention: Corporate Trust Administration Re: 9 7/8 % Senior Subordinated Notes due 2011 (CUSIP _______________) Reference is hereby made to the Indenture, dated as of April 8, 2004 (the "Indenture"), among Mission Resources Corporation (the "Company"), the subsidiary guarantors party thereto and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. _______________ (the "Owner") owns and proposes to exchange the Securities or interest in such Securities specified herein, in the principal amount of $______________ in such Securities or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. [ ] EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the United States Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Owner's Exchange of a Restricted Definitive Security for an Unrestricted Definitive Security, the Owner hereby certifies (i) the Unrestricted Definitive Security is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Securities and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Security is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE SECURITY. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Security with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Security is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Security issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Security and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Security for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global Note with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. ________________________________ [Insert Name of Owner] By: ____________________________ Name: Title: Dated:_______, ___ EX-4.3 5 h14499aexv4w3.txt EXCHANGE & REGISTRATION RIGHTS AGMT DATED 4/8/2004 EXHIBIT 4.3 MISSION RESOURCES CORPORATION $130,000,000 9 7/8% Senior Notes due 2011 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT April 8, 2004 Guggenheim Capital Markets, LLC 135 E. 57th Street New York, New York 10022 Ladies and Gentlemen: Mission Resources Corporation, a Delaware corporation (the "Company"), proposes to issue and sell to Guggenheim Capital Markets, LLC ("Guggenheim") and Petrie Parkman & Co. (together with Guggenheim, the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated March 31, 2004 (the "Purchase Agreement"), $130,000,000 aggregate principal amount of its 9 7/8% Senior Notes due 2011 (the "Securities") to be jointly and severally guaranteed (the "Guarantees") by the subsidiaries of the Company listed on Schedule 1 and the signatories hereto (collectively, the "Guarantors"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Company and the Guarantors agree with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers) of the Securities, the Exchange Securities (as defined herein) and the Private Exchange Securities (as defined herein) (collectively, the "Holders"), as follows: 1. Registered Exchange Offer. The Company shall (i) prepare and, not later than 60 days following the date of original issuance of the Securities (the "Issue Date"), file with the Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Securities and the Guarantees (the "Exchange Offer") to issue and deliver to such Holders, in exchange for the Securities and the Guarantees, a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Exchange Securities") that are identical in all material respects to the Securities, except for the transfer restrictions relating to the Securities, (ii) use its reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 180 days after the Issue Date and the Exchange Offer to be consummated no later than 220 days after the Issue Date and (iii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Securities will be issued under the Indenture or an indenture (the "Exchange Securities Indenture") between the Company, the Guarantors and the Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange Securities Trustee"), such indenture to be identical in all material respects to the Indenture, except for the transfer restrictions relating to the Securities (as described above). An Exchange Offer Registration Statement pursuant to this Section 1 or a Shelf Registration Statement pursuant to Section 2 hereof will not be deemed to have become effective unless it has been declared effective by the Commission; provided, however, that if, after it has been declared effective, the offering of Exchange Securities pursuant to an Exchange Offer Registration Statement or a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the Commission or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference, until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Exchange Offer, it being the objective of such Exchange Offer to enable each Holder electing to exchange Securities for Exchange Securities (assuming that such Holder (a) is not an affiliate of the Company or an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Securities that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Securities in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Securities) and to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company, the Guarantors, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, each Holder that is a broker-dealer electing to exchange Securities, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Exchange Offer. If, prior to the consummation of the Exchange Offer, any Holder holds any Securities acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Exchange Offer, the Company shall, upon the request of any such Holder, simultaneously with the delivery of the Exchange Securities in the Exchange Offer, issue and deliver to any such Holder, in exchange for the Securities held by such Holder (the "Private Exchange"), a like aggregate principal amount of debt securities of the Company and guarantees thereof by the Guarantors (the "Private Exchange Securities") that are identical in all material respects to the Exchange Securities, except for the transfer restrictions relating to such Private Exchange Securities. The Private Exchange Securities will be issued under the same indenture as the Exchange Securities, and the Company shall use its reasonable best efforts to cause the Private Exchange Securities to bear the same CUSIP number as the Exchange Securities. In connection with the Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; 2 (b) keep the Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Securities at any time prior to the close of business, New York City time, on the last business day on which the Exchange Offer shall remain open; and (e) otherwise comply in all respects with all laws that are applicable to the Exchange Offer. As soon as practicable after the close of the Exchange Offer and any Private Exchange, as the case may be, the Company shall: (a) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Exchange Offer and the Private Exchange; (b) deliver to the Trustee for cancellation all Securities so accepted for exchange; and (c) cause the Trustee or the Exchange Securities Trustee, as the case may be, promptly to authenticate and deliver to each Holder, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Securities of such Holder so accepted for exchange. The Company shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers have sold all Exchange Securities held by them and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 180 days after the consummation of the Exchange Offer. The Indenture or the Exchange Securities Indenture, as the case may be, shall provide that the Securities, the Exchange Securities and the Private Exchange Securities shall vote and consent together on all matters as one class and that none of the Securities, the Exchange Securities or the Private Exchange Securities will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Securities surrendered in exchange therefor or, if no interest has been paid on the Securities, from the Issue Date. 3 Each Holder participating in the Exchange Offer shall be required to represent to the Company that at the time of the consummation of the Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Company or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. The Exchange Offer and the Private Exchange shall be subject to the condition that no action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer or the Private Exchange which, in the judgment of the Company and the Guarantors, would reasonably be expected to impair the ability of the Company or the Guarantors to proceed with the Exchange Offer or the Private Exchange. The Company and the Guarantors shall, to the extent such information is available to the Company or the Guarantors, inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, subject to the right of any Holder to object to the disclosure of such information with respect to such Holder, and the Initial Purchasers shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. Upon consummation of the Exchange Offer in accordance with this Agreement, the Company and the Guarantors shall have no further obligation to register the Registrable Securities pursuant to this Section 1. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Company and the Guarantors determine after consultation with their outside counsel that the Company or the Guarantors is not permitted to effect the Exchange Offer as contemplated by Section 1 hereof, or (ii) for any other reason the Exchange Offer is not consummated within 220 days after the Issue Date, or (iii) any Initial Purchaser so requests with respect to Securities or Private Exchange Securities not eligible to be exchanged for Exchange Securities in the Exchange Offer and held by it following the consummation of the Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder to participate in the Exchange Offer, or (v) any Holder that participates in the Exchange Offer does not receive freely transferable Exchange Securities in exchange for tendered Securities, or (vi) the Company so elects, then the following provisions shall apply: 4 (a) The Company and the Guarantors shall file as promptly as practicable (but in no event more than the later of 60 days after so required or requested pursuant to this Section 2 or 180 days after the Issue Date) with the Commission (the "Shelf Filing Date"), and thereafter shall use their reasonable best efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). "Transfer Restricted Securities" means each Security or Private Exchange Security until the earliest to occur of: (i) the date on which such Security has been exchanged for a freely transferable Exchange Security in the Exchange Offer, (ii) the date on which such Security or Private Exchange Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Security or Private Exchange Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. (b) The Company and the Guarantors shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Securities for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Securities covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Securities become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf Registration Period"). The Company and the Guarantors shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Transfer Restricted Securities covered thereby not being able to offer and sell such Transfer Restricted Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions hereof, the Company will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Company by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue 5 statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) In the absence of the events described in clauses (i) through (vi) of the first paragraph of this Section 2, the Company and the Guarantors shall not be permitted to discharge its obligations hereunder by means of the filing of a Shelf Registration Statement. 3. Additional Interest. (a) The parties hereto agree that the Holders of Transfer Restricted Securities will suffer damages if the Company and the Guarantors fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the Exchange Offer Registration Statement is not filed with the Commission on or prior to 60 days after the Issue Date or the Shelf Registration Statement is not filed with the Commission on or before the Shelf Filing Date, (ii) the Exchange Offer Registration Statement is not declared effective within 180 days after the Issue Date or the Shelf Registration Statement is not declared effective within 60 days after the Shelf Filing Date or (iii) the Exchange Offer is not consummated on or prior to 220 days after the Issue Date (each such event referred to in clauses (i) through (iii), a "Registration Default"), the Company and the Guarantors will be jointly and severally obligated to pay additional interest ("Additional Interest") to each Holder of Transfer Restricted Securities, during the period of one or more such Registration Defaults, in an amount equal to one-half of one percent (0.50%) per annum upon the occurrence of each Registration Default, which rate will increase by one half of one percent (0.50%) at the beginning of each succeeding 90-day period (or portion thereof) that such Additional Interest continues to accrue under any such circumstance; provided, however, that the maximum aggregate increase in the interest rate will in no event exceed one and one-half percent (1.5%) per annum; provided further, that no Additional Interest shall be payable if the Exchange Offer Registration Statement is not filed or declared effective or the Exchange Offer is not consummated on account of the reasons set forth in clause (i) of the first paragraph of Section 2 (it being understood, however, that in any such case the Company and the Guarantors shall be obligated to file a Shelf Registration Statement and additional interest shall be payable if the Shelf Registration Statement is not declared effective in accordance with clause (ii) of this paragraph (a)); provided further, that no Additional Interest shall be payable if the Shelf Registration Statement is not declared effective as set forth above because of a request under clause (iii) of Section 2); and provided further, that Additional Interest shall only be payable in case the Shelf Registration Statement is not declared effective as aforesaid. Immediately following the cure of a Registration Default, the accrual of Additional Interest with respect to that particular Registration Default will cease. Immediately following the cure of all Registration Defaults or the date on which the Exchange Securities are saleable pursuant to Rule 144(k) under the 1933 Act or any successor provision, the accrual of Additional Interest will cease and the interest rate will revert to the original rate. (b) If the Shelf Registration Statement is declared effective but becomes unusable by the Holders of Registrable Securities covered by such Shelf Registration Statement ("Shelf Registrable Securities") for any reason, and the aggregate number of days in any consecutive 365 day period for which the Shelf Registration Statement shall not be usable exceeds 30 days in the aggregate, then the interest rate borne by the Shelf Registrable Securities will be increased by 0.50% per annum of the principal amount of the Securities for the first 90-day period (or portion thereof) beginning on the 31st such day that such Shelf Registration 6 Statement remains unusable. If the Shelf Registration Statement remains unusable for 30 days during any 90-day period for which Additional Interest shall be payable pursuant to this paragraph, then the interest rate borne by the Shelf Registrable Securities during such 90-day period shall be increased by an additional 0.50% per annum of the principal amount of the Securities at the beginning of each such subsequent 90-day period; provided, however, that the maximum aggregate increase in the interest rate as a result of a Shelf Registration Statement being unusable will in no event exceed one and one-half percent (1.5%) per annum. Upon the Shelf Registration Statement once again becoming usable, the interest rate borne by the Shelf Registrable Securities will be reduced to the interest rate in effect prior to the Shelf Registration Statement becoming unusable. Additional Interest shall be computed based on the actual number of days elapsed in each 90-day period for which Additional Interest is due. (c) The Company shall notify the Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Company and the Guarantors shall pay the Additional Interest due on the Transfer Restricted Securities by depositing with the Paying Agent (which may not be the Company for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Securities, sums sufficient to pay the Additional Interest then due. The Additional Interest due shall be payable on each interest payment date specified by the Indenture and the Securities to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay Additional Interest shall be deemed to accrue from and including the date of the applicable Registration Default. (d) The parties hereto agree that the Additional Interest provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Securities by reason of the failure of (i) the Shelf Registration Statement or the Exchange Offer Registration Statement to be filed, (ii) the Shelf Registration Statement to remain effective or (iii) the Exchange Offer Registration Statement to be declared effective and the Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use its reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Exchange Offer; and (iii) if requested by any Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. 7 (b) The Company shall advise each Initial Purchaser, each Exchanging Dealer and the Holders (if applicable) and, if requested by any such person, confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities, the Exchange Securities or the Private Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) The Company and the Guarantors will make every reasonable effort to obtain the withdrawal at the earliest practicable time of any order suspending the effectiveness of any Registration Statement. (d) The Company will furnish to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Securities in connection with the offer and sale of the Transfer Restricted Securities covered by such prospectus or any amendment or supplement thereto. (f) The Company will furnish to each Initial Purchaser and each Exchanging Dealer, and to any other Holder who so requests, without charge, at least one 8 conformed copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer or any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Company will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer and such other persons that are required to deliver a prospectus following the Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons may reasonably request; and the Company and the Guarantors consent to the use of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (h) In the case of a Shelf Registration, the Company will notify each Holder of Registrable Securities, at least five business days prior to filing, that a Shelf Registration Statement with respect to the Registrable Securities is being filed and advising such Holders that the distribution of Registrable Securities will be made in accordance with the method selected by the Initial Purchasers, if any, or if no Initial Purchaser is participating in the Shelf Registration, by the Holders of a majority of the aggregate principal amount of Registrable Securities participating in the Shelf Registration. (i) Prior to the effective date of any Registration Statement, the Company and the Guarantors will use their reasonable best efforts to register or qualify, or cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities included therein and their respective counsel in connection with the registration or qualification of, such Securities, Exchange Securities or Private Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities, Exchange Securities or Private Exchange Securities covered by such Registration Statement; provided that the Company and the Guarantors will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (j) The Company and the Guarantors will cooperate with the Holders of Securities, Exchange Securities or Private Exchange Securities to facilitate the timely preparation and delivery of certificates representing Securities, Exchange Securities or Private Exchange Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing prior to sales of Securities, Exchange Securities or Private Exchange Securities pursuant to such Registration Statement. (k) If any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Company and the Guarantors are required to maintain an effective Registration Statement, the Company will promptly prepare and file with the Commission a post-effective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to 9 purchasers of the Securities, Exchange Securities or Private Exchange Securities from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Securities, the Exchange Securities and the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (m) The Company and the Guarantors will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act; provided that in no event shall such earning statement be delivered later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement, which statement shall cover such 12-month period. (n) The Company and the Guarantors will cause the Indenture or the Exchange Securities Indenture, as the case may be, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (o) The Company may require each Holder of Transfer Restricted Securities to be registered pursuant to any Shelf Registration Statement to furnish to the Company such information concerning the Holder and the distribution of such Transfer Restricted Securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Company may exclude from such registration the Transfer Restricted Securities of any Holder that fails to furnish such information within a reasonable time after receiving such request. (p) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Securities to be registered pursuant thereto agrees by acquisition of such Transfer Restricted Securities that, upon receipt of any notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer Restricted Securities until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(k) or until advised in writing (the "Advice") by the Company that the use of the applicable prospectus may be resumed. If the Company shall give any notice under Section 4(b)(ii) through (v) during the period that the Company is required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Securities covered by such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(k) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). 10 (q) In the case of a Shelf Registration Statement, the Company and the Guarantors shall (i) enter into customary agreements (including, if requested, an underwriting agreement in customary form), (ii) cause the same to set forth indemnification provisions and procedures comparable in scope to the indemnification provisions and procedures set forth in Section 6 hereof with respect to the Initial Purchasers and all other parties to be indemnified pursuant to said Section 6 or, at the request of any underwriters, such other indemnification provisions customarily provided to underwriters under the circumstances applicable to the offering; provided, however, that such underwriting agreement shall contain indemnification provisions and procedures regarding the indemnification of the Company and the Guarantors with respect to information provided by the underwriter or by any other party to be indemnified under Section 6 hereof, comparable in scope to the indemnification provisions and procedures set forth in Section 6 hereof or, at the request of the Company or the Guarantors, such other indemnification provisions customarily provided under the circumstances applicable to the offering, and (iii) take all such other action, if any, as Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (r) In the case of a Shelf Registration Statement, the Company shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold and any underwriter participating in any disposition of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries and (ii) use its reasonable best efforts to have its officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement. (s) In the case of a Shelf Registration Statement, the Company shall, if requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use its reasonable best efforts to cause (i) its counsel to deliver an opinion relating to the Shelf Registration Statement and the Securities, Exchange Securities or Private Exchange Securities, as applicable, that (x) the Company and the Guarantors have duly authorized, executed and delivered the Exchange Securities and/or Private Exchange Securities, as applicable, and the related indenture, and (y) each of the Exchange Securities and related indenture constitutes a legal, valid and binding obligation of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms (with customary exceptions); (ii) its officers to execute and deliver all customary documents and certificates requested by Holders of a majority in aggregate principal amount of the Securities, Exchange Securities and Private Exchange Securities being sold, their Special Counsel or the managing underwriters (if any); and (iii) its independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 11 (t) In the case of a Shelf Registration, if so requested by the Initial Purchasers, if any, or the Holders of a majority of the aggregate principal amount of Registrable Securities, or if requested by the underwriter or underwriters as appointed by the Initial Purchasers, if any, the Company shall (i) use its reasonable best efforts to cause all Exchange Securities and Shelf Registrable Securities to be listed on any securities exchange on which similar debt securities issued by the Company or the Guarantors are then listed, and (ii) use its reasonable best efforts to cause the Shelf Registrable Securities to be rated by two nationally recognized statistical rating agencies. (u) The Company shall cooperate and assist in any filings required to be made with the NASD and, in the case of a Shelf Registration, in the performance of any due diligence investigation by any underwriter as appointed by the Initial Purchasers, if any, or the Holders of a majority of the aggregate principal amount of Registrable Securities and such underwriter's counsel (including any "qualified independent underwriter" that is required to be retained in accordance with the rules and regulations of the NASD). 5. Registration Expenses. The Company and the Guarantors will bear all expenses incurred in connection with the performance of its obligations under Sections 1, 2, 3 and 4 and the Company will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys (in addition to any local counsel) chosen by the Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities to be sold pursuant to each Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. 6. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the Company and each of the Guarantors shall jointly and severally indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser or Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Securities, Exchange Securities or Private Exchange Securities), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or 12 alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related preliminary prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Securities, Exchange Securities or Private Exchange Securities to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus and any amendment or supplement thereto was not sent or given to such person at or prior to the written confirmation of the sale of such Securities, Exchange Securities or Private Exchange Securities to such person and (B) the untrue statement in or omission from the related preliminary prospectus was corrected in the final prospectus or any amendment or supplement thereto unless, in either case, such failure to deliver the final prospectus or any amendment or supplement thereto was a result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g). (a) In the event of a Shelf Registration Statement, each Holder shall indemnify and hold harmless the Company, each Guarantor and their respective affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Company or any Guarantor within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b), Section 6(d) and Section 7 as the Company), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Holders' Information furnished to the Company by such Holder, and shall reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Securities, Exchange Securities or Private Exchange Securities pursuant to such Shelf Registration Statement. (b) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to 13 participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon written advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon written advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement (i) includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding and (ii) does not include a statement or admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) The Company shall not be liable for any settlement of any proceedings effected without its written consent (which consent shall not be unreasonably withheld). Notwithstanding the immediately preceding sentence, if at any time an indemnified party shall have requested the Company to reimburse such indemnified party for legal or other expenses in connection with investigating, responding to or defending any proceedings as contemplated by Section 6(a), the Company shall be liable for any settlement of any proceedings effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by the Company of such request for the reimbursement, (ii) the Company shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement and (iii) 14 the Company shall not have responded in writing to such request, specifying those expenses that it has chosen not to reimburse and the reason for such non-reimbursement, prior to the date of such settlement. The Company shall not, without the prior written consent of an indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceedings in respect of which indemnity could have been sought hereunder by such indemnified party unless such settlement (x) includes an unconditional release of such indemnified party in form and substance satisfactory to such indemnified party from all liability on claims that are the subject matter of such proceedings and (y) does not include any statement as to or any admission of fault, culpability or failure to act by or on behalf of any indemnified party. In addition, except as otherwise set forth in this paragraph, an indemnified party shall not, without the prior written consent of the Company (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceedings in respect of which indemnity could have been sought hereunder by such indemnified party unless such settlement (x) includes an unconditional release of the Company in form and substance satisfactory to the Company from all liability on claims that are the subject matter of such proceedings and (y) does not include any statement as to or any admission of fault, culpability or failure to act by or on behalf of the Company. 7. Contribution. If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering and sale of the Securities, on the one hand, and a Holder with respect to the sale by such Holder of Securities, Exchange Securities or Private Exchange Securities, on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and each of the Guarantors on the one hand and such Holder on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company and each of the Guarantors on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) received by or on behalf of the Company and each of the Guarantors, on the one hand, and the total discounts and commissions received by such Holder with respect to the Securities, Exchange Securities or Private Exchange Securities, on the other, bear to the total gross proceeds from the sale of Securities, Exchange Securities or Private Exchange Securities. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Company and each of the Guarantors or information supplied by the Company and each of the Guarantors on the one hand or to any Holders' Information supplied by such Holder on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by 15 such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, an indemnifying party that is a Holder of Securities, Exchange Securities or Private Exchange Securities shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities, Exchange Securities or Private Exchange Securities sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Rules 144 and 144A. The Company shall use its reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of such Holder's securities pursuant to Rules 144 and 144A. The Company and the Guarantors covenant that they will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Securities, the Company and the Guarantors shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 9. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities included in such offering, subject to the consent of the Company (which shall not be unreasonably withheld or delayed), and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of Holders of a majority in aggregate principal amount of the Securities, the 16 Exchange Securities and the Private Exchange Securities, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Securities, Exchange Securities or Private Exchange Securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Securities, the Exchange Securities and the Private Exchange Securities being sold by such Holders pursuant to such Registration Statement. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Guggenheim Capital Markets, LLC and each Initial Purchaser; (2) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; (3) if to the Company, initially at the address of the Company set forth in the Purchase Agreement; and (4) if to the Guarantors, initially at the address of the Guarantors set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next-day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the Company, the Guarantors and their respective successors and assigns, including, without limitation and without the need for an express assignment, subsequent Holders; provided, however, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement and the Indenture, and such person shall be entitled to receive the benefits hereof. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 17 (e) Third Party Beneficiaries. The Initial Purchasers (even if the Initial Purchasers are not Holders of Registrable Securities) shall be third party beneficiaries to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Holders, on the other hand, and shall have the right to enforce such agreements directly to the extent they deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. Each Holder of Registrable Securities shall be a third party beneficiary to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights hereunder. (f) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (i) Remedies. In the event of a breach by the Company or any of the Guarantors or by any Holder of any of their respective obligations under this Agreement, each Holder or the Company or any Guarantor, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Company or any Guarantor of their obligations under Sections 1 or 2 hereof for which additional interest has been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. The Company, each Guarantor and each Holder agree that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. (j) No Inconsistent Agreements. Each of the Company and each Guarantor represents, warrants and agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Securities, it shall not grant to any person the right to request the Company to register any debt securities of the Company under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (k) No Piggyback on Registrations. Neither the Company nor the Guarantors nor any of its security holders (other than the Holders of Transfer Restricted 18 Securities in such capacity) shall have the right to include any securities of the Company in any Shelf Registration or Exchange Offer other than Transfer Restricted Securities. (l) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 19 Please confirm that the foregoing correctly sets forth the agreement among the Company and the Initial Purchasers. Very truly yours, MISSION RESOURCES CORPORATION By /s/ Richard W. Piacenti ---------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer BLACK HAWK OIL COMPANY By /s/ Richard W. Piacenti ---------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer MISSION HOLDINGS LLC By /s/ Richard W. Piacenti ---------------------------------------- Name: Richard W. Piacenti Title: Manager MISSION E&P LIMITED PARTNERSHIP By: Black Hawk Oil Company General Partner By /s/ Richard W. Piacenti ---------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer Accepted: GUGGENHEIM CAPITAL MARKETS, LLC By /s/ Jeffrey Lewis -------------------------------- Name: Jeffrey Lewis Title: Senior Managing Director SCHEDULE I GUARANTORS Black Hawk Oil Company Mission Holdings LLC Mission E&P Limited Partnership S-1 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." A-1 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution". B-1 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until _______________, 200_, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker- dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any broker- dealers and will indemnify the Holders of the Securities (including any broker- dealers) against certain liabilities, including liabilities under the Securities Act. C-1 ANNEX D [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: Address: If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. D-1 EX-10.1 6 h14499aexv10w1.txt CREDIT AGREEMENT DATED APRIL 8, 2004 EXHIBIT 10.1 EXECUTION COUNTERPART CREDIT AGREEMENT DATED AS OF APRIL 8, 2004 AMONG MISSION RESOURCES CORPORATION AS BORROWER, WELLS FARGO BANK, NATIONAL ASSOCIATION, AS LEAD ARRANGER AND ADMINISTRATIVE AGENT, AND THE LENDERS SIGNATORY HERETO TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS...................................................... 1 Section 1.01 Terms Defined Above..................................................................... 1 Section 1.02 Certain Defined Terms................................................................... 1 Section 1.03 Accounting Terms and Determinations..................................................... 18 ARTICLE II COMMITMENTS............................................................................. 19 Section 2.01 Loans and Letters of Credit............................................................. 19 Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit............................ 19 Section 2.03 Changes of Revolving Credit Commitments................................................. 21 Section 2.04 Fees.................................................................................... 22 Section 2.05 Several Obligations..................................................................... 23 Section 2.06 Notes................................................................................... 23 Section 2.07 Prepayments............................................................................. 23 Section 2.08 Borrowing Base.......................................................................... 24 Section 2.09 Assumption of Risks..................................................................... 26 Section 2.10 Obligation to Reimburse and to Prepay................................................... 27 Section 2.11 Lending Offices......................................................................... 29 ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST...................................................... 29 Section 3.01 Repayment of Loans...................................................................... 29 Section 3.02 Interest................................................................................ 29 ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC......................................... 30 Section 4.01 Payments................................................................................ 30 Section 4.02 Pro Rata Treatment...................................................................... 31 Section 4.03 Computations............................................................................ 31 Section 4.04 Non-receipt of Funds by the Agent....................................................... 31 Section 4.05 Set-off, Sharing of Payments, Etc....................................................... 32 Section 4.06 Taxes................................................................................... 33 Section 4.07 Disposition of Proceeds................................................................. 35 ARTICLE V CAPITAL ADEQUACY AND ADDITIONAL COSTS................................................... 36 Section 5.01 Capital Adequacy and Additional Costs................................................... 36 Section 5.02 Limitation on LIBOR Loans............................................................... 38 Section 5.03 Illegality.............................................................................. 38 Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03................................ 38 Section 5.05 Compensation............................................................................ 39 Section 5.06 Replacement Lenders..................................................................... 39 ARTICLE VI CONDITIONS PRECEDENT.................................................................... 40 Section 6.01 Initial Funding......................................................................... 40
i Section 6.02 Initial and Subsequent Loans and Letters of Credit...................................... 44 Section 6.03 Conditions Precedent for the Benefit of Lenders......................................... 44 Section 6.04 No Waiver............................................................................... 44 ARTICLE VII REPRESENTATIONS AND WARRANTIES.......................................................... 45 Section 7.01 Corporate Existence..................................................................... 45 Section 7.02 Financial Condition..................................................................... 45 Section 7.03 Litigation.............................................................................. 45 Section 7.04 No Breach............................................................................... 46 Section 7.05 Authority............................................................................... 46 Section 7.06 Approvals............................................................................... 46 Section 7.07 Use of Loans............................................................................ 46 Section 7.08 ERISA................................................................................... 47 Section 7.09 Taxes................................................................................... 48 Section 7.10 Titles, etc............................................................................. 48 Section 7.11 No Material Misstatements............................................................... 48 Section 7.12 Investment Company Act.................................................................. 49 Section 7.13 Public Utility Holding Company Act...................................................... 49 Section 7.14 Subsidiaries............................................................................ 49 Section 7.15 Location of Business and Offices........................................................ 49 Section 7.16 Defaults................................................................................ 49 Section 7.17 Environmental Matters................................................................... 49 Section 7.18 Compliance with the Law................................................................. 50 Section 7.19 Insurance............................................................................... 51 Section 7.20 Intentionally Deleted................................................................... 51 Section 7.21 Hedging Agreements...................................................................... 52 Section 7.22 Restriction on Liens.................................................................... 52 Section 7.23 Material Agreements..................................................................... 52 Section 7.24 Gas Imbalances.......................................................................... 52 Section 7.25 Partnership Agreement................................................................... 53 Section 7.26 Intentionally Deleted................................................................... 53 Section 7.27 Solvency................................................................................ 53 Section 7.28 Name Changes............................................................................ 53 Section 7.29 Taxpayer Identification Number.......................................................... 53 Section 7.30 State of Formation...................................................................... 53 ARTICLE VIII AFFIRMATIVE COVENANTS................................................................... 53 Section 8.01 Reporting Requirements.................................................................. 54 Section 8.02 Litigation.............................................................................. 56 Section 8.03 Maintenance, Etc........................................................................ 56 Section 8.04 Environmental Matters................................................................... 58 Section 8.05 Further Assurances...................................................................... 58 Section 8.06 Performance of Obligations.............................................................. 58 Section 8.07 Engineering Reports..................................................................... 59 Section 8.08 Title Information and Mortgage Coverage................................................. 60
ii Section 8.09 Additional Collateral................................................................... 61 Section 8.10 Cash Collateral Account Agreement....................................................... 61 Section 8.11 Intentionally Deleted................................................................... 62 Section 8.12 ERISA Information and Compliance........................................................ 62 Section 8.13 Joinder and Guaranty Agreements......................................................... 62 ARTICLE IX NEGATIVE COVENANTS...................................................................... 62 Section 9.01 Debt.................................................................................... 63 Section 9.02 Liens................................................................................... 64 Section 9.03 Investments, Loans and Advances......................................................... 64 Section 9.04 Dividends, Distributions and Redemptions................................................ 65 Section 9.05 Sales and Leasebacks.................................................................... 65 Section 9.06 Nature of Business...................................................................... 65 Section 9.07 Limitation on Leases.................................................................... 65 Section 9.08 Mergers, Etc............................................................................ 65 Section 9.09 Proceeds of Notes; Letters of Credit.................................................... 66 Section 9.10 ERISA Compliance........................................................................ 66 Section 9.11 Sale or Discount of Receivables......................................................... 67 Section 9.12 Intentionally Deleted................................................................... 67 Section 9.13 Current Ratio........................................................................... 67 Section 9.14 Tangible Net Worth...................................................................... 67 Section 9.15 Leverage Ratio.......................................................................... 68 Section 9.16 Interest Coverage Ratio................................................................. 68 Section 9.17 Sale of Mortgaged Properties and Oil and Gas Properties................................. 68 Section 9.18 Intentionally Deleted................................................................... 68 Section 9.19 Environmental Matters................................................................... 68 Section 9.20 Transactions with Affiliates............................................................ 69 Section 9.21 Subsidiaries............................................................................ 69 Section 9.22 Negative Pledge Agreements.............................................................. 69 Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments........................................ 69 Section 9.24 Ownership of Subsidiaries............................................................... 69 Section 9.25 Change in Borrower's or Subsidiary's Name or State of Formation......................... 70 Section 9.26 Material Agreements..................................................................... 70 Section 9.27 Partnership Agreement................................................................... 70 ARTICLE X EVENTS OF DEFAULT; REMEDIES............................................................. 70 Section 10.01 Events of Default....................................................................... 70 Section 10.02 Remedies................................................................................ 72 ARTICLE XI THE AGENT............................................................................... 73 Section 11.01 Appointment, Powers and Immunities...................................................... 73 Section 11.02 Reliance by Agent....................................................................... 74 Section 11.03 Defaults................................................................................ 74 Section 11.04 Rights as a Lender...................................................................... 74 Section 11.05 INDEMNIFICATION......................................................................... 74 Section 11.06 Non-Reliance on Agent and other Lenders................................................. 75
iii Section 11.07 Action by Agent......................................................................... 75 Section 11.08 Resignation or Removal of Agent......................................................... 76 ARTICLE XII MISCELLANEOUS........................................................................... 76 Section 12.01 Waiver.................................................................................. 76 Section 12.02 Notices................................................................................. 76 Section 12.03 Payment of Expenses, Indemnities, etc................................................... 77 Section 12.04 Amendments, Etc......................................................................... 80 Section 12.05 Successors and Assigns.................................................................. 80 Section 12.06 Assignments and Participations.......................................................... 80 Section 12.07 Invalidity.............................................................................. 82 Section 12.08 Counterparts............................................................................ 82 Section 12.09 References; Use of Word "Including"..................................................... 82 Section 12.10 Survival................................................................................ 82 Section 12.11 Captions................................................................................ 82 Section 12.12 NO ORAL AGREEMENTS...................................................................... 83 Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION............................................... 83 Section 12.14 Interest................................................................................ 84 Section 12.15 Confidentiality......................................................................... 85 Section 12.16 Effectiveness........................................................................... 85 Section 12.17 Exculpation Provisions.................................................................. 85 Section 12.18 Arbitration............................................................................. 86
iv ANNEXES, EXHIBITS AND SCHEDULES Annex I - List of Percentage Shares and Maximum Credit Amounts Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Borrowing, Continuation and Conversion Request Exhibit C - Form of Compliance Certificate Exhibit D - List of Security Instruments Exhibit E - Form of Assignment Agreement Exhibit F - Form of Letter of Credit Application Exhibit G - Joinder Agreement Exhibit H - Guaranty Agreement Schedule 2.08 - Borrowing Base Schedule 7.02 - Liabilities Schedule 7.03 - Litigation Schedule 7.09 - Taxes Schedule 7.10 - Titles, etc. Schedule 7.14 - Subsidiaries and Partnerships; Locations; Jurisdictions Schedule 7.17 - Environmental Matters Schedule 7.19 - Insurance Schedule 7.21 - Hedging Agreements Schedule 7.23 - Material Agreements Schedule 7.24 - Gas Imbalances Schedule 7.28 - Name Changes Schedule 9.01 - Debt Schedule 9.02 - Liens Schedule 9.03 - Investments, Loans and Advances v CREDIT AGREEMENT THIS CREDIT AGREEMENT dated as of April __, 2004 is among MISSION RESOURCES CORPORATION, a corporation formed under the laws of the State of Delaware (the "BORROWER"); each of the lenders that is a signatory hereto or which becomes a signatory hereto as provided in Section 12.06 (individually, together with its successors and assigns, a "LENDER" and, collectively, the "LENDERS"); and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (in its individual capacity, "WELLS FARGO"), as administrative agent for the Lenders (in such capacity, together with its successors in such capacity, the "AGENT"). RECITALS A. The Borrower has requested that the Lenders provide certain loans to and extensions of credit on behalf of the Borrower; and B. The Lenders have agreed to make such loans and extensions of credit subject to the terms and conditions of this Agreement. C. In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Terms Defined Above. As used in this Agreement, the terms "AGENT," "BORROWER," "LENDER," "LENDERS," and "WELLS FARGO" shall have the meanings indicated above. Section 1.02 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Article I or in other provisions of this Agreement in the singular to have equivalent meanings when used in the plural and vice versa): "ADDITIONAL COSTS" shall have the meaning assigned such term in Section 5.01(c). "AFFECTED LOANS" shall have the meaning assigned such term in Section 5.04. "AFFILIATE" of any Person shall mean (i) any Person directly or indirectly controlled by, controlling or under common control with such first Person, (ii) any director or officer of such first Person or of any Person referred to in clause (i) above and (iii) if any Person in clause (i) above is an individual, any member of the immediate family (including parents, spouse and children) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such CREDIT AGREEMENT member or trust. For purposes of this definition, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to "CONTROL" (including, with its correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") such corporation or other Person. "AGGREGATE MAXIMUM REVOLVING CREDIT AMOUNTS" at any time shall equal the sum of the Maximum Revolving Credit Amounts of the Lenders ($100,000,000.00), as the same may be reduced pursuant to Section 2.03(b). As of the Closing Date, the Aggregate Maximum Revolving Credit Amounts equal $100,000,000.00. "AGGREGATE REVOLVING CREDIT COMMITMENTS" at any time shall equal the amount calculated in accordance with Section 2.03. "AGREEMENT" shall mean this Credit Agreement, as the same may from time to time be amended or supplemented. "APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each Type of Loan, the lending office of such Lender (or an Affiliate of such Lender) designated for such Type of Loan on the signature pages hereof or such other offices of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Agent and the Borrower as the office by which its Loans of such Type are to be made and maintained. "APPLICABLE MARGIN" shall mean the applicable per annum percentage set forth at the appropriate intersection in the table shown below, based on the Borrowing Base Utilization as in effect from time to time:
BORROWING BASE UTILIZATION APPLICABLE MARGIN - ------------------------------------------------------------------------------------ LIBOR BASE RATE REVOLVING CREDIT LOANS LOANS COMMITMENT FEE - ------------------------------------------------------------------------------------ Less than 33% 1.75% .25% .375% Greater than or equal to 33%, 2.00% .50% .50% but less than 50% Greater than or equal to 50%, 2.25% .75% .50% but less than 66% Greater than or equal to 66%, 2.50% 1.00% .50% but less than 90% Greater than 90% 2.75% 1.25% .50%
CREDIT AGREEMENT 2 Each change in the Applicable Margin resulting from a change in the Borrowing Base Utilization shall take effect on the day such change in the Borrowing Base Utilization occurs. "ASSIGNMENT" shall have the meaning assigned such term in Section 12.06(b). "BASE RATE" shall mean, with respect to any Base Rate Loan, for any day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or (ii) the Prime Rate for such day. Each change in any interest rate provided for herein based upon the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. "BASE RATE LOANS" shall mean Loans that bear interest at rates based upon the Base Rate. "BLACK HAWK" shall mean Black Hawk Oil Company, a Delaware corporation. "BORROWING BASE" shall mean at any time an amount equal to the amount determined in accordance with Section 2.08. "BORROWING BASE UTILIZATION" shall mean the sum of (i)(a) the aggregate outstanding principal amount of the Loans plus (b) the aggregate face amount of all undrawn and uncancelled Letters of Credit, plus (c) the aggregate of all amounts drawn under all Letters of Credit and not yet reimbursed, divided by (ii) the Borrowing Base. "BUSINESS DAY" shall mean any day other than a day on which commercial banks are authorized or required to close in Houston, Texas, and, where such term is used in the definition of "Quarterly Date" or if such day relates to a borrowing or continuation of, a payment or prepayment of principal of or interest on, or a conversion of or into, or the Interest Period for, a LIBOR Loan or a notice by the Borrower with respect to any such borrowing or continuation, payment, prepayment, conversion or Interest Period, any day which is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "CASH COLLATERAL ACCOUNT AGREEMENT" shall mean that certain Cash Collateral Account Agreement between the Borrower, its Subsidiaries and the Agent in form and substance satisfactory to Agent and shall include a financing statement in form and substance satisfactory to Agent covering and granting a perfected first priority security interest to the Agent in the cash collateral, and subject only to Liens or any other encumbrances satisfactory to Agent. "CLOSING DATE" shall mean April 8, 2004. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute. "COMMITMENT" shall mean, for any Lender, its obligation to make Loans and to participate in the Letters of Credit as provided in Section 2.01(b) up to the lesser of (i) such Lender's Maximum Credit Amount and (ii) the Lender's Percentage Share of the amount equal to the then effective Borrowing Base. CREDIT AGREEMENT 3 "CONSOLIDATED NET INCOME" shall mean with respect to the Borrower and its Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and its Consolidated Subsidiaries after allowances for taxes for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (i) the net income of any Person in which the Borrower or any Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and its Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in such period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but not loss) of any Consolidated Subsidiary to the extent that the declaration or payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary, or is otherwise restricted or prohibited in each case determined in accordance with GAAP; (iii) any extraordinary gains or losses, including gains or losses attributable to Property sales not in the ordinary course of business; and (iv) the cumulative effect of a change in accounting principles and any gains or losses attributable to write-ups or write-downs of assets. "CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of a Person (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of such Person in accordance with GAAP. Unless otherwise indicated, each reference to the term "Consolidated Subsidiary" shall mean a Subsidiary consolidated with the Borrower. "CURRENT ASSETS" shall have the meaning assigned such term in Section 9.13. "CURRENT LIABILITIES" shall have the meaning assigned such term in Section 9.13. "DEBT" shall mean, for any Person the sum of the following (without duplication): (i) all obligations of such Person for borrowed money or evidenced by bonds, debentures, notes or other similar instruments (including principal, interest, fees and charges); (ii) all obligations of such Person (whether contingent or otherwise) in respect of bankers' acceptances, letters of credit, surety or other bonds and similar instruments; (iii) all obligations of such Person to pay the deferred purchase price of Property or services (other than for borrowed money); (iv) all obligations under leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable (whether contingent or otherwise); (v) all Debt (as described in the other clauses of this definition) and other obligations of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person; (vi) all Debt (as described in the other clauses of this definition) and other obligations of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss with respect to the Debt or obligations of others; (vii) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property (if the obligation to purchase Property is incurred to assure a creditor against loss) of others; (viii) obligations to deliver goods or services including Hydrocarbons in consideration of advance payments, except as permitted by CREDIT AGREEMENT 4 Section 9.23 and disclosed by Section 8.07(c); (ix) obligations to pay for goods or services whether or not such goods or services are actually received or utilized by such Person; (x) any capital stock or other ownership interest of such Person in which such Person has a mandatory obligation to redeem such stock or other ownership interest prior to the Final Maturity Date; (xi) any Debt of a Special Entity for which such Person is liable either by agreement or because of a Governmental Requirement; (xii) the undischarged balance of any production payment created by such Person or for the creation of which such Person directly or indirectly received payment; and (xiii) all net obligations of such Person under Hedging Agreements excluding Hedging Agreements with Agent or any other Lender. "DEFAULT" shall mean an Event of Default or an event which with notice or lapse of time or both would become an Event of Default. "DOLLARS" and "$" shall mean lawful money of the United States of America. "EBITDA" shall mean, for any period, the sum of Consolidated Net Income for such period plus the following charges to the extent deducted from Consolidated Net Income in such period: interest, income taxes (including franchise taxes calculated with respect to income), depreciation, depletion and amortization and any other non-cash charges and non-cash revenues and after eliminating extraordinary items. For the quarter ending June 30, 2004, September 30, 2004 and December 31, 2004, EBITDA shall be calculated by annualizing EBITDA for the period beginning on April 1, 2004; e.g., for the quarter ending June 30, 2004, the calculation for said quarter of 2004 will be multiplied by four, for the two quarters ending September 30, 2004, the calculation for said two quarters will be multiplied by two, and for the three quarters ending December 31, 2004, the calculation for said three quarters of 2004 will be multiplied by one and one-third. Thereafter, EBITDA shall be calculated on a rolling four quarter basis. In addition, for any applicable period during which an acquisition or disposition permitted by this Agreement is consummated, EBITDA shall be determined on a pro forma basis (with such calculation to be acceptable to, and approved by, the Agent) as if such acquisition or disposition were consummated on the first day of such applicable period. "EFFECTIVE DATE" shall have the meaning assigned such term in Section 12.16. "ENGINEERING REPORTS" shall have the meaning assigned such term in Section 2.08. "ENVIRONMENTAL LAWS" shall mean any and all applicable Governmental Requirements pertaining to health or the environment in effect in any and all jurisdictions in which the Borrower or any Subsidiary is conducting or at any time has conducted business, or where any Property of the Borrower or any Subsidiary is located, including without limitation, OPA, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection laws. The term "oil" shall have the meaning specified in OPA, the terms "hazardous substance" and "release" (or "threatened release") have the meanings specified in CERCLA, and the terms "solid CREDIT AGREEMENT 5 waste" and "disposal" (or "disposed") have the meanings specified in RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (ii) to the extent the laws of the state in which any Property of the Borrower or any Subsidiary is located establish a meaning for "oil," "hazardous substance," "release," "solid waste" or "disposal" which is broader than that specified in either OPA, CERCLA or RCRA, such broader meaning shall apply. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "ERISA AFFILIATE" shall mean each trade or business (whether or not incorporated) which together with the Borrower or any Subsidiary would be deemed to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of Section 414 of the Code. "ERISA EVENT" shall mean (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "EVENT OF DEFAULT" shall have the meaning assigned such term in Section 10.01. "EXCEPTED LIENS" shall mean: (i) Liens for taxes, assessments or other governmental charges or levies not yet due, which remain payable without penalty or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained; (ii) Liens in connection with workmen's compensation, unemployment insurance or other social security, old age pension or public liability obligations not yet due or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (iii) operators', non-operators', vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties or statutory landlord's liens, each of which is in respect of obligations that have not been outstanding more than ninety (90) days or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP; (iv) any Liens reserved in leases, joint operating agreements, farmout agreements and other similar agreements for rent or royalties and for compliance with the terms of such agreements or leases in the case of leasehold estates, to the extent that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (v) encumbrances (other than to secure the payment of borrowed money or the deferred purchase CREDIT AGREEMENT 6 price of Property or services), easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any rights of way or other Property of the Borrower or any Subsidiary for the purpose of roads, pipelines, transmission lines, transportation lines, distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, and defects, irregularities, zoning restrictions and deficiencies in title of any rights of way or other Property which in the aggregate do not materially impair the use of such rights of way or other Property for the purposes of which such rights of way and other Property are held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (vi) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature incurred in the ordinary course of business; (vii) Liens permitted by the Security Instruments; and (viii) Liens given to secure the Second Lien Notes; provided that Liens in this clause (viii) are subject to an intercreditor agreement in form and substance satisfactory to Agent. "EXISTING SENIOR SUBORDINATED UNSECURED NOTES" shall mean the 107/8% Senior Subordinated Notes Due 2007, Series C issued by the Borrower and outstanding in the principal amount of $87,426,000.00. "FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight federal funds transactions with a member of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the date for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate charged to the Agent on such day on such transactions as determined by the Agent. "FEE LETTER" shall mean that certain letter agreement from Wells Fargo to the Borrower dated March 27, 2004, concerning certain fees in connection with this Agreement and any agreements or instruments executed in connection therewith, as the same may be amended or replaced from time to time. "FINAL MATURITY DATE" shall mean the earlier to occur of (i) the third anniversary of the Closing Date, (ii) the date that the Notes are prepaid in full pursuant to Section 2.07 and neither the Agent nor any Lender is obligated to make Revolving Credit Loans or advance other funds to Borrower hereunder, and (iii) termination of this Agreement. "FINANCIAL STATEMENTS" shall mean the financial statement or statements of the Borrower and its Consolidated Subsidiaries described or referred to in Section 7.02. "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time. CREDIT AGREEMENT 7 "GOVERNMENTAL AUTHORITY" shall include the country, the state, county, city and political subdivisions in which any Person or such Person's Property is located or which exercises valid jurisdiction over any such Person or such Person's Property, and any court, agency, department, commission, board, bureau or instrumentality of any of them including monetary authorities which exercises valid jurisdiction over any such Person or such Person's Property. Unless otherwise specified, all references to Governmental Authority herein shall mean a Governmental Authority having jurisdiction over, where applicable, the Borrower, its Subsidiaries or any of their Property or the Agent, any Lender, or any Applicable Lending Office. "GOVERNMENTAL REQUIREMENT" shall mean any applicable law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement (having the force of law), including, without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority. "GUARANTOR" shall mean, individually and collectively, (i) each and every Subsidiary of Borrower and all of their Subsidiaries (and so on and so forth) existing as of the date hereof, and (ii) each and every Subsidiary and all of their Subsidiaries (and so on and so forth) hereafter created, acquired or otherwise owned by Borrower, and shall include, without limitation, Black Hawk Oil Company, MSSN Holdings, and Mission E&P. "GUARANTY AGREEMENT" shall mean any agreement executed by any Guarantor in form and substance satisfactory to the Agent guarantying, unconditionally, payment of the Obligations, as the same may be amended, modified or supplemented from time to time. "HEDGING AGREEMENTS" shall mean any commodity, interest rate or currency swap, cap, floor, collar, forward agreement or other exchange or protection agreements or any option with respect to any such transaction. "HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on any other Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "HYDROCARBON INTERESTS" shall mean all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature. "HYDROCARBONS" shall mean oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or separated therefrom. "INDEMNIFIED PARTIES" shall have the meaning assigned such term in Section 12.03(a)(ii). CREDIT AGREEMENT 8 "INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings (including any investigations, litigation or inquiries), claims, demands and causes of action made or threatened against a Person and, in connection therewith, all losses, liabilities, damages (including, without limitation, consequential damages) or reasonable costs and expenses of any kind or nature whatsoever incurred by such Person whether caused by the sole or concurrent negligence of such Person seeking indemnification. "INITIAL FUNDING" shall mean the funding of the initial Loans or issuance of the initial Letters of Credit upon satisfaction of the conditions set forth in Sections 6.01 and 6.02. "INITIAL RESERVE REPORT" shall mean the report of Netherland Sewell & Associates, Inc., dated as of January 1, 2004, with respect to the Oil and Gas Properties of the Borrower, a copy of which has been delivered to the Agent. "INTEREST COVERAGE RATIO" shall have the meaning ascribed to such term in Section 9.16. "INTEREST PERIOD" shall mean, with respect to any LIBOR Loan, the period commencing on the date such LIBOR Loan is made and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as the Borrower may select as provided in Section 2.02 (or such longer period as may be requested by the Borrower and agreed to by the Majority Lenders), except that each Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) no Interest Period may end after the Final Maturity Date; (ii) no Interest Period for any LIBOR Loan may end after the due date of any installment, if any, provided for in Section 2.07(b) to the extent that such LIBOR Loan would need to be prepaid prior to the end of such Interest Period in order for such installment to be paid when due; (iii) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (iv) no Interest Period shall have a duration of less than one month and, if the Interest Period for any LIBOR Loans would otherwise be for a shorter period, such Loans shall not be available hereunder. "ISSUING BANK" shall mean Wells Fargo. "LC COMMITMENT" at any time shall mean $3,000,000.00. "LC EXPOSURE" at any time shall mean the difference between (i) the aggregate face amount of all undrawn and uncancelled Letters of Credit plus the aggregate of all amounts drawn under all Letters of Credit and not yet reimbursed, minus (ii) the aggregate amount of all cash securing outstanding Letters of Credit pursuant to Section 2.10(b). "LENDER TERMINATION DATE" shall have the meaning assigned to such term in Section 5.06(c). CREDIT AGREEMENT 9 "LETTER OF CREDIT AGREEMENTS" shall mean the written agreements of the Borrower or any of its Subsidiaries with the Issuing Bank, as issuing lender for any Letter of Credit, executed in connection with the issuance by the Issuing Bank of the Letters of Credit, such agreements to be on the Issuing Bank's customary form for letters of credit of comparable amount and purpose as from time to time in effect or as otherwise agreed to by the Borrower and the Issuing Bank. "LETTER OF CREDIT APPLICATION" shall mean a letter of credit application, in form and substance satisfactory to the Issuing Bank, delivered to the Agent requesting the issuance, reissuance, extension or renewal of any Letter of Credit and containing the information set forth in Section 2.02(g). "LETTERS IN LIEU" shall mean each and every letter in lieu in form and substance reasonably satisfactory to Agent executed by the Borrower or any Subsidiary, as applicable, to each of the purchasers of the Hydrocarbons of the Borrower or any Subsidiary produced from the Borrower's and any of its Subsidiaries' Oil and Gas Properties. "LETTERS OF CREDIT" shall mean the letters of credit issued pursuant to Section 2.01(b) and all reimbursement obligations pertaining to any such letters of credit, and "Letter of Credit" shall mean any one of the Letters of Credit and the reimbursement obligations pertaining thereto. "LEVERAGE RATIO" shall mean, for any period, the ratio of Total Debt as of the last day of such period to EBITDA for such period. "LIBOR" shall mean, for each Interest Period for any LIBOR borrowing, the rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to the average of the offered quotations appearing on Telerate Page 3750 (or if such Telerate Page shall not be available, any successor or similar service as may be selected by Agent and Borrower) as of 11:00 a.m., Houston, Texas time (or, as soon thereafter as practicable) two (2) LIBOR Business Days prior to the first day of such Interest Period for deposits in Dollars having a term comparable to such Interest Period and in an amount comparable to the principal amount of the LIBOR borrowing to which such Interest Period relates. If none of such Telerate Page 3750 nor any successor or similar service is available, then "LIBOR" shall mean, with respect to any Interest Period for any applicable LIBOR borrowing, the rate of interest per annum, rounded upwards, if necessary, to the nearest 1/16th of 1%, quoted by Agent at or before 11:00 a.m., Houston, Texas time (or, as soon thereafter as practicable), two (2) LIBOR Business Days before the first day of such Interest Period, to be the arithmetic average of the prevailing rates per annum at the time of determination and in accordance with the then existing practice in the applicable market, for the offering to Agent by one or more prime banks selected by Agent in its sole discretion, in the London interbank market, of deposits in Dollars for delivery on the first day of such Interest Period and having a maturity equal (or as nearly equal as may be) to the length of such Interest Period and in an amount equal (or as nearly equal as may be) to the LIBOR borrowing to which such Interest Period relates. Each determination by Agent of LIBOR shall be conclusive and binding, absent manifest error, and may be computed using any reasonable averaging and attribution method. "LIBOR LOANS" shall mean Loans the interest rates on which are determined on the basis of rates referred to in the definition of "LIBOR Rate". CREDIT AGREEMENT 10 "LIBOR RATE" shall mean, with respect to any LIBOR Loan, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the Agent to be equal to the quotient of (i) LIBOR for such Loan for the Interest Period for such Loan divided by (ii) one (1) minus the Reserve Requirement for such Loan for such Interest Period. "LIEN" shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (i) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (ii) production payments and the like payable out of Oil and Gas Properties, except to the extent the reserves attributable thereto are deducted from the applicable Reserve Report. The term "LIEN" shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing. "LIMITED LIABILITY COMPANY AGREEMENT" shall mean the First Amended and Restated Limited Liability Company Agreement of Mission Holdings LLC, a Delaware Limited Liability Company, among its Members dated January 8, 2002. "LOAN DOCUMENTS" shall mean this Agreement, the Notes, all Letters of Credit, all Letter of Credit Agreements, all Letter of Credit Applications, the Fee Letter and the Security Instruments. "LOANS" shall mean the loans as provided for by Section 2.01. "Loans" shall include the Revolving Credit Loans. "LOCKBOX" shall mean the lockbox established pursuant to the Cash Collateral Account Agreement and subject to the Lockbox Agreement. "LOCKBOX AGREEMENT" shall mean that certain Lockbox Agreement between the Borrower, its Subsidiaries, and the Agent in form and substance satisfactory to Agent which shall grant a security interest in the contents therein and shall include a financing statement in form and substance satisfactory to Agent covering the contents therein. "MAJORITY LENDERS" shall mean, at any time while no Loans are outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%) of the Aggregate Revolving Credit Commitments and, at any time while Loans are outstanding, Lenders holding at least sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate principal amount of the Loans (without regard to any sale by a Lender of a participation in any Loan under Section 12.06(c)); provided, however, Agent, alone, shall constitute the Majority Lenders at any time that Agent is the sole Lender hereunder and if there are two or more Lenders, it shall take at least two Lenders to constitute the "Majority Lenders". CREDIT AGREEMENT 11 "MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect on (i) the assets, liabilities, financial condition, business, operations or affairs of the Borrower and its Subsidiaries taken as a whole different from those reflected in the Financial Statements or from the facts represented or warranted in any Loan Document, or (ii) the ability of the Borrower and its Subsidiaries taken as a whole to carry out their business as at the Closing Date or as proposed as of the Closing Date to be conducted or meet their obligations under the Loan Documents on a timely basis. "MATERIAL AGREEMENTS" shall mean all agreements listed on SCHEDULE 7.23. "MAXIMUM REVOLVING CREDIT AMOUNT" shall mean, as to each Lender, the amount set forth opposite such Lender's name on ANNEX I under the caption "Maximum Revolving Credit Amounts" (as the same may be reduced pursuant to Section 2.03(b) pro rata to each Lender based on its Percentage Share), as modified from time to time to reflect any assignments permitted by Section 12.06(b). "MISSION E&P shall mean Mission E&P Limited Partnership, a Texas limited partnership. "MORTGAGES" shall mean, individually and collectively, each Amended and Restated Consolidated Mortgage, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement dated as of April 8, 2004, covering certain of Borrower's and its Subsidiaries' Oil and Gas Properties in Texas and Louisiana, and each Amended and Restated Mortgage, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement dated as of April 8, 2004, covering certain of Mission E&P's Oil and Gas Properties in New Mexico, together with any and all amendments, modifications, supplements and/or restatements thereof. "MORTGAGED PROPERTY" shall mean the Property owned by the Borrower and its Subsidiaries and which is subject to the Liens existing and to exist under the terms of the Security Instruments. "MSSN HOLDINGS" shall mean Mission Holdings LLC, a Delaware limited liability company. "MULTIEMPLOYER PLAN" shall mean a Plan defined as such in Section 3(37) or 4001(a)(3) of ERISA. "NOTES" shall mean the Notes provided for by Section 2.06, together with any and all renewals, extensions for any period, increases, rearrangements, substitutions and/or modifications thereof. "NOTICE OF TERMINATION" shall have the meaning assigned such term in Section 5.06(a). "OBLIGATIONS" shall mean all indebtedness, obligations and liabilities of the Borrower or any Subsidiary to any of the Lenders, any of the Lenders' Affiliates, the Agent, or the Issuing Bank, individually or collectively, existing on the date of this Agreement or arising thereafter, CREDIT AGREEMENT 12 direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising or incurred under any Hedging Agreement, under this Agreement or any of the other Loan Documents or in respect of any of the Loans made or reimbursement obligations incurred or any of the Notes, Letters of Credit or other instruments at any time evidencing any thereof, including interest accruing subsequent to the filing of a petition or other action concerning bankruptcy or other similar proceedings, overdrafts to the Agent or ACH obligations to the Agent, or any other obligations incurred under this Agreement or any of the Security Instruments and all renewals, extensions, refinancings and replacements for the foregoing. "OIL AND GAS PROPERTIES" shall mean Hydrocarbon Interests; any interest of the Person owning such Hydrocarbon Interest in the Properties now or hereafter pooled or unitized with such Hydrocarbon Interests; all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created in connection therewith (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; all operating agreements, contracts and other agreements which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests; and all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment or other personal property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. "OPA" shall mean the Oil Pollution Act of 1990. "OTHER TAXES" shall have the meaning assigned such term in Section 4.06(b). "PARTNERS" shall mean Black Hawk Oil Company and MSSN Holdings. "PARTNERSHIP AGREEMENT" shall mean the Agreement of Limited Partnership of Mission E&P Limited Partnership among the Partners dated as of December 4, 2001. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions. CREDIT AGREEMENT 13 "PERCENTAGE SHARE" shall mean (with respect to any Lender) the percentage of the Aggregate Revolving Credit Commitments to be provided by such Lender under this Agreement as indicated on ANNEX I hereto, as modified from time to time to reflect any assignments permitted by Section 12.06(b). "PERMITTED TRANSFER" shall mean (i) the sale of Hydrocarbons in the ordinary course of business, (ii) the sale or transfer of equipment that is (A) obsolete, worn-out, depleted or uneconomic and disposed of in the ordinary course of business, (B) no longer necessary for the business of the Borrower or such Guarantor or (C) contemporaneously replaced by equipment of at least comparable value and use, (iii) the Transfer of any Oil and Gas Properties having a zero or negative value in the most recent Reserve Report, and (iv) the Transfer of Oil and Gas Properties of the Borrower or any Guarantor where the aggregate fair market value of such Oil and Gas Properties Transferred since the date hereof or, if one or more Redetermination Dates shall have occurred, since the last Redetermination Date, is less than or equal to five percent (5%) of the present value discounted at ten percent (10%) proved developed producing reserves as reflected in the most recent Reserve Report. "PERSON" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization or government or any agency, instrumentality or political subdivision thereof, or any other form of entity. "PLAN" shall mean any employee pension benefit plan, as defined in Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was at any time during the preceding six calendar years sponsored, maintained or contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate. "POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan or any other amount payable by the Borrower under this Agreement or any other Loan Document, a rate per annum during the period commencing on the date of occurrence of an Event of Default until such amount is paid in full or all Events of Default are cured or waived equal to 2% per annum above the Base Rate as in effect from time to time plus the Applicable Margin (if any), but in no event to exceed the Highest Lawful Rate; provided however, for a LIBOR Loan, the "Post-Default Rate" for such principal shall be, for the period commencing on the date of occurrence of an Event of Default and ending on the earlier to occur of the last day of the Interest Period therefor or the date all Events of Default are cured or waived, four percent (4%) per annum above the interest rate for such Loan as provided in Section 3.02(a)(ii), but in no event to exceed the Highest Lawful Rate. "PRIME RATE" shall mean the variable per annum rate of interest then most recently announced within Wells Fargo at its principal office in San Francisco, California, as its "prime rate", with the understanding that Wells Fargo's "prime rate" is one of its base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Wells Fargo may designate. Each change in any interest rate provided for herein based upon the Prime Rate resulting from a change in the Prime Rate shall CREDIT AGREEMENT 14 take effect on the day the change is announced within Wells Fargo without notice to the Borrower at the time of such change in the Prime Rate. "PRINCIPAL OFFICE" shall mean the principal office of the Agent, located in Houston, Texas, presently located at 1000 Louisiana, Third Floor, Houston, Texas 77002. "PROPERTY" or "PROPERTIES" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "QUARTERLY DATES" shall mean the last day of each June, September, December, and March, in each year, the first of which shall be June 30, 2004; provided, however, that if any such day is not a Business Day, such Quarterly Date shall be the next succeeding Business Day. "REDETERMINATION DATE" shall have the meaning assigned to such term in Section 2.08(a). "REGULATION D" shall mean Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as the same may be amended or supplemented from time to time. "REGULATORY CHANGE" shall mean, with respect to any Lender, any change after the Closing Date in any Governmental Requirement (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of lenders (including such Lender or its Applicable Lending Office) of or under any Governmental Requirement (whether or not having the force of law) by any Governmental Authority charged with the interpretation or administration thereof. "REPLACEMENT LENDERS" shall have the meaning assigned to such term in Section 5.06(b). "REQUIRED PAYMENT" shall have the meaning assigned such term in Section 4.04. "RESERVE REPORT" shall mean a report, in form and substance satisfactory to the Agent, setting forth, as of each January 1 and July 1 (or in the event of an unscheduled redetermination, the effective date thereof); (i) the oil and gas reserves attributable to the Borrower's and its Subsidiaries' Oil and Gas Properties together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the pricing assumptions determined by Agent at the time and (ii) such other information as the Agent may reasonably request. The term "Reserve Report" shall also include the information to be provided by the Borrower each year pursuant to Section 8.07(a). "RESERVE REQUIREMENT" shall mean, for any Interest Period for any LIBOR Loan, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding one billion Dollars against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves CREDIT AGREEMENT 15 required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which LIBOR is to be determined as provided in the definition of "LIBOR" or (ii) any category of extensions of credit or other assets which include a LIBOR Loan. "RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief Executive Officer, the President or any Vice President of such Person and, with respect to financial matters, the term "Responsible Officer" shall include the Chief Financial Officer of such Person. Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower. "REVOLVING CREDIT COMMITMENT" shall mean, for any Lender, its obligation to make Loans and participate in the issuance of Letters of Credit as provided in Section 2.01 up to the lesser of (i) such Lender's Maximum Revolving Credit Amount and (ii) such Lender's Percentage Share of the then effective Borrowing Base. "REVOLVING CREDIT LOANS" shall mean Loans made pursuant to Section 2.01(a). "REVOLVING CREDIT NOTES" shall mean the promissory note or notes (whether one or more) of the Borrower described in Section 2.06 and being in the form of EXHIBIT A. "REVOLVING CREDIT PERIOD" shall mean the period from the Closing Date to and ending on the Revolving Credit Termination Date. "REVOLVING CREDIT TERMINATION DATE" shall mean the earlier to occur of (i) April 8, 2007, or (ii) the date that the Revolving Credit Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02. "SCHEDULED REDETERMINATION DATE" shall have the meaning assigned such term in Section 2.08(d). "SEC" shall mean the Securities and Exchange Commission or any successor Governmental Authority. "SECOND LIEN NOTES" shall mean those certain Notes dated April 8, 2004, executed by the Borrower and payable to Guggenheim Corporate Funding, LLC in the aggregate original principal amount of $25,000,000, together with any and all renewals, extensions for any period, increases, rearrangements, substitutions, and/or modifications thereof. "SECOND LIEN NOTEHOLDER" shall mean, at any time, the holder or holders of the Second Lien Notes. "SECURITY INSTRUMENTS" shall mean the agreements or instruments described or referred to in EXHIBIT D, and any and all other agreements or instruments now or hereafter executed and delivered by the Borrower or any other Person (other than participation or similar agreements between any Lender and any other lender or creditor with respect to any Obligations pursuant to this Agreement) in connection with, or as security for the payment or performance of, the Notes, CREDIT AGREEMENT 16 this Agreement, or reimbursement obligations under the Letters of Credit, as such agreements may be amended, supplemented or restated from time to time. "SENIOR UNSECURED NOTES" shall mean the 97/8% Senior Notes due 2011 in the original principal amount of $130,000,000.00 issued by the Borrower pursuant to the Senior Unsecured Notes Indenture. "SENIOR UNSECURED NOTES INDENTURE" shall mean the Indenture to be dated on or about the closing date, between the Borrower and The Bank of New York, as Trustee. "SPECIAL ENTITY" shall mean any joint venture, limited liability company or partnership, general or limited partnership or any other type of partnership or company other than a corporation in which a Person or one or more of its other Subsidiaries is a member, owner, partner or joint venturer and owns, directly or indirectly, at least a majority of the equity of such entity or controls such entity, but excluding any tax partnerships that are not classified as partnerships under state law. For purposes of this definition, any Person which owns directly or indirectly an equity investment in another Person which allows the first Person to manage or elect managers who manage the normal activities of such second Person will be deemed to "control" such second Person (e.g., a sole general partner controls a limited partnership). "SUBSIDIARY" shall mean (i) any corporation or other legally formed entity of which at least a majority of the outstanding shares of stock or other ownership interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or other governing body of such entity (irrespective of whether or not at the time stock or any other ownership interest of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by another Person or one or more of such Person's Subsidiaries or by such Person and one or more of its Subsidiaries (and, with respect to the Borrower, shall include, without limitation, Black Hawk, Mission E&P, and MSSN Holdings) and (ii) any Special Entity. Unless otherwise indicated herein, each reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower. "SUPER MAJORITY LENDERS" shall mean, at any time while no Loans are outstanding, Lenders having at least seventy five percent (75%) of the Aggregate Revolving Credit Commitments and, at any time while Loans are outstanding, Lenders holding at least seventy five percent (75%) of the outstanding aggregate principal amount of the Loans (without regard to any sale by a Lender of a participation in any Loan under Section 12.06(c)); provided, however, Agent, alone, shall constitute the Super Majority Lenders at any time that Agent is the sole Lender hereunder. "TANGIBLE NET WORTH" shall mean, as at any date, the sum of the following for the Borrower and its Consolidated Subsidiaries determined (without duplication) in accordance with GAAP: (i) the amount of preferred stock and common stock at par plus the amount of additional paid in capital of the Borrower, plus CREDIT AGREEMENT 17 (ii) the retained earnings (or, in the case of retained earnings deficit, minus the amount of such deficit), minus (iii) the sum of the following: cost of treasury shares and the book value of all assets of the Borrower and its Consolidated Subsidiaries which should be classified as intangibles (without duplication of deductions in respect of items already deducted in arriving at additional paid in capital and retained earnings) but in any event including as such intangibles the following: goodwill, research and development costs, trademarks, trade names, copyrights, patents and franchises, unamortized debt discount and expense, all reserves and any writeup in the book value of assets resulting from a revaluation thereof or resulting from any changes in GAAP subsequent to December 31, 2003. "TAXES" shall have the meaning assigned such term in Section 4.06(a). "TERMINATED LENDER" shall have the meaning assigned such term in Section 5.06(a). "TOTAL DEBT" shall mean, without duplication, the sum of: (i) all indebtedness of the Borrower and its Subsidiaries for borrowed money including, but not limited to, senior bank debt, senior notes, and subordinated debt; (ii) capital leases; (iii) issued and outstanding letters of credit; and (iv) contingent obligations for funded indebtedness of the types described in clauses (i), (ii), and (iii). "TRANSFER" shall mean any sale, assignment, farmout, conveyance or other transfer of any Mortgaged Property or any Oil and Gas Property, or any interest in any Mortgaged Property or any Oil and Gas Property (including, without limitation, any working interest, overriding royalty interest, production payment, net profits interest, royalty interest, or mineral fee interest) of the Borrower or any Guarantor. "TYPE" shall mean, with respect to any Loan, a Base Rate Loan or a LIBOR Loan. "WHOLLY-OWNED SUBSIDIARY" shall mean, as to any Person, any Subsidiary of which all of the outstanding shares of capital stock or other equity interests, on a fully-diluted basis, are owned by such Person or one or more of its Wholly-Owned Subsidiaries or by such Person and one or more of its Wholly-Owned Subsidiaries. Unless otherwise indicated, each reference to a "Wholly-Owned Subsidiary" shall mean a Wholly-Owned Subsidiary of the Borrower. Section 1.03 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the audited financial statements of the Borrower referred to in Section 7.02 (except for changes concurred with by the Borrower's independent public accountants). CREDIT AGREEMENT 18 ARTICLE II COMMITMENTS Section 2.01 Loans and Letters of Credit. (a) Loans. Each Lender severally agrees, on the terms and conditions of this Agreement, to make loans to the Borrower during the period from and including (i) the Closing Date or (ii) such later date that such Lender becomes a party to this Agreement as provided in Section 12.06(b), to but excluding, the Final Maturity Date in an aggregate principal amount at any one time outstanding up to, but not exceeding, the amount of such Lender's Revolving Credit Commitment as then in effect less the amount of such Lender's Percentage Share of the LC Exposure at such time. Subject to the terms of this Agreement, during the period from the Closing Date to and up to, but excluding, the Final Maturity Date, the Borrower may borrow, repay and reborrow as provided in this Section 2.01(a). (b) Letters of Credit. During the period from and including the Closing Date to, but excluding, the Final Maturity Date, the Issuing Bank, as issuing bank for the Lenders, agrees to extend credit for the account of the Borrower or any Subsidiary at any time and from time to time by issuing, renewing, extending or reissuing Letters of Credit; provided however, the LC Exposure at any one time outstanding shall not exceed the lesser of (i) the LC Commitment or (ii) the Aggregate Revolving Credit Commitments, as then in effect, minus the aggregate principal amount of all Loans then outstanding. The Lenders shall participate in such Letters of Credit according to their respective Percentage Shares. Each of the Letters of Credit shall (i) be issued by the Issuing Bank, (ii) contain such terms and provisions as are reasonably required by the Issuing Bank, (iii) be for the account of the Borrower or a Subsidiary and (iv) expire not later than five (5) days before the Final Maturity Date. (c) Limitation on Types of Loans. Subject to the other terms and provisions of this Agreement, at the option of the Borrower, the Loans may be Base Rate Loans or LIBOR Loans; provided that, without the prior written consent of the Majority Lenders, no more than five (5) LIBOR Loans may be outstanding at any time. Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit. (a) Borrowings. The Borrower shall give the Agent (which shall promptly notify the Lenders) advance notice as hereinafter provided of each borrowing hereunder, which shall specify (i) the aggregate amount of such borrowing, (ii) the Type, (iii) the date (which shall be a Business Day) of the Loans to be borrowed, and (iv) (in the case of LIBOR Loans) the duration of the Interest Period therefor. (b) Minimum Amounts. All Base Rate Loan borrowings shall be in amounts of at least $500,000.00 or the remaining balance of the Aggregate Revolving Credit Commitments, if less, or any whole multiple of $100,000.00 in excess thereof, and all CREDIT AGREEMENT 19 LIBOR Loans shall be in amounts of at least $3,000,000.00 or any whole multiple of $1,000,000.00 in excess thereof. (c) Notices. All borrowings, continuations and conversions shall require advance written notice to the Agent (which shall promptly notify the Lenders) in the form of EXHIBIT B (or telephonic notice promptly confirmed by such a written notice), which in each case shall be irrevocable, from the Borrower to be received by the Agent not later than 11:00 a.m. Houston, Texas time at least one (1) Business Day prior to the date of each Base Rate Loan borrowing and three Business Days prior to the date of each LIBOR Loan borrowing, continuation or conversion. Without in any way limiting the Borrower's obligation to confirm in writing any telephonic notice, the Agent may act without liability upon the basis of telephonic notice believed by the Agent in good faith to be from the Borrower prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the Agent's record of the terms of such telephonic notice except in the case of gross negligence or willful misconduct by the Agent. (d) Continuation Options. Subject to the provisions made in this Section 2.02(d), the Borrower may elect to continue all or any part of any LIBOR Loan beyond the expiration of the then current Interest Period relating thereto by giving advance notice as provided in Section 2.02(c) to the Agent (which shall promptly notify the Lenders) of such election, specifying the amount of such Loan to be continued and the Interest Period therefor. In the absence of such a timely and proper election, the Borrower shall be deemed to have elected to convert such LIBOR Loan to a Base Rate Loan pursuant to Section 2.02(e). All or any part of any LIBOR Loan may be continued as provided herein, provided that (i) any continuation of any such Loan shall be (as to each Loan as continued for an applicable Interest Period) in amounts of at least $3,000,000.00 or any whole multiple of $1,000,000.00 in excess thereof and (ii) no Event of Default shall have occurred and be continuing. If an Event of Default shall have occurred and be continuing, each LIBOR Loan shall be converted to a Base Rate Loan on the last day of the Interest Period applicable thereto. (e) Conversion Options. The Borrower may elect to convert all or any part of any LIBOR Loan on the last day of the then current Interest Period relating thereto to a Base Rate Loan by giving advance notice to the Agent (which shall promptly notify the Lenders) of such election. Subject to the provisions made in this Section 2.02(e), the Borrower may elect to convert all or any part of any Base Rate Loan at any time and from time to time to a LIBOR Loan by giving advance notice as provided in Section 2.02(c) to the Agent (which shall promptly notify the Lenders) of such election. All or any part of any outstanding Loan may be converted as provided herein, provided that (i) any conversion of any Base Rate Loan into a LIBOR Loan shall be (as to each such Loan into which there is a conversion for an applicable Interest Period) in amounts of at least $3,000,000.00 or any whole multiple of $1,000,000.00 in excess thereof and (ii) no Default shall have occurred and be continuing. If an Event of Default shall have occurred and be continuing, no Base Rate Loan may be converted into a LIBOR Loan. CREDIT AGREEMENT 20 (f) Advances. Not later than 11:00 a.m. Houston, Texas time on the date specified for each borrowing hereunder, each Lender shall make available the amount of the Loan to be made by it on such date to the Agent, to an account which the Agent shall specify, in immediately available funds, for the account of the Borrower. The amounts so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by depositing the same, in immediately available funds, in an account of the Borrower, designated by the Borrower and maintained at the Principal Office. (g) Letters of Credit. The Borrower shall give the Issuing Bank (which shall promptly notify the Lenders of such request and their Percentage Share of such Letter of Credit), a Letter of Credit Application to be received by the Issuing Bank not later than 11:00 a.m. Houston, Texas, time not less than three (3) Business Days prior thereto of each request for the issuance, and at least ten (10) Business Days prior to the date of the renewal or extension, of a Letter of Credit hereunder which request shall specify (i) the amount of such Letter of Credit, (ii) the date (which shall be a Business Day) such Letter of Credit is to be issued, renewed or extended, (iii) the duration thereof, (iv) the name and address of the beneficiary thereof, (v) the form and type of the Letter of Credit and (vi) such other information as the Issuing Bank may reasonably request, all of which shall be reasonably satisfactory to the Issuing Bank. Subject to the terms and conditions of this Agreement, on the date specified for the issuance, renewal or extension of a Letter of Credit, the Issuing Bank shall issue, renew or extend such Letter of Credit to the beneficiary thereof. In conjunction with the issuance of each Letter of Credit, the Borrower and the Subsidiary, if the account party, shall execute a Letter of Credit Agreement. In the event of any conflict between any provision of a Letter of Credit Agreement and this Agreement, the Borrower, the Issuing Bank, the Agent and the Lenders hereby agree that the provisions of this Agreement shall govern. The Issuing Bank will send to the Borrower and each Lender, immediately upon issuance of any Letter of Credit, or an amendment thereto, a true and complete copy of such Letter of Credit, or such amendment thereto. Section 2.03 Changes of Revolving Credit Commitments. (a) The Aggregate Revolving Credit Commitments shall at all times be equal to the lesser of (i) the Aggregate Maximum Revolving Credit Amounts after adjustments resulting from reductions pursuant to Section 2.03(b) or (ii) the Borrowing Base as determined from time to time. (b) The Borrower shall have the right to terminate or to reduce the amount of the Aggregate Maximum Revolving Credit Amounts at any time, or from time to time, upon not less than three (3) Business Days' prior notice to the Agent (which shall promptly notify the Lenders) of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which shall not CREDIT AGREEMENT 21 be less than $5,000,000.00 or any whole multiple of $1,000,000.00 in excess thereof) and shall be irrevocable and effective only upon receipt by the Agent. (c) The Aggregate Maximum Revolving Credit Amounts once terminated or reduced may not be reinstated. Section 2.04 Fees. (a) Revolving Credit Commitment Fee. The Borrower shall pay to the Agent for the account of each Lender a Revolving Credit Commitment fee on the daily average unused amount of the Borrowing Base for the period from and including the Closing Date up to, but excluding, the earlier of the date the Aggregate Revolving Credit Commitments are terminated or the Final Maturity Date at a rate per annum equal to the amount reflected on the appropriate intersection in the table set forth in the definition of "APPLICABLE MARGIN." Accrued Revolving Credit Commitment fees shall be payable quarterly in arrears on each Quarterly Date and on the earlier of the date the Aggregate Revolving Credit Commitments are terminated or the Final Maturity Date. (b) Intentionally Deleted. (c) Letter of Credit Fees. (i) The Borrower agrees to pay the Agent, for the account of each Lender, commissions for issuing the Letters of Credit on the daily average outstanding of the maximum liability of the Issuing Bank existing from time to time under such Letter of Credit (calculated separately for each Letter of Credit) at the rate per annum equal to the amount reflected on the appropriate "LIBOR LOANS" intersection in the table set forth in the definition of "APPLICABLE MARGIN". Each Letter of Credit shall be deemed to be outstanding up to the full face amount of the Letter of Credit until the Issuing Bank has received the canceled Letter of Credit or a written cancellation of the Letter of Credit from the beneficiary of such Letter of Credit in form and substance acceptable to the Issuing Bank, or for any reductions in the amount of the Letter of Credit (other than from a drawing), written notification from the beneficiary of such Letter of Credit. Such commissions are payable quarterly in arrears on each Quarterly Date and upon cancellation or expiration of each such Letter of Credit. (ii) The Borrower shall pay to the Issuing Bank, for its own account, the greater of $500.00 or one-eighth of one percent (1/8%) as an issuing fee. (iii) Upon each transfer of any Letter of Credit to a successor beneficiary in accordance with its terms, the Borrower shall pay to the Agent for its own account a sum in an amount which is in accordance with the Agent's then-current fee policy. (iv) Upon each drawing of any Letter of Credit, the Borrower shall pay to the Agent for its own account a negotiation fee in an amount which is in CREDIT AGREEMENT 22 accordance with the Agent's then-current fee policy; provided that such fee shall not be a condition to any drawing. (v) Upon each amendment of any Letter of Credit, the Borrower shall pay to the Agent for its own account a sum in an amount which is in accordance with the Agent's then-current fee policy. (d) Intentionally Deleted. Section 2.05 Several Obligations. The failure of any Lender to make any Loan to be made by it or to provide funds for disbursements or reimbursements under Letters of Credit on the date specified therefor shall not relieve any other Lender of its obligation to make its Loan or provide funds on such date, but no Lender shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender or to provide funds to be provided by such other Lender. Section 2.06 Notes. The Loans made by each Lender shall be evidenced by a single promissory note of the Borrower in substantially the form of EXHIBIT A, dated (i) the Closing Date or (ii) the effective date of an Assignment pursuant to Section 12.06(b), payable to the order of such Lender in a principal amount equal to its Maximum Revolving Credit Amount as originally in effect and otherwise duly completed and such substitute Notes as required by Section 12.06(b). The date, amount, Type, interest rate and Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note, and, prior to any transfer may be endorsed by such Lender on the schedule attached to such Note or any continuation thereof or on any separate record maintained by such Lender. Failure to make any such notation or to attach a schedule shall not affect any Lender's or the Borrower's rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note. Section 2.07 Prepayments. (a) Voluntary Prepayments. The Borrower may prepay the Base Rate Loans upon not less than one (1) Business Day's prior notice to the Agent (which shall promptly notify the Lenders), which notice shall specify the prepayment date (which shall be a Business Day) and the amount of the prepayment (which shall be at least $500,000.00 and a multiple of $100,000.00 or the remaining aggregate principal balance outstanding on the Notes) and shall be irrevocable and effective only upon receipt by the Agent, provided that interest on the principal prepaid, accrued to the prepayment date, shall be paid on the prepayment date. The Borrower may prepay LIBOR Loans on the same conditions as for Base Rate Loans (except that prior notice to the Agent shall be not less than three (3) Business Days for LIBOR Loans) and in addition such prepayments of LIBOR Loans shall be subject to the terms of Section 5.05 and shall be in an amount equal to all of the LIBOR Loans for the Interest Period prepaid. CREDIT AGREEMENT 23 (b) Mandatory Prepayments. (i) If, after giving effect to any termination or reduction of the Aggregate Maximum Revolving Credit Amounts pursuant to Section 2.03(b), the outstanding aggregate principal amount of the Loans plus the LC Exposure exceeds the Aggregate Maximum Revolving Credit Amounts, the Borrower shall (i) prepay the Loans on the date of such termination or reduction in an aggregate principal amount equal to the excess, together with interest on the principal amount paid accrued to the date of such prepayment and (ii) if any excess remains after prepaying all of the Loans because of LC Exposure, pay to the Agent on behalf of the Lenders an amount equal to the excess to be held as cash collateral as provided in Section 2.10(b) hereof. (ii) Upon any redetermination of the amount of the Borrowing Base in accordance with Section 2.08, if the redetermined Borrowing Base is less than the aggregate outstanding principal amount of the Loans plus the LC Exposure, then the Borrower shall within thirty (30) days of such Borrowing Base redetermination do one or any combination of the following: (i) prepay the Loans in an aggregate principal amount equal to such excess, together with interest on the principal amount paid accrued to the date of such prepayment, (ii) notify the Agent that Borrower will prepay, in five (5) equal monthly installments commencing thirty (30) days after such Borrowing Base redetermination and continuing on the same day the next four months (unless there is no corresponding day, in which event, it will be paid on the last day of such month), the Loans in an aggregate principal amount equal to such excess, together with interest on the principal amount paid accrued to the date of such prepayment; or (iii) provide additional collateral acceptable to the Agent to increase the Borrowing Base to an amount at least equal to the aggregate outstanding principal amounts of the Loans, and if a Borrowing Base deficiency remains after prepaying all of the Loans because of LC Exposure, the Borrower shall pay to the Agent on behalf of the Lenders an amount equal to such Borrowing Base deficiency to be held as cash collateral as provided in Section 2.10(b). (c) Generally. Prepayments permitted or required under this Section 2.07 shall be without premium or PENALTY, except as required under Section 5.05 for prepayment of LIBOR Loans. Any prepayments on the Loans may be reborrowed subject to the then effective Aggregate Revolving Credit Commitments. Section 2.08 Borrowing Base. (a) The Borrowing Base shall be determined in accordance with Section 2.08(b) by the Agent with the concurrence of the applicable number of required Lenders as provided in Section 2.08(b) and is subject to redetermination in accordance with Section 2.08(d). Upon any redetermination of the Borrowing Base, and Schedule 2.08 such redetermination shall remain in effect until the next successive Redetermination Date. "Redetermination Date" shall mean the date that the redetermined CREDIT AGREEMENT 24 Borrowing Base and Schedule 2.08 becomes effective subject to the notice requirements specified in Section 2.08(e) both for scheduled redeterminations and unscheduled redeterminations. So long as any of the Revolving Credit Commitments are in effect or any LC Exposure or Loans are outstanding hereunder, this facility shall be governed by the then effective Borrowing Base and Schedule 2.08. During the period from and after the Closing Date until the first redetermination pursuant to Section 2.08(d) or adjusted pursuant to Section 8.08(c), the amount of the Borrowing Base shall be $50,000,000.00, with $30,000,000 of the initial Borrowing Base to be available for general corporate purposes and $20,000,000.00 of the initial Borrowing Base to be available for acquisitions of Oil and Gas Properties approved by the Majority Lenders, and to the extent required by Section 8.08, such properties must be mortgaged to the Agent by documents in form and substance satisfactory to Agent and title work furnished satisfactory to Agent and subject to no liens or encumbrances of any kind whatsoever except those acceptable to Agent in Agent's sole discretion. Notwithstanding the above, all Lenders shall have the right, at all Lenders' sole discretion, at any time, to increase the amount of advances under the Borrowing Base available for General Corporate Purposes and approved acquisitions in an amount determined by all Lenders, in their sole discretion. Notwithstanding the foregoing, as acquisitions of Oil and Gas Properties are approved by the Majority Lenders, the Borrowing Base available for general corporate purposes shall be increased by the amount of the purchase price paid with respect to such acquisition (to the extent approved by the Majority Lenders in their sole discretion), and the Borrowing Base available for acquisitions shall be reduced by a like amount. (b) Upon receipt of the reports required by Section 8.07 and such other reports, data and supplemental information as may from time to time be reasonably requested by the Agent (the "ENGINEERING REPORTS"), the Agent will redetermine the Borrowing Base and Schedule 2.08. Such redetermination will be made in the sole discretion of the Agent and the applicable number of required Lenders, as provided below, in accordance with their normal and customary procedures for evaluating oil and gas reserves and other related assets as such exist at that particular time. Each Lender, in its sole discretion, may make adjustments to the rates, volumes and prices and other assumptions set forth therein in accordance with its normal and customary procedures for evaluating oil and gas reserves and other related assets as such exist at that particular time. The Agent shall propose to the Lenders a new Borrowing Base and Schedule 2.08 within twenty (20) days following receipt by the Agent and the Lenders of the Engineering Reports. Lenders holding 100% of the Aggregate Commitments must approve increases to the Borrowing Base, while the approval of the Super Majority Lenders is required to approve a decrease in, or maintain, the Borrowing Base. After having received notice of such proposal by the Agent, all of the Lenders shall have ten (10) days to agree or disagree with such proposal. If at the end of the ten (10) days, any Lender shall have not communicated its approval or disapproval, such silence shall be deemed to be an approval of the Agent's proposal, and the Agent's proposal shall be the new Borrowing Base. If however, within the time prescribed by the preceding sentence, (i) all the Lenders have not approved (or have not been deemed to have CREDIT AGREEMENT 25 approved) the Agent's proposal with respect to an increase in the Borrowing Base, or (ii) the Super Majority Lenders have not approved (or have not been deemed to have approved) the Agent's proposal with respect to a decrease in, or maintenance of, the Borrowing Base, the Agent and, as applicable, either all the Lenders (with respect to an increase in the Borrowing Base) or the Super Majority Lenders (with respect to a decrease in, or maintenance of, the Borrowing Base) shall, within an additional ten (10) days, agree upon a new Borrowing Base and Schedule 2.08. If the Agent and, as applicable, either all the Lenders or the Super Majority Lenders cannot otherwise agree on a redetermination of the Borrowing Base within such additional ten (10) day period, then the proposed Borrowing Base shall be set at the lesser of (i) the Borrowing Base proposed by the Agent or (ii) the amount calculated by the Agent as the "weighted arithmetic average" (as hereinafter calculated) of the Borrowing Base, as determined by each individual Lender and communicated to the Agent in writing, and such Borrowing Base shall then become the Borrowing Base. However, the amount of the Borrowing Base shall never be increased at any time without the unanimous consent of the Lenders, notwithstanding anything else herein to the contrary. For purposes of this paragraph, the "weighted arithmetic average" of the Borrowing Base shall be determined by first multiplying the Borrowing Base proposed in writing to the Agent by each Lender by the ratio of such Lender's Percentage Share over the sum of the Percentage Shares of all Lenders, and then adding the results of each such calculation, with the resultant sum being the Borrowing Base. (c) The Agent may exclude any Oil and Gas Property or portion of production therefrom or any income from any other Property from the Borrowing Base, at any time, because title information is not reasonably satisfactory, such Property is not Mortgaged Property or such Property is not assignable. (d) So long as any of the Revolving Credit Commitments are in effect and until payment in full of all Loans hereunder, on or around the first Business Day of each April and October, commencing October 1, 2004, (each being a "SCHEDULED REDETERMINATION DATE"), the Lenders shall redetermine the amount of the Borrowing Base in accordance with Section 2.08(b). In addition, the Borrower and Agent may each initiate one unscheduled redetermination of the Borrowing Base between each Scheduled Redetermination Date (or by the Borrower, prior to October 1, 2004, if the Borrower acquires additional Oil and Gas Properties) by specifying in writing to the non-initiating party the date on which Borrower is to furnish a Reserve Report in accordance with Section 8.07(b) and the date as of which such redetermination is to occur. (e) The Agent shall promptly notify in writing the Borrower and the Lenders of the new Borrowing Base. Any redetermination of the Borrowing Base shall not be in effect until written notice is received by the Borrower. Section 2.09 Assumption of Risks. The Borrower assumes all risks of the acts or omissions of any beneficiary of any Letter of Credit or any transferee thereof with respect to its use of such Letter of Credit. Neither the Issuing Bank (except in the case of gross negligence or willful misconduct on the part of the Issuing Bank or any of its employees), its correspondents nor any Lender shall be responsible for the validity, sufficiency or genuineness of certificates or CREDIT AGREEMENT 26 other documents or any endorsements thereon, even if such certificates or other documents should in fact prove to be invalid, insufficient, fraudulent or forged; for errors, omissions, interruptions or delays in transmissions or delivery of any messages by mail, telex, or otherwise, whether or not they be in code; for errors in translation or for errors in interpretation of technical terms; the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; the failure of any beneficiary or any transferee of any Letter of Credit to comply fully with conditions required in order to draw upon any Letter of Credit; or for any other consequences arising from causes beyond the Issuing Bank's control or the control of the Issuing Bank's correspondents. In addition, neither the Issuing Bank, the Agent nor any Lender shall be responsible for any error, neglect, or default of any of the Issuing Bank's correspondents; and none of the above shall affect, impair or prevent the vesting of any of the Issuing Bank's, the Agent's or any Lender's rights or powers hereunder [or under the Letter of Credit Agreements], all of which rights shall be cumulative. The Issuing Bank and its correspondents may accept certificates or other documents that appear on their face to be in order, without responsibility for further investigation of any matter contained therein regardless of any notice or information to the contrary. In furtherance and not in limitation of the foregoing provisions, the Borrower agrees that any action, inaction or omission taken or not taken by the Issuing Bank or by any correspondent for the Issuing Bank in good faith in connection with any Letter of Credit, or any related drafts, certificates, documents or instruments, shall be binding on the Borrower and shall not put the Issuing Bank or its correspondents under any resulting liability to the Borrower. Section 2.10 Obligation to Reimburse and to Prepay. (a) If a disbursement by the Issuing Bank is made under any Letter of Credit, the Borrower shall pay to the Agent within two (2) Business Days after notice of any such disbursement is received by the Borrower, the amount of each such disbursement made by the Issuing Bank under the Letter of Credit (if such payment is not sooner effected as may be required under this Section 2.10 or under other provisions of the Letter of Credit), together with interest on the amount disbursed from and including the date of disbursement until payment in full of such disbursed amount at a varying rate per annum equal to (i) the then applicable interest rate for Base Rate Loans through the second Business Day after notice of such disbursement is received by the Borrower and (ii) thereafter, the Post-Default Rate for Base Rate Loans (but in no event to exceed the Highest Lawful Rate) for the period from and including the third Business Day following the date of such disbursement to and including the date of repayment in full of such disbursed amount. The obligations of the Borrower under this Agreement with respect to each Letter of Credit shall be absolute, unconditional and irrevocable and shall be paid or performed strictly in accordance with the terms of this Agreement under all circumstances whatsoever, including, without limitation, but only to the fullest extent permitted by applicable law, the following circumstances: (i) any lack of validity or enforceability of this Agreement, any Letter of Credit or any of the Security Instruments; (ii) any amendment or waiver of (including any default), or any consent to departure from this Agreement (except to the extent permitted by any amendment or waiver), any Letter of Credit or any of the Security Instruments; (iii) the existence of any claim, set-off, CREDIT AGREEMENT 27 defense or other rights which the Borrower may have at any time against the beneficiary of any Letter of Credit or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Bank, the Agent, any Lender or any other Person, whether in connection with this Agreement, any Letter of Credit, the Security Instruments, the transactions contemplated hereby or any unrelated transaction; (iv) any statement, certificate, draft, notice or any other document presented under any Letter of Credit proves to have been forged, fraudulent, insufficient or invalid in any respect or any statement therein proves to have been untrue or inaccurate in any respect whatsoever; (v) payment by the Issuing Bank under any Letter of Credit against presentation of a draft or certificate which appears on its face to comply, but does not comply, with the terms of such Letter of Credit; and (vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. Notwithstanding anything in this Agreement to the contrary, the Borrower will not be liable for payment or performance that results from the gross negligence or willful misconduct of the Issuing Bank, except where the Borrower or any Subsidiary actually recovers the proceeds for itself or the Issuing Bank of any payment made by the Issuing Bank in connection with such gross negligence or willful misconduct. (b) In the event of the occurrence of any Event of Default, a payment or prepayment pursuant to Section 2.07(b) or the maturity of the Notes, whether by acceleration or otherwise, an amount equal to the LC Exposure (or the excess in the case of Section 2.07(b)) shall be deemed to be forthwith due and owing by the Borrower to the Agent as of the date of any such occurrence; and the Borrower's obligation to pay such amount shall be absolute and unconditional, without regard to whether any beneficiary of any such Letter of Credit has attempted to draw down all or a portion of such amount under the terms of a Letter of Credit, and, to the fullest extent permitted by applicable law, shall not be subject to any defense or be affected by a right of set-off, counterclaim or recoupment which the Borrower may now or hereafter have against any such beneficiary, the Issuing Bank, the Agent, the Lenders or any other Person for any reason whatsoever. Such payments shall be held by the Agent on behalf of the Lenders as cash collateral securing the LC Exposure in an interest-bearing account or accounts (such interest being for the account of the Borrower, but must remain pledged as security in favor of the Agent on behalf of the Lenders) at the Principal Office; and the Borrower hereby grants to and by its deposit with the Agent grants to the Agent a security interest in such cash collateral. Upon request by the Agent, the Borrower shall immediately execute and deliver to the Agent the Cash Collateral Account Agreement. In the event of any such payment by the Borrower of amounts contingently owing under outstanding Letters of Credit and in the event that thereafter drafts or other demands for payment complying with the terms of such Letters of Credit are not made prior to the respective expiration dates thereof, the Agent agrees, if no Event of Default has occurred and is continuing or if no other amounts are outstanding under this Agreement, the Notes or the Security Instruments, to remit to the Borrower amounts for which the contingent obligations evidenced by the Letters of Credit have ceased. CREDIT AGREEMENT 28 (c) Each Lender severally and unconditionally agrees that it shall promptly reimburse the Issuing Bank an amount equal to such Lender's Percentage Share of any disbursement made by the Issuing Bank under any Letter of Credit that is not reimbursed according to this Section 2.10. (d) Notwithstanding anything to the contrary contained herein, if no Default exists and subject to availability under the Aggregate Revolving Credit Commitments (after reduction for LC Exposure), to the extent the Borrower has not reimbursed the Issuing Bank for any drawn upon Letter of Credit within one (1) Business Days after notice of such disbursement has been received by the Borrower, the amount of such Letter of Credit reimbursement obligation shall automatically be funded by the Lenders as a Loan hereunder and used by the Lenders to pay such Letter of Credit reimbursement obligation. If an Event of Default has occurred and is continuing, or if the funding of such Letter of Credit reimbursement obligation as a Loan would cause the aggregate amount of all Loans outstanding to exceed the Aggregate Revolving Credit Commitments (after reduction for LC Exposure), such Letter of Credit reimbursement obligation shall not be funded as a Loan, but instead shall accrue interest as provided in Section 2.10(a). Section 2.11 Lending Offices. The Loans of each Type made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Repayment of Loans. (a) Loans. On the Final Maturity Date the Borrower shall repay the outstanding principal amount of the Revolving Credit Notes. (b) Generally. The Borrower will pay to the Agent, for the account of each Lender, the principal payments required by this Section 3.01. Section 3.02 Interest. (a) Interest Rates. Except as otherwise provided in Section 3.02(b), the Borrower will pay to the Agent, for the account of each Lender, interest on the unpaid principal amount of each Loan made by such Lender for the period commencing on the date such Loan is made to, but excluding, the date such Loan shall be paid in full, at the following rates per annum: (i) if such a Loan is a Base Rate Loan, the Base Rate (as in effect from time to time) plus the Applicable Margin, but in no event to exceed the Highest Lawful Rate; and CREDIT AGREEMENT 29 (ii) if such a Loan is a LIBOR Loan, for each Interest Period relating thereto, the LIBOR Rate for such Loan plus the Applicable Margin (as in effect from time to time), but in no event to exceed the Highest Lawful Rate. (b) Post-Default Rate. Notwithstanding the foregoing, the Borrower will pay to the Agent, for the account of each Lender interest at the applicable Post-Default Rate on any principal of any Loan made by such Lender, and (to the fullest extent permitted by law) on any other amount payable by the Borrower hereunder, under any Loan Document or under any Note held by such Lender to or for account of such Lender, for the period commencing on the date of an Event of Default until the same is paid in full or all Events of Default are cured or waived. (c) Due Dates. Accrued interest on Base Rate Loans and LIBOR Loans shall be payable monthly on the first Business Day of each month commencing on May 3, 2004, except that interest payable at the Post-Default Rate shall be payable from time to time on demand and interest on any LIBOR Loan that is converted into a Base Rate Loan (pursuant to Section 5.04) shall be payable on the date of conversion (but only to the extent so converted). Any accrued and unpaid interest on the Loans shall also be paid on (i) the date of any prepayment thereof, and (ii) the Final Maturity Date. (d) Determination of Rates. Promptly after the determination of any interest rate provided for herein or any change therein, the Agent shall notify the Lenders to which such interest is payable and the Borrower thereof. Each determination by the Agent of an interest rate or fee hereunder shall, except in cases of manifest error, be final, conclusive and binding on the parties. ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrower under this Agreement, the Notes and the Letter of Credit Agreements shall be made in Dollars, in immediately available funds, to the Agent at such account as the Agent shall specify by notice to the Borrower from time to time, not later than 11:00 a.m. Houston, Texas time on the date on which such payments shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Such payments shall be made without (to the fullest extent permitted by applicable law) defense, set-off or counterclaim. Each payment received by the Agent under this Agreement or any Note for account of a Lender shall be paid promptly to such Lender in immediately available funds. Except as otherwise provided in the definition of "INTEREST PERIOD", if the due date of any payment under this Agreement or any Note would otherwise fall on a day which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for any principal so extended for the period of such extension. At the time of each payment to the Agent of any principal of or interest on any borrowing, the Borrower shall notify the Agent of the Loans to which such payment shall apply. In the absence of such notice the CREDIT AGREEMENT 30 Agent may specify the Loans to which such payment shall apply, but to the extent possible such payment or prepayment will be applied first to the Loans comprised of Base Rate Loans. Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein each Lender agrees that: (i) each borrowing from the Lenders under Section 2.01 and each continuation and conversion under Section 2.02 shall be made from the Lenders pro rata in accordance with their Percentage Share, each payment of commitment fee or other fees under Section 2.04 shall be made for account of the Agent or the Lenders pro rata (as applicable) in accordance with their Percentage Share, and each termination or reduction of the amount of the Aggregate Maximum Revolving Credit Amounts under Section 2.03(b) shall be applied to the Revolving Credit Commitment of each Lender, pro rata according to the amount of its respective Revolving Credit Commitment; (ii) each payment of principal of Loans by the Borrower shall be made for account of the Lenders pro rata in accordance with their respective Percentage Shares; and (iii) each payment of interest on Loans by the Borrower shall be made for account of the Lenders pro rata in accordance with their respective Percentage Shares; and (iv) each reimbursement by the Borrower of disbursements under Letters of Credit shall be made for account of the Issuing Bank or, if funded by the Lenders, pro rata for the account of the Lenders, in accordance with their respective Percentage Shares. Section 4.03 Computations. Interest on LIBOR Loans and fees shall be computed on the basis of a year of three hundred sixty (360) days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which such interest is payable, unless such calculation would exceed the Highest Lawful Rate, in which case interest shall be calculated on the per annum basis of a year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may be. Interest on Base Rate Loans shall be computed on the basis of a year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may be, and actual days elapsed (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 4.04 Non-receipt of Funds by the Agent. Unless the Agent shall have been notified by a Lender or the Borrower prior to the date on which such notifying party is scheduled to make payment to the Agent (in the case of a Lender) of the proceeds of a Loan or a payment under a Letter of Credit to be made by it hereunder or (in the case of the Borrower) a payment to the Agent for account of one or more of the Lenders hereunder (such payment being herein called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt, that it does not intend to make the Required Payment to the Agent, the Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient(s) on such date and, if such Lender or the Borrower (as the case may be) has not in fact made the Required Payment to the Agent, the recipient(s) of such payment shall, on demand, repay to the Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Agent until, but excluding, the date the Agent recovers such amount at a rate per annum which, for any Lender as recipient, will be equal to the Federal Funds Rate, and for the Borrower as recipient, will be equal to the Base Rate plus the Applicable Margin. CREDIT AGREEMENT 31 Section 4.05 Set-off, Sharing of Payments, Etc. (a) The Borrower agrees that, in addition to (and without limitation of) any right of set-off, bankers' lien or counterclaim a Lender may otherwise have, each Lender shall have the right and be entitled (after consultation with the Agent), at its option, to offset balances held by it or by any of its Affiliates for account of the Borrower [or any Subsidiary] at any of its offices, in Dollars or in any other currency, against any principal of or interest on any of such Lender's Loans, or any other amount payable to such Lender hereunder, which is not paid when due (regardless of whether such balances are then due to the Borrower), in which case it shall promptly notify the Borrower and the Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender shall obtain payment of any principal of or interest on any Loan made by it to the Borrower under this Agreement (or reimbursement as to any Letter of Credit) through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise, and, as a result of such payment, such Lender shall have received a greater percentage of the principal or interest (or reimbursement) then due hereunder by the Borrower to such Lender than the percentage received by any other Lenders, it shall promptly (i) notify the Agent and each other Lender thereof and (ii) purchase from such other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loans (or participations in Letters of Credit) made by such other Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal and/or interest on the Loans held by each of the Lenders (or reimbursements of Letters of Credit). To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Borrower agrees that any Lender so purchasing a participation (or direct interest) in the Loans made by other Lenders (or in interest due thereon, as the case may be) may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans (or Letters of Credit) in the amount of such participation. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 4.05 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.05 to share the benefits of any recovery on such secured claim. CREDIT AGREEMENT 32 Section 4.06 Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder shall be made, in accordance with Section 4.01, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender, the Issuing Bank and the Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by (i) any jurisdiction (or political subdivision thereof) of which the Agent, the Issuing Bank or such Lender, as the case may be, is a citizen or resident or in which such Lender has an Applicable Lending Office, (ii) the jurisdiction (or any political subdivision thereof) in which the Agent, the Issuing Bank or such Lender is organized, or (iii) any jurisdiction (or political subdivision thereof) in which such Lender, the Issuing Bank or the Agent is presently doing business which taxes are imposed solely as a result of doing business in such jurisdiction (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Lenders, the Issuing Bank or the Agent (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.06) such Lender, the Issuing Bank or the Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. (b) Other Taxes. In addition, to the fullest extent permitted by applicable law, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, any Assignment or any Security Instrument (hereinafter referred to as "OTHER TAXES"). (c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE ISSUING BANK AND THE AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID BY SUCH LENDER, THE ISSUING BANK OR THE AGENT (ON THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER, THE ISSUING BANK OR THE AGENT, AS THE CASE CREDIT AGREEMENT 33 MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER, THE ISSUING BANK OR THE AGENT RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER, ISSUING BANK OR THE AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER, THE ISSUING BANK OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT. (d) Lender Representations. (i) Each Lender represents that it is either (1) a banking association or corporation organized under the laws of the United States of America or any state thereof or (2) it is entitled to complete exemption from United States withholding tax imposed on or with respect to any payments, including fees, to be made to it pursuant to this Agreement (A) under an applicable provision of a tax convention to which the United States of America is a party or (B) because it is acting through a branch, agency or office in the United States of America and any payment to be received by it hereunder is effectively connected with a trade or business in the United States of America. Each Lender that is not a banking association or corporation organized under the laws of the United States of America or any state thereof agrees to provide to the Borrower and the Agent on the Closing Date, or on the date of its delivery of the Assignment pursuant to which it becomes a Lender, and at such other times as required by United States law or as the Borrower or the Agent shall reasonably request, two accurate and complete original signed copies of either (A) Internal Revenue Service Form W-8ECI (or successor form) certifying that all payments to be made to it hereunder will be effectively connected to a United States trade or business (the "FORM W-8ECI CERTIFICATION") or (B) Internal Revenue Service Form W-8BEN (or successor form) certifying that it is entitled to the benefit of a provision of a tax convention to which the United States of America is a party which completely exempts from United States withholding tax all payments to be made to it hereunder (the "FORM W-8BEN CERTIFICATION"). In addition, each Lender agrees that if it previously filed a Form W-8ECI Certification, it will deliver to the Borrower and the Agent a new Form W-8ECI Certification prior to the first payment date occurring in each of its subsequent taxable years; and if it previously filed a Form W-8BEN Certification, it will deliver to the Borrower and the Agent a new certification prior to the first payment date falling in the third year following the previous filing of such certification. Each Lender also agrees to deliver to the Borrower and the Agent such other or supplemental forms as may CREDIT AGREEMENT 34 at any time be required as a result of changes in applicable law or regulation in order to confirm or maintain in effect its entitlement to exemption from United States withholding tax on any payments hereunder, provided that the circumstances of such Lender at the relevant time and applicable laws permit it to do so. If a Lender determines, as a result of any change in either (i) a Governmental Requirement or (ii) its circumstances, that it is unable to submit any form or certificate that it is obligated to submit pursuant to this Section 4.06, or that it is required to withdraw or cancel any such form or certificate previously submitted, it shall promptly notify the Borrower and the Agent of such fact. If a Lender is organized under the laws of a jurisdiction outside the United States of America, unless the Borrower and the Agent have received a Form W-8BEN Certification or Form W-8ECI Certification satisfactory to them indicating that all payments to be made to such Lender hereunder are not subject to United States withholding tax, the Borrower shall withhold taxes from such payments at the applicable statutory rate. Each Lender agrees to indemnify and hold harmless the Borrower or Agent, as applicable, from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by (i) the Agent as a result of such Lender's failure to submit any form or certificate that it is required to provide pursuant to this Section 4.06 or (ii) the Borrower or the Agent as a result of their reliance on any such form or certificate which such Lender has provided to them pursuant to this Section 4.06. (ii) For any period with respect to which a Lender has failed to provide the Borrower with the form required pursuant to this Section 4.06, if any, (other than if such failure is due to a change in a Governmental Requirement occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 4.06 with respect to taxes imposed by the United States which taxes would not have been imposed but for such failure to provide such forms; provided, however, that if a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such taxes. (iii) Any Lender claiming any additional amounts payable pursuant to this Section 4.06 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrower or the Agent or to change the jurisdiction of its Applicable Lending Office or to contest any tax imposed if the making of such a filing or change or contesting such tax would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender. Section 4.07 Disposition of Proceeds. The Mortgages contain an assignment by the Borrower unto and in favor of the Agent for the benefit of the Lenders of all production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged CREDIT AGREEMENT 35 Property, and the Mortgages further provide in general for the application of such proceeds to the satisfaction of the Obligations and other indebtedness, liabilities and obligations described therein and secured thereby. Notwithstanding the assignment contained in the Mortgages, until the occurrence of an Event of Default, the Lenders agree that they will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds to be remitted to the Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrower. ARTICLE V CAPITAL ADEQUACY AND ADDITIONAL COSTS Section 5.01 Capital Adequacy and Additional Costs. (a) The Borrower shall pay directly to each Lender from time to time on request such amounts as such Lender may determine to be necessary to compensate such Lender or its parent or holding company for any costs which it determines are attributable to the maintenance by such Lender or its parent or holding company, pursuant to any Governmental Requirement, of capital in respect of its Revolving Credit Commitment or making, funding or maintaining any Loans or Letters of Credit (such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender or its parent or holding company to a level below that which such Lender or its parent or holding company could have achieved but for such Governmental Requirement). Each Lender will notify the Borrower that it is entitled to compensation pursuant to this Section 5.01(a) as promptly as practicable after it determines to request such compensation. (b) Determinations and allocations by any Lender for purposes of this Article V shall be conclusive, provided that such determinations and allocations are made on a reasonable basis. (c) LIBOR Regulations, etc. The Borrower shall pay directly to each Lender from time to time such amounts as such Lender may determine to be necessary to compensate such Lender for any costs which it determines are attributable to its making or maintaining of any LIBOR Loans or issuing or participating in Letters of Credit hereunder or its obligation to make any LIBOR Loans or issue or participate in any Letters of Credit hereunder, or any reduction in any amount receivable by such Lender hereunder in respect of any of such LIBOR Loans, Letters of Credit or such obligation (such increases in costs and reductions in amounts receivable being herein called "ADDITIONAL COSTS"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Lender under this Agreement or any Note in respect of any of such LIBOR Loans or Letters of Credit (other than taxes imposed on the overall net income of such Lender or of its Applicable Lending Office for any of such LIBOR Loans by the jurisdiction in which such Lender has its principal office or Applicable Lending Office); or (ii) imposes or modifies any reserve, special deposit, minimum capital, capital ratio or similar requirements relating to any extensions of credit CREDIT AGREEMENT 36 or other assets of, or any deposits with or other liabilities of such Lender, or the Revolving Credit Commitment or Loans of such Lender or the LIBOR interbank market; or (iii) imposes any other condition affecting this Agreement or any Note (or any of such extensions of credit or liabilities) or such Lender's Revolving Credit Commitment or Loans. Each Lender will notify the Agent and the Borrower of any event occurring after the Closing Date which will entitle such Lender to compensation pursuant to this Section 5.01(c) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation, and will designate a different Applicable Lending Office for the Loans of such Lender affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender, be disadvantageous to such Lender, provided that such Lender shall have no obligation to so designate an Applicable Lending Office located in the United States. If any Lender requests compensation from the Borrower under this Section 5.01(c), the Borrower may, by notice to such Lender, suspend the obligation of such Lender to make additional Loans of the Type with respect to which such compensation is requested until the Regulatory Change giving rise to such request ceases to be in effect (in which case the provisions of Section 5.04 shall be applicable). (d) Regulatory Change. Without limiting the effect of the provisions of Section 5.01(c), in the event that at any time (by reason of any Regulatory Change or any other circumstances arising after the Closing Date affecting (A) any Lender, (B) the LIBOR interbank market or (C) such Lender's position in such market), the LIBOR Rate, as determined in good faith by such Lender, will not adequately and fairly reflect the cost to such Lender of funding its LIBOR Loans, then, if such Lender so elects, by notice to the Borrower and the Agent, the obligation of such Lender to make additional LIBOR Loans shall be suspended until such Regulatory Change or other circumstances ceases to be in effect (in which case the provisions of Section 5.04 shall be applicable). (e) Capital Adequacy. Without limiting the effect of the foregoing provisions of this Section 5.01 (but without duplication), the Borrower shall pay directly to any Lender from time to time on request such amounts as such Lender may reasonably determine to be necessary to compensate such Lender or its parent or holding company for any costs which it determines are attributable to the maintenance by such Lender or its parent or holding company (or any Applicable Lending Office), pursuant to any Governmental Requirement following any Regulatory Change, of capital in respect of its Revolving Credit Commitment, its Note, or its Loans or any interest held by it in any Letter of Credit, such compensation to include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender or its parent or holding company (or any Applicable Lending Office) to a level below that which such Lender or its parent or holding company (or any Applicable Lending Office) could have achieved but for such Governmental Requirement. Such Lender will notify the Borrower that it is entitled to compensation pursuant to this Section 5.01(e) as promptly as practicable after it determines to request such compensation. (f) Compensation Procedure. Any Lender notifying the Borrower of the incurrence of Additional Costs under this Section 5.01 shall in such notice to the CREDIT AGREEMENT 37 Borrower and the Agent set forth in reasonable detail the basis and amount of its request for compensation. Determinations and allocations by each Lender for purposes of this Section 5.01 of the effect of any Regulatory Change pursuant to Section 5.01(c) or (d), or of the effect of capital maintained pursuant to Section 5.01(e), on its costs or rate of return of maintaining Loans or its obligation to make Loans or issue Letters of Credit, or on amounts receivable by it in respect of Loans or Letters of Credit, and of the amounts required to compensate such Lender under this Section 5.01, shall be conclusive and binding for all purposes, provided that such determinations and allocations are made on a reasonable basis. Any request for additional compensation under this Section 5.01 shall be paid by the Borrower within thirty (30) days of the receipt by the Borrower of the notice described in this Section 5.01(f). Section 5.02 Limitation on LIBOR Loans. Anything herein to the contrary notwithstanding, if, on or prior to the determination of any LIBOR Rate for any Interest Period: (i) the Agent determines (which determination shall be conclusive, absent manifest error) that quotations of interest rates for the relevant deposits referred to in the definition of "LIBOR RATE" in Section 1.02 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for LIBOR Loans as provided herein; or (ii) the Agent determines (which determination shall be conclusive, absent manifest error) that the relevant rates of interest referred to in the definition of "LIBOR RATE" in Section 1.02 upon the basis of which the rate of interest for LIBOR Loans for such Interest Period is to be determined are not sufficient to adequately cover the cost to the Lenders of making or maintaining LIBOR Loans; then the Agent shall give the Borrower prompt notice thereof, and so long as such condition remains in effect, the Lenders shall be under no obligation to make additional LIBOR Loans. Section 5.03 Illegality. Notwithstanding any other provision of this Agreement, in the event that it becomes unlawful for any Lender or its Applicable Lending Office to honor its obligation to make or maintain LIBOR Loans hereunder, then such Lender shall promptly notify the Borrower thereof and such Lender's obligation to make LIBOR Loans shall be suspended until such time as such Lender may again make and maintain LIBOR Loans (in which case the provisions of Section 5.04 shall be applicable). Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03. If the obligation of any Lender to make LIBOR Loans shall be suspended pursuant to Sections 5.01, 5.02 or 5.03 ("AFFECTED LOANS"), all Affected Loans which would otherwise be made by such Lender shall be made instead as Base Rate Loans (and, if an event referred to in Section 5.01 or Section 5.03 has occurred and such Lender so requests by notice to the Borrower, all Affected Loans of such Lender then outstanding shall be automatically converted into Base Rate Loans on the date specified by such Lender in such notice) and, to the extent that Affected Loans are so made as (or converted into) Base Rate Loans, all payments of principal which would otherwise be applied to such Lender's Affected Loans shall be applied instead to its Base Rate Loans. CREDIT AGREEMENT 38 Section 5.05 Compensation. The Borrower shall pay to each Lender within thirty (30) days of receipt of written request of such Lender (which request shall set forth, in reasonable detail, the basis for requesting such amounts and which shall be conclusive and binding for all purposes provided that such determinations are made on a reasonable basis), such amount or amounts as shall compensate it for any loss, cost, expense or liability which such Lender determines are attributable to: (i) any payment, prepayment or conversion of a LIBOR Loan properly made by such Lender or the Borrower for any reason (including, without limitation, the acceleration of the Loans pursuant to Section 10.01) on a date other than the last day of the Interest Period for such Loan; or (ii) any failure by the Borrower for any reason (including but not limited to, the failure of any of the conditions precedent specified in Article VI to be satisfied) to borrow, continue or convert a LIBOR Loan from such Lender on the date for such borrowing, continuation or conversion specified in the relevant notice given pursuant to Section 2.02(c). Without limiting the effect of the preceding sentence, such compensation shall include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the principal amount so paid, prepaid or converted or not borrowed for the period from the date of such payment, prepayment or conversion or failure to borrow to the last day of the Interest Period for such Loan (or, in the case of a failure to borrow, the Interest Period for such Loan which would have commenced on the date specified for such borrowing) at the applicable rate of interest for such Loan provided for herein over (ii) the interest component of the amount such Lender would have bid in the London interbank market for Dollar deposits of leading banks in amounts comparable to such principal amount and with maturities comparable to such period (as reasonably determined by such Lender). Section 5.06 Replacement Lenders. (a) If any Lender has notified the Borrower and the Agent of its incurring Additional Costs under Section 5.01 or has required the Borrower to make payments for Taxes under Section 4.06, then the Borrower may, unless such Lender has notified the Borrower and the Agent that the circumstances giving rise to such notice no longer apply, terminate, in whole but not in part, the Revolving Credit Commitment of any Lender (other than the Agent) (the "TERMINATED LENDER") at any time upon five (5) Business Days' prior written notice to the Terminated Lender and the Agent (such notice referred to herein as a "NOTICE OF TERMINATION"). (b) In order to effect the termination of the Revolving Credit Commitment of the Terminated Lender, the Borrower shall: (i) obtain an agreement with one or more Lenders to increase their Revolving Credit Commitment or Revolving Credit Commitments and/or (ii) request any one or more other banking institutions to become parties to this Agreement in place and instead of such Terminated Lender and agree to accept a Revolving Credit Commitment or Revolving Credit Commitments; provided, however, that such one or more other banking institutions are reasonably acceptable to CREDIT AGREEMENT 39 the Agent and become parties by executing an Assignment (the Lenders or other banking institutions that agree to accept in whole or in part the Revolving Credit Commitment of the Terminated Lender being referred to herein as the "REPLACEMENT LENDERS"), such that the aggregate increased and/or accepted Revolving Credit Commitments of the Replacement Lenders under clauses (i) and (ii) above equal the Revolving Credit Commitment of the Terminated Lender. (c) The Notice of Termination shall include the name of the Terminated Lender, the date the termination will occur (the "LENDER TERMINATION DATE"), and the Replacement Lender or Replacement Lenders to which the Terminated Lender will assign its Revolving Credit Commitment and, if there will be more than one Replacement Lender, the portion of the Terminated Lender's Revolving Credit Commitment to be assigned to each Replacement Lender. (d) On the Lender Termination Date, (i) the Terminated Lender shall by execution and delivery of an Assignment assign its Revolving Credit Commitment to the Replacement Lender or Replacement Lenders (pro rata, if there is more than one Replacement Lender, in proportion to the portion of the Terminated Lender's Revolving Credit Commitment to be assigned to each Replacement Lender) indicated in the Notice of Termination and shall assign to the Replacement Lender or Replacement Lenders each of its Loans (if any) then outstanding and participation interests in Letters of Credit (if any) then outstanding pro rata as aforesaid), (ii) the Terminated Lender shall endorse its Note, payable without recourse, representation or warranty to the order of the Replacement Lender or Replacement Lenders (pro rata as aforesaid), (iii) the Replacement Lender or Replacement Lenders shall purchase the Note held by the Terminated Lender (pro rata as aforesaid) at a price equal to the unpaid principal amount thereof plus interest and facility and other fees accrued and unpaid to the Lender Termination Date, and (iv) the Replacement Lender or Replacement Lenders will thereupon (pro rata as aforesaid) succeed to and be substituted in all respects for the Terminated Lender with like effect as if becoming a Lender pursuant to the terms of Section 12.06(b), and the Terminated Lender will have the rights and benefits of an assignor under Section 12.06(b). To the extent not in conflict, the terms of Section 12.06(b) shall supplement the provisions of this Section 5.06(d). For each assignment made under this Section 5.06, the Replacement Lender shall pay to the Agent the processing fee provided for in Section 12.06(b). The Borrower will be responsible for the payment of any breakage costs associated with termination and Replacement Lenders, as set forth in Section 5.05. ARTICLE VI CONDITIONS PRECEDENT Section 6.01 Initial Funding. The obligation of the Lenders to make the Initial Funding is subject to the receipt by the Agent and the Lenders of all fees payable pursuant to Section 2.04 on or before the Closing Date CREDIT AGREEMENT 40 and the receipt by the Agent of the following documents (in sufficient original counterparts, other than the Notes, for each Lender) and satisfaction of the other conditions provided in this Section 6.01, each of which shall be satisfactory to the Agent in form and substance: (a) A certificate of the Secretary or an Assistant Secretary of the Borrower setting forth (i) resolutions of its board of directors with respect to the authorization of the Borrower to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of the Borrower (y) who are authorized to sign the Loan Documents to which Borrower is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of the authorized officers, and (iv) the certificate of incorporation and bylaws of the Borrower, certified as being true and complete. The Agent and the Lenders may conclusively rely on such certificate until the Agent receives notice in writing from the Borrower to the contrary. (b) A certificate of the Secretary or an Assistant Secretary of any Subsidiary that is a corporation or a limited liability company (an "LLC") or a general partner of a Subsidiary setting forth (i) resolutions of its board of directors with respect to the authorization of the Subsidiary to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of the Subsidiary (y) who are authorized to sign the Loan Documents to which the Subsidiary is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of the authorized officers, and (iv) the articles or certificate of incorporation and bylaws (and the Regulations if such Subsidiary is an LLC) of the Subsidiary, certified as being true and complete. The Agent and the Lenders may conclusively rely on such certificate until they receive notice in writing from the Subsidiary to the contrary. (c) A certificate of each partner of each partnership that is a Subsidiary setting forth (i) resolutions of its partners with respect to the authorization of such Subsidiary to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the Persons of such Subsidiary (y) who are authorized to sign the Loan Documents to which such Subsidiary is a party and (z) who will, until replaced by another Person duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of the authorized Persons, and (iv) the partnership agreement of such Subsidiary, certified as being true and complete. The Agent and the Lenders may conclusively rely on such certificate until they receive notice in writing from the Borrower to the contrary. CREDIT AGREEMENT 41 (d) Certificates of the appropriate state agencies with respect to the existence, qualification and good standing of the Borrower, Guarantor(s), and Subsidiaries. (e) A compliance certificate which shall be substantially in the form of EXHIBIT C, duly and properly executed by a Responsible Officer and dated as of the date of the Initial Funding. (f) The Notes, duly completed and executed. (g) The Security Instruments, including those described on EXHIBIT D, duly completed and executed in sufficient number of counterparts for recording, if necessary. (h) An opinion of Porter & Hedges, L.L.P., and Schully, Roberts, Slattery, Jaubert & Marino, PC and James Bruce, Attorney at Law, counsel to the Borrower, Guarantor, and the Subsidiaries, in form and substance satisfactory to the Agent, as to such matters incident to the transactions herein contemplated as the Agent may reasonably request, including, without limitation, the enforceability of the Mortgages and other Security Instruments and the validity, perfection, and priority of the liens created thereby. (i) A certificate of insurance coverage of the Borrower evidencing that the Borrower is carrying insurance in accordance with Section 7.19. (j) Title information as the Agent may require from attorneys satisfactory to the Agent setting forth the status of title to at least eight-five percent (85%) of the value of the Oil and Gas Properties included in the Initial Reserve Report. (k) The Security Instruments and related financing statements covering the Mortgaged Property shall have been delivered to special counsel for the Agent for filing and recording in the appropriate offices to perfect the Liens and security interests created thereby in accordance with the requirements for perfection provided by the attorneys who have furnished the legal opinions called for in (h) above. (l) Letters in Lieu executed by the Borrower or any Subsidiary, as applicable, and a list of the purchasers of the Hydrocarbons of the Borrower or any Subsidiary produced from the Borrower's and any of its Subsidiaries' Oil and Gas Properties. (m) The Agent shall have been furnished with appropriate UCC search certificates reflecting the filing of all financing statements required to perfect the Liens granted by the Security Instruments and reflecting no prior Liens. (n) The organizational chart of Borrower and its Subsidiaries (unless there are no Subsidiaries). (o) All consents in form and substance satisfactory to all Lenders and of all Persons required by the Lenders. CREDIT AGREEMENT 42 (p) [INTENTIONALLY DELETED.] (q) Agent shall have received from the Borrower, reviewed, and be satisfied, in Agent's sole discretion, of the Borrower's and each Subsidiary's (i) existing corporate and partnership documents; (ii) annual financial statements; (iii) most recent interim financial statements; (iv) valuation information of assets proposed by the Borrower to secure the Obligations; (v) all lien searches covering any and all of the Mortgaged Property; (vi) other material documents and agreements (including, without limitation, all: (1) Material Agreements listed on SCHEDULE 7.23, and (2) all other material documents and agreements as the Agent shall have requested); (vii) the legal, corporate, partnership, and capital structure of the Borrower and its Subsidiaries on the Closing Date and after giving effect to the transactions contemplated hereby; (viii) evidence satisfactory to Agent that prior to or concurrently with the closing, the Borrower shall have received gross cash proceeds from the Second Lien Notes to the Borrower of at least Twenty-Five Million Dollars ($25,000,000.00) (minus reasonable fees and expenses not to exceed Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) on terms and conditions satisfactory to the Agent, together with a intercreditor agreement executed by Agent, Borrower, and the Second Lien Noteholder containing terms and conditions satisfactory to Agent and satisfactory review and approval of all loan documents and instruments executed in connection with the Second Lien Notes; (ix) evidence satisfactory to Agent that prior to or concurrently with the closing, the Borrower shall have received gross cash proceeds from the Senior Unsecured Notes of at least One Hundred Thirty Million Dollars ($130,000,000.00) on terms and conditions satisfactory to the Agent and satisfactory review and approval by Agent of all loan documents and instruments executed in connection with the Senior Unsecured Notes; (x) evidence satisfactory to Agent that concurrent with the closing of this transaction, all Debt of Borrower and its Subsidiaries for borrowed money existing prior to closing, shall have been repaid and/or provided for except for purchase money indebtedness not to exceed $100,000.00 in the aggregate and insurance premium financing notes not to exceed $100,000.00 in the aggregate; and (xi) evidence satisfactory to Agent that all existing Hedging Agreements executed by the Borrower and its Subsidiaries are acceptable to the Agent with counterparties acceptable to the Agent and have been provided to Agent for purposes of calculating the Borrowing Base. (r) Such other documents, in form and substance reasonably satisfactory to Agent, as the Agent or any Lender or special counsel to the Agent may reasonably request, including, without limitation, (i) documentation of all environmental and title matters relating to all of the Borrower's Oil and Gas Properties including, without limitation, the Mortgaged Properties and (ii) all Material Agreements. (s) A receipt from The Bank of New York for the funds to be deposited with The Bank of New York in connection with the redemption of the Existing Senior Subordinated Unsecured Notes, such funds to be in the amount specified in the Certificate described in subsection (t) below. CREDIT AGREEMENT 43 (t) A copy of the Officer's Certificate to Trustee to be provided by the Borrower to The Bank of New York in connection with the redemption of the Existing Senior Subordinated Unsecured Notes, such Officer's Certificate to contain, inter alia, a statement of the amount required to be deposited with The Bank of New York in connection with such redemption. Section 6.02 Initial and Subsequent Loans and Letters of Credit. The obligation of the Lenders to make Loans to the Borrower upon the occasion of each borrowing hereunder and to issue, renew, extend or reissue Letters of Credit for the account of the Borrower (including the Initial Funding) is subject to the further conditions precedent that, as of the date of such Loans and after giving effect thereto: (a) no Default shall exist; (b) no Material Adverse Effect shall have occurred; (c) the representations and warranties made by the Borrower in Article VII and in the Security Instruments shall be true on and as of the date of the making of such Loans or issuance, renewal, extension or reissuance of a Letter of Credit with the same force and effect as if made on and as of such date and following such new borrowing, except to the extent such representations and warranties are expressly limited to an earlier date or the Majority Lenders may expressly consent in writing to the contrary; and (d) after giving effect to the requested borrowing or borrowings, no Default will exist under the Credit Agreement or any other Loan Document. Each request for a borrowing or issuance, renewal, extension or reissuance of a Letter of Credit by the Borrower hereunder shall constitute a certification by the Borrower to the effect set forth in Section 6.02(c) (both as of the date of such notice and, unless the Borrower otherwise notifies the Agent prior to the date of and immediately following such borrowing or issuance, renewal, extension or reissuance of a Letter of Credit as of the date thereof). Section 6.03 Conditions Precedent for the Benefit of Lenders. All conditions precedent to the obligations of the Lenders to make any Loan are imposed hereby solely for the benefit of the Lenders, and no other Person may require satisfaction of any such condition precedent or be entitled to assume that the Lenders will refuse to make any Loan in the absence of strict compliance with such conditions precedent. Section 6.04 No Waiver. No waiver of any condition precedent with respect to any Loan shall preclude the Agent or the Lenders from requiring such condition to be met prior to making any subsequent Loan and the making of any Loan by the Lenders, notwithstanding the existence of a Default, shall set not preclude the Agent from exercising the remedies set forth in Section 10.02 in the event such Default becomes an Event of Default. CREDIT AGREEMENT 44 ARTICLE VII REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Agent and the Lenders that (each representation and warranty herein (unless such representation and warranty is given as of a particular date) is given as of the Closing Date and shall be deemed repeated and reaffirmed on the dates of each borrowing and issuance, renewal, extension or reissuance of a Letter of Credit as provided in Section 6.02): Section 7.01 Corporate Existence. Each of the Borrower and each Subsidiary: (i) is a corporation, limited liability company, or a partnership duly organized, legally existing and in good standing under the laws of the jurisdiction of its organization; (ii) has all requisite corporate, limited liability company, or partnership power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (iii) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect. Section 7.02 Financial Condition. The audited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at December 31, 2003, and the related consolidated statements of income, stockholders' equity and cash flows of the Borrower and its Consolidated Subsidiaries for the fiscal year ended on said date, with the opinion thereon of KPMG LLP heretofore furnished to each of the Lenders are complete and correct and fairly present the consolidated financial condition of the Borrower and its Consolidated Subsidiaries as at said date and the results of their operations for the fiscal year ended on said date, all in accordance with GAAP, as applied on a consistent basis. Neither the Borrower nor any Subsidiary has on the Closing Date any material Debt, contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in the Financial Statements or in SCHEDULE 7.02 or incurred since the date of the Financial Statements in the ordinary course of business. Since December 31, 2003, there has been no change or event having a Material Adverse Effect. Since the date of the Financial Statements, neither the business nor the Properties of the Borrower or any Subsidiary have been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or cancellation of contracts, permits or concessions by any Governmental Authority, riot, activities of armed forces or acts of God or of any public enemy. Section 7.03 Litigation. Except as disclosed to the Lenders in SCHEDULE 7.03 hereto, which matters could not reasonably be expected to cause a Material Adverse Effect and except with respect to Environmental Matters which are addressed in Section 7.17, which could not reasonably be expected to cause a Material Adverse Effect, at the Closing Date there is no litigation, legal, administrative or arbitral proceeding, investigation or other action of any nature pending or, to the knowledge of the Borrower threatened against or affecting the Borrower or any Subsidiary which involves the possibility of any judgment or liability against the Borrower CREDIT AGREEMENT 45 or any Subsidiary not fully covered by insurance (except for normal deductibles). There are no outstanding judgments against Borrower or any Subsidiary. Section 7.04 No Breach. Neither the execution and delivery of the Loan Documents, nor compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent which has not been obtained as of the Closing Date under, the respective charter, by-laws, or partnership agreement of the Borrower or any Subsidiary, or any Governmental Requirement or any agreement or instrument to which the Borrower or any Subsidiary is a party or by which it is bound or to which it or its Properties are subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of the Borrower or any Subsidiary pursuant to the terms of any such agreement or instrument other than the Liens created by the Loan Documents. Section 7.05 Authority. The Borrower and each Subsidiary have all necessary corporate and partnership power and authority to execute, deliver and perform its obligations under the Loan Documents to which it is a party; and the execution, delivery and performance by the Borrower and each Subsidiary of the Loan Documents to which it is a party, have been duly authorized by all necessary corporate and partnership action on its part; and the Loan Documents constitute the legal, valid and binding obligations of the Borrower and each Subsidiary, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, or other laws relating to or affecting the enforcement of creditors' rights generally and general principles of equity. Section 7.06 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any Person are necessary for the execution, delivery or performance by the Borrower or any Subsidiary of the Loan Documents or for the validity or enforceability thereof, except for the recording and filing of the Security Instruments as required by this Agreement. Section 7.07 Use of Loans. The proceeds of the Loans shall be used by the Borrower to: (a) refinance existing indebtedness for borrowed money; (b) pay fees and expenses incurred in connection with the transactions contemplated hereby; (c) provide for the working capital and general corporate purpose needs of the Borrower and its Subsidiaries; and (d) purchase Oil and Gas Properties approved by the Agent and permitted by, and subject to, the terms of this Agreement. Neither the Borrower nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the CREDIT AGREEMENT 46 Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan hereunder will be used to buy or carry any margin stock. Section 7.08 ERISA. (a) The Borrower, each Subsidiary and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan. (b) Each Plan is, and has been, maintained in substantial compliance with ERISA and, where applicable, the Code. (c) No act, omission or transaction has occurred which could result in imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA. (d) No Plan (other than a defined contribution plan) or any trust created under any such Plan has been terminated since September 2, 1974. No liability to the PBGC (other than for the payment of current premiums which are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with respect to any Plan has occurred. (e) Full payment when due has been made of all amounts which the Borrower, any Subsidiary or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan, and no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan. (f) The actuarial present value of the benefit liabilities under each Plan which is subject to Title IV of ERISA does not, as of the end of the Borrower's most recently ended fiscal year, exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE BENEFIT liabilities" shall have the meaning specified in section 4041 of ERISA. (g) None of the Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material liability. (h) None of the Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the preceding six calendar years, sponsored, maintained or contributed to, any Multiemployer Plan. CREDIT AGREEMENT 47 (i) None of the Borrower, any Subsidiary or any ERISA Affiliate is required to provide security under section 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the Plan. Section 7.09 Taxes. Except as set out in SCHEDULE 7.09, each of the Borrower and its Subsidiaries has filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all material taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Borrower, adequate. No tax lien has been filed and, to the knowledge of the Borrower, no claim is being asserted with respect to any such tax, fee or other charge. Section 7.10 Titles, etc. (a) Except as set out in SCHEDULE 7.10, each of the Borrower and its Subsidiaries has good and defensible title to its material (individually or in the aggregate) Properties, free and clear of all Liens, except Liens permitted by Section 9.02. Except as set forth in SCHEDULE 7.10, after giving full effect to the Excepted Liens, the Borrower owns the net interests in production attributable to the Hydrocarbon Interests reflected in the most recently delivered Reserve Report and the ownership of such Properties shall not in any material respect obligate the Borrower to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount in excess of the working interest of each Property set forth in the most recently delivered Reserve Report. All information contained in the most recently delivered Reserve Report is true and correct in all material respects as of the date thereof. (b) All leases and agreements necessary for the conduct of the business of the Borrower and its Subsidiaries are valid and subsisting, in full force and effect (including as to depths) and there exists no default or event or circumstance which with the giving of notice or the passage of time or both would give rise to a default under any such lease or leases, which would adversely affect in any material respect the conduct of the business of the Borrower and its Subsidiaries. (c) The rights, Properties and other assets presently owned, leased or licensed by the Borrower and its Subsidiaries including, without limitation, all easements and rights of way, include all rights, Properties and other assets necessary to permit the Borrower and its Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the Closing Date. (d) All of the assets and Properties of the Borrower and its Subsidiaries which are reasonably necessary for the operation of its business are in good working condition and are maintained in accordance with prudent business standards. Section 7.11 No Material Misstatements. No written information, statement, exhibit, certificate, document or report furnished to the Agent and the Lenders (or any of them) by the Borrower or any Subsidiary in connection with the negotiation of this Agreement CREDIT AGREEMENT 48 contained any material misstatement of fact and all such information, taken together, did not omit to state a material fact or any fact necessary to make the statement contained therein not materially misleading in the light of the circumstances in which made and with respect to the Borrower and its Subsidiaries taken as a whole. There is no fact peculiar to the Borrower or any Subsidiary which has a Material Adverse Effect or in the future could have (so far as the Borrower can now foresee) a Material Adverse Effect and which has not been set forth in this Agreement or the other documents, certificates and statements furnished to the Agent by or on behalf of the Borrower or any Subsidiary prior to, or on, the Closing Date in connection with the transactions contemplated hereby. Section 7.12 Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Section 7.13 Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 7.14 Subsidiaries. Except as set forth on SCHEDULE 7.14, the Borrower has no Subsidiaries. Section 7.15 Location of Business and Offices. The Borrower's principal place of business and chief executive offices are located at the address stated on the signature page of this Agreement. The principal place of business and chief executive office of each Subsidiary are located at the addresses stated on SCHEDULE 7.14. Section 7.16 Defaults. Neither the Borrower nor any Subsidiary is in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default under any Material Agreement or instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary is bound which could have a Material Adverse Effect. No Default hereunder has occurred and is continuing. Section 7.17 Environmental Matters. To the best of knowledge of Borrower, except (i) as provided in SCHEDULE 7.17 which would not reasonably be expected to have a Material Adverse Effect, or (ii) as would not have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions would not have a Material Adverse Effect): (a) Neither any Property of the Borrower or any Subsidiary nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws; (b) Without limitation of clause (a) above, no Property of the Borrower or any Subsidiary nor the operations currently conducted thereon (or, to the best knowledge of CREDIT AGREEMENT 49 the Borrower, by any prior owner or operator of such Property or operation), are in violation of or subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to any remedial obligations under Environmental Laws; (c) All notices, permits, licenses or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any and all Property of the Borrower and each Subsidiary, including without limitation past or present treatment, storage, disposal or release of a hazardous substance or solid waste into the environment, have been duly obtained or filed, and the Borrower and each Subsidiary are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations; (d) All hazardous substances, solid waste, and oil and gas exploration and production wastes, if any, generated at any and all Property of the Borrower or any Subsidiary have in the past been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and, to the best knowledge of the Borrower, all such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and are not the subject of any existing, pending or threatened action, investigation or inquiry by any Governmental Authority in connection with any Environmental Laws; (e) The Borrower has taken all steps reasonably necessary to determine and has determined that no hazardous substances, solid waste, or oil and gas exploration and production wastes, have been disposed of or otherwise released and there has been no threatened release of any hazardous substances on or to any Property of the Borrower or any Subsidiary except in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment; (f) To the extent applicable, all Property of the Borrower and each Subsidiary currently satisfies all design, operation, and equipment requirements imposed by the OPA or scheduled as of the Closing Date to be imposed by OPA during the term of this Agreement, and the Borrower does not have any reason to believe that such Property, to the extent subject to OPA, will not be able to maintain compliance with the OPA requirements during the term of this Agreement; and (g) Neither the Borrower nor any Subsidiary has any known contingent liability in connection with any release or threatened release of any oil, hazardous substance or solid waste into the environment. Section 7.18 Compliance with the Law. Neither the Borrower nor any Subsidiary has violated any Governmental Requirement or failed to obtain any license, permit, franchise or other governmental authorization necessary for the ownership of any of its Properties or the conduct of its business, which violation or failure could reasonably be expected to have (in the event such violation or failure were asserted by any Person through appropriate CREDIT AGREEMENT 50 action) a Material Adverse Effect. To the best knowledge of the Borrower, except for such acts or failures to act as could not reasonably be expected to have a Material Adverse Effect, and except with respect to Environmental Matters which are addressed in Section 7.17, the Oil and Gas Properties (and properties unitized therewith) operated by the Borrower or its Subsidiaries, and to Borrower's knowledge, their non-operated Oil and Gas Properties, have been maintained, operated and developed in conformity to standards customary in the industry and in conformity with all applicable laws and all rules, regulations and orders of all duly constituted authorities having jurisdiction and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties; specifically in this connection, except as could not reasonably expected to have a Material Adverse Effect, (i) after the Closing Date, no Oil and Gas Property is subject to having allowable production reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) prior to the Closing Date and (ii) none of the wells comprising a part of the Oil and Gas Properties (or properties unitized therewith) are deviated from the vertical more than the maximum permitted by applicable laws, regulations, rules and orders, and such wells are, in fact, bottomed under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or in the case of wells located on properties unitized therewith, such unitized properties). Section 7.19 Insurance. SCHEDULE 7.19 attached hereto contains an accurate and complete description of all material policies of fire, liability, workmen's compensation and other forms of insurance owned or held by the Borrower and each Subsidiary. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the date of the closing have been paid, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are sufficient for compliance with all requirements of law and of all agreements to which the Borrower or any Subsidiary is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business for the assets and operations of the Borrower and each Subsidiary; will remain in full force and effect through the respective dates set forth in SCHEDULE 7.19 without the payment of additional premiums; and will not in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement. SCHEDULE 7.19 identifies all material risks, if any, which the Borrower and its Subsidiaries and their respective Board of Directors or officers have designated as being self insured. Neither the Borrower nor any Subsidiary has been refused any insurance with respect to its assets or operations, nor has its coverage been limited below usual and customary policy limits, by an insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last three years. All such policies name Agent as additional insured, loss payee, and contain endorsements for no cancellation thereof without thirty (30) days' prior written notice to the Agent and the Lenders on all such policies. Section 7.20 Intentionally Deleted. CREDIT AGREEMENT 51 Section 7.21 Hedging Agreements. SCHEDULE 7.21 sets forth, as of the Closing Date, a true and complete list of all Hedging Agreements (including commodity price swap agreements, forward agreements or contracts of sale which provide for prepayment for deferred shipment or delivery of oil, gas or other commodities) of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied), and the counter party to each such agreement. Section 7.22 Restriction on Liens. Neither the Borrower nor any of its Subsidiaries is a party to any agreement or arrangement (other than the Second Amended and Restated Credit Agreement dated June 5, 2003, among the Borrower, the lenders named therein, and Wells Fargo Foothill, Inc., as administrative agent, which agreement is to be terminated on the Closing Date), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Agent for the benefit of the Lenders as contemplated by this Agreement and the Security Instruments. Section 7.23 Material Agreements. Set forth on SCHEDULE 7.23 hereto is a complete and correct list of all material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, and other instruments in effect or to be in effect as of the Closing Date (other than Hedging Agreements) providing for, evidencing, securing or otherwise relating to any Debt for borrowed money of the Borrower or any of its Subsidiaries (other than the Debt hereunder, Debt evidenced by the Existing Senior Subordinated Unsecured Notes and Debt to be paid off contemporaneously with the Closing Date out of the proceeds of the Initial Funding and the proceeds of the Senior Unsecured Notes), including the Senior Unsecured Notes Indenture, the Purchase Agreement pursuant to which the Senior Unsecured Notes are to be issued by the Borrower to the purchaser named therein and the Term Loan Agreement pursuant to which the Second Lien Notes are to be issued, and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Debt (other than the Senior Unsecured Notes) or lease obligations outstanding or to be outstanding and the Property subject to any Lien securing such Debt or lease obligation. Also set forth on SCHEDULE 7.23 hereto is a complete and correct list of all material agreements of the Borrower and its Subsidiaries relating to the sale and supply of Hydrocarbons, (other than any such agreement with a term or cancelable by the Borrower or a Subsidiary on notice, of less than twelve (12) months, any such agreement in which commodity prices float with market indices and any agreement that is expected to account for less than five percent (5%) of the sales of the Borrower and its Subsidiaries during the Borrower's current fiscal year) in effect or to be in effect as of the Closing Date. The Borrower has heretofore delivered to the Agent a complete and correct copy of all such material agreements in effect on the Closing Date. All of the Material Agreements of the Borrower and all of its Subsidiaries together with all amendments and/or modifications thereto are set forth on SCHEDULE 7.23. Section 7.24 Gas Imbalances. Except as set forth on SCHEDULE 7.24 or on the most recent certificate delivered pursuant to Section 8.07(c), on a net basis there are no gas imbalances, take or pay or other prepayments with respect to the Borrower's Oil and Gas Properties which (taken together with the imbalances, take or pay, or other prepayments on CREDIT AGREEMENT 52 Schedule 7.24 or such certificate) would require the Borrower or its Subsidiaries to deliver, in the aggregate, after netting all over-production and under-production, three percent (3%) or more of the total volumes of proved, producing reserves of Hydrocarbons (calculated on an mcf equivalent basis with each barrel of oil being equivalent to six mcf of natural gas) reflected in the Initial Reserve Report or the most recent Reserve Report delivered pursuant to Section 8.07, as the case may be, from the Oil and Gas Properties of Borrower and its Subsidiaries at some future time without then or thereafter receiving full payment therefor. Section 7.25 Partnership Agreement. The Partnership Agreement has not been terminated, is in full force and effect as of the date hereof and no default has occurred and is in continuance thereunder which would have a Material Adverse Effect. Section 7.26 Intentionally Deleted. Section 7.27 Solvency. Borrower and its Subsidiaries (and with respect to its Subsidiaries, after taking into account each Subsidiary's rights of contribution), on an individual and a consolidated basis, are not insolvent, Borrower's and its Subsidiaries' assets (and with respect to its Subsidiaries, after taking into account each Subsidiary's rights of contribution), on an individual and a consolidated basis, exceed their liabilities, and neither Borrower nor any of its Subsidiaries (and with respect to its Subsidiaries, after taking into account each Subsidiary's rights of contribution) will be rendered insolvent by the execution and performance of this Agreement and the Loan Documents. Section 7.28 Name Changes. Borrower's official name as recorded on its currently effective organizational documents which are filed with the Secretary of State of its State of organization is the same as found on the signature page of this Agreement. Borrower has not, during the preceding five years, entered into any contract, agreement, security instrument or other document using a name other than, or been known by or otherwise used any name other than, the name used by Borrower herein and as set forth on SCHEDULE 7.28 attached hereto. Section 7.29 Taxpayer Identification Number. Borrower's Taxpayer Identification No. is 76-0437769 and each Subsidiary's Borrower's Taxpayer Identification No. is set forth on SCHEDULE 7.14. Section 7.30 State of Formation. Borrower is a corporation organized under the laws of the State of Delaware. The Subsidiaries are corporations, limited liability corporations, or partnerships organized under the laws of the states set forth on SCHEDULE 7.14. ARTICLE VIII AFFIRMATIVE COVENANTS The Borrower covenants and agrees that, so long as any of the Revolving Credit Commitments are in effect and until payment in full of all Loans hereunder, all interest thereon and all other amounts payable by the Borrower hereunder: CREDIT AGREEMENT 53 Section 8.01 Reporting Requirements. The Borrower shall deliver, or shall cause to be delivered, to the Agent with sufficient copies of each for the Lenders: (a) Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower, the audited consolidated statements of income, stockholders' equity, changes in financial position and cash flows of the Borrower and its Consolidated Subsidiaries for such fiscal year, and the related consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year, and setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by the related unqualified opinion of independent public accountants of recognized national standing acceptable to the Agent which opinion shall state that said financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries as at the end of, and for, such fiscal year and that such financial statements have been prepared in accordance with GAAP, except for such changes in such principles with which the independent public accountants shall have concurred and such opinion shall not contain a "going concern" or like qualification or exception, and a certificate of such accountants stating that, in making the examination necessary for their opinion, they obtained no knowledge, except as specifically stated, of any Default, together with calculations confirming the Borrower's compliance with the financial covenants set forth in Sections 9.13, 9.14, 9.15, and 9.16, certified by a senior financial officer of Borrower. (b) Quarterly Financial Statements. As soon as available and in any event within forty-five (45) days after the end of each of the first three fiscal quarterly periods of each fiscal year of the Borrower, consolidated statements of income, stockholders' equity, changes in financial position and cash flows of the Borrower and its Consolidated Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheets as at the end of such period, and setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year, accompanied by the certificate of a Responsible Officer, which certificate shall state that said financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries in accordance with GAAP, as at the end of, and for, such period (subject to normal year-end audit adjustments), together with calculations confirming the Borrower's compliance with all financial covenants, certified by a senior financial officer of Borrower. (c) Projected Financial Statements. As soon as available and in any event within forty-five (45) days after the end of the preceding fiscal year of the Borrower, the projected consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for such projected fiscal year, and the related consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year, and setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, accompanied by the certificate of a Responsible Officer, CREDIT AGREEMENT 54 which certificate shall state that said financial projections have been prepared on reasonable assumptions at the date presented. (d) Notice of Default, Etc. Promptly after the Borrower knows that any Default or any Material Adverse Effect has occurred, a notice of such Default or Material Adverse Effect, describing the same in reasonable detail and the action the Borrower proposes to take with respect thereto. (e) Other Accounting Reports. Promptly upon receipt thereof, a copy of each other report or letter submitted to the Borrower or any Subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower and its Subsidiaries, and a copy of any response by the Borrower or any Subsidiary of the Borrower, or the Board of Directors of the Borrower or any Subsidiary of the Borrower, to such letter or report. (f) SEC Filings, Etc. Promptly upon its becoming available, each financial statement, report, notice or proxy statement sent by the Borrower to stockholders generally and each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters) in respect thereof filed by the Borrower with or received by the Borrower in connection therewith from any securities exchange or the SEC or any successor agency. (g) Notices Under Other Loan Agreements. Promptly after the furnishing thereof, copies of any statement, report or notice furnished to any Person pursuant to the terms of any material indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 8.01. (h) Other Matters. From time to time such other information regarding the business, affairs or financial condition of the Borrower or any Subsidiary (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender or the Agent may reasonably request. (i) Hedging Agreements. As soon as available and in any event within ten (10) Business Days after the last day of each calendar quarter, a report, in form and substance satisfactory to the Agent, setting forth as of the last Business Day of such calendar quarter, a true and complete list of all Hedging Agreements (including commodity price swap agreements, forward agreements or contracts of sale which provide for prepayment for deferred shipment or delivery of oil, gas or other commodities) of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value therefor, any new credit support agreements relating thereto not listed on SCHEDULE 7.21, any margin required or supplied under any credit support document, and the counter party to each such agreement. The Borrower will furnish to the Agent, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate substantially in the form of EXHIBIT C CREDIT AGREEMENT 55 executed by a Responsible Officer (i) certifying as to the matters set forth therein and stating that no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail), and (ii) setting forth in reasonable detail the computations necessary to determine whether the Borrower is in compliance with Sections 9.13, 9.14, 9.15, and 9.16 as of the end of the respective fiscal quarter or fiscal year. Section 8.02 Litigation. The Borrower shall promptly give to the Agent notice of: (i) all legal or arbitral proceedings, and of all proceedings before any Governmental Authority affecting the Borrower or any Subsidiary, except proceedings which, if adversely determined, could not have a Material Adverse Effect, and (ii) of any litigation or proceeding against or adversely affecting the Borrower or any Subsidiary in which the amount involved is not covered in full by insurance (subject to normal and customary deductibles and for which the insurer has not assumed the defense), or in which injunctive or similar relief is sought. The Borrower will, and will cause each of its Subsidiaries to, promptly notify the Agent and each of the Lenders of any claim, judgment, Lien or other encumbrance affecting any Property of the Borrower or any Subsidiary if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $250,000.00. Section 8.03 Maintenance, Etc. (a) Generally. The Borrower shall and shall cause each Subsidiary to: preserve and maintain its corporate existence and all of its material rights, privileges and franchises; keep books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and activities; comply with all Governmental Requirements if failure to comply with such requirements will have a Material Adverse Effect; pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; upon reasonable notice, permit representatives of the Agent or any Lender, during normal business hours, to examine, copy and make extracts from its books and records, to inspect its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Agent (as the case may be); and keep, or cause to be kept, insured by financially sound and reputable insurers all Property of a character usually insured by Persons engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such Persons and carry such other insurance as is usually carried by such Persons including, without limitation, environmental risk insurance to the extent reasonably available. The Borrower shall promptly obtain endorsements to such insurance policies naming "Wells Fargo Bank, National Association, as Agent for the Lenders" as joint loss payee, additional insured, and containing provisions that such policies will not be canceled without 30 days prior written notice having been given by the insurance company to the Agent. CREDIT AGREEMENT 56 (b) Proof of Insurance. Contemporaneously with the delivery of the financial statements required by Section 8.01(a) to be delivered for each year, the Borrower will furnish or cause to be furnished to the Agent and the Lenders a certificate of insurance coverage from the insurer in form and substance satisfactory to the Agent and, if requested, will furnish the Agent and the Lenders copies of the applicable policies. (c) Operation of Properties. The Borrower will and will cause each Subsidiary to operate its Properties or cause such Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance in all material respects with all Governmental Requirements. (d) Oil and Gas Properties. The Borrower will and will cause each Subsidiary to, at its own expense, do or cause to be done and, in the case of non-operated Oil and Gas Properties, to use reasonable commercial efforts to cause them to be done by the operators all things reasonably necessary to preserve and keep in good repair, working order and efficiency all of its Oil and Gas Properties and other material Properties including, without limitation, all equipment, machinery and facilities, and from time to time will make all the reasonably necessary repairs, renewals and replacements so that at all times the state and condition of its Oil and Gas Properties and other material Properties will be preserved and maintained in accordance with industry standards, except to the extent a portion of such Properties is no longer capable of producing Hydrocarbons in economically reasonable amounts. The Borrower will and will cause each Subsidiary or use reasonable commercial efforts to cause the operator to do so, in the case of non-operated properties to promptly: (i) pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties, (ii) perform or make reasonable and customary efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties, (iii) will and will cause each Subsidiary to do all other things necessary to keep unimpaired, except for Liens described in Section 9.02, its rights with respect to its Oil and Gas Properties and other material Properties and prevent any forfeiture thereof or a default thereunder, except to the extent a portion of such Properties is undeveloped or is no longer capable of producing Hydrocarbons in economically reasonable amounts and except for dispositions permitted by Section 9.17. The Borrower will and will cause each Subsidiary to operate its Oil and Gas Properties and other material Properties or cause or make reasonable and customary efforts to cause such Oil and Gas Properties and other material Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance in all material respects with all Governmental Requirements. CREDIT AGREEMENT 57 Section 8.04 Environmental Matters. (a) Establishment of Procedures. The Borrower will and will cause each Subsidiary to establish and implement such procedures as may be reasonably necessary to continuously determine and assure that any failure of the following does not have a Material Adverse Effect: (i) all Property of the Borrower and its Subsidiaries and the operations conducted thereon and other activities of the Borrower and its Subsidiaries are in compliance with and do not violate the requirements of any Environmental Laws, (ii) no oil, hazardous substances or solid wastes are disposed of or otherwise released on or to any Property owned by any such party except in compliance with Environmental Laws, (iii) no hazardous substance will be released on or to any such Property in a quantity equal to or exceeding that quantity which requires reporting pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and production wastes or hazardous substance is released on or to any such Property so as to pose an imminent and substantial endangerment to public health or welfare or the environment. (b) Notice of Action. The Borrower will promptly notify the Agent and the Lenders in writing of any threatened action, investigation or inquiry by any Governmental Authority of which the Borrower has knowledge in connection with any Environmental Laws, excluding routine testing and corrective action. (c) Future Acquisitions. The Borrower will and will cause each Subsidiary to provide environmental audits and tests in accordance with American Society for Testing and Materials standards as reasonably requested by the Agent and the Lenders (or as otherwise required to be obtained by the Agent or the Lenders by any Governmental Authority) in connection with any future acquisitions of Oil and Gas Properties or other material Properties. Section 8.05 Further Assurances. The Borrower will and will cause each Subsidiary to cure promptly any defects in the creation and issuance of the Notes and the execution and delivery of the Security Instruments and this Agreement. The Borrower at its expense will and will cause each Subsidiary to promptly execute and deliver to the Agent upon request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Subsidiary, as the case may be, in the Security Instruments and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Notes, or to correct any omissions in the Security Instruments, or to state more fully the security obligations set out herein or in any of the Security Instruments, or to perfect, protect or preserve any Liens created pursuant to any of the Security Instruments, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith. Section 8.06 Performance of Obligations. The Borrower will pay the Notes according to the reading, tenor and effect thereof; and the Borrower will and will cause each Subsidiary to do and perform every act and discharge all of the obligations to be performed and discharged by them under the Security Instruments and this Agreement, at the time or times and in the manner specified. CREDIT AGREEMENT 58 Section 8.07 Engineering Reports. (a) Not less than thirty (30) days prior to each Scheduled Redetermination Date, commencing with the Scheduled Redetermination Date to occur on October 1, 2004, the Borrower shall furnish to the Agent and the Lenders a Reserve Report. The Reserve Report as of January 1 of each year shall be prepared by certified independent petroleum engineers or other independent petroleum consultant(s) acceptable to the Agent and the Reserve Report as of July 1 of each year shall be prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding Reserve Report as of January 1. (b) In the event of an unscheduled redetermination, the Borrower shall furnish to the Agent and the Lenders a Reserve Report prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding Reserve Report. For any unscheduled redetermination requested by the Majority Lenders or the Borrower pursuant to Section 2.08(d)), the Borrower shall provide such Reserve Report with an "as of" date as required by the Agent as soon as possible, but in any event no later than thirty (30) days following the receipt of the request by the Agent. (c) With the delivery of each Reserve Report, the Borrower shall provide to the Agent and the Lenders, a certificate from a Responsible Officer certifying that, to the best of his knowledge and in all material respects: (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct, (ii) the Borrower owns good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.02, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay, or other prepayments with respect to Borrower's Oil and Gas Properties which (taken together with the imbalances, take or pay, or other prepayments reflected on such exhibit to the certificate) would require Borrower or its Subsidiaries to deliver, in the aggregate, after netting all over-production and under-production, three percent (3%) or more of total volumes of proved, producing reserves of Hydrocarbons (calculated on an mcf equivalent basis with each barrel of oil being equivalent to six mcf of natural gas) reflected in the Initial Reserve Report or the most recent Reserve Report delivered pursuant to this Section 8.07, as the case may be, which would require Borrower and/or any of its Subsidiaries to deliver from the Oil and Gas Properties of Borrower and its Subsidiaries at some future time without then receiving full payment therefor which would require the Borrower to deliver Hydrocarbons produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of its Oil and Gas Properties have been sold since the date of the last Borrowing Base determination except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in such detail as reasonably required by the Majority Lenders, (v) attached to the certificate is a list of its Oil and Gas Properties added to and deleted from the CREDIT AGREEMENT 59 immediately prior Reserve Report and a list showing any change in working interest or net revenue interest in its Oil and Gas Properties occurring and the reason for such change, (vi) attached to the certificate is a list of all Persons disbursing proceeds to the Borrower from its Oil and Gas Properties and (vii) except as set forth on a schedule attached to the certificate, at least eighty-five percent (85%), by value, of the Oil and Gas Properties of the Borrower and its Subsidiaries are Mortgaged Property. (d) As soon as available and in any event within sixty (60) days after the end of each month, the Borrower shall furnish to the Agent reports which shall include any direct or allocated general and administrative expenses and production reports for its Oil and Gas Properties, which reports shall include quantities or volume of production, revenue, realized product prices, operating expenses, taxes, capital expenditures and lease operating costs which have accrued to the Borrower's accounts in such period, and such other information with respect thereto as the Agent may require. Section 8.08 Title Information and Mortgage Coverage. (a) Mortgage and Title Coverage. The Borrower will provide the Agent with (i) title information in form and substance acceptable to the Agent and (ii) Mortgages on the Oil and Gas Properties of the Borrower and its Subsidiaries, in form and substance satisfactory to Agent, and subject only to Excepted Liens, which are, at all times, sufficient to cause eighty-five percent (85%) of the value of the proved Oil and Gas Properties of the Borrower and its Subsidiaries to be covered both by such title information and by Mortgages in favor of the Agent for the benefit of the Lenders (the "85% Coverage Requirement"). (b) Cure of Title Defects. The Borrower shall promptly proceed in good faith to cure any title defects or exceptions which are not Excepted Liens raised by such title information, or substitute acceptable Mortgaged Properties with no material title defects or exceptions except for Excepted Liens covering Mortgaged Property sufficient to cause the 85% Coverage Requirement to be maintained, as promptly as reasonable, and in any event, within ninety (90) days after a request by the Agent or the Lenders to cure such defects or exceptions. With respect to this Section 8.08(b), "material title defects or exceptions" shall mean the defects and exceptions relating to all the Mortgaged Properties that could reasonably be expected to affect the revenue stream attributable to such Mortgaged Properties and the cost to cure such defects or exceptions could reasonably be expected to exceed $200,000 individually or $2,000,000 in the aggregate to cure. (c) Failure to Cure Title Defects. If the Borrower is unable to cure any title defect requested by the Agent or the Lenders to be cured within the ninety (90)-day period or the Borrower does not substitute acceptable Mortgage Properties sufficient to cause the 85% Coverage Requirement to be maintained, such default shall not be a Default or an Event of Default, but instead the Agent and the Lenders shall have the right to exercise the following remedy in their sole discretion from time to time, and any failure to so exercise this remedy at any time shall not be a waiver as to future exercise of CREDIT AGREEMENT 60 the remedy by the Agent or the Lenders. To the extent that the Agent or the Lenders are not satisfied with title to any such Oil and Gas Property after the time period in Section 8.08(b) has elapsed, such unacceptable Oil and Gas Property shall not count towards the 85% Coverage Requirement, and the Agent may send a notice to the Borrower and the Lenders that the then outstanding Borrowing Base shall be reduced by an amount as determined by all of the Lenders to cause the Borrower to be in compliance with the requirement to provide acceptable title information on eighty-five percent (85%) of the value of the Oil and Gas Properties. This new Borrowing Base shall become effective immediately after receipt of such notice. Section 8.09 Additional Collateral. (a) Lien in Acquired Oil and Gas Properties. Should the Borrower or any of its Subsidiaries acquire any additional developed Oil and Gas Properties or additional interests in its existing developed Oil and Gas Properties, the Borrower will (i) grant to the Agent as security for the Obligations a first-priority Lien and security interest (subject only to Excepted Liens) on the Borrower's interest in any such developed Oil and Gas Properties to the extent not already subject to a Lien of the Security Instruments, which Lien will be created and perfected by and in accordance with the provisions of mortgages, deeds of trust, security agreements and financing statements, or other Security Instruments, all in form and substance satisfactory to the Agent in its sole discretion and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes, and (ii) will provide the Agent with title information in form and substance satisfactory to the Agent on such developed Oil and Gas Properties, to the extent required to maintain the satisfaction of the 85% Coverage Requirement. (b) Intentionally Deleted. (c) Legal Opinions. Also, promptly after the filing of any new Security Instrument in any state, upon the reasonable request of the Agent, the Borrower will provide to the Agent an opinion addressed to the Agent for the benefit of the Lenders in form and substance satisfactory to the Agent in its sole discretion from counsel acceptable to Agent, stating that the Security Instrument creates a Lien and is valid, binding and enforceable in accordance with its terms in legally sufficient form for such jurisdiction, and the means by which to perfect the Lien created by such Security Instrument. Section 8.10 Cash Collateral Account Agreement. Upon the occurrence of a Default, the Borrower and all of its Subsidiaries shall cause all proceeds arising from its Oil and Gas Properties, including without limitation from the sale of Hydrocarbons, to be directed to a lockbox (and in connection therewith, Borrower and all of its Subsidiaries shall execute a Lockbox Agreement and financing statements in form and substance satisfactory to the Agent) pursuant to letters acceptable to the Agent stating that such directions may not be changed without the written consent of the Agent. The Cash Collateral Account Agreement and the Liens and security interests established in such Cash Collateral Account Agreement will continue until all the Obligations under this Agreement are paid in full and this Agreement is terminated. CREDIT AGREEMENT 61 Section 8.11 Intentionally Deleted. Section 8.12 ERISA Information and Compliance. The Borrower will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Agent with sufficient copies to the Lenders (i) promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan or any trust created thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA Event or of any "PROHIBITED TRANSACTION," as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by a Responsible Officer specifying the nature thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (iii) immediately upon receipt thereof, copies of any notice of the PBGC's intention to terminate or to have a trustee appointed to administer any Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of section 412 of the Code (determined without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA. Section 8.13 Joinder and Guaranty Agreements. The Borrower and each of its Subsidiaries will cause each of their Subsidiaries, whether newly formed, after acquired, or otherwise existing, upon the creation or acquisition thereof, to become a Guarantor hereunder by way of a Joinder Agreement attached hereto as EXHIBIT G, a Guaranty Agreement attached hereto as EXHIBIT H, a Contribution Agreement by and among the Borrower and all Guarantors, and the execution of mortgages, deeds of trusts, security agreements, pledges, and any other instruments in form and substance satisfactory to Agent and in Agent's sole discretion covering all of such Subsidiaries, assets, security for the Obligations, together with evidence satisfactory to the Agent, in Agent's sole discretion, that all such collateral will be a perfected first Lien on such collateral in favor of the Agent, with only such Liens or other encumbrances of any kind on such collateral that are acceptable to the Agent. ARTICLE IX NEGATIVE COVENANTS The Borrower covenants and agrees that, so long as any of the Revolving Credit Commitments are in effect and until payment in full of Loans hereunder, all interest thereon and all other amounts payable by the Borrower hereunder, without the prior written consent of the Majority Lenders: CREDIT AGREEMENT 62 Section 9.01 Debt. Neither the Borrower nor any Subsidiary will incur, create, assume or permit to exist any Debt, except: (a) the Notes or other Obligations or any guaranty of or suretyship arrangement for the Notes or other Obligations; (b) the Second Lien Notes, the Senior Unsecured Notes, and Debt of the Borrower existing on the Closing Date which is reflected in the Financial Statements or is disclosed in SCHEDULE 9.01, and any renewals or extensions or refinancings (but not increases) thereof; (c) accounts payable (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business which, if greater than 90 days past the invoice or billing date, are being contested in good faith by appropriate proceedings if reserves adequate under GAAP shall have been established therefor; (d) Debt under capital leases (as required to be reported on the financial statements of the Borrower pursuant to GAAP) not to exceed $100,000.00 in the aggregate at any time outstanding; (e) Debt associated with bonds or surety obligations required by contract or by Governmental Requirements in connection with the operation of the Oil and Gas Properties, in the ordinary course of business; (f) Debt of the Borrower and its Subsidiaries under Hedging Agreements, but only if (i) the provider of the Hedging Agreements is a Lender or an unsecured counterparty acceptable to the Agent; (ii) the total notional volume attributable to such Hedging Agreement, if it is a Hedging Agreement with respect to Hydrocarbon Interests, does not exceed more than seventy-five percent (75%) of scheduled proved producing net production quantities in any period, (iii) if the Hedging Agreement is an interest rate hedge, the notional principal amount shall not exceed more than seventy-five percent (75%) of Loans outstanding to the Borrower, provided, however, at no time shall Borrower fail to maintain (x) a Hedging Agreement on fifty percent (50%) of proved producing volumes projected to be produced over the next 12 months after the Closing Date, and thereafter on a rolling 12-month basis until the Maturity Date; and (y) a Hedging Agreement on twenty-five (25%) of proved producing production volumes projected to be produced over the 13th through the 24th months after the Closing Date, on a rolling 12-month basis; and (z) provided, further, that Agent, in its discretion, may require the Borrower to hedge a percentage of projected production volumes determined by the Agent in its sole discretion, on terms acceptable to the Agent, whenever Borrower has Loans and LC Exposure under this Agreement in excess of seventy percent (70%) of the Borrowing Base available for general corporate purposes; and (g) any guaranty of Debt otherwise permitted under Section 9.01. CREDIT AGREEMENT 63 Section 9.02 Liens. Neither the Borrower nor any Subsidiary will create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except: (a) Liens securing the payment of any Obligations; (b) Excepted Liens; (c) Liens securing leases allowed under Section 9.01(d), but only on the Property under lease; (d) Liens securing the Second Lien Notes and other Liens disclosed on SCHEDULE 9.02; (e) Liens on cash or securities of the Borrower securing the Debt described in Section 9.01(e); and (f) Certain permitted Liens allowed by Agent, at Agent's sole discretion. Section 9.03 Investments, Loans and Advances. Neither the Borrower nor any Subsidiary will make or permit to remain outstanding any loans or advances to or investments in any Person (other than the Borrower or any Guarantor), except that the foregoing restriction shall not apply to: (a) investments, loans or advances reflected in the Financial Statements or which are disclosed to the Lenders in SCHEDULE 9.03; (b) accounts receivable arising in the ordinary course of business; (c) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case maturing within one year from the date of creation thereof; (d) commercial paper maturing within one year from the date of creation thereof rated in the highest grade by Standard & Poor's Corporation or Moody's Investors Service, Inc.; (e) deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $500,000,000 (as of the date of such Lender's or bank or trust company's most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively; CREDIT AGREEMENT 64 (f) deposits in money market funds investing at least ninety-five percent (95%) of funds exclusively in investments described in Section 9.03(c), 9.03(d) or 9.03(e); (g) usual and customary travel and other similar expense advances to employees, officers, directors or agents of the Borrower or any Subsidiary not to exceed $100,000.00 outstanding in the aggregate at any time; (h) Hedging Agreements permitted to be incurred pursuant to Section 9.01(f); and (i) investments by the Borrower in direct ownership interests in additional Oil and Gas Properties and gas gathering systems related thereto. Section 9.04 Dividends, Distributions and Redemptions. The Borrower will not declare or pay any dividend, purchase, redeem or otherwise acquire for value any of its stock now or hereafter outstanding, return any capital to its stockholders or make any distribution of its assets to its stockholders. Section 9.05 Sales and Leasebacks. Neither the Borrower nor any Subsidiary will enter into any arrangement, directly or indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or transfer any of its Property, whether now owned or hereafter acquired, and whereby the Borrower or any Subsidiary shall then or thereafter rent or lease as lessee such Property or any part thereof or other Property which the Borrower or any Subsidiary intends to use for substantially the same purpose or purposes as the Property sold or transferred. Section 9.06 Nature of Business. Neither the Borrower nor any Subsidiary will allow any material change to be made in the character of its business as an independent oil and gas exploration and production company. Section 9.07 Limitation on Leases. Neither the Borrower nor any Subsidiary will create, incur, assume or permit to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal excluding capital leases, leases of Hydrocarbon Interests and leases of automobiles, compression or other oilfield equipment leased in the ordinary course of business), under leases or lease agreements which would cause the aggregate amount of all payments made by the Borrower and its Subsidiaries pursuant to all such leases or lease agreements to exceed $1,500,000.00 in any period of twelve consecutive calendar months during the life of such leases. Section 9.08 Mergers, Etc. Neither the Borrower nor any Subsidiary will merge into or with or consolidate with any other Person, or sell, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property or assets to any other Person; provided, however, nothing shall prohibit Borrower or any Subsidiary from: (i) acquiring (a) any domestic undeveloped Hydrocarbon Interests or (b) domestic developed Oil and Gas Properties, so long as Borrower or such Subsidiary pledges and/or mortgages to the Lenders all such developed Oil and Gas Properties acquired pursuant thereto (to the extent necessary to maintain Agent's Lien in at least eighty-five percent (85%) by value of the Oil and CREDIT AGREEMENT 65 Gas Properties of Borrower and its Subsidiaries) by execution of documents in form and substance satisfactory to Agent, granting perfected, first priority Liens and security interests in such Oil and Gas Properties subject only to Excepted Liens and other Liens acceptable to the Lenders; or (ii) merging (after having given Agent thirty (30) days prior written notice) (a) any Guarantor into another Guarantor or (b) any Guarantor into Borrower. Section 9.09 Proceeds of Notes; Letters of Credit. The Borrower will not permit the proceeds of the Notes or Letters of Credit to be used for any purpose other than those permitted by Section 7.07. Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulation T, U or X or any other regulation of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. Section 9.10 ERISA Compliance. The Borrower will not at any time: (a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage in, any transaction in connection with which the Borrower, any Subsidiary or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code; (b) Terminate, or permit any Subsidiary or ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability to the Borrower, any Subsidiary or any ERISA Affiliate to the PBGC; (c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail to make, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is required to pay as contributions thereto; (d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to permit to exist, any accumulated funding deficiency within the meaning of section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan; (e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by the Borrower, any Subsidiary or any ERISA Affiliate which is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE BENEFIT LIABILITIES" shall have the meaning specified in section 4041 of ERISA; (f) Contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan; CREDIT AGREEMENT 66 (g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower, any Subsidiary or any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; (i) Contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any material liability; or (j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Borrower, any Subsidiary or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code. Section 9.11 Sale or Discount of Receivables. Neither the Borrower nor any Subsidiary will discount or sell (with or without recourse) any of its notes receivable or accounts receivable. Section 9.12 Intentionally Deleted. Section 9.13 Current Ratio. The Borrower will not permit its ratio of (i) consolidated Current Assets (including, without limitation, Borrowing Base availability for general corporate purposes) to (ii) consolidated Current Liabilities (excluding current maturities of the Notes) to be less than 1.00 to 1.00 at any time. The current ratio shall be calculated and tested quarterly as of the last day of each fiscal quarter of Borrower, beginning with the quarter ending March 31, 2004. As used in this Section 9.13, "CURRENT ASSETS" shall have the meaning of such term as defined by GAAP, except any availability under the Borrowing Base shall be included in the definition of Current Assets and "CURRENT LIABILITIES" shall have the meaning of such term as defined by GAAP, except that current maturities of the Notes shall be excluded from Current Liabilities. Current asset or liability accounts associated with Hedging Agreements will be excluded from calculations of the Current Ratio. Section 9.14 Tangible Net Worth. The Borrower will not permit, at any time, its Tangible Net Worth to be less than eighty-five percent (85%) of Tangible Net Worth as of March 31, 2004, plus fifty percent (50%) of positive net income after tax distributions, plus one CREDIT AGREEMENT 67 hundred percent (100%) of equity offerings after March 31, 2004, excluding any asset impairment charges. Section 9.15 Leverage Ratio. The Borrower will not permit its Leverage Ratio on an annualized basis (until the passing of four (4) full fiscal quarters after the date hereof), on the last day of each fiscal quarter to be more than the ratio set forth below for the corresponding time.
Period Ending Maximum Leverage Ratio ------------- ---------------------- June 30, 2004 through September 30, 2004 3.75x December 31, 2004 and thereafter 3.50x
Section 9.16 Interest Coverage Ratio. The Borrower will not permit its Interest Coverage Ratio (on an annualized basis until the passing of four fiscal quarters after the date hereof) as of the end of any fiscal quarter of the Borrower (calculated quarterly at the end of each fiscal quarter) to be less than the ratio set forth below for the corresponding time periods. For the purposes of this Section 9.16, "INTEREST COVERAGE RATIO" shall mean the ratio of (i) EBITDA for the four fiscal quarters ending on such date to (ii) cash interest payments made for such four fiscal quarters of the Borrower and its Consolidated Subsidiaries.
Period Ending Minimum Interest Coverage Ratio ------------- ------------------------------- June 30, 2004 through December 31, 2004 2.50x March 30, 2005 through June 30, 2005 2.75x September 30, 2005 and thereafter 3.00x
Section 9.17 Sale of Mortgaged Properties and Oil and Gas Properties. The Borrower will not, and will not permit any Subsidiary to, Transfer any Mortgaged Property, Oil and Gas Property or any interest in any Mortgaged Property or Oil and Gas Property, except for Permitted Transfers. Section 9.18 Intentionally Deleted. Section 9.19 Environmental Matters. After the Effective Date of this Agreement, Borrower and Borrower's Subsidiaries will remain in substantial compliance with all state and federal environmental regulations and Borrower will not place nor permit to be placed any hazardous substance on any of the Mortgaged Property in violation of applicable state and federal environmental laws. In the event Borrower shall discover any hazardous substances on any of the Mortgaged Property which could result in a breach of the foregoing covenant, Mortgagor shall notify Mortgagee within three (3) days after such discovery. Borrower shall dispose of any hazardous substances generated on a Mortgaged Property after the Effective Date only at facilities and/or with carriers that maintain valid governmental permits under RCRA. Neither the Borrower nor any Subsidiary will cause or permit any of its Property to be in violation of, or do anything or permit anything to be done which will subject any such Property CREDIT AGREEMENT 68 to any remedial obligations under any Environmental Laws, assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to such Property where such violations or remedial obligations would have a Material Adverse Effect. Section 9.20 Transactions with Affiliates. Neither the Borrower nor any Subsidiary will enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate unless such transactions are otherwise permitted under this Agreement, are in the ordinary course of its business and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not an Affiliate. Section 9.21 Subsidiaries. The Borrower shall not, and shall not permit any Subsidiary to, create, acquire or otherwise own any additional Subsidiaries unless Borrower concurrently pledges to the Agent for the benefit of the Lenders all stock or other ownership interests of such Subsidiary, and such Subsidiary is created, acquired or otherwise owned and in compliance with Sections 9.03 and 9.08. Section 9.22 Negative Pledge Agreements. Neither the Borrower nor any Subsidiary will create, incur, assume or permit to exist any contract, agreement or understanding (other than this Agreement and the Security Instruments) which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Agent, for the benefit of the Lenders, or restricts any Subsidiary from paying dividends to the Borrower, or which requires the consent of or notice to other Persons in connection therewith, provided, however, the foregoing restrictions will not apply to restrictions existing under or by reason of: (i) applicable law, (ii) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices, (iii) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired, (iv) agreements which restrict the disposition or distribution of assets or property in oil and gas leases, joint operating agreements, joint exploration and/or development agreements, participation agreements and other similar agreements entered into in the ordinary course of the oil and gas exploration and development business. Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will not allow gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower and its Subsidiary which would require the Borrower and its Subsidiaries to deliver Hydrocarbons produced on Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor in an aggregate amount, after netting all over-production and all under-production, in excess of three percent (3%) or more of the total volumes of proved, producing reserves of Hydrocarbons (calculated on an mcf equivalent basis with each barrel of oil being equivalent to six mcf of natural gas) reflected in the Initial Reserve Report or the most recent Reserve Report delivered pursuant to Section 8.07, as the case may be. Section 9.24 Ownership of Subsidiaries. The Borrower shall fail to pledge, assign, deliver, and transfer to the Agent for the benefit of the Lenders, and grant to the Agent for the benefit of the Lenders a continuing security interest in one hundred percent (100%) of the CREDIT AGREEMENT 69 stock or other ownership interests in the Subsidiaries existing as of the date hereof and any Subsidiaries the Borrower shall create, acquire or otherwise own hereafter. Section 9.25 Change in Borrower's or Subsidiary's Name or State of Formation. Without the prior written approval of Agent, (a) Borrower will not (nor permit any Subsidiary to) change its name, identity or place of organization and (b) Borrower will not (nor permit any Subsidiary to) engage in any other business or transaction under any name other than Borrower's or each Subsidiary's name hereunder. Should Agent approve, prior to doing any of the aforesaid, Borrower shall provide (or cause each Subsidiary to provide) to Agent all assignments, certificates, financing statements, financing statement amendments or other documents determined necessary in Agent's sole judgment to protect and continue Agent's interest in the collateral pledged by Borrower, any Guarantor, or any other party to secure the Obligations. Section 9.26 Material Agreements. Neither the Borrower nor any Subsidiary, or Affiliate of Borrower will amend or permit to be amended any Material Agreement to which it is a party, without prior written consent of the Agent, if such amendment could reasonably be expected to result in a Material Adverse Effect; provided, however, notwithstanding the foregoing, in any event that the Borrower, any Subsidiary, or Affiliate of Borrower amends or permits any Material Agreement to be amended in any manner whatsoever, the Borrower, such Subsidiary, or Affiliate of Borrower shall furnish to the Agent a fully executed copy of said amendment within five (5) Business Days after execution thereof. Section 9.27 Partnership Agreement. The Borrower will not amend or permit to be amended the Partnership Agreement in any manner that could adversely affect any of the Lenders without the prior written consent of the Majority Lenders. ARTICLE X EVENTS OF DEFAULT; REMEDIES Section 10.01 Events of Default. One or more of the following events shall constitute an "EVENT OF DEFAULT": (a) the Borrower shall default in the payment or prepayment when due of any principal of or interest on any Loan, or any reimbursement obligation for a disbursement made under any Letter of Credit, or any fees or other amount payable by it hereunder or under any Security Instrument; or (b) the Borrower or any Subsidiary shall default in the payment when due of any principal of or interest on any of its other Debt aggregating Five Hundred Thousand and No/100 Dollars ($500,000.00) or more, or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Debt shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, such Debt to become due prior to its stated maturity; or CREDIT AGREEMENT 70 (c) any representation, warranty or certification made or deemed made herein or in any Security Instrument by the Borrower or any Subsidiary, or any certificate furnished to any Lender or the Agent pursuant to the provisions hereof or any Security Instrument, shall prove to have been false or misleading as of the time made or furnished in any material respect; or (d) the Borrower shall default in the performance of any of its obligations under Article IX or any other Article of this Agreement other than under Article VIII; or the Borrower shall default in the performance of any of its obligations under Article VIII or the Borrower or any Subsidiary shall default in the performance of their obligations under any Security Instrument (other than the payment of amounts due which shall be governed by Section 10.01(a)) and such default shall continue unremedied for a period of thirty (30) days after the earlier to occur of (i) notice thereof to the Borrower by the Agent or any Lender (through the Agent), or (ii) the Borrower otherwise becoming aware of such default; or (e) the Borrower shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (f) the Borrower shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, liquidation or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code, or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (g) a proceeding or case shall be commenced, without the application or consent of the Borrower, in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower of all or any substantial part of its assets, or (iii) similar relief in respect of the Borrower under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) days; or (iv) an order for relief against the Borrower shall be entered in an involuntary case under the Federal Bankruptcy Code; or (h) a judgment or judgments for the payment of money in excess of $500,000.00 in the aggregate shall be rendered by a court against the Borrower or any Subsidiary and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within thirty (30) days CREDIT AGREEMENT 71 from the date of entry thereof and the Borrower or such Subsidiary shall not, within said period of thirty (30) days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (i) the Security Instruments after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with their terms, or cease to create a valid and perfected Lien of the priority required thereby on any of the collateral purported to be covered thereby, except to the extent permitted by the terms of this Agreement, or the Borrower shall so state in writing; or (j) any Letter of Credit becomes the subject matter of any order, judgment, injunction or any other such determination, or if the Borrower or any other Person shall petition or apply for or obtain any order restricting payment by the Agent under any Letter of Credit or extending the Lenders' liability under any Letter of Credit beyond the expiration date stated therein or otherwise agreed to by the Agent; or (k) an event having a Material Adverse Effect shall occur; or (l) the Borrower or any Subsidiary discontinues its usual business or suffers to exist any material change in its organization or ownership as of the date hereof, or Robert Cavnar and Richard Piacenti, or any successors acceptable to Lender, fails to (i) be responsible for running Borrower's or any Subsidiary's day to day operations or (ii) act as Chief Executive Officer and Chief Financial Officer, respectively, of Borrower or any Subsidiary. (m) Guarantor takes, suffers or permits to exist any of the events or conditions referred to in paragraphs (e), (f), (g) or (h) or if any provision of any guaranty agreement related thereto shall for any reason cease to be valid and binding on Guarantor or if Guarantor shall so state in writing; or (n) any Subsidiary takes, suffers or permits to exist any of the events or conditions referred to in paragraphs (e), (f), (g) or (h). (o) the Existing Senior Subordinated Unsecured Notes shall have failed to be redeemed in full on the redemption date provided in the Officer's Certificate to Trustee described in Section 6.01(t), but in no event later than sixty (60) days from the date of the Closing. Section 10.02 Remedies. (a) In the case of an Event of Default other than one referred to in clauses (e), (f) or (g) of Section 10.01 or in clause (m) or (n) to the extent it relates to clauses (e), (f) or (g), the Agent, upon request of the Majority Lenders, shall, by notice to the Borrower, cancel the Revolving Credit Commitments (in whole or part) and/or declare the principal amount then outstanding of, and the accrued interest on, the Loans and all other amounts CREDIT AGREEMENT 72 payable by the Borrower hereunder and under the Notes (including, without limitation, the payment of cash collateral to secure the LC Exposure as provided in Section 2.10(b)) to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of which are hereby expressly waived by the Borrower. (b) In the case of the occurrence of an Event of Default referred to in clauses (e), (f) or (g) of Section 10.01 or in clause (m) or (n) to the extent it relates to clauses (e), (f) or (g), the Revolving Credit Commitments shall be automatically canceled and the principal amount then outstanding of, and the accrued interest on, the Loans and all other amounts payable by the Borrower hereunder and under the Notes (including without limitation the payment of cash collateral to secure the LC Exposure as provided in Section 2.10(b)) shall become automatically immediately due and payable without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of which are hereby expressly waived by the Borrower. (c) All proceeds received after maturity of the Notes, whether by acceleration or otherwise shall be applied first to reimbursement of expenses and indemnities provided for in this Agreement and the Security Instruments; second to accrued interest on the Notes; third to fees; fourth pro rata to principal outstanding on the Notes and any other Obligations; fifth to serve as cash collateral to be held by the Agent to secure the LC Exposure; and any excess shall be paid to the Borrower or as otherwise required by any Governmental Requirement. ARTICLE XI THE AGENT Section 11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Agent to act as its agent hereunder and under the Security Instruments with such powers as are specifically delegated to the Agent by the terms of this Agreement and the Security Instruments, together with such other powers as are reasonably incidental thereto. The Agent (which term as used in this sentence and in Section 11.05 and the first sentence of Section 11.06 shall include reference to its Affiliates and its and its Affiliates' officers, directors, employees, attorneys, accountants, experts and agents): (i) shall have no duties or responsibilities except those expressly set forth in the Loan Documents, and shall not by reason of the Loan Documents be a trustee or fiduciary for any Lender; (ii) makes no representation or warranty to any Lender and shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement, or for the value, validity, effectiveness, genuineness, execution, effectiveness, legality, enforceability or sufficiency of this Agreement, any Note or any other document referred to or provided for herein or for any failure by the Borrower or any other Person (other than the Agent) to perform any of its obligations hereunder or thereunder or for the existence, value, perfection or priority of any collateral security or the financial or other condition of the CREDIT AGREEMENT 73 Borrower, its Subsidiaries or any other obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be required to initiate or conduct any litigation or collection proceedings hereunder; and (iv) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other document or instrument referred to or provided for herein or in connection herewith including its own ordinary negligence, except for its own gross negligence or willful misconduct. The Agent may employ agents, accountants, attorneys and experts and shall not be responsible for the negligence or misconduct of any such agents, accountants, attorneys or experts selected by it in good faith or any action taken or omitted to be taken in good faith by it in accordance with the advice of such agents, accountants, attorneys or experts. The Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the Agent. The Agent is authorized to release any collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents. Section 11.02 Reliance by Agent. The Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Agent. Section 11.03 Defaults. The Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on Loans or of fees or failure to reimburse for Letter of Credit drawings) unless the Agent has received notice from a Lender or the Borrower specifying such Default and stating that such notice is a "NOTICE OF DEFAULT." In the event that the Agent receives such a notice of the occurrence of a Default, the Agent shall give prompt notice thereof to the Lenders. In the event of a payment Default, the Agent shall give each Lender prompt notice of each such payment Default. Section 11.04 Rights as a Lender. With respect to its Revolving Credit Commitments and the Loans made by it and its participation in the issuance of Letters of Credit, Wells Fargo (and any successor acting as Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Agent, and the term "LENDER" or "LENDERS" shall, unless the context otherwise indicates, include the Agent in its individual capacity. Wells Fargo (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Affiliates) as if it were not acting as the Agent, and Wells Fargo and its Affiliates may accept fees and other consideration from the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE AGENT AND THE ISSUING BANK RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY CREDIT AGREEMENT 74 AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR THE ISSUING BANK IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT, THE SECURITY INSTRUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, ANY SECURITY INSTRUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENT OR THE ISSUING BANK, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE AGENT. Section 11.06 Non-Reliance on Agent and other Lenders. Each Lender acknowledges and agrees that it has, independently and without reliance on the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and its decision to enter into this Agreement, and that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. The Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this Agreement, the Notes, the Security Instruments or any other document referred to or provided for herein or to inspect the properties or books of the Borrower. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of the Agent or any of its Affiliates. In this regard, each Lender acknowledges that Winstead Sechrest & Minick P.C. is acting in this transaction as special counsel to the Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each Lender will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein. Section 11.07 Action by Agent. Except for action or other matters expressly required of the Agent hereunder, the Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall (i) receive written instructions from the Majority Lenders (or all of the Lenders as expressly required by Section 12.04) specifying the action to be taken, and (ii) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions of the Majority Lenders (or all of the Lenders as expressly required by Section 12.04) and any action taken or failure to act pursuant thereto by the Agent shall be binding on all of the Lenders. If a Default has occurred and is continuing, the Agent shall take such action with respect to such Default as shall be directed by the Majority Lenders (or all of the Lenders as required by Section 12.04) in the written instructions (with indemnities) described CREDIT AGREEMENT 75 in this Section 11.07, provided that, unless and until the Agent shall have received such directions, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. In no event, however, shall the Agent be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement and the Security Instruments or applicable law. Section 11.08 Resignation or Removal of Agent. Subject to the appointment and acceptance of a successor Agent as provided below, the Agent may resign at any time by giving notice thereof to the Lenders and the Borrower, and the Agent may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon the acceptance of such appointment hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Article XI and Section 12.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Agent. ARTICLE XII MISCELLANEOUS Section 12.01 Waiver. No failure on the part of the Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. Section 12.02 Notices. All notices and other communications provided for herein and in the other Loan Documents (including, without limitation, any modifications of, or waivers or consents under, this Agreement or the other Loan Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the intended recipient at the "ADDRESS FOR NOTICES" specified below its name on the signature pages hereof or in the Loan Documents, except that all such notices and communications sent to Agent shall also be sent to Agency Syndications as follows: AGENCY SYNDICATION: Wells Fargo Bank, as Agent Sean Lewis Syndications Specialist CREDIT AGREEMENT 76 1740 Broadway, MAC C7300-034 Denver, Colorado 80274 or, as to any party, at such other address as shall be designated by such party in a notice to each other party. STANDARD PAYMENT INSTRUCTIONS: Pay To: Wells Fargo Bank, N.A. ABA: 121000248 Address: San Francisco, California Acct. No.: 4100052596 Payee Name: Syndic/WFBCORP/Mission Resources Ref: Mission Resources with a facsimile copy to: Wells Fargo Bank Attention: Sean Lewis (303) 863-5533 If you are a foreign bank, please forward a copy of the IRS form W-8BEN. Except as otherwise provided in this Agreement or in the other Loan Documents, all such communications shall be deemed to have been duly given when transmitted, if transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next succeeding Business Day) by telex or telecopier and evidence or confirmation of receipt is obtained, or personally delivered or, in the case of a mailed notice, three (3) Business Days after the date deposited in the mails, postage prepaid, in each case given or addressed as aforesaid. Section 12.03 Payment of Expenses, Indemnities, etc. (a) The Borrower agrees: (i) whether or not the transactions hereby contemplated are consummated, to pay all reasonable expenses of the Agent in the administration (both before and after the execution hereof and including advice of counsel as to the rights and duties of the Agent and the Lenders with respect thereto) of, and in connection with the negotiation, syndication, investigation, preparation, execution and delivery of, recording or filing of, preservation of rights under, enforcement of, and refinancing, renegotiation or restructuring of, the Loan Documents and any amendment, waiver or consent relating thereto (including, without limitation, travel, photocopy, mailing, courier, telephone and other similar expenses of the Agent, the cost of environmental audits, surveys and appraisals at reasonable intervals, the reasonable fees and disbursements of counsel and other outside consultants for the Agent and, in the case of enforcement, the reasonable fees and disbursements of counsel for the Agent and any of the Lenders); and promptly reimburse the Agent for all amounts expended, advanced or incurred by the Agent CREDIT AGREEMENT 77 or the Lenders to satisfy any obligation of the Borrower under this Agreement or any Security Instrument, including without limitation, all costs and expenses of foreclosure; (ii) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY OF THE LOANS OR LETTERS OF CREDIT, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER OF CREDIT, OR (VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER IMPROPER PRESENTATION OF THE MANUALLY EXECUTED DRAFT(S) AND CERTIFICATION(S), (VIII) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND (iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, CREDIT AGREEMENT 78 THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS; PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(A)(III) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE). (b) No Indemnified Party may settle any claim to be indemnified without the consent of the indemnitor, such consent not to be unreasonably withheld; provided, that the indemnitor may not reasonably withhold consent to any settlement that an Indemnified Party proposes, if the indemnitor does not have the financial ability to pay all its obligations outstanding and asserted against the indemnitor at that time, including the maximum potential claims against the Indemnified Party to be indemnified pursuant to this Section 12.03. (c) In the case of any indemnification hereunder, the Agent or Lender, as appropriate shall give notice to the Borrower of any such claim or demand being made against the Indemnified Party and the Borrower shall have the non-exclusive right to join in the defense against any such claim or demand provided that if the Borrower provides a defense, the Indemnified Party shall bear its own cost of defense unless there is a conflict between the Borrower and such Indemnified Party. (d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY. CREDIT AGREEMENT 79 (e) The Borrower's obligations under this Section 12.03 shall survive any termination of this Agreement and the payment of the Notes and shall continue thereafter in full force and effect. (f) The Borrower shall pay any amounts due under this Section 12.03 within thirty (30) days of the receipt by the Borrower of notice of the amount due. Section 12.04 Amendments, Etc. Any provision of this Agreement or any Security Instrument may be amended, modified or waived with the Borrower's and the Majority Lenders' prior written consent; provided that (i) no amendment, modification or waiver which extends the final maturity of the Loans, increases the Aggregate Maximum Revolving Credit Amounts, modifies the Borrowing Base, forgives the principal amount of any Obligations outstanding under this Agreement, releases any guarantor of any Obligations or releases all or substantially all of the collateral, reduces the interest rate applicable to the Loans or the fees payable to the Lenders generally, affects Section 2.03(a), this Section 12.04 or Section 12.06(a) or modifies the definition of "MAJORITY LENDERS" shall be effective without consent of all Lenders; (ii) no amendment, modification or waiver which increases the Maximum Revolving Credit Amount or the Revolving Credit Commitment of any Lender shall be effective without the consent of such Lender; and (iii) no amendment, modification or waiver which modifies the rights, duties or obligations of the Agent shall be effective without the consent of the Agent. Section 12.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 12.06 Assignments and Participations. (a) The Borrower may not assign its rights or obligations hereunder or under the Notes or any Letters of Credit without the prior consent of all of the Lenders and the Agent. (b) Any Lender may, upon the written consent of the Agent and, if no Event of Default has occurred and is continuing, the Borrower (which consent will not be unreasonably withheld), assign to one or more assignees all or a portion of its rights and obligations under this Agreement pursuant to an Assignment Agreement substantially in the form of EXHIBIT E (an "ASSIGNMENT"); provided, however, that (i) any such assignment shall be in the amount of at least $5,000,000.00 or such lesser amount to which the Borrower has consented and (ii) the assignee or assignor shall pay to the Agent a processing and recordation fee of $3,000.00 for each assignment. Any such assignment will become effective upon the execution and delivery to the Agent of the Assignment and the consent of the Agent. Promptly after receipt of an executed Assignment, the Agent shall send to the Borrower a copy of such executed Assignment. Upon receipt of such executed Assignment, the Borrower, will, at its own expense, execute and deliver new Notes to the assignor and/or assignee, as appropriate, in accordance with their respective interests as they appear. Upon the effectiveness of any assignment pursuant to this Section 12.06(b), the assignee will become a "LENDER", if not already a "LENDER," for all purposes of this Agreement and the Security Instruments. The assignor shall be CREDIT AGREEMENT 80 relieved of its obligations hereunder to the extent of such assignment (and if the assigning Lender no longer holds any rights or obligations under this Agreement, such assigning Lender shall cease to be a "LENDER" hereunder except that its rights under Sections 4.06, 5.01, 5.05 and 12.03 shall not be affected). The Agent will prepare on the last Business Day of each month during which an assignment has become effective pursuant to this Section 12.06(b), a new ANNEX I giving effect to all such assignments effected during such month, and will promptly provide the same to the Borrower and each of the Lenders. (c) Each Lender may transfer, grant or assign participations in all or any part of such Lender's interests hereunder pursuant to this Section 12.06(c) to any Person, provided that: (i) such Lender shall remain a "LENDER" for all purposes of this Agreement and the transferee of such participation shall not constitute a "LENDER" hereunder; and (ii) no participant under any such participation shall have rights to approve any amendment to or waiver of any of the Loan Documents except to the extent such amendment or waiver would (x) forgive any principal owing on any Obligations or extend the final maturity of the Loans, (y) reduce the interest rate (other than as a result of waiving the applicability of any post-default increases in interest rates) or fees applicable to any of the Revolving Credit Commitments or Loans or Letters of Credit in which such participant is participating, or postpone the payment of any thereof, or (z) release any guarantor of the Obligations or release all or substantially all of the collateral (except as provided in the Loan Documents) supporting any of the Revolving Credit Commitments or Loans or Letters of Credit in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the Security Instruments (the participant's rights against the granting Lender in respect of such participation to be those set forth in the agreement with such Lender creating such participation), and all amounts payable by the Borrower hereunder shall be determined as if such Lender had not sold such participation, provided that such participant shall be entitled to receive additional amounts under Article V on the same basis as if it were a Lender and be indemnified under Section 12.03 as if it were a Lender. In addition, each agreement creating any participation must include an agreement by the participant to be bound by the provisions of Section 12.15. (d) The Lenders may furnish any information concerning the Borrower in the possession of the Lenders from time to time to assignees and participants (including prospective assignees and participants); provided that, such Persons agree to be bound by the provisions of Section 12.15. (e) Notwithstanding anything in this Section 12.06 to the contrary, any Lender may assign and pledge its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve System and/or such Federal Reserve Bank. No such assignment and/or pledge shall release the assigning and/or pledging Lender from its obligations hereunder. CREDIT AGREEMENT 81 (f) Notwithstanding any other provisions of this Section 12.06, no transfer or assignment of the interests or obligations of any Lender or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Borrower to file a registration statement with the SEC or to qualify the Loans under the "BLUE SKY" laws of any state. (g) Borrower acknowledges that the Initial Reserve Report will be furnished to all the Lenders and such Lenders must be satisfied, in each such Lenders' sole discretion, that the Borrowing Base is valued at $50,000,000.00, and if not, such Lenders will not become one of the syndicated Lenders; and in connection therewith, if such other Lenders need additional engineering information, Borrower will provide same. Section 12.07 Invalidity. In the event that any one or more of the provisions contained in any of the Loan Documents or the Letters of Credit, the Letter of Credit Agreements shall, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of the Notes, this Agreement or any other Loan Document. Section 12.08 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 12.09 References; Use of Word "INCLUDING". The words "HEREIN," "HEREOF", "HEREUNDER" and other words of similar import when used in this Agreement refer to this Agreement as a whole, and not to any particular article, section or subsection. Any reference herein to a Section or Article shall be deemed to refer to the applicable Section or Article of this Agreement unless otherwise stated herein. Any reference herein to an exhibit, schedule, or other attachment shall be deemed to refer to the applicable exhibit, schedule, or other attachment attached hereto unless otherwise stated herein. The word "INCLUDING", "INCLUDES" and words of similar import means "INCLUDING, WITHOUT LIMITATION". Section 12.10 Survival. The obligations of the parties under Section 4.06, Article V, and Sections 11.05, 12.03, and 12.15 shall survive the repayment of the Loans and the termination of the Revolving Credit Commitments. To the extent that any payments on the Obligations or proceeds of any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Agent's and the Lenders' Liens, security interests, rights, powers and remedies under this Agreement and each Security Instrument shall continue in full force and effect. In such event, each Security Instrument shall be automatically reinstated and the Borrower shall take such action as may be reasonably requested by the Agent and the Lenders to effect such reinstatement. Section 12.11 Captions. Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. CREDIT AGREEMENT 82 Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED. CH. 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR ANY LENDER FROM OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING JURISDICTION. (c) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER OR ITS PROPERTIES IN ANY OTHER JURISDICTION. (d) THE BORROWER, THE AGENT AND EACH LENDER HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENT AND FOR ANY COUNTERCLAIM CREDIT AGREEMENT 83 THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE, 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 (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13. Section 12.14 Interest. It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America and the State of Texas or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the full term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue CREDIT AGREEMENT 84 to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.14. To the extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of determining the Highest Lawful Rate, such Lender elects to determine the applicable rate ceiling under such Chapter by the indicated weekly rate ceiling from time to time in effect. Section 12.15 Confidentiality. In the event that the Borrower provides to the Agent or the Lenders written confidential information belonging to the Borrower, if the Borrower shall denominate such information in writing as "CONFIDENTIAL", the Agent and the Lenders shall thereafter maintain such information in confidence in accordance with the standards of care and diligence that each utilizes in maintaining its own confidential information. This obligation of confidence shall not apply to such portions of the information which (i) are in the public domain, (ii) hereafter become part of the public domain without the Agent or the Lenders breaching their obligation of confidence to the Borrower, (iii) are previously known by the Agent or the Lenders from some source other than the Borrower, (iv) are hereafter developed by the Agent or the Lenders without using the Borrower's information, (v) are hereafter obtained by or available to the Agent or the Lenders from a third party who owes no obligation of confidence to the Borrower with respect to such information or through any other means other than through disclosure by the Borrower, (vi) are disclosed with the Borrower's consent, (vii) must be disclosed either pursuant to any Governmental Requirement or to Persons regulating the activities of the Agent or the Lenders, or (viii) as may be required by law or regulation or order of any Governmental Authority in any judicial, arbitration or governmental proceeding. Further, the Agent or a Lender may disclose any such information to any other Lender, any independent petroleum engineers or consultants, any independent certified public accountants, any legal counsel employed by such Person in connection with this Agreement or any Security Instrument, including without limitation, the enforcement or exercise of all rights and remedies thereunder, or any assignee or participant (including prospective assignees and participants) in the Loans; provided, however, that the Agent or the Lenders shall receive a confidentiality agreement from the Person to whom such information is disclosed such that said Person shall have the same obligation to maintain the confidentiality of such information as is imposed upon the Agent or the Lenders hereunder. Notwithstanding anything to the contrary provided herein, this obligation of confidence shall cease three (3) years from the date the information was furnished, unless the Borrower requests in writing at least thirty (30) days prior to the expiration of such three year period, to maintain the confidentiality of such information for an additional three year period. The Borrower waives any and all other rights it may have to confidentiality as against the Agent and the Lenders arising by contract, agreement, statute or law except as expressly stated in this Section 12.15. Section 12.16 Effectiveness. This Agreement shall be effective on the Closing Date (the "EFFECTIVE DATE"). Section 12.17 Exculpation Provisions. Each of the parties hereto specifically agrees that it has a duty to read this Agreement and the Security Instruments and agrees that it is charged with notice and knowledge of CREDIT AGREEMENT 85 the terms of this Agreement and the Security Instruments; that it has in fact read this Agreement and is fully informed and has full notice and knowledge of the terms, conditions and effects of this Agreement; that it has been represented by independent legal counsel of its choice throughout the negotiations preceding its execution of this Agreement and the Security Instruments; and has received the advice of its attorney in entering into this Agreement and the Security Instruments; and that it recognizes that certain of the terms of this Agreement and the Security Instruments result in one party assuming the liability inherent in some aspects of the transaction and relieving the other party of its responsibility for such liability. Each party hereto agrees and covenants that it will not contest the validity or enforceability of any exculpatory provision of this Agreement and the Security Instruments on the basis that the party had no notice or knowledge of such provision or that the provision is not "CONSPICUOUS." Section 12.18 Arbitration. (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Texas selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the "RULES"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or any similar applicable state law. (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This CREDIT AGREEMENT 86 exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in Sections (i), (ii) and (iii) of this paragraph. (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided, however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Texas with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Texas and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than twenty (20) days before the hearing date and within one hundred and eighty (180) days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available. (f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding. (g) Payment of Arbitration Costs and Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding. CREDIT AGREEMENT 87 (h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within one hundred and eighty (180) days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties. [SIGNATURES BEGIN ON NEXT PAGE] CREDIT AGREEMENT 88 The parties hereto have caused this Agreement to be duly executed as of the day and year first above written. BORROWER: MISSION RESOURCES CORPORATION By: /s/ Richard W. Piacenti ---------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer Address for Notices: 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 642-2916 Telephone No.: (713) 495-3000 Attention: Chief Financial Officer With copy to: Porter & Hedges, L.L.P. 700 Louisiana Street, Suite 3500 Houston, Texas 77002 Attention: William W. Wiggins, Jr. CREDIT AGREEMENT Signature Page LENDER AND AGENT: WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Jeff Dalton ---------------------------------------- Jeff Dalton Vice President Lending Office for Base Rate and LIBOR Loans: Wells Fargo Bank, National Association 1000 Louisiana, Third Floor Houston, Texas 77002 Telecopier No.: (713) 739-1081 Telephone No.: (713) 319-1368 Attention: Jeff Dalton Address for Notices: Wells Fargo Bank, National Association 1000 Louisiana, Third Floor Houston, Texas 77002 Telecopier No.: (713) 739-1081 Telephone No.: (713) 319-1368 Attention: Jeff Dalton [With copy to:] Winstead Sechrest & Minick P.C. 910 Travis, Suite 2400 Houston, Texas 77002 Attention: Benny C. Pace CREDIT AGREEMENT Signature Page ANNEX I LIST OF PERCENTAGE SHARES AND MAXIMUM REVOLVING CREDIT AMOUNTS
MAXIMUM REVOLVING NAME OF LENDER PERCENTAGE SHARE CREDIT AMOUNT - --------------------------------------------------------------------------------------------------------- Wells Fargo Bank, National Association ______% $ 50,000,000.00 - --------------------------------------------------------------------------------------------------------- _________________________________ ______% $______________ - --------------------------------------------------------------------------------------------------------- _________________________________ ______% $______________ - --------------------------------------------------------------------------------------------------------- TOTAL 100% $ 50,000,000.00
Annex I-1 EXHIBIT A FORM OF REVOLVING CREDIT NOTE $_____________________________ ___________________, 200__ FOR VALUE RECEIVED, MISSION RESOURCES CORPORATION, a ____________ corporation (the "BORROWER") hereby promises to pay to the order of ______________________________ (the "LENDER"), at the Principal Office of WELLS FARGO BANK, NATIONAL ASSOCIATION (the "AGENT"), at 1000 Louisiana, Third Floor, Houston, Texas 77002, the principal sum of _____________ Dollars ($____________) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the Lender to the Borrower under the Credit Agreement, as hereinafter defined), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement. The date, amount, Type, interest rate, Interest Period and maturity of each Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Revolving Credit Note, endorsed by the Lender on the schedules attached hereto or any continuation thereof. This Revolving Credit Note is one of the Notes referred to in the Credit Agreement dated as of April 8, 2004, among the Borrower, the Lenders which are or become parties thereto (including the Lender) and the Agent (as the same may be amended or supplemented from time to time, the "Credit Agreement"), and evidences Loans made by the Lender thereunder. Capitalized terms used in this Revolving Credit Note have the respective meanings assigned to them in the Credit Agreement. This Revolving Credit Note is issued pursuant to the Credit Agreement and is entitled to the benefits provided for in the Credit Agreement and the Security Instruments. The Credit Agreement provides for the acceleration of the maturity of this Revolving Credit Note upon the occurrence of certain events, for prepayments of Loans upon the terms and conditions specified therein and other provisions relevant to this Revolving Credit Note. THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. MISSION RESOURCES CORPORATION By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Exhibit A-1 EXHIBIT B FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST _____________________, 200__ MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER"), pursuant to the Credit Agreement dated as of April 8, 2004, among the Borrower, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent for the lenders (the "LENDERS") which are or become parties thereto, and such Lenders (together with all amendments, modifications, supplements, and/or restatements thereto, the "CREDIT AGREEMENT"), hereby makes the requests indicated below (unless otherwise defined herein, capitalized terms are defined in the Credit Agreement): $_________________________ under the Revolving Credit Note Requested funding date: _________________________. [ ] 1. Revolving Credit Loans: (a) Aggregate amount of new Revolving Credit Loans to be $__________; (b) Requested funding date is _________________, 200__; (c) $_________________ of such borrowings are to be LIBOR Loans; $_________________ of such borrowings are to be Base Rate Loans; and (d) Length of Interest Period for LIBOR Loans is: __________________. [ ] 2. LIBOR Loan Continuation for LIBOR Loans maturing on _________: (a) Aggregate amount to be continued as LIBOR Loans is $___________; (b) Aggregate amount to be converted to Base Rate Loans is $_________; (c) Length of Interest Period for continued LIBOR Loans is __________. [ ] 3. Conversion of Outstanding Base Rate Loans to LIBOR Loans: Convert $__________________ of the outstanding Base Rate Loans to LIBOR Loans on ____________________ with an Interest Period of ______________________. [ ] 4. Conversion of outstanding LIBOR Loans to Base Rate Loans: Convert $__________________ of the outstanding LIBOR Loans with Interest Period maturing on ______________________, 200_, to Base Rate Loans. Exhibit B-1 The undersigned certifies that he is the _____________________ of the Borrower, and that as such he is authorized to execute this certificate on behalf of the Borrower. The undersigned further certifies, represents and warrants on behalf of the Borrower that the Borrower is entitled to receive the requested borrowing, continuation or conversion under the terms and conditions of the Credit Agreement. MISSION RESOURCES CORPORATION By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Exhibit B-2 EXHIBIT C FORM OF COMPLIANCE CERTIFICATE The undersigned hereby certifies that he is the ________________ of MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER") and that as such he is authorized to execute this certificate on behalf of the Borrower. With reference to the Credit Agreement dated as of April 8, 2004, among the Borrower, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent for the lenders (the "LENDERS") which are or become a party thereto, and such Lenders (together with all amendments, modifications, supplements and/or restatements thereto being the "CREDIT AGREEMENT"), the undersigned represents and warrants as follows (each capitalized term used herein having the same meaning given to it in the Credit Agreement unless otherwise specified): (a) The representations and warranties of the Borrower contained in Article VII of the Credit Agreement and in the Security Instruments and otherwise made in writing by or on behalf of the Borrower pursuant to the Credit Agreement and the Security Instruments were true and correct when made, and are repeated at and as of the time of delivery hereof and are true and correct at and as of the time of delivery hereof, except to the extent any such representations and warranties are expressly limited to an earlier date or the Majority Lenders have expressly consented in writing to the contrary. (b) The Borrower has performed and complied with all agreements and conditions contained in the Credit Agreement and in the Security Instruments required to be performed or complied with by it prior to or at the time of delivery hereof. (c) Neither the Borrower nor any Subsidiary has incurred any material liabilities, direct or contingent, since December 31, 2003, except those set forth in SCHEDULE 9.01 to the Credit Agreement and except those allowed by the terms of the Credit Agreement or consented to by the Majority Lenders in writing. (d) Since December 31, 2003, no change has occurred, either in any case or in the aggregate, in the condition, financial or otherwise, of the Borrower or any Subsidiary which would have a Material Adverse Effect. (e) There exists, and, after giving effect to the loan or loans with respect to which this certificate is being delivered, will exist, no Default under the Credit Agreement or any event or circumstance which constitutes, or with notice or lapse of time (or both) would constitute, an event of default under any loan or credit agreement, indenture, deed of trust, security agreement or other agreement or instrument evidencing or pertaining to any Debt of the Borrower or any Subsidiary, or under any material agreement or instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary is bound. (f) The financial statements furnished to the Agent with this certificate fairly present the consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries as at the end of, and for, the [fiscal quarter] [fiscal year] Exhibit C-1 ending _________________________ and such financial statements have been prepared in accordance with the accounting procedures specified in the Credit Agreement. (g) Attached hereto are the detailed computations necessary to determine whether the Borrower and its Consolidated Subsidiaries are in compliance with Sections 9.13, 9.14, 9.15 and 9.16 of the Credit Agreement as of the end of the [fiscal quarter] [fiscal year] ending _________________________. EXECUTED AND DELIVERED this ____ day of ______________. MISSION RESOURCES CORPORATION By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Exhibit C-2 EXHIBIT D SECURITY INSTRUMENTS 1. Amended, Restated and Consolidated Mortgages, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement of Borrower (Texas) (Louisiana) 2. Amended, Restated and Consolidated Mortgages, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement of Mission E&P (Texas) (Louisiana) 3. Amended and Restated Mortgages, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement of Mission E&P (New Mexico) 4. Security Agreement of Borrower covering all assets of Borrower 5. UCC-1 Financing Statement (Delaware Secretary of State) relating to all assets of Borrower 6. Third Party Security Agreement of Mission E&P covering all assets of Mission E&P 7. UCC-1 Financing Statement (Texas Secretary of State) relating to all assets of Mission E&P 8. Pledge Agreement by Borrower 9. Third Party Pledge Agreement by Black Hawk 10. UCC-1 Financing Statement (Delaware Secretary of State) relating to Third Party Pledge Agreement by Black Hawk 11. Third Party Pledge Agreement by MSSN Holdings 12. UCC-1 Financing Statement (Delaware Secretary of State) relating to Third Party Pledge Agreement by Mission Holdings 13. Guaranty - Mission E&P 14. Guaranty - Black Hawk 15. Guaranty - MSSN Holdings 16. Contribution and Indemnification Agreement between Borrower, Black Hawk, Mission E&P, and MSSN Holdings. 17. Intercreditor Agreement by Agent, Borrower, Guarantors and Guggenheim Corporate Funding, LLC Exhibit D-1 18. Letters in Lieu 19. Section 26.02 Notice Exhibit D-2 EXHIBIT E FORM OF ASSIGNMENT AGREEMENT ASSIGNMENT AGREEMENT ("AGREEMENT") dated as of ________________, 200___ between _____________________________________________________ (the "ASSIGNOR") and __________________________ (the "ASSIGNEE"). RECITALS A. The Assignor is a party to the Credit Agreement dated as of April 8, 2004 (as amended, modified, supplemented and/or restated and in effect from time to time, the "CREDIT AGREEMENT") among MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER"), each of the lenders that is or becomes a party thereto as provided in Section 12.06 of the Credit Agreement (individually, together with its successors and assigns, a "LENDER", and collectively, together with their successors and assigns, the "LENDERS"), and Wells Fargo Bank, National Association, in its individual capacity, ("WELLS FARGO") and as agent for the Lenders (in such capacity, together with its successors in such capacity, the "AGENT"). B. The Assignor proposes to sell, assign and transfer to the Assignee, and the Assignee proposes to purchase and assume from the Assignor, a portion of the Assignor's Revolving Credit Commitment, outstanding Loans and its Percentage Share of the outstanding LC Exposure, all on the terms and conditions of this Agreement. C. In consideration of the foregoing and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. All capitalized terms used but not defined herein have the respective meanings given to such terms in the Credit Agreement. Section 1.02 Other Definitions. As used herein, the following terms have the following respective meanings: "ASSIGNED INTEREST" shall mean all of Assignor's (in its capacity as a "LENDER") rights and obligations under the Credit Agreement and the other Security Instruments in respect of the Revolving Credit Commitment of the Assignor relating to the Assignor's Maximum Revolving Credit Amount in the principal amount equal to $____________________ and the principal amount of the Loans outstanding thereunder, currently in the amount of $_________________ (the "LOAN BALANCE"), plus the interest and fees which will accrue from and after the Assignment Date. "ASSIGNMENT DATE" shall mean _____________________, 200__. Exhibit E-1 ARTICLE II SALE AND ASSIGNMENT Section 2.01 Sale and Assignment. On the terms and conditions set forth herein, effective on and as of the Assignment Date, the Assignor hereby sells, assigns and transfers to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the right, title and interest of the Assignor in and to, and all of the obligations of the Assignor in respect of, the Assigned Interest. Such sale, assignment and transfer is without recourse and, except as expressly provided in this Agreement, without representation or warranty. Section 2.02 Assumption of Obligations. The Assignee agrees with the Assignor (for the express benefit of the Assignor and the Borrower) that the Assignee will, from and after the Assignment Date, perform all of the obligations of the Assignor in respect of the Assigned Interest. From and after the Assignment Date: (a) the Assignor shall be released from the Assignor's obligations in respect of the Assigned Interest, and (b) the Assignee shall be entitled to all of the Assignor's rights, powers and privileges under the Credit Agreement and the other Security Instruments in respect of the Assigned Interest. Section 2.03 Consent by Agent. By executing this Agreement as provided below, in accordance with Section 12.06(b) of the Credit Agreement, the Agent hereby acknowledges notice of the transactions contemplated by this Agreement and consents to such transactions. ARTICLE III PAYMENTS Section 3.01 Payments. As consideration for the sale, assignment and transfer contemplated by Section 2.01 hereof, the Assignee shall, on the Assignment Date, assume Assignor's obligations in respect of the Assigned Interest and pay to the Assignor an amount equal to the Loan Balance, if any. An amount equal to all accrued and unpaid interest and fees shall be paid to the Assignor as provided in Section 3.02 (iii) below. Except as otherwise provided in this Agreement, all payments hereunder shall be made in Dollars and in immediately available funds, without setoff, deduction or counterclaim. Section 3.02 Allocation of Payments. The Assignor and the Assignee agree that (i) the Assignor shall be entitled to any payments of principal with respect to the Assigned Interest made prior to the Assignment Date, together with any interest and fees with respect to the Assigned Interest accrued prior to the Assignment Date, (ii) the Assignee shall be entitled to any payments of principal with respect to the Assigned Interest made from and after the Assignment Date, together with any and all interest and fees with respect to the Assigned Interest accruing from and after the Assignment Date, and (iii) the Agent is authorized and instructed to allocate payments received by it for account of the Assignor and the Assignee as provided in the foregoing clauses. Each party hereto agrees that it will hold any interest, fees or other amounts that it may receive to which the other party hereto shall be entitled pursuant to the preceding sentence for account of such other party and pay, in like money and funds, any such amounts that it may receive to such other party promptly upon receipt. Exhibit E-2 Section 3.03 Delivery of Notes. Promptly following the receipt by the Assignor of the consideration required to be paid under Section 3.01 hereof, the Assignor shall, in the manner contemplated by Section 12.06(b) of the Credit Agreement, (i) deliver to the Agent (or its counsel) the Notes held by the Assignor and (ii) notify the Agent to request that the Borrower execute and deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the Assignee, dated the date of this Agreement in respective principal amounts equal to the respective Revolving Credit Commitments of the Assignor (if appropriate) and the Assignee after giving effect to the sale, assignment and transfer contemplated hereby. Section 3.04 Further Assurances. The Assignor and the Assignee hereby agree to execute and deliver such other instruments, and take such other actions, as either party may reasonably request in connection with the transactions contemplated by this Agreement. ARTICLE IV CONDITIONS PRECEDENT Section 4.01 Conditions Precedent. The effectiveness of the sale, assignment and transfer contemplated hereby is subject to the satisfaction of each of the following conditions precedent: (a) the execution and delivery of this Agreement by the Assignor and the Assignee; (b) the receipt by the Assignor of the payment required to be made by the Assignee under Section 3.01 hereof; and (c) the acknowledgment and consent by the Agent contemplated by Section 2.03 hereof. ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.01 Representations and Warranties of the Assignor. The Assignor represents and warrants to the Assignee as follows: (a) it has all requisite power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill its obligations under, and consummate the transactions contemplated by, this Agreement; (b) the execution, delivery and compliance with the terms hereof by Assignor and the delivery of all instruments required to be delivered by it hereunder do not and will not violate any Governmental Requirement applicable to it; (c) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against it in accordance with its terms; Exhibit E-3 (d) all approvals and authorizations of, all filings with and all actions by any Governmental Authority necessary for the validity or enforceability of its obligations under this Agreement have been obtained; (e) the Assignor has good title to, and is the sole legal and beneficial owner of, the Assigned Interest, free and clear of all Liens, claims, participations or other charges of any nature whatsoever; and (f) the transactions contemplated by this Agreement are commercial banking transactions entered into in the ordinary course of the banking business of the Assignor. Section 5.02 Disclaimer. Except as expressly provided in Section 5.01 hereof, the Assignor does not make any representation or warranty, nor shall it have any responsibility to the Assignee, with respect to the accuracy of any recitals, statements, representations or warranties contained in the Credit Agreement or in any certificate or other document referred to or provided for in, or received by any Lender under, the Credit Agreement, or for the value, validity, effectiveness, genuineness, execution, effectiveness, legality, enforceability or sufficiency of the Credit Agreement, the Notes or any other document referred to or provided for therein or for any failure by the Borrower or any other Person (other than Assignor) to perform any of its obligations thereunder prior or for the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower or the Subsidiaries or any other obligor or guarantor, or any other matter relating to the Credit Agreement or any other Security Instrument or any extension of credit thereunder. Section 5.03 Representations and Warranties of the Assignee. The Assignee represents and warrants to the Assignor as follows: (a) it has all requisite power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill its obligations under, and consummate the transactions contemplated by, this Agreement; (b) the execution, delivery and compliance with the terms hereof by Assignee and the delivery of all instruments required to be delivered by it hereunder do not and will not violate any Governmental Requirement applicable to it; (c) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against it in accordance with its terms; (d) all approvals and authorizations of, all filings with and all actions by any Governmental Authority necessary for the validity or enforceability of its obligations under this Agreement have been obtained; (e) the Assignee has fully reviewed the terms of the Credit Agreement and the other Security Instruments and has independently and without reliance upon the Assignor, and based on such information as the Assignee has deemed appropriate, made its own credit analysis and decision to enter into this Agreement; Exhibit E-4 (f) the Assignee hereby affirms that the representations contained in Section 4.06(d)(i) and (ii) of the Credit Agreement are true and accurate as to it and, to the extent applicable, the Assignee has contemporaneously herewith delivered to the Agent and the Borrower such certifications as are required thereby to avoid the withholding taxes referred to in Section 4.06; and (g) the transactions contemplated by this Agreement are commercial banking transactions entered into in the ordinary course of the banking business of the Assignee. ARTICLE VI MISCELLANEOUS Section 6.01 Notices. All notices and other communications provided for herein (including, without limitation, any modifications of, or waivers, requests or consents under, this Agreement) shall be given or made in writing (including, without limitation, by telex or telecopy) to the intended recipient at its "ADDRESS FOR NOTICES" specified below its name on the signature pages hereof or, as to either party, at such other address as shall be designated by such party in a notice to the other party. Section 6.02 Amendment, Modification or Waiver. No provision of this Agreement may be amended, modified or waived except by an instrument in writing signed by the Assignor and the Assignee, and consented to by the Agent. Section 6.03 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. The representations and warranties made herein by the Assignee are also made for the benefit of the Agent and the Borrower, and the Assignee agrees that the Agent and the Borrower are entitled to rely upon such representations and warranties. Section 6.04 Assignments. Neither party hereto may assign any of its rights or obligations hereunder except in accordance with the terms of the Credit Agreement. Section 6.05 Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 6.06 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be identical and all of which, taken together, shall constitute one and the same instrument, and each of the parties hereto may execute this Agreement by signing any such counterpart. Section 6.07 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Texas. Section 6.08 Expenses. Each party hereto shall bear its own expenses in connection with the execution, delivery and performance of this Agreement. Exhibit E-5 Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed and delivered as of the date first above written. ASSIGNOR: By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Address for Notices: ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ ____________________________________________ Exhibit E-6 ASSIGNEE: By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Address for Notices: ____________________________________________ ____________________________________________ ____________________________________________ Telecopier No.: ____________________________ Telephone No.: _____________________________ Attention: _________________________________ ACKNOWLEDGED AND CONSENTED TO: ______________________________, as Agent By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Exhibit E-7 EXHIBIT F FORM OF LETTER OF CREDIT APPLICATION Exhibit F-1 EXHIBIT G FORM OF JOINDER AGREEMENT This JOINDER AGREEMENT (the "Agreement"), dated as of ______________, 20___, is by and between __________________, a __________________ (the "Subsidiary Guarantor"), and Wells Fargo Bank, National Association, in its capacity as Agent under that certain Credit Agreement dated April 8, 2004, by and among Mission Resources Corporation, a Delaware corporation, and Wells Fargo Bank, National Association, as Agent (the "Agent") (as same may be amended, modified, extended or restated from time to time, the "Credit Agreement"). Capitalized terms not otherwise defined in this Agreement shall have the meanings given them in the Credit Agreement. The Subsidiary Guarantor is a subsidiary of ________________, and, consequently, _________________ is required by Section 8.13 of the Credit Agreement to cause the Subsidiary Guarantor to become a "Guarantor" thereunder. Accordingly, the Subsidiary Guarantor hereby agrees as follows with the Agent, for the benefit of the Lenders: 1. The Subsidiary Guarantor hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the Subsidiary Guarantor will be deemed to be a Subsidiary of Borrower and a Guarantor for all purposes of the Credit Agreement and the other Loan Documents, and shall have all of the obligations of a Guarantor thereunder. The Subsidiary Guarantor hereby (i) jointly and severally together with the other Guarantors, guarantees to each Lender, the Agent and the Issuing Bank as provided in the Credit Agreement the prompt payment and performance of the Obligations of the Borrower in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) strictly in accordance with the terms thereof and agrees that if any of such Obligations are not paid or performed in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise), the Subsidiary Guarantor will, jointly and severally together with the other Guarantors, promptly pay and perform the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Obligations of the Borrower, the same will be promptly paid in full when due (whether at extended maturity, as a mandatory prepayment, by acceleration, as a mandatory cash collateralization or otherwise) in accordance with the terms of such extension or renewal. 2. The Subsidiary Guarantor contemporaneously herewith shall deliver on its behalf to Agent a fully executed Guaranty Agreement in the form of Exhibit H to the Credit Agreement. Additionally, the Subsidiary Guarantor hereby grants to Agent, for the benefit of the Lenders, as security for the Obligations, a continuing, perfected, first priority lien and security interest in, and a right of set off against any and all of the Subsidiary Guarantor's assets, contemporaneously executing any and all documents required by Agent in form and substance satisfactory to Agent. 3. The Subsidiary Guarantor acknowledges and confirms that it has received a copy of the Credit Agreement and the schedules and exhibits thereto and each Security Instrument and Exhibit G-1 the schedules and exhibits thereto. The information on the schedules to the Credit Agreement and the Security Instruments are hereby amended to provide the information shown on the attached Schedule A. 4. The Borrower confirms that all of its obligations under the Credit Agreement are, and upon the Subsidiary Guarantor becoming a Guarantor, shall continue to be, in full force and effect. The parties hereto confirm and agree that immediately upon the Subsidiary Guarantor becoming a Guarantor the term "Obligations" as used in the Credit Agreement, shall include all obligations of such Subsidiary Guarantor under the Subsidiary Guarantor's Guaranty Agreement and under each other Security Instrument. 5. Each of the Borrower and the Subsidiary Guarantor agrees that at any time and from time to time, upon the written request of the Agent, it will execute and deliver such further documents and do such further acts and things as the Agent may request in order to effect the purposes of this Agreement. 6. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute one contract. 7. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Texas, without reference to laws that would require the application of the laws of a jurisdiction other than the State of Texas. IN WITNESS WHEREOF, each of the Borrower and the Subsidiary Guarantor has caused this Agreement to be duly executed by its authorized officer, and the Agent, for the benefit of the Lenders, has caused the same to be accepted by its authorized officer, as of the day and year first above written. BORROWER: MISSION RESOURCES CORPORATION, a Delaware corporation By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Exhibit G-2 SUBSIDIARY GUARANTOR: [SUBSIDIARY GUARANTOR], a __________________________ By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Acknowledged and accepted: WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Exhibit G-3 EXHIBIT H FORM OF GUARANTEE AGREEMENT TO: WELLS FARGO BANK, NATIONAL ASSOCIATION 1. GUARANTY; DEFINITIONS. In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to MISSION RESOURCES CORPORATION, a Delaware corporation (whether one or more, "Borrower") by WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent for itself and the Lenders party to the hereinafter defined Credit Agreement ("Bank"), and for other valuable consideration, the undersigned ________________________, a ____________ [corporation/limited partnership/limited liability company] (whether one or more, "Guarantor"), jointly and severally and unconditionally guarantees and promises to pay to Bank, or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrower to Bank. The term "Indebtedness" means all "Obligations" as defined in that certain Credit Agreement dated as of April __, 2004, between Borrower, the Lenders party thereto and Wells Fargo Bank, National Association as Agent for itself and such Lenders, (as same may be amended, modified, supplemented and/or restated, the "Credit Agreement"), together with any and all renewals, extensions, rearrangements, modifications, restatements, amendments, and/or increases to any of the aforesaid Indebtedness described in this Agreement. All terms not otherwise defined herein shall have the meaning given to them in the Credit Agreement or Obligations described in the Credit Agreement. This Guaranty is a guaranty of payment and not collection. 2. SUCCESSIVE TRANSACTIONS; OBLIGATION UNDER OTHER GUARANTIES. This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of the Borrower to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of the Borrower or Guarantor, or any other guarantor or other party now or hereafter liable or obligated in any manner as guarantor or otherwise to pay or perform all or any part of the Indebtedness (hereinafter such other party being called an "Other Liable Party") or any other event or proceeding affecting the Borrower, Guarantor, or any Other Liable Party. 3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder are joint and several and independent of the obligations of Borrower, and a separate action or actions may be brought and prosecuted against Guarantor whether action is brought against the Borrower or any other person, or whether the Borrower or any other person is joined in any such action or actions. Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other Exhibit H-1 action contemplated by Guarantor. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to Guarantor's liability hereunder. The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid. The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto. 4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank (either before or after revocation hereof) without notice to or demand on Guarantor, and without affecting Guarantor's liability hereunder, from time to time to: (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any Other Liable Party or guarantor of the Indebtedness or Other Liable Party, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from the Borrower to any Indebtedness of the Borrower to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise. Bank may without notice assign this Guaranty in whole or in part. Upon Bank's request, Guarantor agrees to provide to Bank copies of Guarantor's financial statements. 5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Bank that: (a) Guarantor is a ______________, duly organized and legally existing under the laws of the State of ___________________; (b) Guarantor is duly authorized and empowered to execute, deliver and perform this Guaranty; (c) Guarantor's Guaranty may reasonably be expected to benefit, directly or indirectly, Guarantor; (d) this Guaranty constitutes the valid and binding obligation of Guarantor, enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy and insolvency laws and general principles of equity; (e) this Guaranty will not violate any provisions of organizational documents or any other contract, agreement, law, regulation, order, injunction, judgment, decree or writ to which Guarantor is subject; (f) Guarantor's execution, delivery and performance of this Guaranty does not require the consent or approval of any other person or entity which has not already been obtained; (g) this Guaranty is executed at Borrower' request; (h) Guarantor shall not, without Bank's prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor's assets except as may be permitted Exhibit H-2 under Section 9.17 of the Credit Agreement or to the extent Section 9.17 of the Credit Agreement is not applicable, other than in the ordinary course of business unless expressly permitted by the Credit Agreement; (i) Bank has made no representation to Guarantor as to the creditworthiness of the Borrower; and (j) Guarantor has established adequate means of obtaining from the Borrower on a continuing basis financial and other information pertaining to Borrower's financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor's risks hereunder, and Guarantor further agrees that Bank shall have no obligation to disclose to Guarantor any information or material about the Borrower which is acquired by Bank in any manner. 6. GUARANTOR'S WAIVERS. (a) Guarantor waives any right to require Bank to: (i) proceed against the Borrower or any other person; (ii) marshal assets or proceed against or exhaust any security held from the Borrower or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from the Borrower or any other person, or otherwise comply with the provisions of Section 9.615 of the Texas Business and Commerce Code or the comparable provisions of the Delaware, Louisiana or New Mexico Uniform Commercial Code; (iv) take any action or pursue any other remedy in Bank's power; or (v) make any presentment or demand for performance, or give any notices of any kind, including without limitation, any notice of nonperformance, protest, notice of protest, notice of dishonor, notice of intention to accelerate or notice of acceleration hereunder or in connection with any obligations or evidences of Indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness. (b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of the Borrower or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of the Borrower or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of the Borrower which is a corporation, partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application by the Borrower of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrower to, or intended or understood by, Bank or Guarantor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of the Borrower or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against the Borrower; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including, without limitation, the renewal, extension, acceleration or other change in time for payment of, or other change in the Exhibit H-3 terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that Bank give any notice of acceptance of this Guaranty. Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against the Borrower or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank. Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's rights to proceed against the Borrower for reimbursement, or (B) any loss of rights Guarantor may suffer by reason of any rights, powers or remedies of the Borrower in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrower's Indebtedness, whether by operation of law or otherwise, including any rights Guarantor may have to a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness. (c) By signing this Guaranty, Guarantor waives (i) each and every right to which it may be entitled by virtue of any suretyship law, including without limitation, any rights arising pursuant to Rule 31 of the Texas Rules of Civil Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and Chapter 34 of the Texas Business and Commerce Code, as the same may be amended from time to time, and (ii) without limiting any of the waivers set forth herein, any other fact or event that, in the absence of this provision, would or might constitute or afford a legal or equitable discharge or release of or defense to Guarantor. 7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S POSSESSION. In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor. No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing. 8. SUBORDINATION. Any Indebtedness of the Borrower now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrower to Bank. Such Indebtedness of Borrower to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrower to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty. Any notes or other instruments now or hereafter evidencing such Indebtedness of the Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Exhibit H-4 Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder. 9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank hereunder are cumulative. No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing. 10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank's rights, powers or remedies and/or the collection of any amounts which become due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Guarantor or any other person or entity. 11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of their interests or rights hereunder without Bank's prior written consent. Guarantor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Borrower to Bank and any obligations with respect thereto, including this Guaranty in accordance with the terms of the Credit Agreement. In connection therewith, and subject to the confidentiality provisions of the Credit Agreement, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Borrower, Guarantor or otherwise. Guarantor further agree that Bank may disclose such documents and information to Borrower. 12. AMENDMENT. This Guaranty may be amended or modified only in writing signed by Bank and Guarantor. 13. APPLICATION OF SINGULAR AND PLURAL. In all cases where there is but a single Borrower, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word "Borrower" and the word "Guarantor" respectively shall mean all or any one or more of them as the context requires. Exhibit H-5 14. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth herein is made with Guarantor's full knowledge of its significance and consequences, and that under the circumstances, the waivers are reasonable and not contrary to public policy or law. If any waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty. 15. GOVERNING LAW. This Guaranty shall be governed by and construed in accordance with the laws of the state of Texas, without reference to laws that would require the application of the laws of a jurisdiction other than the State of Texas. 16. ARBITRATION. (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related loan and security documents which are the subject of this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Texas selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or any similar applicable state law. (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a Exhibit H-6 receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph. (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Texas with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Texas and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date and within 180 days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available. (f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Guaranty shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding. (g) Payment of Arbitration Costs and Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding. Exhibit H-7 (h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties. 17. NOTICES. All notices, requests, demands and other communications provided for herein shall be given or made by telex, telecopy, courier or U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the intended recipient at the "ADDRESS FOR NOTICES" specified below its name on the signature pages hereof, except that all such notices and communications sent to Secured Party shall also be sent to Agency Syndications, Wells Fargo Bank, 1740 Broadway, Denver, Colorado 80274, C7300-034, Attention: Edward M. Welty or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted, if transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next succeeding Business Day) by telex or telecopier and evidence or confirmation of receipt is obtained, or personally delivered or, in the case of a mailed notice, three (3) Business Days after the date deposited in the mails by certified mail, return receipt requested, postage prepaid, in each case given or addressed as aforesaid. NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS. IN WITNESS WHEREOF, the undersigned Guarantor have executed this Guaranty as of ______________, 20__. ____________________________________________ By: ________________________________________ Name: ______________________________________ Title: _____________________________________ Exhibit H-8 ADDRESS: ____________________________________________ ____________________________________________ ____________________________________________ Attention: _________________________________ Telephone: _________________________________ Facsimile: _________________________________ SECURED PARTY: WELLS FARGO BANK, NATIONAL ASSOCIATION Address for Notices: Wells Fargo Bank, National Association 1000 Louisiana, Third Floor Houston, Texas 77002 Telecopier No.: (713) 739-1081 Telephone No.: (713) 319-1368 Attention: Jeff Dalton [With copy to:] Winstead Sechrest & Minick P.C. 910 Travis, Suite 2400 Houston, Texas 77002 Attention: Benny C. Pace Exhibit H-9 SCHEDULE 2.08
Date Determined or Redetermined Amount - --------------- ------ Closing Date $50,000,000.00
Schedule 2.08 EX-10.2 7 h14499aexv10w2.txt TERM LOAN AGREEMENT DATED APRIL 8, 2004 EXHIBIT 10.2 TERM LOAN AGREEMENT DATED AS OF APRIL 8, 2004 AMONG MISSION RESOURCES CORPORATION AS BORROWER, GUGGENHEIM CORPORATE FUNDING, LLC AS COLLATERAL AGENT, AND THE LENDERS SIGNATORY HERETO TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS........................................... 1 Section 1.01 Terms Defined Above................................................. 1 Section 1.02 Certain Defined Terms............................................... 1 Section 1.03 Accounting Terms and Determinations................................. 14 ARTICLE II COMMITMENTS ................................................................. 14 Section 2.01 Loans............................................................... 14 Section 2.02 Fees................................................................ 15 Section 2.03 Several Obligations................................................. 15 Section 2.04 Notes............................................................... 15 Section 2.05 Prepayments......................................................... 15 Section 2.06 Lending Offices..................................................... 16 ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST......................................... 16 Section 3.01 Repayment of Loans.................................................. 16 Section 3.02 Interest............................................................ 16 Section 3.03 Intercreditor Agreement............................................. 17 ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.............................. 17 Section 4.01 Payments............................................................ 17 Section 4.02 Pro Rata Treatment.................................................. 17 Section 4.03 Computations........................................................ 17 Section 4.04 Non-receipt of Funds by the Collateral Agent........................ 18 Section 4.05 Set-off, Sharing of Payments, Etc................................... 18 Section 4.06 Taxes............................................................... 19 Section 4.07 Disposition of Proceeds............................................. 21 ARTICLE V [RESERVED] .................................................................. 22 ARTICLE VI CONDITIONS PRECEDENT ........................................................ 22 Section 6.01 Conditions to Funding............................................... 22 Section 6.02 Conditions to the Lenders' Obligations.............................. 25 Section 6.03 Conditions Precedent for the Benefit of Lenders..................... 25 Section 6.04 No Waiver........................................................... 26 ARTICLE VII REPRESENTATIONS AND WARRANTIES .............................................. 26 Section 7.01 Corporate Existence................................................. 26 Section 7.02 Financial Condition................................................. 26 Section 7.03 Litigation.......................................................... 26 Section 7.04 No Breach........................................................... 27 Section 7.05 Authority........................................................... 27 Section 7.06 Approvals........................................................... 27 Section 7.07 Use of Loans........................................................ 27
Section 7.08 ERISA............................................................... 28 Section 7.09 Taxes............................................................... 29 Section 7.10 Titles, etc......................................................... 29 Section 7.11 No Material Misstatements........................................... 29 Section 7.12 Investment Company Act.............................................. 30 Section 7.13 Public Utility Holding Company Act.................................. 30 Section 7.14 Subsidiaries........................................................ 30 Section 7.15 Location of Business and Offices.................................... 30 Section 7.16 Defaults............................................................ 30 Section 7.17 Environmental Matters............................................... 30 Section 7.18 Compliance with the Law............................................. 31 Section 7.19 Insurance........................................................... 32 Section 7.20 [RESERVED].......................................................... 32 Section 7.21 Hedging Agreements.................................................. 32 Section 7.22 Restriction on Liens................................................ 33 Section 7.23 Material Agreements................................................. 33 Section 7.24 Gas Imbalances...................................................... 33 Section 7.25 Partnership Agreement............................................... 34 Section 7.26 [RESERVED].......................................................... 34 Section 7.27 Solvency............................................................ 34 Section 7.28 Name Changes........................................................ 34 Section 7.29 Taxpayer Identification Number...................................... 34 Section 7.30 State of Formation.................................................. 34 ARTICLE VIII AFFIRMATIVE COVENANTS ....................................................... 34 Section 8.01 Reporting Requirements.............................................. 34 Section 8.02 Litigation.......................................................... 36 Section 8.03 Maintenance, Etc.................................................... 37 Section 8.04 Environmental Matters............................................... 38 Section 8.05 Further Assurances.................................................. 39 Section 8.06 Performance of Obligations.......................................... 39 Section 8.07 Engineering Reports................................................. 39 Section 8.08 Title Information and Mortgage Coverage............................. 40 Section 8.09 Additional Collateral............................................... 41 Section 8.10 Cash Collateral Account Agreement................................... 42 Section 8.11 [RESERVED].......................................................... 42 Section 8.12 ERISA Information and Compliance.................................... 42 Section 8.13 Joinder and Guaranty Agreements..................................... 42 ARTICLE IX NEGATIVE COVENANTS .......................................................... 43 Section 9.01 Debt................................................................ 43 Section 9.02 Liens............................................................... 44 Section 9.03 Investments, Loans and Advances..................................... 44 Section 9.04 Dividends, Distributions and Redemptions............................ 45 Section 9.05 Sales and Leasebacks................................................ 45 Section 9.06 Nature of Business.................................................. 46 Section 9.07 Limitation on Leases................................................ 46
Section 9.08 Mergers, Etc........................................................ 46 Section 9.09 Proceeds of Notes................................................... 46 Section 9.10 ERISA Compliance.................................................... 46 Section 9.11 Sale or Discount of Receivables..................................... 48 Section 9.12 [RESERVED].......................................................... 48 Section 9.13 Current Ratio....................................................... 48 Section 9.14 Tangible Net Worth.................................................. 48 Section 9.15 Leverage Ratio...................................................... 48 Section 9.16 Interest Coverage Ratio............................................. 48 Section 9.17 Sale of Mortgaged Properties........................................ 49 Section 9.18 [RESERVED].......................................................... 49 Section 9.19 Environmental Matters............................................... 49 Section 9.20 Transactions with Affiliates........................................ 49 Section 9.21 Subsidiaries........................................................ 49 Section 9.22 Negative Pledge Agreements.......................................... 49 Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments.................... 50 Section 9.24 Ownership of Subsidiaries........................................... 50 Section 9.25 Change in Borrower's or Subsidiary's Name or State of Formation..... 50 Section 9.26 Material Agreements................................................. 50 Section 9.27 Partnership Agreement............................................... 51 ARTICLE X EVENTS OF DEFAULT; REMEDIES ................................................. 51 Section 10.01 Events of Default................................................... 51 Section 10.02 Remedies............................................................ 53 ARTICLE XI THE COLLATERAL AGENT ........................................................ 53 Section 11.01 Appointment, Powers and Immunities.................................. 53 Section 11.02 Reliance by Collateral Agent........................................ 54 Section 11.03 Defaults............................................................ 54 Section 11.04 Rights as a Lender.................................................. 54 SECTION 11.05 INDEMNIFICATION..................................................... 55 Section 11.06 Non-Reliance on Collateral Agent and other Lenders.................. 55 Section 11.07 Action by Collateral Agent.......................................... 56 Section 11.08 Resignation or Removal of Collateral Agent.......................... 56 ARTICLE XII MISCELLANEOUS ............................................................... 56 Section 12.01 Waiver.............................................................. 56 Section 12.02 Notices............................................................. 57 Section 12.03 Payment of Expenses, Indemnities, etc............................... 57 Section 12.04 Amendments, Etc..................................................... 59 Section 12.05 Successors and Assigns.............................................. 60 Section 12.06 Assignments......................................................... 60 Section 12.07 Invalidity.......................................................... 60 Section 12.08 Counterparts........................................................ 61 Section 12.09 References; Use of Word "Including"................................. 61 Section 12.10 Survival............................................................ 61
Section 12.11 Captions............................................................ 61 SECTION 12.12 NO ORAL AGREEMENTS.................................................. 61 SECTION 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION........................... 61 Section 12.14 Interest............................................................ 62 Section 12.15 Confidentiality..................................................... 63 Section 12.16 Effectiveness....................................................... 64 Section 12.17 Exculpation Provisions.............................................. 64 Section 12.18 Arbitration......................................................... 64
ANNEXES, EXHIBITS AND SCHEDULES Annex I - List of Term Loan Amounts Exhibit A - Form of Note Exhibit B - Form of Compliance Certificate Exhibit C - List of Security Instruments Exhibit D - Form of Assignment Agreement Exhibit E - Form of Joinder Agreement Exhibit F - Form of Guaranty Schedule 7.02 - Liabilities Schedule 7.03 - Litigation Schedule 7.09 - Taxes Schedule 7.10 - Titles, etc. Schedule 7.14 - Subsidiaries and Partnerships Schedule 7.17 - Environmental Matters Schedule 7.19 - Insurance Schedule 7.21 - Hedging Agreements Schedule 7.23 - Material Agreements Schedule 7.24 - Gas Imbalances Schedule 9.01 - Debt Schedule 9.02 - Liens Schedule 9.03 - Investments, Loans and Advances THIS TERM LOAN AGREEMENT dated as of April 8, 2004 is among MISSION RESOURCES CORPORATION, a corporation formed under the laws of the State of Delaware (the "BORROWER"); the subsidiaries of the Borrower, each of which is or becomes a signatory hereto as provided in Section 8.13; each of the lenders that is a signatory hereto or which becomes a signatory hereto as provided in Section 12.06 (individually, together with its successors and assigns, a "LENDER" and, collectively, the "LENDERS"); and Guggenheim Corporate Funding, LLC, (in its individual capacity, "GUGGENHEIM"), as collateral agent for the Lenders (in such capacity, together with its successors in such capacity, the "COLLATERAL AGENT"). R E C I T A L S A. The Borrower has requested that the Lenders provide one or more term loans to the Borrower; and B. The Lenders have agreed to make such term loans subject to the terms and conditions of this Agreement. C. In consideration of the mutual covenants and agreements herein contained and of the loans and commitments hereinafter referred to, the parties hereto agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS Section 1.01 Terms Defined Above. As used in this Agreement, the terms "COLLATERAL AGENT," "BORROWER," "LENDER," "LENDERS," and "GUGGENHEIM" shall have the meanings indicated above. Section 1.02 Certain Defined Terms. As used herein, the following terms shall have the following meanings (all terms defined in this Article I or in other provisions of this Agreement in the singular to have equivalent meanings when used in the plural and vice versa): "AFFILIATE" of any Person shall mean (i) any Person directly or indirectly controlled by, controlling or under common control with such first Person, (ii) any director or officer of such first Person or of any Person referred to in clause (i) above and (iii) if any Person in clause (i) above is an individual, any member of the immediate family (including parents, spouse and children) of such individual and any trust whose principal beneficiary is such individual or one or more members of such immediate family and any Person who is controlled by any such member or trust. For purposes of this definition, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person (other than as a limited partner of such other Person) will be deemed to "CONTROL" (including, with its correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") such corporation or other Person; provided that, the previous clause of this sentence notwithstanding, for purposes of this Agreement, Guggenheim and its Affiliates (excluding the Borrower and its Subsidiaries) shall be deemed not to be Affiliates of the Borrower. "AGREEMENT" shall mean this Term Loan Agreement, as the same may from time to time be amended or supplemented. "APPLICABLE LENDING OFFICE" shall mean, for each Lender, the lending office of such Lender (or an Affiliate of such Lender) designated for such Loan on the signature pages hereof or such other offices of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify to the Collateral Agent and the Borrower as the office by which its Loans are to be made and maintained. "ASSIGNMENT" shall have the meaning assigned such term in Section 12.06(b). "BLACK HAWK" shall mean Black Hawk Oil Company, a Delaware corporation "BUSINESS DAY" shall mean any day other than a day on which commercial banks are authorized or required to close in New York, New York, and if such day relates to a payment or prepayment of principal of or interest on, or the Interest Period for, a Loan or a notice by the Borrower with respect to any such payment, prepayment, or Interest Period, any day which is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "CASH COLLATERAL ACCOUNT AGREEMENT" shall mean that certain Cash Collateral Account Agreement among the Borrower, each of its Subsidiaries and the Collateral Agent in form and substance satisfactory to Collateral Agent and shall include a financing statement and all other documentation required, in form and substance satisfactory to Collateral Agent to cover and grant a perfected second priority security interest to the Collateral Agent in the cash collateral, and subject only to Liens or any other encumbrances satisfactory to Collateral Agent. "CLOSING DATE" shall mean April 8, 2004. "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute. "COMMITMENT" shall mean with respect to each Lender, the commitment of such Lender to make a Loan hereunder on the Effective Date, expressed as an amount representing the principal amount of the Loan to be made by such Lender hereunder. The amount of each Lender's Commitment is set forth on ANNEX I. The aggregate amount of the Lenders' Commitments is $25,000,000. "CONSOLIDATED NET INCOME" shall mean with respect to the Borrower and its Consolidated Subsidiaries, for any period, the aggregate of the net income (or loss) of the Borrower and its Consolidated Subsidiaries after allowances for taxes for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein) the following: (i) the net income of any Person in which the Borrower or any Consolidated Subsidiary has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of the Borrower and its Consolidated Subsidiaries in accordance with GAAP), except to the extent of the amount of dividends or distributions actually paid in such period by such other Person to the Borrower or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but not loss) of any Consolidated Subsidiary to the extent that the declaration or 2 payment of dividends or similar distributions or transfers or loans by that Consolidated Subsidiary is not at the time permitted by operation of the terms of its charter or any agreement, instrument or Governmental Requirement applicable to such Consolidated Subsidiary, or is otherwise restricted or prohibited in each case determined in accordance with GAAP; (iii) any extraordinary gains or losses, including gains or losses attributable to Property sales not in the ordinary course of business; and (iv) the cumulative effect of a change in accounting principles and any gains or losses attributable to write-ups or write-downs of assets. "CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of a Person (whether now existing or hereafter created or acquired) the financial statements of which shall be (or should have been) consolidated with the financial statements of such Person in accordance with GAAP. Unless otherwise indicated, each reference to the term "Consolidated Subsidiary" shall mean a Subsidiary consolidated with the Borrower. "CREDIT FACILITY" shall mean the revolving loans and secured commitments under the Senior Credit Agreement. "CREDIT FACILITY AGENT" shall mean the administrative agent under the Senior Credit Agreement. "CURRENT ASSETS" shall have the meaning assigned such term in Section 9.13. "CURRENT LIABILITIES" shall have the meaning assigned such term in Section 9.13. "DEBT" shall mean, for any Person the sum of the following (without duplication): (i) all obligations of such Person for borrowed money or evidenced by bonds, debentures, notes or other similar instruments (including principal, interest, fees and charges); (ii) all obligations of such Person (whether contingent or otherwise) in respect of bankers' acceptances, letters of credit, surety or other bonds and similar instruments; (iii) all obligations of such Person to pay the deferred purchase price of Property or services (other than for borrowed money); (iv) all obligations under leases which shall have been, or should have been, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable (whether contingent or otherwise); (v) all Debt (as described in the other clauses of this definition) and other obligations of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person; (vi) all Debt (as described in the other clauses of this definition) and other obligations of others guaranteed by such Person or in which such Person otherwise assures a creditor against loss with respect to the Debt or obligations of others; (vii) all obligations or undertakings of such Person to maintain or cause to be maintained the financial position or covenants of others or to purchase the Debt or Property (if the obligation to purchase Property is incurred to assure a creditor against loss) of others; (viii) obligations to deliver goods or services including Hydrocarbons in consideration of advance payments, except as permitted by Section 9.23 and disclosed by Section 8.07(c); (ix) obligations to pay for goods or services whether or not such goods or services are actually received or utilized by such Person; (x) any capital stock or other ownership interest of such Person in which such Person has a mandatory obligation to redeem such stock or other ownership interest prior to the Final Maturity Date; (xi) any Debt of a Special Entity for which such Person is liable either by agreement or because of a Governmental Requirement; (xii) the undischarged balance of any production payment 3 created by such Person or for the creation of which such Person directly or indirectly received payment; and (xiii) all net obligations of such Person under Hedging Agreements excluding Hedging Agreements with Credit Facility Agent or any lender under the Senior Credit Agreement. "DEFAULT" shall mean an Event of Default or an event which with notice or lapse of time or both would become an Event of Default. "DOLLARS" and "$" shall mean lawful money of the United States of America. "EBITDA" shall mean, for any period, the sum of Consolidated Net Income for such period plus the following charges to the extent deducted from Consolidated Net Income in such period: interest, income taxes (including franchise taxes calculated with respect to income), depreciation, depletion and amortization and any other non-cash charges and non-cash revenues and after eliminating extraordinary items. For the quarter ending June 30, 2004, September 30, 2004 and December 31, 2004, EBITDA shall be calculated by annualizing EBITDA for the period beginning on April 1, 2004; e.g., for the quarter ending June 30, 2004, the calculation for said quarter of 2004 will be multiplied by four, for the two quarters ending September 30, 2004, the calculation for said two quarters will be multiplied by two, and for the three quarters ending December 31, 2004, the calculation for said three quarters of 2004 will be multiplied by one and one-third. Thereafter, EBITDA shall be calculated on a rolling four quarter basis. In addition, for any applicable period during which an acquisition or disposition permitted by this Agreement is consummated, EBITDA shall be determined on a pro forma basis (with such calculation to be consistent with the comparable calculation made pursuant to the Senior Credit Agreement and reasonably acceptable to the Collateral Agent) as if such acquisition or disposition were consummated on the first day of such applicable period. "EFFECTIVE DATE" shall have the meaning assigned such term in Section 12.16. "ENGINEERING REPORTS" shall mean the reports required by Section 8.07 and such other reports, data and supplemental information as may from time to time be reasonably requested by the Collateral Agent or any Lender. "ENVIRONMENTAL LAWS" shall mean any and all applicable Governmental Requirements pertaining to health or the environment in effect in any and all jurisdictions in which the Borrower or any Subsidiary is conducting or at any time has conducted business, or where any Property of the Borrower or any Subsidiary is located, including without limitation, OPA, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection laws. The term "oil" shall have the meaning specified in OPA, the terms "hazardous substance" and "release" (or "threatened release") have the meanings specified in CERCLA, and the terms "solid waste" and "disposal" (or "disposed") have the meanings specified in RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is amended so as to broaden the 4 meaning of any term defined thereby, such broader meaning shall apply subsequent to the effective date of such amendment and (ii) to the extent the laws of the state in which any Property of the Borrower or any Subsidiary is located establish a meaning for "oil," "hazardous substance," "release," "solid waste" or "disposal" which is broader than that specified in either OPA, CERCLA or RCRA, such broader meaning shall apply. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "ERISA AFFILIATE" shall mean each trade or business (whether or not incorporated) which together with the Borrower or any Subsidiary would be deemed to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code. "ERISA EVENT" shall mean (i) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan. "EVENT OF DEFAULT" shall have the meaning assigned such term in Section 10.01. "EXCEPTED LIENS" shall mean: (i) Liens for taxes, assessments or other governmental charges or levies not yet due, which remain payable without penalty, or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained; (ii) Liens in connection with workmen's compensation, unemployment insurance or other social security, old age pension or public liability obligations not yet due or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP; (iii) operators', non-operators', vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of Oil and Gas Properties or statutory landlord's liens, each of which is in respect of obligations that have not been outstanding more than ninety (90) days or which are being contested in good faith by appropriate proceedings and for which adequate reserves have been maintained in accordance with GAAP; (iv) any Liens reserved in leases, joint operating agreements, farmout agreements and other similar agreements for rent or royalties and for compliance with the terms of such agreements or leases in the case of leasehold estates, to the extent that any such Lien referred to in this clause does not materially impair the use of the Property covered by such Lien for the purposes for which such Property is held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (v) encumbrances (other than to secure the payment of borrowed money or the deferred purchase price of Property or services), easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any rights of way or other Property of the Borrower or any Subsidiary for the purpose of roads, pipelines, transmission lines, transportation lines, 5 distribution lines for the removal of gas, oil, coal or other minerals or timber, and other like purposes, or for the joint or common use of real estate, rights of way, facilities and equipment, and defects, irregularities, zoning restrictions and deficiencies in title of any rights of way or other Property which in the aggregate do not materially impair the use of such rights of way or other Property for the purposes of which such rights of way and other Property are held by the Borrower or any Subsidiary or materially impair the value of such Property subject thereto; (vi) deposits of cash or securities to secure the performance of bids, trade contracts, leases, statutory obligations and other obligations of a like nature incurred in the ordinary course of business; (vii) Liens permitted by the Security Instruments and (viii) Liens given to secure obligations under the Senior Credit Agreement. "EXISTING SENIOR SUBORDINATED UNSECURED NOTES" shall mean the 10 -7/8% Senior Subordinated Notes due 2007, Series C, issued by the Borrower and outstanding in the aggregate principal amount of $87,426,000.00. "FEE LETTER" shall mean that certain letter agreement between Guggenheim and the Borrower dated March 29, 2004, concerning certain fees in connection with this Agreement and any agreements or instruments executed in connection therewith, as the same may be amended or replaced from time to time. "FINAL MATURITY DATE" shall mean the earlier to occur of (i) the fourth anniversary of the Closing Date, (ii) the date that the Notes are prepaid in full pursuant to Section 2.05 and (iii) termination of this Agreement. "FINANCIAL STATEMENTS" shall mean the financial statement or statements of the Borrower and its Consolidated Subsidiaries described or referred to in Section 7.02. "FUNDING" shall mean the funding of the Loans upon satisfaction of the conditions set forth in Section 6.01. "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time. "GOVERNMENTAL AUTHORITY" shall include the country, the state, county, city and political subdivisions in which any Person or such Person's Property is located or which exercises valid jurisdiction over any such Person or such Person's Property, and any court, agency, department, commission, board, bureau or instrumentality of any of them including monetary authorities which exercises valid jurisdiction over any such Person or such Person's Property. Unless otherwise specified, all references to Governmental Authority herein shall mean a Governmental Authority having jurisdiction over, where applicable, the Borrower, its Subsidiaries or any of their Property or the Collateral Agent, any Lender, or any Applicable Lending Office. "GOVERNMENTAL REQUIREMENT" shall mean any applicable law, statute, code, ordinance, order, determination, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other directive or requirement (having the force of law), including, without limitation, Environmental Laws, energy regulations and occupational, safety and health standards or controls, of any Governmental Authority. 6 "GUARANTOR" shall mean, individually and collectively, (i) each and every Subsidiary of Borrower and all of their direct and indirect Subsidiaries existing as of the date hereof, and (ii) each and every Subsidiary and all of their direct and indirect Subsidiaries hereafter created, acquired or otherwise owned by Borrower, and shall include, without limitation, Black Hawk Oil Company, MSSN Holdings, and Mission E&P. "GUARANTY AGREEMENT" shall mean any agreement executed by any Guarantor in form and substance satisfactory to the Collateral Agent guarantying, unconditionally, payment of the Obligations, as the same may be amended, modified or supplemented from time to time. "HEDGING AGREEMENTS" shall mean any commodity, interest rate or currency swap, cap, floor, collar, forward agreement or other exchange or protection agreements or any option with respect to any such transaction. "HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the Notes or on any other Obligations under laws applicable to such Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "HYDROCARBON INTERESTS" shall mean all rights, titles, interests and estates now or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding royalty and royalty interests, net profit interests and production payment interests, including any reserved or residual interests of whatever nature. "HYDROCARBONS" shall mean oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all products refined or separated therefrom. "INDEMNIFIED PARTIES" shall have the meaning assigned such term in Section 12.03(a)(ii). "INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings (including any investigations, litigation or inquiries), claims, demands and causes of action made or threatened against a Person and, in connection therewith, all losses, liabilities, damages (including, without limitation, consequential damages) or reasonable costs and expenses of any kind or nature whatsoever incurred by such Person whether caused by the sole or concurrent negligence of such Person seeking indemnification. "INITIAL RESERVE REPORT" shall mean the report of Netherland Sewell & Associates, Inc., dated as of January 1, 2004, with respect to the Oil and Gas Properties of the Borrower, a copy of which has been delivered to the Collateral Agent. "INTERCREDITOR AGREEMENT" shall mean the intercreditor agreement of even date herewith by and among the Borrower, the Guarantors, Wells Fargo Bank, National Association, 7 in its capacity as agent and for each of the Senior Secured Creditors, the Collateral Agent and each of the Lenders. "INTEREST COVERAGE RATIO" shall have the meaning ascribed to such term in Section 9.16. "INTEREST PERIOD" shall mean, with respect to each Loan, the period commencing on and including the Effective Date or the numerically corresponding day in any month, as applicable, and ending on, but excluding, the numerically corresponding day in the immediately succeeding month. Notwithstanding the foregoing: (i) no Interest Period may end after the Final Maturity Date; (ii) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (iii) no Interest Period shall have a duration of less than one month. "LENDER TERMINATION DATE" shall have the meaning assigned to such term in Section 5.05(c). "LETTERS IN LIEU" shall mean each and every letter in lieu in form and substance reasonably satisfactory to Collateral Agent executed by the Borrower or any Subsidiary, as applicable, to each of the purchasers of the Hydrocarbons of the Borrower or any Subsidiary produced from the Borrower's and any of its Subsidiaries' Oil and Gas Properties. "LEVERAGE RATIO" shall mean, for any period, the ratio of Total Debt as of the last day of such period to EBITDA for such period. "LIBOR" shall mean, for each Interest Period for any Loan, the rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to the average of the offered quotations for 30-day LIBOR appearing on Telerate Page 3750 (or if such Telerate Page shall not be available, any successor or similar service as may be selected by Collateral Agent and Borrower) as of 11:00 a.m., New York, New York time (or, as soon thereafter as practicable) two (2) LIBOR Business Days prior to the first day of such Interest Period for deposits in Dollars having a term comparable to such Interest Period and in an amount comparable to the principal amount of the LIBOR borrowing to which such Interest Period relates. If none of such Telerate Page 3750 nor any successor or similar service is available, then "LIBOR" shall mean, with respect to any Interest Period for any applicable LIBOR borrowing, the rate of interest per annum, rounded upwards, if necessary, to the nearest 1/16th of 1%, quoted by Collateral Agent at or before 11:00 a.m., New York, New York time (or, as soon thereafter as practicable), TWO (2) LIBOR Business Days before the first day of such Interest Period, to be the arithmetic average of the prevailing rates per annum at the time of determination and in accordance with the then existing practice in the applicable market, for the offering to Collateral Agent by one or more prime banks selected by Collateral Agent in its sole discretion, in the London interbank market, of deposits in Dollars for delivery on the first day of such Interest Period and having a maturity equal (or as nearly equal as may be) to the length of such Interest Period and in an amount equal (or as nearly equal as may be) to the LIBOR borrowing to which such Interest Period relates. Each determination by Collateral Agent of LIBOR shall be conclusive and 8 binding, absent manifest error, and may be computed using any reasonable averaging and attribution method. "LIBOR RATE" shall mean, with respect to any Loan, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the Collateral Agent to be equal to (A) LIBOR for such Loan for the next succeeding Interest Period plus (B) 5.25%. "LIEN" shall mean any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and whether such obligation or claim is fixed or contingent, and including but not limited to (i) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes or (ii) production payments and the like payable out of Oil and Gas Properties except to the extent the reserves attachable thereto are deducted from the applicable Reserve Report. The term "LIEN" shall include reservations, exceptions, encroachments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement, or leases under a financing lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person in a transaction intended to create a financing. "LIMITED LIABILITY COMPANY AGREEMENT" shall mean the First Amended and Restated Limited Liability Company Agreement of Mission Holdings LLC, a Delaware Limited Liability Company, among its Members dated January 8, 2002. "LOAN COMMITMENT" shall mean, for any Lender, its obligation to make a Loan as provided in Section 2.01. "LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Fee Letter and the Security Instruments. "LOANS" shall mean the loans as provided for by Section 2.01. "LOCKBOX" shall mean the lockbox established pursuant to the Cash Collateral Account Agreement and subject to the Lockbox Agreement. "LOCKBOX AGREEMENT" shall mean that certain Lockbox Agreement between the Borrower, its Subsidiaries, and the Collateral Agent in form and substance satisfactory to Collateral Agent which shall grant a second priority security interest in the contents therein and shall include a financing statement in form and substance satisfactory to Collateral Agent covering the contents therein. "MAJORITY LENDERS" shall mean, at any time while Loans are outstanding, one or more Lenders holding at least a majority of the outstanding aggregate principal amount of the Loans. "MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect on (i) the assets, liabilities, financial condition, business, operations or affairs of the Borrower and its Subsidiaries 9 taken as a whole different from those reflected in the Financial Statements or from the facts represented or warranted in any Loan Document, or (ii) the ability of the Borrower and its Subsidiaries taken as a whole to carry out their business as at the Closing Date or as proposed as of the Closing Date to be conducted or meet their obligations under the Loan Documents on a timely basis. "MATERIAL AGREEMENTS" shall mean all agreements listed on SCHEDULE 7.23. "MISSION E&P" shall mean E&P Limited Partnership, a Texas limited partnership. "MORTGAGES" shall mean, individually and collectively, (i) each Amended and Restated Consolidated Mortgage, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement dated as of April 8, 2004, covering certain Borrower's and its Subsidiaries' Oil and Gas Properties in Texas and Louisiana, and (ii) each Amended and Restated Mortgage, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement dated as of April 8, 2004, covering certain of Mission E&P's Oil and Gas Properties in New Mexico together with any and all amendments, modifications, supplements and/or restatements thereof. "MORTGAGED PROPERTY" shall mean the Property owned by the Borrower and its Subsidiaries and which is subject to the Liens existing and to exist under the terms of the Security Instruments. "MSSN HOLDINGS" shall mean Mission Holdings LLC, a Delaware limited liability company. "MULTIEMPLOYER PLAN" shall mean a Plan defined as such in Section 3(37) or 4001(a)(3) of ERISA. "NOTES" shall mean the promissory note or notes (whether one or more) of the Borrower described in Section 2.04 and being in the form of EXHIBIT A. "NOTICE OF TERMINATION" shall have the meaning assigned such term in Section 5.05(a). "OBLIGATIONS" shall mean all indebtedness, obligations and liabilities of the Borrower or any Subsidiary to any of the Lenders, any of the Lenders' Affiliates or the Collateral Agent, individually or collectively, existing on the date of this Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising or incurred under any Hedging Agreement, under this Agreement or any of the other Loan Documents or in respect of any of the Loans made or reimbursement obligations incurred or any of the Notes or other instruments at any time evidencing any thereof, including interest accruing subsequent to the filing of a petition or other action concerning bankruptcy or other similar proceedings, overdrafts, or any other obligations incurred under this Agreement or any of the Security Agreements and all renewals, extensions, refinancings and replacements for the foregoing. "OIL AND GAS PROPERTIES" shall mean Hydrocarbon Interests; any interest of the Person owning such Hydrocarbon Interest in the Properties now or hereafter pooled or unitized with such Hydrocarbon Interests; all presently existing or future unitization, pooling agreements and 10 declarations of pooled units and the units created in connection therewith (including without limitation all units created under orders, regulations and rules of any Governmental Authority) which may affect all or any portion of the Hydrocarbon Interests; all operating agreements, contracts and other agreements which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and Properties in any manner appertaining, belonging, affixed or incidental to the Hydrocarbon Interests; and all Properties, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment or other personal property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil wells, gas wells, injection wells or other wells, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing. "OPA" shall mean the Oil Pollution Act of 1990. "OTHER TAXES" shall have the meaning assigned such term in Section 4.06(b). "PARTNERS" shall mean Black Hawk Oil Company and MSSN Holdings. "PARTNERSHIP AGREEMENT" shall mean the Agreement of Limited Partnership of Mission E&P Limited Partnership among the Partners dated as of December 4, 2001. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions. "PERMITTED TRANSFER" shall mean (i) the sale of Hydrocarbons in the ordinary course of business, (ii) the sale or transfer of equipment that is (A) obsolete, worn out, depleted or uneconomic and disposed of in the ordinary course of business, (B) no longer necessary for the business of the Borrower or such Guarantor or (C) contemporaneously replaced by equipment of at least comparable value and use, and (iii) the Transfer of any Oil and Gas Property having a zero or negative value in the most recent Reserve Report; and (iv) the Transfer of Oil and Gas Properties of the Borrower or any Guarantor; where the aggregate fair market value of such Oil and Gas Properties Transferred since the date hereof or, if one or more Redetermination Dates shall have occurred, since the last Redetermination Date is less than or equal to five percent (5%) of the present value discounted at ten percent (10%) of proved developed producing reserves as reflected in the most recent Reserve Report. 11 "PERSON" shall mean any individual, corporation, company, voluntary association, partnership, joint venture, trust, unincorporated organization or government or any agency, instrumentality or political subdivision thereof, or any other form of entity. "PLAN" shall mean any employee pension benefit plan, as defined in Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii) was at any time during the preceding six calendar years sponsored, maintained or contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate. "POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan or any other amount payable by the Borrower under this Agreement or any other Loan Document, a rate per annum for the period commencing on the date of occurrence of an Event of Default and ending on the earlier to occur of the last day of the Interest Period therefor or the date all Events of Default are cured or waived, four percent (4%) per annum above the interest rate for such Loan as provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate. "PROPERTY" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "REQUIRED PAYMENT" shall have the meaning assigned such term in Section 4.04. "RESERVE REPORT" shall mean a report, in form and substance satisfactory to the Collateral Agent, setting forth, as of each January 1 and July 1 (or in the event of an unscheduled redetermination, the effective date thereof); (i) the oil and gas reserves attributable to the Borrower's and its Subsidiaries' Oil and Gas Properties together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, based upon the pricing assumptions determined by the Collateral Agent at the time and (ii) such other information as the Collateral Agent may reasonably request. The term "Reserve Report" shall also include the information to be provided by the Borrower each year pursuant to Section 8.07(a). "RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief Executive Officer, the President or any Vice President of such Person and, with respect to financial matters, the term "Responsible Officer" shall include the Chief Financial Officer of such Person. Unless otherwise specified, all references to a Responsible Officer herein shall mean a Responsible Officer of the Borrower. "REVOLVING CREDIT COMMITMENT" shall mean, for any lender under the Senior Credit Agreement, its obligation to make Loans and participate in the issuance of Letters of Credit to the extent and on the terms set forth in the Senior Credit Agreement. "SEC" shall mean the Securities and Exchange Commission or any successor Governmental Authority. "SECURITY INSTRUMENTS" shall mean the agreements or instruments described or referred to in EXHIBIT C, and any and all other agreements or instruments now or hereafter executed and delivered by the Borrower or any other Person (other than participation or similar agreements 12 between any Lender and any other lender or creditor with respect to any Obligations pursuant to this Agreement) in connection with, or as security for the payment or performance of, the Notes, or this Agreement, as such agreements may be amended, supplemented or restated from time to time. "SENIOR CREDIT AGREEMENT" shall mean the Credit Agreement of even date herewith (as amended, restated or supplemented from time to time) among the Borrower, each of the lenders signatory thereto and Wells Fargo Bank, National Association, as agent for the lenders thereunder. "SENIOR SECURED LENDERS" shall mean each of the lenders that is a party to the Senior Credit Agreement. "SENIOR UNSECURED NOTES" shall mean the 97/8% Senior Notes due 2011 in the original principal amount of $130,000,000.00 issued by the Borrower pursuant to the Senior Unsecured Notes Indenture. "SENIOR UNSECURED NOTES INDENTURE" shall mean the Indenture to be dated on the closing date, between the Borrower and The Bank of New York, as Trustee. "SPECIAL ENTITY" shall mean any joint venture, limited liability company or partnership, general or limited partnership or any other type of partnership or company other than a corporation in which a Person or one or more of its other Subsidiaries is a member, owner, partner or joint venturer and owns, directly or indirectly, at least a majority of the equity of such entity or controls such entity, but excluding any tax partnerships that are not classified as partnerships under state law. For purposes of this definition, any Person which owns directly or indirectly an equity investment in another Person which allows the first Person to manage or elect managers who manage the normal activities of such second Person will be deemed to "control" such second Person (e.g., a sole general partner controls a limited partnership). "SUBSIDIARY" shall mean (i) any corporation or other legally formed entity of which at least a majority of the outstanding shares of stock or other ownership interest having by the terms thereof ordinary voting power to elect a majority of the board of directors or other governing body of such entity (irrespective of whether or not at the time stock or any other ownership interest of any other class or classes of such entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by another Person or one or more of such Person's Subsidiaries or by such Person and one or more of its Subsidiaries (and, with respect to the Borrower, shall include, without limitation, Black Hawk, Mission E&P, and MSSN Holdings) and (ii) any Special Entity. Unless otherwise indicated herein, each reference to the term "Subsidiary" shall mean a Subsidiary of the Borrower. "TANGIBLE NET WORTH" shall mean, as at any date, the sum of the following for the Borrower and its Consolidated Subsidiaries determined (without duplication) in accordance with GAAP: (i) the amount of preferred stock and common stock at par plus the amount of additional paid in capital of the Borrower, plus 13 (ii) the retained earnings (or, in the case of retained earnings deficit, minus the amount of such deficit), minus (iii) the sum of the following: cost of treasury shares and the book value of all assets of the Borrower and its Consolidated Subsidiaries which should be classified as intangibles (without duplication of deductions in respect of items already deducted in arriving at additional paid in capital and retained earnings) but in any event including as such intangibles the following: goodwill, research and development costs, trademarks, trade names, copyrights, patents and franchises, unamortized debt discount and expense, all reserves and any write-up in the book value of assets resulting from a revaluation thereof or resulting from any changes in GAAP subsequent to December 31, 2003. "TAXES" shall have the meaning assigned such term in Section 4.06(a). "TOTAL DEBT" shall mean, without duplication, the sum of: (i) all indebtedness of the Borrower and its Subsidiaries for borrowed money including, but not limited to, senior bank debt, senior notes, and subordinated debt; (ii) capital leases; (iii) issued and outstanding letters of credit; and (iv) contingent obligations for funded indebtedness of the types described in clauses (i), (ii) and (iii). "TRANSFER" shall mean any sale, assignment, farmout, conveyance or other transfer of any Mortgaged Property or any Oil and Gas Property, or any interest in any Mortgaged Property or any Oil and Gas Property (including, without limitation, any working interest, overriding royalty interest, production payment, net profits interest, royalty interest, or mineral fee interest) of the Borrower or any Guarantor. "WHOLLY-OWNED SUBSIDIARY" shall mean, as to any Person, any Subsidiary of which all of the outstanding shares of capital stock or other equity interests, on a fully-diluted basis, are owned by such Person or one or more of its Wholly-Owned Subsidiaries or by such Person and one or more of its Wholly-Owned Subsidiaries. Unless otherwise indicated, each reference to a "Wholly-Owned Subsidiary" shall mean a Wholly-Owned Subsidiary of the Borrower. Section 1.03 Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all determinations with respect to accounting matters hereunder shall be made, and all financial statements and certificates and reports as to financial matters required to be furnished to the Collateral Agent or the Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis consistent with the audited financial statements of the Borrower referred to in Section 7.02 (except for changes concurred with by the Borrower's independent public accountants). ARTICLE II COMMITMENTS Section 2.01 Loans. (a) Loans. Each Lender severally agrees, on the terms and conditions of this Agreement, to make a Loan to the Borrower on the Closing Date in a principal amount 14 equal to the amount of such Lender's Loan Commitment set forth opposite such Lender's name on Annex I; provided that the aggregate principal amount of all such Loans by all Lenders hereunder shall equal $25,000,000. (b) Notice. The Borrower shall deliver, not later than 11:00 a.m., New York time, on the date hereof written notice to each Lender and to the Collateral Agent, which shall be irrevocable, requesting that the Loan by such Lender be funded not later than 1:00 p.m., New York time, on the date hereof. (c) Funding. Not later than 1:00 p.m., New York time, on the Closing Date, each Lender shall make available in immediately available funds the amount of its Loan Commitment to the Collateral Agent, to an account which the Collateral Agent shall specify, for the account of the Borrower. The amounts so received by the Collateral Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by depositing the same, in immediately available funds, in an account of the Borrower, designated by the Borrower. Section 2.02 Fees. The Borrower shall pay to the Collateral Agent such fees as agreed in the Fee Letter. Section 2.03 Several Obligations. The failure of any Lender to make any Loan to be made by it on the Closing Date shall not relieve any other Lender of its obligation to make its Loan on such date, but no Lender shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender or to provide funds to be provided by such other Lender. Section 2.04 Notes. The Loan made by each Lender shall be evidenced by a single promissory note of the Borrower in substantially the form of EXHIBIT A, dated (i) the Closing Date or (ii) the effective date of an Assignment pursuant to Section 12.06(b), payable to the order of such Lender in a principal amount equal to the amount set forth opposite such Lender's name on ANNEX I hereto as originally in effect and otherwise duly completed and such substitute Notes as required by Section 12.06(b). The date, amount, interest rate and Interest Period of each Loan made by each Lender, and all payments made on account of the principal thereof, shall be recorded by such Lender on its books for its Note, and prior to any transfer may be endorsed by such Lender on the schedule attached to such Note or on any separate record maintained by such Lender. Failure to make any such notation or to attach a schedule shall not affect any Lender's or the Borrower's rights or obligations in respect of such Loans or affect the validity of such transfer by any Lender of its Note. Section 2.05 Prepayments. (a) Voluntary Prepayments. To the extent permitted under the Intercreditor Agreement, the Borrower may prepay the Loans in whole on any Business Day or in part on the last day of the Interest Period for the Loans, in each case upon not less than ten (10) Business Day's prior written notice to the Collateral Agent (which shall promptly notify the Lenders), which notice shall specify the prepayment date and the amount of the prepayment (which shall be an integral multiple of $1,000,000.00 or the remaining aggregate principal balance outstanding on the Notes) and shall be irrevocable and 15 effective only upon receipt by the Collateral Agent. Prepayments shall be made at the prices (expressed as percentages of the outstanding principal amount) set forth below, if prepaid during each successive 12-month period beginning on April 9 of each year indicated below:
PREPAYMENT YEAR PRICE - ------------------- ---------- 2004 102% 2005 101% 2006 and thereafter 100%
provided, however, that no prepayment shall be made prior to the date six months and one day after the Closing Date. Accrued and unpaid interest on the principal amount prepaid, and the prepayment price set forth in this Section 2.05, shall be paid on the prepayment date. Section 2.06 Lending Offices. The Loans made by each Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans. ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST Section 3.01 Repayment of Loans. (a) Loans. On the Final Maturity Date the Borrower shall repay the outstanding principal amount of the Notes. (b) Generally. The Borrower will pay to each Lender the principal payments required by this Section 3.01. Section 3.02 Interest. (a) Interest Rates. Except as otherwise provided in Section 3.02(b), the Borrower will pay to each Lender interest on the unpaid principal amount of each Loan made by such Lender for the period commencing on the Closing Date to, but excluding, the date such Loan shall be paid in full, at the LIBOR Rate, but in no event to exceed the Highest Lawful Rate. (b) Post-Default Rate. Notwithstanding the foregoing, the Borrower will pay to each Lender interest at the applicable Post-Default Rate on any principal of any Loan made by such Lender, and (to the fullest extent permitted by law) on any other amount payable by the Borrower hereunder, under any Loan Document or under any Note held by such Lender to or for account of such Lender, for the period commencing on the date of an Event of Default until the same is paid in full or all Events of Default are cured or waived. 16 (c) Due Dates. Accrued interest on each Loan shall be payable on the last day of each Interest Period, except that interest payable at the Post-Default Rate shall be payable from time to time on demand. Any accrued and unpaid interest on the Loans shall also be paid on the date of any prepayment thereof. (d) Determination of Rates. Promptly after the determination of any interest rate provided for herein or any change therein, the Collateral Agent shall notify the Lenders and the Borrower thereof. Each determination by the Collateral Agent of an interest rate or fee hereunder shall, except in cases of manifest error, be final, conclusive and binding on the parties. Section 3.03 Intercreditor Agreement. All terms of this Article III are subject to the terms of the Intercreditor Agreement. ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC. Section 4.01 Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrower under this Agreement and the Notes shall be made in Dollars, in immediately available funds, to the Lenders at such account as each of the Lenders shall have specified by notice to the Borrower and the Collateral Agent from time to time, not later than 11:00 a.m. New York, New York time on the date on which such payments shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). Such payments shall be made without (to the fullest extent permitted by applicable law and the terms of the Intercreditor Agreement) defense, set-off or counterclaim. Each payment received by the Collateral Agent under this Agreement or any Note for account of a Lender shall be paid promptly to such Lender in immediately available funds. Except as otherwise provided in the definition of "Interest Period", if the due date of any payment under this Agreement or any Note would otherwise fall on a day which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for any principal so extended for the period of such extension. Section 4.02 Pro Rata Treatment. Except to the extent otherwise provided herein each Lender agrees that: (i) each payment or prepayment of principal of Loans by the Borrower shall be made to the Lenders pro rata in accordance with the respective unpaid principal amount of the Loans held by the Lenders; and (ii) each payment of interest and premium, if any, on Loans by the Borrower shall be made to the Lenders pro rata in accordance with the amounts of interest due and payable to the respective Lenders. Section 4.03 Computations. Interest on Loans and fees shall be computed on the basis of a year of three hundred sixty (360) days and actual days elapsed (including the first day, but excluding the last day) occurring in the period for which such interest is payable, unless such calculation would exceed the Highest Lawful Rate, in which case interest shall be calculated on the per annum basis of a year of three hundred sixty-five (365) or three hundred sixty-six (366) days, as the case may be. 17 Section 4.04 Non-receipt of Funds by the Collateral Agent. Unless the Collateral Agent shall have been notified by a Lender prior to the Closing Date (such payment being herein called the "REQUIRED PAYMENT"), which notice shall be effective upon receipt, that it does not intend to make the Required Payment to the Collateral Agent, the Collateral Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the Borrower on such date and, if such Lender has not in fact made the Required Payment to the Collateral Agent, the Borrower shall, on demand, repay to the Collateral Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Collateral Agent until, but excluding, the date the Collateral Agent recovers such amount at a rate per annum that will be equal to the LIBOR Rate. Section 4.05 Set-off, Sharing of Payments, Etc. (a) The Borrower agrees that, in addition to (and without limitation of) any right of set-off, bankers' lien or counterclaim a Lender may otherwise have, each Lender shall have the right and be entitled, subject to the terms of the Intercreditor Agreement (after consultation with the Collateral Agent), at its option, to offset balances held by it or by any of its Affiliates for account of the Borrower or any Subsidiary at any of its offices, in Dollars or in any other currency, against any principal of or interest on such Lender's Loan, or any other amount payable to such Lender hereunder, which is not paid when due (regardless of whether such balances are then due to the Borrower), in which case it shall promptly notify the Borrower and the Collateral Agent thereof, provided that such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender shall obtain payment of any principal of or interest on any Loan made by it to the Borrower under this Agreement through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise, and, as a result of such payment, such Lender shall have received a greater percentage of the principal or interest of its Loan then due hereunder by the Borrower to such Lender than the percentage of their respective Loans received by any other Lenders, it shall promptly (i) notify the Collateral Agent and each other Lender thereof and (ii) make such adjustments as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such excess payment) pro rata in accordance with the unpaid principal and/or interest on the Loan held by each of the Lenders. To such end all the Lenders shall make appropriate adjustments among themselves if such payment is rescinded or must otherwise be restored. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 4.05 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 4.05 to share the benefits of any recovery on such secured claim. 18 Section 4.06 Taxes. (a) Payments Free and Clear. Any and all payments by the Borrower hereunder shall be made, in accordance with Section 4.01, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender and the Collateral Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by (i) any jurisdiction (or political subdivision thereof) of which the Collateral Agent or such Lender, as the case may be, is a citizen or resident or in which such Lender has an Applicable Lending Office, (ii) the jurisdiction (or any political subdivision thereof) in which the Collateral Agent or such Lender is organized, or (iii) any jurisdiction (or political subdivision thereof) in which such Lender or the Collateral Agent is presently doing business which taxes are imposed solely as a result of doing business in such jurisdiction (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to the Lenders or the Collateral Agent (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 4.06) such Lender or the Collateral Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. (b) Other Taxes. In addition, to the fullest extent permitted by applicable law, the Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement, any Assignment or any Security Instrument (hereinafter referred to as "OTHER TAXES"). (c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE COLLATERAL AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID BY SUCH LENDER OR THE COLLATERAL AGENT (ON ITS BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER OR THE COLLATERAL AGENT, AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER OR THE COLLATERAL AGENT RECEIVES A REFUND OR 19 CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR THE COLLATERAL AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER OR THE COLLATERAL AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE COLLATERAL AGENT IN THE EVENT SUCH LENDER OR THE COLLATERAL AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT. (d) Lender Representations. (i) Each Lender represents that it is either (1) a corporation or limited liability company (an "LLC") organized under the laws of the United States of America or any state thereof or (2) it is entitled to complete exemption from United States withholding tax imposed on or with respect to any payments to be made to it pursuant to this Agreement (A) under an applicable provision of a tax convention to which the United States of America is a party or (B) because it is acting through a branch, agency or office in the United States of America and any payment to be received by it hereunder is effectively connected with a trade or business in the United States of America. Each Lender that is not a corporation organized under the laws of the United States of America or any state thereof agrees to provide to the Borrower and the Collateral Agent on the Closing Date, or on the date of its delivery of the Assignment pursuant to which it becomes a Lender, and at such other times as required by United States law or as the Borrower or the Collateral Agent shall reasonably request, two accurate and complete original signed copies of either (A) Internal Revenue Service Form W-8ECI (or successor form) certifying that all payments to be made to it hereunder will be effectively connected to a United States trade or business (the "FORM W-8ECI CERTIFICATION") or (B) Internal Revenue Service Form W-8BEN (or successor form) certifying that it is entitled to the benefit of a provision of a tax convention to which the United States of America is a party which completely exempts from United States withholding tax all payments to be made to it hereunder (the "FORM W-8BEN CERTIFICATION"). In addition, each Lender agrees that if it previously filed a Form W-8ECI Certification, it will deliver to the Borrower and the Collateral Agent a new Form W-8ECI Certification prior to the first payment date occurring in each of its subsequent taxable years; and if it previously filed a Form W-8BEN Certification, it will deliver to the Borrower and the Collateral Agent a new certification prior to the first payment date falling in the third year following the previous filing of such certification. Each Lender also agrees to deliver to the Borrower and the Collateral Agent such other or supplemental forms as may at any time be required as a result of changes in applicable law or regulation in order to confirm or maintain in effect its 20 entitlement to exemption from United States withholding tax on any payments hereunder, provided that the circumstances of such Lender at the relevant time and applicable laws permit it to do so. If a Lender determines, as a result of any change in either (i) a Governmental Requirement or (ii) its circumstances, that it is unable to submit any form or certificate that it is obligated to submit pursuant to this Section 4.06, or that it is required to withdraw or cancel any such form or certificate previously submitted, it shall promptly notify the Borrower and the Collateral Agent of such fact. If a Lender is organized under the laws of a jurisdiction outside the United States of America, unless the Borrower and the Collateral Agent have received a Form W-8BEN Certification or Form W-8ECI Certification satisfactory to them indicating that all payments to be made to such Lender hereunder are not subject to United States withholding tax, the Borrower shall withhold taxes from such payments at the applicable statutory rate. Each Lender agrees to indemnify and hold harmless the Borrower or Collateral Agent, as applicable, from any United States taxes, penalties, interest and other expenses, costs and losses incurred or payable by (i) the Collateral Agent as a result of such Lender's failure to submit any form or certificate that it is required to provide pursuant to this Section 4.06 or (ii) the Borrower or the Collateral Agent as a result of their reliance on any such form or certificate which such Lender has provided to them pursuant to this Section 4.06. (ii) For any period with respect to which a Lender has failed to provide the Borrower with the form required pursuant to this Section 4.06, if any, (other than if such failure is due to a change in a Governmental Requirement occurring subsequent to the date on which a form originally was required to be provided), such Lender shall not be entitled to indemnification under this Section 4.06 with respect to taxes imposed by the United States which taxes would not have been imposed but for such failure to provide such forms; provided, however, that if a Lender, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such taxes. (iii) Any Lender claiming any additional amounts payable pursuant to this Section 4.06 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrower or the Collateral Agent or to change the jurisdiction of its Applicable Lending Office or to contest any tax imposed if the making of such a filing or change or contesting such tax would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole determination of such Lender, be otherwise disadvantageous to such Lender. Section 4.07 Disposition of Proceeds. The Mortgages contain an assignment by the Borrower unto and in favor of the Lenders of all production and all proceeds attributable thereto which may be produced from or allocated to the Mortgaged Property, and the Mortgages further provide in general for the application of such proceeds to the satisfaction of the Obligations and other indebtedness, liabilities and obligations described therein and secured 21 thereby. Notwithstanding the assignment contained in the Mortgages, until the occurrence of an Event of Default and subject to the terms of the Intercreditor Agreement, the Lenders agree that they will neither notify the purchaser or purchasers of such production nor take any other action to cause such proceeds to be remitted to the Lenders, but the Lenders will instead permit such proceeds to be paid to the Borrower. ARTICLE V [RESERVED] ARTICLE VI CONDITIONS PRECEDENT Section 6.01 Conditions to Funding. The obligation of the Lenders to make the Loans on the Closing Date is subject to the receipt by the Collateral Agent of all fees payable pursuant to Section 2.02 on or before the Closing Date and the receipt by the Collateral Agent and the Lenders of the following documents (in sufficient original counterparts, other than the Notes, for each Lender) and satisfaction of the other conditions provided in this Section 6.01, each of which shall be satisfactory to the Collateral Agent and the Lenders in form and substance: (a) A certificate of the Secretary or an Assistant Secretary of the Borrower setting forth (i) resolutions of its board of directors with respect to the authorization of the Borrower to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of the Borrower (y) who are authorized to sign the Loan Documents to which Borrower is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of the authorized officers, and (iv) the certificate of incorporation and bylaws of the Borrower, certified as being true and complete. The Collateral Agent and the Lenders may conclusively rely on such certificate until the Collateral Agent receives notice in writing from the Borrower to the contrary. (b) A certificate of the Secretary or an Assistant Secretary of any Subsidiary that is a corporation or an LLC or a general partner of a Subsidiary that is a partnership or a limited partnership setting forth (i) resolutions of its board of directors with respect to the authorization of the Subsidiary to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the officers of the Subsidiary (y) who are authorized to sign the Loan Documents to which the Subsidiary is a party and (z) who will, until replaced by another officer or officers duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this 22 Agreement and the transactions contemplated hereby, (iii) specimen signatures of the authorized officers, and (iv) the articles or certificate of incorporation and bylaws (and the Regulations if such Subsidiary is an LLC) of the Subsidiary, certified as being true and complete. The Collateral Agent and the Lenders may conclusively rely on such certificate until they receive notice in writing from the Subsidiary to the contrary. (c) A certificate of each partner of each partnership that is a Subsidiary setting forth (i) resolutions of its partners with respect to the authorization of such Subsidiary to execute and deliver the Loan Documents to which it is a party and to enter into the transactions contemplated in those documents, (ii) the Persons of such Subsidiary (y) who are authorized to sign the Loan Documents to which such Subsidiary is a party and (z) who will, until replaced by another Person duly authorized for that purpose, act as its representative for the purposes of signing documents and giving notices and other communications in connection with this Agreement and the transactions contemplated hereby, (iii) specimen signatures of the authorized Persons, and (iv) the partnership agreement of such Subsidiary, certified as being true and complete. The Collateral Agent and the Lenders may conclusively rely on such certificate until they receive notice in writing from the Borrower to the contrary. (d) Certificates of the appropriate state agencies with respect to the existence, qualification and good standing of the Borrower, Guarantor(s), and Subsidiaries. (e) A compliance certificate which shall be substantially in the form of EXHIBIT B, duly and properly executed by a Responsible Officer and dated as of the date of the Funding. (f) The Notes, duly completed and executed. (g) The Security Instruments, including those described on EXHIBIT C, duly completed and executed in sufficient number of counterparts for recording, if necessary. (h) An opinion of each of Porter & Hedges, L.L.P., and Schully, Roberts, Slattery, Jaubert & Marino, PC and James Bruce, Attorney at Law, counsel to the Borrower, Guarantor and the Subsidiaries, in form and substance satisfactory to the Collateral Agent, as to such matters incident to the transactions herein contemplated as the Collateral Agent may reasonably request, including, without limitation, the enforceability of the Mortgages and other Security Instruments and the validity, perfection, and priority of the liens created thereby. (i) A certificate of insurance coverage of the Borrower evidencing that the Borrower is carrying insurance in accordance with Section 7.19. (j) Title information as the Collateral Agent may require from attorneys satisfactory to the Collateral Agent setting forth the status of title to at least eighty-five percent (85%) of the value of the Oil and Gas Properties included in the Initial Reserve Report. 23 (k) The Security Instruments and related financing statements covering the Mortgaged Property shall have been delivered to special counsel for the Collateral Agent for filing and recording in the appropriate offices to perfect the Liens and security interests created thereby in accordance with the requirements for perfection provided by the attorneys who have furnished the legal opinions called for in (h) above. (l) Letters in Lieu executed by the Borrower or any Subsidiary, as applicable, and a list of the purchasers of the Hydrocarbons of the Borrower or any Subsidiary produced from the Borrower's and any of its Subsidiaries' Oil and Gas Properties. (m) The Collateral Agent shall have been furnished with appropriate UCC search certificates reflecting the filing of all financing statements required to perfect the Liens granted by the Security Instruments and reflecting no prior Liens. (n) The organizational chart of Borrower and its Subsidiaries. (o) All consents in form and substance satisfactory to all Lenders and of all Persons required by the Lenders. (p) [RESERVED] (q) Collateral Agent shall have received from the Borrower, reviewed, and be satisfied, in Collateral Agent's sole discretion, of the Borrower's and each Subsidiary's (i) existing corporate, limited liability company and partnership documents; (ii) annual financial statements; (iii) most recent interim financial statements; (iv) valuation information of assets proposed by the Borrower to secure the Obligations; (v) all lien searches covering any and all of the Mortgaged Property; (vi) other material documents and agreements (including, without limitation, (1) all Material Agreements and (2) all other material documents and other agreements as the Collateral Agent shall have requested) as the Collateral Agent shall have requested; (vii) the legal, corporate, partnership, and capital structure of the Borrower and its Subsidiaries on the Closing Date and after giving effect to the transactions contemplated hereby; (viii) evidence satisfactory to Collateral Agent that prior to or concurrently with the closing, the Borrower shall have executed all necessary documentation with respect to the Credit Facility on terms and conditions satisfactory to the Collateral Agent, together with an intercreditor agreement executed by Collateral Agent, the Lenders, Borrower, and the Credit Facility Agent, containing terms and conditions satisfactory to Collateral Agent and the Senior Credit Agreement shall be in full force and effect; (ix) evidence satisfactory to the Collateral Agent that prior to or concurrently with the Funding, the Borrower shall have received gross cash proceeds from a drawing under the Credit Facility of at least Twenty-One Million Dollars ($21,000,000); (x) evidence satisfactory to Collateral Agent that prior to or concurrently with the closing, the Borrower shall have received gross cash proceeds from the Senior Unsecured Notes to the Borrower of at least One Hundred Thirty Million Dollars ($130,000,000.00) on terms and conditions satisfactory to the Collateral Agent and satisfactory review and approval by Collateral Agent of all loan documents and instruments executed in connection with the Senior Unsecured Notes; (xi) evidence satisfactory to Collateral Agent that concurrent with the 24 closing of this transaction, all Debt of Borrower and its Subsidiaries for borrowed money existing prior to closing, shall have been repaid and/or provided for except for purchase money indebtedness not to exceed $100,000.00 in the aggregate and insurance premium financing notes not to exceed $100,000.00 in the aggregate; and (xii) evidence satisfactory to Collateral Agent that all existing Hedging Agreements executed by the Borrower and its Subsidiaries are acceptable to the Collateral Agent with counterparties acceptable to the Collateral Agent. (r) Such other conditions and documents, in form and substance reasonably satisfactory to Collateral Agent, as the Collateral Agent or any Lender or special counsel to the Collateral Agent may reasonably request, including, without limitation, (i) documentation of all environmental and title matters relating to all of the Borrower's Oil and Gas Properties including, without limitation, the Mortgaged Properties and (ii) all Material Agreements. (s) A receipt from The Bank of New York for the funds to be deposited with the Bank of New York in connection with the redemption of the Existing Senior Subordinated Unsecured Notes, such funds to be in the amount specified in the Certificate described in subsection (t) below. (t) A copy of the Officer's Certificate to Trustee to be provided by the Borrower to The Bank of New York in connection with the redemption of the Existing Senior Subordinated Unsecured Notes, such Officer's Certificate to contain, inter alia, a statement of the amount required to be deposited with The Bank of New York in connection with such redemption. Section 6.02 Conditions to the Lenders' Obligations. The obligation of the Lenders to make Loans to the Borrower on and as of the Closing Date is subject to the further conditions precedent that, as of the date of such Loans and after giving effect thereto: (a) no Default shall exist; (b) no Material Adverse Effect shall have occurred; (c) the representations and warranties made by the Borrower in Article VII and in the Security Instruments shall be true on and as of and following such funding, except to the extent such representations and warranties are expressly limited to an earlier date or the Majority Lenders may expressly consent in writing to the contrary; and (d) after giving effect to the requested Funding, no Default will exist under this Agreement or any other Loan Document. Section 6.03 Conditions Precedent for the Benefit of Lenders. All conditions precedent to the obligations of the Lenders to make any Loan are imposed hereby solely for the benefit of the Lenders, and no other Person may require satisfaction of any such condition precedent or be entitled to assume that the Lenders will refuse to make any Loan in the absence of strict compliance with such conditions precedent. 25 Section 6.04 No Waiver. The funding of the Loans by the Lenders notwithstanding the existence of a Default shall not preclude the Collateral Agent or the Lenders, consistent with the terms of the Intercreditor Agreement, from thereafter exercising the remedies available to them herein in the event such Default becomes an Event of Default. ARTICLE VII REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants to the Collateral Agent and the Lenders that (each representation and warranty herein is given as of the Closing Date: Section 7.01 Corporate Existence. Each of the Borrower and each Subsidiary: (i) is a corporation, limited liability company, or partnership, duly organized, legally existing and in good standing under the laws of the jurisdiction of its organization; (ii) has all requisite corporate, limited liability company, or partnership power, and has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (iii) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect. Section 7.02 Financial Condition. The audited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at December 31, 2003, and the related consolidated statements of income, stockholders' equity and cash flows of the Borrower and its Consolidated Subsidiaries for the fiscal year ended on said date, with the opinion thereon of KPMG LLP heretofore furnished to each of the Lenders are complete and correct and fairly present the consolidated financial condition of the Borrower and its Consolidated Subsidiaries as at said dates and the results of their operations for the fiscal year on said date, all in accordance with GAAP, as applied on a consistent basis. Neither the Borrower nor any Subsidiary has on the Closing Date any material Debt except as referred to or reflected or provided for in the Financial Statements or in SCHEDULE 7.02, or has on the Closing Date any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in the Financial Statements or in SCHEDULE 7.02 or incurred since the date of the Financial Statements in the ordinary course of business. Since December 31, 2003, there has been no change or event having a Material Adverse Effect. Since the date of the Financial Statements, neither the business nor the Properties of the Borrower or any Subsidiary have been materially and adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of Property or cancellation of contracts, permits or concessions by any Governmental Authority, riot, activities of armed forces or acts of God or of any public enemy. Section 7.03 Litigation. Except as disclosed to the Lenders in SCHEDULE 7.03 hereto, which matters could not reasonably be expected to cause a Material Adverse Effect and except with respect to Environmental Matters which are addressed in Section 7.17, which could not reasonably be expected to cause a Material Adverse Effect, at the Closing Date there is no litigation, legal, administrative or arbitral proceeding, investigation or other action of any nature 26 pending or, to the knowledge of the Borrower threatened against or affecting the Borrower or any Subsidiary that involves the possibility of any judgment or liability against the Borrower or any Subsidiary not fully covered by insurance (except for normal deductibles). There are no outstanding judgments against Borrower or any Subsidiary. Section 7.04 No Breach. Neither the execution and delivery of the Loan Documents, nor compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent that has not been obtained as of the Closing Date under, the respective charter, by-laws, or partnership agreement of the Borrower or any Subsidiary, or any Governmental Requirement or any agreement or instrument to which the Borrower or any Subsidiary is a party or by which it is bound or to which it or its Properties are subject, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of the Borrower or any Subsidiary pursuant to the terms of any such agreement or instrument other than the Liens created by the Loan Documents. Section 7.05 Authority. The Borrower and each Subsidiary have all necessary corporate and partnership power and authority to execute, deliver and perform its obligations under the Loan Documents to which it is a party; and the execution, delivery and performance by the Borrower and each Subsidiary of the Loan Documents to which it is a party, have been duly authorized by all necessary corporate and partnership action on its part; and the Loan Documents constitute the legal, valid and binding obligations of the Borrower and each Subsidiary, enforceable in accordance with their terms except as may be limited by bankruptcy, insolvency, or other laws relating to or affecting the enforcement of creditors' rights generally and general principles of equity. Section 7.06 Approvals. No authorizations, approvals or consents of, and no filings or registrations with, any Governmental Authority or any Person are necessary for the execution, delivery or performance by the Borrower or any Subsidiary of the Loan Documents or for the validity or enforceability thereof, except for the recording and filing of the Security Instruments as required by this Agreement. Section 7.07 Use of Loans. The proceeds of the Loans shall be used by the Borrower to: (a) refinance existing indebtedness for borrowed money; and (b) pay fees and expenses incurred in connection with the transactions contemplated hereby; Neither the Borrower nor any Subsidiary is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying margin stock (within the meaning of Regulation T, U or X of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan hereunder will be used to buy or carry any margin stock. 27 Section 7.08 ERISA. (a) The Borrower, each Subsidiary and each ERISA Affiliate have complied in all material respects with ERISA and, where applicable, the Code regarding each Plan. (b) Each Plan is, and has been, maintained in substantial compliance with ERISA and, where applicable, the Code. (c) No act, omission or transaction has occurred which could result in imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether directly or indirectly) of (i) either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under section 409 of ERISA. (d) No Plan (other than a defined contribution plan) or any trust created under any such Plan has been terminated since September 2, 1974. No liability to the PBGC (other than for the payment of current premiums which are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be incurred with respect to any Plan. No ERISA Event with respect to any Plan has occurred. (e) Full payment when due has been made of all amounts which the Borrower, any Subsidiary or any ERISA Affiliate is required under the terms of each Plan or applicable law to have paid as contributions to such Plan, and no accumulated funding deficiency (as defined in section 302 of ERISA and section 412 of the Code), whether or not waived, exists with respect to any Plan. (f) The actuarial present value of the benefit liabilities under each Plan which is subject to Title IV of ERISA does not, as of the end of the Borrower's most recently ended fiscal year, exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE BENEFIT LIABILITIES" shall have the meaning specified in section 4041 of ERISA. (g) None of the Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains, or contributes to an employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its sole discretion at any time without any material liability. (h) None of the Borrower, any Subsidiary or any ERISA Affiliate sponsors, maintains or contributes to, or has at any time in the preceding six calendar years, sponsored, maintained or contributed to, any Multiemployer Plan. (i) None of the Borrower, any Subsidiary or any ERISA Affiliate is required to provide security under section 401(a)(29) of the Code due to a Plan amendment that results in an increase in current liability for the Plan. 28 Section 7.09 Taxes. Except as set out in SCHEDULE 7.09, each of the Borrower and its Subsidiaries has filed all United States Federal income tax returns and all other tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary except those taxes, singly or in the aggregate, the failure of which to pay could not cause a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Borrower, adequate. No tax lien has been filed and, to the knowledge of the Borrower, no claim is being asserted with respect to any such tax, fee or other charge. Section 7.10 Titles, etc. (a) Except as set out in SCHEDULE 7.10, each of the Borrower and its Subsidiaries has good and defensible title to its material (individually or in the aggregate) Properties, free and clear of all Liens, except Liens permitted by Section 9.02. Except as set forth in SCHEDULE 7.10, after giving full effect to the Excepted Liens, the Borrower owns the net interests in production attributable to the Hydrocarbon Interests reflected in the most recently delivered Reserve Report and the ownership of such Properties shall not in any material respect obligate the Borrower to bear the costs and expenses relating to the maintenance, development and operations of each such Property in an amount in excess of the working interest of each Property set forth in the most recently delivered Reserve Report. All information contained in the most recently delivered Reserve Report is true and correct in all material respects as of the date thereof. (b) All leases and agreements necessary for the conduct of the business of the Borrower and its Subsidiaries are valid and subsisting, in full force and effect (including as to depths) and there exists no default or event or circumstance which with the giving of notice or the passage of time or both would give rise to a default under any such lease or leases, which would adversely affect in any material respect the conduct of the business of the Borrower and its Subsidiaries. (c) The rights, Properties and other assets presently owned, leased or licensed by the Borrower and its Subsidiaries including, without limitation, all easements and rights of way, include all rights, Properties and other assets necessary to permit the Borrower and its Subsidiaries to conduct their business in all material respects in the same manner as its business has been conducted prior to the Closing Date. (d) All of the assets and Properties of the Borrower and its Subsidiaries which are reasonably necessary for the operation of its business are in good working condition and are maintained in accordance with prudent business standards. Section 7.11 No Material Misstatements. No written information, statement, exhibit, certificate, document or report furnished to the Collateral Agent and the Lenders (or any of them) by the Borrower or any Subsidiary in connection with the negotiation of this Agreement contained any material misstatement of fact and all information, taken together, did not omit to state a material fact or any fact necessary to make the statement contained therein not materially misleading in the light of the circumstances in which made and with respect to the Borrower and 29 its Subsidiaries taken as a whole. There is no fact peculiar to the Borrower or any Subsidiary that has a Material Adverse Effect or in the future could have (so far as the Borrower can now foresee) a Material Adverse Effect and which has not been set forth in this Agreement or the other documents, certificates and statements furnished to the Collateral Agent by or on behalf of the Borrower or any Subsidiary prior to, or on, the Closing Date in connection with the transactions contemplated hereby. Section 7.12 Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. Section 7.13 Public Utility Holding Company Act. Neither the Borrower nor any Subsidiary is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", or a "public utility" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 7.14 Subsidiaries. Except as set forth on SCHEDULE 7.14, the Borrower has no Subsidiaries. Section 7.15 Location of Business and Offices. The Borrower's principal place of business and chief executive offices are located at the address stated on the signature page of this Agreement. The principal place of business and chief executive office of each Subsidiary are located at the addresses stated on SCHEDULE 7.14. Section 7.16 Defaults. Neither the Borrower nor any Subsidiary is in default nor has any event or circumstance occurred which, but for the expiration of any applicable grace period or the giving of notice, or both, would constitute a default under any Material Agreement or instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary is bound which could have a Material Adverse Effect. No Default hereunder has occurred and is continuing. Section 7.17 Environmental Matters. To the best of knowledge of Borrower, except (i) as provided in SCHEDULE 7.17, which would not reasonably be expected to have a Material Adverse Effect, or (ii) as would not have a Material Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to take such actions would not have a Material Adverse Effect): (a) Neither any Property of the Borrower or any Subsidiary nor the operations conducted thereon violate any order or requirement of any court or Governmental Authority or any Environmental Laws; (b) Without limitation of clause (a) above, no Property of the Borrower or any Subsidiary nor the operations currently conducted thereon or, to the best knowledge of the Borrower, by any prior owner or operator of such Property or operation, are in violation of or subject to any existing, pending or threatened action, suit, investigation, inquiry or proceeding by or before any court or Governmental Authority or to any remedial obligations under Environmental Laws; 30 (c) All notices, permits, licenses or similar authorizations, if any, required to be obtained or filed in connection with the operation or use of any and all Property of the Borrower and each Subsidiary, including without limitation past or present treatment, storage, disposal or release of a hazardous substance or solid waste into the environment, have been duly obtained or filed, and the Borrower and each Subsidiary are in compliance with the terms and conditions of all such notices, permits, licenses and similar authorizations; (d) All hazardous substances, solid waste, and oil and gas exploration and production wastes, if any, generated at any and all Property of the Borrower or any Subsidiary have in the past been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and, to the best knowledge of the Borrower, all such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and are not the subject of any existing, pending or threatened action, investigation or inquiry by any Governmental Authority in connection with any Environmental Laws; (e) The Borrower has taken all steps reasonably necessary to determine and has determined that no hazardous substances, solid waste, or oil and gas exploration and production wastes, have been disposed of or otherwise released and there has been no threatened release of any hazardous substances on or to any Property of the Borrower or any Subsidiary except in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment; (f) To the extent applicable, all Property of the Borrower and each Subsidiary currently satisfies all design, operation, and equipment requirements imposed by the OPA or scheduled as of the Closing Date to be imposed by OPA during the term of this Agreement, and the Borrower does not have any reason to believe that such Property, to the extent subject to OPA, will not be able to maintain compliance with the OPA requirements during the term of this Agreement; and (g) Neither the Borrower nor any Subsidiary has any known contingent liability in connection with any release or threatened release of any oil, hazardous substance or solid waste into the environment. Section 7.18 Compliance with the Law. Neither the Borrower nor any Subsidiary has violated any Governmental Requirement or failed to obtain any license, permit, franchise or other governmental authorization necessary for the ownership of any of its Properties or the conduct of its business, which violation or failure could reasonably be expected to have (in the event such violation or failure were asserted by any Person through appropriate action) a Material Adverse Effect. To the best knowledge of the Borrower, except for such acts or failures to act as could not reasonably be expected to have a Material Adverse Effect, and except with respect to Environmental Matters which are addressed in Section 7.17, the Oil and Gas Properties (and properties unitized therewith) operated by the Borrower or its Subsidiaries, and to Borrower's knowledge, their non-operated Oil and Gas Properties, have been maintained, 31 operated and developed in conformity to standards customary in the industry and in conformity with all applicable laws and all rules, regulations and orders of all duly constituted authorities having jurisdiction and in conformity with the provisions of all leases, subleases or other contracts comprising a part of the Hydrocarbon Interests and other contracts and agreements forming a part of the Oil and Gas Properties; specifically in this connection, except as could not reasonably expected to have a Material Adverse Effect (i) after the Closing Date, no Oil and Gas Property is subject to having allowable production reduced below the full and regular allowable (including the maximum permissible tolerance) because of any overproduction (whether or not the same was permissible at the time) prior to the Closing Date and (ii) none of the wells comprising a part of the Oil and Gas Properties (or properties unitized therewith) are deviated from the vertical more than the maximum permitted by applicable laws, regulations, rules and orders, and such wells are, in fact, bottomed under and are producing from, and the well bores are wholly within, the Oil and Gas Properties (or in the case of wells located on properties unitized therewith, such unitized properties). Section 7.19 Insurance. SCHEDULE 7.19 attached hereto contains an accurate and complete description of all material policies of fire, liability, workmen's compensation and other forms of insurance owned or held by the Borrower and each Subsidiary. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the date of the closing have been paid, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are sufficient for compliance with all requirements of law and of all agreements to which the Borrower or any Subsidiary is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business for the assets and operations of the Borrower and each Subsidiary; will remain in full force and effect through the respective dates set forth in SCHEDULE 7.19 without the payment of additional premiums; and will not in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement. SCHEDULE 7.19 identifies all material risks, if any, which the Borrower and its Subsidiaries and their respective Board of Directors or officers have designated as being self insured. Neither the Borrower nor any Subsidiary has been refused any insurance with respect to its assets or operations, nor has its coverage been limited below usual and customary policy limits, by an insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last three years. All such policies name Collateral Agent as additional insured, loss payee, and contain endorsements for no cancellation thereof without thirty (30) days' prior written notice to the Collateral Agent and the Lenders on all such policies. Section 7.20 [RESERVED] Section 7.21 Hedging Agreements. SCHEDULE 7.21 sets forth, as of the Closing Date, a true and complete list of all Hedging Agreements (including commodity price swap agreements, forward agreements or contracts of sale which provide for prepayment for deferred shipment or delivery of oil, gas or other commodities) of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating 32 thereto (including any margin required or supplied), and the counter party to each such agreement. Section 7.22 Restriction on Liens. Neither the Borrower nor any of its Subsidiaries is a party to any agreement or arrangement (other than the Second Amended and Restated Credit Agreement dated June 5, 2003, among the Borrower, the lenders named therein and Wells Fargo Foothill, Inc., as administrative agent, which agreement is to be terminated on the Closing Date), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to the Collateral Agent for the benefit of the Lenders as contemplated by the Agreement and the Security Instruments. Section 7.23 Material Agreements. Set forth on SCHEDULE 7.23 hereto is a complete and correct list of all material agreements, leases, indentures, purchase agreements, obligations in respect of letters of credit, guarantees, and other instruments in effect or to be in effect as of the Closing Date (other than Hedging Agreements) providing for, evidencing, securing or otherwise relating to any Debt for borrowed money of the Borrower or any of its Subsidiaries, (other than the Debt hereunder, Debt evidenced by the Existing Unsecured Notes and Debt to be paid off contemporaneously with the Closing Date out of the proceeds of the Initial Funding and the proceeds of the Senior Unsecured Notes), including the Senior Unsecured Notes Indenture, the Purchase Agreement pursuant to which the Senior Unsecured Notes are to be issued by the Borrower to the purchasers named therein and the Senior Credit Agreement and such list correctly sets forth the names of the debtor or lessee and creditor or lessor with respect to the Debt (other than the Senior Unsecured Notes) or lease obligations outstanding or to be outstanding and the Property subject to any Lien securing such Debt or lease obligation. Also set forth on SCHEDULE 7.23 hereto is a complete and correct list of all material agreements of the Borrower and its Subsidiaries relating to the sale and supply of Hydrocarbons (other than any such agreement with a term, or cancelable by the Borrower or a Subsidiary on notice of less than (12) months, any such agreement in which commodity prices float with market indices and any agreement that is expected to account for less than five percent (5%) of the sales of the Borrower and its Subsidiaries during the Borrower's current fiscal year) in effect on the Closing Date. The Borrower will provide to the Collateral Agent a complete and correct copy of material agreements in effect on the Closing Date. All of the Material Agreements of the Borrower and all of its Subsidiaries together with all amendments and modifications thereto are set forth on SCHEDULE 7.23. Section 7.24 Gas Imbalances. Except as set forth on SCHEDULE 7.24 or on the most recent certificate delivered pursuant to Section 8.07(c), on a net basis there are no gas imbalances, take or pay or other prepayments with respect to the Borrower's Oil and Gas Properties which (taken together with the imbalances take or pay, or other prepayments on Schedule 7.24 or such certificate)would require the Borrower or its Subsidiaries to deliver, in the aggregate, after netting over-production and under-production three percent (3%) or more of the total volumes of proved, producing reserves of Hydrocarbons (calculated on an mcf equivalent basis with each barrel of oil being equivalent to six mcf of natural gas) reflected in the Initial Reserve Report on the most recent Reserve Report delivered pursuant to SECTION 8.07, as the case may be, from the Oil and Gas Properties of Borrower and its Subsidiaries at some future time without then or thereafter receiving full payment therefor. 33 Section 7.25 Partnership Agreement. The Partnership Agreement has not been terminated, is in full force and effect as of the date hereof and no default has occurred and is in continuance thereunder which would have a Material Adverse Effect. Section 7.26 [RESERVED] Section 7.27 Solvency. Borrower and its Subsidiaries (and with respect to its Subsidiaries, after taking into account each Subsidiary's rights of contribution), on an individual and a consolidated basis, are not insolvent, Borrower's and its Subsidiaries' assets (and with respect to its Subsidiaries, after taking into account each Subsidiary's rights of contribution), on an individual and a consolidated basis, exceed their liabilities, and neither Borrower nor any of its Subsidiaries (and with respect to its Subsidiaries, after taking into account each Subsidiary's rights of contribution) will be rendered insolvent by the execution and performance of this Agreement and the Loan Documents. Section 7.28 Name Changes. Borrower's official name as recorded on its currently effective organizational documents which are filed with the Secretary of State of its State of organization is the same as found on the signature page of this Agreement. Borrower has not, during the preceding five years, entered into any contract, agreement, security instrument or other document using a name other than, or been known by or otherwise used any name other than, the name used by Borrower herein. Section 7.29 Taxpayer Identification Number. Borrower's Taxpayer Identification No. is 76-0437769 and each Subsidiary's Borrower's Taxpayer Identification No. is set forth on SCHEDULE 7.14. Section 7.30 State of Formation. Borrower is a corporation organized under the laws of the State of Delaware. The Subsidiaries are corporations, limited liability corporations, or partnerships organized under the laws of the states set forth on SCHEDULE 7.14. ARTICLE VIII AFFIRMATIVE COVENANTS The Borrower covenants and agrees that, so long as any of the Revolving Credit Commitments under the Senior Credit Agreement are in effect and until payment in full of all Loans hereunder, all interest thereon and all other amounts payable by the Borrower hereunder: Section 8.01 Reporting Requirements. The Borrower shall deliver, or shall cause to be delivered, to the Collateral Agent with sufficient copies of each for the Lenders: (a) Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each fiscal year of the Borrower, the audited consolidated statements of income, stockholders' equity, changes in financial position and cash flows of the Borrower and its Consolidated Subsidiaries for such fiscal year, and the related consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year, and setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by the related 34 unqualified opinion of independent public accountants of recognized national standing acceptable to the Collateral Agent, which opinion shall state that said financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries as at the end of, and for, such fiscal year and that such financial statements have been prepared in accordance with GAAP, except for such changes in such principles with which the independent public accountants shall have concurred and such opinion shall not contain a "going concern" or like qualification or exception, and a certificate of such accountants stating that, in making the examination necessary for their opinion, they obtained no knowledge, except as specifically stated, of any Default, together with calculations confirming the Borrower's compliance with the financial covenants set forth in Sections 9.13, 9.14, 9.15 and 9.16, certified by a senior financial officer of Borrower. (b) Quarterly Financial Statements. As soon as available and in any event within forty-five (45) days after the end of each of the first three fiscal quarterly periods of each fiscal year of the Borrower, consolidated statements of income, stockholders' equity, changes in financial position and cash flows of the Borrower and its Consolidated Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related consolidated balance sheets as at the end of such period, and setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year, accompanied by the certificate of a Responsible Officer, which certificate shall state that said financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries in accordance with GAAP, as at the end of, and for, such period (subject to normal year-end audit adjustments), together with calculations confirming the Borrower's compliance with all financial covenants, certified by a senior financial officer of Borrower. (c) Projected Financial Statements. Upon request by the Collateral Agent or any Lender, as soon as available and in any event within forty-five (45) days after the end of the preceding fiscal year of the Borrower, the projected consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for such projected fiscal year, and the related projected consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year, and setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, accompanied by the certificate of a Responsible Officer, which certificate shall state that said financial projections have been prepared based on assumptions that were reasonable at the date presented. (d) Notice of Default, Etc. Promptly after the Borrower knows that any Default or any Material Adverse Effect has occurred, a notice of such Default or Material Adverse Effect, describing the same in reasonable detail and the action the Borrower proposes to take with respect thereto. (e) Other Accounting Reports. Upon request by the Collateral Agent or any Lender, promptly upon receipt thereof, a copy of each other report or letter submitted to the Borrower or any Subsidiary by independent accountants in connection with any 35 annual, interim or special audit made by them of the books of the Borrower and its Subsidiaries, and a copy of any response by the Borrower or any Subsidiary of the Borrower, or the Board of Directors of the Borrower or any Subsidiary of the Borrower, to such letter or report. (f) SEC Filings, Etc. Promptly upon its becoming available, each financial statement, report, notice or proxy statement sent by the Borrower to stockholders generally and each regular or periodic report and any registration statement, prospectus or written communication (other than transmittal letters) in respect thereof filed by the Borrower with or received by the Borrower in connection therewith from any securities exchange or the SEC or any successor agency. (g) Notices Under Other Loan Agreements. Promptly after the furnishing thereof, copies of any statement, report or notice furnished to any Person pursuant to the terms of any material indenture, loan or credit or other similar agreement, other than this Agreement and not otherwise required to be furnished to the Lenders pursuant to any other provision of this Section 8.01. (h) Other Matters. From time to time such other information regarding the business, affairs or financial condition of the Borrower or any Subsidiary (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA) as any Lender or the Collateral Agent may reasonably request. (i) Hedging Agreements. Upon request by the Collateral Agent or any Lender, as soon as available and in any event within ten (10) Business Days after the last day of each calendar quarter, a report, in form and substance satisfactory to the Collateral Agent, setting forth as of the last Business Day of such calendar quarter a true and complete list of all Hedging Agreements (including commodity price swap agreements, forward agreements or contracts of sale which provide for prepayment for deferred shipment or delivery of oil, gas or other commodities) of the Borrower and each Subsidiary, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value therefor, any new credit support agreements relating thereto not listed on SCHEDULE 7.21, any margin required or supplied under any credit support document, and the counter party to each such agreement. The Borrower will furnish to the Collateral Agent, at the time it furnishes each set of financial statements pursuant to paragraph (a) or (b) above, a certificate substantially in the form of EXHIBIT C executed by a Responsible Officer (i) certifying as to the matters set forth therein and stating that no Default has occurred and is continuing (or, if any Default has occurred and is continuing, describing the same in reasonable detail), and (ii) setting forth in reasonable detail the computations necessary to determine whether the Borrower is in compliance with Sections 9.13, 9.14, 9.15, and 9.16 as of the end of the respective fiscal quarter or fiscal year. Section 8.02 Litigation. The Borrower shall promptly give to the Collateral Agent notice of: (i) all legal or arbitral proceedings, and of all proceedings before any 36 Governmental Authority affecting the Borrower or any Subsidiary, except proceedings which, if adversely determined, could not have a Material Adverse Effect, and (ii) of any litigation or proceeding against or adversely affecting the Borrower or any Subsidiary in which the amount involved is not covered in full by insurance (subject to normal and customary deductibles and for which the insurer has not assumed the defense), or in which injunctive or similar relief is sought. The Borrower will, and will cause each of its Subsidiaries to, promptly notify the Collateral Agent and each of the Lenders of any claim, judgment, Lien or other encumbrance affecting any Property of the Borrower or any Subsidiary if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $250,000.00. Section 8.03 Maintenance, Etc. (a) Generally. The Borrower shall and shall cause each Subsidiary to: preserve and maintain its corporate existence and all of its material rights, privileges and franchises; keep books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and activities; comply with all Governmental Requirements if failure to comply with such requirements will have a Material Adverse Effect; pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its Property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; upon reasonable notice, permit representatives of the Collateral Agent or any Lender, during normal business hours, to examine, copy and make extracts from its books and records, to inspect its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Collateral Agent (as the case may be); and keep, or cause to be kept, insured by financially sound and reputable insurers all Property of a character usually insured by Persons engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such Persons and carry such other insurance as is usually carried by such Persons including, without limitation, environmental risk insurance to the extent reasonably available. The Borrower shall promptly obtain endorsements to such insurance policies naming "Guggenheim Corporate Funding, LLC, as Collateral Agent for the Lenders" as joint loss payee, additional insured, and containing provisions that such policies will not be canceled without 30 days prior written notice having been given by the insurance company to the Collateral Agent. (b) Proof of Insurance. Contemporaneously with the delivery of the financial statements required by Section 8.01(a) to be delivered for each year, the Borrower will furnish or cause to be furnished to the Collateral Agent and the Lenders a certificate of insurance coverage from the insurer in form and substance satisfactory to the Collateral Agent and, if requested, will furnish the Collateral Agent and the Lenders copies of the applicable policies. (c) Operation of Properties. The Borrower will and will cause each Subsidiary to operate its Properties or cause such Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance 37 with all applicable contracts and agreements and in compliance in all material respects with all Governmental Requirements. (d) Oil and Gas Properties. The Borrower will and will cause each Subsidiary to, at its own expense, do or cause to be done and, in the case of non-operated Oil and Gas Properties, to use its reasonable commercial efforts to cause them to be done by the operators all things reasonably necessary to preserve and keep in good repair, working order and efficiency all of its Oil and Gas Properties and other material Properties including, without limitation, all equipment, machinery and facilities, and from time to time will make all the reasonably necessary repairs, renewals and replacements so that at all times the state and condition of its Oil and Gas Properties and other material Properties will be preserved and maintained in accordance with industry standards, except to the extent a portion of such Properties is no longer capable of producing Hydrocarbons in economically reasonable amounts. The Borrower will and will cause each Subsidiary or use its reasonable commercial efforts to cause the operator to do so, in the case of non-operated properties, to promptly: (i) pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all delay rentals, royalties, expenses and indebtedness accruing under the leases or other agreements affecting or pertaining to its Oil and Gas Properties, (ii) perform or make reasonable and customary efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of the assignments, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Oil and Gas Properties and other material Properties, (iii) will and will cause each Subsidiary to do all other things necessary to keep unimpaired, except for Liens described in Section 9.02, its rights with respect to its Oil and Gas Properties and other material Properties and prevent any forfeiture thereof or a default thereunder, except to the extent a portion of such Properties is undeveloped or is no longer capable of producing Hydrocarbons in economically reasonable amounts and except for dispositions permitted by Section 9.17. The Borrower will and will cause each Subsidiary to operate its Oil and Gas Properties and other material Properties or cause or make reasonable and customary efforts to cause such Oil and Gas Properties and other material Properties to be operated in a careful and efficient manner in accordance with the practices of the industry and in compliance with all applicable contracts and agreements and in compliance in all material respects with all Governmental Requirements. Section 8.04 Environmental Matters. (a) Establishment of Procedures. The Borrower will and will cause each Subsidiary to establish and implement such procedures as may be reasonably necessary to continuously determine and assure that any failure of the following does not have a Material Adverse Effect: (i) all Properties of the Borrower and its Subsidiaries and the operations conducted thereon and other activities of the Borrower and its Subsidiaries are in compliance with and do not violate the requirements of any Environmental Laws, (ii) no oil, hazardous substances or solid wastes are disposed of or otherwise released on or to any Property owned by any such party except in compliance with Environmental Laws, (iii) no hazardous substance will be released on or to any such Property in a quantity equal to or exceeding that quantity which requires reporting pursuant to 38 Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and production wastes or hazardous substance is released on or to any such Property so as to pose an imminent and substantial endangerment to public health or welfare or the environment. (b) Notice of Action. The Borrower will promptly notify the Collateral Agent and the Lenders in writing of any threatened action, investigation or inquiry by any Governmental Authority of which the Borrower has knowledge in connection with any Environmental Laws, excluding routine testing and corrective action. (c) Future Acquisitions. The Borrower will and will cause each Subsidiary to provide environmental audits and tests in accordance with American Society for Testing and Materials standards as reasonably requested by the Collateral Agent and the Lenders (or as otherwise required to be obtained by the Collateral Agent or the Lenders by any Governmental Authority) in connection with any future acquisitions of Oil and Gas Properties or other material Properties. Section 8.05 Further Assurances. The Borrower will and will cause each Subsidiary to cure promptly any defects in the creation and issuance of the Notes and the execution and delivery of the Security Instruments and this Agreement. The Borrower at its expense will and will cause each Subsidiary to promptly execute and deliver to the Collateral Agent upon request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Subsidiary, as the case may be, in the Security Instruments and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Notes, or to correct any omissions in the Security Instruments, or to state more fully the security obligations set out herein or in any of the Security Instruments, or to perfect, protect or preserve any Liens created pursuant to any of the Security Instruments, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith. Section 8.06 Performance of Obligations. The Borrower will pay the Notes according to the reading, tenor and effect thereof; and the Borrower will and will cause each Subsidiary to do and perform every act and discharge all of the obligations to be performed and discharged by them under the Security Instruments and this Agreement, at the time or times and in the manner specified. Section 8.07 Engineering Reports. (a) Commencing with October 1, 2004, upon request of the Collateral Agent or any Lender, the Borrower shall furnish to the Collateral Agent and the Lenders its most recent Reserve Report; provided that such Reserve Reports shall be available not less than ninety (90) days after each January 1 and July 1. The Reserve Report as of January 1 of each year shall be prepared by certified independent petroleum engineers or other independent petroleum consultant(s) acceptable to the Collateral Agent and the Reserve Report as of July 1 of each year shall be prepared by or under the supervision of the chief engineer of the Borrower who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately proceeding Reserve Report as of January 1. 39 (b) In the event any additional Reserve Report is prepared by or under the supervision of the chief engineer of the Borrower who certifies such Reserve Report to be true and accurate and to have been prepared in accordance with the procedures used in the immediately preceding Reserve Report, the Company shall furnish such Reserve Report to the Collateral Agent and the Lenders. (c) With the delivery of each Reserve Report, the Borrower shall provide to the Collateral Agent and the Lenders, a certificate from a Responsible Officer certifying that, to the best of his knowledge and in all material respects: (i) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct, (ii) the Borrower owns good and defensible title to the Oil and Gas Properties evaluated in such Reserve Report and such Properties are free of all Liens except for Liens permitted by Section 9.02, (iii) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take or pay or other prepayments with respect to the Borrower's Oil and Gas Properties which would require Borrower or its Subsidiaries to deliver, in the aggregate, after netting all over-production and under-production, three percent (3%) or more of total volumes of proved, producing reserves of Hydrocarbons (calculated on an mcf equivalent basis with each barrel of oil being equivalent to six mcf of natural gas) reflected in the Initial Reserve Report or the most recent Reserve Report delivered pursuant to this Section 8.07, as the case may be, from the Oil and Gas Properties of Borrower and its Subsidiaries at some future time without then receiving full payment therefor which would require the Borrower to deliver Hydrocarbons produced from such Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor, (iv) none of its Oil and Gas Properties have been sold since the date of the previous Reserve Report except as set forth on an exhibit to the certificate, which certificate shall list all of its Oil and Gas Properties sold and in reasonable detail, (v) attached to the certificate is a list of its Oil and Gas Properties added to and deleted from the immediately prior Reserve Report and a list showing any change in working interest or net revenue interest in its Oil and Gas Properties occurring and the reason for such change, (vi) attached to the certificate is a list of all Persons disbursing proceeds to the Borrower from its Oil and Gas Properties and (vii) except as set forth on a schedule attached to the certificate, at least eighty-five percent (85%), by value, of the Oil and Gas Properties of the Borrower and its Subsidiaries are Mortgaged Property. (d) As soon as available and in any event within sixty (60) days after the end of each month, the Borrower shall furnish to the Collateral Agent, upon request, reports, which reports shall include any direct or allocated general and administrative expenses and production reports for its Oil and Gas Properties, which production reports shall include quantities or volume of production, revenue, realized product prices, operating expenses, taxes, capital expenditures and lease operating costs which have accrued to the Borrower's accounts in such period, and such other information with respect thereto as the Collateral Agent may require. Section 8.08 Title Information and Mortgage Coverage. 40 (a) Mortgage and Title Coverage. The Borrower will provide the Collateral Agent with (i) title information in form and substance acceptable to the Agent and (ii) Mortgages on the Oil and Gas Properties of the Borrower and its Subsidiaries, in form and substance satisfactory to Collateral Agent, and subject on to Excepted Liens, which are, at all times, sufficient to cause eighty-five percent (85%) of the value of the proved Oil and Gas Properties of the Borrower and its Subsidiaries to be covered both by such title information and by Mortgages in favor of the Collateral Agent for the benefit of the Lenders (the "85% Coverage Requirement"). (b) Cure of Title Defects. The Borrower shall promptly proceed in good faith to cure any title defects or exceptions which are not Excepted Liens raised by such information, or substitute acceptable Mortgaged Properties with no material title defects or exceptions except for Excepted Liens covered Mortgaged Property sufficient to cause the 85% Coverage Requirement to be maintained as promptly as reasonable and, in any event, within ninety (90) days after a request by the Collateral Agent or the Lenders to cure such defects or exceptions. With respect to this Section 8.08(b), "material title defects or exceptions" shall mean the defects and exceptions relating to all the Mortgaged Properties that could reasonably be expected to affect the revenue stream attributable to such Mortgaged Properties and the cost to cure such defects or exceptions could reasonably be expected to exceed $200,000.00 individually or $2,000,000.00 in the aggregate. (c) Failure to Cure Title Defects. If the Borrower is unable to cure any title defect as requested by the Collateral Agent or the Lenders to be cured within the ninety (90) day period set forth in subsection (b) above and the Borrower does not substitute acceptable Mortgage Properties sufficient to cause the 85% Coverage Requirement to be maintained, such default shall constitute a Default or an Event of Default. Section 8.09 Additional Collateral. (a) Lien in Acquired Oil and Gas Properties. Should the Borrower or any of its Subsidiaries acquire any additional developed Oil and Gas Properties or additional interests in its existing developed Oil and Gas Properties, the Borrower will (i) grant to the Collateral Agent as security for the Obligations a second-priority Lien and security interest (subject only to the first priority Lien granted under the terms of the Senior Credit Agreement and Excepted Liens) on the Borrower's interest in any such developed Oil and Gas Properties not already subject to a Lien of the Security Instruments, which Lien will be created and perfected by and in accordance with the provisions of mortgages, deeds of trust, security agreements and financing statements, or other Security Instruments, all in form and substance satisfactory to the Collateral Agent in its sole discretion and in sufficient executed (and acknowledged where necessary or appropriate) counterparts for recording purposes, and (ii) will provide the Agent with title information in form and substance satisfactory to the Agent on such developed Oil and Gas Properties, to the extent required to maintain the satisfaction of the 85% Coverage Requirement. (b) [RESERVED] 41 (c) Legal Opinions. Also, promptly after the filing of any new Security Instrument in any state, upon the reasonable request of the Collateral Agent, the Borrower will provide to the Collateral Agent an opinion addressed to the Collateral Agent for the benefit of the Lenders in form and substance satisfactory to the Collateral Agent in its sole discretion from counsel acceptable to Collateral Agent, stating that the Security Instrument creates a Lien and is valid, binding and enforceable in accordance with its terms in legally sufficient form for such jurisdiction, and the means by which to perfect the Lien created by such Security Instrument. Section 8.10 Cash Collateral Account Agreement. Upon the occurrence of a Default, the Borrower and all of its Subsidiaries shall cause all proceeds arising from its Oil and Gas Properties, including without limitation from the sale of Hydrocarbons, to be directed to a lockbox (and in connection therewith, Borrower and all of its Subsidiaries shall execute a Lockbox Agreement and financing statements in form and substance satisfactory to the Collateral Agent) pursuant to letters acceptable to the Collateral Agent stating that such directions may not be changed without the written consent of the Collateral Agent. The Cash Collateral Account Agreement and the Liens and security interests established in such Cash Collateral Account Agreement will continue until all the Obligations under this Agreement are paid in full and this Agreement is terminated. Section 8.11 [RESERVED] Section 8.12 ERISA Information and Compliance. The Borrower will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Collateral Agent and the Lenders, upon request (i) promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan or any trust created thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA Event or of any "PROHIBITED TRANSACTION," as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by a Responsible Officer specifying the nature thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (iii) immediately upon receipt thereof, copies of any notice of the PBGC's intention to terminate or to have a trustee appointed to administer any Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of section 412 of the Code (determined without regard to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA. Section 8.13 Joinder and Guaranty Agreements. The Borrower and each of its Subsidiaries will cause each of their Subsidiaries, whether newly formed, after acquired, or otherwise existing, upon the creation or acquisition thereof, to become a Guarantor hereunder by 42 way of a Joinder Agreement attached hereto as EXHIBIT E and a Guaranty Agreement attached hereto as EXHIBIT F and the execution of mortgages, deeds of trusts, security agreements, pledges, and any other instruments in form and substance satisfactory to Collateral Agent and in Collateral Agent's sole discretion covering all of such Subsidiaries, assets, security for the Obligations, together with evidence satisfactory to the Collateral Agent, in Collateral Agent's sole discretion, that all such collateral will be a perfected second Lien on such collateral in favor of the Collateral Agent, with only such Liens or other encumbrances of any kind on such collateral that are acceptable to the Collateral Agent. Section 8.14 Ancillary Documents. Not later than the fifth business day immediately succeeding the Closing Date, (i) the Borrower, the Collateral Agent and the Lenders, as applicable, shall enter into the agreements listed on Exhibit G hereto (the "Remaining Agreements"), (ii) the Borrower shall execute and deliver to the Collateral Agent and the Lenders the other documents listed on Exhibit G hereto (the "Remaining Documents" and, collectively with the Other Agreements the "Required Documentation"), and (iii) counsel to the Borrower shall issue opinions required under the terms of this Agreement and the Remaining Agreements, in each case dated as of the date hereof and in form and substance satisfactory to the Collateral Agent. ARTICLE IX NEGATIVE COVENANTS The Borrower covenants and agrees that, until payment in full of all Loans hereunder, all interest thereon and all other amounts payable by the Borrower hereunder, without the prior written consent of the Majority Lenders: Section 9.01 Debt. Neither the Borrower nor any Subsidiary will incur, create, assume or permit to exist any Debt, except: (a) the Notes or other Obligations or any guaranty of or suretyship arrangement for the Notes or other Obligations; (b) The Senior Secured Notes, the Senior Unsecured Notes and Debt of the Borrower existing on the Closing Date which is reflected in the Financial Statements or is disclosed in SCHEDULE 9.01, and any renewals, extensions or refinancings (but not increases) thereof; (c) accounts payable (for the deferred purchase price of Property or services) from time to time incurred in the ordinary course of business which, if greater than 90 days past the invoice or billing date, are being contested in good faith by appropriate proceedings if reserves adequate under GAAP shall have been established therefor; (d) Debt under capital leases (as required to be reported on the financial statements of the Borrower pursuant to GAAP) not to exceed $100,000.00 in the aggregate at any time outstanding; 43 (e) Debt associated with bonds or surety obligations required by contract or by Governmental Requirements in connection with the operation of the Oil and Gas Properties, in the ordinary course of business; (f) Debt of the Borrower and its Subsidiaries under Hedging Agreements, but only if (i) the provider of the Hedging Agreements is a Lender or an unsecured counterparty acceptable to the Collateral Agent; (ii) the total notional volume attributable to such Hedging Agreement, if it is a Hedging Agreement with respect to Hydrocarbon Interests, does not exceed more than seventy-five percent (75%) of scheduled proved producing net production quantities in any period, (iii) if the Hedging Agreement is an interest rate hedge, the notional principal amount shall not exceed more than seventy-five percent (75%) of loans outstanding to the Borrower under the Senior Credit Agreement, provided, however, at no time shall Borrower fail to maintain (x) a hedge position on fifty percent (50%) of proved producing volumes projected to be produced over the next 12 months after the Closing Date, and thereafter on a rolling 12-month basis until the Maturity Date; and (y) a Hedging Agreement on twenty-five (25%) of proved producing production volumes projected to be produced over the 13th through the 24th months after the Closing Date, on a rolling 12-month basis; and (g) any guarantee of Debt otherwise permitted under Section 9.01. Section 9.02 Liens. Neither the Borrower nor any Subsidiary will create, incur, assume or permit to exist any Lien on any of its Properties (now owned or hereafter acquired), except: (a) Liens securing the loans and other obligations under the Senior Credit Agreement; (b) Liens securing the payment of any Obligations; (c) Excepted Liens; (d) Liens securing leases allowed under Section 9.01(d), but only on the Property under lease; (e) Liens disclosed on SCHEDULE 9.02; (f) Liens on cash or securities of the Borrower securing the Debt described in Section 9.01(e); and (g) certain permitted Liens allowed by the Credit Facility Agent, at the Credit Facility Agent's sole discretion. Section 9.03 Investments, Loans and Advances. Neither the Borrower nor any Subsidiary will make or permit to remain outstanding any loans or advances to or investments in any Person (other than the Borrower or any Guarantor), except that the foregoing restriction shall not apply to: 44 (a) investments, loans or advances reflected in the Financial Statements or which are disclosed to the Lenders in SCHEDULE 9.03; (b) accounts receivable arising in the ordinary course of business; (c) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, in each case maturing within one year from the date of creation thereof; (d) commercial paper maturing within one year from the date of creation thereof rated in the highest grade by Standard & Poor's Corporation or Moody's Investors Service, Inc.; (e) deposits maturing within one year from the date of creation thereof with, including certificates of deposit issued by, any Lender or any office located in the United States of any other bank or trust company which is organized under the laws of the United States or any state thereof, has capital, surplus and undivided profits aggregating at least $500,000,000 (as of the date of such Lender's or bank or trust company's most recent financial reports) and has a short term deposit rating of no lower than A2 or P2, as such rating is set forth from time to time, by Standard & Poor's Corporation or Moody's Investors Service, Inc., respectively; (f) deposits in money market funds investing at least ninety-five percent (95%) of funds exclusively in investments described in Section 9.03(c), 9.03(d) or 9.03(e); (g) usual and customary travel and other similar expense advances to employees, officers, directors or agents of the Borrower or any Subsidiary not to exceed $100,000 in the aggregate at any time outstanding; (h) Hedging Agreements permitted to be incurred pursuant to SECTION 9.01(f); and (i) investments by the Borrower in direct ownership interests in additional Oil and Gas Properties and gas gathering systems related thereto. Section 9.04 Dividends, Distributions and Redemptions. The Borrower will not declare or pay any dividend, purchase, redeem or otherwise acquire for value any of its stock now or hereafter outstanding, return any capital to its stockholders or make any distribution of its assets to its stockholders. Section 9.05 Sales and Leasebacks. Neither the Borrower nor any Subsidiary will enter into any arrangement, directly or indirectly, with any Person whereby the Borrower or any Subsidiary shall sell or transfer any of its Property, whether now owned or hereafter acquired, and whereby the Borrower or any Subsidiary shall then or thereafter rent or lease as lessee such Property or any part thereof or other Property which the Borrower or any Subsidiary intends to use for substantially the same purpose or purposes as the Property sold or transferred. 45 Section 9.06 Nature of Business. Neither the Borrower nor any Subsidiary will allow any material change to be made in the character of its business as an independent oil and gas exploration and production company. Section 9.07 Limitation on Leases. Neither the Borrower nor any Subsidiary will create, incur, assume or permit to exist any obligation for the payment of rent or hire of Property of any kind whatsoever (real or personal excluding capital leases, leases of Hydrocarbon Interests and leases of automobiles, compression or other oilfield equipment leased in the ordinary course of business), under leases or lease agreements that would cause the aggregate amount of all payments made by the Borrower and its Subsidiaries pursuant to all such leases or lease agreements to exceed $1,500,000.00 in any period of twelve consecutive calendar months during the life of such leases. Section 9.08 Mergers, Etc. Neither the Borrower nor any Subsidiary will merge into or with or consolidate with any other Person, or sell, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its Property or assets to any other Person; provided, however, nothing shall prohibit Borrower or any Subsidiary from: (i) acquiring (a) any domestic undeveloped Hydrocarbon Interests or (b) domestic developed Oil and Gas Properties, so long as Borrower or such Subsidiary pledges and/or mortgages to the Lenders all such developed Oil and Gas Properties acquired pursuant thereto (to the extent necessary to maintain Agent's Lien in at least eighty-five percent (85%) by value of the Oil and Gas Properties of Borrower and its Subsidiaries) by execution of documents in form and substance satisfactory to Collateral Agent, granting perfected, second priority Liens and security interests in such Oil and Gas Properties subject only to (x) Excepted Liens and other Liens acceptable to the Lenders and (y) Liens securing loans under the Senior Credit Agreement or (ii) merging (after having given the Collateral Agent thirty (30) days prior written notice) (a) any Guarantor into another Guarantor or (b) any Guarantor into Borrower. Section 9.09 Proceeds of Notes. The Borrower will not permit the proceeds of the Notes to be used for any purpose other than those permitted by Section 7.07. Neither the Borrower nor any Person acting on behalf of the Borrower has taken or will take any action which might cause any of the Loan Documents to violate Regulation T, U or X or any other regulation of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. Section 9.10 ERISA Compliance. The Borrower will not at any time: (a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage in, any transaction in connection with which the Borrower, any Subsidiary or any ERISA Affiliate could be subjected to either a civil penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code; (b) Terminate, or permit any Subsidiary or ERISA Affiliate to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability to the Borrower, any Subsidiary or any ERISA Affiliate to the PBGC; 46 (c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail to make, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is required to pay as contributions thereto; (d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to permit to exist, any accumulated funding deficiency within the meaning of section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan; (e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the actuarial present value of the benefit liabilities under any Plan maintained by the Borrower, any Subsidiary or any ERISA Affiliate which is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE BENEFIT LIABILITIES" shall have the meaning specified in section 4041 of ERISA; (f) Contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any Multiemployer Plan; (g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an interest in any Person that causes such Person to become an ERISA Affiliate with respect to the Borrower, any Subsidiary or any ERISA Affiliate if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; (i) Contribute to or assume an obligation to contribute to, or permit any Subsidiary or ERISA Affiliate to contribute to or assume an obligation to contribute to, any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any material liability; or (j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan resulting in an increase in current liability such that the Borrower, any Subsidiary or any ERISA Affiliate is required to provide security to such Plan under section 401(a)(29) of the Code. 47 Section 9.11 Sale or Discount of Receivables. Neither the Borrower nor any Subsidiary will discount or sell (with or without recourse) any of its notes receivable or accounts receivable. Section 9.12 [RESERVED] Section 9.13 Current Ratio. The Borrower will not permit its ratio of (i) consolidated Current Assets (including, without limitation, Borrowing Base availability for loans for general corporate purposes under the Credit Facility) to (ii) consolidated Current Liabilities (excluding current maturities of the Notes) to be less than 1.00 to 1.00 at any time. The current ratio shall be calculated and tested quarterly as of the last day of each fiscal quarter of Borrower, beginning with the quarter ending March 31, 2004. As used in this Section 9.13, "CURRENT ASSETS" shall have the meaning of such term as defined by GAAP, except any availability under the Borrowing Base (as defined in the Senior Credit Agreement) under the Credit Facility shall be included in the definition of Current Assets and "CURRENT LIABILITIES" shall have the meaning of such term as defined by GAAP, except that current maturities of loans under the Credit Facility and under this Agreement shall be excluded from Current Liabilities. Current asset or liability accounts associated with Hedging Agreements will be excluded from calculations of the Current Ratio. Section 9.14 Tangible Net Worth. The Borrower will not permit, at any time, its Tangible Net Worth to be less than eighty-five percent (85%) of Tangible Net Worth as of March 31, 2004, plus fifty percent (50%) of positive net income after tax distributions, plus one hundred percent (100%) of equity offerings after March 31, 2004 excluding any asset impairment charges. Section 9.15 Leverage Ratio. The Borrower will not permit its Leverage Ratio on an annualized basis (until the passing of four (4) full fiscal quarters after the date hereof), on the last day of each fiscal quarter to be more than the ratio set forth below for the corresponding time.
Period Ending Maximum Leverage Ratio - ---------------------------------------- ---------------------- June 30, 2004 through September 30, 2004 3.75x December 31, 2004 and thereafter 3.50x
Section 9.16 Interest Coverage Ratio. The Borrower will not permit its Interest Coverage Ratio (on an annualized basis until the passing of four fiscal quarters after the date hereof) as of the end of any fiscal quarter of the Borrower (calculated quarterly at the end of each fiscal quarter) to be less than the ratio set forth below for the corresponding time periods. For the purposes of this Section 9.16, "INTEREST COVERAGE RATIO" shall mean the ratio of (i) EBITDA for the four fiscal quarters ending on such date to (ii) cash interest payments made for such four fiscal quarters of the Borrower and its Consolidated Subsidiaries. 48
Period Ending Minimum Interest Coverage Ratio - --------------------------------------- ------------------------------- June 30, 2004 through December 31, 2004 2.50x March 30, 2005 through June 30, 2005 2.75x September 30, 2005 and thereafter 3.00x
Section 9.17 Sale of Mortgaged Properties. The Borrower will not, and will not permit any Subsidiary to, Transfer any Mortgaged Property, Oil and Gas Property or any interest in any Mortgaged Property or Oil and Gas Property, except for Permitted Transfers. Section 9.18 [RESERVED] Section 9.19 Environmental Matters. After the Effective Date of this Agreement, Borrower and Borrower's Subsidiaries will remain in substantial compliance with all state and federal environmental regulations and Borrower will not place nor permit to be placed any hazardous substance on any of the Mortgaged Property in violation of applicable state and federal environmental laws. In the event Borrower shall discover any hazardous substances on any of the Mortgaged Property which could result in a breach of the foregoing covenant, Mortgagor shall notify Mortgagee within three (3) days after such discovery. Borrower shall dispose of any hazardous substances generated on a Mortgaged Property after the Effective Date only at facilities and/or with carriers that maintain valid governmental permits under RCRA. Neither the Borrower nor any Subsidiary will cause or permit any of its Property to be in violation of, or do anything or permit anything to be done which will subject any such Property to any remedial obligations under any Environmental Laws, assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to such Property where such violations or remedial obligations would have a Material Adverse Effect. Section 9.20 Transactions with Affiliates. Neither the Borrower nor any Subsidiary will enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of Property or the rendering of any service, with any Affiliate unless such transactions are otherwise permitted under this Agreement, are in the ordinary course of its business and are upon fair and reasonable terms no less favorable to it than it would obtain in a comparable arm's length transaction with a Person not an Affiliate. Section 9.21 Subsidiaries. The Borrower shall not, and shall not permit any Subsidiary to, create, acquire or otherwise own any additional Subsidiaries unless Borrower concurrently pledges to the Collateral Agent for the benefit of the Lenders all stock or other ownership interests of such Subsidiary, and such Subsidiary is created, acquired or otherwise owned and in compliance with Sections 9.03 and 9.08. Section 9.22 Negative Pledge Agreements. Neither the Borrower nor any Subsidiary will create, incur, assume or permit to exist any contract, agreement or understanding (other than this Agreement and the Security Instruments and the Senior Credit Agreement and the security instruments in connection therewith) which in any way prohibits or restricts the 49 granting, conveying, creation or imposition of any Lien on any of its Property in favor of the Collateral Agent or the Lenders or restricts any Subsidiary from paying dividends to the Borrower, or which requires the consent of or notice to other Persons in connection therewith provided, however, the foregoing restrictions will not apply to restrictions existing under or by reason of: (i) applicable law; (ii) customary non-assignment provisions in leases entered into in the ordinary course of business and consistent with past practices; (iii) purchase money obligations for property acquired in the ordinary course of business that impose restrictions on the property so acquired; and (iv) agreements that restrict to the disposition or distribution of assets or property in oil and gas leases, joint operating agreements, joint exploration and/or development agreements, participation agreements and other similar agreements entered into in the ordinary course of the oil and gas exploration and development business. Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will not allow gas imbalances, take-or-pay or other prepayments with respect to the Oil and Gas Properties of the Borrower and its Subsidiaries which would require the Borrower and its Subsidiaries to deliver Hydrocarbons produced on Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor in an aggregate amount, after netting all over-production and all under-production, in excess of three percent (3%) or more of the total volumes of proved, producing reserves of Hydrocarbons (calculated on an mcf equivalent basis with each barrel of oil being equivalent to six mcf of natural gas) reflected in the Initial Reserves Report or the most recent Reserve Report delivered pursuant to SECTION 8.07, as the case may be. Section 9.24 Ownership of Subsidiaries. The Borrower shall fail to pledge, assign, deliver, and transfer to the Collateral Agent for the benefit of the Lenders, and grant to the Collateral Agent for the benefit of the Lenders a continuing security interest in one hundred percent (100%) of the stock or other ownership interests in the Subsidiaries existing as of the date hereof and any Subsidiaries the Borrower shall create, acquire or otherwise own hereafter. Section 9.25 Change in Borrower's or Subsidiary's Name or State of Formation. Without the prior written approval of the Collateral Agent, (a) the Borrower will not (nor permit any Subsidiary to) change its name, identity or place of organization and (b) the Borrower will not (nor permit any Subsidiary to) engage in any other business or transaction under any name other than the Borrower's or each Subsidiary's name hereunder. Should Collateral Agent approve, prior to doing any of the aforesaid, the Borrower shall provide (or cause each Subsidiary to provide) to Collateral Agent all assignments, certificates, financing statements, financing statement amendments or other documents determined necessary in Collateral Agent's sole judgment to protect and continue Collateral Agent's interest in the collateral pledged by Borrower, any Guarantor, or any other party to secure the Obligations. Section 9.26 Material Agreements. Neither the Borrower nor any Subsidiary or Affiliate of Borrower will amend or permit to be amended any Material Agreement to which it is a party, without prior written consent of the Collateral Agent, if such amendment could reasonably be expected to result in a Material Adverse Effect; provided, however, notwithstanding the foregoing, in any event that the Borrower, or any Subsidiary or Affiliate of Borrower, amends or permits any Material Agreement to be amended in any manner whatsoever, the Borrower, or such Subsidiary, or Affiliate of Borrower shall notify the Collateral Agent and 50 shall furnish to the Collateral Agent a fully executed copy of said amendment within five (5) Business Days after request by the Collateral Agent thereof. Section 9.27 Partnership Agreement. The Borrower will not amend or permit to be amended the Partnership Agreement in any manner that could adversely affect any of the Lenders without the prior written consent of the Majority Lenders. ARTICLE X EVENTS OF DEFAULT; REMEDIES Section 10.01 Events of Default. One or more of the following events shall constitute an "EVENT OF DEFAULT": (a) the Borrower shall default in the payment or prepayment when due of any principal of or premium or interest on any Loan, or any fees or other amount payable by it hereunder or under any Security Instrument; or (b) the Borrower or any Subsidiary shall default in the payment when due of any principal of or interest on any of its other Debt aggregating Five Hundred Thousand and No/100 Dollars ($500,000.00) or more, or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Debt shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Debt (or a trustee or agent on behalf of such holder or holders) to cause, such Debt to become due prior to its stated maturity; or (c) any representation, warranty or certification made or deemed made herein or in any Security Instrument by the Borrower or any Subsidiary, or any certificate furnished to any Lender or the Collateral Agent pursuant to the provisions hereof or any Security Instrument, shall prove to have been false or misleading as of the time made or furnished in any material respect; or (d) the Borrower shall default in the performance of any of its obligations under Article IX or any other Article of this Agreement other than under Article VIII; or the Borrower shall default in the performance of any of its obligations under Article VIII or any Security Instrument (other than the payment of amounts due, which shall be governed by Section 10.01(a)) and such default shall continue unremedied for a period of thirty (30) days after the earlier to occur of (i) notice thereof to the Borrower by the Collateral Agent or any Lender (through the Collateral Agent), or (ii) the Borrower otherwise becoming aware of such default; or (e) the Borrower shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due; or (f) the Borrower shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its 51 creditors, (iii) commence a voluntary case under the Federal Bankruptcy Code (as now or hereafter in effect), (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, liquidation or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code, or (vi) take any corporate action for the purpose of effecting any of the foregoing; or (g) a proceeding or case shall be commenced, without the application or consent of the Borrower, in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower of all or any substantial part of its assets, or (iii) similar relief in respect of the Borrower under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) days; or (iv) an order for relief against the Borrower shall be entered in an involuntary case under the Federal Bankruptcy Code; or (h) a judgment or judgments for the payment of money in excess of $500,000.00 in the aggregate shall be rendered by a court against the Borrower or any Subsidiary and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof and the Borrower or such Subsidiary shall not, within said period of thirty (30) days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or (i) the Security Instruments after delivery thereof shall for any reason, except to the extent permitted by the terms thereof, cease to be in full force and effect and valid, binding and enforceable in accordance with their terms, or cease to create a valid and perfected Lien of the priority required thereby on any of the collateral purported to be covered thereby, except to the extent permitted by the terms of this Agreement, or the Borrower shall so state in writing; or (j) an event having a Material Adverse Effect shall occur; or (k) the Borrower or any Subsidiary discontinues its usual business or suffers to exist any material change in its organization or ownership as of the date hereof, or Robert Cavnar and Richard Piacenti, or either of them, or any successors acceptable to Lender, fail to (i) be responsible for running Borrower's or any Subsidiary's day to day operations or (ii) act as Chief Executive Officer and Chief Financial Officer, respectively, of Borrower or any Subsidiary. (l) any Guarantor takes, suffers or permits to exist any of the events or conditions referred to in paragraphs (e), (f), (g) or (h) or if any provision of any guaranty 52 agreement related thereto shall for any reason cease to be valid and binding on Guarantor or if Guarantor shall so state in writing; or (m) any Subsidiary takes, suffers or permits to exist any of the events or conditions referred to in paragraphs (e), (f), (g) or (h). (n) the Existing Senior Subordinated Unsecured Notes shall have failed to be redeemed in full on the redemption date provided in the officer's certificate described in Section 6.01(t), but in no event later than sixty (60) days from the Closing Date. Section 10.02 Remedies. (a) In the case of an Event of Default other than one referred to in clauses (e), (f) or (g) of Section 10.01 or in clause (l) or (m) to the extent it relates to clauses (e), (f) or (g), subject to the terms of the Intercreditor Agreement, the Collateral Agent, upon request of the Majority Lenders, shall, by notice to the Borrower, declare the principal amount then outstanding of, and the accrued interest on, the Loans and all other amounts payable by the Borrower hereunder and under the Notes to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of which are hereby expressly waived by the Borrower. (b) In the case of the occurrence of an Event of Default referred to in clauses (e), (f) or (g) of Section 10.01 or in clause (l) or (m) to the extent it relates to clauses (e), (f) or (g), the principal amount then outstanding of, and the accrued interest on, the Loans and all other amounts payable by the Borrower hereunder and under the Notes shall become automatically immediately due and payable without presentment, demand, protest, notice of intent to accelerate, notice of acceleration or other formalities of any kind, all of which are hereby expressly waived by the Borrower. (c) All proceeds received after maturity of the Notes, whether by acceleration or otherwise shall be applied first to reimbursement of expenses and indemnities provided for in this Agreement and the Security Instruments; second to accrued interest on the Notes; third to fees; fourth pro rata to principal outstanding on the Notes and any other Obligations; and any excess shall be paid to the Borrower or as otherwise required by any Governmental Requirement. ARTICLE XI THE COLLATERAL AGENT Section 11.01 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes the Collateral Agent to act as its agent hereunder and under the Security Instruments with such powers as are specifically delegated to the Collateral Agent by the terms of this Agreement and the Security Instruments, together with such other powers as are reasonably incidental thereto. The Collateral Agent (which term as used in this sentence and in Section 11.05 and the first sentence of Section 11.06 shall include reference to its Affiliates and its and its Affiliates' officers, directors, employees, attorneys, accountants, experts and 53 agents): (i) shall have no duties or responsibilities except those expressly set forth in the Loan Documents, and shall not by reason of the Loan Documents be a trustee or fiduciary for any Lender; (ii) makes no representation or warranty to any Lender and shall not be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement, or in any certificate or other document referred to or provided for in, or received by any of them under, this Agreement, or for the value, validity, effectiveness, genuineness, execution, effectiveness, legality, enforceability or sufficiency of this Agreement, any Note or any other document referred to or provided for herein or for any failure by the Borrower or any other Person (other than the Collateral Agent) to perform any of its obligations hereunder or thereunder or for the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower, its Subsidiaries or any other obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be required to initiate or conduct any litigation or collection proceedings hereunder; and (iv) shall not be responsible for any action taken or omitted to be taken by it hereunder or under any other document or instrument referred to or provided for herein or in connection herewith including its own ordinary negligence, except for its own gross negligence or willful misconduct. The Collateral Agent may employ agents, accountants, attorneys and experts and shall not be responsible for the negligence or misconduct of any such agents, accountants, attorneys or experts selected by it in good faith or any action taken or omitted to be taken in good faith by it in accordance with the advice of such agents, accountants, attorneys or experts. The Collateral Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof permitted hereunder shall have been filed with the Collateral Agent. The Collateral Agent is authorized to release any collateral that is permitted to be sold or released pursuant to the terms of the Loan Documents. Section 11.02 Reliance by Collateral Agent. The Collateral Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telecopier, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Collateral Agent. Section 11.03 Defaults. The Collateral Agent shall not be deemed to have knowledge of the occurrence of a Default (other than the non-payment of principal of or interest on Loans or of fees) unless the Collateral Agent has received notice from a Lender or the Borrower specifying such Default and stating that such notice is a "NOTICE OF DEFAULT." In the event that the Collateral Agent receives such a notice of the occurrence of a Default, the Collateral Agent shall give prompt notice thereof to the Lenders. In the event of a payment Default, the Collateral Agent shall give each Lender prompt notice of each such payment Default. Section 11.04 Rights as a Lender. With respect to the Loans, if any, made by it, Guggenheim (and any successor acting as Collateral Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Collateral Agent, and the term "LENDER" or "LENDERS" shall, unless the context otherwise indicates, include the Collateral Agent in its individual capacity. Guggenheim (and any successor acting as Collateral Agent) and its Affiliates may (without 54 having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Affiliates) as if it were not acting as the Collateral Agent, and Guggenheim and its Affiliates may accept fees and other consideration from the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE COLLATERAL AGENT FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE COLLATERAL AGENT IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT, THE SECURITY INSTRUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, ANY SECURITY INSTRUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE COLLATERAL AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE COLLATERAL AGENT. Section 11.06 Non-Reliance on Collateral Agent and other Lenders. Each Lender acknowledges and agrees that it has, independently and without reliance on the Collateral Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and its decision to enter into this Agreement, and that it will, independently and without reliance upon the Collateral Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. The Collateral Agent shall not be required to keep itself informed as to the performance or observance by the Borrower of this Agreement, the Notes, the Security Instruments or any other document referred to or provided for herein or to inspect the properties or books of the Borrower. Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by the Collateral Agent hereunder, the Collateral Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of the Collateral Agent or any of its Affiliates. In this regard, each Lender acknowledges that Sidley Austin Brown & Wood LLP is acting in this transaction as special counsel to the Collateral Agent only, except to the extent otherwise expressly stated in any legal opinion or any Loan Document. Each Lender will consult with its own legal counsel to the extent that it deems necessary in connection with the Loan Documents and the matters contemplated therein. 55 Section 11.07 Action by Collateral Agent. Except for action or other matters expressly required of the Collateral Agent hereunder, the Collateral Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall (i) receive written instructions from the Majority Lenders (or all of the Lenders as expressly required by Section 12.04) specifying the action to be taken, and (ii) be indemnified to its satisfaction by the Lenders against any and all liability and expenses which may be incurred by it by reason of taking or continuing to take any such action. The instructions of the Majority Lenders (or all of the Lenders as expressly required by Section 12.04) and any action taken or failure to act pursuant thereto by the Collateral Agent shall be binding on all of the Lenders. If a Default has occurred and is continuing, the Collateral Agent shall take such action with respect to such Default as shall be directed by the Majority Lenders (or all of the Lenders as required by Section 12.04) in the written instructions (with indemnities) described in this Section 11.07, provided that, unless and until the Collateral Agent shall have received such directions, the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default as it shall deem advisable in the best interests of the Lenders. In no event, however, shall the Collateral Agent be required to take any action which exposes the Collateral Agent to personal liability or which is contrary to this Agreement and the Security Instruments or applicable law. Section 11.08 Resignation or Removal of Collateral Agent. Subject to the appointment and acceptance of a successor Collateral Agent as provided below, the Collateral Agent may resign at any time by giving notice thereof to the Lenders and the Borrower, and the Collateral Agent may be removed at any time with or without cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Collateral Agent. If no successor Collateral Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Collateral Agent's giving of notice of resignation or the Majority Lenders' removal of the retiring Collateral Agent, then the retiring Collateral Agent may, on behalf of the Lenders, appoint a successor Collateral Agent. Upon the acceptance of such appointment hereunder by a successor Collateral Agent, such successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After any retiring Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Article XI and Section 12.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Collateral Agent. ARTICLE XII MISCELLANEOUS Section 12.01 Waiver. No failure on the part of the Collateral Agent or any Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any of the Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any of the Loan Documents preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. 56 Section 12.02 Notices. All notices and other communications provided for herein and in the other Loan Documents (including, without limitation, any modifications of, or waivers or consents under, this Agreement or the other Loan Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the intended recipient at the "ADDRESS FOR NOTICES" specified below its name on the signature pages hereof or in the Loan Documents, except that all such notices and communications sent to Collateral Agent shall be sent to Guggenheim Corporate Funding, LLC, 135 E. 57th Street, New York, New York 10022, Attention: Managing Director -- Mission Resources Corporation or, as to any party, at such other address as shall be designated by such party in a notice to each other party. Except as otherwise provided in this Agreement or in the other Loan Documents, all such communications shall be deemed to have been duly given when transmitted, if transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next succeeding Business Day) by telex or telecopier and evidence or confirmation of receipt is obtained, or personally delivered or, in the case of a mailed notice, three (3) Business Days after the date deposited in the mails, postage prepaid, in each case given or addressed as aforesaid. Section 12.03 Payment of Expenses, Indemnities, etc. (a) The Borrower agrees: (i) whether or not the transactions hereby contemplated are consummated, to pay all reasonable expenses of the Collateral Agent in the administration (both before and after the execution hereof and including advice of counsel as to the rights and duties of the Collateral Agent and the Lenders with respect thereto) of, and in connection with the negotiation, syndication, investigation, preparation, execution and delivery of, recording or filing of, preservation of rights under, enforcement of, and refinancing, renegotiation or restructuring of, the Loan Documents and any amendment, waiver or consent relating thereto (including, without limitation, travel, photocopy, mailing, courier, telephone and other similar expenses of the Collateral Agent, the cost of environmental audits, surveys and appraisals at reasonable intervals, the reasonable fees and disbursements of counsel and other outside consultants for the Collateral Agent and, in the case of enforcement, the reasonable fees and disbursements of counsel for the Collateral Agent and any of the Lenders); and promptly reimburse the Collateral Agent for all amounts expended, advanced or incurred by the Collateral Agent or the Lenders to satisfy any obligation of the Borrower under this Agreement or any Security Instrument, including without limitation, all costs and expenses of foreclosure; (ii) TO INDEMNIFY THE COLLATERAL AGENT AND EACH LENDER AND EACH OF THEIR AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY 57 WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE COLLATERAL AGENT OR A LENDER'S SHAREHOLDERS AGAINST THE COLLATERAL AGENT OR LENDER OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND (iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS; PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(A)(III) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE COLLATERAL AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE). 58 (b) No Indemnified Party may settle any claim to be indemnified without the consent of the indemnitor, such consent not to be unreasonably withheld; provided, however, that the indemnitor may not reasonably withhold consent to any settlement that an Indemnified Party proposes, if the indemnitor does not have the financial ability to pay all its obligations outstanding and asserted against the indemnitor at that time, including the maximum potential claims against the Indemnified Party to be indemnified pursuant to this Section 12.03. (c) In the case of any indemnification hereunder, the Collateral Agent or Lender, as appropriate shall give notice to the Borrower of any such claim or demand being made against the Indemnified Party and the Borrower shall have the non-exclusive right to join in the defense against any such claim or demand provided that if the Borrower provides a defense, the Indemnified Party shall bear its own cost of defense unless there is a conflict between the Borrower and such Indemnified Party. (d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY. (e) The Borrower's obligations under this Section 12.03 shall survive any termination of this Agreement and the payment of the Notes and shall continue thereafter in full force and effect. (f) The Borrower shall pay any amounts due under this Section 12.03 within thirty (30) days of the receipt by the Borrower of notice of the amount due. Section 12.04 Amendments, Etc. Any provision of this Agreement or any Security Instrument may be amended, modified or waived with the Borrower's and the Majority Lenders' prior written consent; provided, however, that (i) no amendment, modification or waiver which extends the final maturity of the Loans, forgives the principal amount of any Obligations outstanding under this Agreement, releases any guarantor of any Obligations or releases all or substantially all of the collateral, reduces the interest rate applicable to the Loans or the fees payable to the Lenders generally, affects Section 2.03(a), this Section 12.04 or Section 12.06(a) or modifies the definition of "MAJORITY LENDERS" shall be effective without consent of all Lenders; and (ii) no amendment, modification or waiver which modifies the rights, duties or obligations of the Collateral Agent shall be effective without the consent of the Collateral Agent. 59 Section 12.05 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 12.06 Assignments. (a) The Borrower may not assign its rights or obligations hereunder or under the Notes without the prior consent of all of the Lenders and the Collateral Agent. (b) Any Lender may assign to one or more of its Affiliates without restriction and may, with the written consent of the Collateral Agent and, if no Event of Default has occurred and is continuing, the Borrower (which consent shall not be unreasonably withheld) assign to one or more other assignees all or a portion of its rights and obligations under this Agreement pursuant to an Assignment Agreement substantially in the form of EXHIBIT D (an "ASSIGNMENT"); provided, however, that (i) any such assignment other than to an Affiliates shall be in the amount of at least $5,000,000.00, and (ii) the assignee shall have executed, and thereby become a party to, the Intercreditor Agreement, and (iii) the assignee or assignor shall pay to the Collateral Agent a processing and recordation fee of $3,000.00 for each assignment. Any such assignment will become effective upon the execution and delivery to the Collateral Agent, the Borrower and the Guarantors of the Assignment Agreement and a signature page of the Intercreditor Agreement, duly executed by the assignee. Upon receipt of such executed documents, the Borrower will, at its own expense, execute and deliver new Notes to the assignor and/or assignee, as appropriate, in accordance with their respective interests as they appear. Upon the effectiveness of any assignment pursuant to this Section 12.06(b), the assignee will become a "LENDER", if not already a "LENDER," for all purposes of this Agreement and the Security Instruments. The assignor shall be relieved of its obligations hereunder to the extent of such assignment (and if the assigning Lender no longer holds any rights or obligations under this Agreement, such assigning Lender shall cease to be a "LENDER" hereunder except that its rights under Sections 4.06 and 12.03 shall not be affected). The Collateral Agent will prepare on the last Business Day of each month during which an assignment has become effective pursuant to this Section 12.06(b), a new ANNEX I giving effect to all such assignments effected during such month, and will promptly provide the same to the Borrower and each of the Lenders. (c) The Lenders may furnish any information concerning the Borrower in the possession of the Lenders from time to time to assignees (including prospective assignees); provided that, such Persons agree to be bound by the provisions of Section 12.15. (d) Notwithstanding any other provisions of this Section 12.06, no transfer or assignment of the interests or obligations of any Lender shall be permitted if such transfer or assignment would require the Borrower to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any state. Section 12.07 Invalidity. In the event that any one or more of the provisions contained in any of the Loan Documents shall, for any reason, be held invalid, illegal or 60 unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of the Notes, this Agreement or any other Loan Document. Section 12.08 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Agreement by signing any such counterpart. Section 12.09 References; Use of Word "Including". The words "herein," "hereof", "hereunder" and other words of similar import when used in this Agreement refer to this Agreement as a whole, and not to any particular article, section or subsection. Any reference herein to a Section or Article shall be deemed to refer to the applicable Section or Article of this Agreement unless otherwise stated herein. Any reference herein to an exhibit, schedule, or other attachment shall be deemed to refer to the applicable exhibit, schedule, or other attachment attached hereto unless otherwise stated herein. The word "including", "includes" and words of similar import means "including, without limitation". Section 12.10 Survival. The obligations of the parties under Section 4.06, Article V, and Sections 11.05, 12.03 and 12.15 shall survive the repayment of the Loans. To the extent that any payments on the Obligations or proceeds of any collateral are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver or other Person under any bankruptcy law, common law or equitable cause, then to such extent, the Obligations so satisfied shall be revived and continue as if such payment or proceeds had not been received and the Collateral Agent's and the Lenders' Liens, security interests, rights, powers and remedies under this Agreement and each Security Instrument shall continue in full force and effect. In such event, each Security Instrument shall be automatically reinstated and the Borrower shall take such action as may be reasonably requested by the Collateral Agent and the Lenders to effect such reinstatement. Section 12.11 Captions. Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER IS LOCATED. 61 (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE THE COLLATERAL AGENT OR ANY LENDER FROM OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING JURISDICTION. (c) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT, ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER OR ITS PROPERTIES IN ANY OTHER JURISDICTION. (d) THE BORROWER, THE COLLATERAL AGENT AND EACH LENDER HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE, 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 (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13. Section 12.14 Interest. It is the intention of the parties hereto that each Lender shall conform strictly to usury laws applicable to it. Accordingly, if the transactions contemplated hereby would be usurious as to any Lender under laws applicable to it (including the laws of the United States of America and the State of New York or any other jurisdiction whose laws may be mandatorily applicable to such Lender notwithstanding the other provisions of this Agreement), then, in that event, notwithstanding anything to the contrary in any of the 62 Loan Documents or any agreement entered into in connection with or as security for the Notes, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to any Lender that is contracted for, taken, reserved, charged or received by such Lender under any of the Loan Documents or agreements or otherwise in connection with the Notes shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be canceled automatically and if theretofore paid shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower); and (ii) in the event that the maturity of the Notes is accelerated by reason of an election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to any Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically by such Lender as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by such Lender on the principal amount of the Obligations (or, to the extent that the principal amount of the Obligations shall have been or would thereby be paid in full, refunded by such Lender to the Borrower). All sums paid or agreed to be paid to any Lender for the use, forbearance or detention of sums due hereunder shall, to the extent permitted by law applicable to such Lender, be amortized, prorated, allocated and spread throughout the full term of the Loans evidenced by the Notes until payment in full so that the rate or amount of interest on account of any Loans hereunder does not exceed the maximum amount allowed by such applicable law. If at any time and from time to time (i) the amount of interest payable to any Lender on any date shall be computed at the Highest Lawful Rate applicable to such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent interest computation period the amount of interest otherwise payable to such Lender would be less than the amount of interest payable to such Lender computed at the Highest Lawful Rate applicable to such Lender, then the amount of interest payable to such Lender in respect of such subsequent interest computation period shall continue to be computed at the Highest Lawful Rate applicable to such Lender until the total amount of interest payable to such Lender shall equal the total amount of interest which would have been payable to such Lender if the total amount of interest had been computed without giving effect to this Section 12.14. Section 12.15 Confidentiality. In the event that the Borrower provides to the Collateral Agent or the Lenders written confidential information belonging to the Borrower, if the Borrower shall denominate such information in writing as "CONFIDENTIAL", the Collateral Agent and the Lenders shall thereafter maintain such information in confidence in accordance with the standards of care and diligence that each utilizes in maintaining its own confidential information. This obligation of confidence shall not apply to such portions of the information which (i) are in the public domain, (ii) hereafter become part of the public domain without the Collateral Agent or the Lenders breaching their obligation of confidence to the Borrower, (iii) are previously known by the Collateral Agent or the Lenders from some source other than the Borrower, (iv) are hereafter developed by the Collateral Agent or the Lenders without using the Borrower's information, (v) are hereafter obtained by or available to the Collateral Agent or the Lenders from a third party who owes no obligation of confidence to the Borrower with respect to such information or through any other means other than through disclosure by the Borrower, (vi) are disclosed with the Borrower's consent, (vii) must be disclosed either pursuant 63 to any Governmental Requirement or to Persons regulating the activities of the Collateral Agent or the Lenders, or (viii) as may be required by law or regulation or order of any Governmental Authority in any judicial, arbitration or governmental proceeding. Further, the Collateral Agent or a Lender may disclose any such information to any other Lender, any independent petroleum engineers or consultants, any independent certified public accountants, any legal counsel employed by such Person in connection with this Agreement or any Security Instrument, including without limitation, the enforcement or exercise of all rights and remedies thereunder, or any assignee or participant (including prospective assignees and participants) in the Loans; provided, however, that the Collateral Agent or the Lenders shall receive a confidentiality agreement from the Person to whom such information is disclosed such that said Person shall have the same obligation to maintain the confidentiality of such information as is imposed upon the Collateral Agent or the Lenders hereunder. Notwithstanding anything to the contrary provided herein, this obligation of confidence shall cease three (3) years from the date the information was furnished, unless the Borrower requests in writing at least thirty (30) days prior to the expiration of such three year period, to maintain the confidentiality of such information for an additional three-year period. The Borrower waives any and all other rights it may have to confidentiality as against the Collateral Agent and the Lenders arising by contract, agreement, statute or law except as expressly stated in this Section 12.15. Section 12.16 Effectiveness. This Agreement shall be effective on the Closing Date (the "EFFECTIVE DATE"). Section 12.17 Exculpation Provisions. Each of the parties hereto specifically agrees that it has a duty to read this Agreement and the Security Instruments and agrees that it is charged with notice and knowledge of the terms of this Agreement and the Security Instruments; that it has in fact read this Agreement and is fully informed and has full notice and knowledge of the terms, conditions and effects of this Agreement; that it has been represented by independent legal counsel of its choice throughout the negotiations preceding its execution of this Agreement and the Security Instruments; and has received the advice of its attorney in entering into this Agreement and the Security Instruments; and that it recognizes that certain of the terms of this Agreement and the Security Instruments result in one party assuming the liability inherent in some aspects of the transaction and relieving the other party of its responsibility for such liability. Each party hereto agrees and covenants that it will not contest the validity or enforceability of any exculpatory provision of this Agreement and the Security Instruments on the basis that the party had no notice or knowledge of such provision or that the provision is not "CONSPICUOUS." Section 12.18 Arbitration. (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. 64 (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in New York selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the "RULES"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C.Section.91 or any similar applicable state law. (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in Sections (i), (ii) and (iii) of this paragraph. (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided, however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of New York with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of New York and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the New York 65 Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than twenty (20) days before the hearing date and within one hundred and eighty (180) days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available. (f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding. (g) Payment of Arbitration Costs and Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding. (h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within one hundred and eighty (180) days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties. [SIGNATURES BEGIN ON NEXT PAGE] 66 The parties hereto have caused this Agreement to be duly executed as of the day and year first above written. BORROWER: MISSION RESOURCES CORPORATION By: /s/ Richard W. Piacenti --------------------------------------- Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer Address for Notices: 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No. (713) 642-2916 Telephone No.: (713) 495-3000 Attention: Chief Financial Officer With copy to: Porter & Hedges L.L.P. 700 Louisiana Street, Suite 3500 Houston, Texas 77002 Attention: William W. Wiggins, Jr. 67 COLLATERAL AGENT: GUGGENHEIM CORPORATE FUNDING, LLC By: /s/ Todd Boehly --------------------------------------- Name: Todd Boehly Title: Authorized Signatory Address for Notices: GUGGENHEIM CORPORATE FUNDING, LLC 135 E. 57th Street New York, New York 10022 Telecopier No.: (212) 644-8396 Telephone No.: (212) 651-9453 Attention: Managing Director, Mission Resources [With copy to:] Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attention: Jack I. Kantrowitz Myles Pollin 68 UPPER COLUMBIA CAPITAL COMPANY, LLC: By: /s/ Todd Boehly ---------------------------------------- Name: Todd Boehly Title: Manager LENDING OFFICE 135 East 57th Street New York, NY 10018 Address for Notices: 135 East 57th Street New York, NY 10018 Telecopier No.: (212) 644-8396 Telephone No.: (212) 651-9453 Attention: Todd Boehly With copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, NY 10019 Attention: Jack I. Kantrowitz, Esq. Myles Pollin, Esq. 69 ANNEX I LIST OF LENDERS AND LOANS
NAME OF LENDER TERM LOAN - ----------------------------------- ----------- Upper Columbia Capital Company, LLC $25,000,000 TOTAL $25,000,000
Annex I-1 EXHIBIT A FORM OF NOTE $25,000,000 April 8, 2004 FOR VALUE RECEIVED, MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER") hereby promises to pay to the order of UPPER COLUMBIA CAPITAL COMPANY, LLC (the "LENDER"), c/o GUGGENHEIM CORPORATE FUNDING, LLC (the "COLLATERAL AGENT"), at 135 E. 57th Street, New York, New York 10022, the principal sum of Twenty-Five Million Dollars ($25,000,000) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the Lender to the Borrower under the Term Loan Agreement, as hereinafter defined), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Term Loan Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Term Loan Agreement. The date, amount, interest rate, Interest Period and maturity of each Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedules attached hereto. This Note is one of the Notes referred to in the Term Loan Agreement dated as of April 8, 2004, among the Borrower, the Lenders which are or become parties thereto (including the Lender) and the Collateral Agent (as the same may be amended or supplemented from time to time, the "Term Loan Agreement"), and evidences Loans made by the Lender thereunder. Capitalized terms used in this Note have the respective meanings assigned to them in the Term Loan Agreement. This Note is issued pursuant to the Term Loan Agreement and is entitled to the benefits provided for in the Term Loan Agreement and the Security Instruments. The Term Loan Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events, for prepayments of Loans upon the terms and conditions specified therein and other provisions relevant to this Note. Exhibit A-1 THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. MISSION RESOURCES CORPORATION By: _______________________________________________ Name: Richard W. Piacenti Title: Executive Vice President and Chief Financial Officer Exhibit A-2 EXHIBIT B FORM OF COMPLIANCE CERTIFICATE The undersigned hereby certifies that he is the ________________ of MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER") and that as such he is authorized to execute this certificate on behalf of the Borrower. With reference to the Term Loan Agreement dated as of April 8, 2004, among the Borrower, GUGGENHEIM CORPORATE FUNDING, LLC, as Collateral Agent for the lenders (the "LENDERS") which are or become a party thereto, and such Lenders (together with all amendments, modifications, supplements and/or restatements thereto being the "TERM LOAN AGREEMENT"), the undersigned represents and warrants as follows (each capitalized term used herein having the same meaning given to it in the Credit Agreement unless otherwise specified): (a) The representations and warranties of the Borrower contained in Article VII of the Term Loan Agreement and in the Security Instruments and otherwise made in writing by or on behalf of the Borrower pursuant to the Term Loan Agreement and the Security Instruments were true and correct when made, and are repeated at and as of the time of delivery hereof and are true and correct at and as of the time of delivery hereof, except to the extent any such representations and warranties are expressly limited to an earlier date or the Majority Lenders have expressly consented in writing to the contrary. (b) The Borrower has performed and complied with all agreements and conditions contained in the Credit Agreement and in the Security Instruments required to be performed or complied with by it prior to or at the time of delivery hereof. (c) Neither the Borrower nor any Subsidiary has incurred any material liabilities, direct or contingent, since _________________, except those set forth in SCHEDULE 9.01 to the Credit Agreement and except those allowed by the terms of the Credit Agreement or consented to by the Majority Lenders in writing. (d) Since __________________, no change has occurred, either in any case or in the aggregate, in the condition, financial or otherwise, of the Borrower or any Subsidiary which would have a Material Adverse Effect. (e) There exists, and, after giving effect to the loan or loans with respect to which this certificate is being delivered, will exist, no Default under the Credit Agreement or any event or circumstance which constitutes, or with notice or lapse of time (or both) would constitute, an event of default under any loan or credit agreement, indenture, deed of trust, security agreement or other agreement or instrument evidencing or pertaining to any Debt of the Borrower or any Subsidiary, or under any material agreement or instrument to which the Borrower or any Subsidiary is a party or by which the Borrower or any Subsidiary is bound. (f) The financial statements furnished to the Collateral Agent with this certificate fairly present the consolidated financial condition and results of operations of Exhibit B-1 the Borrower and its Consolidated Subsidiaries as at the end of, and for, the [fiscal quarter] [fiscal year] ending _________________________ and such financial statements have been prepared in accordance with the accounting procedures specified in the Credit Agreement. (g) Attached hereto are the detailed computations necessary to determine whether the Borrower and its Consolidated Subsidiaries are in compliance with Sections 9.13, 9.14, 9.15 and 9.16 of the Term Loan Agreement as of the end of the [fiscal quarter] [fiscal year] ending _________________________. EXECUTED AND DELIVERED this ____ day of ______________. MISSION RESOURCES CORPORATION By: __________________________________ Name: _______________________________ Title: _______________________________ Exhibit B-2 EXHIBIT C SECURITY INSTRUMENTS 1. Amended, Restated and Consolidated Mortgages, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement of Borrower (Texas) (Louisiana) 2. Mortgages, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement of Mission E&P (Texas) (Louisiana) 3. Amended and Restated Mortgages, Deed of Trust, Assignment of Production, Security Agreement and Financing Statement of Mission E&P (New Mexico) 4. Security Agreement of Borrower covering all assets of Borrower 5. UCC-1 Financing Statement (Delaware Secretary of State) relating to all assets of Borrower 6. Third Party Security Agreement of Mission E&P covering all assets of Mission E&P 7. UCC-1 Financing Statement (Texas Secretary of State) relating to all assets of Mission E&P Limited Partnership 8. Pledge Agreement by Borrower 9. Third Party Pledge Agreement by Black Hawk 10. UCC-1 Financing Statement (Delaware Secretary of State) relating to Third Party Pledge Agreement by Black Hawk 11. Third Party Pledge Agreement by [Mission E&P] 12. UCC-1 Financing Statement (Delaware Secretary of State) relating to Third Party Pledge Agreement by Mission E&P 13. Guaranty - Mission E&P 14. Guaranty - Black Hawk 15. Guaranty - Mission Holdings 16. Contribution and Indemnification Agreement between Borrower and _______________, ____________________, ________________________, and ______________________. 17. Intercreditor Agreement by Collateral Agent, Borrower, Guarantors and Wells Fargo Bank, National Association. 18. Letters in Lieu Exhibit C-1 19. Section 26.02 Notice Exhibit C-2 EXHIBIT D FORM OF ASSIGNMENT AGREEMENT ASSIGNMENT AGREEMENT ("AGREEMENT") dated as of ________________, 200___ between _____________________________________________________ (the "ASSIGNOR") and __________________________ (the "ASSIGNEE"). RECITALS A. The Assignor is a party to the Term Loan Agreement dated as of April 8, 2004 (as amended, modified, supplemented and/or restated and in effect from time to time, the "TERM LOAN AGREEMENT") among MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER"), each of the lenders that is or becomes a party thereto as provided in Section 12.06 of the Term Loan Agreement (individually, together with its successors and assigns, a "LENDER", and collectively, together with their successors and assigns, the "Lenders"), and Guggenheim Corporate Funding, LLC, in its individual capacity, ("GUGGENHEIM") and as collateral agent for the Lenders (in such capacity, together with its successors in such capacity, the "COLLATERAL AGENT"). The Assignor is also a party to the Intercreditor Agreement dated as of April 8, 2004 (as amended, modified, supplemented and/or restated and in effect from time to time, the "INTERCREDITOR AGREEMENT") by and between Mission Resources Corporation, a Delaware corporation, Black Hawk Oil Company, a Delaware corporation, Mission Holdings LLC, a Delaware limited liability company, Mission E&P Limited Partnership, a Texas limited partnership, Wells Fargo Bank, National Association, in its capacity as agent for itself and for each of the lenders to be a party to the Senior Secured Term Loan Agreement dated as of April 8, 2004 and Guggenheim Corporate Funding LLC, a Delaware limited liability company as collateral agent, for itself and for each of the lenders that is or becomes a party to the Term Loan Agreement. B. The Assignor proposes to sell, assign and transfer to the Assignee, and the Assignee proposes to purchase and assume from the Assignor, a portion of the Assignor's outstanding Loans on the terms and conditions of this Agreement. C. In consideration of the foregoing and the mutual agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01 Definitions. All capitalized terms used but not defined herein have the respective meanings given to such terms in the Term Loan Agreement. Section 1.02 Other Definitions. As used herein, the following terms have the following respective meanings: "ASSIGNED INTEREST" shall mean all of Assignor's (in its capacity as a "LENDER") rights and obligations under the Term Loan Agreement and the other Security Exhibit D-1 Instruments in respect of the principal amount of the Loans outstanding thereunder, currently in the amount of $_________________ (the "LOAN BALANCE"), plus the interest and fees which will accrue from and after the Assignment Date. "ASSIGNMENT DATE" shall mean _____________________, 200__. ARTICLE II SALE AND ASSIGNMENT Section 2.01 Sale and Assignment. On the terms and conditions set forth herein, effective on and as of the Assignment Date, the Assignor hereby sells, assigns and transfers to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, all of the right, title and interest of the Assignor in and to, and all of the obligations of the Assignor in respect of, the Assigned Interest. Such sale, assignment and transfer is without recourse and, except as expressly provided in this Agreement, without representation or warranty. Section 2.02 Assumption of Obligations. The Assignee agrees with the Assignor (for the express benefit of the Assignor and the Borrower) that the Assignee will, from and after the Assignment Date, perform all of the obligations of the Assignor in respect of the Assigned Interest. From and after the Assignment Date: (a) the Assignor shall be released from the Assignor's obligations in respect of the Assigned Interest, and (b) the Assignee shall be entitled to all of the Assignor's rights, powers and privileges under the Term Loan Agreement and the other Security Instruments in respect of the Assigned Interest. Section 2.03 Consent by Collateral Agent. By executing this Agreement as provided below, in accordance with Section 12.06(b) of the Term Loan Agreement, the Collateral Agent hereby acknowledges notice of the transactions contemplated by this Agreement and consents to such transactions. ARTICLE III PAYMENTS Section 3.01 Payments. As consideration for the sale, assignment and transfer contemplated by Section 2.01 hereof, the Assignee shall, on the Assignment Date, assume Assignor's obligations in respect of the Assigned Interest and pay to the Assignor an amount equal to the Loan Balance, if any. An amount equal to all accrued and unpaid interest and fees shall be paid to the Assignor as provided in Section 3.02 (iii) below. Except as otherwise provided in this Agreement, all payments hereunder shall be made in Dollars and in immediately available funds, without setoff, deduction or counterclaim. Section 3.02 Allocation of Payments. The Assignor and the Assignee agree that (i) the Assignor shall be entitled to any payments of principal with respect to the Assigned Interest made prior to the Assignment Date, together with any interest and fees with respect to the Assigned Interest accrued prior to the Assignment Date, (ii) the Assignee shall be entitled to any payments of principal with respect to the Assigned Interest made from and after the Assignment Date, together with any and all interest and fees with respect to the Assigned Interest accruing from and after the Assignment Date, and (iii) the Collateral Agent is authorized and instructed to allocate payments received by it for account of the Assignor and the Assignee as Exhibit D-2 provided in the foregoing clauses. Each party hereto agrees that it will hold any interest, fees or other amounts that it may receive to which the other party hereto shall be entitled pursuant to the preceding sentence for account of such other party and pay, in like money and funds, any such amounts that it may receive to such other party promptly upon receipt. Section 3.03 Delivery of Notes. Promptly following the receipt by the Assignor of the consideration required to be paid under Section 3.01 hereof, the Assignor shall, in the manner contemplated by Section 12.06(b) of the Term Loan Agreement, (i) deliver to the Collateral Agent (or its counsel) the Notes held by the Assignor and (ii) notify the Collateral Agent to request that the Borrower execute and deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the Assignee, dated the date of this Agreement in respective principal amounts equal to the respective Loans of the Assignor (if appropriate) and the Assignee after giving effect to the sale, assignment and transfer contemplated hereby. Section 3.04 Further Assurances. The Assignor and the Assignee hereby agree to execute and deliver such other instruments, and take such other actions, as either party may reasonably request in connection with the transactions contemplated by this Agreement. ARTICLE IV CONDITIONS PRECEDENT Section 4.01 Conditions Precedent. The effectiveness of the sale, assignment and transfer contemplated hereby is subject to the satisfaction of each of the following conditions precedent: (a) the execution and delivery of this Agreement by the Assignor and the Assignee; (b) the execution and delivery of the Intercreditor Agreement by the Assignee; (c) the receipt by the Assignor of the payment required to be made by the Assignee under Section 3.01 hereof; and (d) the acknowledgment and consent by the Collateral Agent contemplated by Section 2.03 hereof. ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.01 Representations and Warranties of the Assignor. The Assignor represents and warrants to the Assignee as follows: (a) it has all requisite power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill its obligations under, and consummate the transactions contemplated by, this Agreement; (b) the execution, delivery and compliance with the terms hereof by Assignor and the delivery of all instruments required to be delivered by it hereunder do not and Exhibit D-3 will not violate any Governmental Requirement applicable to it; (c) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against it in accordance with its terms; (d) all approvals and authorizations of, all filings with and all actions by any Governmental Authority necessary for the validity or enforceability of its obligations under this Agreement have been obtained; (e) the Assignor has good title to, and is the sole legal and beneficial owner of, the Assigned Interest, free and clear of all Liens, claims, participations or other charges of any nature whatsoever; and (f) the transactions contemplated by this Agreement are commercial banking transactions entered into in the ordinary course of the banking business of the Assignor. Section 5.02 Disclaimer. Except as expressly provided in Section 5.01 hereof, the Assignor does not make any representation or warranty, nor shall it have any responsibility to the Assignee, with respect to the accuracy of any recitals, statements, representations or warranties contained in the Term Loan Agreement or in any certificate or other document referred to or provided for in, or received by any Lender under, the Term Loan Agreement, or for the value, validity, effectiveness, genuineness, execution, effectiveness, legality, enforceability or sufficiency of the Term Loan Agreement, the Notes or any other document referred to or provided for therein or for any failure by the Borrower or any other Person (other than Assignor) to perform any of its obligations thereunder prior or for the existence, value, perfection or priority of any collateral security or the financial or other condition of the Borrower or the Subsidiaries or any other obligor or guarantor, or any other matter relating to the Term Loan Agreement or any other Security Instrument or any extension of credit thereunder. Section 5.03 Representations and Warranties of the Assignee. The Assignee represents and warrants to the Assignor as follows: (a) it has all requisite power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill its obligations under, and consummate the transactions contemplated by, this Agreement; (b) the execution, delivery and compliance with the terms hereof by Assignee and the delivery of all instruments required to be delivered by it hereunder do not and will not violate any Governmental Requirement applicable to it; (c) this Agreement has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against it in accordance with its terms; (d) all approvals and authorizations of, all filings with and all actions by any Governmental Authority necessary for the validity or enforceability of its obligations under this Agreement have been obtained; Exhibit D-4 (e) the Assignee has fully reviewed the terms of the Term Loan Agreement and the other Security Instruments and has independently and without reliance upon the Assignor, and based on such information as the Assignee has deemed appropriate, made its own credit analysis and decision to enter into this Agreement; (f) the Assignee hereby affirms that the representations contained in Section 4.06(d)(i) and (ii) of the Term Loan Agreement are true and accurate as to it and, to the extent applicable, the Assignee has contemporaneously herewith delivered to the Collateral Agent and the Borrower such certifications as are required thereby to avoid the withholding taxes referred to in Section 4.06; and (g) the transactions contemplated by this Agreement are commercial banking transactions entered into in the ordinary course of the banking business of the Assignee. ARTICLE VI MISCELLANEOUS Section 6.01 Notices. All notices and other communications provided for herein (including, without limitation, any modifications of, or waivers, requests or consents under, this Agreement) shall be given or made in writing (including, without limitation, by telex or telecopy) to the intended recipient at its "ADDRESS FOR NOTICES" specified below its name on the signature pages hereof or, as to either party, at such other address as shall be designated by such party in a notice to the other party. Section 6.02 Amendment, Modification or Waiver. No provision of this Agreement may be amended, modified or waived except by an instrument in writing signed by the Assignor and the Assignee, and consented to by the Collateral Agent. Section 6.03 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. The representations and warranties made herein by the Assignee are also made for the benefit of the Collateral Agent and the Borrower, and the Assignee agrees that the Collateral Agent and the Borrower are entitled to rely upon such representations and warranties. Section 6.04 Assignments. Neither party hereto may assign any of its rights or obligations hereunder except in accordance with the terms of the Term Loan Agreement. Section 6.05 Captions. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 6.06 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be identical and all of which, taken together, shall constitute one and the same instrument, and each of the parties hereto may execute this Agreement by signing any such counterpart. Section 6.07 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Texas. Exhibit D-5 Section 6.08 Expenses. Each party hereto shall bear its own expenses in connection with the execution, delivery and performance of this Agreement. Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be executed and delivered as of the date first above written. ASSIGNOR: __________________________________________ By: ______________________________________ Name: ____________________________________ Title: ___________________________________ Address for Notices: __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ Exhibit D-6 ASSIGNEE: __________________________________________ By: ______________________________________ Name: ____________________________________ Title: ___________________________________ Address for Notices: __________________________________________ __________________________________________ __________________________________________ Telecopier No.: __________________________ Telephone No.: ___________________________ Attention: _______________________________ ACKNOWLEDGED AND CONSENTED TO: __________________________________________, as Collateral Agent By: ______________________________________ Name: ____________________________________ Title: ___________________________________ Exhibit D-7 EX-10.3 8 h14499aexv10w3.txt INTERCREDITOR AGREEMENT DATED APRIL 8, 2004 EXHIBIT 10.3 EXECUTION COUNTERPART INTERCREDITOR AGREEMENT THIS INTERCREDITOR AGREEMENT (as amended, modified, supplemented, renewed, restated or replaced in writing from time to time, the "Agreement") is made as of April 8, 2004, by and between Mission Resources Corporation, a Delaware corporation ("Borrower"), Black Hawk Oil Company, a Delaware corporation ("Black Hawk"), Mission Holdings LLC, a Delaware limited liability company ("MSSN Holdings"), Mission E&P Limited Partnership, a Texas limited partnership ("MSSN E&P") Wells Fargo Bank, National Association, in its capacity as agent for itself and for the lenders to be a party to the Senior Credit Agreement as defined below (collectively, the "Senior Secured Creditor") and Guggenheim Corporate Funding LLC, a Delaware limited liability company as collateral agent, for itself and for each of the lenders that is or becomes a party to the Second Lien Credit Agreement ("Second Lien Creditor"). Capitalized terms not defined in this Agreement have the meanings given them in the Senior Credit Agreement. RECITALS WHEREAS, Senior Secured Creditor has made, and in the future may make, credit accommodations available to Borrower pursuant to the terms and provisions of a credit agreement, dated as of the date hereof, by and between Senior Secured Creditor and Borrower (such agreement, as the same may be amended, supplemented, modified, extended, renewed, restated and/or replaced as permitted hereunder, the "Senior Credit Agreement"); WHEREAS, as a condition for executing and entering into the Senior Credit Agreement, the Senior Secured Creditor has required that the Second Lien Creditor's liens against the Borrower and the Guarantors be subordinated in favor of Senior Secured Creditor's liens and right of payments and claims under the Senior Credit Agreement and that the Second Lien Creditor makes the arrangements set forth herein with respect to right to payment and claims against the Borrower and the Guarantor; WHEREAS, in order to accommodate the Senior Secured Creditor's conditions and obtain the direct and indirect benefits to the Borrower and the Second Lien Creditor resulting from the Borrower's and Senior Secured Creditor's execution of the Senior Credit Agreement and other Senior Loan Documents; and WHEREAS, Second Lien Creditor has made credit accommodations available to Borrower pursuant to the terms and provisions of a Second Lien Term Loan Agreement dated as of the date hereof (such agreement, as the same now exists and may hereafter be amended, supplemented, modified, extended, renewed, restated, and/or replaced as permitted hereunder, the "Second Lien Credit Agreement") by and between the Second Lien Creditor resulting in the Borrower's and the Second Lien Creditor's execution of the Second Lien Credit Agreement. AGREEMENT NOW, THEREFORE, in consideration of the above recitals and the provisions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: Section 1. Definitions. For purposes of this Agreement, (a) terms defined in the introductory paragraph and recitals to this Agreement have the meaning set forth therein and (b) the following terms used herein shall have the following meanings: "Collateral" shall mean any and all property which now constitutes or hereafter will constitute collateral or other security for payment of the Senior Secured Debt pursuant to the Senior Loan Documents. "Enforcement Notice" means a written notice which states that a default or an event of default under any provision of the Second Lien Debt has occurred and that Second Lien Creditor desires to take enforcement action as a consequence thereof. "Guarantors" shall mean Black Hawk, MSSN Holdings, MSSN E&P and any other Person which at any time guarantees the Senior Secured Debt whether now or in the future. "Loan Parties" shall mean, individually and collectively, Borrower, Guarantors and any other Person (other than Senior Secured Creditor and the Second Lien Creditor or other Lenders that are parties to the Senior Loan Documents or the Second Lien Loan Documents) which is at any time a party to any Senior Loan Documents or Second Lien Loan Documents or individually, a "Loan Party". "Person" shall mean an individual, corporation, partnership, joint venture, association, trust, or unincorporated organization, limited liability company, or a government or any agency or political subdivision thereof. "Proceeding" shall mean any (a) insolvency, bankruptcy, receivership, custodianship, liquidation, reorganization, readjustment, composition or other similar proceeding relating to any Loan Party or any of their respective properties, whether under any bankruptcy, reorganization or insolvency law or laws, federal or state, or any law, federal or state, relating to relief of debtors, readjustment of indebtedness, reorganization, composition or extension, (b) proceeding for any liquidation, liquidating distribution, dissolution or other winding up of any Loan Party, voluntary or involuntary, whether or not involving insolvency or bankruptcy proceedings, or (c) assignment for the benefit of creditors of any Loan Party. "Proceeds" shall have the meaning assigned to it under the UCC, and, in any event, shall include, but not be limited to (a) any and all proceeds of any insurance, indemnity, warranty, letter of credit or guaranty or collateral security payable to any grantor from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to the owner of the Collateral from -2- time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental body, authority, bureau or agency (or any Person acting under color of governmental authority) and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Second Lien Creditor" means, individually and collectively, Second Lien Creditor and all other present or future holders of all or part of the Second Lien Debt, and their respective successors and assigns. "Second Lien Debt" shall mean and include all indebtedness, obligations and liabilities of any Loan Party under the Second Lien Loan Documents, including, without limitation, all principal and interest (including post-petition interest accrued subsequent to, and interest that would have accrued but for, the filing of any petition under any bankruptcy, insolvency or similar law), and other amounts payable under the Second Lien Loan Documents. "Second Lien Loan Documents" shall mean the Second Lien Credit Agreement and all other loan documents, whether now or in the future, that are executed in connection with or as security for Second Lien Debt including, without limitation, notes, security agreements and guaranty agreements, as in effect on the date hereof without giving effect to any amendments hereafter executed to which Senior Secured Creditor has not consented. "Senior Loan Documents" shall mean the Senior Credit Agreement and all the other loan documents, whether now or in the future, that are executed in connection with or as security for Senior Secured Debt including, without limitation, notes, security agreements and guaranty agreements, as the same shall be amended, supplemented, modified, extended, renewed, restated and/or replaced as permitted hereunder from time to time. "Senior Secured Creditor" means, individually and collectively, Senior Secured Creditor and all other present or future holders of all or part of the Senior Secured Debt, and their respective successors and assigns. "Senior Secured Debt" shall mean and include all (a) indebtedness, obligations and liabilities of any Loan Party under the Senior Loan Documents including, without limitation, all principal and interest, costs and expenses of the Agent and the Lenders including, without limitation, attorneys' fees, and (b) indebtedness, obligations and liabilities of any Loan Party in connection with hedges, swaps and other interest rate protection products including, without limitation, all principal, interest (including interest accrued subsequent to, and interest that would have accrued but for, the filing of any petition under any bankruptcy, insolvency or similar law) fees, costs, disbursements, (including advances made to preserve Collateral) and all other amounts payable under or in connection with the foregoing, in each case whether now or hereafter arising, direct or indirect, primary or secondary, joint, several or joint and several, liquidated or -3- unliquidated, final or contingent and whether incurred as maker, endorser, guarantor or otherwise including all complete or partial refinancings of such indebtedness. "Stop Payment Notice" shall have the meaning set forth in Section 3(a) hereof. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of Texas. Section 2. General. Notwithstanding any provision of the Second Lien Loan Documents, the liens and security interests securing the Second Lien Debt shall be subordinate and junior in all respects to all liens and security interests securing all or any part of any of the Senior Secured Debt, to the extent and in the manner provided for in this Agreement, and each Second Lien Creditor, by acceptance thereof whether upon original issuance, transfer, assignment or exchange, agrees to be bound by the provisions of this Agreement. Section 3. Certain Events of Defaults; Principal Payments. Second Lien Creditor agrees as follows: (a) If any Default under the Senior Credit Agreement occurs or exists, then if Senior Secured Creditor elects, in Senior Secured Creditor's sole and absolute discretion to do so, Senior Secured Creditor may send a stop payment notice as described in this Section 3(a) and (i) the rights of Second Lien Creditor to receive any payments or other distributions with respect to the Second Lien Debt shall be suspended from and after the date that the Second Lien Creditor receives notice thereof from the Senior Secured Creditor or a copy of the notice of such default from the Senior Secured Creditor that Senior Secured Creditor sent to Borrower (each such notice being hereinafter called a "Stop Payment Notice"), and (ii) except subsequent to a Buy Back by the Second Lien Creditor of the Senior Secured Debt as set forth in Section 3(b), no payment or distribution of any character, whether in cash, securities or other property shall be made by any Loan Party, or received or accepted by Second Lien Creditor, on account of the Second Lien Debt, or in respect of the redemption, retirement, purchase or other acquisition thereof, unless and until Second Lien Creditor shall have received notice from Senior Secured Creditor that such default shall have been cured or waived. (b) In the event that the Senior Secured Creditor sends a Stop Payment Notice as described hereinabove to the Second Lien Creditor, the Second Lien Creditor may, in Second Lien Creditor's sole and absolute discretion, send a notice to buy the Senior Secured Debt and Liens securing same from the Senior Secured Creditor upon the following terms and conditions: (i) the Second Lien Creditor shall give written notice to the Senior Secured Creditor, informing the Senior Secured Creditor of the Second Lien Creditor's election to buy the Senior Secured Debt and Liens securing same related thereto (the purchase hereinafter called a "Buy Back" and any such notice being hereinafter called a "Buy Back Notice"), (ii) the Second Lien Creditor shall have forty-five (45) days from the date of the Stop Payment Notice to purchase the Senior Secured Debt for an amount equal to the outstanding Senior Secured Debt (including, without limitation, principal, interest, fees, and expenses (reimbursable under the Senior Loan Documents) outstanding on the date of the purchase), (iii) said Buy Back shall not occur (at Senior Secured Creditor's election) if the Default that precipitated the Stop Payment Notice has been waived or cured prior to the consummation of the Buy Back, and (iv) upon receipt of -4- payment of all of the Senior Secured Debt as described above, the Senior Secured Creditor will execute an assignment of the Senior Secured Debt and Liens securing same to the Second Lien Creditor without recourse and without representation or warranty (either express or implied), other than to the effect that the Senior Secured Creditor at the closing of the Buy Back has not sold or assigned the Second Lien Debt and Liens securing same and the amount of the Senior Secured Debt. Contemporaneously with the consummation of the Buy Back, the Borrower and the Guarantors shall acknowledge such assignment and shall do all things necessary to give full force and effect thereto. (c) Notwithstanding anything to the contrary contained above in Sections 3(a) and 3(b), (i) Borrower may pay and Second Lien Creditor may take and retain any regularly scheduled interest (but not principal) payment on the Second Lien Debt received by Second Lien Creditor before receipt by Second Lien Creditor of a Stop Payment Notice, and (ii) Borrower shall be entitled to resume the making of any payments otherwise prohibited under this Section 3, including any payments previously suspended, at such time as Second Lien Creditor shall have received notice from Senior Secured Creditor that the default giving rise to such prohibition shall have been cured or waived. (d) Notwithstanding any other provision in this entire Agreement to the contrary, except if Second Lien Creditor exercises and completes Buy Back under Section 3(b) or 5(b) in this Agreement, in no event shall any Loan Party pay or Second Lien Creditor take and retain any payment of principal on the Second Lien Debt until the Senior Secured Debt shall have been paid in full in cash. Section 4. Events of Insolvency, etc. Second Lien Creditor agrees that, in the event and during the continuation of any Proceeding, until all Senior Secured Debt shall first have been finally and irrevocably paid in full, in cash, any payment or distribution in any such Proceeding of any kind or character, whether in cash, securities or other property which would otherwise (but for this Agreement) be payable or deliverable in respect of any Second Lien Debt shall, unless otherwise agreed in writing, signed by the Senior Secured Creditor and the Second Lien Creditor, be paid or delivered by the person making such distribution or payment, whether a trustee in bankruptcy, receiver, assignee for the benefit of creditors, liquidating trustee or agent, or otherwise, directly to the Senior Secured Creditor, for application in payment of the Senior Secured Debt in accordance with the priorities then existing among such holders, to the extent necessary to pay in full all Senior Secured Debt then remaining unpaid, after giving effect to any concurrent payment or distribution to the holders of Senior Secured Debt. Should Second Lien Creditor receive any such payment, it will promptly turn over such payment to Senior Secured Creditor. Section 5. Standstill. (a) Second Lien Creditor agrees to promptly send to Senior Secured Creditor a notice of any default that occurs and is continuing under the Second Lien Loan Documents and further agrees that Second Lien Creditor shall not accelerate any of the amounts due with respect to the Second Lien Debt or exercise any rights or remedies or take any enforcement action available upon the occurrence of a default or an event of default or otherwise under the Second Lien Loan Documents or take any action toward the collection of any Second Lien Debt until the earliest of (i) 180 days following receipt by Senior Secured Creditor of a written Enforcement Notice from Second Lien Creditor stating that it is the formal Enforcement -5- Notice required under this Agreement, (ii) the date Senior Secured Creditor accelerates the maturity of the Senior Secured Debt or the date Senior Secured Creditor exercises any foreclosure remedies or proceedings available to it upon a default or event of default with respect to the Senior Secured Debt, (iii) the occurrence of a Proceeding, or (iv) all of the Senior Secured Debt shall have been paid in full in cash. The failure to make a payment of principal of, interest on, or fees, costs or expenses relative to any of the Second Lien Debt by reason of any provision of this Agreement shall not be construed as preventing the occurrence of a default or event of default with respect to such Second Lien Debt as a result of such failure. After the earliest to occur of the events described in clauses (i) through (iv) above, Second Lien Creditor shall be permitted, to the extent it is authorized to do so under the Second Lien Loan Documents and applicable law and subject to the provisions of Section 3, to accelerate the maturity and demand payment of the Second Lien Debt, commence suit against any Loan Party, obtain a judgment lien, and otherwise seek to collect the Second Lien Debt and enforce the Second Lien Loan Documents; provided, however, that Second Lien Creditor's right to take any action in respect of any of the Collateral or Proceeds shall be limited as set forth in Section 9 hereof. (b) In the event that the Second Lien Creditor sends a notice of default as described in subsection (a) above to the Senior Secured Creditor, the Second Lien Creditor may, in the Second Lien Creditor's sole and absolute discretion, buy the Debt and Liens securing same from the Senior Secured Creditor upon the following terms and conditions: (i) the Second Lien Creditor shall give a written notice to the Senior Secured Creditor, informing the Senior Secured Creditor of the Second Lien Creditor's election to buy the Senior Secured Debt and Liens securing same related thereto (the purchase hereinafter called a "Standstill Buyback" and such notice being hereinafter called a "Standstill Buy Back Notice"), (ii) the Second Lien Creditor may, within forty-five (45) days of the date of the Standstill Buy Back Notice, and so long as the default that gave rise to such notice is continuing, purchase the Senior Secured Debt for an amount equal to the outstanding Senior Secured Debt (including, without limitation, principal, interest, fees, and expenses outstanding on the date of the purchase) and (iii) upon receipt of the payment as described above, the Senior Secured Creditor will execute an assignment of the Senior Secured Debt and Liens securing same to the Second Lien Creditor without recourse and without representation or warranty (either express or implied), other than to the effect that the Senior Secured Creditor at the closing of the Standstill Buy Back has not otherwise sold or assigned the Senior Secured Debt and Liens securing same and the amount of the Senior Secured Debt. Contemporaneously with the consummation of the Standstill Buy Back, the Borrower and the Guarantors shall acknowledge such assignment and shall do all things necessary to give full force and effect thereto. Section 6. Payments Notwithstanding. No payment or distribution of any character, whether in cash, securities or other property to which Second Lien Creditor would have been entitled except for the provisions of this Agreement and that shall have been made to or for the account of Senior Secured Creditor shall, as between each Loan Party and its creditors (other than Senior Secured Creditor), be deemed to be a payment or distribution by such Loan Party to or for the account of Senior Secured Creditor, and from and after the payment in full in cash of all Senior Secured Debt, Second Lien Creditor shall be subrogated to all rights of Senior Secured Creditor to receive any further payments or distribution applicable to the Senior Secured Debt until the principal of and interest on the Second Lien Debt shall be paid in full in cash, and no -6- such payment or distribution made pursuant to such rights of subrogation to Second Lien Creditor that otherwise would be payable or distributable to or for the account of Senior Secured Creditor shall, as between each Loan Party and its creditors (other than Second Lien Creditor), be deemed to be a payment or distribution by such Loan Party to Second Lien Creditor or on account of the Second Lien Debt. Section 7. No Prejudice or Impairment. The provisions of this Agreement are solely for the purposes of defining the relative rights of Senior Secured Creditor, on the one hand and Second Lien Creditor, on the other hand. Senior Secured Creditor shall not be prejudiced in the right to enforce the terms of this Agreement by any act or failure to act by any Loan Party or anyone in custody of its assets or property. Nothing herein shall impair, as between each Loan Party and Second Lien Creditor, the obligation of such Loan Party, which is unconditional and absolute, to pay to Second Lien Creditor the principal of and interest on the Second Lien Debt as and when the same shall become due in accordance with their terms, nor shall anything herein prevent Second Lien Creditor from exercising all remedies otherwise permitted by applicable law upon default under the Second Lien Loan Documents, subject, however, to the provisions of this Agreement and the rights of Senior Secured Creditor to the extent provided herein. Second Lien Creditor shall not at any time be charged with knowledge of the existence of any facts which would prohibit the making of any payment to Second Lien Creditor or, except as otherwise provided in Section 5, the taking of any other action under this Agreement unless and until Second Lien Creditor shall have received written notice from Senior Secured Creditor and, prior to the receipt of any such notice, Second Lien Creditor shall be entitled to assume conclusively that no such facts exist. Section 8. Turnover of Payments. If any payment, distribution, security, or the proceeds of any thereof, shall be collected or received by Second Lien Creditor in contravention of any of the terms of this Agreement and prior to the irrevocable payment in full in cash of Senior Secured Debt at the time outstanding, the holder thereof will forthwith deliver such payment, distribution, security or proceeds to Senior Secured Creditor and, until so delivered, the same shall be held in trust by such holder as the property of Senior Secured Creditor. Section 9. Priorities Regarding Collateral. Any and every Lien and security interest in the Collateral (whether now or hereafter existing) in favor of or held for the benefit of Senior Secured Creditor has and shall have priority over any Lien or security interest that Second Lien Creditor now has or may hereafter acquire in the Collateral notwithstanding any statement or provision contained in the Second Lien Loan Documents or otherwise to the contrary, and irrespective of whether the Senior Lender has a perfected security interest in the Collateral or not, and irrespective of the time or order of obtaining a judgment or filing or recording of financing statements, deeds of trust, mortgages or other notices of security interests, Liens or assignments granted pursuant thereto, and irrespective of anything contained in any filing or agreement to which any party hereto or its respective successors and assigns may now or hereafter be a party, and irrespective of the ordinary rules for determining priorities under the UCC or under any other law governing the relative priorities of secured and lien creditors. Second Lien Creditor shall be entitled to rely upon any final, non-appealable order or decree made by any court of competent jurisdiction in which proceedings are pending, or a certificate of the liquidating trustee or other person making any distribution to Second Lien Creditor, for the -7- purpose of ascertaining the persons entitled to participate in such distribution, the Senior Secured Creditor and the holders of other debt of Borrowers, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Agreement; provided, however, that to give effect to this provision the Senior Secured Creditor shall have filed all financing statements in the manner and at the locations required to perfect its security interests in the Collateral prior to the close of business, five (5) business days immediately following the Closing Date and shall have promptly notified the Collateral Agent to that effect. Notwithstanding anything contained in this Section 9 or elsewhere in this Agreement, during the term of this Agreement: (a) in no event shall Second Lien Creditor seek to attach, garnish, levy or execute upon or otherwise seek to enforce any Lien upon assets of any Loan Party, and Second Lien Creditor shall be barred from taking any such enforcement action with respect to any of the Collateral or Proceeds; and (b) in no event shall Second Lien Creditor seek or take a Lien on any assets of any of the Loan Parties unless Senior Secured Creditor also has a Lien on such assets that is superior to any Lien that Second Lien Creditor has covering such assets and is made subject to the terms of this Agreement. Should any such Liens exist, either now or in the future, by this document they shall be deemed to be fully subordinated to the Liens of the Senior Secured Creditor pursuant to the terms hereof and any funds received by the Second Lien Creditor with respect to such assets shall be held in trust for the benefit of the Senior Secured Creditor. Senior Secured Creditor agrees that, upon payment in full of the Senior Secured Debt and upon termination of the security interests and Liens securing the Senior Secured Debt, the Senior Secured Creditor shall deliver all Collateral in its possession or under its control to Second Lien Creditor. Nothing in this Section 9 or elsewhere in this Agreement is intended (and shall not be construed) to permit a court or other authority to disregard or modify in its discretion payment or Lien priorities set forth in this Agreement, but rather is intended simply to indicate that Second Lien Creditor may rely on the interpretation of a court of competent jurisdiction regarding interpretation of this Agreement and the appropriate payment priorities in accordance with this Agreement. Section 10. Benefit of Agreement, Amendments of Certain Documents, etc. This Agreement shall constitute a continuing offer to all persons who, in reliance upon such provisions, become a Senior Secured Creditor, and such provisions are made for the benefit of each Senior Secured Creditor and each of them may enforce such provisions. Neither Senior Secured Creditor nor Second Lien Creditor shall have any obligation to preserve rights in the Collateral against any prior parties or to marshal any of the Collateral for the benefit of any person. No failure to exercise, and no delay in exercising on the part of any party hereto, any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies provided in this Agreement are cumulative and shall not be exclusive of any rights or remedies provided by law. Any agreements, promissory notes, documents or instruments which at anytime evidence the Second Lien Debt or any part thereof shall be marked with a conspicuous legend in bold print stating that payment hereunder is subject to the terms and -8- provisions of this Agreement. In no event shall any Second Lien Creditor (i) initiate or prosecute or encourage any other person to initiate or prosecute any claim, action or other proceeding challenging the enforceability of the Senior Secured Debt or any Liens and security interests securing the Senior Secured Debt or (ii) contest the enforceability of this Agreement. Section 11. Senior Secured Creditor's Freedom of Dealing. Second Lien Creditor agrees, with respect to the Senior Secured Debt and any and all Collateral therefor and guaranties thereof, that each Loan Party and Senior Secured Creditor may agree to increase the amount of the Senior Secured Debt provided that the Borrowing Base shall not be increased above Sixty-Five Million and no/100 Dollars ($65,000,000.00) without the prior written consent of Second Lien Creditor) or (except as expressly limited by Section 12(b)) change the amount, manner, place or terms of payment or otherwise modify the terms of any of the Senior Secured Debt, and (except as expressly limited by Section 12(b)) Senior Secured Creditor may grant extensions of the time of payment or performance to and make compromises, including sales, exchanges and releases of Collateral or guaranties, and settlements with any Loan Party and all other persons, and may exercise or refrain from exercising any rights against any Loan Party and others, in each case without the consent of Second Lien Creditor and without affecting the agreements of the Second Lien Creditor contained in this Agreement. No compromise, alteration, amendment, modification, extension, renewal or other change of, or waiver, consent or other action in respect of any liabilities or obligations under or in respect of any of the terms, covenants, or conditions of any Senior Loan Document, whether or not in accordance with the provisions of any applicable document, shall in any way alter or affect any of the provisions of this Agreement. Section 12. Modification and Assignment of Debt. (a) Modification of Second Lien Debt. Second Lien Creditor agrees that it will not: (i) amend or modify any of the Second Lien Loan Documents to add any covenant thereto; or (ii) amend or otherwise change the terms of any Second Lien Debt or accept any payment consistent with an amendment or change thereto, if the effect of such amendment or change is to increase the interest rate on such Second Lien Debt, change any date on which a payment of principal or interest is due thereon to an earlier date or increase the amount of any such payment, change any default or condition to a default with respect to such Second Lien Debt, change the redemption provisions thereof to an earlier date, take any Collateral or make any other change which, together with all other amendments or changes made, increase materially the obligations of the obligor or confer additional rights on the holder of such Second Lien Debt that would be adverse to any Loan Party or Senior Secured Creditor. Notwithstanding any other provision in this Agreement to the contrary, Second Lien Creditor represents, warrants, and agrees that the Second Lien Loan Documents do not and will not, without the prior written consent of Senior Secured Creditor (1) provide for any principal amortization of the Second Lien Debt prior to the maturity of the Senior Secured Debt, (2) include financial covenants or events of default which are not included in the Senior Loan Documents and any such included financial covenants or events of default shall be no more stringent from those contained in the Senior Loan Documents, as determined by Senior Secured Creditor, (3) mature less than twelve (12) months after the maturity of the Senior Secured Debt, and (4) have interest payments more than monthly. (b) Assignment of Senior Secured Debt and/or Second Lien Debt. Neither Senior Secured Creditor nor Second Lien Creditor will sell, transfer, pledge, assign, hypothecate -9- or otherwise dispose of any or all of the Senior Secured Debt or Second Lien Debt, as the case may be, to any person other than a person who executes a counterpart of this Agreement (or in the case of a Senior Secured Creditor agrees to be bound hereto in the assignment and acceptance delivered pursuant to the Senior Credit Agreement) and becomes a party hereto, thereby succeeding to the rights and agreeing to be bound by all of the obligations of such Senior Secured Creditor or Second Lien Creditor hereunder. Section 13. Reservation of Security Interests as Against Third Parties. Nothing contained in this Agreement is intended to affect or limit in any way the security interests and/or Liens Second Lien Creditor and Senior Secured Creditor has in or on any or all of the property and assets of any Loan Party, whether tangible or intangible, insofar as any Loan Party and third parties are concerned. Second Lien Creditor and Senior Secured Creditor hereto specifically reserve all respective security interests and/or Liens and rights to assert such security interests and/or Liens as against any Loan Party and third parties. Section 14. Priority of Security Interests. Irrespective of (a) the time, order, manner or method of creation, attachment or perfection of the respective security interests and/or Liens granted to Second Lien Creditor or Senior Secured Creditor in or on any or all of the property or assets of Borrower, (b) the time or manner of the filing, failure to file, or the filing in the wrong place of their respective financing statements, (c) whether Second Lien Creditor or Senior Secured Creditor or any bailee or agent thereof holds possession of any or all of the property or assets of Borrower, (d) the dating, execution or delivery of any agreement, document or instrument granting Second Lien Creditor or Senior Secured Creditor security interests and/or Liens in or on any or all of the property or assets of Borrower, (e) the giving or failure to give notice of the acquisition or expected acquisition of any purchase money or other security interests, and (f) any provision of the UCC or any other applicable law to the contrary, any and all security interests, Liens, rights and interests of Second Lien Creditor, whether now or hereafter arising and howsoever existing, in or on any or all of the Collateral shall be and hereby are subordinated to any and all security interests, Liens, rights and interests of Senior Secured Creditor in and to the Collateral. For purposes of the foregoing allocation of priorities, any claim of a right of setoff shall be treated in all respects as a security interest and no claimed right of setoff shall be asserted to defeat or diminish the rights or priorities provided for herein. Section 15. Release of Senior Secured Creditor Collateral. Second Lien Creditor agrees that any collection, sale or disposition of any or all of the Collateral by Senior Secured Creditor (whether pursuant to the UCC or otherwise) shall be free and clear of any and all security interests, Liens, claims, and/or rights of Second Lien Creditor in such Collateral. At the request of Senior Secured Creditor, Second Lien Creditor shall promptly provide Senior Secured Creditor with any necessary or appropriate releases to permit the collection, sale or other disposition of any or all of the Collateral free and clear of Second Lien Creditor's security interests and Liens, so long as the proceeds thereof are applied, first, to the payment of amounts payable with respect to the Senior Secured Debt until the Senior Secured Debt is fully repaid and second, to the payment of amounts payable with respect to the Second Lien Debt to the extent the same is secured by Collateral.. In addition, at the request of Senior Secured Creditor, Second Lien Creditor shall promptly release, at the consummation of the sale or other disposition of any Collateral, any and all security interests, Liens, claims and/or rights which it may have on or in -10- the applicable Collateral to facilitate the collection, sale or other disposition of such Collateral by Borrower so long as the proceeds thereof are applied first to the payment of the Senior Secured Debt and any excess is then applied to the payment of the Second Lien Debt to the extent the same is secured by the Collateral. Section 16. Non-avoidability and Perfection. The subordinations and relative priority arrangements set forth in this Agreement are applicable regardless of whether the security interest and/or Lien to which another security interest and/or Lien is subordinated is not perfected or is voidable for any reason. Section 17. Insurance Proceeds. In the event of the occurrence of any casualty with respect to any of the Collateral, Second Lien Creditor and Senior Secured Creditor agree that Senior Secured Creditor shall have the sole and exclusive right to adjust, compromise or settle any such loss with the insurer thereof, and to collect and receive the proceeds from such insurer to the extent of the Senior Secured Debt until the Senior Secured Debt has been paid in full. Any insurer shall be fully protected if it acts in reliance on the provisions of this paragraph. Section 18. Assignment of Second Lien Debt. Second Lien Creditor represents and warrants to Senior Secured Creditor that it has not previously assigned any interest in any of the Second Lien Debt, that no other party owns an interest in any of the Second Lien Debt other than Second Lien Creditor (whether as joint holders of the Second Lien Debt, as participants or otherwise) and that the entire Second Lien Debt is owed only to Second Lien Creditor. Second Lien Creditor covenants and agrees with Senior Secured Creditor that the entire Second Lien Debt shall continue to be owing only to Second Lien Creditor, unless such indebtedness is assigned expressly subject to the terms, provisions and conditions of this Agreement, the assignee of such indebtedness agrees in writing to be bound by the terms, provisions and conditions of this Agreement, and Second Lien Creditor shall have delivered such executed assignment and assumption agreements to Senior Secured Creditor. Section 19. Amendment of Senior Secured Debt; Release of Collateral. Senior Secured Creditor may at any time and from time to time (a) enter into such agreements with Borrower as Senior Secured Creditor may deem proper (i) increasing or decreasing the principal amount of, extending the time of payment of and/or renewing or otherwise amending or altering the terms (including, without limitation, the interest rates) of any or all of the Senior Secured Debt, (ii) increase or decrease the Borrowing Base (provided that such amount shall not be increased above Sixty-Five Million and no/100 Dollars ($65,000,000.00) without the prior written consent of Second Lien Creditor), and/or (iii) amending, modifying or otherwise altering the terms of the Senior Loan Documents and (b) exchange, sell, release, surrender or otherwise deal with any or all of the Collateral, all without in any way compromising or affecting this Agreement. Section 20. Reliance by Senior Secured Creditor; Waiver of Notices; No Representations by Senior Secured Creditor; Management of Credit Facilities by Senior Secured Creditor. All of the Senior Secured Debt shall be deemed to have been made or incurred in reliance upon this Agreement. Second Lien Creditor expressly waives all notice of the acceptance by Senior Secured Creditor of the provisions of this Agreement and all other notices not specifically required pursuant to the terms of this Agreement. Second Lien Creditor agrees -11- that neither Senior Secured Creditor nor its officers, directors, employees, or attorneys have made any representation or warranty with respect to the due execution, legality, validity, completeness or enforceability of any of the Senior Loan Documents, the perfection or priority of any security interest or Lien or description of, or title to, or the value of any of the Collateral securing any or all of the Senior Secured Debt or the Second Lien Debt, or the collectibility of any of the Senior Secured Debt or the Second Lien Debt. Senior Secured Creditor shall be entitled to manage and supervise its credit facilities with Borrower in accordance with applicable law and its usual business practices, modified from time to time as it deems appropriate under the circumstances, without regard to the existence of any rights that Second Lien Creditor may have now or hereafter in or to any of the property or assets of Borrower or any other Loan Party, and Senior Secured Creditor shall have no liability to Second Lien Creditor for any loss, claim or damage allegedly suffered by Second Lien Creditor in any proceeding by Senior Secured Creditor to foreclose or otherwise enforce any of its security interests in and/or Liens on any of the Collateral. Section 21. Financial Condition of Borrower and Guarantors. Second Lien Creditor hereby assumes responsibility for keeping itself informed of the condition (whether financial or otherwise) of Borrower, any and all Guarantors, and the description of, title to or value of any of the Collateral and the perfection and priority or any security interest or Lien securing any or all of the Senior Secured Debt or the Second Lien Debt, and of all other circumstances bearing upon the risk of non-payment of the Second Lien Debt that diligent inquiry would reveal and Second Lien Creditor hereby agrees that Senior Secured Creditor shall have no duty to advise Second Lien Creditor of any information regarding such condition or any such circumstances. Section 22. Representations and Warranties. Each of the parties hereto hereby represents and warrants that (a) it has full power, authority and legal right to make and perform this Agreement, and (b) this Agreement is its legal, valid and binding obligation, enforceable against it in accordance with its terms. Section 23. Amendment. Neither this Agreement nor any of the terms hereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Senior Secured Creditor and Second Lien Creditor. Section 24. Successors and Assigns. This Agreement, and the terms, covenants and conditions hereof, shall be binding upon, and inure to the benefit of the successors and assigns of Senior Secured Creditor, Second Lien Creditor, and Guarantors, regardless of whether Senior Secured Creditor, Second Lien Creditor or Guarantors comply with the provisions of Section 12(b). Section 25. GOVERNING LAW. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING THE CONFLICTS OF LAW, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. THE PARTIES HERETO -12- CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE IN ANY STATE OR FEDERAL COURT IN THE COUNTY OF HARRIS, TEXAS. SERVICE OF PROCESS ON ANY OF THE PARTIES HERETO IN ANY ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE, EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS LISTED IN SECTION 26 OF THIS AGREEMENT. Section 26. Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties by another, or whenever any of the parties desires to give or serve upon another any such communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration, or other communication shall be in writing (including by facsimile) and shall be deemed to have been duly given and received, for purposes hereof, when delivered by hand or three days after being deposited in the mail, postage prepaid, certified, return receipt requested, or, in the case of facsimile notice, when sent, answer back received, in each case, addressed as follows: If to Borrower: Mission Resources Corporation 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 642-2916 Telephone No.: (713) 495-3000 Attention: Richard W. Piacenti Executive Vice President and Chief Financial Officer If to Guarantors: Black Hawk Oil Company 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 642-2916 Telephone No.: (713) 495-3000 Attention: Richard W. Piacenti Executive Vice President and Chief Financial Officer Mission E&P Limited Partnership 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 652-2916 Telephone No.: (713) 495-3000 Attention: Richard W. Piacenti -13- Executive Vice President and Chief Financial Officer Mission Holdings LLC 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 652-2916 Telephone No.: (713) 495-3000 Attention: Richard W. Piacenti Executive Vice President and Chief Financial Officer If to Senior Secured Creditor: Wells Fargo Bank, National Association 1000 Louisiana, Third Floor Houston, Texas 77002 Attn: Jeff Dalton, Vice President Telecopy No: (713) 739-1081 with a copy to: Winstead Sechrest & Minick P.C. 2400 Bank One Center 910 Travis Street Houston, Texas 77002 Attn: Benny C. Pace, Esq. Telecopy No.: (713) 650-2739 If to Second Lien Creditor: Guggenheim Corporate Funding, LLC 135 East 57th Street New York, New York 10018 Attn: Managing Director, Mission Resources with a copy to: Sidley Austin Brown & Wood LLP 787 Seventh Avenue New York, New York 10019 Attn: Myles Pollin, Esq. Jack I. Kantrowitz, Esq. Telecopy No.: (212) 839-5599 or at such address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated above to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. Section 27. Further Assurances. Second Lien Creditor hereby covenants and agrees to take any and all additional actions and execute, deliver, file and/or record any and all additional -14- agreements, documents and instruments as may be necessary or as Senior Secured Creditor may from time to time reasonably request to effect provisions of this Agreement. The Second Lien Creditor hereby agrees to make reference in all Second Lien Loan Documents to its obligations under this Agreement including, without limitation, that all the liens and security interests created by the Second Lien Loan Documents are subordinate to the liens and security interests created by the Senior Lien Documents. Section 28. Modifications in Writing. No amendment, modification, supplement, termination, consent or waiver of or to any provision of this Agreement nor any consent to any departure therefrom shall in any event be effective unless the same shall be in writing and signed by or on behalf of each party hereto. Any waiver of any provision of this Agreement, and any consent to any departure from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which given. Section 29. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement. Section 30. Equitable Remedies. Each party to this Agreement acknowledges that the breach by it of any of the provisions of this Agreement is likely to cause irreparable damage to the other party. Therefore, the relief to which any party shall be entitled in the event of any such breach or threatened breach shall include, but not be limited to, a mandatory injunction for specific performance, injunctive or other judicial relief to prevent a violation of any of the provisions of this Agreement, damages and any other relief to which it may be entitled at law or in equity. Section 31. Revival. Second Lien Creditor further agrees that, to the extent that any Loan Party makes a payment or payments to Senior Secured Creditor, which payment or payments or any parts thereof are subsequently invalidated, avoided, declared to be fraudulent or preferential, set aside, or required to be repaid to a debtor in possession, a trustee, a receiver or any other party under Title 11, United States Code, any state or federal law, common law, or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied shall be revived and continued in full force and effect as a part of the obligations of the Loan Parties under the Senior Secured Debt as if such payment had not been made, and shall be subject in all respects to the subordination and other provisions in favor of Senior Secured Creditor hereunder. Section 32. Exculpation Provisions. Each of the parties hereto specifically agrees that it has a duty to read this Agreement and the Security Instruments and agrees that it is charged with notice and knowledge of the terms of this Agreement and the Security Instruments; that it has in fact read this Agreement and is fully informed and has full notice and knowledge of the terms, conditions, and effects of this Agreement; that it has independently made its own analysis of the financial condition of the Borrower and the Guarantors and their assets including, without limitation, their Collateral; that it has been represented by independent legal counsel of its choice throughout the negotiations preceding its execution of this Agreement and the Security -15- Instruments; and has received the advice of its attorney in entering into this Agreement and the Security Instruments; and that it recognizes that certain of the terms of this Agreement and the Security Instruments result in one party assuming the liability inherent in some aspects of the transaction and relieving the other party of its responsibility for such liability. Each party hereto agrees and covenants that it will not contest the validity or enforceability of any exculpatory provision of this Agreement and the Security Instruments on the basis that the party had no notice or knowledge of such provision or that the provision is not "conspicuous." Section 33. WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE FEDERAL AND STATE LAWS TO APPLY, TO THE EXTENT THAT THE PROVISIONS OF SECTION 35 HEREOF ARE DETERMINED TO BE UNENFORCEABLE, THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT. Section 34. NO ORAL AGREEMENTS. THIS AGREEMENT AND THE LOAN DOCUMENTS EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 35. Arbitration. (a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) this Agreement and related documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit. (b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Texas selected by the American Arbitration Association ("AAA"); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA's commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA's optional procedures for large, -16- complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the "Rules"). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. Section 91 or any similar applicable state law. (c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party (unless prohibited by the terms of this Agreement) to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in Sections (i), (ii) and (iii) of this paragraph. (d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided, however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Texas with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Texas and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than twenty (20) days before the -17- hearing date and within one hundred and eighty (180) days of the filing of the dispute with the AAA. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available. (f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding. (g) Payment of Arbitration Costs and Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding. (h) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within one hundred and eighty (180) days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to this Agreement or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of this Agreement, any document executed in connection herewith, or any relationship between the parties. Section 36. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Signatures given by facsimile or other electronic transmission shall be binding and effective as originals. [Balance of page left blank intentionally.] -18- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their proper and duly authorized officers as of the day and year first above written. BORROWER: MISSION RESOURCES CORPORATION By: /s/ Richard W. Piacenti ---------------------------------------------- Richard W. Piacenti, Executive Vice President & Chief Financial Officer Address for Notices: 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 642-2916 Telephone No.: (713) 495-3000 Attention: Chief Financial Officer With copy to: Porter & Hedges, L.L.P. 700 Louisiana Street, Suite 3500 Houston, Texas 77002 Attention: William W. Wiggins, Jr. SIGNATURE PAGE - INTERCREDITOR AGREEMENT GUARANTOR: BLACK HAWK OIL COMPANY, a Delaware corporation By: /s/ Richard W. Piacenti ----------------------------------------------- Richard W. Piacenti, Executive Vice President and Chief Financial Officer Address for Notices: 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 652-2916 Telephone No.: (713) 495-3000 Attention: Chief Financial Officer SIGNATURE PAGE - INTERCREDITOR AGREEMENT GUARANTOR: MISSION E&P LIMITED PARTNERSHIP, a Texas limited partnership By: BLACK HAWK OIL COMPANY its sole general partner By: /s/ Richard W. Piacenti ----------------------------------------------- Richard W. Piacenti Executive Vice President and Chief Financial Officer Address for Notices: 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 652-2916 Telephone No.: (713) 495-3000 Attention: Chief Financial Officer SIGNATURE PAGE - INTERCREDITOR AGREEMENT GUARANTOR: MISSION HOLDINGS LLC, a Delaware limited liability company By: /s/ Richard W. Piacenti ---------------------------------------- Richard W. Piacenti Manager Address for Notices: 1331 Lamar, Suite 1455 Houston, Texas 77010-3039 Telecopier No.: (713) 652-2916 Telephone No.: (713) 495-3000 Attention: Chief Financial Officer SIGNATURE PAGE - INTERCREDITOR AGREEMENT SENIOR SECURED CREDITOR: WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ Jeff Dalton ------------------------------------------- Jeff Dalton Vice President Lending Office for Base Rate and LIBOR Loans: Wells Fargo Bank, National Association 1000 Louisiana, Third Floor Houston, Texas 77002 Telecopier No.: (713) 739-1081 Telephone No.: (713) 319-1368 Attention: Jeff Dalton Address for Notices: Wells Fargo Bank, National Association 1000 Louisiana, Third Floor Houston, Texas 77002 Telecopier No.: (713) 739-1081 Telephone No.: (713) 319-1368 Attention: Jeff Dalton [With copy to:] Winstead Sechrest & Minick P.C. 910 Travis, Suite 2400 Houston, Texas 77002 Attention: Benny C. Pace SIGNATURE PAGE - INTERCREDITOR AGREEMENT SECOND LIEN CREDITOR: GUGGENHEIM CORPORATE FUNDING, LLC By: /s/ Todd Boehly ---------------------------------------- Todd Boehly Authorized Signatory SIGNATURE PAGE - INTERCREDITOR AGREEMENT -----END PRIVACY-ENHANCED MESSAGE-----