-----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, OiKBsC0kFM0gq4UGsUU/FlhnwQQcMRpfwJR2AcdpJrerFV/VV1KGkWrAbi4Pdhch gYwpmu5IpskOdGnV289ZxQ== 0000909334-02-000063.txt : 20020416 0000909334-02-000063.hdr.sgml : 20020416 ACCESSION NUMBER: 0000909334-02-000063 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020328 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL RESOURCES INC CENTRAL INDEX KEY: 0000732834 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 730767549 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-61547 FILM NUMBER: 02607980 BUSINESS ADDRESS: STREET 1: 302 NORTH INDEPENDENCE, SUITE 1400 CITY: ENID STATE: OK ZIP: 73702 BUSINESS PHONE: 5802338955 8-K 1 criform8k4112002.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT: April 11, 2002 (Date of earliest event reported) March 28, 2002 CONTINENTAL RESOURCES, INC. (Exact name of registrant as specified in its charter) OKLAHOMA 333-61547 73-0767549 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 301 North Independence, Suite 106 Enid, Oklahoma 73701 (Address of principal executive offices) (Zip Code) (580) 233-8955 (Registrant's telephone number, including area code) Information To Be Included in the Report Item 2. Acquisition or Disposition of Assets. On March 28, 2002, the Registrant executed a Fourth Amended and Restated Credit Agreement in which a group of lenders, led by Union Bank of California, N.A., Guaranty Bank, FSB and Fortis Capital Corp., agreed to provide a $175.0 million senior secured revolving credit facility to the Registrant. Availability of funds under the credit facility is subject to a maximum borrowing base amount to be determined semi-annually on a regular basis and at other times upon request by either the lenders or the Registrant. The initial borrowing base is $140.0 million. Borrowings under the credit facility are secured by liens on all oil and gas properties and associated assets of the Registrant and its subsidiaries. Borrowings under the credit facility bear interest, payable quarterly, at (a) a rate per annum equal to the rate at which eurodollar deposits for one, two, three or six months (as selected by the Registrant) are offered by Union Bank of California plus an applicable margin ranging from 150 to 250 basis points, or (b) at Union Bank's reference rate plus an applicable margin ranging from 25 to 50 basis points. The credit facility matures March 28, 2005. There is no scheduled amortization of principal prior to maturity. In the event the applicable borrowing base exceeds the outstanding principal balance under the credit facility, the Registrant must either provide additional collateral or reduce the principal balance by the amount of such excess. The credit facility contains certain covenants restricting or limiting the ability of the Registrant to incur debt, pledge or mortgage assets, pay dividends, enter into hedging agreements and sell assets. In addition, the Registrant is required to maintain certain ratios, including (i) a current ratio of 1.0 to 1.0; (ii) a fixed charge coverage ratio of not less than 1.25 to 1.0; (iii) a ratio of total funded debt to EBITDA of not more than 3.75 to 1.0; (iv) a ratio of senior debt to EBITDA of not more than 2.5 to 1.0 and (v) a ratio of total funded debt to total capitalization of not more than .70 to 1.0. The credit facility contains customary events of default and customary remedies are available to the lenders upon the existence of uncured events of default. Item 7. Financial Statements and Exhibits. Exhibits -------- 10.1 Fourth Amended and Restated Credit Agreement dated March 28, 2002 among the Registrant, Union Bank of California, N.A., Guaranty Bank, FSB and Fortis Capital Corp. 10.2 Unlimited Guaranty Agreement dated March 28, 2002. 10.3 Security Agreement dated March 28, 2002 between Registrant and Guaranty Bank, FSB, as Agent. 10.4 Stock Pledge Agreement dated March 28, 2002 between Registrant and Guaranty Bank, FSB, as Agent. 10.5 Collateral Assignment of Contracts dated March 28, 2002 between Registrant and Guaranty Bank, FSB, as Agent. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CONTINENTAL RESOURCES, INC. By ROGER CLEMENT Roger Clement, Senior Vice President and Chief Financial Officer April 11, 2002 EXHIBIT INDEX Exhibit No. Description Method of Filing - ------ ----------- ---------------- 10.1 Fourth Amended and Restated Credit Filed herewith electronically Agreement dated March 28, 2002 among the Registrant, Union Bank of California, N.A., Guaranty Bank, FSB and Fortis Capital Corp. 10.2 Unlimited Guaranty Agreement dated March Filed herewith electronically 28, 2002. 10.3 Security Agreement dated March 28, 2002 Filed herewith electronically between Registrant and Guaranty Bank, FSB, as Agent. 10.4 Stock Pledge Agreement dated March 28, Filed herewith electronically 2002 between Registrant and Guaranty Bank, FSB, as Agent. 10.5 Collateral Assignment of Contracts dated Filed herewith electronically March 28, 2002 between Registrant and Guaranty Bank, FSB, as Agent. EX-10.1 3 criex101form8k4112002.txt FOURTH AMENDED AND RESTATED CREDIT AGREEMENT REVOLVING LINE OF CREDIT OF UP TO $175,000,000.00 AMONG UNION BANK OF CALIFORNIA, N.A. As Administrative Agent, LC Issuer, Lead Arranger, Fronting Bank and a Bank; GUARANTY BANK, FSB As Collateral/Documentation Agent, Co-Arranger and a Bank; FORTIS CAPITAL CORP. As Syndication Agent, Co-Arranger and a Bank, OTHER FINANCIAL INSTITUTIONS AND BANKS, As Banks, AND CONTINENTAL RESOURCES, INC. As Borrower March 28, 2002 TABLE OF CONTENTS Page ---- ARTICLE I. DEFINITIONS.............................................................2 ARTICLE II. THE LOANS AND LETTERS OF CREDIT........................................18 2.01 The Commitment.............................................18 2.02 Notice and Manner of Borrowing.............................19 2.03 Payment Procedure..........................................19 2.04 Payments of Interest under the Notes.......................20 2.05 General Provisions Relating to Interest....................21 2.06 Borrowing Base Determination...............................22 2.07 Mandatory Prepayment Due to a Loan Excess..................23 2.08 Other Mandatory Prepayments................................23 2.09 Prepayment and Conversion..................................24 2.10 Increased Cost of Loans....................................24 2.11 Change of Law..............................................26 2.12 Mitigation: Mandatory Assignment...........................26 2.13 Pro Rata Treatment and Payments............................27 2.14 Sharing of Payments and Setoffs............................27 2.15 Commitment Fee.............................................27 2.16 Borrowing Base Increase Fee................................28 2.17 Agent's Fee................................................28 2.18 Addition of Borrowing Base Oil & Gas Properties............28 2.19 Adjustment to Aggregate Commitment Amount..................28 2.20 Facility LCs...............................................29 2.21 Advances to Satisfy Obligations of the Borrower............32 2.22 Assignment of Production...................................33 ARTICLE III. CONDITIONS.............................................................33 3.01 General Conditions to Closing and to all Disbursements.....33 3.02 Deliveries at the Closing..................................34 3.03 Documents Required for Subsequent Disbursements Involving Additional Borrowing Base Oil and Gas Properties...........35 ARTICLE IV. REPRESENTATIONS AND WARRANTIES.........................................35 4.01 Existence..................................................36 4.02 Due Authorization..........................................36 4.03 Valid and Binding Obligations..............................36 4.04 Scope and Accuracy of Financial Statements.................36 4.05 Title to Borrowing Base Oil and Gas Properties.............37 4.06 Oil and Gas Leases.........................................37 4.07 Interest in the Borrowing Base Oil and Gas Properties......37 4.08 Oil and Gas Contracts......................................37 4.09 Producing Wells............................................38 4.10 Purchasers of Production...................................38 4.11 Authorizations and Consents................................38 4.12 Environmental Laws.........................................38 4.13 Compliance with Laws, Rules, Regulations and Orders........39 4.14 Liabilities, Litigation and Restrictions...................39 4.15 Existing Indebtedness......................................39 4.16 Material Commitments.......................................40 4.17 Margin Stock...............................................40 4.18 Proper Filing of Tax Returns and Payment of Taxes Due......40 4.19 ERISA......................................................40 4.20 Investment Company Act Compliance..........................41 4.21 Public Utility Holding Company Act Compliance..............41 4.22 Insurance..................................................41 4.23 Material Misstatements and Omissions.......................41 ARTICLE V. AFFIRMATIVE COVENANTS..................................................41 5.01 Use of Funds...............................................41 5.02 Maintenance and Access to Records..........................41 5.03 Quarterly Unaudited Financial Statements...................42 5.04 Annual Audited Financial Statements........................42 5.05 Compliance Certificate.....................................42 5.06 Statement of Material Adverse Change.......................42 5.07 Title Defects..............................................42 5.08 Additional Information.....................................42 5.09 Compliance with Laws and Payment of Assessments and Charges43 5.10 Maintenance of Existence and Good Standing.................43 5.11 Further Assurances.........................................43 5.12 Initial Expenses of the Bank...............................43 5.13 Subsequent Expenses of the Bank Parties....................43 5.14 Maintenance of Tangible Property...........................44 5.15 Maintenance of Insurance...................................44 5.16 Inspection of Tangible Assets/Right of Audit...............44 5.17 Payment of Note and Performance of Obligations.............44 5.18 Borrowing Base.............................................44 5.19 Compliance with Environmental Laws.........................44 5.20 Hazardous Substances Indemnification.......................45 5.21 Transactions with Affiliates...............................46 5.22 Leases.....................................................46 5.23 Operation of Borrowing Base Oil and Gas Properties.........46 5.24 Assignments................................................46 5.25 Change of Purchasers of Production.........................46 5.26 Payment of Taxes, Etc......................................46 5.27 Notice of Litigation.......................................47 5.28 Notice of Events of Default................................47 5.29 Notice of Change of Principal Offices......................47 5.30 Employee Benefit Plans.....................................47 5.31 Annual Capital Budget......................................47 5.32 Payment of Obligations.....................................48 ARTICLE VI. NEGATIVE COVENANTS.....................................................48 6.01 Other Indebtedness.........................................48 6.02 Loans or Advances..........................................48 6.03 Mortgages or Pledges of Assets.............................48 6.04 Sales of Assets............................................49 6.05 Dividends..................................................49 6.06 Payment of Accounts Payable................................49 6.07 Cancellation of Insurance..................................49 6.08 Investments................................................49 6.09 Changes in Structure or Business...........................49 6.10 Pooling or Unitization.....................................50 6.11 Hedge Agreements...........................................50 6.12 Capital Stck of Borrower and Guarantors/Redemption of Senior Subordinated Notes.........................................50 6.13 Margin Stock...............................................50 6.14 Senior Subordinated Debt...................................50 6.15 Current Ratio..............................................50 6.16 Fixed Charge Coverage Ratio................................50 6.17 Total Funded Debt to EBITDA................................51 6.18 Senior Debt to EBITDA......................................51 6.19 Total Funded Debt to Total Capitalization..................51 ARTICLE VII. EVENTS OF DEFAULT......................................................51 7.01 Enumeration of Events of Default...........................51 7.02 Rights Upon Unmatured Event of Default.....................53 7.03 Rights Upon Default........................................53 7.04 Remedies...................................................54 7.05 Right of Set-off...........................................55 ARTICLE VIII. THE AGENTS.............................................................55 8.01 Authorization and Action...................................55 8.02 Agent's Reliance, Etc......................................56 8.03 Each Agent and its Affiliates..............................56 8.04 Bank Credit Decision.......................................56 8.05 Agent's Indemnity..........................................57 8.06 Successor Agents...........................................57 8.07 Notice of Default..........................................58 ARTICLE IX. MISCELLANEOUS..........................................................58 9.01 Security Interests in Deposits and Right of Offset or the Banker's Lien..............................................58 9.02 Survival of Representations, Warranties and Covenants......58 9.03 Notices and Other Communications...........................58 9.04 Parties in Interest........................................59 9.05 Successors and Assigns; Participation; Purchasing Banks....59 9.06 Renewals and Extensions....................................61 9.07 No Waiver by the Bank Parties..............................61 9.08 Waiver, Release, and Indemnification by the Borrower.......62 9.09 GOVERNING LAW..............................................62 9.10 Incorporation of Exhibits and Schedules....................63 9.11 Survival Upon Unenforceability.............................63 9.12 Rights of Third Parties....................................63 9.13 Amendments or Modifications................................63 9.14 Agreement Construed as an Entirety.........................64 9.15 Number and Gender..........................................64 9.16 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS..................64 9.17 Controlling Provision Upon Conflict........................64 9.18 Time, Place and Method of Payments.........................65 9.19 Termination................................................65 9.20 Non-Application of Chapter 346 of Texas Finance Code.......65 9.21 Counterpart Execution......................................65 9.22 Power of Attorney..........................................65 9.23 Subordination of Intercompany Debt.........................66 9.24 Prior Agreement............................................67 EXHIBITS EXHIBIT A Borrowing Base Oil and Gas Properties EXHIBIT B Form of Amended and Restated Replacement Notes EXHIBIT C Compliance Certificate EXHIBIT D Security Instruments EXHIBIT E Request for Advance SCHEDULES Schedule 1.01(a) Third Restated Agreement Notes Schedule 1.01(b) Commitment Amount and Aggregate Commitment Schedule 2.20(C) Fax Numbers for all Parties Schedule 4.01 Information Regarding the Borrower and its Subsidiaries Schedule 4.08 Certain Oil and Gas Contracts Schedule 4.10 List of Purchasers of Production Schedule 4.15 Existing Indebtedness Schedule 4.16 Material Commitments Schedule 4.22 Insurance Certificates Schedule 9.05(d) Commitment Transfer Supplement FOURTH AMENDED AND RESTATED CREDIT AGREEMENT THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), executed March 28, 2002, is by and between CONTINENTAL RESOURCES, INC., an Oklahoma corporation (the "Borrower"), UNION BANK OF CALIFORNIA, N.A., as LC Issuer, Bank, Lead Arranger, Fronting Bank and Administrative Agent (in such latter capacity and together with its successors and permitted assigns in such capacity the "Administrative Agent"), GUARANTY BANK, FSB, as Co-Arranger, Bank and Collateral/Documentation Agent (in such latter capacity and together with its successors and permitted assigns in such capacity the "Collateral Agent"), FORTIS CAPITAL CORP., as Co-Arranger, Bank and Syndication Agent (in such latter capacity and together with its successors and permitted assigns in such capacity the "Syndication Agent"), and the several banks and financial institutions from time to time parties to this Credit Agreement (the "Banks," such term to include all undersigned Banks and all other financial institutions which subsequently become parties to this Agreement in accordance with Section 9.05 hereof). W I T N E S S E T H WHEREAS, on August 21, 2000, Borrower and certain of its Affiliates and certain predecessors to the Banks entered into a certain Restated Credit Agreement (the "Original Agreement") whereby the Banks' predecessors provided Borrower and certain of its Affiliates with a $25,000,000.00 revolving credit facility as evidenced by a $25,000,000.00 revolving note; WHEREAS, on July 9, 2001, the Original Agreement, as amended through such date, was amended and restated (the "Second Restated Agreement") in order, among other things, to increase the then-existing credit facility; WHEREAS, on January 17, 2002, the Second Restated Agreement was amended and restated (the "Third Restated Agreement") in order to again, among other things, further increase the then- existing credit facility; WHEREAS, the Third Restated Credit Agreement, Borrower's indebtedness and obligations thereunder, and the various notes evidencing the obligations of the Borrower and certain of its Affiliates to the Banks' predecessors (collectively the "Third Restated Agreement Notes"), which are more fully described on Schedule 1.01(a) attached hereto, were on the date of this Agreement assigned from the Banks' predecessors to the Banks hereunder; WHEREAS, Borrower and the Bank Parties desire to amend and restate the Third Restated Agreement and the Third Restated Agreement Notes to increase the Aggregate Commitment Amount to a maximum of $175,000,000.00, with an initial Borrowing Base of $140,000,000.00, as well as to make other modifications thereto as set forth herein; and WHEREAS, Borrower and the Bank Parties all desire to hereby document this Fourth Amended and Restated Credit Agreement, which amends and restates, but does not extinguish, the Borrower's obligations under the Third Restated Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the Bank Parties and the Borrower agree as follows: ARTICLE I. DEFINITIONS As used in this Agreement, the following terms shall have the meanings indicated: "Administrative Agent" means Union Bank of California, N.A., as Administrative Agent for the Banks hereunder and under the other Loan Documents, and each successor Administrative Agent. "Affiliate" means, as applied to any Person, any other Person, directly or indirectly, controlling, controlled by, or under common control with, that Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by", and "under common control with"), as applied to any Person, means either: (a) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities, by contract, or otherwise, or (b) the legal or beneficial ownership of or voting rights with respect to twenty percent (20%) or more of the equity interest in such Person. "Agent(s)" means, individually and collectively, the Administrative Agent, the Collateral Agent, and the Syndication Agent, and each successor to each of such respective positions. "Aggregate Commitment Amount" means the lesser of: (a) the Borrowing Base in effect from time to time, or (b) the amount stated as the Aggregate Commitment Amount on Schedule 1.01(b) attached hereto, as the same may be amended from time to time as provided in this Agreement. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Banks. "Agreement" means this Fourth Amended and Restated Credit Agreement, as the same may be amended or supplemented from time to time. "Applicable Law" means that law in effect from time to time and applicable to the Notes which lawfully permits the charging and collection of the highest permissible lawful, non-usurious rate of interest on the Notes, including laws of the State of Texas and laws of the United States of America; Chapter 303 of the Texas Finance Code shall be included in the laws of the State of Texas in determining Applicable Law; and for the purpose of applying said Chapter 303 to the Notes, the interest ceiling applicable to the Notes under said Chapter 303 shall be the indicated weekly rate ceiling from time to time in effect. "Applicable Margin" means the applicable LIBOR Margin or RR Margin provided for in the Pricing Grid set forth below based upon the Utilization Percentage. "Arranger" means, individually and collectively, the Lead Arranger and each Co-Arranger, each such position being held as of the Closing by Union Bank of California, N.A., Guaranty Bank, FSB and Fortis Capital Corp., respectively. "Bank(s)" means any of the banks signatory to this Agreement, their successors and, upon the effective date after registration with the Administrative Agent pursuant to Section 9.05 of a Commitment Transfer Supplement executed by a Purchasing Bank, such Purchasing Bank. "Bank Parties" means the Banks, the Fronting Bank, the LC Issuer, each Co-Arranger, the Lead Arranger, the Syndication Agent, the Collateral Agent and the Administrative Agent. "Borrower" has the meaning stated therefor in the preamble of this Agreement. "Borrowing" means a group of Loans made by the Banks to Borrower on a single date. "Borrowing Base" means the maximum loan amount supported by the Borrowing Base Oil and Gas Properties, as determined by the Arrangers and approved by the Required Banks from time to time in accordance with Section 2.06 of this Agreement. "Borrowing Base Oil and Gas Properties" means those Oil and Gas Properties of the Borrower and/or the Guarantors that are described in Exhibit "A" attached hereto and made a part hereof, as such Exhibit "A" may be amended from time to time, together with any other Oil and Gas Properties of the Borrower and/or the Guarantors that are described in and covered by (or that Collateral Agent and Borrower or Guarantor have attempted to describe in) any of the Security Instruments, whether or not such Oil and Gas Properties are described in Exhibit A attached hereto. "Breakage Costs" means all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by any Bank to fund its LIBOR Loans but excluding loss of anticipated profit with respect to any LIBOR Loans) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or the Administrative Agent) a borrowing of LIBOR Loans does not occur on a date specified therefor in a Request for Advance; (ii) if any repayment or conversion of any LIBOR Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any LIBOR Loans is not made on any date specified in a notice of prepayment given by Borrower; or (iv) as a consequence of any default by the Borrower to repay LIBOR Loans when required by the terms of this Agreement. "Business Day" means a day other than a Saturday, Sunday or legal holiday for commercial banks under the laws of the State of Texas or the State of California, provided that with respect to transactions under this Agreement relating to LIBOR Loans, such day must also be a Eurodollar Business Day. "Business Entity" means a company, corporation, limited liability company, limited partnership, partnership, joint venture, trust, association, or other entity other than a natural person, that has been formed and exists to conduct any line of business. "Cedar Hills Project" means those two certain secondary recovery units in which Borrower will conduct water flood and high pressure air injection operations to maximize the recovery of oil from both the Cedar Hills North-Red River "B" Unit in Bowman and Slope Counties, North Dakota, and the West Cedar Hills Unit in Fallon County, Montana. "Certificate of Formation" means any certificates, articles, or other instruments that are required or permitted to be filed with any designated agency of the jurisdiction in which a Business Entity is formed in order to evidence the legal formation of such Business Entity. "Change of Control" means any of the following events: (a) any "person" or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) has become, directly or indirectly, the "beneficial owner" (as defined in Rules 13d- 3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have "beneficial ownership" of all such shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), by way of merger, consolidation or otherwise, of a majority or more of the common stock of Borrower on a fully-diluted basis, after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of the Borrower (whether or not such securities are then currently convertible or exercisable), (b) during any period of two consecutive calendar quarters, individuals who at the beginning of such period were officers of the Borrower and were also members of the Borrower's board of directors cease for any reason to constitute a majority of the directors of the Borrower then in office unless (i) such new directors were elected by a majority of the directors of the Borrower who constituted the board of directors of the Borrower at the beginning of such period (or by directors so elected) or (ii) the reason for such directors failing to constitute a majority is a result of retirement by directors due to age, death or disability, (c) Harold Hamm no longer owns a controlling beneficial interest or ownership in Borrower, (d) Harold Hamm is no longer chief executive officer of Borrower, or (e) Borrower no longer owns 100% of all the issued and outstanding shares of common stock of Continental Gas, Inc. "Closing" has the meaning provided in Section 3.01. "Collateral Agent" means Guaranty Bank, FSB, as Collateral/Documentation Agent for the Banks hereunder and under the other Loan Documents, and each successor Collateral/Documentation Agent. "Commitment" means, as to any Bank, the obligation of such Bank to make Loans to, and participate in Facility LCs issued upon the application of, the Borrower in an aggregate amount at any one time outstanding not to exceed the lesser of (i) such Bank's Commitment Amount and (ii) such Bank's Percentage Share of the Borrowing Base then in effect. "Commitment Amount" means at any time, for any Bank, the amount set forth opposite such Bank's name on Schedule 1.01(b) under the heading "Commitment Amount," as such amount may be changed as provided in this Agreement. "Commitment Transfer Supplement" means a Commitment Transfer Supplement executed by Administrative Agent and a Purchasing Bank substantially in the form of Schedule 9.05(d) and registered with the Administrative Agent pursuant to Section 9.05(d) hereof. "Compliance Certificate" means the certificate of the President or Chief Financial Officer of the Borrower submitted to the Administrative Agent from time to time pursuant to this Agreement and attesting to the financial covenants and stating, to such officer's knowledge, whether or not an Event of Default or an Unmatured Event of Default has occurred and is continuing and, if such an event has occurred, the actions being taken by the Borrower to remedy such situation and that GAAP has been used in the preparation of the Financial Statements, which certificate shall be in the form attached hereto as Exhibit "C". "COPAS" means the Accounting Procedure Joint Operations recommended by the Council of Petroleum Accountants, with respect to onshore and offshore operations, respectively, including the most current versions thereof and any other recent versions thereof commonly in use. "Corporate Action" means action taken by the Governing Body of any Business Entity (not just a corporation) in order to authorize such Business Entity pursuant to its Governing Documentation to enter into and become bound by the terms of any particular transaction. "Corporate Power" means the power and authority of a Business Entity, under the terms of its Governing Documentation and applicable law, to enter into, and become bound by, the terms of any particular transaction. "Credit Extension" means the making of a Loan or the issuance of a Facility LC hereunder. "Credit Extension Date" means the date on which a Loan is advanced or a Facility LC is issued. "Current Assets" means at any time, all assets, that should in accordance with GAAP, be classified as current assets on a consolidated balance sheet of Borrower and the Guarantors, plus the then current availability under the aggregate Commitments, but excluding any mark-to-market valuation under Permitted Hedge Agreements. "Current Liabilities" means at any time, all liabilities that should in accordance with GAAP, be classified as current liabilities on a consolidated balance sheet of Borrower and the Guarantors, but excluding any mark-to-market valuation under Permitted Hedge Agreements, minus the amount of Credit Extensions under this Agreement that is deemed to be current in accordance with GAAP. "Current Ratio" means the ratio derived from dividing Current Assets by Current Liabilities. "Defensible Title" means good and defensible title, as set forth, qualified and/or limited on Exhibit "A," free and clear of all mortgages, liens and encumbrances, except for Permitted Encumbrances. "EBITDA" means, for any reporting period, Borrower's and Guarantors' Net Income on a consolidated basis before deductions for interest expense, taxes, depreciation, depletion and amortization, exploration expenses, including dry hole costs, and non-cash compensation expense. "Environmental Laws" means (a) the following federal laws as they may be cited, referenced and amended from time to time: the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Endangered Species Act, the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the Hazardous Materials Transportation Act, the Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act, and the Oil Pollution Act of 1990; (b) any and all environmental statutes of any state in which property of the Borrower is situated, as they may be cited, referenced and amended from time to time; (c) any rules or regulations promulgated under or adopted pursuant to the above federal and state laws; and (d) any other federal, state or local statute or any requirement, rule, regulation, code, ordinance or order adopted pursuant thereto, including, without limitation, those relating to the generation, transportation, treatment, storage, recycling, disposal, handling or release of Hazardous Substances. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and published interpretations thereof. "ERISA Affiliate" means any trade or business (whether or not incorporated) which together with the Borrower would be treated as a single employer under Section 4001 of ERISA. "Eurodollar Business Day" means a day on which, in the determination of the Administrative Agent, significant dealings are carried on in the LIBOR Market. "Event of Default" means any of the events specified in Section 7.01 of this Agreement. "Facility LC" is defined in Section 2.20(A). "Facility LC Application" is defined in Section 2.20(C). "Facility Termination Date" means March 28, 2005. "Federal Funds Effective Rate" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published by the Federal Reserve Bank of New York for such day on the next succeeding Business Day or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financial Statements" means the statements of the financial condition of the indicated Person, on a consolidated basis, as at the point in time and for the period indicated and consisting of at least a balance sheet, income statement and statement of cash flows, and when the foregoing are audited, accompanied by the certification of such Person's independent certified public accountants and footnotes to any of the foregoing, all of which shall be prepared in accordance with GAAP applied on a basis consistent with that of the preceding year, except for any inconsistency that results from changes in GAAP from year to year. "First Restated Agreement" has the meaning stated in the Recitals of this Agreement. "Floating Rate" means a per annum interest rate determined by reference to the following schedule: o LIBOR + LIBOR Margin at Borrower's option pursuant to Section 2.04, or RR + RR Margin o After the occurrence and during the continuation of an Event of Default, the Floating Rate determined in accordance with the forgoing schedule shall, in each case, be increased by four percent (4%) per annum, not to exceed the Maximum Rate. "GAAP" means generally accepted accounting principles, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable as of the date of Closing, except that solely for purposes of the definition of Financial Statements herein, changes in GAAP from time to time (if any) shall be applied and reflected in the Financial Statements. Accounting principles are applied on a "consistent basis" when the accounting principles observed in a current period are comparable in all material respects to those accounting principles applied in a preceding period. "Governing Body" means, in the case of a corporation, its board of directors, in the case of a limited liability company, its members or its managers, depending on how the management of such Business Entity is allocated in its Governing Documentation, in the case of a general partnership or joint venture, the partners or the joint venturers thereof, respectively, in the case of a limited partnership, the applicable Governing Body of the general partner thereof, if such general partner is a Business Entity, and in the case of any other Business Entity not specified herein, the designees thereof that, pursuant to the Governing Documentation of such Business Entity, fulfill the responsibilities typically discharged by a board of directors of a corporation. "Governing Documentation" means, in the case of a corporation, its certification of incorporation, articles of incorporation and by laws, as amended, in the case of a limited liability company, its certificate of formation, its limited liability company agreement, and its operating agreement or regulations (or similar documentation as denominated under the laws of the jurisdiction in which it is formed), in the case of a partnership, joint venture or a limited partnership, the applicable partnership agreement or joint venture agreement, and the certificate of limited partnership, if applicable, and in the case of any other Business Entity not specifically enumerated herein, the applicable documentation typically utilized in the jurisdiction where such Business Entity has been formed for purposes of initially forming such Business Entity according to the laws of such jurisdiction and thereafter operating and managing such Business Entity. "Guarantor(s)" means, individually and collectively, Continental Gas, Inc., Continental Resources of Illinois, Inc., Continental Crude Co. and all other Subsidiaries of Borrower. "Guaranty" means the unlimited guaranty agreement, guaranteeing the full payment and performance of all of Borrower's Obligations to the Bank Parties under this Agreement and the other Loan Documents, in form and substance satisfactory to the Administrative Agent, duly executed by each Guarantor. "Hazardous Substances" means flammables, explosives, radioactive materials, hazardous wastes, asbestos or any material containing asbestos, polychlorinated biphenyls (PCBs), toxic substances or related materials, petroleum and petroleum products and associated oil or natural gas exploration, production and development wastes or any substances defined as "hazardous substances", "hazardous materials", "hazardous wastes" or "toxic substances" under the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Superfund Amendments and Reauthorization Act, as amended, the Hazardous Materials Transportation Act, as amended, the Resource Conservation and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or any other Environmental Laws now or hereafter enacted or promulgated by any regulatory authority or governmental body, but only to the extent any such law is or becomes applicable to the Borrower or any of its property. "Hedge Agreement" means any swap agreement, cap, collar, floor, exchange transaction, forward agreement or exchange or protection agreement related to Hydrocarbons or any option with respect to such transaction, as more specifically provided in those certain master swap agreements on International Swap Dealers Association forms and the schedules thereto and any confirmations thereunder entered into by Borrower with any other Person. "Hydrocarbons" means crude oil, condensate, natural gas, natural gas liquids and other hydrocarbons. "Increased Costs" has the meaning stated therefor in Section 2.10 (A) of this Agreement. "Indebtedness" means, as to any Person, (a) all items of indebtedness or liability for borrowed money which in accordance with GAAP would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date as of which Indebtedness is to be determined, (b) indebtedness secured by (or for which the holder of such indebtedness has a right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien, security interest, or other charge or encumbrance existing on or encumbering property owned by the Person whose Indebtedness is being determined, whether or not the indebtedness secured thereby shall have been assumed, and (c) all indebtedness of others which such Person has directly or indirectly guaranteed, endorsed (otherwise than for collection or deposit in the ordinary course of business), discounted with recourse, agreed (contingently or otherwise) to purchase or repurchase or otherwise acquire, or in respect of which such Person has agreed to supply or advance funds (whether by way of loan, purchase of securities or capital contribution, through a commitment to pay for property or services regardless of the nondelivery of such property or the nonfurnishing of such services or otherwise), or in respect of which such Person has otherwise become directly or indirectly liable, contingently or otherwise, whether now existing or hereafter arising. "Interest Period" means as to any LIBOR Loan the period commencing on and including the date of such Loan (or on the effective date of the election pursuant to Section 2.04(B) by which such Loan became a LIBOR Loan) and ending on and including the day preceding the numerically corresponding day (or if there is no such numerically corresponding day, the last day) in the 1st, 2nd, 3rd or 6th calendar month after the date of such Loan, as selected by the Borrower in accordance with Section 2.04(B), and after such selected month, such period commencing on and including the day immediately following the last day of the then ending Interest Period for such Loan and ending on and including the day preceding the day numerically corresponding to the first day of such Interest Period (or if there is no such numerically corresponding day, the last day), in the 1st, 2nd, 3rd or 6th calendar month after the first day of such Interest Period, as so selected by the Borrower; provided, however, that if any Interest Period would otherwise end on a day immediately prior to a day that is not a Business Day it shall be extended so as to end on the day immediately prior to the next succeeding Business Day unless the same would fall in a different calendar month, in which case such Interest Period shall end on the day immediately preceding the first Business Day immediately preceding such next succeeding Business Day. "Investment" in any Person means any stock, bond, note or other evidence of Indebtedness or any other security (other than current trade and customer accounts) of, or loan to, such Person. "Laws" means all ordinances, statutes, rules, regulations, orders, injunctions, writs, or decrees of any government or political subdivision or agency thereof, or any court or similar entity established by any thereof. "LC Fee" is defined in Section 2.20(D). "LC Issuer" has the meaning set forth in the preamble of this Agreement. "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.20(E). "Leases" means oil and gas leases and all oil, gas and mineral leases constituting any part of the Borrowing Base Oil and Gas Properties. "LIBOR" means, with respect to each Interest Period, the rate of interest per annum at which deposits of not less than $1,000,000.00 in United States dollars are offered in the LIBOR Market for a period of time equal or comparable to such Interest Period and in an amount equal to or comparable to the principal amount of the LIBOR Loan to which such Interest Period relates as appearing on Telerate Page 3750 as of 11:00 AM (London time) two (2) Business Days before the first day of the applicable Interest Period, as adjusted for maximum statutory reserves, provided, however, that if such rate is not available on the Telerate, then within five (5) Business Days of receipt of notification, the Administrative Agent and the Borrower shall enter into good faith negotiations for a period of fifteen (15) days (or such shorter period as is required to agree to the alternative basis) with a view to agreeing on an alternative basis for determining the rate of interest applicable to LIBOR Loans, and if no alternative basis is agreed within the fifteen (15) day period, the LIBOR Loan shall be deemed to have converted to an RR Loan as of the end of the last Interest Period. "LIBOR Loan" means any Loan from time to time for which interest thereon is to be computed at a Floating Rate based on LIBOR plus the LIBOR Margin, as elected by Borrower pursuant to Section 2.04 hereof. "LIBOR Margin" means the applicable margin set forth in the Pricing Grid under the caption, "LIBOR Margin," determined based on the Utilization Percentage prevailing from time to time. "LIBOR Market" means the London interbank offered interest rate market created by major London clearing banks for deposits in United States dollars. "Limitation Period" means any period while any amount remains owing on the Notes when interest on such amount, calculated at the applicable rate prescribed on the Notes, plus any fees payable hereunder and deemed to be interest under applicable Law, would exceed the Maximum Rate. "Loan" means, singly, any advance by the Banks to the Borrower pursuant to this Agreement and "Loans" means, cumulatively, the aggregate sum of all money advanced by the Banks to the Borrower pursuant to this Agreement. "Loan Documents" means this Agreement, the Notes, the Facility LC Applications, the Security Instruments, the Guaranties and all other promissory notes, security agreements, and other instruments, documents, and agreements executed and delivered pursuant to or in connection with this Agreement, as such instruments, documents, and agreements may be amended, modified, renewed, extended, or supplemented from time to time. "Loan Excess" means, at any point in time, the amount, if any, by which the outstanding balance on the Aggregate Outstanding Credit Exposure exceeds the Aggregate Commitment Amount then in effect. "Material Adverse Change" means any change in the business, property, condition (financial or otherwise) or results of operations, or reasonably foreseeable prospects of Borrower and the Guarantors, considered as a whole, which has a Material Adverse Effect, excluding any change in prevailing economic or business conditions that are applicable, generally, to companies engaged in the domestic oil and gas exploration and production business in the continental United States, including, without limitation, fluctuations in oil and gas prices. "Material Adverse Effect" means a material adverse effect on (i) the business, property, condition (financial or otherwise), results of operations, or reasonably foreseeable prospects of Borrower or any Guarantor, (ii) the ability of Borrower or any Guarantor to perform its obligations under the Loan Documents to which it is a party, or (iii) the validity or enforceability of any of the Loan Documents or the rights or remedies of any of the Bank Parties thereunder. "Maximum Rate" means the maximum rate of non-usurious interest permitted from day to day by Applicable Law, including Chapter 303 of the Texas Finance Code (and as the same may be incorporated by reference in other Texas statutes), but otherwise without limitation, that rate based upon the "indicated weekly rate ceiling." "Modify" and "Modification" are defined in Section 2.20(A). "Multi-employer Plan" means a plan described in Section 4001(a)(3) of ERISA which covers employees of the Borrower or any ERISA Affiliate. "Net Income" means, for any period, without duplication, the net income (or loss) of Borrower and Guarantors on a consolidated basis after allowances for taxes for such period, determined 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 Guarantor 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 or such Guarantor 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 such Guarantor; (ii) any extraordinary gains or losses, including gains or losses attributable to property sales not in the ordinary course of business, (iii) the cumulative effect of a change in accounting principles, and (iv) any gains or losses attributable to writeups or writedowns of assets. "Note" and "Notes" means, individually, a promissory note issued by Borrower payable to the order of a Bank evidencing the Loans made by that Bank pursuant to Section 2.01 hereof and being substantially in the form of the note attached as Exhibit B hereto, together with any and all further renewals, extensions for any period, increases or rearrangements thereof, and means collectively all of such Notes. "Obligations" means all obligations, indebtedness, and liabilities of the Borrower to the Bank Parties, now existing or hereafter arising under this Agreement and the other Loan Documents, including, but not limited to, the Indebtedness evidenced by the Notes and the Reimbursement Obligations, and all interest accruing thereon and all attorneys' fees and other expenses incurred in the administration, enforcement or collection thereof. "Oil and Gas Properties" means fee, leasehold or other interests in or under mineral estates or oil, gas and other liquid or gaseous hydrocarbon leases with respect to properties situated in the United States, including, without limitation, overriding royalty and royalty interests, leasehold estate interests, net profits interests, production payment interests and mineral fee interests, and all gathering systems, processing plants, compressors, and associated facilities of any type relating thereto, together with contracts executed in connection therewith and all tenements, hereditaments, appurtenances and properties, real or personal, appertaining, belonging, affixed or incidental thereto. "Original Agreement" has the meaning stated in the Recitals of this Agreement. "Outstanding Credit Exposure" means, as to any Bank at any time, the sum of (i) the aggregate principal amount of its Loans outstanding at such time, plus (ii) an amount equal to its Percentage Share of the LC Obligations at such time. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Percentage Share" means, as to any Bank, a fraction (expressed as a percentage), the numerator of which shall be such Bank's Commitment Amount, and the denominator of which shall be the Aggregate Commitment Amount stated on Schedule 1.01(b) attached hereto. "Permitted Asset Sales" means (a) sales, leases, assignments, transfers or disposals of, in one or any series of related transactions, (i) all or any portion of Borrower's or any Guarantor's assets (except for items included in clause (ii) of this definition), whether now owned or hereafter acquired, including transfers to Subsidiaries, which, in the aggregate, do not exceed $2,500,000.00 in any rolling four quarter period, and (ii) Borrower's or any Guarantor's offshore platforms that have been abandoned or dismantled; and (b) sales of Hydrocarbons in the ordinary course of business. "Permitted Encumbrances" means: (A) Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business that are not yet due and payable; (B) Liens of mechanics, materialmen, warehousemen, carriers, or other like liens, securing obligations incurred in the ordinary course of business that are not yet due and payable; (C) Pledges or deposits in connection with or to secure workmen's compensation, unemployment insurance, pensions or other employee benefits; (D) Encumbrances consisting of covenants, zoning restrictions, rights, easements, liens or other restrictions on the use of real property, none of which materially impairs the use of such property by the Borrower or any Guarantor in the operation of its business, and none of which is violated in any material respect by existing or proposed operations; (E) Liens of operators and/or co-working interest owners under joint operating agreements or similar contractual arrangements with respect to the Borrower's or any Guarantor's proportionate share of the expense of exploration, development and operation of oil, gas and mineral leasehold or fee interests owned jointly with others, to the extent that same relate to sums not yet due; (F) Liens securing surety or other bonds required in the normal course of business not to exceed $2,000,000.00 in the aggregate at any time in effect; (G) The following, if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings, so long as levy and execution thereon have been stayed and continue to be stayed and they do not, in the aggregate, materially detract from the value of the property of Borrower or any Guarantor, or materially impair the use thereof in the operation of its business: (1) Claims or liens for taxes, assessments, or charges due and payable and subject to interest or penalty; (2) Claims, liens, and encumbrances upon, and defects of title to, real or personal property, including any attachment of personal or real property or other legal process prior to adjudication of a dispute on the merits; (3) Claims or liens of mechanics, materialmen, warehousemen, carriers, or other like liens; and (4) Adverse judgments on appeal; (H) Liens securing payment and performance of the Obligations; (I) Liens securing purchase money obligations included in the definition of Permitted Indebtedness if such liens encumber only the property for which such purchase money obligation was incurred; and (J) Inchoate liens in respect of royalty owners. "Permitted Hedge Agreement" means any Hedge Agreement which Borrower or any Guarantor enters into with or through a counterparty that has a credit rating of at least "A-" by Standard and Poors or "A3" by Moody's Investment Service, together with the confirmations which Borrower may hereafter enter into with or through such counterparty covering, in the aggregate, among all such Hedge Agreements, not more than seventy-five percent (75%) of the Proved Reserves that are (i) attributable to Borrower's or such Guarantor's interest in the Borrowing Base Oil and Gas Properties and (ii) projected to be produced during the term(s) of such Hedge Agreement(s), provided that the floor, fixed or strike prices for oil or gas, respectively, prescribed in any such Hedge Agreement must be at least equal to or greater than the average of the prices for oil or gas, as applicable, then being used by the Arrangers in their price decks applicable to Borrowing Base determinations, which average prices shall be provided to Borrower and each Guarantor within five (5) Business Days after written request therefor from Borrower to Arrangers. "Permitted Indebtedness" means: (A) The Loans and Facility LCs; (B) Unsecured current accounts payable incurred in the ordinary course of business which are (i) not unpaid for more than ninety (90) days after the date of the invoice therefor, or (ii) being contested in good faith by appropriate proceedings, or (iii) the subject of usual and customary review and evaluation; (C) Extensions of credit from suppliers or contractors who are not Affiliates of Borrower for the performance of labor or services or the provision of supplies or materials under applicable contracts or agreements in connection with Borrower's or any Guarantor's oil and gas exploration and development activities, which are not overdue or are being contested in good faith by appropriate proceedings; (D) Letters of credit or performance bonds required to be obtained by the Borrower or any Guarantor in the normal course of its business to assure the proper plugging and abandonment of oil or gas drilling or production locations or bonds required by any governmental agency or instrumentality in the normal course of the Borrower's business; (E) Purchase money obligations of the Borrower and Guarantors of up to $15,000,000, in the aggregate, at any time for the purchase of compressors, pipelines, engines and other equipment necessary or useful for injection plants for use in Borrower's Cedar Hills Project so long as (i) the purchase money obligations do not exceed the fair market value of the equipment purchased therewith (ii) Borrower and Guarantors have no personal liability for such Indebtedness and (iii) the recourse of the holder thereof is limited to taking possession of or foreclosing upon such compressors; (F) Income taxes payable that are not overdue; (G) Accrued abandonment liabilities for abandonment obligations that are not in default; (H) The Indebtedness evidenced by the Senior Subordinated Notes; (I) Indebtedness arising out of Permitted Hedge Agreements; (J) Other unsecured indebtedness incurred by the Borrower or any Guarantor not to exceed, in the aggregate at any time outstanding, One Million Dollars ($1,000,000.00); and (K) Any Indebtedness between or among the Borrower and all or any of the Guarantors, subject to Section 9.23. "Person" means an individual, company, corporation, partnership, joint venture, limited liability company, trust, association, unincorporated organization or a government or any agency or political subdivision thereof. "Plan" means, at any time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pricing Grid" means the following table:
Utilization Percentage LIBOR Margin RR Margin Commitment Fee LC Fee ====================== ============ ========= ============== ======= 90% or more 2.50% 0.50% .25% 2.00% equal to or greater than 68% but less than 90% 2.25% 0.25% .375% 1.75% equal to or greater than 33% but less than 68% 2.00% 0% .375% 1.50% less than 33% 1.50% 0% .375% 1.50%
For purposes of determining the applicable LIBOR Margin, RR Margin, Commitment Fee and/or LC Fee at any time, the applicable Utilization Percentage shall be determined based on the most recently completed fiscal quarter, as of the end of such quarter. "Prior Credit Agreements" means, collectively, the Original Agreement, the First Restated Agreement, the Second Restated Agreement and the Third Restated Agreement. "Prior Security Instruments" means, collectively, all Security Instruments as defined in, and/or executed pursuant to, any of the Prior Credit Agreements, except to the extent, and only to the extent, that any of them have been wholly or partially released of record. "Production Revenue" means revenues of the Borrower and the Guarantors from the sale of its oil and gas production minus any applicable oil and gas production taxes and royalties. "Prohibited Transaction" means any transaction set forth in Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time to time. "Proved Reserves" means the estimated quantities of crude oil, condensate, natural gas liquids and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs underlying lands or interests therein constituting Oil and Gas Properties, under existing economic and operating conditions, using the criteria and parameters required by and acceptable to the Securities and Exchange Commission, provided that with respect to estimated quantities of crude oil, condensate, natural gas liquids and natural gas expected to be produced from secondary recovery operations, such determination shall be made using criteria and parameters generally utilized by and acceptable to Ryder Scott Petroleum Engineers or other petroleum engineers acceptable to the Arrangers. "Purchasing Bank" shall have the meaning assigned to that term in Section 9.05 hereof. "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.20 to reimburse the LC Issuer for amounts paid by the LC Issuer in respect of any one or more drawings under Facility LCs. "Reportable Event" means any of the events set forth in Section 4043 of ERISA. "Request for Advance" means the written or verbal (confirmed in writing within one (1) Business Day) request by the Borrower to the Administrative Agent for an advance by the Banks pursuant to this Agreement, which Request for Advance shall be in substantially the form attached hereto as Exhibit "E," signed by an authorized officer of the Borrower and which shall include a statement of the amount requested to be advanced, the date of the requested advance and such other information as the Administrative Agent in its reasonable discretion deems necessary. "Required Banks" means, at any time, Banks holding at least sixty-six and two-thirds percent (662/3%) of the Aggregate Commitment Amount or, if the Aggregate Commitment Amount has been terminated, Banks having at least sixty-six and two-thirds percent (662/3%) of the Aggregate Outstanding Credit Exposure; subject to the provisions of Section 9.13. "Required Number" means: in the case of notices hereunder (i) relative to borrowings, prepayments, elections of LIBOR Loans, selections of Interest Periods for, or other transactions in respect of, LIBOR Loans: by 10:00 a.m., Los Angeles, California time on the third Business Day prior to the proposed activity; or (ii) relative to all transactions in respect of RR Loans: the same Business Day by 11:00 a.m., Los Angeles, California time; it being understood, however, that in the case of notices involving transactions in respect of more than one type of Loan (such as a change in type of Loan in accordance with Section 2.04(B)), "Required Number" means that number of days, as indicated above in respect of the Loans involved, which would constitute the longest applicable period of time. "Reserve Report" means a report prepared by an independent petroleum engineer or firm of engineers acceptable to Administrative Agent or a report prepared under the supervision of the chief petroleum engineer of Borrower, as applicable pursuant to Section 2.06, in each case regarding the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties, using the criteria and parameters required by and acceptable to the Securities and Exchange Commission, and incorporating the present cost of appropriate plugging and abandonment obligations to be incurred in the future, taking into account any plugging and abandonment fund required to be accrued or established by Borrower or any Guarantor out of cash flow from the Borrowing Base Oil and Gas Properties covered by such report with respect to such future obligations. "RR" means a fluctuating reference rate of interest equal to the higher of (i) a rate per annum equal to the reference rate of interest announced from time to time by Administrative Agent (which is not necessarily the lowest rate charged to any customer), changing when and as said reference rate changes, and (ii) the sum of the Federal Funds Effective Rate most recently determined by the Administrative Agent plus one-half percent (1/2%) per annum. "RR Loan" means any Loan from time to time for which interest thereon is to be computed on the basis of the RR plus the RR Margin, as elected by Borrower pursuant to Section 2.04 hereof. "RR Margin" means the applicable margin set forth in the Pricing Grid under the caption, "RR Margin," determined based on the Utilization Percentage prevailing from time to time. "Second Restated Agreement" has the meaning stated therefor in Recitations to this Agreement. "Security Instruments" means the security instruments described on Exhibit "D," in form and substance satisfactory to the Collateral Agent, to be executed by Borrower pursuant to Section 3.01, together with all Prior Security Instruments and any and all other instruments or documents hereafter executed in connection with or as security for the payment of the Notes and performance of the Obligations. "Senior Debts" has the meaning stated therefor in Section 9.23. "Senior Subordinated Notes" means those certain $150,000,000, 10.25% Senior Subordinated Notes issued by Borrower due August 2008. "Stockholders' Equity" means, at any time, the sum of the following accounts set forth on a consolidated balance sheet of the Borrower and the Guarantors, prepared in accordance with GAAP: (A) the par or stated value of all outstanding capital stock (common and preferred); (B) capital surplus including paid in capital; and (C) retained earnings, excluding any non-cash items. "Subordinated Intercompany Debt" has the meaning stated therefor in Section 9.23. "Subsidiary" means, as to any Person, any corporation in which such Person, directly or indirectly through its Subsidiaries, owns more than fifty percent (50%) of the stock of any class or classes having by the terms thereof the ordinary voting power to elect a majority of the directors of such corporation, and any partnership, limited partnership, association, joint venture, or other entity in which such Person, directly or indirectly through its Subsidiaries, has more than a fifty percent (50%) equity interest at the time. "Super-Majority" means, at any time, Banks holding at least seventy-five percent (75%) of the Aggregate Commitment Amount or, if the Aggregate Commitment Amount has been terminated, Banks having at least seventy-five percent (75%) of the Aggregate Outstanding Credit Exposure; subject to the provisions of Section 9.13. "Syndication Agent" means Fortis Capital Corp. as Syndication Agent for the Banks hereunder and under the other Loan Documents, and each successor Syndication Agent. "Third Restated Agreement" has the meaning stated therefor in the Recitals of this Agreement. "Transfer Order Letters" means the letters in lieu of division or transfer orders, in form acceptable to the Administrative Agent. "Unmatured Event of Default" means any event or occurrence which solely with the lapse of time or the giving of notice or both will ripen into an Event of Default. "Utilization Percentage" means the percentage of the Aggregate Commitment Amount represented by the aggregate principal amount of all Credit Extensions outstanding from time to time calculated at the end of each fiscal quarter based on the average daily Aggregate Commitment Amount and the average daily balance of all outstanding Credit Extensions during such quarter. Undefined Terms. Undefined financial accounting terms used in this Agreement shall be defined according to GAAP. ARTICLE II. THE LOANS AND LETTERS OF CREDIT 2.01 The Commitment. From and including the date of this Agreement and prior to the Facility Termination Date, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to (i) make Loans to the Borrower and (ii) participate in Facility LCs issued upon the request of the Borrower, provided that, after giving effect to the making of each Loan and the issuance of each Facility LC, such Bank's Outstanding Credit Exposure shall not exceed its Commitment. The Loans advanced by each Bank to the Borrower shall be evidenced by the Banks' respective Notes from the Borrower. Subject to the terms of this Agreement, the Borrower may borrow, repay and reborrow up to the Aggregate Commitment Amount at any time prior to the Facility Termination Date. All Commitments to extend credit hereunder shall expire on the Facility Termination Date. The LC Issuer will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.20. 2.02 Notice and Manner of Borrowing. (a) The amount and date of each Credit Extension shall be designated in a Request for Advance executed by Borrower, to be received by the Administrative Agent at least the Required Number of, but not more than ten (10), Business Days prior to the date of such Credit Extension, which date shall be a Business Day. The Administrative Agent shall promptly advise the Banks and, if applicable, the LC Issuer, of any Request for Advance given pursuant to this Section 2.02, of each Bank's Percentage Share of any requested Borrowing and, if applicable, the amount requested for any Facility LC by telephone, confirmed promptly in writing, or telecopier. Upon satisfaction of the applicable conditions set forth in Article III, each Borrowing shall be made at the office of the Administrative Agent, and shall be funded prior to 1:00 o'clock p.m., Los Angeles, California time, on the day so requested in immediately available funds in the amount so requested. (b) Each Bank shall make each Loan to be made by it hereunder on the date of the proposed Borrowing by wire transfer of immediately available funds to the Administrative Agent in Los Angeles, California, not later than 10:00 a.m., Los Angeles, California time, and upon fulfillment of the applicable conditions set forth in Article III, the Administrative Agent will make such funds available to Borrower as Borrower shall direct to the Administrative Agent from time to time or, if a Borrowing shall not occur on such date because any condition precedent herein specified shall not have been met, return the amounts so received to the respective Banks as soon as practicable. Unless the Administrative Agent shall have received notice from a Bank prior to the date of any proposed Borrowing that such Bank will not make available to the Administrative Agent such Bank's Percentage Share of such Borrowing, the Administrative Agent may assume that such Bank has made its Percentage Share available to the Administrative Agent on the date of such Borrowing in accordance with this paragraph (b) and the Administrative Agent may, in reliance upon such assumption, make available to Borrower on such date a corresponding amount. If, and to the extent that, such Bank shall not have made its Percentage Share available to the Administrative Agent, such Bank and Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to Borrower until the date such amount is repaid to the Administrative Agent at (i) in the case of Borrower, the interest rate applicable at the time to the Loans comprising such Borrowing and (ii) in the case of such Bank, the Federal Funds Effective Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount shall constitute such Bank's Loan as part of such Borrowing for purposes of this Agreement. 2.03 Payment Procedure. All payments and prepayments made by Borrower under this Agreement shall be made to the Administrative Agent at its office in Monterey Park, California for the account of the Banks in immediately available funds before 10:00 a. m., Los Angeles, California time, on the date that such payment is required to be made. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to such payments or prepayments ratably to the Banks (and if the payment relates to amounts owed to a particular Bank only, in like funds to such Bank), in each case, to be applied in accordance with the terms of this Agreement. Borrower hereby authorizes the Administrative Agent, if and to the extent payment or prepayment (including prepayments required pursuant to Section 2.11 hereof) is not made when due hereunder or under the Notes or any other Loan Document, to charge from time to time against Borrower's account with the Administrative Agent any amount so due. Any payment received and accepted by the Administrative Agent (or any branch or Affiliate thereof) after such time shall be considered for all purposes (including the calculation of interest, to the extent permitted by law) as having been made on the next following Business Day. 2.04 Payments of Interest under the Notes. Subject to the terms and provisions of this Agreement, interest on the Loan, calculated at the Floating Rate, shall be due and payable as follows: (A) Interest on RR Loans shall be calculated on the basis of a 365/366-day year, as applicable, and on LIBOR Loans on the basis of a 360-day year, in each case counting the actual number of days elapsed. Interest on the outstanding principal balance of the Loans shall accrue for each day at either a Floating Rate based on RR plus the RR Margin for such day for RR Loans, or a Floating Rate based on LIBOR for the Interest Period which includes such day plus the LIBOR Margin for such day for LIBOR Loans, all as elected and specified (including specification as to length of Interest Period, as permitted by the definition of that term, with respect to any election of a Floating Rate based on LIBOR) by the Borrower in accordance with Section 2.04(B); provided that: (1) In the absence of an election by the Borrower of a Floating Rate based on LIBOR plus the LIBOR Margin, or, having made such election, but upon the Required Number of days prior to the end of the then current Interest Period the Borrower fails or is not entitled under the terms of this Agreement to elect to continue a Floating Rate based on LIBOR plus the LIBOR Margin and specify the applicable Interest Period therefor, then upon the expiration of such then current Interest Period, interest on the Loans shall accrue for each day at a Floating Rate based on RR plus the RR Margin for such day, until the Borrower, pursuant to Section 2.04(B), elects a different Floating Rate and specifies the Interest Period for the Loans. (2) Interest accruing on any LIBOR Loan during any Interest Period shall be payable on the first Business Day after the last day of such Interest Period except that: (a) with respect to LIBOR Loans for which Borrower has selected an Interest Period of six (6) months, interest will be payable on the first Business Day following the ninetieth (90th) day after the commencement of such Interest Period and on the first Business Day of the next Interest Period, (b) interest will be payable on the Facility Termination Date on any LIBOR Loan with an Interest Period ending on the Facility Termination Date; and provided that (c) all accrued interest on any LIBOR Loan converted or prepaid pursuant to Section 2.11 shall be paid immediately upon such prepayment or conversion. (B) By at least the Required Number of days prior to the advance of any Loan hereunder, the Borrower shall select the initial Floating Rate to be charged on such Loan, and from time to time thereafter the Borrower may elect, on at least the Required Number of days irrevocable prior written (or verbal, promptly confirmed by written) notice to the Administrative Agent, an initial Floating Rate for any additional Loan, or to change the Floating Rate on any Loan to any other Floating Rate (including, when applicable, the selection of the Interest Period); provided that; (i) the Borrower shall not select an Interest Period that extends beyond the Facility Termination Date; (ii) except as otherwise provided in Section 2.11 no such change from a Floating Rate based on LIBOR plus the LIBOR Margin to another Floating Rate shall become effective on a day other than the day, which must be a Business Day, next following the last day of the Interest Period last effective for such LIBOR Loan; (iii) any elections made by the Borrower pursuant to this Section 2.04(B) shall be in the amount of $1,000,000, plus any additional increment of $1,000,000, or such lesser amount as constitutes the balance of all Loans then outstanding hereunder; (iv) notwithstanding anything herein to the contrary, the Borrower may not make any election under this Section 2.04(B) that would result in Loans outstanding based on more than six (6) different LIBORs without the consent of the Required Banks to do so; and (v) the first day of each Interest Period as to a LIBOR Loan shall be a Business Day. (C) Interest on RR Loans shall be paid monthly in arrears on the first Business Day of each calendar month (for the immediately preceding month) commencing with the month following any month during which interest begins to accrue at a Floating Rate based on RR plus the RR Margin, as elected by Borrower pursuant to Section 2.04(B), and on the date the principal of such Loans shall be due (on the stated Facility Termination Date, on acceleration, or otherwise). 2.05 General Provisions Relating to Interest. It is the intention of the parties hereto to comply strictly with the usury Laws of the State of Texas and the United States of America and, in this connection, there shall never be collected, charged or received on any sums advanced hereunder interest in excess of the Maximum Rate. For purposes of Chapter 303 of the Texas Finance Code, as amended, the Borrower agrees that the maximum rate to be charged shall be the "indicated (weekly) rate ceiling" as defined in said Chapter, provided that the Bank may also rely to the extent permitted by applicable Laws of the State of Texas or the United States of America, on alternative maximum rates of interest under other applicable Laws of the State of Texas or the United States of America applicable to the Loans, if greater. Notwithstanding anything herein or in the Notes to the contrary, during any Limitation Period, the interest rate to be charged on amounts evidenced by the Notes shall be the Maximum Rate and the obligation of the Borrower for any fees payable hereunder and deemed to be interest under applicable Law shall be suspended. During any period or periods of time following a Limitation Period, to the extent permitted by applicable Laws of the State of Texas or the United States of America, the interest rate to be charged hereunder shall remain at the Maximum Rate until such time as there has been paid to each Bank (a) the amount of interest in excess of the Maximum Rate that such Bank would have received during the Limitation Period had the interest rate remained at the relevant rates specified in the Note, and (b) all interest and fees otherwise due to such Bank but for the effect of such Limitation Period. If under any circumstances the aggregate amounts paid on the Notes or under this Agreement include amounts which by Law are deemed interest and which would exceed the amount permitted if the Maximum Rate were in effect, the Borrower stipulates that such payment and collection will have been and will be deemed to have been, to the extent permitted by applicable Laws of the State of Texas or the United States of America, the result of mathematical error on the part of both the Borrower and the Banks, and each Bank shall promptly refund the amount of such excess (to the extent only of such interest payments above the Maximum Rate which could lawfully have been collected and retained) upon discovery of such error by such Bank or notice thereof from the Borrower. 2.06 Borrowing Base Determination. The Borrowing Base in effect as of the Closing is One Hundred Forty Million Dollars ($140,000,000.00). The Borrowing Base shall be re-determined semi-annually pursuant to the following provisions of this Section. On or before October 1, 2002, the Borrower shall furnish to the Administrative Agent information sufficient to update to an effective date of July 1, 2002, the most recent Reserve Report provided to the Administrative Agent prior to Closing relative to the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties. Upon receipt of such information, the Arrangers shall, in the normal course of business, make a joint determination of the Borrowing Base, which shall become effective upon approval by the Required Banks and subsequent written notification from the Administrative Agent to the Borrower, and which, subject to the other provisions of this Agreement, shall be the basis on which the Borrowing Base shall thereafter be calculated until the effective date of the next redetermination of the Borrowing Base as set forth in this Section. Thereafter, on or before each April 1 and October 1 until the Facility Termination Date, beginning April 1, 2003, the Borrower shall furnish to the Administrative Agent a Reserve Report, in form and substance satisfactory to the Administrative Agent, which report shall set forth, as of each preceding January 1 or July 1, as applicable, the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties. Each Reserve Report that is due to be submitted to the Administrative Agent on or before each April 1 shall be a complete report prepared by an independent petroleum engineer or firm of engineers acceptable to Administrative Agent, and each Reserve Report due to be submitted on or before October 1 or each year shall be prepared under the supervision of the chief petroleum engineer of Borrower and shall simply update, to its effective date, the last complete Reserve Report provided to Administrative Agent. Upon receipt of each such Reserve Report, the Arrangers shall, in the normal course of business, make a joint determination of the Borrowing Base which shall become effective upon approval by the Required Banks and subsequent written notification from the Administrative Agent to the Borrower, and which, subject to the other provisions of this Agreement, shall be the basis on which the Borrowing Base shall thereafter be calculated until the effective date of the next redetermination of the Borrowing Base as set forth in this Section 2.06. The Arrangers may, subject to approval of the Required Banks, and must, upon the request of the Required Banks, redetermine the Borrowing Base at any time, and from time to time, which redetermination shall become effective upon approval by the Required Banks and subsequent written notification from the Administrative Agent to the Borrower and which, subject to the other provisions of this Agreement, shall be the basis on which the Borrowing Base shall thereafter be calculated until the effective date of the next redetermination of the Borrowing Base, as set forth in this Section. Not more often than two times in any calendar year, the Administrative Agent may request in writing that the Borrower provide a Reserve Report regarding the Proved Reserves attributable to the Borrowing Base Oil and Gas Properties with an effective date not more than ninety (90) days prior to Borrower's delivery of such Reserve Report to Administrative Agent, and such Reserve Report shall be delivered to Administrative Agent within ninety (90) days after Borrower's receipt of such written request. The Borrower shall have the right to request, by written notice to Administrative Agent, one unscheduled redetermination of the Borrowing Base between any two scheduled redeterminations thereof, subject to contemporaneously providing to Administrative Agent a Reserve Report with an effective date not more than ninety (90) days prior to the date of such notice. If at any time the Arrangers cannot otherwise agree on a redetermination of the Borrowing Base, then the proposed Borrowing Base shall be set on the basis of the Administrative Agent's calculation of the "weighted arithmetic average" (as hereinafter calculated) of the Borrowing Base, as determined by each Arranger and communicated to Administrative Agent in writing, and such Borrowing Base, calculated by the Administrative Agent based on the "weighted arithmetic average" of each Borrowing Base proposed by the respective Arrangers, shall then be subject to the approval of the Required Banks. However, the amount of the Borrowing Base shall never be increased at any time without the unanimous consent of the Banks, 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 Administrative Agent by each Arranger by the ratio such Arranger's Percentage Share over the sum of the Percentage Shares of all Arrangers, and then adding the results of each such calculation, with the resultant sum being the Borrowing Base to be submitted to the Banks for approval as provided herein. The Borrowing Base shall represent the Required Banks' approval of the Arrangers' determination, in accordance with their customary lending practices, of the maximum loan amount with respect to the Borrowing Base Oil and Gas Properties and the Borrower acknowledges, for purposes of this Agreement, such determination by the Arrangers as being the maximum loan amount that can be supported by the Borrowing Base Oil and Gas Properties. In making any redetermination of the Borrowing Base, the Arrangers and the other Banks shall apply the parameters and other credit factors consistently applied, then generally being utilized by the Arrangers and each such Bank, respectively, for Borrowing Base redeterminations for other similarly situated borrowers. The Borrower, Required Banks and the Arrangers acknowledge that (a) due to the uncertainties of the oil and gas extraction process, the Borrowing Base Oil and Gas Properties are not subject to evaluation with a high degree of accuracy and are subject to potential rapid deterioration in value, and (b) for this reason and the difficulties and expenses involved in liquidating and collecting against the Borrowing Base Oil and Gas Properties, the Arrangers' determination of the maximum loan amount with respect to the Borrowing Base Oil and Gas Properties contains an equity cushion, which equity cushion is acknowledged by the Borrower as essential for the adequate protection of the Banks. 2.07 Mandatory Prepayment Due to a Loan Excess. Within thirty (30) days after receipt of written notice from Administrative Agent that a Loan Excess exists, including, but not limited to, any notice establishing a redetermined Borrowing Base that is less than the Aggregate Outstanding Credit Exposure, Borrower shall either (i) prepay the principal of the Note in an aggregate amount at least equal to such Loan Excess, or (ii) add to the Borrowing Base Oil and Gas Properties additional Oil and Gas Properties of the Borrower sufficient in value, as determined pursuant to Section 2.06, to increase the Borrowing Base to equal the unpaid principal amount of the Notes. 2.08 Other Mandatory Prepayments. (A) On each date on which the Borrower or any Guarantor sells any of its Oil and Gas Properties, the Borrowing Base will be automatically reduced to the loan value (determined in accordance with the procedures for determining the Borrowing Base) of the remaining Borrowing Base Oil and Gas Properties, and the Borrower shall be required to make the prepayment, if any, required pursuant to Section 2.07. (B) Nothwithstanding the provisions of Section 2.07, if on any date the Outstanding Credit Exposure exceeds the amount of the then effective Aggregate Commitment as a result of a reduction in the Borrowing Base, the Borrower shall be required to immediately prepay the Loans by the amount of such excess. 2.09 Prepayment and Conversion. Upon the Required Number of days written notice to the Administrative Agent, the Borrower may, without the payment of penalty or premium, prepay the principal of the Loans or voluntarily convert the applicable Floating Rate of any Loan prior to the termination of the applicable Interest Period in whole or in part, from time to time. Any partial payment or conversion of RR Loans shall be made in the sum of not less than $1,000,000, and any partial payment or conversion of LIBOR Loans shall be made in the sum of not less than $1,000,000 or any $1,000,000 increment in addition thereto. With respect to any such prepayment or conversion of any LIBOR Loan the Borrower agrees to pay to the Banks upon the request of the Administrative Agent such amount or amounts as will compensate the Banks for Breakage Costs, excluding, however, any such Breakage Costs resulting from a payment or prepayment made more than sixty (60) days prior to the Administrative Agent's request for payment of Breakage Costs. The payment of any such Breakage Costs to the Banks shall be made within thirty (30) days of a request therefor from Administrative Agent. If LIBOR cannot be determined on the date of such prepayment, the Administrative Agent shall calculate LIBOR by interpolating LIBOR in effect immediately prior to the prepayment and LIBOR in effect immediately after the prepayment. 2.10 Increased Cost of Loans. (A) Notwithstanding any other provisions herein, if as a result of any regulatory change after the date hereof (1) the basis of taxation of payments to any Bank of the principal of, or interest on, any LIBOR Loan or any other amounts due under this Agreement in respect of any such LIBOR Loan (except for taxes imposed on the overall net income or receipts of such Bank, and franchise or other taxes imposed generally on such Bank), by the jurisdiction (or any political subdivision therein) in which the Bank has its principal office (if such other taxes do not specifically affect the cost to the Bank of making the Loans) is changed; (2) any reserve, special deposit, or similar requirement (including without limitation any reserve requirement under regulations of the Board of Governors of the Federal Reserve System) against assets of, deposits with, or for the account of, or credit extended by such Bank, is imposed, increased, modified, or deemed applicable; or (3) any other condition affecting this Agreement or any LIBOR Loan is imposed on such Bank or (in the case of LIBOR Loans) the LIBOR Market; and the result of any of the foregoing is to increase the actual direct cost to such Bank of making or maintaining any such LIBOR Loan (and such increase shall not have been compensated by a corresponding increase in the interest rate applicable to the respective Loans) by an amount deemed by such Bank to be material (such increases in cost and reductions in amounts receivable being herein called "Increased Costs"), then the Borrower shall pay such Bank, within thirty (30) days after its written demand, such additional amount or amounts as will compensate such Bank for those Increased Costs. No Bank will demand to be compensated by Borrower for such Increased Costs unless such Bank generally makes such demands to its other LIBOR Loan customers who are similarly situated. A certificate of such Bank setting forth the basis for the determination of such amount necessary to compensate such Bank as aforesaid (including a representation by such Bank that it is generally making demands as required by the preceding sentence), accompanied by documentation showing reasonable support for such increased costs or reduced sums received by such Bank, shall be delivered to the Borrower and shall be conclusive, save for manifest error, as to such determination and such amount. The affected Bank shall notify the Borrower, as promptly as practicable after such Bank obtains knowledge of any Increased Costs or other sums payable pursuant to this Section 2.10 and determines to request compensation therefor, or any event occurring after the Closing which will entitle such Bank to compensation pursuant to this Section; provided that, notwithstanding anything herein to the contrary, the Borrower shall not be obligated for the payment of any Increased Costs or other sums payable pursuant to this Section 2.10 to the extent such Increased Costs or other sums accrued more than 90 days prior to the date upon which the Borrower was given such notice. If the Borrower is required to indemnify or pay additional amounts pursuant to this Section 2.10, then the Bank will take such action as in the reasonable judgment of the Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise commercially unreasonable. The Bank shall use its reasonable efforts to obtain in a timely fashion any refund, deduction or credit of any taxes paid or reimbursed by the Borrower pursuant to this Section 2.10. If the Bank receives a benefit in the nature of a refund, deduction or credit (including a refund in the form of a deduction from or credit against taxes that are otherwise payable by the Bank) of any taxes with respect to which the Borrower has made a payment under Section 2.10, the Bank agrees to reimburse the Borrower to the extent of the benefit of such refund, deduction or credit promptly after the Bank reasonably determines that such refund deduction or credit has become final; provided, however, that nothing contained in this paragraph shall require the Bank to make available its tax returns (or any other information relating to its taxes which it deems to be confidential) or to attempt to obtain any such refund, deduction or credit, which attempt would be inconsistent with any reporting position otherwise taken by the Bank on its tax returns. (B) Notwithstanding the foregoing provisions of this Section 2.10, in the event that by reason of any regulatory change any Bank either (i) incurs Increased Costs based on, or measured by, the excess above a specified level of the amount of a category of deposits or other liabilities of such Bank that includes deposits by reference to which the interest rate on LIBOR Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Bank that includes LIBOR Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets that it may hold, then, if such Bank so elects by written notice to the Borrower, the obligation of such Bank to make or convert Loans of any other type into LIBOR Loans hereunder shall be suspended until the earlier of the date such regulatory change ceases to be in effect or the date the Borrower and such Bank agree upon an alternative method of determining the interest rate payable by the Borrower on LIBOR Loans, and all LIBOR Loans of such Bank then outstanding shall be converted into an RR Loan (if not otherwise prohibited under the terms of this Agreement) at such Bank's option. 2.11 Change of Law. Notwithstanding any other provision herein, in the event that any change in any Applicable Law or in the interpretation or administration thereof shall make it unlawful for the Banks to (i) honor any commitment it may have hereunder to make any LIBOR Loan, then such commitment shall terminate, or (ii) maintain any LIBOR Loan, then all LIBOR Loans of the Banks then outstanding shall be repaid and converted to RR Loans (unless the Banks' obligations to fund Loans hereunder has been suspended by any other provisions of this Agreement) at the Borrower's option in accordance with the election procedures set forth in Section 2.04(B); provided, however, that prior to the effective date of such election, interest shall be calculated at the RR. Any remaining commitment of the Banks hereunder to make LIBOR Loans (but not other Loans) shall be suspended so long as they are prohibited by any applicable law. Upon the occurrence of any such change, the Administrative Agent shall promptly notify the Borrower thereof, and shall furnish to the Borrower in writing evidence thereof certified by the Administrative Agent. Any repayment or conversion of any LIBOR Loan which is required under this Section 2.11 or under 2.04(B) shall be effected by payment thereof, together with accrued interest thereon, on demand, and concurrently there shall occur the borrowing of the corresponding RR Loan as provided herein. If any repayment to the Banks of any LIBOR Loan (including conversions thereof) is made under this Section 2.11 on a day other than a day otherwise scheduled for a payment of principal of or interest on such Loan, the Borrower shall pay to the Banks upon the request of the Administrative Agent such amount or amounts as will compensate the Banks for Breakage Costs, excluding, however, any such Breakage Costs resulting from a prepayment or conversion made more than sixty (60) days prior to the Administrative Agent's request for payment of Breakage Costs. The payment of any such Breakage Costs to the Banks shall be made within thirty (30) days of a request therefor from Administrative Agent. 2.12 Mitigation: Mandatory Assignment. Each Bank shall use reasonable efforts to avoid or mitigate any Increased Cost or suspension of the availability of an interest rate under Sections 2.09 through 2.10 above, to the greatest extent practicable (including transferring the Loans to another lending office or Affiliate of a Bank) unless, in the opinion of such Bank, such efforts would be likely to have an adverse effect upon it. In the event a Bank makes a request to the Borrower for additional payments in accordance with Sections 2.09 or 2.10, then, provided that no Event of Default or Unmatured Event of Default has occurred and is continuing at such time, the Borrower may, at its own expense and in its sole discretion, require such Bank to transfer and assign in whole (but not in part), without recourse, all of its interests, rights and obligations under this Agreement to an assignee which shall assume such assigned obligations (which assignee may be another Bank, if a Bank accepts such assignment); provided that (a) such assignment shall not conflict with any law, rule or regulation or order of any court or other governmental authority and (b) the Borrower or such assignee shall have paid to the Administrative Agent for the account of the assigning Bank in immediately available funds the principal of and interest accrued to the date of such payment on the portion of the Loans hereunder held by such assigning Bank and all other amounts owed to such assigning Bank hereunder, including amounts owed pursuant to Sections 2.09 and 2.10 hereof, and such assignment shall otherwise comply with Section 9.05, including without limitation the payment of the assignment fee payable to Administrative Agent under Section 9.05. 2.13 Pro Rata Treatment and Payments. Each Borrowing by Borrower from the Banks hereunder, each payment by Borrower on account of any fee hereunder and any reduction of the Commitments of the Banks shall be made pro rata according to the respective Percentage Shares of the Banks. Each payment (including each prepayment) by Borrower on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Banks. The Administrative Agent shall distribute such payments to the Banks promptly upon receipt in like funds as received. 2.14 Sharing of Payments and Setoffs. Each Bank agrees that if it shall, through the exercise of a right of banker's lien, setoff or counterclaim against Borrower (pursuant to Section 7.05, Section 9.01 or otherwise), including, but not limited to, a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Bank under any applicable bankruptcy, insolvency or other similar law or otherwise, or by similar means, obtain payment (voluntary or involuntary) in respect of any Loan or Loans (other than pursuant to Section 2.10) as a result of which the unpaid principal portion of its Loans shall be proportionately less than the unpaid principal portion of the Loans of any other Bank, it shall simultaneously purchase from such other Banks at face value a participation in the Loans of such other Banks, so that the aggregate unpaid principal amount of Loans and participations in Loans held by each Bank shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to such exercise of banker's lien, setoff, counterclaim or other event was to the principal amount of all Loans outstanding prior to such exercise of banker's lien, setoff, counterclaim or other event; provided, however, that if any such purchase or purchases or adjustments shall be made pursuant to this Section 2.14 and the payment giving rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall be rescinded to the extent of such recovery and the purchase price or prices or adjustment restored without interest. 2.15 Commitment Fee. As consideration for the commitment of the Banks to make Credit Extensions to the Borrower through the Facility Termination Date pursuant to this Agreement, the Borrower agrees to pay to the Administrative Agent for the account of the Banks within five (5) Business Days after the end of each quarterly period ending March 31, June 30, September 30 and December 31 of each year (except the first period shall be for a period of time from the Closing to June 30, 2002) during the period commencing on the date of this Agreement to and including the Facility Termination Date and at the Facility Termination Date, a commitment fee equal to the percentage per annum specified in the Pricing Grid based on the Utilization Percentage (computed on the basis of a year of 360 days) multiplied by an amount equal to the daily average excess, if any, of the Aggregate Commitment Amount over the Outstanding Credit Exposure, throughout the period from the date of this Agreement or previous calculation date provided above, whichever is later, to the relevant calculation date or the Facility Termination Date, as the case may be. 2.16 Borrowing Base Increase Fee. To the extent that the Borrowing Base is increased to an amount that exceeds the largest amount of Borrowing Base in existence at any time prior to such increase, a fee of one half percent (0.50%) of the incremental amount of any increases in the Borrowing Base subsequent to Closing ("Borrowing Base Increase Fee") shall be due upon such increased Borrowing Base becoming effective. The Borrowing Base Increase Fee shall be paid by Borrower to Administrative Agent, and Administrative Agent shall promptly thereafter remit to each Bank such Bank's Percentage Share of such Borrowing Base Increase Fee. 2.17 Agent's Fee. At Closing and on each anniversary of the Closing, Borrower shall pay to Administrative Agent a fee (the "Agent's Fee") of $75,000.00. Administrative Agent shall promptly thereupon remit one-third of this Agent's Fee to each Arranger. 2.18 Addition of Borrowing Base Oil & Gas Properties. The Borrower may, from time to time upon written notice to the Administrative Agent, propose to add Oil and Gas Properties of the Borrower to the Borrowing Base Oil and Gas Properties. Any such proposal to add Oil and Gas Properties of the Borrower to the Borrowing Base Oil and Gas Properties shall be accompanied by a Reserve Report applicable to such properties that conforms to the requirements of Section 2.06, and evidence sufficient to establish that Borrower (or either of them) has Defensible Title to such Oil and Gas Properties, and any such addition shall become effective at such time as: (a) the Arrangers, with the approval of the Banks, have made a determination of the amount by which the Borrowing Base would be increased as the result of such addition and (b) the conditions set forth in Article III hereof, to the extent they are applicable to such additional Oil and Gas Properties of the Borrower, have been satisfied. In determining the increase in the Borrowing Base pursuant to this Section, the Arrangers and the Banks shall apply the parameters and other credit factors consistently applied then generally being utilized by the Arrangers and each such Bank, respectively, for Borrowing Base determinations for other similarly situated borrowers 2.19 Adjustment to Aggregate Commitment Amount. At any time that Borrower proposes to increase the Borrowing Base by adding additional Oil and Gas Properties to the Borrowing Base Oil and Gas Properties pursuant to Section 2.18, Borrower may also request that Banks increase the amount of the Aggregate Commitment Amount. At any time that Borrower makes such a request it shall promptly provide Administrative Agent with such financial information as Administrative Agent may request to assist the Administrative Agent in evaluating such request. Following the receipt of such information from Borrower, the Arrangers shall, with the unanimous approval of the Banks in each Bank's sole discretion, make a redetermination of the Aggregate Commitment Amount, which shall become effective upon written notification from the Administrative Agent to Borrower of the new Aggregate Commitment Amount. The Borrower may upon written notice to Administrative Agent, not sooner than one hundred eighty (180) days subsequent to the last such action by Borrower, amend the definition of the Aggregate Commitment Amount by reducing the amount set forth in such definition. Upon such reduction, the Banks shall not be obligated to make Credit Extensions in excess of such reduced Aggregate Commitment Amount. If and when the Banks change the Aggregate Commitment Amount at Borrower's request, the commitment fee, as determined pursuant to Section 2.15 of this Agreement, shall be calculated using such changed amount for all of the calculation period in which such Aggregate Commitment Amount was changed. 2.20 Facility LCs. (A) Issuance. The LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby letters of credit (each, a "Facility LC") and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time from and including the date of this Agreement and prior to the Facility Termination Date upon the request of the Borrower; provided that immediately after each such Facility LC is issued or Modified, (i) the aggregate amount of the outstanding LC Obligations shall not exceed Seven Million, Five Hundred Thousand Dollars ($7,500,000.00) and (ii) the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment Amount. Facility LC's issued pursuant to the Original Credit Agreement or the First Amended Credit Agreement and outstanding as of the Closing of this Agreement shall also constitute Facility LCs hereunder. No Facility LC shall have an expiry date later than the earlier of (x) the thirtieth (30th) day prior to the Facility Termination Date and (y) eighteen (18) months after its issuance. (B) Participations. Upon the issuance or Modification by the LC Issuer of a Facility LC in accordance with this Section 2.20, the LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from the LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Percentage Share. (C) Notice. Subject to Section 2.20(A), the Borrower shall give the LC Issuer notice prior to 10:00 a.m. (Los Angeles, California time) at least five Business Days prior to the proposed date of issuance or Modification of each Facility LC, specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC and the nature of the transactions proposed to be supported thereby. Upon receipt of such notice, the LC Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Bank, of the contents thereof and of the amount of such Bank's participation in such proposed Facility LC. The issuance or Modification by the LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article III (the satisfaction of which the LC Issuer shall have no duty to ascertain), be subject to the conditions precedent that such Facility LC shall be satisfactory to the LC Issuer and that the Borrower shall have executed and delivered such application agreement and/or such other instruments and agreements relating to such Facility LC as the LC Issuer shall have reasonably requested (each, a "Facility LC Application"). In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. Each notice required or permitted to be given under this Section 2.20(C) by any party to any other party may be given by fax to the fax contact numbers specified for such party on Schedule 2.20(C) attached hereto. (D) LC Fees. The Borrower shall pay to the Administrative Agent, for the account of the Banks ratably in accordance with their respective Percentage Shares, with respect to each Facility LC, a letter of credit fee at a rate as specified in the Pricing Grid based on the Utilization Percentage applicable at the time of issuance of the Facility LC, but not less than $500.00 per Facility LC per annum, such fee to be payable in arrears on or before the first Business Day of each calendar month (each such fee described in this sentence an "LC Fee"). The Borrower shall also pay to the LC Issuer for its own account (x) at the time of issuance of each Facility LC, a fronting fee calculated at the rate of twelve and five-tenths (12.5) basis points per annum pro-rated over the term, and (y) documentary and processing charges in connection with the issuance or Modification of and draws under Facility LCs in accordance with the LC Issuer's standard schedule for such charges as in effect from time to time. (E) Administration; Reimbursement by Banks. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the LC Issuer shall notify the Administrative Agent and the Administrative Agent shall promptly notify the Borrower and each other Bank as to the amount to be paid by the LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of the LC Issuer to the Borrower and each Bank shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. The LC Issuer shall endeavor to exercise the same care in the issuance and administration of the Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by the LC Issuer, each Bank shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse the LC Issuer on demand for (i) such Bank's Percentage Share of the amount of each payment made by the LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.20(F) below, plus (ii) interest on the foregoing amount to be reimbursed by such Bank, for each day from the date of the LC Issuer's demand for such reimbursement (or, if such demand is made after 10:00 a.m. (Los Angeles, California time) on such date, from the next succeeding Business Day) to the date on which such Bank pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the Floating Rate based on RR. (F) Reimbursement by Borrower. The Borrower shall be irrevocably and unconditionally obligated to reimburse the LC Issuer on or before the applicable LC Payment Date for any amounts to be paid by the LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Bank shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Bank to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) the LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. All such amounts paid by the LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to RR Loans for such day if such day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus the rate applicable to RR Loans for such day if such day falls after such LC Payment Date. The LC Issuer will pay to each Bank ratably in accordance with its Percentage Share all amounts received by it from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by the LC Issuer, but only to the extent such Bank has made payment to the LC Issuer in respect of such Facility LC pursuant to Section 2.20(E). Subject to the terms and conditions of this Agreement (including without limitation the submission of a Request for Advance in compliance with Section 2.02 and the satisfaction of the applicable conditions precedent set forth in Article III), the Borrower may request a Loan hereunder for the purpose of satisfying any Reimbursement Obligation. (G) Obligations Absolute. The Borrower's obligations under this Section 2.20 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC Issuer, any Bank or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuer and the Banks that the LC Issuer and the Banks shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. The LC Issuer shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by the LC Issuer or any Bank under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrower and shall not put the LC Issuer or any Bank under any liability to the Borrower. Nothing in this Section 2.20(G) is intended to limit the right of the Borrower to make a claim against the LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.20(F). (H) Actions of LC Issuer. The LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.20, the LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and any future holders of a participation in any Facility LC. (I) Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Bank Party and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Bank Party may incur (or which may be claimed against such Bank Party by any Person whatsoever) by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the LC Issuer may incur by reason of or in connection with (i) the failure of any other Bank to fulfill or comply with its obligations to the LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Bank) or (ii) by reason of or on account of the LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to the LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Bank Party for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of the LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.20(I) is intended to limit the obligations of the Borrower under any other provision of this Agreement. (J) Banks' Indemnification. Each Bank shall, ratably in accordance with its Percentage Share, indemnify the LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or the LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of the Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.20 or any action taken or omitted by such indemnitees hereunder. (K) Rights as a Bank. In its capacity as a Bank, the LC Issuer shall have the same rights and obligations as any other Bank. 2.21 Advances to Satisfy Obligations of the Borrower. The Administrative Agent or any Bank may, but shall not be obligated to, make advances hereunder for the benefit of the Banks and apply same to the satisfaction of any condition, warranty, representation or covenant of the Borrower contained in this Agreement, and the funds so advanced and applied shall be part of the Loan proceeds advanced under this Agreement and evidenced by the Notes. 2.22 Assignment of Production. Certain of the Security Instruments covering the Borrowing Base Oil and Gas Properties contain an assignment unto and in favor of Collateral Agent for the benefit of the Banks of all oil, gas and other minerals produced and to be produced from or attributable to the Borrowing Base Oil and Gas Properties together with all of the revenues and proceeds attributable to such production, and such Security Instruments further provide that all such revenues and proceeds which may be so collected by the Collateral Agent for the benefit of the Banks pursuant to the assignment shall be applied to the payment of the Notes and the satisfaction of all other Indebtedness to be secured by such Security Instruments. The Borrower hereby appoints the Collateral Agent as its agent and attorney-in-fact until this Agreement has been terminated in accordance with Section 9.19 hereof for purposes of completing the Transfer Order Letters delivered to the Collateral Agent pursuant to Section 3.02(B) hereof, which power is coupled with an interest and is not revocable. ARTICLE III. CONDITIONS The obligation of the Banks to make the Credit Extensions is subject to the following conditions precedent: 3.01 General Conditions to Closing and to all Disbursements. At the time of the execution and delivery of this Agreement by all parties who are designated as signatories on the signature pages of this Agreement (the "Closing") and at each subsequent Credit Extension: (A) No Event of Default shall have occurred and be continuing, and no Unmatured Event of Default shall have occurred; (B) The representations and warranties contained in Article IV of this Agreement shall be true and correct in all material respects as though such representations and warranties had been made on such date, except such as are expressly limited to a prior date, which shall have been true and correct in all material respects as of such prior date; (C) The Collateral Agent and the Banks shall have been, and shall continue to be, satisfied, in their good faith discretion, that the Borrower (individually or collectively) holds Defensible Title to the Borrowing Base Oil and Gas Properties, and that such ownership includes record title to an undivided net revenue interest in the production from each such Borrowing Base Oil and Gas Property that is not less than, as well as an undivided working interest in each Borrowing Base Oil and Gas Property that is not greater than (unless there is a corresponding increase in the net revenue interest attributed to such party therein), the net revenue interest therein and the working interest therein, respectively, attributed to the Borrower on Exhibit "A," subject to the limitations and qualifications on such exhibit (or attributed to Borrower in any Security Instrument applicable to any Oil and Gas Property that is added to the Borrowing Base Oil and Gas Properties in connection with any subsequent funding after the Closing); (D) No Material Adverse Change shall have occurred since the date of the latest audited Financial Statements provided to the Administrative Agent; (E) All of the Prior Security Instruments delivered with respect to the Borrowing Base Oil and Gas Properties shall have remained in full force and effect; and (F) All legal matters incidental thereto shall be reasonably satisfactory to legal counsel designated by the Administrative Agent. 3.02 Deliveries at the Closing. The Borrower shall have duly delivered or caused to be delivered to the Collateral Agent, prior to or contemporaneously with the Closing, the following: (A) The Notes payable to each respective Bank, along with the Security Instruments covering each of the Borrowing Base Oil and Gas Properties. (B) Transfer Order Letters applicable to the production of oil and gas from any Borrowing Base Oil and Gas Properties for which Transfer Order letters have not previously been delivered to the Administrative Agent. (C) The results of a Uniform Commercial Code search showing all financing statements and other documents or instruments on file against the Borrower in the Offices of the Secretaries of State of the State of Texas, the State of Delaware, the State of Louisiana and each State in which any of the Borrowing Base Oil and Gas Properties are located or deemed to be located, and the counties and/or parishes in which the Borrower maintains its principal place of business and in which any of the Borrowing Base Oil and Gas Properties are located, such search to be as of a date no more than ten (10) days prior to the date of Closing. (D) A certified (as of the date of the Closing) copy of resolutions of Borrower's and each Guarantor's Governing Body authorizing the execution, delivery, and performance of this Agreement, the Notes, and each other document to be delivered pursuant hereto; (E) A certificate (dated the date of the Closing) of Borrower's and each Guarantor's corporate secretary as to the incumbency and signatures of the officers of the Borrower or such general partner and each Guarantor signing this Agreement, the Notes, and each other document to be delivered pursuant hereto; (F) A copy, certified as of the most recent date practicable by the Secretary of State of the state in which Borrower and each Guarantor was formed, of the Borrower's and each Guarantor's Certificate of Formation, together with a certificate (dated the date of the Closing) of the Borrower's and each Guarantor's corporate secretary to the effect true and complete copies of the Borrower's and each Guarantor's Governing Documentation are attached thereto and that such Governing Documentation has not been amended except as described therein; (G) Certificates, as of the most recent dates practicable, of the aforesaid Secretaries of State, the Secretary of State of each state in which the Borrower, each general partner thereof and each Guarantor is qualified as a foreign Business Entity and the department of revenue or taxation of each of the foregoing states, as to the good standing of the Borrower, each general partner therein and each Guarantor; (H) A Compliance Certificate, dated the date of the Closing; (I) Payment of the Administrative Agent's and Collateral Agent's attorneys' fees upon receipt of a reasonably detailed invoice pursuant to Section 5.12 hereof; and (J) A legal opinion or opinions of outside counsel to the Borrower and Guarantors, addressed to the Bank Parties, in form and substance reasonably satisfactory to the Administrative Agent, covering, among other matters reasonably requested by Administrative Agent or its counsel, the matters addressed in Sections 4.01, 4.02, 4.03, 4.20 and 4.21 hereof and in Section 4(d) of the Guaranty. (K) Duly executed counterparts of the Guaranty of each Guarantor. (L) Duly executed assignments, in form and substance satisfactory to the Collateral Agent, of the Third Restated Agreement Notes, the Prior Security Instruments securing same, the Third Restated Agreement and all rights associated therewith from the holders of the Third Restated Agreement Notes to the Banks, in accordance with their respective percentage shares, along with the original Third Restated Agreement Notes duly endorsed by the holder of each note to the Banks, in their respective percentage shares. 3.03 Documents Required for Subsequent Disbursements Involving Additional Borrowing Base Oil and Gas Properties. As of the time of funding any additional advances to Borrower that have been approved by the Banks pursuant to Section 2.01 and are made in conjunction with the addition of Oil and Gas Properties owned by the Borrower or any Guarantor to the Borrowing Base Oil and Gas Properties, the Borrower or such Guarantor shall have duly delivered to the Administrative Agent: (i) the Security Instruments that are necessary or appropriate, in the reasonable opinion of the Administrative Agent, relating to such additional Oil and Gas Properties, and (ii) Transfer Order Letters applicable to the production of oil and gas from the such additional Borrowing Base Oil and Gas Properties. ARTICLE IV. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Banks to enter into this Agreement and to make the Credit Extensions hereunder, Borrower represents and warrants to the Administrative Agent and the Banks that: 4.01 Existence. The Borrower is a Business Entity of the type specified for such Borrower on the signature pages of this Agreement, duly organized, legally existing, and in good standing under the Laws of the State in which it was organized; the Borrower has the lawful power to own their properties and to engage in the businesses it conducts, and it is duly qualified and in good standing as a foreign Business Entity in the jurisdictions wherein the nature of the business transacted by it or property owned by it makes such qualification necessary; the states in which the Borrower is incorporated or organized and qualified to do business are set forth in Schedule 4.01; the addresses of all places of business of the Borrower are as set forth in Schedule 4.01; Borrower has not changed its name, been the surviving company in a merger, acquired any business, or changed its principal executive office within five (5) years and one (1) month prior to the date hereof; and Borrower has no Subsidiaries other than the Guarantors. Borrower and each Guarantor is qualified under applicable Minerals Management Service regulations to act as the operator of the Leases where required. 4.02 Due Authorization. Upon execution of the Loan Documents, the execution and delivery by the Borrower of this Agreement, the Notes, and the borrowings hereunder; the execution and delivery by the Borrower and each Guarantor of the Security Instruments and the Transfer Order Letters to which each is a party; and the repayment by the Borrower of the Indebtedness evidenced by the Notes and interest and fees provided in the Notes and this Agreement are (a) within the Corporate Power of the Borrower and each Guarantor, as applicable; (b) have been duly authorized by all necessary Corporate Action, and (c) do not and will not (i) require the consent of any regulatory authority or governmental body, (ii) contravene or conflict with any provision of Law or of the Governing Documentation of the Borrower or any Guarantor, (iii) contravene or conflict with any indenture, instrument or other agreement to which the Borrower or any Guarantor is a party or by which its property may be presently bound or encumbered, or (iv) result in or require the creation or imposition of any mortgage, lien, pledge, security interest, charge or other encumbrance in, upon or of any of the properties or assets of the Borrower or any Guarantor under any such indenture, instrument or other agreement, other than under any of the Security Instruments. 4.03 Valid and Binding Obligations. This Agreement, the Notes, the Security Instruments and the other Loan Documents when duly executed and delivered, will be legal, valid and binding obligations of and enforceable against the Borrower, in accordance with their respective terms (subject to any applicable bankruptcy, insolvency or other Laws of general application affecting creditors' rights, general equitable principles, whether considered in a proceeding in equity or at law, and judicial decisions interpreting any of the foregoing). 4.04 Scope and Accuracy of Financial Statements. All Financial Statements submitted and to be submitted to the Administrative Agent hereunder are and will be complete and correct in all material respects, are and will be prepared in accordance with GAAP consistently applied, and do and will fairly reflect the consolidated financial condition and the results of the operations of the Borrower and the Guarantors in all material respects as of the dates and for the period stated therein (subject only to normal year-end audit adjustments with respect to such unaudited interim statements of the Borrower), and no Material Adverse Change has occurred since the effective date of the latest audited Financial Statements of Borrower delivered to Administrative Agent. 4.05 Title to Borrowing Base Oil and Gas Properties. The Borrower and Guarantors have Defensible Title to the working and net revenue interests in the Borrowing Base Oil and Gas Properties as set forth on Exhibit "A", free and clear of all mortgages, liens and encumbrances, except for Permitted Encumbrances and any other exceptions, limitations or qualifications expressly disclosed on Exhibit "A." 4.06 Oil and Gas Leases. The Leases which constitute any part of the Borrowing Base Oil and Gas Properties are in full force and effect as to those portions within the Borrowing Base Oil and Gas Properties, are valid, subsisting leases as to those portions within the Borrowing Base Oil and Gas Properties to which they pertain and all rentals, royalties and other amounts due and payable in accordance with the terms of the Leases as to those portions within the Borrowing Base Oil and Gas Properties, overriding royalties, net profits or other production burdens have been duly paid or provided for; the obligations to be performed under the Leases as to those portions within the Borrowing Base Oil and Gas Properties have been duly performed; and the Borrower is not aware of any default by any third party under any of the Leases with respect to such third party's obligations. 4.07 Interest in the Borrowing Base Oil and Gas Properties. Except as otherwise set forth on Exhibit "A" hereto, with respect to each of the Borrowing Base Oil and Gas Properties, the ownership of the Borrower and Guarantors in such property will, with respect to the wells, units and/or tracts of land described in Exhibit "A" hereto in connection with such property, (i) entitle the Borrower or Guarantors, as applicable, to receive (subject to the terms and provisions of this Agreement) a decimal share of the oil and gas produced from, or allocated to, such wells, units and/or tracts equal to not less than the decimal share set forth in Exhibit "A" in connection with such wells, units and/or tracts, and (ii) cause the Borrower or Guarantors, as applicable, to be obligated to bear a decimal share of the cost of exploration, development and operation of such wells, units and/or tracts of land not greater than the decimal share set forth in Exhibit "A" in connection with such wells, units and/or tracts, unless any increase in the Borrower's or Guarantors, as applicable, share of costs is accompanied by a pro-rata increase in the Borrower's or Guarantors, as applicable, share of revenue. Except as set forth in the instrument and agreements, if any, more particularly described in Exhibit "A" hereto, all such shares of production which the Borrower or Guarantors, as applicable, is entitled to receive, and shares of expenses which the Borrower or Guarantors, as applicable, is obligated to bear, are not subject to change, except for changes attributable to future elections by the Borrower or Guarantors, as applicable, not to participate in operations proposed pursuant to customary forms of applicable joint operating agreements, and except for changes attributable to changes in participating areas under any federal units wherein participating areas may be formed, enlarged or contracted in accordance with the rules and regulations of the applicable governmental authority. 4.08 Oil and Gas Contracts. Except as set forth on Schedule 4.08 attached hereto, neither Borrower nor any Guarantor is obligated, by virtue of any prepayment under any contract providing for the sale by the Borrower or Guarantor of Hydrocarbons which contains a "take-or-pay" clause or under any similar prepayment agreement or arrangement, including, without limitation, "gas balancing agreements", to deliver a material amount of Hydrocarbons produced from the Borrowing Base Oil and Gas Properties at some future time without then or thereafter receiving full payment therefor (i.e., in the case of oil, not in excess of sixty (60) days, and in the case of gas, not in excess of ninety (90) days). Except as set forth on Schedule 4.08 attached hereto, the Borrowing Base Oil and Gas Properties are not subject to any contractual, or other arrangement for the sale of crude oil which cannot be canceled on ninety (90) days' (or less) notice, unless the price provided for therein is equal to or greater than the prevailing market price in the vicinity. The Borrowing Base Oil and Gas Properties are not subject to any gas sales contract that contains any material terms which are not customary in the industry within the region in which the Borrowing Base Oil and Gas Properties affected thereby are located. The Borrowing Base Oil and Gas Properties are not subject to any regulatory refund obligation and no facts exist which might cause the same to be imposed. 4.09 Producing Wells. All producing wells located on the Borrowing Base Oil and Gas Properties have been, during all times that such were under the direction or control of the Borrower and, to the knowledge of the Borrower, at all other times, drilled, operated and produced in conformity with all applicable Laws, rules, regulations and orders of all regulatory authorities having jurisdiction, are subject to no penalties on account of past production, and are bottomed under and are producing from, and the well bores are wholly within, the Borrowing Base Oil and Gas Properties, or on Oil and Gas Properties which have been pooled, unitized or communitized with the Borrowing Base Oil and Gas Properties. 4.10 Purchasers of Production. The persons who are purchasing the Borrower's or any Guarantor's interests in oil and gas produced from the Borrowing Base Oil and Gas Properties as of the calendar month during which the initial Loans are made hereunder are identified on Schedule 4.10 attached hereto. 4.11 Authorizations and Consents. No authorization, consent, approval, exemption, franchise, permit or license of, or filing with, any governmental or public authority or any third party is required to authorize, or is otherwise required in connection with the valid execution and delivery by the Borrower or any Guarantor of this Agreement, the Notes, and the Security Instruments, or any other instrument contemplated hereby to which such Person is a party, the repayment by the Borrower of advances against the Notes and interest and fees provided in the Notes and this Agreement, or the performance by the Borrower or any Guarantor of its obligations under any of the foregoing. 4.12 Environmental Laws. Except to the extent that the failure to do so would not have and would not be expected to have a Material Adverse Effect, the Borrower and each Guarantor (a) is and has in the past been in compliance with all Environmental Laws and all permits, requests and notifications relating to health, safety or the environment applicable to the Borrower or Guarantors or any of its properties, assets, operations and businesses; (b) has obtained and adhered to and currently possesses all necessary permits and other approvals, including interim status under the Federal Resource Conservation and Recovery Act, necessary to store, dispose of and otherwise handle Hazardous Substances and to operate its properties, assets and businesses; (c) has reported, to the extent required by all federal, state and local statutes, Laws, ordinances, regulations, rules, permits, judgments, orders and decrees, all past and present sites owned and/or operated by the Borrower or any Guarantor where any Hazardous Substance has been released, treated, stored or disposed of and (d) has not used, stored, or Released any Hazardous Substance in excess of amounts allowed by Environmental Law. There is (x) no location on any property currently or previously owned or operated by the Borrower where Hazardous Substances are known to have entered or are likely to enter into the soil or groundwater or such property, other than immaterial releases of oil or natural gas in the ordinary course of business none of which releases (i) either individually, or in the aggregate, has had or may be expected to have a Material Adverse Effect or (ii) has violated or may be expected to violate any Environmental Laws, except for any such violation that has not had and would not be expected to have a Material Adverse Effect, and (y) no on-site or off-site location to which the Borrower or any Guarantor has released or transported Hazardous Substances or arranged for the transportation or disposal of Hazardous Substances, which is or is likely to be the subject of any federal, state, local or foreign enforcement action or any investigation which could lead to any material claims against any such entity for any clean-up cost, remedial work, damage to natural resources, common law or legal liability, including, but not limited to, claims under Comprehensive Environmental Response, Compensation, and Liability Act. For the purposes of this Section, references to "the Borrower" and "the Guarantor(s)" shall include all predecessors, successors-in- interest of the Borrower or any Guarantor. 4.13 Compliance with Laws, Rules, Regulations and Orders. Except to the extent that the failure to comply would not materially interfere with the conduct of the business of the Borrower or Guarantor, Borrower and each Guarantor has complied with all applicable Laws with respect to: (1) the conduct of its business; and (2) the use, maintenance, and operation of the Borrowing Base Oil and Gas Properties and personal properties owned or leased by it in the conduct of its business; except as expressly set forth on Exhibit "A" hereto, Borrower and each Guarantor possesses all licenses, approvals, registrations, permits and other authorizations necessary to enable it to carry on its business in all material respects as now conducted, and all such licenses, approvals, registrations, permits and other authorizations are in full force and effect; and Borrower has no reason to believe that the Borrower or any Guarantor will be unable to obtain the renewal of any such licenses, approvals, registrations, permits and other authorizations. 4.14 Liabilities, Litigation and Restrictions. Except as disclosed in the Financial Statements, Borrower and Guarantors do not have any liabilities, direct or contingent, which may materially and adversely affect it, its business or assets. There is no litigation or other action of any nature pending before any court, governmental instrumentality, regulatory authority or arbitral body or, to the knowledge of the Borrower threatened against or affecting Borrower or any Guarantor which might reasonably be expected to result in any material, adverse change in the Borrower or any Guarantor, or its business or assets. To the best of the Borrower's knowledge, no unduly burdensome restriction, restraint or hazard exists by contract or Law that would have a Material Adverse Effect. 4.15 Existing Indebtedness. All Indebtedness of Borrower and any Guarantor consisting of liability to repay borrowed money or to pay money to become due on capital leases as of the Closing is described in Schedule 4.15; and neither Borrower nor any Guarantor is in default with respect to any of its existing Indebtedness. 4.16 Material Commitments. Except as described in Schedule 4.16 hereto and in filings made by Borrower with the Securities Exchange Commission, (a) neither Borrower nor any Guarantor has any material leases (other than oil and gas leases), contracts or commitments of any kind (including, without limitation, employment agreements; collective bargaining agreements; powers of attorney; distribution arrangements; patent license agreements; contracts for future purchase or delivery of goods or rendering of services; bonuses, pension and retirement plans; or accrued vacation pay, insurance and welfare agreements); (b) to the best of Borrower's knowledge, all parties to all such material leases, contracts, and other commitments to which Borrower or any Guarantor is a party have complied with the provisions of such leases, contracts, and other commitments; and (c) to the best of the Borrower's knowledge, no party is in default under any thereof and no event has occurred that but for the giving of notice or the passage of time, or both, would constitute a default, except for defaults and events that have not had and would not be expected to have a Material Adverse Effect. 4.17 Margin Stock. The Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U, or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any extension of credit under this Agreement will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying margin stock. Neither the Borrower nor any Person acting on its behalf has taken any action that might cause the transactions contemplated by this Agreement or the Notes to violate Regulations T, U, or X or to violate the Securities Exchange Act of 1934, as amended. 4.18 Proper Filing of Tax Returns and Payment of Taxes Due. Except as otherwise permitted herein, the Borrower and each Guarantor has filed all federal, state, and local tax returns and other reports required by any applicable Laws to have been filed prior to the date hereof, has paid or caused to be paid all taxes, assessments, and other governmental charges that are due and payable prior to the date hereof, and has made adequate provision for the payment of such taxes, assessments, or other charges accruing but not yet payable; the Borrower has no knowledge of any material deficiency or additional assessment in connection with any taxes, assessments, or charges not provided for on its books. 4.19 ERISA. The Borrower is in compliance in all material respects with all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited Transaction has occurred and is continuing with respect to any plan; no notice of intent to terminate a plan has been filed, nor has any plan been terminated; no circumstances exist which constitute grounds under Section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administrate a plan, nor has the PBGC instituted any such proceedings; neither the Borrower nor any ERISA Affiliate has completely or partially withdrawn under Sections 4201 or 4204 of ERISA from a Multi-Employer Plan; the Borrower and each ERISA Affiliate has met its minimum funding requirements under ERISA with respect to all of its plans and the present value of all vested benefits under each plan is less than the fair market value of all plan assets allocable to such benefits, as determined on the most recent valuation date of the plan and in accordance with the provisions of ERISA and the regulations thereunder for calculating the potential liability of the Borrower or any ERISA Affiliate to the PBGC or the plan under Title IV of ERISA; and neither the Borrower nor any ERISA Affiliate has incurred any liability to the PBGC under ERISA. 4.20 Investment Company Act Compliance. Borrower is not directly or indirectly controlled by, or acting on behalf of, any, Person which is an "Investment Company," within the meaning of the Investment Company Act of 1940, as amended. 4.21 Public Utility Holding Company Act Compliance. Borrower is not a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. 4.22 Insurance. Borrower and each Guarantor maintains insurance with respect to the properties and business of the Borrower and each Guarantor, respectively, providing coverage for such liabilities, casualties, risks and contingencies and in such amounts as is customary in the industry. The insurance coverage reflected on the Certificate of Insurance attached hereto as Schedule 4.22 is in full force and effect, and all premiums due thereon have been paid or provided for. 4.23 Material Misstatements and Omissions. No representation or warranty by or with respect to Borrower or any Guarantor contained herein or in any certificate or other document furnished by the Borrower pursuant hereto contains any untrue statement of a material fact or omits to state a material fact necessary to make such representation or warranty not misleading in light of the circumstances under which it was made. ARTICLE V. AFFIRMATIVE COVENANTS Borrower covenants so long as any Indebtedness of the Borrower to any Bank or the LC Issuer remains unpaid under this Agreement, or any Obligations of the Borrower or any Guarantor to any Bank Parties remain unsatisfied, or any Bank remains obligated to make advances hereunder or the LC Issuer is obligated to issue any Facility LC hereunder, to; 5.01 Use of Funds. Use funds advanced hereunder for the purposes of (A) refinancing existing debt owed pursuant to the Third Restated Agreement, (B) funding Borrower's and Guarantors' working capital needs, and (C) funding Borrower's other lawful corporate purposes. 5.02 Maintenance and Access to Records. Keep adequate records in accordance with good accounting practices, of all of the transactions of the Borrower and each Guarantor so that at any time, and from time to time, such records present fairly the financial condition of the Borrower and each Guarantor which may be readily determined and, at the Administrative Agent's reasonable request, make all financial records and records relating to the Borrowing Base Oil and Gas Properties available for the Administrative Agent's inspection and permit the Administrative Agent to make and take away copies thereof. 5.03 Quarterly Unaudited Financial Statements. Deliver to the Administrative Agent, on or before the forty-fifth (45th) day after the end of each calendar quarter, unaudited consolidated and consolidating Financial Statements of the Borrower and the Guarantors, as at the end of such period and from the beginning of such fiscal year to the end of the respective period, as applicable, which Financial Statements shall be certified by the president or chief financial officer of the Borrower, as being true and correct, subject to changes resulting from year-end audit adjustments. 5.04 Annual Audited Financial Statements. Deliver to the Administrative Agent, on or before the one hundred twentieth (120th) day after the close of each fiscal year of the Borrower a copy of annual audited consolidated and consolidating Financial Statements of the Borrower and the Guarantors, together with the report and opinion thereon of Arthur Andersen LLP or such other firm of independent certified public accountants acceptable to the Administrative Agent at its reasonable discretion. 5.05 Compliance Certificate. At Closing and at the time of delivery of the certified but unaudited Financial Statements pursuant to Section 5.03 above, and the delivery of the annual audited Financial Statements pursuant to Section 5.04 above, deliver to the Administrative Agent a Compliance Certificate. 5.06 Statement of Material Adverse Change. Deliver to the Administrative Agent, promptly upon any officer of Borrower having knowledge of any Material Adverse Change (or any event or circumstance that would result in any such Material Adverse Change), a statement of the President, Chief Financial Officer, or the Treasurer of the Borrower, setting forth the change in condition or event or circumstance likely to result in any such change and the steps being taken by the Borrower with respect to such change in condition or event or circumstance. 5.07 Title Defects. Cure any title defects, and/or to cause any Guarantor to cure any title defects, to the Borrowing Base Oil and Gas Properties which cause the title to the Oil and Gas Properties not to be Marketable and which title defects cause material reduction in value of the Oil and Gas Properties, considered as a whole, in the reasonable opinion of the Administrative Agent, and, in the event any such title defects are not cured in a timely manner, pay all related costs and fees incurred by the Administrative Agent for the account of the Banks to do so; provided, however, the Borrower may remove any of its or Guarantor's Oil and Gas Properties from the determination of the Borrowing Base so long as the Indebtedness evidenced by the Revolving Notes and the LCs is less than or equal to the Borrowing Base (determined by the Banks in accordance with Section 2.06 exclusive of such Oil and Gas Properties). 5.08 Additional Information. Furnish to the Administrative Agent copies of all information, if any, filed with the Securities Exchange Commission by the Borrower and all information routinely provided by the Borrower to its shareholders, generally. Furnish to the Administrative Agent, promptly upon the Administrative Agent's reasonable request, such additional financial or other information concerning the assets, liabilities, operations, and transactions of the Borrower, including, without limitation, information concerning title to any of the Borrowing Base Oil and Gas Properties. 5.09 Compliance with Laws and Payment of Assessments and Charges. Materially comply, and cause any Guarantor to materially comply, with all applicable statutes and government regulations, including, without limitation, ERISA, and pay all taxes, assessments, governmental charges, claims for labor, supplies, rent and other obligations which, if unpaid, might become a lien other than a Permitted Encumbrance against its property, except any of the foregoing being contested in good faith and as to which accruals satisfactory to the Administrative Agent, in its reasonable discretion, have been provided. 5.10 Maintenance of Existence and Good Standing. Maintain the Borrower's and each Guarantor's corporate existence and good standing in the jurisdiction of its organization, and maintain the Borrower's and any Guarantor's qualification and good standing in all other jurisdictions wherein the property now owned or hereafter acquired or business now or hereafter conducted by Borrower or any Guarantor necessitates same, other than those jurisdictions wherein the failure to so qualify will not have a Material Adverse Effect on the Borrower. 5.11 Further Assurances. Promptly cure, and/or to cause any Guarantor to promptly cure, any defects in the execution and delivery of this Agreement, the Notes, the Security Instruments, the Transfer Order Letters, or any other instrument referred to herein or executed in connection with the Notes, and upon the reasonable request of the Administrative Agent promptly execute and deliver to the Administrative Agent all such other and further instruments as may be reasonably required or desired by the Administrative Agent from time to time in compliance with the covenants and agreements made in this Agreement. 5.12 Initial Expenses of the Bank. Pay prior to or at Closing all documented reasonable fees and expenses of Porter & Hedges, L.L.P., and Hall, Estill, Hardwick, Goble, Golden & Nelson, A Professional Corporation the special legal counsel for the Administrative Agent and the Collateral Agent incurred directly and solely in connection with the preparation of this Agreement, the Notes, the Security Instruments, the Transfer Order Letters, and any other instrument referred to herein or executed directly and solely in connection with the Notes, the satisfaction of the conditions precedent set forth in Article III of this Agreement and the consummation of the transactions contemplated in this Agreement. 5.13 Subsequent Expenses of the Bank Parties. Upon request, promptly reimburse any Bank Party for all documented amounts reasonably expended, advanced or incurred by such Bank Party to collect the Notes, restructure the Notes or to enforce the rights of such Bank Party under this Agreement, the Notes, the Security Instruments, the Transfer Order Letters, or any other instrument referred to herein or executed in connection with the Notes, which amounts shall be deemed compensatory in nature and liquidated as to amount upon notice to the Borrower by the Administrative Agent and which amounts will include, but not be limited to, (a) all court costs, (b) reasonable attorneys' fees, (c) fees of auditors and accountants, (d) investigation expenses, (e) internal fees of the Administrative Agent's or Collateral Agent's in-house legal counsel, (f) fees and expenses incurred in connection with any Bank Party's participation as a member of the creditors committee in a case commenced under Title 11 of the United States Code or other similar Law of the United States, the State of Texas or any other jurisdiction, (g) fees and expenses incurred in connection with lifting the automatic stay prescribed in ss.ss.362 Title 11 of the United States Code, and (h) fees and expenses incurred in connection with any action pursuant to ss.ss.1129 Title 11 of the United States Code, reasonably incurred by any Bank Party in connection with the collection of any sums due under this Agreement, together with interest at the Floating Rate per annum, calculated on a basis of a year of three hundred sixty (360) days on each such amount from the date of notification to the Borrower that the same was expended, advanced or incurred by any Bank Party until, but not including, the date it is repaid to such Bank Party, with the obligations under this Section 5.13, surviving the non-assumption of this Agreement in a case commenced under Title 11 of the United States Code or other similar Law of the United States, the State of Texas or any other jurisdiction and being binding upon the Borrower or a trustee, receiver or liquidator of any such party appointed in any such case. 5.14 Maintenance of Tangible Property. Maintain all of its and each Guarantor's tangible property relating to the Borrowing Base Oil and Gas Properties in good repair and condition and make all necessary replacements thereof and operate such property in a good and workmanlike manner in accordance with standard industry practices, unless the failure to do so would not have a Material Adverse Effect on the Borrower or the value of any Borrowing Base Oil and Gas Property. 5.15 Maintenance of Insurance. Continue to maintain, or cause to be maintained, insurance with respect to the properties and business of the Borrower and each Guarantor against such liabilities, casualties, risks and contingencies and in such amounts as is customary in the industry and furnish to the Collateral Agent annually after the execution of this Agreement certificates evidencing such insurance. 5.16 Inspection of Tangible Assets/Right of Audit. Permit any authorized representative of the Administrative Agent or the Collateral Agent to visit and inspect (at the risk of the Administrative Agent, the Collateral Agent and/or such representative) any tangible asset of the Borrower and each Guarantor, and/or to audit the books and records of the Borrower and each Guarantor during normal business hours, at the expense of the Administrative Agent or the Collateral Agent following reasonable advance notice. 5.17 Payment of Note and Performance of Obligations. Pay the Notes according to the reading, tenor and effect thereof, as modified hereby, and do and perform every act and discharge all of the Obligations provided to be performed and discharged hereunder. 5.18 Borrowing Base. Maintain a Borrowing Base such that the amount of the Outstanding Credit Exposure will not, at any time other than during applicable grace periods expressly set forth elsewhere in this Agreement, exceed the Aggregate Commitment Amount. 5.19 Compliance with Environmental Laws. To the extent necessary to avoid a Material Adverse Effect, comply, and/or to cause any Guarantor to comply, with any and all requirements of Law, including, without limitation, Environmental Laws, (a) applicable to any natural or environmental resource or media located on, above, within, in the vicinity of, related to or affected by any Borrowing Base Oil and Gas Properties or any other property of the Borrower or any Guarantor, or (b) applicable to the performance or conduct of its operations, including, without limitation, all permits, licenses, registrations, approvals and authorizations, and, in this regard, comply with, and require all employees, crew members, agents, contractors and subcontractors (pursuant to appropriate contractual provisions) and future lessees (pursuant to appropriate lease provisions) of the Borrower or any Guarantor while such Persons are acting within the scope of their relationship with the Borrower or any Guarantor, to so comply with, all applicable requirements of Law, including, without limitation, applicable Environmental Laws, and other applicable requirements with respect to the property of the Borrower or any Guarantor, and the operation thereof necessary or appropriate to enable the Borrower to fulfill its obligations under all applicable requirements of Law, including, without limitation, Environmental Laws, applicable to the use, generation, handling, storage, treatment, transport and disposal of any Hazardous Substances now or hereafter located or present on or under any such property. 5.20 Hazardous Substances Indemnification. Indemnify and hold each of the Bank Parties harmless from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial actions, requirements and enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including, without limitation, attorneys' fees and expenses), arising directly or indirectly, in whole or in part, out of (a) the presence of any Hazardous Substances on, under or from its property, whether prior to or during the term hereof, or (b) any activity carried on or undertaken on or off its property, whether prior to or during the term hereof, and whether by the Borrower, or any predecessor in title or any employees, agents, contractors or subcontractors of the Borrower, or any predecessor in title, or any third Persons at any time occupying or present on such property, in connection with the handling, treatment, removal, storage, decontamination, cleanup, transportation or disposal of any Hazardous Substances at any time located or present on or under such property; with the foregoing indemnity further applying to any residual contamination on or under the property of the Borrower, or any property of any other Person, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transportation or disposal of any Hazardous Substances, irrespective of whether any of such activities were or will be undertaken in accordance with applicable requirements of Law, including, without limitation, Environmental Laws, and surviving satisfaction of all Indebtedness of the Borrower to any of the Bank Parties and the termination of this Agreement, unless all such Indebtedness has been satisfied wholly in cash from the Borrower and not by way of realization against any property or the conveyance of any property of the Borrower in lieu thereof, provided that the claims and other actions of any kind against any of the Bank Parties which give rise to such indemnity are not barred by the applicable statute of limitations at the time such claims or actions are instituted and such indemnity shall not extend to any act or omission by any of the Bank Parties with respect to the relevant property subsequent to the Administrative Agent, the Arranger or any Bank becoming the owner of, taking possession of to the exclusion of the Borrower or assuming operations of any property previously owned by the Borrower and with respect to which property such claim, loss, damage, liability, fine, penalty, charge, proceeding, order, judgment, action or requirement arises subsequent to the acquisition of title thereto, taking possession thereof or assumption of operations thereon by any of the Bank Parties. 5.21 Transactions with Affiliates. Conduct, and to cause any Guarantor to conduct, all transactions with any Affiliate of the Borrower on an arm's-length basis (provided that such transactions are otherwise permitted by the terms of this Agreement). 5.22 Leases. Keep and continue, and/or to cause any Guarantor to keep and continue, all Leases comprising the Borrowing Base Oil and Gas Properties and related contracts and agreements relating thereto in full force and effect in accordance with the terms thereof and not permit the same to lapse or otherwise become impaired for failure to comply with the obligations thereof, whether express or implied; provided, however, that this provision shall not prevent the Borrower or any Guarantor from abandoning and releasing any such Leases upon their termination as the result of cessation of production in paying quantities that did not result from the Borrower's or such Guarantor's failure to maintain such production as a reasonably prudent operator. 5.23 Operation of Borrowing Base Oil and Gas Properties. Operate or, to the extent that the right of operation is vested in others, exercise all reasonable efforts to require the operator to operate the Borrowing Base Oil and Gas Properties and all wells drilled thereon and that may hereafter be drilled thereon, continuously and in a good and workmanlike manner and in accordance with all Laws of the State in which the Borrowing Base Oil and Gas Properties are situated and the United States of America, as well as all rules, regulations, and Laws of any governmental agency having jurisdiction to regulate the manner in which the operation of the Borrowing Base Oil and Gas Properties shall be carried on, and comply with all terms and conditions of the Leases it or any Guarantor now holds, and any assignment or contract obligating the Borrower or any Guarantor in any way with respect to the Borrowing Base Oil and Gas Properties; but nothing herein shall be construed to empower the Borrower or any Guarantor to bind any Bank Party to any contract obligation, or render any Bank Party in any way responsible or liable for bills or obligations incurred by the Borrower or any Guarantor. 5.24 Assignments. Upon request of the Administrative Agent or Collateral Agent, execute and deliver, and/or to cause any Guarantor to execute and deliver, written notices of assignments to any persons, corporations or other entities owing or which may in the future owe to the Borrower or any Guarantor monies or accounts arising in connection with any of the following matters: (a) any oil, gas or mineral production from the Borrowing Base Oil and Gas Properties; (b) any gas contracts, processing contracts or other contracts relating to the Borrowing Base Oil and Gas Properties; or (c) the operation of or production from any part of the Borrowing Base Oil and Gas Properties. 5.25 Change of Purchasers of Production. On or before each anniversary of the Closing, and at any other time that the Administrative Agent may so request in writing, the Borrower shall notify the Administrative Agent in writing of the identity and address of each then-current purchaser of production from the Borrowing Base Oil and Gas Properties and, if requested by the Administrative Agent, shall provide the Administrative Agent or Collateral Agent with Transfer Order Letters executed by the Borrower or any Guarantor, as applicable, and addressed to such purchasers of production. 5.26 Payment of Taxes, Etc. Pay or cause to be paid when due, all taxes, assessments, and charges or levies imposed upon it and/or any of its Subsidiaries, or on any of their respective property, or which it or they are required to withhold and pay, except where contested in good faith by appropriate proceedings with adequate reserves therefor having been set aside on its books, provided, however, that the Borrower and the Guarantors shall each pay or cause to be paid all such taxes, assessments, charges, or levies forthwith whenever foreclosure on any lien that may have attached (or security therefor) appears imminent. 5.27 Notice of Litigation. Give immediate notice to the Administrative Agent of: (1) any litigation or proceeding in which it or any of its Subsidiaries is a party if an adverse decision therein would require it or any of its Subsidiaries to pay more than One Million Dollars ($1,000,000.00) in the aggregate or deliver assets the value of which exceeds such sum (whether or not the claim is considered to be covered by insurance); and (2) the institution of any other suit or proceeding involving the Borrower or any of the Guarantors that might materially and adversely affect its operations, financial condition, property, or business prospects. 5.28 Notice of Events of Default. Notify the Administrative Agent immediately if it becomes aware of the occurrence of any Event of Default or of any fact, condition, or event that only with the giving of notice or passage of time or both, would become an Event of Default or if it becomes aware of any Material Adverse Change (including, without limitation, proceedings in bankruptcy, insolvency, reorganization, or the appointment of a receiver or trustee), or of the failure of the Borrower or any Guarantor to observe any of its undertakings hereunder or under the Security Instruments. 5.29 Notice of Change of Principal Offices. Notify the Administrative Agent thirty (30) days in advance of any change in the location of the principal offices of Borrower or any of its Subsidiaries. 5.30 Employee Benefit Plans. Fund its Plan(s) in accordance with no less than the minimum funding standards of 29 U.S.C.A. ss. 1082 (Section 302 of ERISA); furnish the Administrative Agent, promptly after the filing or receiving of the same, with copies of any reports or other statements filed with, or notices or other communications received from, the United States Department of Labor, the PBGC, or the Internal Revenue Service with respect to any such Plan; promptly advise the Administrative Agent of the occurrence of any Reportable Event or Prohibited Transaction with respect to any such Plan and the action the Borrower proposes to take with respect thereto; and promptly advise the Administrative Agent when the Borrower knows or has reason to believe that the PBGC or the Borrower has instituted or will institute proceedings under Title IV of ERISA to terminate any such Plan and the action the Borrower proposes to take with respect thereto. 5.31 Annual Capital Budget. Within thirty (30) days after Closing, Borrower shall prepare and submit to Arrangers an annual capital budget (the "Budget") applicable to the activities of Borrower and Guarantors to be conducted: (a) through the projected completion date of all capital expenditures to be made on the Cedar Hills Project, and (b) through the fiscal quarter ending March 31, 2003, with respect to all activities of Borrower and Guarantors other than the Cedar Hills Project, such Budget to be in form and substance satisfactory to Arrangers, and which shall be sufficient to demonstrate to Arrangers' satisfaction that Borrower and Guarantors will remain in compliance with this Agreement and the other Loan Documents during the period covered by the Budget. Thereafter, an updated Budget shall be submitted to Arrangers within fifteen (15) days after the close of each fiscal quarter beginning with the quarter ending June 30, 2002, so that the portion of the Budget applicable to the Cedar Hills Project activities always covers the period through the projected completion of all planned capital expenditures on the Cedar Hills Project, and through the ensuing four (4) calendar quarters with respect to all activities of Borrower and Guarantors other than the Cedar Hills Project. Each updated Budget submitted to the Arrangers within fifteen (15) days after the close of each fiscal quarter shall also include a comparison of Borrower's and Guarantors' actual capital expenditures during such preceding quarter compared to the expenditures forecast for such quarter on the most recent Budget that had been submitted to Arrangers with respect thereto. Such comparison shall separate the expenditures made on the Cedar Hills Project from expenditures made in connection with all other activities of Borrower and Guarantors. Borrower shall conduct, or shall cause Guarantors to conduct, as applicable, the activities contemplated by the capital expenditures forecast in each current Budget, substantially as and when contemplated in such Budget. 5.32 Payment of Obligations. Promptly pay (or renew and extend) all of its Indebtedness as it becomes due, unless payment of such Indebtedness is: (a) restricted pursuant to Article VI hereof, or (b) being contested in good faith by appropriate proceedings. 5.33 Compliance with Section 2.06. Comply with Section 2.06, including, but not limited to, the delivery of the Reserve Reports, as specified therein. 5.34 Notice Regarding Early Termination of Hedge Agreements. Promptly notify Administrative Agent regarding the occurrence of any early termination or other unwind of any Hedge Agreement prior to the end of its original, nominal term, such notification to be given by Borrower as promptly as possible after Borrower learns of the occurrence or impending occurrence of such early termination, and in any event not later than two Business Days thereafter. ARTICLE VI. NEGATIVE COVENANTS Without the prior written consent of the Administrative Agent and the Required Banks and so long as any part of the principal or interest on the Notes shall remain unpaid or any Bank remains obligated to make advances hereunder, Borrower covenants that it will not: 6.01 Other Indebtedness. Incur, create, assume or suffer to exist any Indebtedness, whether by way of loan or the issuance or sale of securities except Permitted Indebtedness. 6.02 Loans or Advances. Make or agree to make or allow to remain outstanding any loans or advances to any Person, except: (a) advances or extensions of credit in the form of accounts receivable incurred in the ordinary course of business, (b) the intercompany Indebtedness owed by Borrower or any Guarantor to the other, and (c) other loans or advances not exceeding One Million Dollars ($1,000,000), in the aggregate, at any time outstanding. 6.03 Mortgages or Pledges of Assets. Create, incur, assume or permit to exist, any mortgage, pledge, security interest, lien or encumbrance on any of its or the Guarantors' properties or assets (now owned or hereafter acquired), except for Permitted Encumbrances. 6.04 Sales of Assets. Except for Permitted Asset Sales, sell, lease, assign, transfer or otherwise dispose of, in one or any series of related transactions, all or any portion of its Oil and Gas Properties or other material assets, whether now owned or hereafter acquired, including transfers to Subsidiaries, or permit any Guarantor to do so, nor enter or permit any Guarantor to enter into any arrangement, directly or indirectly, with any Person to sell and rent or lease back as lessee such property or any part thereof which is intended to be used for substantially the same purpose or purposes as the property sold or transferred. 6.05 Dividends. Declare or pay any dividend or distribution on any capital stock of or other equity interest in Borrower except the foregoing restriction shall not apply to o Cash dividends paid by the Borrower to its shareholders in amounts not in excess of each such shareholder's allocable share of federal and state income taxes attributable to the taxable income of the Borrower, as substantiated by such documentation as Administrative Agent my reasonably require, provided that no such payments shall be permitted if an Event of Default or Unmatured Event of Default involving non-payment of principal, interest, fees or other monies owed to any of the Bank Parties (a "Cash Default") has occurred and is continuing or would result from any such payment(s), and upon the occurrence and during the continuance of any Event of Default or Unmatured Event of Default that is not a Cash Default, the aggregate amount of such cash dividends shall not exceed $2,000,000.00 during any calendar year; and o Dividends payable by any Guarantor to the Borrower. 6.06 Payment of Accounts Payable. Allow or permit any Guarantor to allow any account payable to remain unpaid more than ninety (90) days after the date of the invoice therefor, except such as are (i) being contested in good faith and as to which adequate provision or accrual has been made, or (ii) the subject of usual and customary review and evaluation. 6.07 Cancellation of Insurance. Allow or permit any Guarantor to allow any property and casualty insurance policy required to be carried hereunder to be terminated or lapse or expire without provision for adequate renewal or replacement thereof. 6.08 Investments. Make Investments in or purchase or otherwise acquire. or permit any of the Guarantors to make Investments in or purchase or otherwise acquire, all or substantially all of the assets of any Person, or any shares of stock of, or similar interest in, any other Person, if the result of such action would impair the ability of the Borrower to perform any of its Obligations pursuant to this Agreement, including, without limitation, the obligation to repay the Indebtedness evidenced by the Notes, except that the Borrower may invest in instruments that are investment grade, and in short-term commercial paper. 6.09 Changes in Structure or Business. Consolidate or merge with or purchase (for cash or securities), or permit any of the Guarantors to consolidate or merge with or purchase (for cash or securities), all or substantially all of the assets or capital stock of any corporation, firm, association or enterprise, or allow any such entity to be merged into the Borrower or any Guarantor, or change the basic business operations of the Borrower or any Guarantor, unless all of the following conditions are satisfied: (a) Borrower has provided Administrative Agent complete and detailed information relating to such merger or purchase at least fifteen (15) days in advance thereof, (b) Borrower or the applicable Guarantor is the survivor of such merger or the acquiror in any such purchase, and (c) such merger or purchase will not otherwise constitute or result in an Event of Default or Unmatured Event of Default under any other provisions of this Agreement. 6.10 Pooling or Unitization. Voluntarily pool or unitize, or permit any Guarantor to voluntarily pool or unitize, all or any part of the Borrowing Base Oil and Gas Properties where the pooling or unitization would result in the diminution of the Borrower's or Guarantor's net revenue from production from the pooled or unitized lands, without the Required Banks' prior consent, which will not be unreasonably withheld. Any unitization, pooling or communitization or other action or instrument in violation of this Section 6.10 shall be of no force or effect against any Bank. 6.11 Hedge Agreements. Except for Permitted Hedge Agreements of which Borrower has notified Administrative Agent in writing at or prior to the time that Borrower or any Guarantor becomes party thereto, enter into or become obligated under any contract for sale for future delivery of Hydrocarbons other than normal production contracts entered into in the Borrower's or any Guarantor's normal course of business (whether or not the subject Hydrocarbons are to be delivered), forward contract, Hedging Agreement, futures contract or any other similar agreement, without the prior written consent of the Required Banks, acting in their sole discretion. 6.12 Capital Stock of Borrower and Guarantors/Redemption of Senior Subordinated Notes. (a) issue, redeem, purchase, retire or otherwise acquire for value any of its capital stock or Senior Subordinated Notes or grant, issue, purchase, retire or otherwise acquire for value any warrant, right, or option pertaining thereto or other security convertible into any of the foregoing, or permit any Guarantor to do so with regard to its capital stock, the Senior Subordinated Notes or any warrant, right, option or security pertaining thereto, or (b) permit any transfer, sale, redemption, retirement, or other change in the ownership of the outstanding capital stock of the Borrower or any Guarantor without the prior written consent of the Required Banks, acting in their discretion; except for (i) issuance, transfer or repurchase of the Borrower's capital stock which does not result in a Change of Control or otherwise constitute or result in an Event of Default or an Unmatured Event of Default under any other provisions of this Agreement, and (ii) the issuance of options pursuant to the Borrower's stock option plan as in effect at Closing. 6.13 Margin Stock. Directly or indirectly apply any part of the proceeds of the Loans to the purchasing or carrying of any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, or any regulations, interpretations or rulings thereunder. 6.14 Senior Subordinated Debt. Make any prepayment of amounts due under the Senior Subordinated Notes without the prior written consent of the Super-Majority or amend any of the terms of the Senior Subordinated Notes. 6.15 Current Ratio. Permit as of the end of any fiscal quarter its Current Ratio to be less than 1.00 to 1.00. 6.16 Fixed Charge Coverage Ratio. Permit, as of the end of any fiscal quarter, the ratio of EBITDA to Borrower's Total Fixed Charges to be lesser than 1.25 to 1.0, calculated on a rolling four- quarter basis. For purposes of this Section, the term "Total Fixed Charges" shall include, without limitation, cash interest charges, capital lease rentals, scheduled and required principal amortization and cash dividends. 6.17 Total Funded Debt to EBITDA. Permit, as of the end of any fiscal quarter, the ratio of the Aggregate Outstanding Credit Exposure plus the outstanding balance of the Senior Subordinated Notes to EBITDA to be greater than 3.75 to 1.0, calculated on a rolling four-quarter basis. 6.18 Senior Debt to EBITDA. Permit, as of the end of any fiscal quarter, the ratio of Aggregate Outstanding Credit Exposure to EBITDA to be greater than 2.5 to 1.0, calculated on a rolling four-quarter basis. 6.19 Total Funded Debt to Total Capitalization. Permit, as of the end of any fiscal quarter, the ratio of: (a) Aggregate Outstanding Credit Exposure plus the outstanding balance of the Senior Subordinated Notes to (b) Stockholders' Equity plus Aggregate Outstanding Credit Exposure plus the outstanding balance of the Senior Subordinated Notes to be greater than .70 to 1.0. ARTICLE VII. EVENTS OF DEFAULT 7.01 Enumeration of Events of Default. Any of the following events shall be considered an Event of Default as that term is used herein: (a) Default shall be made by the Borrower in the payment of any installment of principal or interest (including, without limitation, any mandatory prepayments payable pursuant to either Section 2.07 or 2.08 of this Agreement) on the Notes, any LC Fee or any other monetary obligation (other than Reimbursement Obligations) payable hereunder when due, or any other fee due to any Bank Party hereunder within five (5) days after such payment was due, or in the payment of any Reimbursement Obligation within one Business Day after the same becomes due; (b) Default shall be made by the Borrower in the due observance or performance of any affirmative covenant required in this Agreement, the Notes, the Facility LC Applications or the Security Instruments and such default continues for more than thirty (30) days after the earlier of: (i) Borrower having knowledge thereof, or (ii) Borrower receiving written notice thereof from the Administrative Agent; (c) Default shall be made by the Borrower in the due observance or performance of any negative covenant required in this Agreement, the Notes, the Facility LC Applications or the Security Instruments; (d) Any representation or warranty herein made by the Borrower proves to have been untrue in any respect material to the Borrower or any Guarantor, or any representation, statement (including Financial Statements), certificate or data furnished or made by the Borrower to the Administrative Agent in connection herewith proves to have been untrue in any respect material to the Borrower or any Guarantor as of the date the facts therein set forth were stated or certified; (e) Default shall be made by any Borrower or any Guarantor (as principal or other surety) in payment or performance of any bond, debenture, note or other evidence of Indebtedness for borrowed money, or under any credit agreement, loan agreement, indenture, promissory note or similar agreement or instrument executed in connection with any of the forgoing, relating to any Indebtedness in an aggregate amount of One Million Dollars ($1,000,000.00) or more, and such default shall remain unremedied for in excess of the period of grace, if any, with respect thereto. (f) Any Borrower or any Guarantor (i) discontinues its usual business or applies for or consents to the appointment of a receiver, trustee or liquidator of it or all or a substantial part of its assets, or (ii) files a voluntary petition commencing a case under Title 11 of the United States Code, seeking liquidation, reorganization or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's relief or other similar Law of the United States the State of Texas or any other jurisdiction, or (iii) makes a general assignment for the benefit of creditors, or (iv) is unable, or admits in writing its inability to pay its debts generally as they become due, or (v) files an answer admitting the material allegations of a petition filed against it in any case commenced under Title 11 of the United States Code or any reorganization, insolvency, conservatorship or similar proceeding under any bankruptcy, insolvency, debtor's relief or other similar Law of the United States, the State of Texas or any other jurisdiction; (g) An order, judgment or decree shall be entered against any Borrower or any Guarantor by any court of competent jurisdiction or by any other duly authorized authority, on the petition of a creditor or otherwise, granting relief under Title 11 of the United States Code or under any bankruptcy, insolvency, debtor's relief or other similar Law of the United States, the State of Texas or any other jurisdiction, approving a petition seeking reorganization or an arrangement of its debts or appointing a receiver, trustee, conservator, custodian or liquidator of it or all or any substantial part of its assets, and the failure to have such order, judgment or decree dismissed within thirty (30) days of its entry; (h) Any Borrower or any Guarantor has concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them; or has made or suffered a transfer of any of its property which would be characterized as a fraudulent conveyance under bankruptcy or similar Laws; or has made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or has suffered or permitted, while insolvent, any creditor to obtain a lien upon any of its property through legal proceedings or distraint which is not vacated within thirty (30) days from the date thereof; (i) the Liens under the Security Instruments cease to be perfected or cease to be first priority Liens subject to only Permitted Encumbrances; or (j) a Material Adverse Change occurs. 7.02 Rights Upon Unmatured Event of Default. At any time that there exists an Unmatured Event of Default, any obligation of the Banks and the LC Issuer to make Credit Extensions shall be suspended unless and until the Administrative Agent, with the approval of the Super-Majority and the LC Issuer, shall reinstate the same in writing, the Unmatured Event of Default shall have been waived by the Administrative Agent, with approval of the Super-Majority and the LC Issuer or the relevant Unmatured Event of Default shall have been remedied prior to ripening into an Event of Default. 7.03 Rights Upon Default. Upon the happening of an Event of Default specified in Subsections 7.01 (f) or (g), the obligations of the Banks and the LC Issuer to make Credit Extensions hereunder shall automatically terminate and all Obligations then outstanding hereunder and the interest accrued thereon shall automatically become immediately due and payable without any election or action on the part of the Administrative Agent, any Bank or the LC Issuer. Upon the happening and during the continuation of any other Event of Default, upon the request of the Super-Majority subject to Section 9.13, the Administrative Agent shall terminate or suspend the obligations of the Banks and the LC Issuer to make Credit Extensions hereunder, or declare the Obligations to be immediately due and payable, or both, and upon such declaration with respect to the Obligations they shall become immediately due and payable. In either case, the entire principal and interest shall thereupon become immediately due and payable, without notice (including, without limitation, notice of intent to accelerate maturity or notice of acceleration of maturity) and without presentment, demand, protest, notice of protest or other notice of default or dishonor of any kind, except as provided to the contrary elsewhere herein, all of which are hereby expressly waived by the Borrower. If, within thirty (30) days after acceleration of the maturity of the Obligations or termination of the obligations of the Banks and LC Issuer to make Credit Extensions hereunder as the result of any Event of Default (other than any Event of Default specified in subsections 7.01(f) or (g)) and before any judgement or decree for the payment of the Obligations due shall have been obtained or entered, the Super-Majority (in their sole discretion) shall direct with respect to the Obligations relating to the Loans or the LC Issuer (in its sole discretion) shall direct with respect to Obligations relating to Facility LCs, the Administrative Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination. 7.04 Remedies. After any acceleration, as provided for in Section 7.03, the Bank Parties shall have, in addition to the rights and remedies given them by this Agreement and the Security Instruments, all those allowed by all applicable Laws, including, but without limitation, the Uniform Commercial Code as enacted in any jurisdiction in which any of the Borrowing Base Oil and Gas Properties may be located. Without limiting the generality of the foregoing, the Collateral Agent, upon the request of the Super-Majority shall, immediately without demand of performance and without other notice (except as specifically required by this Agreement or the Security Instruments) or demand whatsoever to the Borrower, all of which are hereby expressly waived, and without advertisement, sell at public or private sale or otherwise realize upon, in Garfield County, Oklahoma, or in any other place where the Borrowing Base Oil and Gas Properties may be located, or in such other place or places as the Collateral Agent may designate, the whole or, from time to time, any part of the Borrowing Base Oil and Gas Properties, or any interest which the Borrower may have therein. After deducting from the proceeds of sale or other disposition of the Borrowing Base Oil and Gas Properties all expenses (including all reasonable expenses for legal services), the Bank shall apply such proceeds toward the satisfaction of the Obligations. Any remainder of the proceeds after satisfaction in full of the Obligations shall be distributed as required by applicable Laws. Notice of any sale or other disposition shall be given to the Borrower at least five (5) days before the time of any public sale or of the time after which any intended private sale or other disposition of the Borrowing Base Oil and Gas Properties is to be made, which the Borrower hereby agrees shall be reasonable notice of such sale or other disposition. The Borrower agrees to assemble, or to cause to be assembled, at its own expense, documents evidencing its ownership of the Borrowing Base Oil and Gas Properties and such other documents or items as the Collateral Agent may reasonably request at such place or places as the Collateral Agent shall designate. At any such sale or other disposition, the Collateral Agent and/or any Bank, to the extent permissible under applicable Laws, may purchase the whole or any part of the Borrowing Base Oil and Gas Properties, free from any right of redemption on the part of the Borrower, which right is hereby waived and released. Without limiting the generality of any of the rights and remedies conferred upon the Collateral Agent for the benefit of the Banks under this paragraph, the Collateral Agent may, to the full extent permitted by the applicable Laws: (A) Enter upon the premises of the Borrower (and, to the extent necessary in the judgment of the Collateral Agent, exclude therefrom the Borrower or any Affiliate thereof) and take immediate possession of the Borrowing Base Oil and Gas Properties, either personally or by means of a receiver appointed by a court of competent jurisdiction, using all necessary force to do so; (B) At the Collateral Agent's option, use, operate, manage, and control the Borrowing Base Oil and Gas Properties in any lawful manner; (C) Collect and receive all rents, income, revenue, earnings, issues, and profits therefrom for the benefit of the Banks; and (D) Maintain, repair, renovate, alter, or remove the Borrowing Base Oil and Gas Properties as the Banks may determine in their discretion. 7.05 Right of Set-off. Upon the occurrence of any Event of Default, each Bank may, and is hereby authorized by the Borrower, at any time and from time to time, to the fullest extent permitted by applicable Laws, without advance notice to the Borrower (any such notice being expressly waived by the Borrower), set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time owing by such Bank to or for the credit or the account of the Borrower against any or all of the Obligations of the Borrower now or hereafter existing, whether or not such Obligations have matured and irrespective of whether such Bank may have exercised any other rights that they have or may have with respect to such Obligations, including, without limitation, any acceleration rights. Each Bank agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Bank under this Section 7.05 are in addition to the other rights and remedies (including, without limitation, other rights of set-off) which the Banks may have. ARTICLE VIII. THE AGENTS 8.01 Authorization and Action. Each Bank hereby irrevocably appoints and authorizes each Agent to act on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are specifically delegated to or required of such Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement or the other Loan Documents (including, without limitation, enforcement or collection of the Notes), no Agent shall be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and, as between such Agent and the Banks, shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Banks, and such instructions shall be binding upon all Banks and all holders of Notes; provided, however, that no Agent shall be required to take any action which exposes such Agent to personal liability or which is contrary to this Agreement, the other Loan Documents or applicable law. 8.02 Agent's Reliance, Etc. Neither any Agent nor any of its directors, officers, agents or employees shall be liable to any Bank for any action taken or omitted to be taken by it or them under or in connection with this Agreement or the other Loan Documents (i) with the consent or at the request of the Required Banks or (ii) in the absence of its or their own gross negligence or willful misconduct (it being the express intention of the parties that no Agent nor its directors, officers, agents and employees shall have any liability for actions and omissions under this Section 8.02 resulting from their sole ordinary or contributory negligence). Without limitation of the generality of the foregoing, each Agent: (i) may treat the payee of each Note as the holder thereof until such Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to such Agent; (ii) may consult with legal counsel (including counsel for Borrower or any of its Subsidiaries), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (iii) makes no warranty or representation to any Bank and shall not be responsible to any Bank for any statements, warranties or representations made in or in connection with this Agreement or the other Loan Documents; (iv) except as otherwise expressly provided herein, shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement or the other Loan Documents or to inspect the property (including the books and records) of Borrower and its Subsidiaries; (v) shall not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; and (vi) shall incur no liability under or in respect of this Agreement or the other Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopier, cable or telex) reasonably believed by it to be genuine and signed or sent by the proper party or parties; and (vii) the provisions of this Section 8.02 shall survive the termination of this Agreement and/or the payment or assignment of any of the Indebtedness under this Agreement. 8.03 Each Agent and its Affiliates. With respect to its Commitment, the Credit Extensions made by it and the Note issued to it as a Bank, each Agent shall have the same rights and powers under this Agreement or the other Loan Documents as any other Bank and may exercise the same as though it were not an Agent. The term "Bank" or "Banks" shall, unless otherwise expressly indicated, include each Agent in its individual capacity. Each Agent and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with Borrower, any of its respective Subsidiaries and any Person who may do business with or own securities of Borrower, any of its respective Subsidiaries, all as if such Agent were not an Agent and without any duty to account therefor to the Banks. 8.04 Bank Credit Decision. Each Bank acknowledges and agrees that it has, independently and without reliance upon the Administrative Agent or any other Agent and based on the Financial Statements referred to in Section 5.04 and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges and agrees that it will, independently and without reliance upon the Administrative Agent or any other Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement and the other Loan Documents. 8.05 Agent's Indemnity. No Agent shall be required to take any action hereunder or to prosecute or defend any suit in respect of this Agreement or the other Loan Documents unless indemnified to such Agent's satisfaction by the Banks against loss, cost, liability and expense. If any indemnity furnished to such Agent shall become impaired, it may call for additional indemnity and cease to do the acts indemnified against until such additional indemnity is given. In addition, the Banks agree to indemnify such Agent (to the extent not reimbursed by Borrower), ratably according to the respective principal amounts of the Notes then held by each of them (or if no Notes are at the time outstanding, ratably according to either (i) the respective amounts of their Commitments, or (ii) if no Commitments are outstanding, the respective amounts of the Commitments immediately prior to the time the Commitments ceased to be outstanding), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against such Agent in any way relating to or arising out of this Agreement or any action taken or omitted by such Agent under this Agreement or the other Loan Documents (including, without limitation, any action taken or omitted under Article II of this Agreement); provided, that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. Each Bank agrees, however, that it expressly intends, under this Section 8.05, to indemnify each Agent ratably as aforesaid for all such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses and disbursements arising out of or resulting from such Agent's ordinary or contributory negligence. Without limitation of the foregoing, each Bank agrees to reimburse such Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counsel fees) incurred by such Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice in respect of rights or responsibilities under, this Agreement and the other Loan Documents to the extent that such Agent is not reimbursed for such expenses by Borrower. The provisions of this Section 8.05 shall survive the termination of this Agreement and/or the payment or assignment of any of the Indebtedness under this Agreement. 8.06 Successor Agents. Each Agent may resign at any time by giving written notice thereof to the Banks and Borrower and may be removed as an Agent under this Agreement and the other Loan Documents at any time with or without cause by the Required Banks. Upon any such resignation or removal, the Required Banks with the concurrence of Borrower shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 calendar days after the retiring Agent's giving of notice of resignation or the Required Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of the Banks and with the concurrence of Borrower, appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder and under the other Loan Documents 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 under this Agreement and the other Loan Documents. After any retiring Agent's resignation or removal as Agent hereunder and under the other Loan Documents, the provisions of this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement and the other Loan Documents. 8.07 Notice of Default. No Agent shall be deemed to have knowledge or notice of the occurrence of any Unmatured Event of Default or Event of Default hereunder unless such Agent shall have received notice from a Bank or Borrower referring to this Agreement, describing such Unmatured Event of Default or Event of Default and stating that such notice is a "notice of default." If any Agent receives such a notice, such Agent shall give notice thereof to the Banks; provided, however, if such notice is received from a Bank, such Agent also shall give notice thereof to Borrower. The Administrative Agent shall be entitled to take action or refrain from taking action with respect to such Unmatured Event of Default or Event of Default as provided in Section 8.01 and Section 8.02. ARTICLE IX. MISCELLANEOUS 9.01 Security Interests in Deposits and Right of Offset or the Banker's Lien. The Borrower hereby transfers, assigns, pledges and grants to each Bank a security interest (as security for the payment and/or performance of the Obligations of the Borrower, with such interest of each Bank to be retransferred, reassigned and/or released by such Bank at the expense of the Borrower upon payment in full and/or complete performance by the Borrower of all such Obligations) and the right, exercisable at such time as any obligation hereunder shall mature, whether by acceleration of maturity or otherwise, of offset or banker's lien against all funds or other property of the Borrower now or hereafter or from time to time on deposit with or in the possession of such Bank, including, without limitation, all certificates of deposit and other depository accounts. 9.02 Survival of Representations, Warranties and Covenants. All representations and warranties of the Borrower and all covenants and agreements herein made shall survive the execution and delivery of the Notes and this Agreement so long as any debt is outstanding under the Notes, or any renewal or extension of this Agreement or the Notes, or the Banks remain obligated to make advances hereunder. 9.03 Notices and Other Communications. Notices, requests and communications hereunder shall be in writing and shall be sufficient in all respects if delivered to the relevant address indicated below (including delivery by registered or certified United States mail, facsimile, telex, telegram or hand): (A) If to Borrower: CONTINENTAL RESOURCES, INC. 302 N. Independence, Suite 300 Enid, Oklahoma 73701 Attention: Harold Hamm and Roger Clement (B) If to any of the Bank Parties: UNION BANK OF CALIFORNIA, N.A. 500 North Akard, Suite 4200 Dallas, Texas 75201 Attention: John Clark Any party may, by proper written notice hereunder to the other, change the individuals or addresses to which such notices to it shall thereafter be sent. 9.04 Parties in Interest. All covenants and agreements herein contained by or on behalf of the Borrower shall be binding upon the Borrower and its successors and assigns and inure to the benefit of the Bank Parties and their respective successors and assigns. 9.05 Successors and Assigns; Participation; Purchasing Banks. (a) Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party; and all covenants, promises and agreements by or on behalf of Borrower, the Administrative Agent or the Banks that are contained in this Agreement shall bind and inure to the benefit of their respective successors and permitted assigns. Borrower may not assign or transfer any of its rights or obligations hereunder without the written consent of all the Banks. (b) Each Bank may, without the consent of Borrower, sell participations to one or more banks or other financial institutions in all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitment, the Loans owing to it, and the Notes held by it); provided, however, that (i) the selling Bank's obligations under this Agreement and the other Loan Documents shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) Borrower, the Administrative Agent, and the other Banks shall continue to deal solely and directly with the selling Bank in connection with such Bank's rights and obligations under this Agreement and the other Loan Documents, (iv) the selling Bank shall remain the holder of its Note(s) for all purposes of this Agreement, and (v) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce to the principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any regularly scheduled payment of principal of, or interest on, the Notes or any fees or other amounts payable hereunder, in each case to the extent subject to such participation. (c) With the prior written consent of Borrower and the Administrative Agent, each Bank may assign to one or more banks or other entities (a "Purchasing Bank"), all or a portion of its interests, rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitment and the same portion of the Loans at the time owing to it and the Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Agreement and the other Loan Documents, (ii) after giving effect to such assignment, the Purchasing Bank's Commitment must be at least $5,000,000 (either solely as the result of such assignment or as the result of multiple assignments from two or more assigning Banks), (iii) the parties to each such assignment shall execute and deliver to the Administrative Agent a Commitment Transfer Supplement together with any Notes subject to such Commitment Transfer Supplement, (iv) the assigning Bank shall pay to Administrative Agent an assignment fee of $3,500, (v) an assigning Bank shall not assign a portion of such Bank's Commitment in an amount less than an amount equal to the lesser of such Bank's Commitment hereunder and $2,500,000 and (vi) if the assigning Bank has retained any Commitment hereunder, such assigning Bank's Commitment shall be at least $5,000,000 after giving effect to such assignment. Upon such execution and delivery, from and after the effective date specified in each Commitment Transfer Supplement, which effective date shall be at least five Business Days after the execution thereof (x) the Purchasing Bank thereunder shall be a party hereto and, to the extent herein provided in such, have the rights and obligations of a Bank hereunder and (y) the assignor Bank thereunder shall, to the extent provided in such assignment, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of a Commitment Transfer Supplement covering all of the remaining portion of an assigning Bank's rights and obligations under this Agreement and the other Loan Documents, such Bank shall cease to be a party hereto). Such Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of such Purchasing Bank and the resulting adjustment of Percentage Shares arising from the purchase by such Purchasing Bank of all or a portion of the rights and obligations of such assigning Bank under this Agreement, the Notes and the other Loan Documents. (d) The Administrative Agent shall maintain at its office a copy of each Commitment Transfer Supplement delivered to it and a register for the recordation of the names and addresses of the Banks and the Commitment Amount of, and principal amount of the Loans owing to, each Bank from time to time (the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and Borrower, the Administrative Agent, and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Agreement. The Register shall be available for inspection by Borrower or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of a Commitment Transfer Supplement executed by an assigning Bank and a Purchasing Bank together with any Notes subject to such Commitment Transfer Supplement and the written consent to such Commitment Transfer Supplement, the Administrative Agent shall (i) accept such Commitment Transfer Supplement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Banks and Borrower. Within five (5) Business Days after receipt of such notice, Borrower shall, at its own expense, execute and deliver to the Administrative Agent, in exchange for the surrendered Notes, replacement Notes dated as of the effective date of such surrendered Notes and otherwise substantially in the form of the Notes replaced thereby payable to the order of such Purchasing Bank in an amount equal to the Commitment assumed by it pursuant to such Commitment Transfer Supplement and, if the assigning Bank has retained any Commitment hereunder, replacement Notes dated as of the effective date of the surrendered Notes and otherwise substantially in the form of the Notes replaced thereby payable to the order of the assigning Bank in an amount equal to the Commitment of such assigning Bank retained by it hereunder. Such replacement Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Notes. Contemporaneously with the delivery of the replacement Notes, the canceled Notes shall be returned to Borrower marked "Replaced." (f) Each Bank agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Banks and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Bank, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by law, regulation, or legal process, (v) to any Person in connection with any legal proceeding to which such Bank is a party, (vi) to such Bank's direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by this Section. Notwithstanding any other provision herein, any Bank may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.05, disclose to the assignee or participant or proposed assignee or participant, any information relating to Borrower or any other Subsidiary of Borrower furnished to such Bank by or on behalf of Borrower or any other Subsidiary of Borrower; provided, that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree to preserve the confidentiality of any confidential information relating to Borrower and any of its Subsidiaries received from such Bank to the same extent as required by this Section. (g) Assignment to Federal Reserve Bank or Federal Home Loan Bank. Notwithstanding any other language in this Agreement, any Bank may at any time assign all or any portion of its rights under this Agreement and the Notes to a Federal Reserve Bank or a Federal Home Loan Bank as collateral in accordance with Regulation A and the applicable operating circular of such Federal Reserve Bank or Federal Home Loan Bank. 9.06 Renewals and Extensions. All provisions of this Agreement relating to the Notes shall apply with equal force and effect to each and all promissory notes hereafter executed which in whole or in part represent a renewal, extension, amendment, modification or rearrangement of any part of the Indebtedness originally represented by the Notes. 9.07 No Waiver by the Bank Parties. No course of dealing on the part of the Bank Parties, their officers or employees, nor any failure or delay by any of the Bank Parties with respect to exercising any of its rights, powers or privileges under this Agreement, the Notes, the Facility LC Applications, the Security Instruments, or any other instrument referred to herein or executed in connection with the Notes shall operate as a waiver thereof. The rights and remedies of the Bank Parties under this Agreement, the Notes, the Facility LC Applications, the Security Instruments, or any other instrument referred to herein or executed in connection with the Notes shall be cumulative and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any other right or remedy. No Credit Extensions hereunder shall constitute a waiver of any of the covenants or warranties of the Borrower contained herein or of any of the conditions to the Banks' or the LC Issuer's obligation to make further Credit Extensions hereunder. In the event that the Borrower is unable to satisfy any such covenant, warranty or condition, no such Credit Extension shall have the effect of precluding the Banks or the LC Issuer from thereafter declaring such inability to be an Event of Default as hereinabove provided. 9.08 Waiver, Release, and Indemnification by the Borrower. To the maximum extent permitted by applicable Laws, the Borrower: (A) Waives (1) protest of all commercial paper at any time held by any Bank on which the Borrower is in any way liable; (2) except as the same may herein be specifically granted, notice of acceleration and intention to accelerate; and (3) notice and opportunity to be heard, after acceleration in the manner provided in Section 7.03, before exercise by Administrative Agent, any Bank or the LC Issuer of the remedies of self-help, set-off, or of other summary procedures permitted by any applicable Laws or by any agreement with the Borrower, and, except where required hereby or by any applicable Laws, notice of any other action taken by Administrative Agent, any Bank or the LC Issuer; (B) Releases each Agent, each of the Bank Parties and the LC Issuer and their respective officers, employees, directors, attorneys, and agents from all claims for loss or damage caused by any act or omission on the part of any of them except willful misconduct or gross negligence; and (C) Agrees to indemnify and hold the Bank Parties and the LC Issuer and their respective officers, employees, directors, attorneys, and agents harmless from and against all claims, damages, liabilities and expenses, known or unknown, accrued and unaccrued, unless attributable to the gross negligence or willful misconduct of the Bank Parties, the LC Issuer or their respective officers, employees, directors, attorneys, and agents, that may now or hereafter be asserted against any of the Bank Parties and the LC Issuer and their respective officers, employees, directors, attorneys, and agents in connection with or arising out of any investigation, litigation or proceeding directly or indirectly relating to or arising out of any of the transactions contemplated by this Agreement. 9.09 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. EACH PARTY HERETO AGREES THAT IN CONNECTION WITH ANY LITIGATION BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO SEEKING TO ENFORCE ANY RIGHTS, REMEDIES OR OBLIGATIONS UNDER THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, EACH PARTY CONCLUSIVELY WAIVES IT RIGHT TO TRIAL BY JURY. 9.10 Incorporation of Exhibits and Schedules. The Exhibits and Schedules attached to this Agreement are incorporated herein for all purposes and shall be considered a part of this Agreement. 9.11 Survival Upon Unenforceability. In the event any one or more of the provisions contained in this Agreement, the Notes, the Security Instruments, or in any other instrument referred to herein or executed in connection with the Notes shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof or of any other instrument referred to herein or executed in connection herewith. 9.12 Rights of Third Parties. All provisions herein are imposed solely and exclusively for the benefit of the Bank Parties and Borrower and no other Person shall have standing to require satisfaction of such provisions in accordance with their terms or be entitled to assume that any Bank will refuse to make advances in the absence of strict compliance with any or all thereof. Any or all of such provisions may be freely waived in whole or in part by the Administrative Agent, the Banks and the LC Issuer at any time if in their discretion they deem it advisable to do so. 9.13 Amendments or Modifications. Subject to the provisions of this Section, the Required Banks (or the Administrative Agent with the consent in writing of the Required Banks) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Banks or the Borrower hereunder or waiving any Event of Default hereunder; provided, however, that: (a) no such supplemental agreement shall, without the consent of all of the Banks: (i) Extend the final maturity of any Loan, postpone any regularly scheduled payment of principal of any Loan, forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon. (ii) Reduce the percentage specified in the definition of Required Banks. (iii)Reduce the percentage specified in the definition of Super-Majority. (iv) Extend the Facility Termination Date, or reduce the amount or extend the payment date for, the mandatory payments required under Sections 2.07 or 2.08, or increase the Aggregate Commitment Amount or the Commitment of any Bank hereunder, or permit the Borrower to assign its rights under this Agreement. (v) Amend the requirement that the Borrowing Base may be increased only with the consent of all Banks. (vi) Release any guarantor of any Loan or, except as provided in the Security Instruments, release all or substantially all of the Borrowing Base Oil and Gas Properties. (vii) Amend this Section 9.13. (b) No amendment of any provision of this Agreement relating to the Administrative Agent shall be effective without the written consent of the Administrative Agent. 9.14 Agreement Construed as an Entirety. This Agreement, for convenience only, has been divided into Articles and Sections and it is understood that the rights, powers, privileges, duties and other legal relations of the parties hereto shall be determined from this Agreement as an entirety and without regard to the aforesaid division into Articles and Sections and without regard to headings prefixed to said Articles or Sections. 9.15 Number and Gender. Whenever the context requires, reference herein made to the single number shall be understood to include the plural and likewise the plural shall be understood to include the singular. Words denoting sex shall be construed to include the masculine, feminine, and neuter, when such construction is appropriate, and specific enumeration shall not exclude the general, but shall be construed as cumulative. 9.16 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS AGREEMENT, TOGETHER WITH THE NOTES, THE FACILITY LC APPLICATIONS, THE SECURITY INSTRUMENTS, AND ANY OTHER WRITTEN INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF, UNLESS SUCH PRIOR AGREEMENT IS EXPRESSLY CONTINUED IN EFFECT UNDER THE TERMS HEREOF. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 9.17 Controlling Provision Upon Conflict. In the event of a conflict between the provisions of this Agreement and those of the Notes, the Facility LC Applications, the Security Instruments or any other instrument referred to herein or executed in connection with the Notes, the provisions of this Agreement shall control; provided if any of the Facility LC Applications or Security Instruments contain any representations, warranties, or covenants of the Borrower that are in addition to or are more restrictive on the Borrower than those set forth in this Agreement, such additional or more restrictive representations, warranties, and covenants shall control. 9.18 Time, Place and Method of Payments. All payments required pursuant to this Agreement or the Notes shall be made in immediately available funds; shall be deemed received by the Administrative Agent on the next Business Day following receipt if such receipt is after 4:00 p.m. Los Angeles, California time, on any Business Day, and shall be made at the principal banking quarters of the Administrative Agent in Monterey Park, California. 9.19 Termination. This Agreement and the Aggregate Commitment Amount may be canceled by the Borrower without premium or penalty prior to the Facility Termination Date upon at least thirty (30) days' prior written notice, provided, that the Obligations that are then due and payable are paid and performed in full to the satisfaction of the Administrative Agent and the Banks; provided, however that any such cancellation hereunder shall not terminate any obligations, representations or warranties of the Borrower to the Administrative Agent and/or the Banks hereunder and under other Loan Documents that survive beyond the Facility Termination Date. Upon the earlier to occur of the (i) the Facility Termination Date, and (ii) cancellation of this Agreement and the Aggregate Commitment Amount prior thereto in accordance with this Section 9.19 and upon payment and performance in full of the Obligations that are due and payable to the satisfaction of the Banks, the Administrative Agent agrees, at the Borrower's request and sole cost and expense, to execute and deliver any such lien release documents and other documentation reasonably requested by the Borrower to release or terminate the Administrative Agent's liens and security interests hereunder and under the other Loan Documents. 9.20 Non-Application of Chapter 346 of Texas Finance Code. The provisions of Chapter 346 of the Texas Finance Code are specifically declared by the parties hereto not to be applicable to this Agreement or any of the other Security Instruments or to the transactions contemplated hereby. 9.21 Counterpart Execution. This Agreement may be executed as one instrument signed by all parties or in separate counterparts hereof, each of which counterparts shall be considered an original and all of which shall be deemed to be one instrument, and any signed counterpart shall be deemed delivered by the party signing it if sent to any other party hereto by electronic facsimile transmission. 9.22 Power of Attorney. To the fullest extent permitted by Law and until this Agreement is terminated in accordance with Section 9.19 hereof, Borrower hereby appoints Collateral Agent as its attorney-in-fact (without requiring the Collateral Agent to act as such) to execute any Security Instrument in the name of the Borrower, and to perform all other acts that the Collateral Agent deems appropriate to perfect and continue its liens, security interests, and other rights in, and to protect and preserve, the Borrowing Base Oil and Gas Properties and other collateral covered by or described in (or, as evidenced by this Agreement, intended to have been covered by) any of the Security Instruments, but only to the extent required of Borrower under the terms of this Agreement. 9.23 Subordination of Intercompany Debt. The term "Subordinated Intercompany Debt" as used in this Section shall mean and include any and all indebtedness, liabilities and obligations of Borrower to any Guarantor, absolute or contingent, direct or indirect, joint, several or independent, now outstanding or owing or which may hereafter be existing or incurred, arising by operation of law or otherwise, due or to become due, or held or to be held by any Guarantor, whether created directly or acquired by assignment, as a participation, conditionally, as collateral security from another or otherwise, including indebtedness, obligations and liabilities of Borrower to any Guarantor as a member of any partnership, syndicate, association or other group, and whether incurred by Borrower as principal, surety, endorser, guarantor, accommodation party or otherwise, including, without limiting the generality of the foregoing, all indebtedness, liabilities and obligations of Borrower to any Guarantor arising out of any operating agreement, management agreement or similar agreement between Borrowers and any of the Guarantors. The term "Senior Debts" as used in this Section shall mean and include any and all indebtedness, liabilities and obligations of Borrower to the Banks or LC Issuer, absolute or contingent, direct or indirect, joint, several or independent, now outstanding or owing or which may hereafter be existing or incurred, arising by operation of law or otherwise, due or to become due, or held or to be held by Banks or LC Issuer, whether created directly or acquired by assignment, as a participation, conditionally, as collateral security from another or otherwise, including indebtedness, obligations and liabilities of Borrower to Banks or LC Issuer as a member of any partnership, syndicate, association or other group, and whether incurred by Borrower as principal, surety, endorser, guarantor, accommodation party or otherwise and including, without limitation, all Obligations, as that term is defined in this Agreement. During such time as any Senior Debts remain unpaid and an Event of Default or Unmatured Event of Default has occurred and is continuing, no Guarantor will ask for, demand, sue for, take, receive or accept from Borrower, by set off or in any other manner, any payment or distribution on account of the Subordinated Intercompany Debt, nor present any instrument evidencing the Subordinated Intercompany Debt for payment (other than such presentment as may be necessary to prevent discharge of other liable parties on such instrument), unless the advance written consent or written demand to do so has been received by such Guarantor from Administrative Agent on behalf of the Banks. In the event any Guarantor shall receive any payments, distributions, property, security or proceeds on account of the Subordinated Intercompany Debt, which such party is not entitled to receive under the provisions this Section, such party will hold any amount so received in trust for the Banks and LC Issuer, as applicable, and will forthwith turn over such payment to Administrative Agent in the form received by such Guarantor (together with any necessary endorsement) to be applied on the Senior Debts and any such sums paid to Administrative Agent by such Guarantor shall not be deemed to reduce or extinguish the Subordinated Intercompany Debt of Borrower to any Guarantor. No Guarantor shall commence any action or proceeding against Borrower to recover all or any part of the Subordinated Intercompany Debt or join with any other creditor, unless Banks and LC Issuer shall also join, in bringing any proceedings against Borrower under any bankruptcy, reorganization, readjustment of debt, arrangement of debt, receivership, liquidation or insolvency law or statute of the Federal or any state government unless and until all Senior Debts shall have been paid in full. In the event of any receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or arrangement with creditors, adjustment of debt, whether or not pursuant to bankruptcy laws, the sale of all or substantially all of the assets, dissolution, liquidation, or any other marshaling of the assets and liabilities of Borrower, any Guarantor will at Bank's request promptly and expeditiously file any claim, proof of claim, proof of interest or other instrument of similar character necessary to enforce the obligations of Borrower in respect of the Subordinated Intercompany Debt and will hold in trust for Banks and LC Issuer, as applicable, and pay over to Administrative Agent in the form received (together with any necessary endorsement), to be applied on the Senior Debts, any and all monies, dividends or other assets received in any such proceedings on account of the Subordinated Intercompany Debt unless and until the Senior Debts shall be paid in full. No Guarantor will assign or transfer to others any claim such Guarantor has or may have against any Borrower as long as any of the Senior Debts remains outstanding. 9.24 Prior Agreement. This Agreement amends, extends, rearranges and restates but does not extinguish, the Borrower's obligations under the Third Restated Agreement. All liens and security interests that exist to secure the indebtedness evidenced by the Third Restated Agreement shall continue in force and effect to secure the indebtedness evidenced by the Notes. [signature pages follow] IN WITNESS WHEREOF, this Agreement is executed as of the date first above written. BORROWER CONTINENTAL RESOURCES, INC. By: ROGER CLEMENT Roger Clement Senior Vice President and Chief Financial Officer ADMINISTRATIVE AGENT, LEAD ARRANGER, LC ISSUER, FRONTING BANK AND BANK: UNION BANK OF CALIFORNIA, N.A. By: RANDALL OSTERBERG Randall Osterberg, Senior Vice President By: JOHN CLARK John Clark, Vice President COLLATERAL/DOCUMENTATION AGENT, CO-ARRANGER AND BANK: GUARANTY BANK, FSB By: RICHARD MENCHACA Richard Menchaca, Vice President SYNDICATION AGENT, CO-ARRANGER AND BANK: FORTIS CAPITAL CORP. By: DARRELL W. HOLLEY Darrell W. Holley, Managing Director By: CHRISTOPHER S. PARADA Christopher S. Parada, Vice President The undersigned Guarantors join in the execution of this Agreement for purposes of agreeing to: (a) be bound by the provisions of Section 9.23 hereof, and (b) comply with each of the affirmative covenants in Article V hereof and each of the negative covenants in Article VI hereof, to the same extent that Borrower has agreed therein to cause Guarantors to comply with such covenants. CONTINENTAL GAS, INC. By: RANDY E. MOEDER Randy E. Moeder President CONTINENTAL RESOURCES OF ILLINOIS, INC. By: ROGER CLEMENT Roger Clement Senior Vice President and Chief Financial Officer CONTINENTAL CRUDE CO. By: ROGER CLEMENT Roger Clement Senior Vice President and Chief Financial Officer EXHIBIT "A" BORROWING BASE OIL AND GAS PROPERTIES This Exhibit A (together with the Borrowing Base Oil and Gas Properties, as defined in this Agreement) sets forth the description of the Borrowing Base Oil & Gas Properties covered by the Agreement to which this Exhibit is attached. All of the terms defined in the Agreement are used in this Exhibit with the same meanings given therein. This Exhibit and the Agreement cover and include the following: (a) All of Borrower's and each Guarantor's right, title and interest in and to the oil, gas and mineral leases described herein and/or lands described in and subject to such oil, gas and mineral leases (regardless, as to such leases and/or lands, of any surface acreage and/or depth limitations set forth in any description of any of such oil, gas and mineral leases), and all of Borrower's and each Guarantor's right, title and interest in and to any of the oil, gas and minerals in, on or under the lands, if any, described on this Exhibit, including, without limitation, all contractual rights, fee interests, leasehold interests, overriding royalty interests, non-participating royalty interests, mineral interests, production payments, net profits interests, or any other interest measured by or payable out of production of oil, gas or other minerals from the oil, gas and mineral leases and/or lands described herein; and (b) All of the foregoing interests of the Borrower and each Guarantor as such interests may be enlarged by the discharge of any payments out of production or by the removal of any charges or encumbrances together with the Borrower's and each Guarantor's interests in, to and under or derived from all renewals and extensions of any oil, gas and mineral leases described herein, it being specifically intended hereby that any new oil and gas lease (i) in which an interest is acquired by the Borrower or any Guarantor after the termination or expiration of any oil and gas lease, the interests of the Borrower or such Guarantor in, to and under or derived from which are subject to the lien and security interest hereof, and (ii) that covers all or any part of the property described in and covered by such terminated or expired leases, shall, to the extent, and only to the extent such new oil and gas lease may cover such property, be considered a renewal or extension of such terminated or expired lease; and (c) All right, title and interest of Borrower and each Guarantor in, to and under or derived from any operating, farmout, and bidding agreements, assignments and subleases, whether or not described in this Exhibit, to the extent, and only to the extent, that such agreements, assignments and subleases (i) cover or include any of the Borrower's and each Guarantor's present right, title and interest in and to the leases and/or lands described in this Exhibit, or (ii) cover or include any other undivided interests now or hereafter held by the Borrower and each Guarantor in, to and under the described leases and/or lands, including, without limitation, any future operating, farmout and bidding agreements, assignments, subleases and pooling, unitization and communitization agreements and the units created thereby (including, without limitation all units formed under orders, regulations, rules or other official acts of any governmental body or agency having jurisdiction) to the extent and only to the extent that such agreements, assignments, subleases, or units cover or include the described leases and/or lands; and (d) All right, title, and interest of the Borrower and each Guarantor in, to and under or derived from all presently existing and future advance payment agreements, oil, casinghead gas and gas sales, exchange, and processing contracts and agreements including, without limitation, those contracts and agreements that are described on this Exhibit to the extent, and only to the extent, those contracts and agreements cover or include the described leases and/or lands herein; and (e) All right, title and interest of the Borrower and each Guarantor in, to and under or derived from all existing and future permits, licenses, easements and similar rights and privileges that relate to or are appurtenant to any of the described leases and/or lands. Notwithstanding the intention of this Agreement to cover all of the right, title and interest of Borrower and each Guarantor in and to the described leases and/or lands, except as expressly set forth herein Borrower hereby specifically warrants and represents that the interests covered by this Exhibit are not greater than the working interest nor less than the net revenue interest, overriding royalty interest, net profit interest, production payment interest or other interest payable out of or measured by production set forth in connection with each oil and gas well described in this Exhibit. In the event the Borrower or any Guarantor owns any other or greater interest, such additional interest shall also be covered by and included in this Agreement. The designation "Working Interest" or "W.I." means an interest owned in an oil, gas, and mineral lease (including operating rights and/or record title interest in oil and gas leases issued pursuant to the Outer Continental Shelf Lands Act) that determines the cost bearing percentage of the owner of such interest. The designation "Net Revenue Interest" or "NRI" means net revenue interest, or that portion of the production attributable to the owner of a working interest after deduction for all royalty burdens, overriding royalty burdens, or other burdens on production, except severance, production, windfall profits and other similar taxes. The designation "Overriding Royalty Interest" or "ORRI" means an interest in production which is free of any obligation for the expense of exploration, development and production, bearing only its pro rata share of severance, production, windfall profits and other similar taxes. EXHIBIT "B" AMENDED AND RESTATED REPLACEMENT NOTE $[175,000,000] Dallas, Texas March 28, 2002 On the dates hereinafter prescribed, for value received, CONTINENTAL RESOURCES, INC., an Oklahoma corporation (herein called "Borrower"), having an address at 302 North Independence, Enid, Oklahoma 73702, promises to pay to the order of _____________________ (herein called "Bank"), by payment to UNION BANK OF CALIFORNIA, N.A., the Administrative Agent in the Credit Agreement (defined below) at 1980 Saturn Drive, Monterey Park, California 91754 (i) the principal amount of U.S. [ONE HUNDRED SEVENTY-FIVE] MILLION DOLLARS ($[175,000,000]) or the principal amount advanced pursuant to the terms of the Credit Agreement (defined herein) as of the date of maturity hereof, whether by acceleration or otherwise, whichever may be the lesser, and (ii) interest on the principal balance from time to time advanced and remaining unpaid from the date of the advance until maturity at a rate of interest equal to lesser of (a) the "Floating Rate" (as defined and calculated in the Credit Agreement), or (b) the Maximum Rate (as defined and calculated in the Credit Agreement). Any increase or decrease in interest rate resulting from a change in the Maximum Rate shall be effective immediately when such change becomes effective, without notice to the Borrower, unless Applicable Law (as defined in the Credit Agreement) requires that such increase or decrease not be effective until a later time, in which event such increase or decrease shall be effective at the earliest time permitted under the provisions of such law. Notwithstanding the foregoing, if during any period the Floating Rate exceeds the Maximum Rate, the rate of interest in effect on this Note shall be limited to the Maximum Rate during each such period, but at all times thereafter the rate of interest in effect on this Note shall be the Maximum Rate or, if there is no Maximum Rate, the Agreed Maximum Rate (as defined below), until the total amount of interest accrued on this Note equals the total amount of interest which would have accrued hereon if the Floating Rate had at all times been in effect. This Note is a revolving credit note and it is contemplated that by reason of prepayments hereon there may be times when no indebtedness is owing hereunder; but notwithstanding such occurrence, this Note shall remain valid and in full force and effect as to each principal advance made hereunder subsequent to each such occurrence. Each principal advance and each payment hereof made pursuant to this Note shall be reflected by the Bank's records and the aggregate unpaid amounts reflected by such records shall constitute rebuttably presumptive evidence of the principal and unpaid, accrued interest remaining outstanding on this Note. "Agreed Maximum Rate" means a per annum rate of seven and three-fourths percent (7.75%) plus the Floating Rate from time to time in effect, which Agreed Maximum Rate shall apply only during any period while there is no Maximum Rate applicable to this Note. Other capitalized terms used herein, that are not defined herein, shall have the meanings prescribed therefor in the Credit Agreement. The Borrower and the Bank hereby agree that Chapter 346 of the Texas Finance Code, shall not apply to this Note or the loan transaction evidenced by, and referenced in, the Credit Agreement (hereinafter defined) in any manner, including without limitation, to any account or arrangement evidenced or created by, or provided for in, this Note. The principal sum of this Note, after giving credit for unadvanced principal, if any, remaining at final maturity, shall be due and payable on or before March 28, 2005; interest to accrue upon the principal sum from time to time owing and unpaid hereunder shall be due and payable as provided in the Credit Agreement; provided, however, the final installment of interest hereunder shall be due and payable not later than the maturity of the principal sum hereof, howsoever such maturity may be brought about. In no event shall the aggregate of the interest on this Note, plus any other amounts paid in connection with the loan evidenced by this Note which would under Applicable Law be deemed "interest," ever exceed the maximum amount of interest which, under Applicable Law, could be lawfully charged on this Note. The Bank and the Borrower specifically intend and agree to limit contractually the interest payable on this Note to not more than an amount determined at the Maximum Rate. Therefore, none of the terms of this Note or any other instruments pertaining to or securing this Note shall ever be construed to create a contract to pay interest at a rate in excess of the Maximum Rate, and neither the Borrower nor any other party liable herefor shall ever be liable for interest in excess of that determined at the Maximum Rate, and the provisions of this paragraph shall control over all provisions of this Note or of any other instruments pertaining to or securing this Note. If any amount of interest taken or received by the Bank shall be in excess of the maximum amount of interest which, under Applicable Law, could lawfully have been collected on this Note, then the excess shall be deemed to have been the result of a mathematical error by the parties hereto and shall be refunded promptly to the Borrower. All amounts paid or agreed to be paid in connection with the indebtedness evidenced by this Note which would under Applicable Law be deemed "interest" shall, to the extent permitted by Applicable Law, be amortized, prorated, allocated and spread throughout the full term of this Note. This Note is secured by all security agreements, collateral assignments, mortgages and lien instruments executed by the Borrower (or by any other party) in favor of Guaranty Bank, FSB, as Collateral Agent for the Banks, including those executed simultaneously herewith, those executed heretofore and those hereafter executed, and including specifically and without limitation the Security Instruments described and defined in that certain Fourth Amended and Restated Credit Agreement dated as of the date first stated above among Borrower, Bank and certain other financial institutions (the "Credit Agreement"). This Note is issued pursuant to the Credit Agreement. Reference is hereby made to the Credit Agreement for a statement of the rights and obligations of the holder of this Note and the duties and obligations of the Borrower in relation thereto; but neither this reference to the Credit Agreement nor any provisions thereof shall affect or impair the absolute and unconditional obligation of the Borrower to pay any outstanding and unpaid principal of and interest on this Note when due, in accordance with the terms of the Credit Agreement. Each advance and each payment made pursuant to this Note shall be reflected by notations made by the Bank on its records and the aggregate unpaid amounts reflected by the notations on the records of the Bank shall be deemed rebuttably presumptive evidence of the principal amount owing under this Note. In the event of default in the payment when due of any of the principal of or any interest on this Note, or in the event of default under the terms of the Credit Agreement or any of the Security Instruments, or if any event occurs or condition exists which authorizes the acceleration of the maturity of this Note under any agreement made by the Borrower, the Bank (or other holder of this Note) may, at its option, without presentment or demand or any notice to the Borrower or any other person liable herefor, declare the unpaid principal balance of and accrued interest on this Note to be immediately due and payable. If this Note is collected by suit or through the Probate or Bankruptcy Court, or any judicial proceeding, or if this Note is not paid at maturity, however such maturity may be brought about, and is placed in the hands of an attorney for collection, then the Borrower agrees to pay reasonable and documented attorneys' fees, not to exceed 10% of the full amount of principal and interest owing hereon at the time this Note is placed in the hands of an attorney. The Borrower and all sureties, endorsers and guarantors of this Note waive demand, presentment for payment, notice of nonpayment, protest, notice of protest, notice of intent to accelerate maturity, notice of acceleration of maturity, and all other notices, filing of suit and diligence in collecting this Note or enforcing any of the security herefor, and agree to any substitution, exchange or release of any such security or the release of any party primarily or secondarily liable hereon and further agrees that it will not be necessary for the Bank, in order to enforce payment of this Note by them, to first institute suit or exhaust its remedies against any Borrower or others liable herefor, or to enforce its rights against any security herefor, and consent to any one or more extensions or postponements of time of payment of this Note on any terms or any other indulgences with respect hereto, without notice thereof to any of them. The Bank may transfer this Note, and the rights and privileges of the Bank under this Note shall inure to the benefit of the Bank's representatives, successors or assigns. This Note amends, extends, rearranges and restates those certain [describe each Third Restated Agreement Note] (the "Prior Notes"). All liens and security interests that exist to secure the indebtedness evidenced by that Prior Notes shall continue in force and effect to secure the indebtedness evidenced by this Note. [signature page follows] Executed as of the date and year first set forth above. CONTINENTAL RESOURCES, INC. Attest: By: Secretary EXHIBIT "C" COMPLIANCE CERTIFICATE I, the President of CONTINENTAL RESOURCES, INC. (the "Company"), pursuant to Section 5.05 of the Revolving Credit Agreement dated as of March 28, 2002, by and among the Company, UNION BANK OF CALIFORNIA, N.A., as Administrative Agent, and the other Banks that are party thereto (the "Agreement") do hereby certify, as of the date hereof, that to my knowledge: (a) No Event of Default (as defined in the Agreement) has occurred and is continuing, and no Unmatured Event of Default (as defined in the Agreement) has occurred and is continuing except for the following events (include actions taken to cure such situations): (b) No Material Adverse Change has occurred since the effective date of the latest audited consolidated Financial Statements of the Company delivered to the Administrative Agent; (c) Except as otherwise stated in the Schedule, if any, attached hereto, each of the representations and warranties of the Company contained in Article IV of the Agreement is true and correct in all respects; and (d) The Company's consolidated financial condition for the quarter ending __________ is as follows:
Actual Date or Time Required Ratio or Ratio or Financial Covenant Period Amount Amount ------------------ ------ ------ ------ (a) Current Ratio As of the end of each 1.0 to 1.0 (Current Assets to fiscal quarter Current Liabilities) (b) Fixed Charge Coverage As of the end of each 1.25 to 1.0 Ratio (EBITDA to Total fiscal quarter, during Fixed Charges) the preceding four quarters (c) Total Funded Debt to As of the end of each 3.75 to 1.0 EBITDA fiscal quarter (d) Senior Debt to EBITDA As of the end of each 2.50 to 1.0 fiscal quarter (e) Total Funded Debt to As of the end of each .70 to 1.0 Total Capitalization fiscal quarter
This certificate is executed this _____ day of_________,_____. CONTINENTAL RESOURCES, INC. By: , President EXHIBIT "D" SECURITY INSTRUMENTS The Security Instruments securing the Borrower's Obligations and Indebtedness to the Bank shall include the following, each in form and substance satisfactory to the Bank: 1. ACT(s) OF MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING AND ASSIGNMENT OF PRODUCTION covering the Borrowing Base Oil and Gas Properties situated in Louisiana and/or in the Gulf of Mexico Outer Continental Shelf offshore Louisiana, the personal property and equipment therein and thereon, the production of oil, gas, and other minerals therefrom, and all of the products and proceeds thereof, to be duly executed by Borrower or Guarantor, as applicable, with respect to all of the Borrowing Base Oil and Gas Properties. 2. DEED(S) OF TRUST, SECURITY AGREEMENT, FINANCING STATEMENT AND ASSIGNMENT OF PRODUCTION covering the Borrowing Base Oil and Gas Properties situated in Texas or other states and/or in the Gulf of Mexico Outer Continental Shelf offshore Texas, the personal property and equipment therein and thereon, the production of oil, gas, and other minerals therefore, and all of the products and proceeds thereof, to be duly executed by Borrower or Guarantor, as applicable, with respect to all of the Borrowing Base Oil and Gas Properties. 3. SECURITY AGREEMENT granting the Collateral Agent a first priority security interest in all of the Borrower's and its Subsidiaries' accounts, equipment, machinery, fixtures, inventory, chattel paper, documents, instruments and general intangibles relating to or arising out of the Oil and Borrowing Base Oil and Gas Properties, and the business of the Borrower, whether now owned or hereafter acquired, and all products and proceeds thereof. 4. STOCK PLEDGE BY BORROWER covering all of the stock owned by Borrower in each Guarantor, together with any products and proceeds thereof. 5. FINANCING STATEMENTS in connection with the Security Instruments described in the preceding paragraphs, in form and number satisfactory to the Collateral Agent as the Collateral Agent, from to time, may specify (including additional or supplemental financing statements, amendments thereto, and continuation statements thereof). 6. OTHER SECURITY INSTRUMENTS. Such other instruments as are necessary or appropriate from time to time, in the good faith opinion of the Collateral Agent, to perfect to the satisfaction of the Collateral Agent, its liens, security interests, and other rights in the Borrowing Base Oil and Gas Properties and in any and all other collateral covered by or described in (or, as evidenced by the Agreement, intended to have been covered by) any of the other Security Instruments described above. EXHIBIT "E" REQUEST FOR ADVANCE I, the undersigned officer of CONTINENTAL RESOURCES, INC. (the "Company"), pursuant to Section 2.01 of the Revolving Credit Agreement dated as of March 28, 2002, as amended from time to time (the "Agreement"), by and between UNION BANK OF CALIFORNIA, N.A. ("Administrative Agent"), the banks and other financial institutions from time to time parties to the Agreement (the "Banks"), and the Company, do hereby make the requests indicated below on this day of , 200 : _ |_| 1. Loans: (a) Amount of new Loan: $ (b) Requested funding date: , 200 (c) $ of such Loan is to be an RR Loan; $ of such Loan is to be a LIBOR Loan. Requested Interest Period for LIBOR Loan: months. _ |_| 2. Continuation or conversion of LIBOR Loan maturing on , 200 : (a) Amount to be continued as a LIBOR Loan is $ , with an Interest Period of months; (b) Amount to be converted to an RR Loan is $ . _ |_| 3. Conversion of Prime Rate Loan: (a) Requested conversion date: , 200 . (b) Amount to be converted to a LIBOR Loan is $ , with an Interest Period of months. 4. The undersigned certifies that the funds advanced from the Banks to the Company pursuant to paragraphs 1 through 3 hereof, as applicable, shall be used by the Company solely for the purposes permitted by the Agreement. 5. The undersigned certifies that to my knowledge after reasonable inquiry into the applicable facts, as of the date hereof, the Company is in compliance with all of the representations, warranties, terms, conditions and covenants contained in the Agreement and no Event of Default or Unmatured Event of Default has occurred and is continuing under the Agreement. 6. The undersigned certifies that to my knowledge after reasonable inquiry into the applicable facts, as of the date hereof, no Material Adverse Change has occurred since the effective date of the latest audited Financial Statements of the Company delivered to the Administrative Agent; This certificate is executed this ____ day of ___________, 200 . CONTINENTAL RESOURCES, INC. By: Schedule 1.01(a) Third Restated Agreement Notes 1. Those three certain Replacement Revolving Notes in the aggregate face amount of $45,700,000. each dated January 17, 2002, executed by Borrower et al. and made payable to MidFirst Bank, Local Oklahoma Bank, N.A. and Guaranty Bank, FSB, respectively. 2. Those three certain Replacement Term Notes in the aggregate face amount of $24,300,000. each dated January 17, 2002, executed by Borrower et al. and made payable to MidFirst Bank, Local Oklahoma Bank, N.A. and Guaranty Bank, FSB, respectively. Schedule 1.01(b) Commitment Amounts and Aggregate Commitment Amount Percentage Commitment Bank Share Amount ---- ----- ------ Union Bank of California, N.A. 33.33333372% $ 58,333,334.00 Guaranty Bank, FSB 33.33333314% $ 58,333,333.00 Fortis Capital Corp. 33.33333314% $ 58,333,333.00 ----------------- Aggregate Commitment Amount: $ 175,000,000.00 Schedule 2.20(C) Fax Numbers for all Parties Union Bank of California, N.A........................214-922-4209 Guaranty Bank, FSB...................................713-890-8868 Fortis Capital Corp..................................214-754-5982 Continental Resources, Inc., Continental Gas, Inc., Continental Resources of Illinois, Inc, and Continental Crude Co.................................580-548-5182 COMMITMENT TRANSFER SUPPLEMENT THIS COMMITMENT TRANSFER SUPPLEMENT (this "Commitment Transfer Supplement") dated as of the date set forth in Item 1 of Schedule I hereto, is among the Transferor Bank set forth in Item 2 of Schedule I hereto (the "Transferor Bank"), each Purchasing Bank set forth in Item 3 of Schedule 1 (each a "Purchasing Bank"), and UNION BANK OF CALIFORNIA, N.A., as Administrative Agent for the Banks under, and as defined in, the Credit Agreement described below (in such capacity, the "Administrative Agent"). RECITALS WHEREAS, this Commitment Transfer Supplement is being executed and delivered in accordance with Section 9.05(c) of the Revolving Credit Agreement dated as of March 28, 2002, by and among CONTINENTAL RESOURCES, INC., a Delaware corporation and certain of its Affiliates ("Borrower"), the Transferor Bank and the other Banks party thereto and the Administrative Agent (as from time to time amended, supplemented or otherwise modified in accordance with the terms thereof, the "Credit Agreement"; terms defined therein being used herein as therein defined); WHEREAS, each Purchasing Bank (if it is not already a Bank party to the Credit Agreement) wishes to become a Bank party to the Credit Agreement; and WHEREAS, the Transferor Bank is selling and assigning to each Purchasing Bank, rights, obligations and commitments under the Credit Agreement; NOW, THEREFORE, the parties hereto agree as follows: GENERAL TERMS Section 1. Upon receipt by the Administrative Agent of five counterparts of this Commitment Transfer Supplement, to each of which is attached a fully completed Schedule I and Schedule II, and each of which has been executed by the Transferor Bank, each Purchasing Bank (and any other person required by the Credit Agreement to execute this Commitment Transfer Supplement), the Administrative Agent will transmit to the Borrower, the Transferor Bank and each Purchasing Bank a Transfer Effective Notice, substantially in the form of Schedule III to this Commitment Transfer Supplement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall set forth, inter alia, the date on which the transfer effected by this Commitment Transfer Supplement shall become effective (the "Transfer Effective Date"), which date shall be at least five (5) Business Days following the date of such Transfer Effective Notice. From and after the Transfer Effective Date each Purchasing Bank shall be a Bank party to the Credit Agreement for all purposes thereof. Section 2. At or before 12:00 Noon, local time of the Transferor Bank, on the Transfer Effective Date, each Purchasing Bank shall pay to the Transferor Bank, in immediately available funds, an amount equal to the purchase price, as agreed between the Transferor Bank and such Purchasing Bank (the "Purchase Price"), of the portion being purchased by such Purchasing Bank (such Purchasing Bank's "Purchased Percentage") of the outstanding Credit Extensions and other amounts owing to the Transferor Bank under the Credit Agreement and the Notes. Effective upon receipt by the Transferor Bank of the Purchase Price from a Purchasing Bank, the Transferor Bank hereby irrevocably sells, assigns and transfers to such Purchasing Bank, without recourse, representation or warranty, and each Purchasing Bank hereby irrevocably purchases, takes and assumes from the Transferor Bank, such Purchasing Bank's Purchased Percentage of the Commitment of the Transferor Bank and the presently outstanding Credit Extensions and other amounts owing to the Transferor Bank under the Credit Agreement and the Notes together with all instruments, documents and collateral security pertaining thereto. Section 3. The Transferor Bank has made arrangements with each Purchasing Bank with respect to (a) the portion, if any, to be paid, and the date or dates for payment, by the Transferor Bank to such Purchasing Bank of any fees heretofore received by the Transferor Bank pursuant to the Credit Agreement prior to the Transfer Effective Date, and (b) the portion, if any, to be paid, and the date or dates for payment, by such Purchasing Bank to the Transferor Bank of fees or interest received by such Purchasing Bank pursuant to the Credit Agreement from and after the Transfer Effective Date. Section 4. (a) All principal payments that would otherwise be payable from and after the Transfer Effective Date to or for the account of the Transferor Bank pursuant to the Credit Agreement and the Notes shall, instead, be payable to or for the account of the Transferor Bank and the Purchasing Banks, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement. (b) All interest, fees and other amounts that would otherwise accrue for the account of the Transferor Bank from and after the Transfer Effective Date pursuant to the Credit Agreement and the Notes shall, instead, accrue for the account of, and be payable to, the Transferor Bank and the Purchasing Banks, as the case may be, in accordance with their respective interests as reflected in this Commitment Transfer Supplement. (c) In the event that any amount of interest, fees or other amounts accruing prior to the Transfer Effective Date was included in the Purchase Price paid by any Purchasing Bank, the Transferor Bank and each Purchasing Bank will make appropriate arrangements for payment by the Transferor Bank to such Purchasing Bank of such amount upon receipt thereof from the Borrower. Section 5. On or prior to the Transfer Effective Date, the Transferor Bank will deliver to the Administrative Agent its Note. Within five (5) Business Days after Borrower's receipt of notice from Administrative Agent of Administrative Agent's receipt of this Commitment Transfer Supplement, the Borrower will deliver to the Administrative Agent, in exchange for the surrendered Note from the Transferor Bank, a new Note for each Purchasing Bank and the Transferor Bank, to the extent the Transferor Bank has retained any of its Commitment, in each case in principal amounts reflecting, in accordance with the Credit Agreement, their respective Commitment Amounts (as adjusted pursuant to this Commitment Transfer Supplement). As provided in Section 9.05(e) of the Credit Agreement, each such new Note shall be dated the date of the original Note delivered pursuant to the Credit Agreement (the "Effective Date"). Promptly after the Transfer Effective Date, the Administrative Agent will send to each of the Transferor Bank and the Purchasing Banks its new Note and will send to the Borrower the superseded Note of the Transferor Bank, marked "Canceled" or "Replaced" as appropriate. Section 6. Concurrently with the execution and delivery hereof, the Transferor Bank will provide to each Purchasing Bank (if it is not already a Bank party to the Credit Agreement) conformed copies of all documents in the Transferor Bank's possession that were delivered to the Administrative Agent on the Effective Date in satisfaction of the conditions precedent set forth in the Credit Agreement. Section 7. Each of the parties to this Commitment Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Commitment Transfer Supplement. Section 8. By executing and delivering this Commitment Transfer Supplement, the Transferor Bank and each Purchasing Bank confirm to and agree with each other and the Administrative Agent and the Banks as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned hereby free and clear of any adverse claim, the Transferor Bank makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the Notes, any other Loan Document or any other instrument or document furnished pursuant thereto; (ii) the Transferor Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any Subsidiary of either of the Borrowers or the performance or observance by the Borrower or any Subsidiary of either of the Borrowers of any of their respective obligations under the Credit Agreement, the Notes, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) each Purchasing Bank confirms that it has received a copy of the Credit Agreement, together with copies of the Financial Statements referred to in Section 3.1(D), the Financial Statements delivered pursuant to Sections 5.03 and 5.04, if any, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Commitment Transfer Supplement; (iv) each Purchasing Bank will, independently and without reliance upon the Administrative Agent, the Transferor Bank or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (v) each Purchasing Bank appoints and authorizes the Administrative Agent to take such action as Administrative Agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto, all in accordance with Article VIII of the Credit Agreement; and (vi) each Purchasing Bank agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank. Section 9. Each party hereto represents and warrants to and agrees with the Administrative Agent that it is aware of and will comply with the provision of Section 2.16 of the Credit Agreement. Section 1. Schedule II hereto sets forth the revised Commitment Amounts and Percentage Shares of the Transferor Bank and each Purchasing Bank as well as administrative information with respect to each Purchasing Bank. SECTION 2. THIS COMMITMENT TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS. IN WITNESS WHEREOF, the parties hereto have caused this Commitment Transfer Supplement to be executed by their respective duly authorized officers on Schedule I hereto as of the date set forth in Item I of Schedule I hereto. Schedule I to Commitment Transfer Supplement COMPLETION OF INFORMATION AND SIGNATURES FOR COMMITMENT TRANSFER SUPPLEMENT Re: Revolving Credit Agreement dated as of March 28, 2002, among Continental Resources, Inc., and certain of its Affiliates, the Banks, and Union Bank of California, N.A., as Administrative Agent for the Banks thereunder. Item 1 (Date of Commitment Transfer Supplement): [Insert date of Commitment Transfer Supplement] Item 2 (Transferor Bank): [Insert name of Transferor Bank] Item 3 (Purchasing Bank[s]): [Insert name[s] of Purchasing Bank[s]] Item 4 (Signatures of Parties to Commitment Transfer Supplement): , as Transferor Bank By: Title:___________________________________ , as Purchasing Bank By: Title:___________________________________ , as Purchasing Bank By: Title:___________________________________ CONSENTED TO AND ACKNOWLEDGED: CONTINENTAL RESOURCES, INC. By: Name: Title: UNION BANK OF CALIFORNIA, N.A. as Administrative Agent By: Name: Title: [Consents Required only when Purchasing Bank is not already a Bank or Affiliate thereof] ACCEPTED FOR RECORDATION IN REGISTER: UNION BANK OF CALIFORNIA, N.A. as Administrative Agent By:___________________________________ Title:__________________________________ Schedule II to Commitment Transfer Supplement LIST OF LENDING OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS [Name of Transferor Bank] Revised Commitment Amount: $______________ Revised Commitment Percentage: ______________ [Name of Purchasing Bank] New Commitment Amount: $_____________ New Commitment Percentage: ______________ Address for Notices: [address] Attention: Telex: Answer back: Telephone: Telecopier: Lending Office: [Form of Transfer Effective Notice] Schedule III to Commitment Transfer Supplement To: [Insert Name of Borrower, Transferor Bank and each Purchasing Bank] The undersigned, as Administrative Agent under the Revolving Credit Agreement dated as of March 28, 2002, among Continental Resources, Inc. ("Borrower"), the Banks and other financial institutions from time to time parties thereto and Union Bank of California, N.A. as Administrative Agent, acknowledges receipt of five executed counterparts of a completed Commitment Transfer Supplement, as described in Schedule I hereto. [Note: attach copy of Schedule I from Commitment Transfer Supplement.] Terms defined in such Commitment Transfer Supplement are used herein as therein defined. 1. Pursuant to such Commitment Transfer Supplement, you are advised that the Transfer Effective Date will be [Insert fifth Business Day following date of Transfer Effective Notice]. 2. Pursuant to such Commitment Transfer Supplement, the Transferor Bank is required to deliver its Note to the Administrative Agent on or before the Transfer Effective Date. 3. Pursuant to such Commitment Transfer Supplement, the Borrower is required to deliver to the Administrative Agent on or before the fifth (5th) Business Day from its receipt of this notice, in return for the Note surrendered to the Administrative Agent by the Transferor Bank, the following Notes [Describe each Note for Transferor Bank and Purchasing Bank as to principal amount and payee], dated March 28, 2002. 4. Pursuant to such Commitment Transfer Supplement each Purchasing Bank is required to pay its Purchase Price to the Transferor Bank at or before 12:00 Noon on the Transfer Effective Date in immediately available funds. Very truly yours, UNION BANK OF CALIFORNIA, N.A., as Administrative Agent By: Title: EX-10.2 4 criex102form8k4112002.txt UNLIMITED GUARANTY THIS UNLIMITED GUARANTY ("Guaranty") is made as of the 28th day of March, 2002, by Guarantor (as hereinafter defined) for the benefit of the "Bank(s)", "Agent" and "LC Issuer" (as such terms are hereinafter defined). 1. Definitions. As used in this Guaranty, the following terms shall have the meanings indicated below: (a) The term "Agent" shall mean, individually and collectively, (i) Guaranty Bank, FSB, as Collateral Agent for the Banks under the Credit Agreement (as hereinafter defined), whose address is 333 Clay Street, Suite 4430, Houston, Texas 77002, Attn: Richard Menchaca, (ii) Union Bank of California, N.A., as Administrative Agent for the Banks under the Credit Agreement, whose address is 500 North Akard, Suite 4200, Dallas, Texas 75201, Attn: John Clark, and (iii) Fortis Capital Corp., as Syndication Agent for the Banks under the Credit Agreement, whose address is 100 Crescent Court, Suite 1777, Dallas, Texas 75201, Attn: Christopher S. Prada, and each successor Collateral Agent, Administrative Agent and Syndication Agent. (b) The term "Bank(s)" shall have the same meaning as that term has in the Credit Agreement, including each Bank's successors and assigns as provided for in Section 9.05 thereof. (c) The term "Borrower" shall mean Continental Resources, Inc., an Oklahoma corporation. (d) The term "Credit Agreement" shall mean that certain Fourth Amended and Restated Credit Agreement dated as of March 28, 2002 by and among Continental Resources, Inc., as Borrower, Guaranty Bank, FSB, as Collateral/Documentation Agent, Co-Arranger and a Bank, Union Bank of California, N.A., as Administrative Agent, LC Issuer, Lead Arranger, Fronting Bank and a Bank, Fortis Capital Corp., as Syndication Agent, Co-Arranger and a Bank, and the Banks and financial institutions from time to time parties to the Credit Agreement. (e) The term "Guaranteed Indebtedness" shall mean (i) all indebtedness, obligations and liabilities of Borrower arising under the Credit Agreement and other Loan Documents (as defined in the Credit Agreement) to the Bank(s), the LC Issuer and/or the Agent of any kind or character, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several, and regardless of whether such indebtedness, obligations and liabilities may, prior to their acquisitions by the Bank(s), the LC Issuer and/or the Agent, respectively, be or have been payable to or in favor of a third party and subsequently acquired by the Bank(s), the LC Issuer and/or the Agent (it being contemplated that the Bank(s), the LC Issuer and/or the Agent may make such acquisitions from third parties), including without limitation all indebtedness, obligations and liabilities of Borrower to the Bank(s), the LC Issuer and/or the Agent now existing or hereafter arising under the Loan Documents by note, draft, acceptance, guaranty, endorsement, letter of credit, assignment, purchase, overdraft, discount, indemnity agreement or otherwise, (ii) all accrued but unpaid interest on any of the indebtedness described in (i) above, (iii) all costs and expenses incurred by the Bank(s), the LC Issuer and/or the Agent in connection with the collection and administration of all or any part of the indebtedness and obligations described in (i), (ii) and (iii) above or the protection or preservation of, or realization upon, the collateral securing all or any part of such indebtedness and obligations, including without limitation all reasonable attorneys' fees, and (iv) all renewals, extensions, modifications and rearrangements of the indebtedness and obligations described in (i), (ii) and (iii) above. (f) The term "Guarantor" shall mean, individually and collectively, Continental Gas, Inc., an Oklahoma corporation, Continental Resources of Illinois, Inc., an Oklahoma corporation, and Continental Crude Co., an Oklahoma corporation, whose addresses for notice purposes are as follows: Continental Gas, Inc. c/o Continental Resources, Inc. 302 N. Independence, Suite 300 Enid, Oklahoma 73701 Attn: Randy E. Moeder Telephone: (580) 233-8955 Telecopy: (580) 548-5188 Continental Resources of Illinois, Inc. c/o Continental Resources, Inc. 302 N. Independence, Suite 300 Enid, Oklahoma 73701 Attn: Randy E. Moeder Telephone: (580) 233-8955 Telecopy: (580) 548-5188 Continental Crude Co. c/o Continental Resources, Inc. 302 N. Independence, Suite 300 Enid, Oklahoma 73701 Attn: Randy E. Moeder Telephone: (580) 233-8955 Telecopy: (580) 548-5188 (g) The term "LC Issuer" shall mean Union Bank of California, N. A. (or any subsidiary or affiliate of Union Bank of California, N.A. designated by Union Bank of California, N.A. and reasonably acceptable to Borrower) in it's capacity as issuer of Facility LCs (as defined in the Credit Agreement). 2. Obligations. As an inducement to Bank(s), the LC Issuer and/or the Agent to extend or continue to extend credit and other financial accommodations to Borrower, Guarantor, for value received, does hereby unconditionally and absolutely guarantee the prompt and full payment and performance of the Guaranteed Indebtedness when due or declared to be due and at all times thereafter. 3. Character of Obligations. This is an absolute, continuing and unconditional guaranty of payment and performance and not of collection and if at any time or from time to time there is no outstanding Guaranteed Indebtedness, the obligations of Guarantor with respect to any and all Guaranteed Indebtedness incurred thereafter shall not be affected. All Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made by Bank(s), the LC Issuer and/or the Agent to Borrower shall be conclusively presumed to have been made or acquired in acceptance hereof. Guarantor shall be liable, jointly and severally, with Borrower and any other guarantor of all or any part of the Guaranteed Indebtedness. 4. Representations and Warranties. Guarantor hereby represents and warrants the following to the Agent and to the Bank(s): (a) The Board of Directors of Guarantor has determined that this Guaranty may reasonably be expected to benefit, directly or indirectly, Guarantor, and that the value of the benefits that Guarantor will derive from giving this Guaranty are reasonably equivalent to the value of the Guaranty; and (b) Guarantor is familiar with, and has independently reviewed the books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be security for the payment of all or any part of the Guaranteed Indebtedness; provided, however, Guarantor is not relying on such financial condition or collateral as an inducement to enter into this Guaranty; and (c) Guarantor has adequate means to obtain from Borrower on a continuing basis information concerning the financial condition of Borrower and Guarantor is not relying on the Agent, the Bank(s) or the LC Issuer to provide such information to Guarantor either now or in the future; and (d) Guarantor has the power and authority to execute, deliver and perform this Guaranty and any other agreements executed by Guarantor contemporaneously herewith, and the execution, delivery and performance of this Guaranty and any other agreements executed by Guarantor contemporaneously herewith do not and will not violate (i) any agreement or instrument to which Guarantor is a party, (ii) any law, rule, regulation or order of any governmental authority to which Guarantor is subject, or (iii) its articles or certificate of incorporation or bylaws; and (e) Neither the Agent, the Bank(s), the LC Issuer nor any other party has made any representation, warranty or statement to Guarantor in order to induce Guarantor to execute this Guaranty; and (f) The financial statements and other financial information regarding Guarantor heretofore and hereafter delivered to the Agent, the LC Issuer and/or the Bank(s) are and shall be true and correct in all material respects and fairly present the financial position of Guarantor as of the dates thereof, and no material adverse change has occurred in the financial condition of Guarantor reflected in the financial statements and other financial information regarding Guarantor heretofore delivered to the Agent, the LC Issuer and/or the Bank(s) since the date of the last statement thereof; and (g) As of the date hereof, and after giving effect to this Guaranty and the obligations evidenced hereby, (i) Guarantor is and will be solvent, (ii) the fair saleable value of Guarantor's assets exceeds and will continue to exceed its liabilities (both fixed and contingent), (iii) Guarantor is and will continue to be able to pay its debts as they mature, and (iv) Guarantor has and will continue to have sufficient capital to carry on its business and all businesses in which it is about to engage. 5. Covenants. Guarantor hereby covenants and agrees with the Agent, the LC Issuer and the Bank(s) as follows: (a) Guarantor shall not, so long as its obligations under this Guaranty continue, transfer or pledge any material portion of its assets for less than full and adequate consideration; and (b) Guarantor shall promptly furnish to the Agent at any time and from time to time such financial statements and other financial information of Guarantor as required by the Credit Agreement, in form and substance satisfactory to Agent; and (c) Guarantor shall comply with all terms and provisions of the Loan Documents (as defined in the Credit Agreement) that apply to Guarantor; and (d) Promptly upon a responsible officer of Guarantor becoming aware, Guarantor shall promptly inform the Agent of (i) any litigation or governmental investigation against Guarantor or affecting any security for all or any part of the Guaranteed Indebtedness or this Guaranty which, if determined adversely, might have a material adverse effect upon the financial condition of Guarantor or upon such security or might cause a default under any of the Loan Documents, (ii) any claim or controversy which might become the subject of such litigation or governmental investigation, and (iii) any material adverse change in the financial condition of Guarantor. 6. Consent and Waiver. (a) Guarantor waives (i) promptness, diligence and notice of acceptance of this Guaranty and notice of the incurring of any obligation, indebtedness or liability to which this Guaranty applies or may apply and waives presentment for payment, notice of nonpayment, protest, demand, notice of protest, notice of intent to accelerate, notice of acceleration, notice of dishonor, diligence in enforcement and indulgences of every kind, and (ii) the taking of any other action by the Agent, the LC Issuer and/or the Bank(s), including without limitation, giving any notice of default or any other notice to, or making any demand on, Borrower, any other guarantor of all or any part of the Guaranteed Indebtedness or any other party except as required by the Credit Agreement. (b) Guarantor waives any rights Guarantor has under, or any requirements imposed by, Chapter 34 of the Texas Business and Commerce Code, as in effect on the date of this Guaranty. (c) The Agent, the LC Issuer and/or the Bank(s) may at any time, without the consent of or notice to Guarantor, without incurring responsibility to Guarantor and without impairing, releasing, reducing or affecting the obligations of Guarantor hereunder: (i) change the manner, place or terms of payment of all or any part of the Guaranteed Indebtedness, or renew, extend, modify, rearrange or alter all or any part of the Guaranteed Indebtedness; (ii) change the interest rate accruing on any of the Guaranteed Indebtedness (including, without limitation, any periodic change in such interest rate that occurs because such Guaranteed Indebtedness accrues interest at a variable rate which may fluctuate from time to time); (iii) sell, exchange, release, surrender, subordinate, realize upon or otherwise deal with in any manner and in any order any collateral for all or any part of the Guaranteed Indebtedness or this Guaranty or setoff against all or any part of the Guaranteed Indebtedness; (iv) neglect, delay, omit, fail or refuse to take or prosecute any action for the collection of all or any part of the Guaranteed Indebtedness or this Guaranty or to take or prosecute any action in connection with any of the Loan Documents; (v) exercise or refrain from exercising any rights against Borrower or others, or otherwise act or refrain from acting; (vi) settle or compromise all or any part of the Guaranteed Indebtedness and subordinate the payment of all or any part of the Guaranteed Indebtedness to the payment of any obligations, indebtedness or liabilities which may be due or become due to the Bank(s), the LC Issuer and/or the Agent or others; and (vii) apply any sums paid to the Bank(s), the LC Issuer and/or the Agent by Guarantor, Borrower or others to the Guaranteed Indebtedness in such order and manner as the Agent, in their sole discretion, may determine. (d) Should the Agent, the LC Issuer or the Bank(s) seek to enforce the obligations of Guarantor hereunder by action in any court or otherwise, Guarantor waives any requirement, substantive or procedural, that (i) the Agent, the LC Issuer or the Bank(s) first enforce any rights or remedies against Borrower or any other person or entity liable to any of such parties for all or any part of the Guaranteed Indebtedness, including without limitation that a judgment first be rendered against Borrower or any other person or entity, or that Borrower or any other person or entity should be joined in such cause, or (ii) the Agent, the LC Issuer or the Bank(s) shall first enforce rights against any collateral which shall ever have been given to secure all or any part of the Guaranteed Indebtedness or this Guaranty. Such waiver shall be without prejudice to the Agent's, the LC Issuer's or the Bank(s)' right, at its option, to proceed against Borrower or any other person or entity, whether by separate action or by joinder. (e) In addition to any other waivers, agreements and covenants of Guarantor set forth herein, Guarantor hereby further waives and releases all claims, causes of action, defenses and offsets for any act or omission of the Agent and/or the Agent's directors, officers, employees, representatives or agents in connection with Agent's administration of the Guaranteed Indebtedness, except for the Agent's willful misconduct and gross negligence. 7. Obligations Not Impaired. (a) Guarantor agrees that its obligations hereunder shall not be released, diminished, impaired, reduced or affected by the occurrence of any one or more of the following events: (i) the death, disability or lack of corporate power of Borrower, Guarantor (except as provided in paragraph 11 herein) or any other guarantor of all or any part of the Guaranteed Indebtedness, (ii) any receivership, insolvency, bankruptcy or other proceedings affecting Borrower, Guarantor or any other guarantor of all or any part of the Guaranteed Indebtedness, or any of their respective property; (iii) the partial or total release or discharge of Borrower or any other guarantor of all or any part of the Guaranteed Indebtedness, or any other person or entity from the performance of any obligation contained in any instrument or agreement evidencing, governing or securing all or any part of the Guaranteed Indebtedness, whether occurring by reason of law or otherwise; (iv) the taking or accepting of any collateral for all or any part of the Guaranteed Indebtedness or this Guaranty; (v) the taking or accepting of any other guaranty for all or any part of the Guaranteed Indebtedness; (vi) any failure by the Agent, the LC Issuer or the Bank(s) to acquire, perfect or continue any lien or security interest on collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment of any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty; (viii) any failure by the Agent, the LC Issuer or the Bank(s) to sell any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty in a commercially reasonable manner or as otherwise required by law; (ix) any invalidity or unenforceability of or defect or deficiency in any of the Loan Documents; or (x) any other circumstance which might otherwise constitute a defense available to, or discharge of, Borrower or any other guarantor of all or any part of the Guaranteed Indebtedness. (b) This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of all or any part of the Guaranteed Indebtedness is rescinded or must otherwise be returned by the Agent, the LC Issuer or the Bank(s) upon the insolvency, bankruptcy or reorganization of Borrower, Guarantor, or any other guarantor of all or any part of the Guaranteed Indebtedness, or otherwise, all as though such payment had not been made. (c) None of the following shall affect Guarantor's liability hereunder: (i) the unenforceability of all or any part of the Guaranteed Indebtedness against Borrower by reason of the fact that the Guaranteed Indebtedness exceeds the amount permitted by law; (ii) the act of creating all or any part of the Guaranteed Indebtedness is ultra vires; or (iii) the officers or partners creating all or any part of the Guaranteed Indebtedness acted in excess of their authority. Guarantor hereby acknowledges that withdrawal from, or termination of, any ownership interest in Borrower now or hereafter owned or held by Guarantor shall not alter, affect or in any way limit the obligations of Guarantor hereunder. 8. Actions against Guarantor. In the event of a default in the payment or performance of all or any part of the Guaranteed Indebtedness when such Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or otherwise, Guarantor shall, without notice or demand, promptly pay the amount due thereon to the Agent, in lawful money of the United States, at Agent's address set forth in subparagraph 1(a) above. One or more successive or concurrent actions may be brought against Guarantor, either in the same action in which Borrower is sued or in separate actions, as often as Agent deem advisable. The exercise by the Agent, the LC Issuer or the Bank(s) of any right or remedy under this Guaranty or under any other agreement or instrument, at law, in equity or otherwise, shall not preclude concurrent or subsequent exercise of any other right or remedy. The books and records of the Agent, the LC Issuer or the Bank(s) shall be admissible in evidence in any action or proceeding involving this Guaranty and shall be prima facie evidence of the payments made on, and the outstanding balance of, the Guaranteed Indebtedness. 9. Payment by Guarantor. Whenever Guarantor pays any sum which is or may become due under this Guaranty, written notice must be delivered to the Agent contemporaneously with such payment. Such notice shall be effective for purposes of this paragraph when contemporaneously with such payment the Agent receive such notice either by: (a) personal delivery to the address of the Agent identified in subparagraph 1(a) above, or (b) United States mail, certified or registered, return receipt requested, postage prepaid, addressed to the Agent at the address shown in subparagraph 1(a) above. In the absence of such notice to the Agent by Guarantor in compliance with the provisions hereof, any sum received by the Agent on account of the Guaranteed Indebtedness shall be conclusively deemed paid by Borrower. 10. Notice of Sale. In the event that Guarantor is entitled to receive any notice under the Uniform Commercial Code, as it exists in the state governing any such notice, of the sale or other disposition of any collateral securing all or any part of the Guaranteed Indebtedness or this Guaranty, reasonable notice shall be deemed given when such notice is deposited in the United States mail, postage prepaid, at the address for Guarantor set forth in subparagraph 1(d) above, ten (10) days prior to the date any public sale, or after which any private sale, of any such collateral is to be held; provided, however, that notice given in any other reasonable manner or at any other reasonable time shall be sufficient. 11. Waiver by Agent or Bank(s). No delay on the part of the Agent, the LC Issuer or the Bank(s) in exercising any right hereunder or failure to exercise the same shall operate as a waiver of such right. In no event shall any waiver of the provisions of this Guaranty be effective unless the same be in writing and signed by an officer of the Agent, the LC Issuer or the Bank(s), and then only in the specific instance and for the purpose given. 12. Successors and Assigns. This Guaranty is for the benefit of the Agent, each successor Agent, the LC Issuer, each successor LC Issuer, the Bank(s), and each Bank's successors and assigns. This Guaranty is binding upon Guarantor and Guarantor's successors and assigns, including without limitation any person or entity obligated by operation of law upon the reorganization, merger, consolidation or other change in the organizational structure of Guarantor. 13. Costs and Expenses. Guarantor shall pay on demand by the Agent all costs and expenses, including without limitation, all reasonable attorneys' fees incurred by the Agent, the LC Issuer and/or the Bank(s) in connection with the preparation, administration, enforcement and/or collection of this Guaranty. This covenant shall survive the payment of the Guaranteed Indebtedness. 14. Severability. If any provision of this Guaranty is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, shall not impair or invalidate the remainder of this Guaranty and the effect thereof shall be confined to the provision held to be illegal, invalid or unenforceable. 15. No Obligation. Nothing contained herein shall be construed as an obligation on the part of the Agent, the LC Issuer or the Bank(s) to extend or continue to extend credit to Borrower. 16. Amendment. No modification or amendment of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by an officer of the Agent, the LC Issuer or the Bank(s), and then shall be effective only in the specific instance and for the purpose for which given. 17. Cumulative Rights. All rights and remedies of the Agent, the LC Issuer or the Bank(s) hereunder are cumulative of each other and of every other right or remedy which the Agent, the LC Issuer or the Bank(s) may otherwise have at law or in equity or under any instrument or agreement, and the exercise of one or more of such rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of any other rights or remedies. 18. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS. 19. Venue. This Guaranty has been entered into in the county in Texas where the Agent's address for notice purposes is located, and it shall be performable for all purposes in such county. Courts within the State of Texas shall have jurisdiction over any and all disputes arising under or pertaining to this Guaranty and venue for any such disputes shall be in the county or judicial district where the Agent's address for notice purposes is located. 20. Compliance with Applicable Usury Laws. Notwithstanding any other provision of this Guaranty or of any instrument or agreement evidencing, governing or securing all or any part of the Guaranteed Indebtedness, Guarantor and the Agent, the LC Issuer and the Bank(s) by their acceptance hereof agree that Guarantor shall never be required or obligated to pay interest in excess of the maximum nonusurious interest rate as may be authorized by applicable law for the written contracts which constitute the Guaranteed Indebtedness. It is the intention of Guarantor and the Agent, LC Issuer and the Bank(s) to conform strictly to the applicable laws which limit interest rates, and any of the aforesaid contracts for interest, if and to the extent payable by Guarantor, shall be held to be subject to reduction to the maximum nonusurious interest rate allowed under said law. 21. Descriptive Headings. The headings in this Guaranty are for convenience only and shall not define or limit the provisions hereof. 22. Entire Agreement. This Guaranty contains the entire agreement between Guarantor and the Agent, the LC Issuer and the Bank(s) regarding the subject matter hereof and supersedes all prior written and oral agreements and understandings, if any, regarding same; provided, however, this Guaranty is in addition to and does not replace, cancel, modify or affect any terms of the Credit Agreement or any Loan Documents (as defined therein), or any other guaranty of Guarantor now or hereafter held by the Agent, the LC Issuer or the Bank(s) that relates to Borrower or any other person or entity. [Signature page follows.] EXECUTED as of the date first above written. GUARANTORS: CONTINENTAL GAS, INC. By: RANDY E. MOEDER Randy E. Moeder, President CONTINENTAL RESOURCES OF ILLINOIS, INC. By: ROGER CLEMENT Roger Clement, Sr. Vice President and Chief Financial Officer CONTINENTAL CRUDE CO. By: ROGER CLEMENT Roger Clement, Sr. Vice President and Chief Financial Officer [THIS IS THE SIGNATURE PAGE TO THE GUARANTY] EX-10.3 5 criex103form8k4112002.txt SECURITY AGREEMENT THIS SECURITY AGREEMENT dated effective as of March 28, 2002, is by and between CONTINENTAL RESOURCES, INC., an Oklahoma corporation (the "Debtor") whose address is 302 N. Independence, Suite 300, Enid, Oklahoma 73701 and GUARANTY BANK, FSB, a federal savings bank, as Bank and as Collateral Agent as defined under the Credit Agreement hereinafter defined (the "Secured Party"), whose address is 333 Clay Street, Suite 4430, Houston, Texas 77002, 730 N. Post Oak Road, 4th Floor, Houston, Texas 77024. R E C I T A L S: A. Reference is made to that certain Fourth Amended and Restated Credit Agreement dated of even date herewith by and among Debtor, Secured Party as Collateral/Documentation Agent, Co-Arranger and a Bank, Union Bank of California, N.A., as Administrative Agent, LC Issuer, Lead Arranger, Fronting Bank and a Bank, Fortis Capital Corp., as Syndication Agent, Co- Arranger and a Bank and the other financial institutions and banks from time to time parties to the Credit Agreement (the "Banks")(as the same may be amended, supplemented or modified from time to time, the "Credit Agreement"); B. The loans to be made pursuant to the Credit Agreement are evidenced by certain Amended and Restated Replacement Notes in the aggregate principal amount of $175,000,000.00, such notes dated as of even date herewith and executed by Debtor and payable to Secured Party, as the same may be amended, extended, renewed or restated (the "Notes"). C. Secured Party has conditioned its obligations under the Credit Agreement upon, among other things, the execution and delivery of this Security Agreement by Debtor (hereinafter, the "Agreement"). NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I SECURITY INTEREST Section 1.01. Security Interest. Debtor hereby grants to Secured Party a security interest in the following property, whether now owned or existing or hereafter arising or acquired and wherever arising or located (such property being hereinafter sometimes called the "Collateral"): (a) All right, title and interest of Debtor in and to all goods, inventory, equipment, fixtures, machinery, furnishings, furniture, appliances, accessories, leasehold improvements, hattels, and other items of personal property owned by the Debtor, including, but not limited to all of the foregoing that are located on the property described on Exhibit "A" ("Property") which is attached hereto and incorporated herein, or used or held for use by Debtor in connection with any such Property; (b) All accounts, contract rights (including, without limitation, any Hedge Agreement, as defined in the Credit Agreement), instruments, documents, chattel paper, and general intangibles owned by the Debtor relating to or arising out of the Property; (c) All right, title and interest of Debtor in and to all accessions or appurtenances to any of the foregoing; (d) All right, title and interest of Debtor in and to all improvements, extensions, alterations, substitutions, replacements, renewals, and rights belonging or in any way appertaining to all or any part of the foregoing or acquired for use in connection therewith; (e) All right, title and interest of Debtor in and to all proceeds payable or to be payable under each policy of insurance relating to the whole or any part of the foregoing; and (f) Without limiting any description of the foregoing, all right, title and interest of Debtor in and to all rights, rents, revenues, income, issues, benefits, leases, contract rights, general intangibles, chattel paper, money, instruments, documents, files, computerized or other records, books, ledger sheets, executory contract rights, rights as an unpaid vendor (including the right to stop goods in transit, to replevy, and to reclaim), tenements, hereditaments, and appurtenances now or hereafter owned by the Debtor and appertaining to, generated from, arising out of, or belonging to any of the foregoing, and all products and proceeds thereof. Section 1.02. After-Acquired Collateral. All property acquired by the Debtor after the date of this Agreement that by the terms hereof is required or intended to be subject to the security interest granted or renewed by this Agreement will, immediately upon the acquisition thereof and without further mortgage, conveyance, or assignment, become subject to the security interest created by this Agreement as fully as though now owned by the Debtor and specifically described herein. Nevertheless, the Debtor will do all such further acts and will execute, acknowledge, and deliver all such further conveyances, mortgages, financing statements, and assurances as the Secured Party reasonably requires for accomplishing the purposes of this Agreement. Section 1.03. Sale of Collateral. The inclusion of proceeds as part of the Collateral does not authorize the Debtor to sell any of the Collateral except to the extent permitted by the Credit Agreement without the Secured Party's prior written consent, except as provided in Section 3.04 of this Security Agreement. Section 1.04. Obligations. The Collateral shall secure the following ("Obligations"): (a) the obligations and indebtedness of Debtor to Secured Party evidenced by the Notes; (b) the obligations and indebtedness of Debtor to Secured Party under the Credit Agreement and the Loan Documents, as such term is defined in the Credit Agreement; (c) any and all indebtedness and liabilities whatsoever of Debtor to Secured Party whether direct or indirect, absolute or contingent, due or to become due, and whether now existing or hereafter arising and however evidenced or acquired, and whether joint or several; (d) all costs and expenses, including, without limitation, all attorneys' fees and legal expenses, incurred by Secured Party to preserve and maintain the Collateral, collect the obligations herein described, and enforce this Agreement; and (e) all extensions, renewals, and modifications of any of the foregoing. ARTICLE II REPRESENTATIONS AND WARRANTIES To induce Secured Party to enter into this Agreement and the Credit Agreement, Debtor represents and warrants to Secured Party that: Section 2.01. Title. Except for the security interest granted herein and Permitted Encumbrances, as defined in the Credit Agreement, Debtor owns, and with respect to Collateral acquired after the date hereof, Debtor will own, the Collateral free and clear of any lien, security interest, or other encumbrance. Section 2.02. Financing Statements. No financing statement, security agreement, or other lien instrument covering all or any part of the Collateral is on file in any public office, except as may have been filed in favor of Secured Party. Section 2.03. Organization and Authority. Debtor is a corporation duly formed and validly existing under the laws of the state of Oklahoma. Debtor has the power and authority to execute, deliver, and perform this Agreement, and the execution, delivery, and performance of this Agreement by Debtor have been authorized by all necessary action on the part of Debtor and do not and will not violate any law, rule or regulation or the charter documents of Debtor and do not and will not conflict with, result in a breach of, or constitute a default under the provisions of any indenture, mortgage, deed of trust, security agreement, or other instrument or agreement pursuant to which Debtor or any of its property is bound. Section 2.04. Principal Place of Business. The principal place of business of Debtor, and the office where Debtor keeps its books and records, is located at the address of Debtor shown at the beginning of this Agreement. Section 2.05. Location of Collateral. The Collateral of Debtor is located either at the address of Debtor shown at the beginning of this Agreement or on the Property described on Exhibit "A" attached hereto. ARTICLE III COVENANTS Debtor covenants and agrees with Secured Party that until the Obligations are paid and performed in full: Section 3.01. Maintenance. Debtor shall maintain the Collateral in good operating condition and repair and shall not permit any waste or destruction of the Collateral or any part thereof, unless the failure to do so, in any one instance or in the aggregate, would not have a Material Adverse Effect (as defined in the Credit Agreement). Debtor shall not use or permit the Collateral to be used in violation of any law or inconsistently with the terms of any policy of insurance. Debtor shall not use or permit the Collateral to be used in any manner or for any purpose that would materially impair the value of the Collateral or expose the Collateral to unusual risk. Section 3.02. Encumbrances. Debtor shall not create, permit, or suffer to exist, and shall defend the Collateral against, any lien, security interest, or other encumbrance on the Collateral except the security interest of Secured Party hereunder and Permitted Encumbrances, as defined in the Credit Agreement, and shall defend Debtor's rights in the Collateral and Secured Party's security interest in the Collateral against the claims of all persons and entities. Section 3.03. Rights to Collateral. Debtor shall do nothing to impair the rights of Secured Party in the Collateral. Section 3.04. Disposition of Collateral. Except as may be expressly provided for in the Credit Agreement, Debtor shall not sell, lease, or otherwise dispose of the Collateral or any part thereof without the prior written consent of Secured Party. Section 3.05. Further Assurances. At any time and from time to time, upon the request of Secured Party, and at the sole expense of Debtor, Debtor shall promptly execute and deliver all such further instruments and documents and take such further action as Secured Party may deem necessary or desirable to preserve and perfect its security interest in the Collateral and carry out the provisions and purposes of this Agreement, including, without limitation, the execution and filing of such financing statements as Secured Party may require. A carbon, photographic, or other reproduction of this Agreement or of any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement and may be filed as a financing statement. Section 3.06. Risk of Loss; Insurance. Debtor shall be responsible for any loss of or damage to the Collateral. Debtor shall maintain, with financially sound and reputable companies, insurance policies (i) insuring the Collateral against loss by fire, explosion, theft, and such other risks and casualties as are customarily insured against by companies engaged in the same or a similar business, and (ii) insuring Debtor and Secured Party against liability for personal injury and property damage relating to the Collateral, such policies to be in such amounts and covering such risks as are customarily insured against by companies engaged in the same or a similar business, with losses payable to Debtor and Secured Party as their respective interests may appear. All insurance with respect to the Collateral shall provide that no cancellation, reduction in amount, or change in coverage thereof shall be effective unless Secured Party has received thirty (30) days prior written notice thereof. Debtor shall deliver to Secured Party copies of all insurance policies covering the Collateral or any part thereof. Section 3.07. Inspection Rights. Debtor shall permit Secured Party and its representatives to examine or inspect the Collateral wherever located and to examine, inspect, and copy Debtor's books and records at any reasonable time and as often as Secured Party may desire during normal business hours. Section 3.08. Notification. Debtor shall promptly notify Secured Party of (i) any lien, security interest, encumbrance, or claim made or threatened against the Collateral, other than Permitted Encumbrances as defined in the Credit Agreement, and (ii) any material change in the Collateral, including, without limitation, any material damage to or loss of the Collateral. Section 3.09. Taxes. Debtor agrees to pay or discharge prior to delinquency all taxes, assessments, levies, and other governmental charges imposed on it or its property, except Debtor shall not be required to pay or discharge any tax, assessment, levy, or other governmental charge if (i) the amount or validity thereof is being contested by Debtor in good faith by appropriate proceedings diligently pursued, (ii) such proceedings do not involve any risk of sale, forfeiture, or loss of the Collateral or any interest therein, and (iii) adequate reserves therefor have been established in conformity with generally accepted accounting principles. Section 3.10. Books and Records; Information. Debtor shall keep accurate and complete books and records of the Collateral. Debtor shall from time to time at the request of Secured Party deliver to Secured Party such information regarding the Collateral and Debtor as Secured Party may request, including, without limitation, lists and descriptions of the Collateral and evidence of the identity and existence of the Collateral. Debtor shall mark its books and records to reflect the security interest of Secured Party under this Agreement. Section 3.11. Location of Collateral. Debtor shall not move any of the Collateral from the location specified herein without the prior written consent of Secured Party except as may be necessary in the normal course of operations of the Property and with proper documentation of disposition of Collateral. Section 3.12. Obligations. Debtor shall duly and punctually pay and perform the Obligations. Section 3.13. Organization Changes. Debtor shall not change its name, identity, or corporate structure or management in any manner that might make any financing statement filed in connection with this Agreement seriously misleading unless Debtor shall have given Secured Party thirty (30) days prior written notice thereof and shall have taken all action deemed necessary or desirable by Secured Party to make each financing statement not seriously misleading. Debtor shall not change its principal place of business or the place where it keeps its books and records unless it shall have given Secured Party thirty (30) days prior written notice thereof and shall have taken all action deemed necessary or desirable by Secured Party to cause its security interest in the Collateral to be perfected with the priority required by this Agreement. ARTICLE IV RIGHTS OF SECURED PARTY Section 4.01. Power of Attorney. Debtor hereby irrevocably constitutes and appoints Secured Party and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the name of Debtor or in its own name, to take, any and all action and to execute any and all documents and instruments which Secured Party at any time and from time to time deems necessary or desirable to accomplish the purposes of this Agreement. All third parties may conclusively rely on any action taken by Secured Party purporting to act in its capacity as attorney-in-fact for Debtor. This power of attorney is a power coupled with an interest and shall be irrevocable. Secured Party shall be under no duty to exercise or withhold the exercise of any of the rights, powers, privileges, and options expressly or implicitly granted to Secured Party in this Agreement, and shall not be liable for any failure to do so or any delay in doing so. Secured Party shall not be liable for any act or omission or for any error of judgment or any mistake of fact or law in its individual capacity or in its capacity as attorney-in-fact except acts or omissions resulting from its gross negligence and willful misconduct. This power of attorney is conferred on Secured Party solely for the purposes of enabling Secured Party to act on behalf of Debtor in order to perform any act that Debtor is obligated to perform hereunder that Debtor has failed or refused to perform, or for any other purpose which Secured Party deems necessary to act promptly to protect or preserve its security interest in the Collateral. Secured Party shall not be responsible for any decline in the value of the Collateral and shall not be required to take any steps to preserve rights against prior parties or to protect, preserve, or maintain any security interest or lien given to secure the Collateral. Section 4.02. Performance by Secured Party of Debtor's Obligations. If Debtor fails to perform or comply with any of its agreements contained herein, Secured Party itself may, at its sole discretion, cause or attempt to cause performance or compliance with such agreement and the expenses of Secured Party, together with interest thereon at the maximum nonusurious per annum rate permitted by applicable law, shall be payable by Debtor to Secured Party on demand and shall constitute Obligations secured by this Agreement. Notwithstanding the foregoing, it is expressly agreed that Secured Party shall not have any liability or responsibility for the performance of any obligation of Debtor under this Agreement. Section 4.03. Setoff; Property Held by Secured Party. Subject to the provisions of the Credit Agreement, which shall control over any contrary provisions in this Section, Secured Party shall have the right to set off and apply against the Obligations, at any time and without notice to Debtor, any and all deposits (general or special, time or demand, provisional or final) or other sums at any time credited by or owing from Secured Party to Debtor. As additional security for the Obligations, Debtor hereby grants Secured Party a security interest in all money, instruments, and other property of Debtor now or hereafter held by Secured Party, including without limitation, property held in safekeeping. In addition to Secured Party's right of setoff and as further security for the Obligations, Debtor hereby grants Secured Party a security interest in all deposits (general or special, time or demand, provisional or final) of Debtor now or hereafter on deposit with or held by Secured Party and all other sums at any time credited by or owing from Secured Party to Debtor. The rights and remedies of Secured Party hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Secured Party may have. Section 4.04. Assignment by Secured Party. Secured Party may from time to time assign the Obligations and any portion thereof and the Collateral and any portion thereof, and the assignee shall be entitled to all of the rights and remedies of Secured Party under this Agreement in relation thereto. Section 4.05 Financing Statement. Secured Party shall be entitled at any time to file, and Debtor hereby authorizes Secured Party to file, a Uniform Commercial Code Financing Statement or this Security Agreement (or any amendment to either such instrument) or a carbon, photographic, or other reproduction of this Security Agreement (or amendment thereto), as a financing statement (or amendment thereto), in any form or medium provided by the UCC, with or without Debtor's signature, but the failure of Secured Party to do so shall not impair the validity or enforceability of this Security Agreement. ARTICLE V DEFAULT Section 5.01. Default and Remedies. Upon the occurrence of an Event of Default (as such term is defined in the Credit Agreement), Secured Party shall have the following rights and remedies: (a) Secured Party may declare the Obligations or any part thereof immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Debtor; provided, however, that upon the occurrence of an Event of Default under Section 7.01 of the Credit Agreement, the Obligations shall become immediately due and payable without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Debtor. (b) In addition to all other rights and remedies granted to Secured Party in this Agreement and in any other instrument or agreement securing, evidencing, or relating to the Obligations or any part thereof, Secured Party shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as adopted by the State of Texas. Without limiting the generality of the foregoing, Secured Party may (i) without demand or notice to Debtor, collect, receive, or take possession of the Collateral or any part thereof and for that purpose Secured Party may enter upon any premises on which the Collateral is located and remove the Collateral therefrom or render it inoperable, and/or (ii) sell, lease, or otherwise dispose of the Collateral, or any part thereof, in one or more parcels at public or private sale or sales, at Secured Party's offices or elsewhere, for cash, on credit, or for future delivery. Upon the request of Secured Party, Debtor shall assemble the Collateral and make it available to Secured Party at any place designated by Secured Party that is reasonably convenient to Debtor and Secured Party. Debtor agrees that Secured Party shall not be obligated to give more than ten (10) days written notice of the time and place of any public sale or of the time after which any private sale may take place and that such notice shall constitute reasonable notice of such matters. Debtor shall be liable for all expenses of retaking, holding, preparing for sale, or the like, and all attorneys' fees, legal expenses, and all other costs and expenses incurred by Secured Party in connection with the collection of the Obligations and the enforcement of Secured Party's rights under this Agreement. Secured Party may apply the Collateral against the Obligations in such order and manner as Secured Party may elect in its sole discretion. Debtor waives all rights of marshalling in respect of the Collateral. (c) Secured Party may cause any or all of the Collateral held by it to be transferred into the name of Secured Party or the name or names of Secured Party's nominee or nominees. ARTICLE VI MISCELLANEOUS Section 6.01. Expenses; Indemnification. Debtor agrees to pay on demand all costs and expenses incurred by Secured Party in connection with the preparation, negotiation, and execution of this Agreement subject to any limitations in the Credit Agreement and any and all amendments, modifications, and supplements hereto. Debtor agrees to pay and to hold Secured Party harmless from and against all fees and all excise, sales, stamp, and other taxes payable in connection with this Agreement or the transactions contemplated hereby. Debtor hereby indemnifies and holds Secured Party harmless from and against any and all present and future claims, actions, liabilities, and damages arising from or relating to this Agreement, the Obligations, or the Collateral, and all costs and expenses (including attorneys' fees) incurred by Secured Party in respect thereof. Section 6.02. No Waiver; Cumulative Remedies. No failure on the part of Secured Party to exercise and no delay in exercising, and no course of dealing with respect to, 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 for in this Agreement are cumulative and not exclusive of any rights and remedies provided by law. Section 6.03. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of Debtor and Secured Party and their respective successors, and assigns, except that Debtor may not assign any of its rights or obligations under this Agreement without the prior written consent of Secured Party. Section 6.04. Notices. All notices and other communications provided for in this Agreement shall be given as provided for in the Credit Agreement. Section 6.05. APPLICABLE LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. ANY ACTION OR PROCEEDING AGAINST DEBTOR UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART THEREOF MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN HARRIS COUNTY, TEXAS. DEBTOR HEREBY IRREVOCABLY (I) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (II) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. DEBTOR AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED HEREIN. NOTHING IN THIS AGREEMENT OR ANY OTHER INSTRUMENT OR AGREEMENT SECURING, EVIDENCING, OR RELATING TO THE OBLIGATIONS OR ANY PART THEREOF SHALL AFFECT THE RIGHT OF SECURED PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF SECURED PARTY TO BRING ANY ACTION OR PROCEEDING AGAINST DEBTOR OR WITH RESPECT TO ANY OF THE COLLATERAL IN ANY STATE OR FEDERAL COURT IN ANY OTHER JURISDICTION. Section 6.06. Headings. The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement. Section 6.07. Survival of Representations and Warranties. All representations and warranties made in this Agreement or in any certificate delivered pursuant hereto shall survive the execution and delivery of this Agreement, and no investigation by Secured Party shall affect the representations and warranties or the right of Secured Party to rely upon them. Section 6.08. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 6.09. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Section 6.10. Construction. Debtor and Secured Party acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by Debtor and Secured Party. Section 6.11. Obligations Absolute. The obligations of Debtor under this Agreement shall be absolute and unconditional and shall not be released, discharged, reduced, or in any way impaired by any circumstance whatsoever, including, without limitation, any amendment, modification, extension, or renewal of this Agreement, the Obligations, the Credit Agreement, or any document or instrument evidencing, securing, or otherwise relating to the Obligations, this Agreement, the Credit Agreement, or any release or subordination of collateral, or any waiver, consent, extension, indulgence, compromise, settlement, or other action or inaction in respect of this Agreement, the Obligations, the Credit Agreement, or any document or instrument evidencing, securing, or otherwise relating to the Obligations, or any exercise or failure to exercise any right, remedy, power, or privilege in respect of this Agreement, the Credit Agreement, or the Obligations. Section 6.12. Definitions. Capitalized terms used and not defined in this Security Agreement have the meanings specified in the Credit Agreement. Section 6.13. Benefit of Banks. Debtor agrees and acknowledges that Secured Party executes this document as a Bank and as the Collateral Agent for the other Banks under that Credit Agreement and any and all rights, benefits and entitlements under this Agreement in favor of Secured Party are for the benefit of all Banks under the Credit Agreement. [Signature Page Follows] IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first written above. DEBTOR: CONTINENTAL RESOURCES, INC. By: ROGER CLEMENT Roger Clement, Sr. Vice President and Chief Financial Officer SECURED PARTY: GUARANTY BANK, FSB, as Collateral Agent By: RICHARD MENCHACA Richard Menchaca Vice President EXHIBIT "A" PROPERTY DESCRIPTION EX-10.4 6 criex104form8k4112002.txt STOCK PLEDGE AGREEMENT (Continental Resources, Inc.) This STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of March 28, 2002, is entered into between Continental Resources, Inc., an Oklahoma corporation ("Pledgor") and Guaranty Bank, FSB, a federal savings bank, as Collateral Agent for the Banks under the Credit Agreement (as hereinafter defined) ("Secured Party"), with reference to the following: WHEREAS, Pledgor beneficially owns one thousand (1,000) shares of common stock, par value $0.50 per share, of Continental Gas, Inc., an Oklahoma corporation ("CGI"), three thousand (3,000) shares of common stock, par value $1.00 per share, of Continental Resources of Illinois, Inc., an Oklahoma corporation ("CRI"), and one thousand (1,000) shares of common stock, par value $1.00 per share, of Continental Crude Co., an Oklahoma corporation ("CCC") as more fully described on Exhibit A hereto, which shares (collectively, the "Pledged Shares") constitute one hundred percent (100%) of the fully diluted equity voting stock of each CGI, CRI and CCC; WHEREAS, the term "Credit Agreement" shall mean that certain Fourth Amended and Restated Credit Agreement dated as of March 28, 2002 by and among Pledgor, as "Borrower", Secured Party as Collateral/Documentation Agent, Co-Arranger and a Bank, Union Bank of California, N.A., as Administrative Agent, LC Issuer, Lead Arranger, Fronting Bank and a Bank, Fortis Capital Corp., as Syndication Agent, Co-Arranger and a Bank, and the Banks and financial institutions from time to time parties to the Credit Agreement; WHEREAS, to induce Secured Party to grant the extensions of credit and other financial accommodations provided to Borrower pursuant to the Credit Agreement, Pledgor desires to pledge, grant, transfer, and assign to Secured Party a security interest in the Collateral (as hereinafter defined) as security for the Obligations (as hereinafter defined); and WHEREAS, Pledgor will benefit directly and indirectly from extensions of credit as a Borrower under the Credit Agreement. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations, and warranties set forth herein and for other good and valuable consideration, the parties hereto agree as follows: 1. Definitions and Construction. (a) Definitions. As used in this Agreement: "Agreement" shall mean this Stock Pledge Agreement. "Bankruptcy Code" shall mean The Bankruptcy Reform Act of 1978 (11 U.S.C. Sections 10l-1330), as amended or supplemented from time to time, and any successor statute, and all of the rules issued or promulgated in connection therewith. "Borrower" shall have the meaning ascribed thereto in the second recital of this Agreement. "Business Day" shall have the meaning ascribed thereto in the Credit Agreement. "CCC" shall have the meaning ascribed thereto in the first recital to this Agreement. "CGI" shall have the meaning ascribed thereto in the first recital to this Agreement. "Collateral" shall mean the Pledged Shares, the Future Rights, and the Proceeds, collectively. "Credit Agreement" shall have the meaning ascribed thereto in the second recital of this Agreement. "CRI" shall have the meaning ascribed thereto in the first recital to this Agreement. "Event of Default" shall have the meaning ascribed thereto in the Credit Agreement. "Future Rights" shall mean Borrower's interest in: (a) all shares of, all securities convertible or exchangeable into, and all warrants, options or other rights to purchase shares of stock of (i) CCC, CGI or CRI (other than the Pledged Shares), and (ii) any Person which, after the date of this Agreement, becomes a direct Subsidiary of Borrower and is incorporated under the laws of any state of the United States from time to time held or acquired by Borrower in any manner; and (b) the certificates or instruments representing such additional shares, convertible or exchangeable securities, warrants, and other rights and all dividends, cash, options, warrants, rights, instruments, and other property or proceeds from time to time received, receivable, or otherwise distributed in respect of or in exchange for any or all of such shares. "Holder" and "Holders" shall have the meanings ascribed thereto in Section 3 of this Agreement. "Lien" shall mean any lien, mortgage, pledge, assignment (including any assignment of rights to receive payments of money), security interest, charge, or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, or any agreement to give any security interest). "Loan Documents" shall have the meaning ascribed thereto in the Credit Agreement. "Obligations" shall mean the "Obligations" as that term is defined in the Credit Agreement. "Person" shall have the meaning ascribed thereto in the Credit Agreement. "Pledgor" shall have the meaning ascribed thereto in the preamble to this Agreement. "Pledged Shares" shall have the meaning ascribed thereto in the first recital of this Agreement. "Proceeds" shall mean all proceeds (including proceeds of proceeds) of the Pledged Shares and Future Rights including all: (a) rights, benefits, distributions, premiums, profits, dividends, interest, cash, instruments, documents of title, accounts, contract rights, inventory, equipment, general intangibles, deposit accounts, chattel paper, and other property from time to time received, receivable, or otherwise distributed in respect of or in exchange for, or as a replacement of or a substitution for, any of the Pledged Shares, Future Rights, or proceeds thereof (including any cash, stock, or other securities or instruments) issued after any recapitalization, readjustment, reclassification, merger or consolidation with respect to CCC, CGI or CRI; (b) proceeds of any insurance, indemnity, warranty, or guaranty (including guaranties of delivery) payable from time to time with respect to any of the Pledged Shares, Future Rights, or proceeds thereof; (c) payments (in any form whatsoever) made or due and payable to Pledgor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Pledged Shares, Future Rights, or proceeds thereof; and (d) other amounts from time to time paid or payable under or in connection with any of the Pledged Shares, Future Rights, or proceeds thereof. "Secured Party" shall have the meaning ascribed thereto in the preamble to this Agreement. "Securities Act" shall have the meaning ascribed thereto in Section 9(b) of this Agreement. "Subsidiary" shall have the meaning ascribed thereto in the Credit Agreement. All initially capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Credit Agreement. (b) Construction. (i) Unless the context of this Agreement clearly requires otherwise, references to the plural includes the singular and to the singular include the plural, the part include the whole, the term "including" is not limiting, and the term "or" has, except where otherwise indicated, the inclusive meaning represented by the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and other similar terms in this Agreement refer to this Agreement as a whole and not exclusively to any particular provision of this Agreement. Article, section, subsection, exhibit, and schedule references are to this Agreement unless otherwise specified. All of the exhibits or schedules attached to this Agreement shall be deemed incorporated herein by reference. Any reference to any of the following documents includes any and all alterations, amendments, extensions, modifications, renewals, or supplements thereto or thereof, as applicable: this Agreement, the Credit Agreement, and any of the other Loan Documents. (ii) Neither this Agreement nor any uncertainty or ambiguity herein shall be construed or resolved against Secured Party or Pledgor, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by both of the parties and their respective counsel and shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties hereto. (iii) In the event of any direct conflict between the express terms and provisions of this Agreement and of the Credit Agreement, the terms and provisions of the Credit Agreement shall control. 2. Pledge. As security for the prompt payment and performance of the Obligations in full when due, whether at stated maturity, by acceleration or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code), Pledgor hereby pledges, grants, transfers, and assigns to Secured Party a security interest in all of Pledgor's right, title, and interest in and to the Collateral. 3. Delivery and Registration of Collateral. (a) All certificates or instruments representing or evidencing the Collateral shall be promptly delivered by Pledgor to Secured Party or Secured Party's designee pursuant hereto at a location designated by Secured Party and shall be held by or on behalf of Secured Party pursuant hereto, and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to Secured Party. (b) After the occurrence and during the continuance of an Event of Default, Secured Party shall have the right, at any time in its discretion and without notice to Pledgor, to transfer to or to register on the books of CCC, CGI and/or CRI, as the case may be (or of any other Person maintaining records with respect to the Collateral) in the name of Secured Party or any of its nominees any or all of the Collateral. In addition, Secured Party shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations. (c) If, at any time and from time to time, any Collateral (including any certificate or instrument representing or evidencing any Collateral) is in the possession of a Person other than Secured Party or Pledgor (a "Holder"), then Pledgor shall immediately, at Secured Party's option, either cause such Collateral to be delivered into Secured Party's possession, or execute and deliver to such Holder a written notification/ instruction, and take all other steps necessary to perfect the security interest of Secured Party in such Collateral, including obtaining from such Holder a written acknowledgment that such Holder holds such Collateral for Secured Party, all pursuant to the applicable laws governing the perfection of Secured Party's security interest in the Collateral in the possession of such Holder. Each such notification/instruction and acknowledgment shall be in form and substance satisfactory to Secured Party. (d) Subject to the provisions in Section 4 hereof, any and all Collateral (including dividends, interest, and other cash distributions) at any time received or held by Pledgor shall be so received or held in trust for Secured Party, shall be segregated from other funds and property of Pledgor and shall be forthwith delivered to Secured Party in the same form as so received or held, with any necessary endorsements. (e) If at any time and from time to time any Collateral consists of an uncertificated security or a security in book entry form, then Pledgor shall immediately cause such Collateral to be registered or entered, as the case may be, in the name of Secured Party, or otherwise cause Secured Party's security interest thereon to be perfected in accordance with applicable law. 4. Voting Rights and Dividends. (a) So long as no Event of Default shall have occurred and be continuing, Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not inconsistent with the terms of the Credit Agreement and shall be entitled to receive and retain any cash dividends or distributions paid in respect of the Collateral as may be permitted under the Credit Agreement. (b) Upon the occurrence and during the continuance of an Event of Default, all rights of Pledgor to exercise the voting and other consensual rights or receive and retain cash dividends or distributions which it would otherwise be entitled to exercise or receive and retain, as applicable pursuant to Section 4(a) shall cease, and all such rights shall thereupon become vested in Secured Party, who shall thereupon have the sole right to exercise such voting or other consensual rights and to receive and retain such cash dividends and distributions. Pledgor shall execute and deliver (or cause to be executed and delivered) to Secured Party all such proxies and other instruments as Secured Party may request for the purpose of enabling Secured Party to exercise the voting and other rights which it is entitled to exercise pursuant to this subsection (b). 5. Representations and Warranties. Pledgor represents, warrants, and covenants as follows: (a) Pledgor has taken all steps it deems necessary or appropriate to be informed on a continuing basis of changes or potential changes affecting the Collateral (including rights of conversion and exchange, rights to subscribe, payment of dividends, reorganizations or recapitalization, tender offers and voting rights), and Pledgor agrees that Secured Party shall have no responsibility or liability for informing Pledgor of any such changes or potential changes or for taking any action or omitting to take any action with respect thereto; (b) All information herein or hereafter supplied to Secured Party by or on behalf of Pledgor in writing with respect to the Collateral is, or in the case of information hereafter supplied will be, accurate and complete in all material respects; (c) Except as pledged, granted, transferred and assigned hereunder, Pledgor is and will be the sole legal and beneficial owner of the Collateral (including the Pledged Shares and all other Collateral acquired by Pledgor after the date hereof) free and clear of any adverse claim, Lien, or other right, title, or interest of any party; (d) This Agreement, and the delivery to Secured Party of the Pledged Shares representing Collateral (or the delivery to all Holders of the Pledged Shares representing Collateral of the notification/instruction referred to in Section 3 of this Agreement), creates a valid, perfected, and first priority security interest in one hundred percent (100%) of the Pledged Shares in favor of Secured Party securing payment of the Obligations, and all actions necessary to achieve such perfection have been duly taken; (e) Schedule A to this Agreement is true and correct and complete in all material respects; without limiting the generality of the foregoing: (i) all the Pledged Shares are in certificated form, and, except to the extent registered in the name of Secured Party or its nominee pursuant to the provisions of this Agreement, are registered in the name of Pledgor; and (ii) the Pledged Shares constitute at least the percentage of all the fully diluted issued and outstanding shares of stock of CCC, CGI and CRI as set forth in Schedule A to this Agreement; (f) There are no presently existing Future Rights or Proceeds owned by Pledgor; (g) The Pledged Shares have been duly authorized and validly issued and are fully paid and nonassessable; and (h) Neither the pledge of the Collateral pursuant to this Agreement nor the extensions of credit represented by the Obligations violates Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 6. Further Assurances. (a) Pledgor agrees that from time to time, at the expense of Pledgor, Pledgor will promptly execute and deliver all further instruments and documents, and take all further action that may be necessary or desirable, or that Secured Party may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, Pledgor will: (i) at the request of Secured Party, mark conspicuously each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to Secured Party, indicating that such Collateral is subject to the security interest granted hereby; (ii) execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as Secured Party may request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (iii) as more fully set forth in the Credit Agreement, allow inspection of the Collateral by Secured Party or Persons designated by Secured Party; and (iv) appear in and defend any action or proceeding that may affect Pledgor's title to or Secured Party's security interest in the Collateral. (b) Pledgor hereby authorizes Secured Party to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of Pledgor where permitted by law and in any form or medium provided by law. A carbon, photographic, or other reproduction of this Agreement, and amendment thereto or any financing statement (whether original or amendment) covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. (c) Pledgor will furnish to Secured Party, upon the request of Secured Party: (1) a certificate executed by an authorized officer of Pledgor, and dated as of the date of delivery to Secured Party, itemizing in such detail as Secured Party may request, the Collateral which, as of the date of such certificate, has been delivered to Secured Party by Pledgor pursuant to the provisions of this Agreement; and (ii) such statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may request. 7. Covenants of Pledgor. Pledgor shall: (a) Perform each and every covenant hereunder and in the Credit Agreement; (b) At all times keep at least one complete set of its records concerning substantially all of the Collateral at its chief executive office at 302 N. Independence, Suite 300, Enid, Oklahoma 73701, and not change the location of its chief executive office or such records without giving Secured Party at least thirty (30) days prior written notice thereof; (c) To the extent it may lawfully do so, use its best efforts to prevent CCC, CGI and CRI from issuing Future Rights or Proceeds; and (d) Upon receipt by Pledgor of any material notice, report, or other communication from CCC, CGI or CRI or any Holder relating to all or any part of the Collateral, deliver such notice, report or other communication to Secured Party as soon as possible, but in no event later than five (5) Business Days following the receipt thereof by Pledgor. 8. Secured Party as Pledgor's Attorney-in-Fact. (a) Pledgor hereby irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full authority in the place and stead of Pledgor and in the name of Pledgor, Secured Party or otherwise, from time to time at Secured Party's discretion, to take any action and to execute any instrument that Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including: (i) after the occurrence and during the continuance of an Event of Default, to receive, endorse, and collect all instruments made payable to Pledgor representing any dividend, interest payment or other distribution in respect of the Collateral or any part thereof to the extent permitted hereunder and to give full discharge for the same and to execute and file governmental notifications and reporting forms; (ii) to issue any notifications/instructions Secured Party deems necessary pursuant to Section 3 of this Agreement; or (iii) after the occurrence and during the continuance of an Event of Default, to arrange for the transfer of the Collateral on the books of Pledgor or any other Person to the name of Secured Party or to the name of Secured Party's nominee. (b) In addition to the designation of Secured Party as Pledgor's attorney-in-fact in subsection (a), Pledgor hereby irrevocably appoints Secured Party as Pledgor's agent and attorney-in-fact to make, execute and deliver any and all documents and writings which may be necessary or appropriate for approval of, or be required by, any regulatory authority located in any city, county, state or country where Pledgor or Borrower engages in business, in order to transfer or to more effectively transfer any of the Pledged Shares or otherwise enforce Secured Party's rights hereunder. 9. Remedies upon Default. Upon the occurrence and during the continuance of an Event of Default: (a) Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Texas Business and Commerce Code (the "Code") (irrespective of whether the Code applies to the affected items of Collateral), and Secured Party may also without notice (except as specified below) sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of Secured Party's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as Secured Party may deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Collateral. To the maximum extent permitted by applicable law, Secured Party may be the purchaser of any or all of the Collateral at any such sale and shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply all or any part of the Obligations as a credit on account of the purchase price of any Collateral payable at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay, or appraisal that it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) calendar days notice to Pledgor of the time and place of any public sale or the time after which a private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the maximum extent permitted by law, Pledgor hereby waives any claims against Secured Party arising because the price at which any Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale, even if Secured Party accepts the first offer received and does not offer such Collateral to more than one offeree. (b) Pledgor hereby acknowledges that the sale by Secured Party of any Collateral pursuant to the terms hereof in compliance with the Securities Act of 1933 as now in effect or as hereafter amended, or any similar statute hereafter adopted with similar purpose or effect (the "Securities Act"), as well as applicable "Blue Sky" or other state securities laws may require strict limitations as to the manner in which Secured Party or any subsequent transferee of the Collateral may dispose thereof. Pledgor acknowledges and agrees that in order to protect Secured Party's interest it may be necessary to sell the Collateral at a price less than the maximum price attainable if a sale were delayed or were made in another manner, such as a public offering under the Securities Act. Pledgor has no objection to sale in such a manner and agrees that Secured Party shall have no obligation to obtain the maximum possible price for the Collateral. Without limiting the generality of the foregoing, Pledgor agrees that, upon the occurrence and during the continuation of an Event of Default, Secured Party may, subject to applicable law, from time to time attempt to sell all or any part of the Collateral by a private placement, restricting the bidders and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution. In so doing, Secured Party may solicit offers to buy the Collateral or any part thereof for cash, from a limited number of investors deemed by Secured Party to be institutional investors or other responsible parties who might be interested in purchasing the Collateral. If Secured Party shall solicit such offers, then the acceptance by Secured Party of one of the offers shall be deemed to be a commercially reasonable method of disposition of the Collateral. (c) If Secured Party shall determine to exercise its right to sell all or any portion of the Collateral pursuant to this Section, Pledgor agrees that upon request of Secured Party, Pledgor will, at its own expense: (i) use its best efforts to execute and deliver, and cause CCC, CGI and CRI and the directors and officers thereof to execute and deliver, all such instruments and documents, and to do or cause to be done all such other acts and things, as may be necessary or, in the opinion of Secured Party, advisable to register such Collateral under the provisions of the Securities Act, and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectuses which, in the opinion of Secured Party, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto; (ii) use its best efforts to qualify the Collateral under the state securities laws or "Blue Sky" laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by Secured Party; (iii) make available to its security holders, as soon as practicable, an earnings statement which will satisfy the provisions of Section II (a) of the Securities Act; (iv) execute and deliver to any person, entity or governmental authority as Secured Party may choose, any and all documents and writings which may be necessary or appropriate for approval, or be required by, any regulatory authority located in any city, county, state or country where Pledgor engages in business, in order to transfer or to more effectively transfer the Pledged Shares or otherwise enforce Secured Party's rights hereunder; and (v) do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law. Pledgor acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of this Section and that such failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in this Section may be specifically enforced. 10. Secured Party: Duties: Standard of Care. The powers conferred on Secured Party hereunder are solely to protect its interests in the Collateral and shall not impose on it any duty to exercise such powers. 11. Choice of Law; Consent to Jurisdiction. (a) THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS. (b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF HARRIS, STATE OF TEXAS OR, AT THE SOLE OPTION OF SECURED PARTY, IN ANY OTHER COURT IN WHICH SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. PLEDGOR WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11. 12. Amendments: etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by Secured Party, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of Secured Party to exercise, and no delay in exercising any right under this Agreement, the Credit Agreement, or otherwise with respect to any of the Obligations, shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement, the Credit Agreement, or otherwise with respect to any of the Obligations preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided in this Agreement or otherwise with respect to any of the Obligations are cumulative and not exclusive of any remedies provided by law. 13. Notices. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be given in accordance with the terms of Section 9.03 of the Credit Agreement. 14. Continuing Security Interest. This Agreement shall create a continuing security interest in the Collateral and shall: (i) remain in full force and effect until the indefeasible payment in full of the Obligations, and the full and final termination of any commitment to extend any financial accommodations under the Credit Agreement; (ii) be binding upon Pledgor, its successors and assigns; and (iii) inure to the benefit of Secured Party and its successors, transferees, and assigns. Upon the indefeasible payment in full of the Obligations, and the full and final termination of any commitment to extend any financial accommodations under the Credit Agreement, the security interests granted hereby shall automatically terminate and all rights to the Collateral shall revert to Pledgor. Upon any such termination, Secured Party will, at Pledgor's expense, execute and deliver to Pledgor such documents as Pledgor shall reasonably request to evidence such termination and will return to Pledgor all certificates or instruments representing or evidencing the Collateral, then in the Secured Party's possession. Such documents shall be prepared by Pledgor and shall be in form and substance satisfactory to Secured Party. 15. Security Interest Absolute. To the maximum extent permitted by law, all rights of Secured Party and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any of the Obligations or any other agreement or instrument relating thereto, including the Credit Agreement or any of the other Loan Documents; or (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement or any of the other Loan Documents, or any other agreement or instrument relating thereto; or (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty for all or any of the Obligations. To the maximum extent permitted by law, Pledgor hereby waives any right to require Secured Party to pursue any other remedy in Secured Party's power whatsoever. 16. Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement or be given any substantive effect. 17. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 18. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same Agreement. 19. Waiver of Marshaling. Pledgor and Secured Party acknowledge and agree that in exercising any rights under or with respect to the Collateral: (i) Secured Party is under no obligation to marshal any collateral pledged to it; (ii) may, in its absolute discretion, realize upon such Collateral in any order and in any manner it so elects; and (iii) may, in its absolute discretion, apply the proceeds of any or all of such Collateral to the obligations secured by the Collateral in any order and in any manner it so elects. 20. Benefit of All Banks. Pledgor agrees and acknowledges that Secured Party executes this document as a Bank and as the Collateral Agent for the other Banks under that Credit Agreement and any and all rights, benefits and entitlements under this Agreement in favor of Secured Party are for the benefit of all Banks under the Credit Agreement. [Signature Page Follows] IN WITNESS WHEREOF, Pledgor and Secured Party have caused this Agreement to be duly executed and delivered by their officers thereunto duly authorized as of the date first above written. BORROWER: CONTINENTAL RESOURCES, INC., an Oklahoma corporation By: ROGER CLEMENT Roger Clement, Sr. Vice President and Chief Financial Officer SECURED PARTY: GUARANTY BANK, FSB, a federal savings bank, as Collateral Agent By: RICHARD MENCHACA Richard Menchaca, Vice President SCHEDULE A TO STOCK PLEDGE AGREEMENT Pledged Shares
Former Name, if Pledgor's Number of Certificate any, in which Percentage Jurisdiction of Issuer Shares Class Number(s) Certificate Issued Ownership Incorporation ------ ------ ----- --------- ------------------ --------- ------------- Continental Gas, Inc. 1,000 Common #2 N/A 100% Oklahoma Continental Resources of Illinois, Inc. 3,000 Common #1 N/A 100% Oklahoma Continental Crude Co. 1,000 Common #1 N/A 100% Oklahoma
EX-10.5 7 criex105form8k4112002.txt COLLATERAL ASSIGNMENT OF CONTRACTS (SECURITY AGREEMENT) In consideration of Ten and No/100 Dollars ($10.00) and other good and valuable consideration in hand paid, the receipt and sufficiency of which are hereby acknowledged and confessed, CONTINENTAL RESOURCES, INC., an Oklahoma corporation (the "Debtor"), having an address 302 N. Independence, Suite 300, Enid, Oklahoma 73701 and GUARANTY BANK, FSB, a federal savings bank, as Bank and as Collateral Agent as defined under the Credit Agreement hereinafter defined (the "Secured Party"), having an address of 333 Clay Street, Suite 4430, Houston, Texas 77002, agree as follows: Article I. Assignment; Collateral; Security 1.1 Assignment. Debtor hereby conveys, grants, transfers and absolutely assigns to Secured Party, its successors and assigns, all right, title, and interest of such Debtor in, to and under the collateral (the "Collateral") described or referred to in this Collateral Assignment of Contracts (this "Assignment") to secure all amounts due or owing to Secured Party by Debtor under that certain Fourth Amended and Restated Credit Agreement dated of even date herewith by and among Debtor, Secured Party as Collateral/Documentation Agent, Co-Arranger and a Bank, Union Bank of California, N.A., as Administrative Agent, LC Issuer, Lead Arranger, Fronting Bank and a Bank, Fortis Capital Corp., as Syndication Agent, Co-Arranger and a Bank and the other financial institutions and banks from time to time parties to the Credit Agreement (as the same may be amended, supplemented or modified from time to time, the "Credit Agreement") and all other obligations to be performed by the Debtor under the Credit Agreement, including, but not limited to, the indebtedness evidenced by the Notes (as defined in the Credit Agreement); together with any and all other indebtedness now or hereafter owed by Debtor to Secured Party, whether or not currently contemplated and whether or not arising under the Credit Agreement. 1.2 Collateral. The Collateral covered by this Assignment is all right, title and interest of Debtor in and to the Contracts described on Exhibit "A" attached hereto and incorporated herein by reference for all purposes (the "Contracts"), including all amendments of, supplements to, and renewals and extensions of the Contracts at any time made; together with all proceeds, earnings, income, issues and profits arising from the Contracts and all other sums due or to become due under and pursuant thereto; together with any and all guarantees of or under any of the Contracts; together with all proceeds payable under any policy of insurance covering loss of income under any Contract for any cause; together with all rights, powers, privileges, options, and other benefits of Debtor under the Contracts, including, but not by way of limitation, (a) the immediate and continuing right to receive and collect all proceeds, income, revenues, issues, profits, damages, moneys, and security payable or receivable under or with respect to the Contracts, or pursuant to any of the provisions thereof, and (b) the right to make all waivers, agreements, and settlements, to give and receive all notices, consents, and releases, to take such action upon the happening of a default under any Contract, including the commencement, conduct, and consummation of proceedings at law or in equity as shall be permitted under any provision of any Contract or by law, and to do any and all other things, whatsoever, which Debtor is or may become entitled to do under the Contracts; SUBJECT, however, to the right and license hereinafter granted to Debtor by Secured Party. 1.3 Security. This Assignment is made and given as security for, and shall remain in full force and effect until, (i) the payment in full of all principal, interest, and premium, if any, on the Notes and (ii) the full and complete performance and observance by Debtor of all of the terms, covenants, and conditions to be performed or observed by Debtor under the Notes, this Assignment, and the other Loan Documents (as defined in the Credit Agreement) to which Debtor is a party. Article II Representations; Covenants; Waivers 2.1 Representations and Covenants. Debtor shall pay to Secured Party any and all sums due or which may become due pursuant to the Notes and the Credit Agreement in accordance with the terms of such Notes and Credit Agreement, respectively, and the terms of this Assignment. Upon Debtor's default under this Assignment following any applicable notice period as may be provided hereunder or under the Credit Agreement, at the option of Secured Party, Debtor shall pay immediately, without demand, notice of any such default or event, notice of intent to accelerate maturity, notice of acceleration of maturity or presentment for payment or acceleration or any other act or notice whatsoever the entire unpaid indebtedness of Debtor to Secured Party whether created or incurred pursuant to this Assignment or otherwise. Debtor represents, warrants and agrees as follows: 1. Debtor owns the Collateral and has the right to transfer the Collateral as provided herein, the Collateral is not subject to the interest of any third person other than the parties to the Contract, no financing statement covering the Collateral or its proceeds will be on file in any public office (other than financing statements in favor of Secured Party), and Debtor will defend the Collateral and its proceeds against the claims and demands of all third persons. 2. Debtor shall keep accurate and complete records of the Collateral and its proceeds. 3. Debtor will promptly notify Secured Party of any occurrences or circumstances which result in or are likely to result in the failure of any third party to any of the Contracts to perform its obligations as described in such Contracts. 2.2 Waivers by Debtor. To the fullest extent permitted by applicable law and, to the extent applicable, Debtor, for itself, its successors and assigns, and each and every person with any interest in the Collateral, or any part thereof, whether now owned or hereafter acquired, hereby waives demand, presentment for payment, diligence in collection, and notice of non-payment and protest; hereby consents and agrees to any extension of time, whether one or more, for the payment thereof and/or to any and all renewals thereof; and hereby consents and agrees that Secured Party may amend the terms thereof, may release all or any part of the security for the payment thereof, without, in any event, affecting the terms or effect of this Assignment or the obligations or liabilities hereunder of Debtor, its successors or assigns, or any person with any interest in the Collateral, or any part thereof, whether now owned or hereafter acquired. Article III Default; Activation 3.1 Events of Default. Debtor shall be in default under this Assignment upon the occurrence of and continuation of any of the events or conditions defined as Events of Default in Section 7.01 of the Credit Agreement (herein called an "Event of Default") beyond any applicable notice period. 3.2 Declaration of Activation. Secured Party may, upon the occurrence of an Event of Default, execute and deliver, by depositing in the United States Mail, postage prepaid, certified mail, addressed to Debtor at the address noted in Section 5.4 of this Assignment, a Declaration of Activation of Assignment of Proceeds (hereinafter referred to as a "Declaration of Activation"), declaring that Secured Party terminates the license granted to Debtor pursuant to Section 4.4 hereof and thereafter shall exercise its rights under this Assignment and declares that constructive possession of the Collateral is vested in Secured Party and that all of the legal and equitable interest in the proceeds, issues and profits of the Collateral is vested in Secured Party. Said Declaration of Activation shall not be deemed ineffective or deficient by reason of the fact that it may contain any matter or matters in addition to the foregoing or by reason of the fact that no specific Event of Default is set forth therein. Said Declaration of Activation shall be in effect immediately upon its deposit in the United States Mail. Article IV Rights of Secured Party 4.1 Powers of Secured Party. After the occurrence of an Event of Activation, Secured Party, without in any way waiving any default, shall, at its option, have the complete right, power and authority, at any time thereafter to terminate the right and license granted to Debtor hereunder and thereafter may transfer the Collateral to itself or its nominee, receive income thereon or therefrom, and apply such income first to any costs incurred by Secured Party in connection with the Notes, or the Credit Agreement, second to accrued but unpaid interest due under the Notes, and third to reduction of the principal balance of the Notes, Debtor remaining liable for any deficiency. Secured Party may delay exercising or elect not to exercise any right or remedy under this Assignment or any indebtedness secured hereby without waiving that or any other past, present or future right or remedy. Secured Party's exercising its right to apply the Collateral and/or proceeds from the Collateral toward its indebtedness shall not constitute an election of remedies, therefore Debtor shall remain liable for any deficiency and Secured Party may exercise or enforce any and all other rights and remedies it may have after enforcing its remedies hereunder. Secured Party shall have the rights, powers and remedies of a secured party under the Uniform Commercial Code under the Texas Business and Commerce Code. Notwithstanding anything to the contrary in this Assignment, if any applicable provision of any law requires Secured Party to give reasonable notice of any sale or disposition or other action, Debtor hereby agrees that ten (10) days prior written notice shall constitute reasonable notice thereof. Debtor further agrees that after the occurrence of an Event of Activation, Secured Party may at any time thereafter demand that all proceeds of any and all Collateral be paid to Secured Party whether or not there are any sums then due on any indebtedness secured hereby, and Debtor authorizes any obligor under any of said Collateral to pay any sums so demanded to Secured Party. 4.2 Attorney-in-Fact. Debtor further agrees, at its expense, to do, make, procure, assign, endorse, and deliver all acts, things, writings, and assurances as Secured Party may at any time require to protect, assure, or enforce its interest and remedies created by this Assignment; including but not limited to any check, endorsement, certificate, or any other instrument required by Secured Party. Debtor further agrees that while any Event of Default remains uncured, Secured Party may following a Declaration of Activation receive any and all proceeds or income from the Collateral, and Secured Party may execute, assign, and endorse appropriate receipts, releases and satisfaction, or negotiable or non-negotiable instruments, or any other instruments or documents in the name of and as agent for Debtor, or in its own name, which Debtor has agreed to execute, sign, or endorse herein or under the Contract, and Secured Party is hereby constituted and appointed the agent and attorney-in-fact of Debtor to do all acts with respect to the Contracts and to execute and endorse all such instruments. Debtor agrees that this power of attorney is coupled with an interest and shall not be revoked until all indebtedness secured by this Assignment has been paid in full. Without limiting the generality of the foregoing, Secured Party shall be entitled at any time to file, and Debtor hereby authorizes Secured Party to file, a Uniform Commercial Code Financing Statement or this Agreement (or any amendment to either such instrument) or a carbon, photographic, or other reproduction of this Agreement, as a financing statement (or amendment thereto), in any form or medium provided by the UCC, with or without Debtor's signature, but the failure of Secured Party to do so shall not impair the validity or enforceability of this Agreement. 4.3 Direction to Party to Contract. Debtor hereby consents to and irrevocably authorizes and directs the parties under the Contracts and any successors to the interest of said parties, upon demand and notice from Secured Party of the right of Secured Party to receive the proceeds and other amounts payable under such Contracts following a Declaration of Activation, to pay to Secured Party the proceeds and other amounts due or to become due under the Contracts, and said parties shall have the right to rely upon such demand and notice from Secured Party and shall pay such proceeds and other amounts to Secured Party without any obligation or right to determine the actual existence of the right of Secured Party to receive such proceeds and other amounts, notwithstanding any notice from or claim of Debtor to the contrary, and Debtor shall not have any right or claim against said parties for any such proceeds and other amounts so paid by said parties to Secured Party. Debtor hereby agrees that, at the request of Secured Party, Debtor will furnish each party under any Contract with a true and complete copy of this Assignment. 4.4 License to Debtor. Notwithstanding the foregoing provisions making and establishing a present and absolute transfer and assignment of the Contracts and the proceeds, earnings, income, and profits arising therefrom, so long as no Event of Activation shall have occurred, Debtor shall have the right and license to collect, use, and enjoy the proceeds, issues, profits, and other sums payable under and by virtue of any Contract, but only as the same become due under the provisions of such Contract, and to enforce the covenants of each Contract and amend, supplement or renew each Contract as required in the ordinary course of business. 4.5 Rights Optional. Secured Party shall not be obligated to perform or discharge any obligation, duty, or liability of Debtor, nor shall Secured Party be responsible for its failure to exercise or enforce any rights granted to it under this Assignment. Any failure or omission by Secured Party to enforce this Assignment for any period of time shall not impair the force or effect hereof or prejudice the rights of Secured Party, and Secured Party shall not be required under this Assignment to exercise or enforce any of the rights herein granted to it, it being understood that all matters contained herein are strictly within the discretion of Secured Party. By executing this Assignment, Debtor agrees that Secured Party does not assume any of Debtor's obligations or duties concerning the Contracts, including, but not limited to, any obligation of performance under the Contracts. 4.6 Rights Cumulative. No right or remedy herein conferred upon or otherwise available to Secured Party is intended to be or shall be construed to be exclusive of any other right or remedy, but each and every one of the rights and remedies of Secured Party hereunder are cumulative and not in lieu of, but in addition to, any rights or remedies which Secured Party may have under the Loan Documents, at law, or in equity, any and all of which such rights and remedies may be exercised by Secured Party prior to, simultaneously with, or subsequent to any action taken hereunder. Any and all rights and remedies of Secured Party may be exercised from time to time and as often as Secured Party deems such exercise to be expedient, and the delay or failure of Secured Party to avail itself of any of the terms, provisions, and conditions of this Assignment for any period of time, at any time or times, shall not be construed or deemed to be or constitute a waiver or impairment thereof. No delay or omission to exercise any right or power accruing upon any default or Event of Default shall impair any such right or power or shall be construed to be a waiver of any such default or Event of Default or an acquiescence therein; nor shall the giving, taking, or enforcement of any other or additional security, collateral, or guaranty for the payment of the indebtedness secured under this Assignment operate to prejudice, waive, or affect the security of this Assignment or any rights, powers, or remedies hereunder; nor shall Secured Party be required to first look to, enforce, or exhaust, any such other or additional security, collateral, or guaranty. Secured Party hereby further agrees that (a) none of the rights or remedies of Secured Party available under any other Loan Document or otherwise shall be delayed or in any way prejudiced by this Assignment; (b) notwithstanding any variation or modification, at any time, of the terms of the Notes, the Credit Agreement, and/or any other Loan Document or any extension of time for payment thereunder or under the Notes or any release of part or parts of the security conveyed under any of the Loan Documents, the Contracts and all of the benefits assigned hereunder shall continue as additional security in accordance with the terms hereof; and (c) each and all of the Contracts shall remain in full force and effect. 4.7 No Waiver. Debtor hereby agrees that the collection of proceeds and the application as aforesaid, the taking of possession of the Collateral, or any part thereof, or the exercise of any other right or remedy by Secured Party shall not cure or waive any Event of Default hereunder; waive, modify, or affect any Declaration of Activation or other notice given hereunder; cure or waive any default; waive, modify, or affect any notice of default under the Notes or any of the Loan Documents; affect or impair any other right or remedy of Secured Party; or invalidate any act done pursuant to any such Declaration of Activation or other notice. The enforcement of any right or remedy by Secured Party, once exercised, shall continue for so long as Secured Party shall elect, and if Secured Party shall thereafter elect to discontinue the exercise of any such right or remedy, then the same or any other right or remedy hereunder or otherwise available may be reasserted at any time and from time to time upon any subsequent or continuing default. 4.8 Indulgences by Secured Party. In the event that Secured Party (a) grants any extension of time or forbearance with respect to the payment of any indebtedness secured by this Assignment; (b) takes other or additional security for the payment thereof; (c) waives or fails to exercise any right granted herein or under the Notes, the Credit Agreement or any Loan Document; (d) grants any release, with or without consideration, of the whole or any part of the security held for the payment of the debts secured hereby or the release of any person liable for payment of such debts; or (e) amends or modifies, in any respect, any of the terms and provisions hereof or of the Notes (including substitution of other Notes), the Credit Agreement or any of the Loan Documents; then and in any such event, such act or omission to act shall not release Debtor or any co-makers, sureties, or guarantors of this Assignment or the Notes under any covenant of this Assignment or the Notes nor preclude Secured Party from exercising any right, power, or privilege herein granted or intended to be granted in the event of any other default or Event of Default then made or any subsequent default or Event of Default, nor in any way impair or affect the lien or priority of this Assignment or any other Loan Document. Article V Miscellaneous Provisions 5.1 Successors of Debtor. In the event of the sale or transfer of all or any part of the Collateral, by operation of law or otherwise, Secured Party is authorized and empowered to deal with the transferee with reference to this Assignment, the Collateral, or the debts secured hereby, or with reference to any of the terms or conditions contained herein, as fully and to the same extent as it might deal with Debtor and without in any way releasing or discharging any liabilities of Debtor hereunder or under the Notes, the Credit Agreement or the other Loan Documents. 5.2 Successors and Assigns. This Assignment shall be assignable by Secured Party, and all representations, warranties, covenants, powers, and rights hereunder contained shall be binding upon Secured Party and Debtor, and their respective successors and assigns, and shall inure to the benefit of Secured Party, and its successors and assigns, and Debtor, and, but only to the extent permitted hereunder, its successors and assigns. 5.3 Expenses of Secured Party. If Secured Party is made a party to any suit or proceeding by reason of the interest of the Secured Party in the Collateral, or if the Notes, this Assignment, the Credit Agreement, or any other Loan Document is placed in the hands of an attorney or attorneys to defend or enforce any rights of Secured Party, then Debtor shall reimburse Secured Party for all costs and expenses, including attorneys' fees, incurred by Secured Party in connection therewith. All amounts incurred by Secured Party hereunder shall be secured hereby and shall be due and payable by Debtor to Secured Party forthwith on demand, with interest thereon at the rate at which interest accrues on amounts due under the Notes after the same become due. 5.4 Notices. All notices, demands, or documents of any kind which may be required or permitted to be served by either party hereto upon or to the other shall be effective upon delivery if served by delivering the same personally or by sending the same in the United States Mail, postage prepaid, certified mail, addressed to Debtor or Secured Party, as the case may be, at its address, as set forth above, or at such other address as either Debtor or Secured Party may from time to time designate by like notice to the other or as otherwise provided by the Credit Agreement. Any notice so mailed shall be deemed to have been given on the date delivered. 5.5 Amendment. Neither this Assignment nor any term, covenant, or condition hereof may be amended, modified, or terminated, except by an agreement in writing, signed by the party against whom enforcement of the amendment, modification, or termination is sought. 5.6 Construction. The Notes, this Assignment, the Credit Agreement, and the other Loan Documents shall be construed without regard to any presumption or rule requiring construction against the party causing such instruments to be drafted. The headings and captions contained in this Assignment are solely for convenience of reference and shall not affect its interpretation. All terms and words used in this Assignment, whether singular or plural and regardless of the gender thereof, shall be deemed to include any other number and any other gender as the context may require. 5.7 Severability. If any term, covenant, or condition of this Assignment or the application thereof to any person or circumstance, shall, to any extent, be invalid or unenforceable, then the remainder of this Assignment or the application of such term, covenant, or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant and condition of this Assignment shall be valid and enforceable to the fullest extent permitted by applicable law. 5.8 Counterparts. This Assignment may be executed, acknowledged, and delivered in any number of counterparts, each of which shall constitute an original, but, all together, only one instrument. 5.9 Duration. This Assignment shall become null, void, and of no further force or effect upon the payment in full of any indebtedness under the Notes, the Credit Agreement, this Assignment, and the other Loan Documents; whereupon the lien and security interest hereof shall be released at the cost and expense of the Debtor, and any Collateral held by Secured Party and not then covered by any of the other Loan Documents shall be reconveyed to Debtor at the cost and expense of Debtor. 5.10 Applicable Law. The law governing this transaction shall be that of the State of Texas, except that the rate of interest that may be contracted for, charged or received on the indebtedness or obligations described herein shall be construed pursuant to the applicable federal or state law whichever allows the highest rate of interest. 5.11 Benefit of All Banks. Debtor agrees and acknowledges that Secured Party executes this document as a Bank and as the Collateral Agent for the other Banks under the Credit Agreement and any and all rights, benefits and entitlements under this Agreement in favor of Secured Party are for the benefit of all Banks under the Credit Agreement. [Signature Page Follows] EXECUTED this 28th day of March, 2002. DEBTOR: CONTINENTAL RESOURCES, INC. an Oklahoma corporation By: ROGER CLEMENT Roger Clement, Sr. Vice President and Chief Financial Officer SECURED PARTY: GUARANTY BANK, FSB, as Collateral Agent By: RICHARD MENCHACA Richard Menchaca Vice President THE STATE OF OKLAHOMA ) ) COUNTY OF OKLAHOMA ) BEFORE ME, the undersigned authority, on this day personally appeared Roger Clement, Sr. Vice President and Chief Financial Officer of Continental Resources, Inc., an Oklahoma corporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, as the act and deed of said corporations and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE this day of March, 2002. NOTARY PUBLIC, STATE OF OKLAHOMA THE STATE OF OKLAHOMA ) ) COUNTY OF OKLAHOMA ) BEFORE ME, the undersigned authority, on this day personally appeared Richard Menchaca, Vice President of Guaranty Bank, FSB, a federal savings bank, as Collateral Agent, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, as the act and deed of said bank and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE this day of March, 2002. NOTARY PUBLIC, STATE OF OKLAHOMA EXHIBIT "A" CONTRACTS -----END PRIVACY-ENHANCED MESSAGE-----