-----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, TVHzZrsM5YN6Hq3kXJSOM65pesXw9u84ynkHgnKjJ9IDmCRVspmgUcxDBTdpuTYG 9MAKp4IH03bSecQZ/7E+RA== 0000950152-04-005557.txt : 20040723 0000950152-04-005557.hdr.sgml : 20040723 20040722171335 ACCESSION NUMBER: 0000950152-04-005557 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20040707 ITEM INFORMATION: Changes in control of registrant ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040722 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BELDEN & BLAKE CORP /OH/ CENTRAL INDEX KEY: 0000880114 STANDARD INDUSTRIAL CLASSIFICATION: DRILLING OIL & GAS WELLS [1381] IRS NUMBER: 341686642 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20100 FILM NUMBER: 04927113 BUSINESS ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 BUSINESS PHONE: 3304991660 MAIL ADDRESS: STREET 1: 5200 STONEHAM RD STREET 2: P O BOX 2500 CITY: NORTH CANTON STATE: OH ZIP: 44720 FORMER COMPANY: FORMER CONFORMED NAME: BELDEN & BLAKE ENERGY CORP /OH DATE OF NAME CHANGE: 19920427 8-K/A 1 l08738ae8vkza.txt BELDEN & BLAKE CORPORATION 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event) July 7, 2004 BELDEN & BLAKE CORPORATION -------------------------- (Exact name of registrant as specified in its charter) Ohio 0-20100 34-1686642 - ---------------------------- ------------------- ----------------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 5200 Stoneham Road, North Canton, Ohio 44720 --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (330) 499-1660 ------------------- Registrant's telephone number, including area code Belden & Blake Corporation (the "Company") filed a Form 8-K on July 7, 2004, related to the Company's merger with Capital C Energy Operations, LP, a Delaware limited partnership ("Capital C"), and Capital C Ohio, Inc., an Ohio corporation and a wholly owned subsidiary of Capital C ("Merger Sub") pursuant to which Merger Sub was merged with and into the Company (the "Merger"), with Belden & Blake Corporation surviving the Merger as a wholly owned subsidiary of Capital C. The Merger resulted in a change in control of the Company. Substantially concurrent with the closing of the Merger, the Company consummated the following related transactions: - Execution of a new senior secured credit agreement providing for a $100 million term facility, a $30 million revolving credit facility and a $40 million letter of credit facility and related documents; - Issuance of $192,500,000 8.75% Senior Secured Notes due 2012 and execution of a related indenture and registration rights agreement; - Establishment of long-term hedging arrangements pursuant to a master agreement and related documents with J. Aron, as more fully described in Item 5 below. This Form 8-K/A includes additional disclosures relating to these transactions in "Item 1. Changes in Control of Registrant" and "Item 5. Other Events and Regulation FD Disclosure" below. In addition, this Form 8-K/A includes as exhibits the executed documents governing these transactions. ITEM 1. CHANGES IN CONTROL OF REGISTRANT The Company's management team remained with the Company after the Merger with the exception of the retirement of the former Chief Executive Officer, John L. Schwager. Frost W. Cochran is the Company's new Chief Executive Officer. In addition, Gregory A. Beard joined the Company as Executive Vice President, Assistant Secretary and Director; and B. Dee Davis and W. Mac Jensen joined the Company as Senior Vice Presidents. Upon consummation of the Merger all former directors of the Company resigned and the new Board of Directors consists of six members, each of whom is elected annually to serve one-year terms. The initial six members of the Board of Directors are Frost W. Cochran, David M. Carmichael, Michael B. Hoffman, Pierre F. Lapeyre, Jr., David M. Leuschen, and Gregory A. Beard. ITEM 5. OTHER EVENTS AND REGULATION FD DISCLOSURE NATURAL GAS HEDGE POSITION At the time of the Merger, the Company became a party to long-term commodity hedges (the "Hedges") and reestablished existing commodity hedge transactions for the remainder of 2004 and for 2005 with a counterparty. The Hedges primarily take the form of monthly settled fixed-price swaps in respect of the settlement prices for the market standard New York Mercantile Exchange ("NYMEX") futures contracts on natural gas and crude oil. The Company will pay a NYMEX-based floating price per Mmbtu, in the case of Hedges on natural gas, and will pay a NYMEX-based floating price per Bbl, in the case of Hedges on crude oil, for each month during the term of the Hedges and will receive a fixed price per Mmbtu or Bbl (as the case may be) in accordance with a monthly schedule of fixed prices. The following tables reflect the natural gas and crude oil volumes and the weighted average prices under financial hedges (including settled hedges) at July 8, 2004:
NATURAL GAS SWAPS NATURAL GAS COLLARS CRUDE OIL SWAPS ------------------- ---------------------- ---------------------- NYMEX NYMEX PRICE NYMEX PRICE PER PER MMBTU ESTIMATED PRICE PER BBTU MMBTU BBTU FLOOR/CAP (1) MBBLS BBL ------ --------- ----- ------------- --------- --------- QUARTER ENDING September 30, 2004 2,040 $ 3.82 1,080 $ 4.00 - 5.77 74 $ 36.06 December 31, 2004 2,040 3.81 1,080 4.00 - 5.76 74 35.68 ------ ------ ----- ------------- --- ------- 4,080 $ 3.82 2,160 $ 4.00 - 5.76 148 $ 35.87 ====== ====== ===== ============= === ======= March 31, 2005 1,500 $ 3.81 1,500 $ 4.00 - 5.32 68 $ 34.76 June 30, 2005 1,500 3.70 1,500 4.00 - 5.32 68 34.18 September 30, 2005 1,500 3.70 1,500 4.00 - 5.32 67 33.72 December 31, 2005 1,500 3.70 1,500 4.00 - 5.32 67 33.31 ------ ------ ----- ------------- --- ------- 6,000 $ 3.73 6,000 $ 4.00 - 5.32 270 $ 34.00 ====== ====== ===== ============= === ======= March 31, 2006 2,829 $ 6.14 63 $ 32.71 June 30, 2006 2,829 5.24 62 32.35 September 30, 2006 2,829 5.22 62 32.02 December 31, 2006 2,829 5.39 62 31.71 ------ ------ --- ------- 11,316 $ 5.50 249 $ 32.20 ====== ====== === ======= YEAR ENDING December 31, 2007 10,745 $ 4.97 227 $ 30.91 December 31, 2008 10,126 4.64 208 29.96 December 31, 2009 9,529 4.43 191 29.34 December 31, 2010 8,938 4.28 175 28.86 December 31, 2011 8,231 4.19 157 28.77 December 31, 2012 7,005 4.09 138 28.70 December 31, 2013 6,528 4.04 127 28.70
BBL - BARREL MMBTU - MILLION BRITISH THERMAL UNITS MBBLS - THOUSAND BARRELS BBTU - BILLION BRITISH THERMAL UNITS (1) The NYMEX price per Mmbtu floor/cap for the natural gas collars in 2004 assume the monthly NYMEX settles at $3.00 per Mmbtu or higher. If the monthly NYMEX settles at less than $3.00 per Mmbtu then the NYMEX price per Mmbtu will be the NYMEX settle plus $1.00. The NYMEX price per Mmbtu floor/cap for the natural gas collars in 2005 assume the monthly NYMEX settles at $3.10 per Mmbtu or higher. If the monthly NYMEX settles at less than $3.10 per Mmbtu then the NYMEX price per Mmbtu will be the NYMEX settle plus $0.90. The proximity of our properties in the Appalachian and Michigan basins to large commercial and industrial natural gas markets has generally resulted in premium wellhead gas prices compared with the prices of NYMEX futures contracts for gas delivered at the Henry Hub in Louisiana. Monthly spot natural gas prices in our market areas are typically 15 to 60 cents higher per Mcf than comparable NYMEX prices. The Company's average price received for crude oil is typically $2.50 to $3.25 per barrel below the NYMEX price per barrel. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. The following exhibits are filed herewith: 2.1 Agreement and Plan of Merger, dated as of June 15, 2004, by and among Capital C Energy Operations, LP, Capital C Ohio, Inc. and Belden & Blake Corporation 4.1 Supplemental Indenture, dated as of July 2, 2004, by and among Belden & Blake Corporation, the Subsidiary Guarantors, as guarantors, and La Salle National Bank, as trustee 4.2 Indenture, dated as of July 7, 2004, by and among Belden & Blake Corporation, The Canton Oil & Gas Company, Ward Lake Drilling, Inc. and BNY Midwest Trust Company 10.1 ISDA Master Agreement, dated as of June 30, 2004, between Capital C Ohio, Inc. and J. Aron & Company 10.2 Credit and Guaranty Agreement, dated as of July 7, 2004, among Belden & Blake Corporation, The Canton Oil & Gas Company and Ward Lake Drilling, Inc., as Guarantors, various Lenders, and Goldman Sachs Credit Partners L.P., as Sole Lead Arranger, Sole Bookrunner, Syndication Agent and Administrative Agent 10.3 Priority Lien Pledge and Security Agreement, dated as of July 7, 2004, between Belden & Blake Corporation, The Canton Oil & Gas Company, Ward Lake Drilling, Inc. and Wells Fargo Bank, N.A., as Collateral Trustee 10.4 Parity Lien Pledge and Security Agreement, dated as of July 7, 2004, between Belden & Blake Corporation, The Canton Oil & Gas Company, Ward Lake Drilling, Inc. and Wells Fargo Bank, N.A., as Collateral Trustee 10.5 Priority Lien Pledge Agreement, dated as of July 7, 2004, between Capital C Energy Operations, LP and Wells Fargo Bank, N.A., as Collateral Trustee 10.6 Parity Lien Pledge Agreement, dated as of July 7, 2004, between Capital C Energy Operations, LP and Wells Fargo Bank, N.A., as Collateral Trustee 10.7 Collateral Trust Agreement, dated as of July 7, 2004, among Belden & Blake Corporation, the other Pledgors party from time to time thereto, Goldman Sachs Credit Partners L.P., as Administrative Agent under the Credit Agreement, J. Aron & Company, as Hedge Counterparty under the Hedge Agreement, BNY Midwest Trust Company, as Trustee under the Indenture, and Wells Fargo Bank, N.A., as Collateral Trustee 10.8 Guaranty Agreement, dated as of July 7, 2004, by J. Aron & Company, The Canton Oil & Gas Company and Ward Lake Drilling, Inc. 10.9 Management Services Agreement, dated as of July 7, 2004, by and between Capital C Energy Operations, LP and Belden & Blake Corporation 10.10 Termination and Release Agreement, dated as of July 7, 2004, by and among Belden & Blake Corporation, The Canton Oil & Gas Company, Ward Lake Drilling, Inc., Ableco Finance LLC and Wells Fargo Foothill, Inc. 10.11 Purchase Agreement, dated as of July 1, 2004, by and among Belden & Blake Corporation, The Canton Oil & Gas Company, Ward Lake Drilling, Inc. and Goldman, Sachs & Co. 10.12 Exchange and Registration Rights Agreement, dated as of July 7, 2004, by and among Belden & Blake Corporation, The Canton Oil & Gas Company, Ward Lake Drilling, Inc. and Goldman, Sachs & Co. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Date: July 22, 2004 BELDEN & BLAKE CORPORATION (Registrant) By: /s/ Robert W. Peshek -------------------------------- Robert W. Peshek, Senior Vice President and Chief Financial Officer EX-2.1 2 l08738aexv2w1.txt EXHIBIT 2.1 EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER dated as of June 15, 2004 by and among CAPITAL C ENERGY OPERATIONS, LP, CAPITAL C OHIO, INC. and BELDEN & BLAKE CORPORATION TABLE OF CONTENTS This Table of Contents is not part of the Agreement to which it is attached but is inserted for convenience only.
Page No. ---- ARTICLE I THE MERGER............................................................................................ 1 1.01 The Merger................................................................................... 1 1.02 Closing...................................................................................... 1 1.03 Effective Time............................................................................... 2 1.04 Articles of Incorporation and Code of Regulations of the Surviving Corporation............... 2 1.05 Directors and Officers of the Surviving Corporation.......................................... 2 1.06 Effects of the Merger........................................................................ 2 1.07 Performance Deposit.......................................................................... 2 1.08 Further Assurances........................................................................... 3 ARTICLE II CONVERSION OF SHARES................................................................................. 3 2.01 Conversion of Capital Shares................................................................. 3 2.02 Exchange of Certificates..................................................................... 5 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................... 8 3.01 Organization and Qualification............................................................... 8 3.02 Capitalization............................................................................... 8 3.03 Authority Relative to this Agreement......................................................... 9 3.04 Non-Contravention; Approvals and Consents.................................................... 10 3.05 SEC Reports and Financial Statements......................................................... 11 3.06 Absence of Certain Changes or Events......................................................... 11 3.07 Absence of Undisclosed Liabilities; Hedging; Accounts Receivable............................. 12 3.08 Legal Proceedings............................................................................ 12 3.09 Permits; Compliance with Laws and Orders..................................................... 12 3.10 Compliance with Agreements................................................................... 13 3.11 Taxes........................................................................................ 13 3.12 Employee Benefit Plans; ERISA................................................................ 15 3.13 Labor Matters................................................................................ 17 3.14 Environmental Matters........................................................................ 17 3.15 Reserve Reports.............................................................................. 18 3.16 Broker's and Finder's Fees................................................................... 19 3.17 Insurance.................................................................................... 19
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Page No. ---- ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..................................................... 19 4.01 Organization and Qualification............................................................... 19 4.02 Authority Relative to this Agreement......................................................... 19 4.03 Non-Contravention; Approvals and Consents.................................................... 20 4.04 Ownership of Company Common Shares........................................................... 21 4.05 Legal Proceedings............................................................................ 21 4.06 Capitalization of Sub........................................................................ 21 4.07 Financing.................................................................................... 21 ARTICLE V COVENANTS OF THE COMPANY............................................................................... 21 5.01 Covenants of the Company..................................................................... 21 5.02 No Solicitations............................................................................. 23 ARTICLE VI ADDITIONAL AGREEMENTS................................................................................. 24 6.01 Access to Information; Confidentiality....................................................... 24 6.02 Approval of Shareholders..................................................................... 25 6.03 Regulatory and Other Approvals............................................................... 25 6.04 Indemnification; Directors' and Officers' Insurance.......................................... 26 6.05 Employment and Severance Agreements; Retention Plan; Severance Plans; Change in Control Plan; Bonus Plans.................................................................................. 27 6.06 Expenses..................................................................................... 28 6.07 Sub.......................................................................................... 28 6.08 Notice and Cure.............................................................................. 28 6.09 Fulfillment of Conditions.................................................................... 28 6.10 Delivery of Hedge Reports.................................................................... 29 ARTICLE VII CONDITIONS........................................................................................... 29 7.01 Conditions to Each Party's Obligation to Effect the Merger................................... 29 7.02 Conditions to Obligation of Parent and Sub to Effect the Merger.............................. 30 7.03 Conditions to Obligation of the Company to Effect the Merger................................. 32 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER.................................................................. 33 8.01 Termination.................................................................................. 33 8.02 Effect of Termination........................................................................ 34 8.03 Amendment.................................................................................... 34 8.04 Waiver....................................................................................... 35 ARTICLE IX GENERAL PROVISIONS................................................................................... 35 9.01 Survival of Representations, Warranties, Covenants and Agreements............................ 35 9.02 Notices...................................................................................... 35 9.03 Entire Agreement; Incorporation of Exhibits.................................................. 37
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Page No. ---- 9.04 Public Announcements......................................................................... 37 9.05 No Third Party Beneficiary................................................................... 37 9.06 No Assignment; Binding Effect................................................................ 37 9.07 Headings..................................................................................... 37 9.08 Invalid Provisions........................................................................... 37 9.09 Governing Law................................................................................ 38 9.10 Enforcement of Agreement..................................................................... 38 9.11 Certain Definitions.......................................................................... 38 9.12 Counterparts................................................................................. 39
- iii - GLOSSARY OF DEFINED TERMS The following terms, when used in this Agreement, have the meanings ascribed to them in the corresponding Sections of this Agreement listed below: "affiliate" -- Section 9.11(a) "Advisory Agreement" -- Section 7.02(h) "Agreement" -- Preamble "Alternative Proposal" -- Section 5.02 "Antitrust Division" -- Section 6.03 "beneficially" -- Section 9.11(b) "business day" -- Section 9.11(c) "Certificate of Merger" -- Section 1.03 "Certificates" -- Section 2.02(b) "Closing" -- Section 1.02 "Closing Date" -- Section 1.02 "Code" -- Section 2.02(e) "Company" -- Preamble "Company Business Plan" -- Section 5.01(b)(D) "Company Common Shares" -- Section 2.01(b) "Company Disclosure Letter" -- Introductory Paragraph in Article III "Company Employee Benefit Plans" -- Section 3.12(b)(i) "Company Financial Statements" -- Section 3.05(b) "Company Material Adverse Effect -- Section 9.11(e) "Company Options" -- Section 2.01(e) "Company Option Plan" -- Section 3.02(a) "Company Permits" -- Section 3.09 "Company Reserve Report" -- Section 3.15 "Company SEC Reports" -- Section 3.05(a) "Company Shareholders' Approval" -- Section 6.02 "Company Shareholders' Meeting" -- Section 6.02 "Confidentiality Agreement" -- Section 6.01 "Consent Solicitation" -- Section 6.09 "Constituent Corporations" -- Section 1.01 "Contracts" -- Section 3.04(a) "control," "controlling," "controlled by" and "under common control with" -- Section 9.11(a) "Covered Parties" -- Section 1.07(b) "Credit Agreement" -- Section 4.07 "Current Premium" -- Section 6.04(b) "Debt Financing" -- Section 4.07 "Dissenting Share" -- Section 2.01(d)(i) "Effective Time" -- Section 1.03 "Environmental Laws" -- Section 3.14(a) - iv - "ERISA" -- Section 3.12(b)(i) "ERISA Affiliate" -- Section 3.12(b)(iii) "Escrow Agent" -- Section 1.07 "Exchange Act" -- Section 3.05(a) "Financial Market Adverse Change" -- Section 7.02(e) "FTC" -- Section 6.03 "Governmental or Regulatory Authority" -- Section 3.04(a) "group" -- Section 9.11(g) "Hedge Market Adverse Change" -- Section 7.02(e) "HSR Act" -- Section 3.04(b) "Indemnified Party" or "Indemnified Parties" -- Section 6.04 "Indenture" -- Section 4.07 "knowledge" -- Section 9.11(f) "laws" -- Section 3.04(a) "Lien" -- Section 3.02(b) "material", "material adverse effect" and "materially adverse" -- Section 9.11(d) "Material Adverse Event" -- Section 7.01(e) "Merger" -- Preamble "Merger Consideration" -- Section 2.02(b) "Merger Price" -- Section 2.01(c) "OGCL" -- Section 1.01 "Options" -- Section 3.02(a) "Option Amount" -- Section 2.01(e) "orders" -- Section 3.04(a) "Parent" -- Preamble "Payment Agent" -- Section 2.02(a) "Payment Fund" -- Section 2.02(a) "Performance Deposit" -- Section 1.07 "person" -- Section 9.11(g) "Plan" -- Section 3.12(b)(ii) "Regulations" -- Section 1.04 "Representatives" -- Section 9.11(h) "Schwager" -- Section 6.05(a) "Schwager Employment Agreement" -- Section 6.05(a) "SEC" -- Introductory Paragraph in Article III "Secretary of State" -- Section 1.03 "Securities Act" -- Section 3.05(a) "Shareholders' Agreement" -- Section 7.02(f) "SMRS" -- Section 7.02(f) "Sub" -- Preamble "Sub Common Shares" -- Section 2.01(a) "Subsidiary" -- Section 9.11(i) "Surviving Corporation" -- Section 1.01 "Surviving Corporation Common Shares" -- Section 2.01(a) - v - "Taxes" -- Section 3.11 "TBR Asset Sale" -- Section 7.02(i) "TBR Asset Purchase Agreement" -- Section 7.02(i) "Voting Agreement" -- Preamble - vi - This AGREEMENT AND PLAN OF MERGER dated as of June 15, 2004 (this "Agreement") is made and entered into by and among Capital C Energy Operations, LP, a Delaware limited partnership ("Parent"), Capital C Ohio, Inc., an Ohio corporation wholly owned by Parent ("Sub"), and Belden & Blake Corporation, an Ohio corporation (the "Company"). WHEREAS, the general partner of the general partner of Parent, and the respective boards of directors of Sub and the Company have each determined that it is advisable and in the best interests of their respective partners and shareholders, as applicable, to consummate, and have approved, the business combination transaction provided for herein in which Sub would merge with and into the Company and the Company would become a wholly-owned subsidiary of Parent (the "Merger"); WHEREAS, Parent, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger; and WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition and inducement to Parent's and Sub's willingness to enter into this Agreement, certain holders of Company Common Shares (as defined below) are entering into a Revocable Proxy, Voting and Option Agreement in substantially the form attached hereto as Exhibit A (the "Voting Agreement") pursuant to which such holders have agreed, among other things, to vote all Company Common Shares (as defined in Section 2.01(b)) owned by such shareholders in favor of the Merger. NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I THE MERGER 1.01 The Merger. Upon the terms and subject to the conditions of this Agreement, at the Effective Time (as defined in Section 1.03), Sub shall be merged with and into the Company in accordance with the General Corporation Law of the State of Ohio (the "OGCL"). At the Effective Time, the separate existence of Sub shall cease and the Company shall continue as the surviving corporation in the Merger (the "Surviving Corporation"). Sub and the Company are sometimes referred to herein as the "Constituent Corporations". As a result of the Merger, the outstanding shares of capital stock and the treasury shares of the Constituent Corporations shall be converted or cancelled in the manner provided in Article II. 1.02 Closing. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 8.01, and subject to the satisfaction or waiver (where applicable) of the conditions set forth in Article VII, the closing of the Merger (the "Closing") will take place at the offices of Vorys, Sater, Seymour 1 and Pease LLP, 52 East Gay Street, Columbus, Ohio 43215 at 10:00 a.m., local time, on a date to be specified by the parties, which shall be no later than the fifth business day after satisfaction or (to the extent permitted by applicable law) waiver of the conditions set forth in Article VII (other than any such conditions which by their nature cannot be satisfied until the Closing, which shall be required to be so satisfied or (to the extent permitted by applicable law) waived at the Closing), unless another date, time or place is agreed to in writing by the parties hereto (the "Closing Date"). 1.03 Effective Time. At the Closing, a certificate of merger (the "Certificate of Merger") shall be duly prepared and executed by the Constituent Corporations and thereafter delivered to the Secretary of State of the State of Ohio (the "Secretary of State") for filing, as provided in Section 1701.81 of the OGCL, as soon as practicable on the Closing Date. The Merger shall become effective at the time of the filing of the Certificate of Merger with the Secretary of State (the date and time of such filing being referred to herein as the "Effective Time"). 1.04 Articles of Incorporation and Code of Regulations of the Surviving Corporation. At the Effective Time, (i) the Articles of Incorporation of Sub as in effect immediately prior to the Effective Time shall be amended so that the name of Sub shall be changed to Belden & Blake Corporation, and, as so amended, such Articles of Incorporation shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as provided by law and such Articles of Incorporation, and (ii) the Code of Regulations of Sub (the "Regulations") as in effect immediately prior to the Effective Time shall be the Regulations of the Surviving Corporation until thereafter amended as provided by law, the Articles of Incorporation of the Surviving Corporation and such Regulations. 1.05 Directors and Officers of the Surviving Corporation. The directors and officers of Sub immediately prior to the Effective Time and such other individuals specified by the Board of Directors of Sub as officers prior to the Effective Time shall, from and after the Effective Time, be the directors and officers, respectively, of the Surviving Corporation until their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Articles of Incorporation and Regulations. 1.06 Effects of the Merger. Subject to the foregoing, the effects of the Merger shall be as provided in the applicable provisions of the OGCL. 1.07 Performance Deposit. (a) Within 10 days after the date of this Agreement, Parent shall deposit with J. P. Morgan Trust Company, N.A. (the "Escrow Agent") a cash performance deposit in the amount of $5,000,000 (the "Performance Deposit"), and Parent, the Company and the Escrow Agent shall enter into an escrow agreement in substantially the form of Exhibit B providing for the payment of the Performance Deposit by the Escrow Agent in accordance with the provisions of this Section 1.07. Parent and the Company mutually covenant and agree that, absent their mutual agreement to the contrary, (i) if the Merger is consummated, the Performance Deposit and all interest thereon shall be paid by the Escrow Agent to Parent, (ii) if this Agreement is terminated by Parent, Sub and the Company pursuant to Section 8.01(a), the 2 Performance Deposit and all interest thereon shall be paid by the Escrow Agent to Parent, (iii) if this Agreement is terminated by Parent pursuant to Section 8.01(b), Section 8.01(d) or Section 8.01(f), the Performance Deposit and all interest thereon shall be paid by the Escrow Agent to Parent, (iv) if this Agreement is terminated by the Company pursuant to Section 8.01(b)(i), (ii) or (iv) or Section 8.01(c), the Performance Deposit and all interest thereon shall be paid by the Escrow Agent to Parent, and (v) if this Agreement is terminated by the Company pursuant to Section 8.01(b)(iii) or Section 8.01(e), then the Performance Deposit and all interest thereon shall be paid by the Escrow Agent to the Company. (b) The payment of the Performance Deposit to the Company pursuant to Section 1.07(a) shall constitute a termination fee or liquidated damages and the sole and exclusive remedy (including, without limitation, any remedy otherwise available at law or in equity) of the Company in respect of the subject matter of this Agreement as against the Parent, Sub or any of their respective partners, affiliates, control persons, agents or representatives (collectively, the "Covered Parties"), and if the Performance Deposit is returned to Parent, the Covered Parties shall not be liable for any amounts in excess of the Performance Deposit in respect of the subject matter of this Agreement. The provisions of this Section 1.07(b) shall not affect or otherwise limit any of the Company's rights or remedies, whether at law or in equity, as against the Parent or any Covered Party as a result of a breach or threatened breach of the Confidentiality Agreement. 1.08 Further Assurances. Each party hereto will, either prior to or after the Effective Time, execute such further documents, instruments, deeds, bills of sale, assignments and assurances and take such further actions as may reasonably be requested by one or more of the others to consummate the Merger, to vest the Surviving Corporation with full right and title to, and, as applicable, possession of, all assets, properties, privileges, rights, immunities, authority and franchises of either of the Constituent Corporations or to effect the other purposes of this Agreement. ARTICLE II CONVERSION OF SHARES 2.01 Conversion of Capital Shares. At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof: (a) Conversion of Sub Shares. Each issued and outstanding common share, without par value, of Sub ("Sub Common Shares") shall be converted into and become one fully paid and nonassessable common share, without par value, of the Surviving Corporation ("Surviving Corporation Common Shares"). Each certificate representing outstanding Sub Common Shares shall at the Effective Time represent an equal number of Surviving Corporation Common Shares. (b) Cancellation of Treasury Shares and Shares Owned by Parent and Subsidiaries. All common shares, without par value, of the Company ("Company Common Shares") that are owned by the Company as treasury shares and any Company Common Shares 3 owned by Parent, Sub or any other wholly-owned Subsidiary (as defined in Section 9.11) of Parent shall be canceled and retired and shall cease to exist and no stock of Parent or other consideration shall be delivered in exchange therefor. (c) Exchange Ratio for Company Common Shares. (i) Each issued and outstanding Company Common Share (other than shares to be canceled in accordance with Section 2.01(b) and other than Dissenting Shares (as defined in Section 2.01(d))) shall be converted into the right to receive the merger price per share as determined in accordance with Annex I attached hereto (the "Merger Price"). If between the date of this Agreement an the Effective Time, the Company shall split, combine or otherwise reclassify any capital stock of the Company, or pay a stock dividend or other stock distribution in any shares of capital stock of the Company, or otherwise change the capital stock of the Company into other securities, or make any other such stock dividend or distribution in respect of the capital stock of the Company, the Merger Price shall be correspondingly adjusted to reflect such action. (ii) Each issued and outstanding Company Common Share (other than shares to be canceled in accordance with Section 2.01(b)) shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive either (x) the Merger Price per share, upon the surrender of such certificate in accordance with Section 2.02(c)(i), without interest, subject to any applicable withholding tax, or (y) payment of fair cash value thereof for Dissenting Shares, upon the proper exercise thereof, as defined in Section 2.01(d). (d) Dissenting Shares. (i) Notwithstanding anything in this Agreement to the contrary, each outstanding Company Common Share that is held of record by a holder who has properly exercised dissenters' rights with respect thereto under Section 1701.85 of the OGCL (a "Dissenting Share"), shall automatically be canceled but shall not be converted into or represent the right to receive the Merger Price pursuant to Section 2.01(c), but the holder thereof shall be entitled to receive such payment of the fair cash value of such Company Common Share from the Surviving Corporation as shall be determined pursuant to Section 1701.85 of the OGCL; provided, however, that if any such holder shall have failed to perfect or shall withdraw or lose such holder's rights under Section 1701.85 of the OGCL, each such holder's Company Common Shares shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Merger Price, without any interest thereon, pursuant to Section 2.01(c ). (ii) The Company shall give Parent (x) prompt notice of any written demands for payment of the fair cash value of shares, withdrawals of such demands and any other instruments delivered pursuant to Section 1701.85 of the OGCL and (y) the opportunity to jointly participate with the Company in all negotiations and proceedings with respect to demands for payment under Section 1701.85 the OGCL. The Company will not voluntarily make any payment with respect to any demands delivered to the Company pursuant to Section 1701.85 and will not, except with the prior written consent of Parent, settle or offer to settle any such demands. (e) Stock Option Plans. (i) Subject to paragraph (ii) below, as of the Effective Time, each outstanding option to acquire Company Common Shares (the "Company Options") 4 granted under any agreement or Company Option Plan (as defined in Section 3.02(a)), whether or not then exercisable, shall be cancelled by the Company and in consideration of such cancellation, the holder thereof shall be entitled to receive from the Company at the Effective Time an amount in respect thereof equal to the product of (A) the excess, if any, of the Merger Price per share over the per share exercise price thereof and (B) the number of Company Common Shares subject thereto (the "Option Amount") (such payment to be net of applicable withholding taxes). Notwithstanding the foregoing, if the Merger Price includes an Arrow Contingent Distribution Right (as such term is defined in Annex I attached hereto), that portion of the Option Amount shall be distributed to the holders of the cancelled options after the Effective Time at approximately the same time as that portion of the Merger Price is distributed to shareholders. Prior to the Effective Time, the Company shall deposit in a bank account not within the Company's control an amount of cash equal to the Option Amount (provided, however, if the Merger Price includes an Arrow Contingent Distribution Right, that portion of the Option Amount shall not be deposited in a bank account prior to the Effective Time) for each Company Option then outstanding (subject to any applicable withholding tax), together with instructions that such cash be promptly distributed following the Effective Time to the holders of such Company Options in accordance with this Section 2.01(e) (including instructions directing that such distributions be made via wire transfers of immediately available funds to holders of Company Options immediately after the Effective Time on the Closing Date to those holders of Company Options who provide the third party payer with all necessary information to effect such wire transfers). (ii) After the date of this Agreement and prior to the Closing Date, the Company shall use its reasonable best efforts and otherwise take all actions reasonably necessary to implement the cancellation and cash-out of the Company Options as provided for in this Section 2.01(e), including seeking the consent of option holders to the cancellation of such options. 2.02 Exchange of Certificates. (a) Payment Agent. At the Closing, Parent shall deposit with a bank or trust company designated before the Closing Date by Parent and reasonably acceptable to the Company (the "Payment Agent"), a cash amount equal to the aggregate Merger Price to which holders of Company Common Shares shall be entitled upon consummation of the Merger, to be held for the benefit of and distributed to such holders in accordance with this Section. Notwithstanding the foregoing, if the Merger Price includes an Arrow Contingent Distribution Right, that portion of the Merger Price shall not deposited with the Payment Agent at the Closing, but the Parent shall deposit with the Payment Agent the aggregate amount of the Arrow Contingent Distribution Right at such time as such amount is determined in accordance with Annex I. The Payment Agent shall agree to hold such funds (such funds, together with earnings thereon, being referred to herein as the "Payment Fund") for delivery as contemplated by this Section and upon such additional terms as may be agreed upon by the Payment Agent, the Company and Parent. If for any reason (including losses) the Payment Fund is inadequate to pay the cash amounts to which holders of Company Common Shares shall be entitled, Parent and the Surviving Corporation shall in any event remain liable, and shall make available to the Payment Agent additional funds, for the payment thereof. The Payment Fund shall not be used for any purpose except as expressly provided in this Agreement. 5 (b) Exchange Procedures. As soon as reasonably practicable after the Effective Time but in any event not later than three business days thereafter, the Parent shall cause the Payment Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding Company Common Shares (the "Certificates") whose shares are converted pursuant to Section 2.01(c) into the right to receive the Merger Consideration (as defined below) (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Payment Agent and shall be in such form and have such other provisions as the Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Parent will use its reasonable efforts to cause provision to be made for holders of Certificates to procure in person immediately after the Effective Time a letter of transmittal and instructions and to deliver in person immediately after the Effective Time such letter of transmittal and Certificates in exchange for the Merger Price for each Company Common Share represented by such Certificates. Upon surrender of a Certificate or Certificates for cancellation to the Payment Agent, together with such letter of transmittal duly executed and completed in accordance with its terms, the holder of such Certificate or Certificates shall be entitled to receive in exchange therefor a check in an amount equal to the Merger Price multiplied by the number of shares of Company Common Shares formerly represented by the surrendered Certificate(s) (the "Merger Consideration"), subject to any applicable withholding tax, which such holder has the right to receive pursuant to the provisions of this Article II, and the Certificate(s) so surrendered shall forthwith be canceled. Notwithstanding the foregoing, if the Merger Price includes an Arrow Contingent Distribution Right, the holder of such Certificate or Certificates shall be entitled to receive that portion of the Merger Price attributable to the Arrow Contingent Distribution Right at such time as the aggregate amount of the Arrow Contingent Distribution Right is determined in accordance with Annex I. In no event shall the holder of any Certificate be entitled to receive interest on any funds to be received in the Merger, including any interest accrued in respect of the Payment Fund. In the event of a transfer of ownership of Company Common Shares prior to the Effective Time which is not registered in the transfer records of the Company, the Merger Consideration may be issued to a transferee if the Certificate representing such Company Common Shares is presented to the Payment Agent accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 2.02(b), each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration as contemplated by this Article II, together with the dividends, if any, which may have been declared by the Company on the Company Common Shares in accordance with the terms of this Agreement and which remain unpaid at the Effective Time. Parent and the Surviving Corporation shall pay all fees and expenses of the Payment Agent in connection with the distribution of the Merger Consideration. (c) No Further Ownership Rights in Company Common Shares. All cash paid upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the Company Common Shares represented thereby, subject, however, to the Surviving Corporation's obligation to pay any dividends which may have been declared by the Company on such shares of Company 6 Common Shares in accordance with the terms of this Agreement and which remained unpaid at the Effective Time. Unless otherwise required by Section 1701.85 of the OGCL, from and after the Effective Time, the share transfer books of the Company shall be closed and there shall be no further registration of transfers on the share transfer books of the Surviving Corporation of the Company Common Shares which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates (other than Certificates representing Dissenting Shares) are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Section. (d) Termination of Payment Fund. Any portion of the Payment Fund which remains undistributed to the shareholders of the Company for six (6) months after the Effective Time shall be delivered to the Parent, upon demand, and any shareholders of the Company who have not theretofore complied with this Article II shall thereafter look only to the Parent (subject to abandoned property, escheat and other similar laws) as general creditors for payment of their claim for the Merger Price per share (without interest). Neither Parent nor the Surviving Corporation shall be liable to any holder of Company Common Shares for cash representing the Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (e) Withholding Rights. Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Shares such amounts as Parent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of state, local or foreign tax law. To the extent that amounts are so withheld by Parent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Company Common Shares in respect of which such deduction and withholding was made by Parent. (f) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Payment Agent shall issue in exchange for such lost, stolen or destroyed Certificate the Merger Consideration with respect to the Company Common Shares evidenced by such Certificate. 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as publicly disclosed with reasonable specificity by the Company in the Company SEC Reports (as defined in Section 3.05) filed with the Securities and Exchange Commission (the "SEC") prior to the date of this Agreement (excluding the exhibits thereto) and except as set forth on the disclosure letter (each section of which qualifies the correspondingly numbered representation and warranty or covenant to the extent specified therein, provided that any disclosure set forth with respect to any particular section shall be deemed to be disclosed in reference to all other applicable sections of this Agreement if the disclosure in respect of the particular section is sufficient on its face without further inquiry reasonably to inform Parent of the information required to be disclosed in respect of the other sections to avoid a breach under the representation and warranty or covenant corresponding to such other sections) dated the date hereof and delivered to Parent and Sub by the Company concurrently with the execution and delivery of this Agreement (the "Company Disclosure Letter"), the Company hereby represents and warrants to Parent and Sub as follows: 3.01 Organization and Qualification. Each of the Company and its Subsidiaries is duly incorporated (in the case of a corporation) or duly organized (in the case a Subsidiary is a limited liability company), validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, as the case may be, and has full corporate or limited liability company, as the case may be, power and authority to conduct its business as and to the extent now conducted and to own, use and lease its assets and properties. Each of the Company and its Subsidiaries is duly qualified, licensed or admitted to do business and is in good standing in each jurisdiction in which the ownership, use or leasing of its assets and properties, or the conduct or nature of its business, makes such qualification, licensing or admission necessary, except for such failures to be so qualified, licensed or admitted and in good standing which, individually or in the aggregate, do not have and would not have a Company Material Adverse Effect (as defined in Section 9.11). Section 3.01 of the Company Disclosure Letter sets forth (i) the name and jurisdiction of incorporation or organization of each Subsidiary of the Company, (ii) its authorized capital shares (if a corporation), (iii) the number of issued and outstanding capital shares (if a corporation) and (iv) the record owners of such shares (if a corporation) or of the membership interests (if a limited liability company). Except for interests in the Subsidiaries of the Company and as disclosed in Section 3.01 of the Company Disclosure Letter, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, limited liability company, joint venture or other business association or entity. The Company has previously delivered or made available to Parent correct and complete copies of the certificate or articles of incorporation, bylaws or code of regulations (or other comparable constituent or organizational documents) of the Company and its Subsidiaries, and each of which, as so delivered is in full force and effect. 3.02 Capitalization. (a) The authorized capital shares of the Company consists solely of 58,000,000 Company Common Shares. As of date of this Agreement, 10,458,900.487 Company Common Shares were issued and outstanding, 216,527.518 shares were held in the treasury of the Company and the only Company Common Shares reserved for issuance as of 8 such date consisted of 488,843 shares which were reserved or held for issuance pursuant to stock options agreements, including stock options outstanding under the Company's 1997 Non-Qualified Stock Option Plan, as amended (such Plan, the "Company Option Plan"). All of the issued and outstanding Company Common Shares are, and all shares reserved for issuance will be, upon issuance in accordance with the terms specified in the instruments or agreements pursuant to which they are issuable, duly authorized, validly issued, fully paid and nonassessable. Except as set forth in Section 3.02 of the Company Disclosure Letter, there are no outstanding subscriptions, options, warrants, rights (including "phantom" stock rights), preemptive rights or other contracts, commitments, understandings or arrangements, including any right of conversion or exchange under any outstanding security, instrument or agreement (together, "Options"), obligating the Company or any of its Subsidiaries to issue or sell any capital shares of the Company or to grant, extend or enter into any Option with respect thereto. Section 3.02 of the Company Disclosure Letter sets forth a true and correct schedule of all outstanding Options as of the date hereof and the exercise prices for such Options. (b) Except as disclosed in Section 3.02 of the Company Disclosure Letter, all of the outstanding capital shares of each Subsidiary of the Company that is a corporation are duly authorized, validly issued, fully paid and nonassessable and are owned, beneficially and of record, by the Company or a Subsidiary wholly owned, directly or indirectly, by the Company, free and clear of any liens, claims, mortgages, encumbrances, pledges, security interests, equities and charges of any kind (each a "Lien"). Except as disclosed in Section 3.02 of the Company Disclosure Letter, there are no (i) outstanding Options obligating the Company or any of its Subsidiaries to issue or sell any capital shares of any Subsidiary of the Company that is a corporation or to grant, extend or enter into any such Option or (ii) voting trusts, proxies or other commitments, understandings, restrictions or arrangements in favor of any person other than the Company or a Subsidiary wholly owned, directly or indirectly, by the Company with respect to the voting of or the right to participate in dividends or other earnings on any capital shares of any Subsidiary of the Company. (c) Except as disclosed in Section 3.02 of the Company Disclosure Letter, there are no outstanding contractual obligations of the Company or any Subsidiary of the Company to repurchase, redeem or otherwise acquire any Company Common Shares or any capital shares of any Subsidiary of the Company or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any Subsidiary of the Company or any other person. 3.03 Authority Relative to this Agreement. The Company has the requisite corporate power and authority to enter into this Agreement and, subject to obtaining the Company Shareholders' Approval (as defined in Section 6.02), to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of the Company. No other corporate proceedings on the part of the Company or its shareholders are necessary to authorize the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, other than obtaining the Company Shareholders' Approval. This 9 Agreement has been duly and validly executed and delivered by the Company and, subject to the obtaining of the Company Shareholders' Approval, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 3.04 Non-Contravention; Approvals and Consents. (a) Except as disclosed in Section 3.04 of the Company Disclosure Letter, the execution and delivery of this Agreement by the Company do not, and the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby will not, conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, result in or give to any person any right of payment or reimbursement, termination, cancellation, modification or acceleration of, or result in the creation or imposition of any Lien upon any of the assets or properties of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of (i) the certificates or articles of incorporation or regulations or bylaws (or other comparable charter documents) of the Company or any of its Subsidiaries, or (ii) subject to the obtaining of the Company Shareholders' Approval and the taking of the actions described in paragraph (b) of this Section 3.04, (x) any statute, law, rule, regulation or ordinance (together, "laws"), or any judgment, decree, order, writ, permit or license (together, "orders"), of any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision (a "Governmental or Regulatory Authority") applicable to the Company or any of its Subsidiaries or any of their respective assets or properties, or (y) any note, bond, mortgage, security agreement, indenture, license, contract, lease or other instrument, obligation or agreement of any kind (together, "Contracts") to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound, excluding from the foregoing clauses (x) and (y) such conflicts, violations, breaches and defaults, such rights of payment, reimbursement, termination, cancellation, modification and acceleration, and such creations and impositions of Liens, which, individually or in the aggregate, would not be reasonably expected to have a Company Material Adverse Effect. (b) No consent, approval or action of, registration or filing with, notice to or permit from any Governmental or Regulatory Authority or other public or private third party is necessary or required under any of the terms, conditions or provisions of any law or order of any Governmental or Regulatory Authority or any Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound for the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder or the consummation of the transactions contemplated hereby, except (i) for the filing of the Certificate of Merger and other appropriate merger documents required by the OGCL with the Secretary of State and appropriate documents with the relevant authorities of other states in which the Constituent Corporations are qualified to do business, (ii) as disclosed in Section 3.04 of the Company Disclosure Letter, and (iii) where the failure to make, take or obtain, as the case may be, such 10 consents, approvals, actions, registrations, filings, notices and permits would not, individually or in the aggregate, be reasonably expected to have a Company Material Adverse Effect. To the knowledge of the Company, neither the filing of a pre-merger notification report by the Company nor any other actions of the Company is required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR Act"). 3.05 SEC Reports and Financial Statements. (a) Since January 1, 2003, the Company has filed with the SEC all forms, reports, schedules, registration statements, and other documents (together with all amendments thereof and supplements thereto)(as such documents have since the time of their filing been amended or supplemented, the "Company SEC Reports") required to be filed by the Company with the SEC. As of their respective dates and giving effect to any amendments or supplements thereto filed prior to the date of this Agreement, the Company SEC Reports (i) complied as to form in all material respects with the requirements of the Securities Act of 1933, as amended, and the rules and regulations thereunder (the "Securities Act"), or the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "Exchange Act"), as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) The audited consolidated financial statements and unaudited interim consolidated financial statements (including, in each case, the notes, if any, thereto) included in the Company SEC Reports (the "Company Financial Statements") complied as to form in all material respects with the published rules and regulations of the SEC with respect thereto, were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto and except with respect to unaudited statements as permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of the unaudited interim financial statements, to normal, recurring year-end audit adjustments) the consolidated financial position of the Company and its consolidated subsidiaries as at the respective dates thereof and the consolidated results of their operations and cash flows for the respective periods then ended. Except as set forth in Section 3.05 of the Company Disclosure Letter, each Subsidiary of the Company is treated as a consolidated Subsidiary of the Company in the Company Financial Statements for all periods covered thereby. 3.06 Absence of Certain Changes or Events. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement, (a) since January 1, 2004, there has not been any change, event or development having, or that would be reasonably expected to have, individually or when aggregated with any other change(s) or event(s), a Company Material Adverse Effect, and (b) except as disclosed in Section 3.06 of the Company Disclosure Letter, between such date and the date hereof (i) the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practice and (ii) neither the Company nor any of its Subsidiaries has taken any action which, if taken after the date hereof, would constitute a breach of any provision of clause (ii) of Section 5.01(b). 11 3.07 Absence of Undisclosed Liabilities; Hedging; Accounts Receivable . (a) Except for matters reflected or reserved against in the balance sheet for the period ended December 31, 2003 included in the Company Financial Statements or as disclosed in Section 3.07(a) of the Company Disclosure Letter, neither the Company nor any of the Company Subsidiaries has any liabilities (whether accrued, absolute, contingent or otherwise) of any nature that would be required by generally accepted accounting principles to be reflected on a consolidated balance sheet of the Company and its consolidated subsidiaries (including the notes thereto), other than any liabilities incurred since December 31, 2003 which, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. (b) Except as disclosed in Section 3.07(b) of the Company Disclosure Letter, the Company and its Subsidiaries have no obligations as of the date of this Agreement for the delivery of hydrocarbons attributable to any of the Company's or any of its Subsidiaries' properties in the future on account of prepayment, advance payment, take-or-pay or similar obligations without then or thereafter being entitled to receive full value for the delivery of such hydrocarbons. Except as disclosed in Section 3.07(b) of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries is bound by futures, hedge, swap, collar, put, call, floor, cap, option or other contracts which are intended to benefit from or reduce or eliminate the risk of fluctuations in the price of commodities. (c) Neither the Company nor any of its Subsidiaries has any account receivable which exceeds $400,000 and (i) is more than ninety days past due as of April 30, 2004, (ii) is reasonably likely not to be collected by the Company or its applicable Subsidiary and (iii) as to which no specific reserve amount has been provided for and reflected on the Company's balance sheet as of March 31, 2004 previously provided to Parent. 3.08 Legal Proceedings. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement or in Section 3.08 of the Company Disclosure Letter, (i) there are no actions, suits, arbitrations or proceedings pending or, to the knowledge of the Company, threatened against, relating to or affecting, nor to the knowledge of the Company are there any Governmental or Regulatory Authority investigations or audits pending or threatened against, relating to or affecting, the Company or any of its Subsidiaries or any of their respective assets and properties which, individually or in the aggregate, have or would be reasonably expected to have a Company Material Adverse Effect, and (ii) neither the Company nor any of its Subsidiaries is subject to any order of any Governmental or Regulatory Authority which, individually or in the aggregate, has or would be reasonably expected to have a Company Material Adverse Effect. 3.09 Permits; Compliance with Laws and Orders. The Company and its Subsidiaries hold all permits, licenses, variances, exemptions, orders and approvals of all Governmental and Regulatory Authorities necessary for the lawful conduct of their respective businesses (the "Company Permits"), except for failures to hold such permits, licenses, variances, exemptions, orders and approvals which, individually or in the aggregate, do not have and would 12 not be reasonably expected to have a Company Material Adverse Effect. The Company and its Subsidiaries are in compliance with the terms of the Company Permits, except failures so to comply which, individually or in the aggregate, do not have and would not be reasonably expected to have a Company Material Adverse Effect. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement, the Company and its Subsidiaries are not in violation of or default under any law or order of any Governmental or Regulatory Authority, except for such violations or defaults which, individually or in the aggregate, do not have and would not be reasonably expected to have a Company Material Adverse Effect. Except as described in Company SEC Reports filed prior to the date of this Agreement or as disclosed in Section 3.09 of the Company Disclosure Letter, to the knowledge of the Company, no investigation or review by any Governmental and Regulatory Authority concerning any such possible violations by the Company or any of its Subsidiaries is pending or threatened, nor has any Governmental and Regulatory Authority indicated to the Company an intention to conduct any such investigation or review other than those the outcome of which would not reasonably be expected to have a Company Material Adverse Effect. 3.10 Compliance with Agreements. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement and except as set forth in Section 3.10 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any other party thereto is in breach or violation of, or in default in the performance or observance of any term or provision of, and no event has occurred which, with notice or lapse of time or both, would be reasonably expected to result in a default under, (i) the certificates or articles of incorporation or bylaws or regulations (or other comparable charter documents) of the Company or any of its Subsidiaries or (ii) any Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound, except in the case of clause (ii) for breaches, violations and defaults which, individually or in the aggregate, do not have and would not be reasonably expected to have a Company Material Adverse Effect. 3.11 Taxes. For purposes of this Agreement, "Taxes" (including, with correlative meaning, the word "Tax") shall include any and all federal, state, county, local, foreign or other taxes, charges, imposts, rates, fees, levies or other assessments imposed by any Governmental or Regulatory Authority, including, without limitation, all net income, alternative minimum, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, production, business and occupation, disability, employment, payroll, license, estimated, stamp, custom duties, severance, withholding or other taxes, fees, assessments or other similar charges of any kind whatsoever, together with any interest and penalties (civil or criminal) on or additions to any such taxes. Except as specifically identified in Section 3.11 of the Company Disclosure Letter: (a) Each of the Company and its Subsidiaries has filed all Tax returns and reports required to be filed by or on behalf of it, or requests for extensions to file such returns or reports have been timely filed or granted and have not expired, and all such Tax returns and reports are complete and accurate in all respects, except to the extent that such failures (i) to file, (ii) to have extensions granted that remain in effect or (iii) to be complete and accurate in all 13 respects, as applicable, individually or in the aggregate, would not have a Company Material Adverse Effect. (b) The Company and each of its Subsidiaries has timely paid (or the Company has paid on its behalf) all Taxes shown as due on such Tax returns and reports. (c) The accrual for Taxes on the most recent financial statements contained in the Company SEC Reports reflects an adequate reserve for all Taxes payable by the Company and its Subsidiaries for all taxable periods and portions thereof accrued through the date of such financial statements, and no deficiencies for any Taxes have been proposed, asserted or assessed against the Company or any of its Subsidiaries that are not adequately reserved for, except for inadequately reserved Taxes and inadequately reserved deficiencies that would not, individually or in the aggregate, have a Company Material Adverse Effect. No material Tax liability since the date of such financial statements has been or will be incurred by the Company or its Subsidiaries other than in the ordinary course of business, and adequate provision has been made by the Company for all Taxes since that date in accordance with generally accepted accounting principles on at least a quarterly basis. (d) No requests for waivers of the time to assess any Taxes against the Company or any of its Subsidiaries have been granted or are pending, except for requests with respect to such Taxes that have been adequately reserved for in the most recent financial statements contained in the Company SEC Reports. (e) No audits or other proceedings by any Governmental or Regulatory Authority are presently pending, or, to the knowledge of the Company or any of its Subsidiaries, threatened, with regard to any Taxes or Tax returns or reports of the Company or any of its Subsidiaries. (f) The Company has made available to Parent complete and accurate copies of (i) all material Tax returns or reports for open years, and any amendments thereto, filed by or on behalf of the Company or any of its Subsidiaries, (ii) all audit reports or written proposed adjustments (whether formal or informal) received from any Governmental or Regulatory Authority relating to any Tax return or report filed by or on behalf of the Company or any of its Subsidiaries and (iii) any Tax ruling or request for a Tax ruling applicable to the Company or any of its Subsidiaries and closing agreements entered into by the Company or any of its Subsidiaries. (g) Neither the Company nor any of its Subsidiaries (i) is a party to, is bound by, or has any obligation under, any agreement relating to the allocation or sharing of Taxes or has any liability for the Taxes of any person other than the Company or its Subsidiaries, as a transferee, or successor or otherwise (including, without limitation, any liability under Treasury Regulations Section 1.1502-6 or any similar provision of state, local or foreign law), (ii) has made any, or is obligated to make any, payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that under Code Section 280G will not be deductible, or (iii) has ever been a member of an affiliated group of corporations (within the meaning of Code Section 1504(a)) filing consolidated Tax returns, other than the affiliated group of which the Company is the common parent. 14 (h) To the knowledge of the Company, each of the Company and its Subsidiaries has disclosed on its federal income Tax returns each position taken therein that could give rise to a substantial understatement of United States federal income Tax within the meaning of Code Section 6662. (i) There are no liens relating to material Taxes upon the assets of the Company or any Subsidiary other than liens relating to Taxes not yet due or liens for which adequate reserves have been established. (j) No state or federal "net operating loss" of the Company or its Subsidiaries determined as of the Effective Time is subject to limitation on its use pursuant to Code Section 382 or comparable provisions of state law as a result of any "ownership change" within the meaning of Code Section 382(g) occurring prior to the Effective Time. 3.12 Employee Benefit Plans; ERISA. (a) Except as disclosed in Section 3.12 of the Company Disclosure Letter or as would not have a Company Material Adverse Effect, (i) all Company Employee Benefit Plans (as defined below) are and have been maintained in compliance with all applicable requirements of law, including without limitation ERISA (as defined below) and the Code, and (ii) neither the Company nor any of its Subsidiaries has any liabilities with respect to any such Company Employee Benefit Plans, whether accrued, contingent or otherwise, nor to the knowledge of the Company are any such liabilities expected to be incurred other than contribution obligations and payment of benefits arising in the normal course under any Company Employee Benefit Plan. Section 3.12(a)(1) of the Company Disclosure Letter lists all Company Employee Benefit Plans. Except as specifically disclosed in Section 3.12(a)(2) of the Company Disclosure Letter, the execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Employee Benefit Plan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. The only severance agreements or severance policies applicable to the Company or any of its Subsidiaries are the agreements and policies specifically referred to in Section 3.12(a)(3) of the Company Disclosure Letter. Each Company Employee Benefit Plan intended to be qualified under Section 401(a) of the Code is so qualified, has received a favorable determination letter from the IRS, and nothing has occurred that could adversely affect such determination. (b) As used herein: (i) "Company Employee Benefit Plan" means any Plan entered into, established, maintained, sponsored, contributed to or required to be contributed to by the Company or any of its Subsidiaries for the benefit of the current or former employees or directors of the Company or any of its Subsidiaries and existing (A) on the date of this Agreement, (B) at any time subsequent thereto, (C) on or prior to the Effective Time and (D) in the case of a Plan which is subject to Part 3 of Title I of the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations thereunder 15 ("ERISA"), Section 412 of the Code or Title IV of ERISA, at any time during the five-year period immediately preceding the date of this Agreement; and (ii) "Plan" means any employment, bonus, incentive compensation, deferred compensation, long term incentive, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, medical, accident, disability, workmen's compensation or other insurance, severance, separation, termination, change of control or other benefit plan, agreement, practice, policy, program, scheme or arrangement, whether written or oral, including, but not limited to any "employee benefit plan" within the meaning of Section 3(3) of ERISA. (iii) "ERISA Affiliate" means any person, who on or before the Effective Time, is under common control with the Company within the meaning of Section 414 of the Code. (c) Complete and correct copies of the following documents have been made available to Parent, as of the date of this Agreement: (i) all material Company Employee Benefit Plans and any related trust agreements or insurance contracts, (ii) the most current summary plan descriptions of each Company Employee Benefit Plan subject to the requirement to give a summary plan description under ERISA, (iii) the most recent Form 5500 and Schedules thereto for each Company Employee Benefit Plan subject to such reporting, (iv) the most recent determination of the Internal Revenue Service with respect to the qualified status of each Company Employee Benefit Plan that is intended to qualify under Section 401(a) of the Code, (v) the most recent accountings with respect to each Company Employee Benefit Plan funded through a trust and (vi) the most recent actuarial report of the qualified actuary of each Company Employee Benefit Plan with respect to which actuarial valuations are conducted. (d) Except as disclosed in Section 3.12(d) of the Company Disclosure Letter, neither the Company nor any Subsidiary maintains or is obligated to provide benefits under any life, medical or health Plan (other than as an incidental benefit under a Plan qualified under Section 401(a) of the Code) which provides benefits to retirees or other terminated employees other than benefit continuations rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. (e) Except as set forth in Section 3.12(e) of the Company Disclosure Letter, each Company Employee Benefit Plan covers only employees who are employed by the Company or a Subsidiary (or former employees or beneficiaries with respect to service with the Company or a Subsidiary) or directors of the Company, so that the transactions contemplated by this Agreement will require no spin-off of assets and liabilities or other division or transfer of rights with respect to any such plan. (f) Neither the Company, any Subsidiary, any ERISA Affiliate nor any other corporation or organization controlled by or under common control with any of the foregoing within the meaning of Section 4001 of ERISA has at any time contributed to any "multiemployer plan", as that term is defined in Section 4001 of ERISA. 16 (g) No event has occurred, and there exists no condition or set of circumstances in connection with any Company Employee Benefit Plan or any Plan sponsored by an ERISA Affiliate, under which the Company or any Subsidiary, directly or indirectly (through any indemnification agreement or otherwise), would reasonably be expected to be subject to any risk of material liability under Section 409 of ERISA, Section 502(i) of ERISA, Title IV of ERISA or Section 4975 of the Code. (h) Except for payments made or to be made in the manner contemplated by Section 6.05(b), no payments requiring shareholder approval according to the requirements of Treasury Regulation Section 1.280G have been submitted to the Company's shareholders for, or have received, such approval. 3.13 Labor Matters. Except as disclosed in Section 3.13 of the Company Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement with any labor union, confederation or association and there are no discussions, negotiations, demands or proposals that are pending or have been conducted or made with or by any labor union, confederation or association regarding organizational activities since January 1, 2004. Except as disclosed in the Company SEC Reports filed prior to the date of this Agreement or in Section 3.13 of the Company Disclosure Letter, there are no material controversies pending or, to the knowledge of the Company, threatened between the Company or any of its Subsidiaries and any representatives of its employees and, to the knowledge of the Company, there are no material organizational efforts presently being made involving any of the now unorganized employees of the Company or any of its Subsidiaries. Since January 1, 2004, there has been no work stoppage, strike or other concerted action by employees of the Company or any of its Subsidiaries. During that period, the Company and its Subsidiaries have complied in all material respects with all applicable laws relating to the employment of labor, including, without limitation, those relating to wages, hours and collective bargaining. 3.14 Environmental Matters. (a) The operations of the Company and its Subsidiaries, including the transportation, treatment, storage, handling, transfer, disposition, recycling or receipt of materials, are in substantial compliance with all applicable legal requirements, laws, rules, orders and regulations related to environmental, natural resource, health or safety matters ("Environmental Laws"), including but not limited to those promulgated, adopted or enforced by the United States Environmental Protection Agency and by similar agencies in states in which the Company or its Subsidiaries conduct their business, except where the failure to comply would not have a Company Material Adverse Effect and except for routine leaks and spills at individual well sites and meter locations. Neither the Company nor any of its Subsidiaries is a party to, or has received notice of, any suit, action, claim, investigation or proceeding now pending before any court, governmental agency or board or other forum or, to the knowledge of the Company, is threatened by any person to be made a party to any such suit, action, claim, investigation or proceeding, which (i) alleges noncompliance with any Environmental Law, (ii) relates to the discharge or release into the environment of any hazardous material, pollutant, or waste at or on a site presently or formerly owned, leased or operated by the Company or any Subsidiary, or (iii) involves the transportation, treatment, storage, handling, transfer, disposition, recycling or receipt of hazardous materials, which if determined adversely to the Company or such Subsidiary would have a Company Material Adverse Effect. 17 (b) Each of the Company and its Subsidiaries holds all material permits, licenses and approvals of governmental authorities and agencies necessary for the use and operation of its business and is in substantial compliance with such permits, licenses and approvals. (c) Neither the Company nor any of its Subsidiaries has been notified that it is a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 or any similar federal, state or local law. (d) Neither the Company nor any of its Subsidiaries has entered into or agreed to any consent decree or order, and is not subject to any judgment, decree or order, relating to compliance with, or cleanup of substances regulated under, any applicable Environmental Law. (e) To the knowledge of the Company, (i) the reserves reflected in the balance sheet relating to environmental matters were adequate under generally accepted accounting principles as of December 31, 2003, and neither the Company nor any of its Subsidiaries has incurred any material liability in respect of any environmental matter since that date that is not covered by insurance, and (ii) the Company SEC Reports include all material information relating to environmental matters required to be included in such reports under the rules and regulations of the SEC applicable thereto. 3.15 Reserve Reports. The Company has furnished to Parent the Company's estimate of Company's and Company Subsidiaries' oil and gas reserves as of January 1, 2004, determined by Wright & Company, Inc. (the "Company Reserve Report"). In connection with the preparation of the Company Reserve Report, the Company made available to Wright & Company, Inc. all material information then in the Company's possession to enable Wright & Company to determine such estimate as of January 1, 2004. Except as would not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, the factual, non-interpretive data on which the Company Reserve Reports were based for purposes of estimating the oil and gas reserves set forth in the Company Reserve Report was accurate. Since the date of the Company Reserve Report, there have been (i) no material adverse changes in the information provided to the engineers and (ii) no material adverse changes that, when aggregated with other changes, would cause or be reasonably likely to cause a materially adverse revision to the estimates of aggregate oil and gas quantities reflected in the Company Reserve Report or the estimated future net cash flows to be received from such quantities as reflected in the Company Reserve Report, except for (w) production of oil, gas and other hydrocarbons in the ordinary course of business, (x) changes which adversely affect the oil and gas exploration and development industry generally (including, without limitation, changes in commodity prices, general market prices and regulatory changes), (y) changes that arise out of general economic or industry conditions or (z) those matters reflected on Section 3.15 of the Company Disclosure Letter. With the exception of the express terms of the warranties set forth in this Section 3.15, the Company makes no warranty, express or implied, with respect to the Company Reserve Report, including, without limitation, any conclusions, opinions, projections, assumptions or judgments set forth in the Company Reserve Report. 18 3.16 Broker's and Finder's Fees. Except as set forth in Section 3.16 of the Company Disclosure Letter, no agent, broker, finder, investment banker, person or firm acting on behalf of the Company or any Company Subsidiary or under the Company's or any Company Subsidiary's authority is or will be entitled to any advisory, commission or broker's or finder's fee or commission from any of the parties hereto in connection with any of the transactions contemplated hereby. 3.17 Insurance. Section 3.17 of the Company Disclosure Letter lists all insurance policies currently maintained by the Company or any of its Subsidiaries. There is no default by the Company or any Subsidiary with respect to any provision contained in any such insurance policy which would permit the denial of coverage or cancellation of coverage thereunder, except for defaults or failures which, individually or in the aggregate, would not have a Company Material Adverse Effect. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Sub, jointly and severally, represent and warrant to the Company as follows: 4.01 Organization and Qualification. Parent is a duly formed Delaware limited partnership, and Sub is a duly incorporated Ohio corporation. Each of Parent and Sub are validly existing and in good standing under the laws of its jurisdiction of formation or incorporation, as the case may be, and has full partnership or corporate power and authority, as the case may be, to conduct its business as and to the extent now conducted and to own, use and lease its assets and properties. Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities, has conducted its operations only as contemplated hereby and has no material liabilities. Parent has previously delivered to the Company correct and complete copies of the certificate of limited partnership and partnership agreement of Parent, the articles of incorporation and regulations of the Sub and any other comparable organizational documents of Parent, each of which as so delivered is in full force and effect. 4.02 Authority Relative to this Agreement. Each of Parent and Sub has the requisite partnership or corporate power and authority, as the case may be, to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Sub and the consummation by each of Parent and Sub of the transactions contemplated hereby have been duly and validly approved by (a) the general partner of the Parent, (b) the Board of Directors of the Sub and (c) by the Parent in its capacity as the sole shareholder of Sub, and no other partnership or corporate proceedings on the part of either of Parent or Sub or their respective partners or shareholders are necessary to authorize the execution, delivery and performance of this Agreement by Parent and Sub and the consummation by Parent and Sub of the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Parent and Sub and constitutes a legal, valid and 19 binding obligation of each of Parent and Sub enforceable against each of Parent and Sub in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4.03 Non-Contravention; Approvals and Consents. (a) The execution and delivery of this Agreement by each of Parent and Sub do not, and the performance by each of Parent and Sub of its obligations hereunder and the consummation of the transactions contemplated hereby will not, conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, result in or give to any person any right of payment or reimbursement, termination, cancellation, modification or acceleration of, or result in the creation or imposition of any Lien upon any of the assets or properties of Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of (i) the certificate of limited partnership or partnership agreement of the Parent, the articles of incorporation or regulations of Sub or any other comparable constituent or organizational documents of Parent or any of its Subsidiaries, or (ii) subject to the taking of the actions described in paragraph (b) of this Section, (x) any laws or orders of any Governmental or Regulatory Authority applicable to Parent or any of its Subsidiaries or any of their respective assets or properties, or (y) any Contracts to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or any of their respective assets or properties is bound, excluding from the foregoing clauses (x) and (y) conflicts, violations, breaches, defaults, terminations, cancellations, modifications, accelerations and creations and impositions of Liens which, individually or in the aggregate, would not be reasonably expected to have a material adverse effect on the Parent and Sub, taken as a whole, or the ability of Parent and Sub to consummate the transactions contemplated by this Agreement. (b) Except for the filing of the Certificate of Merger and other appropriate merger documents required by the OGCL with the Secretary of State and appropriate documents with the relevant authorities of other states in which the Constituent Corporations are qualified to do business, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or other public or private third party is necessary or required under any of the terms, conditions or provisions of any law or order of any Governmental or Regulatory Authority or any Contract to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or any of their respective assets or properties is bound for the execution and delivery of this Agreement by each of Parent and Sub, the performance by each of Parent and Sub of its obligations hereunder or the consummation of the transactions contemplated hereby, other than such consents, approvals, actions, filings and notices which the failure to make or obtain, as the case may be, individually or in the aggregate, would not be reasonably expected to have a material adverse effect on the ability of Parent and Sub to consummate the transactions contemplated by this Agreement. To the knowledge of Parent and Sub, neither the filing of a pre-merger notification report by Parent nor any other actions of Parent is required under the HSR Act. 20 4.04 Ownership of Company Common Shares. Neither Parent nor any of its Subsidiaries or other affiliates beneficially owns any Company Common Shares. 4.05 Legal Proceedings. There are no actions, suits, arbitrations or proceedings pending or, to the knowledge of Parent or Sub, threatened against, relating to or affecting, nor to the knowledge of Parent or Sub are there any Governmental or Regulatory Authority investigations or audits pending or threatened against, relating to or affecting, Parent or any of its Subsidiaries or any of their respective assets and properties which, individually or in the aggregate, would be reasonably expected to have a material adverse effect on the ability of Parent and Sub to consummate the transactions contemplated by this Agreement, and neither Parent nor any of its Subsidiaries is subject to any order of any Governmental or Regulatory Authority which, individually or in the aggregate, would be reasonably expected to have a material adverse effect on the ability of Parent and Sub to consummate the transactions contemplated by this Agreement. 4.06 Capitalization of Sub. The authorized capital stock of Sub consists of one thousand five hundred (1,500) shares of common stock, no par value per share, all of which shares, as of the date of this Agreement, are validly issued and outstanding, fully paid and nonassessable and are owned by Parent free and clear of all Liens. 4.07 Financing. Parent and Sub have delivered to the Company copies of a commitment letter obtained by Parent from Carlyle/Riverstone Global Energy and Power Fund II, L.P. relating to an equity contribution and a commitment letter obtained by Parent and Sub relating to debt facilities (the "Debt Financing") to be incurred at Closing to consummate the transactions contemplated by this Agreement, and, subject to the terms of such commitment letters, Parent will have immediately prior to the Closing all funds necessary (a) to perform its obligations under this Agreement, including the payment of the amounts required under Article II of this Agreement, (b) to satisfy and discharge the Company's indebtedness under the Amended and Restated Credit Agreement dated as of August 23, 2000 among the Company, the lender parties thereto, Ableco Finance LLC, as collateral agent and as administrative agent, and Foothill Capital Corporation, as funding agent, as amended to date (the "Credit Agreement") and (c) to satisfy, discharge or otherwise assume the obligations of the Company under the Indenture dated as of June 27, 1997 between LaSalle National Bank, as trustee, the Company, as issuer, and the various Subsidiary guarantors, as amended to date (the "Indenture"), including the obligation to offer to repurchase notes issued under the Indenture following the change in control of the Company under Section 4.13 of the Indenture. ARTICLE V COVENANTS OF THE COMPANY 5.01 Covenants of the Company. At all times from and after the date hereof until the Effective Time, the Company covenants and agrees as to itself and its Subsidiaries that (except as expressly contemplated or permitted by this Agreement, or to the extent that Parent shall otherwise previously consent in writing): 21 (a) Ordinary Course. The Company and each of its Subsidiaries shall conduct their respective businesses only in, and neither the Company nor any such Subsidiary shall take any action except in, the ordinary course consistent with past practice. (b) Without limiting the generality of paragraph (a) of this Section, (i) the Company and its Subsidiaries shall use all commercially reasonable efforts to preserve intact in all material respects their present business organizations and reputation, to keep available the services of their key officers and employees, to maintain their assets and properties in good working order and condition, ordinary wear and tear excepted, to maintain insurance on their tangible assets and businesses in such amounts and against such risks and losses as are currently in effect, to preserve their relationships with customers and suppliers and others having significant business dealings with them and to comply in all material respects with all laws and orders of all Governmental or Regulatory Authorities applicable to them, and (ii) the Company shall not, nor shall it permit any of its Subsidiaries to, except as otherwise expressly provided for in this Agreement and except as set forth in Section 5.01(b) of the Company Disclosure Letter: (A) amend or propose to amend its certificate or articles of incorporation or bylaws or regulations (or other comparable corporate charter documents); (B) (w) declare, set aside or pay any dividends on or make other distributions in respect of any of its capital shares, except for the declaration and payment of dividends by a wholly-owned Subsidiary solely to its parent corporation, (x) split, combine, reclassify or take similar action with respect to any of its capital shares or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for its capital shares, (y) adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such liquidation or a dissolution, merger, consolidation, restructuring, recapitalization or other reorganization or (z) redeem, cancel, retire, repurchase or otherwise acquire any capital shares or any Option with respect thereto; (C) issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any of its capital shares or any Option with respect thereto, other than (i) the issuance of Company Common Shares or share appreciation or similar rights, as the case may be, pursuant to Options outstanding on the date of this Agreement and in accordance with their present terms, and (ii) the issuance of Options pursuant to the Company Option Plan, in each case in accordance with their present terms and only in connection with the hiring of new employees, and the issuance of Company Common Shares upon exercise of such options; (D) except for transactions provided for in or contemplated by the most recent business operating plan of the Company furnished to Parent (the "Company Business Plan"), acquire (by merging or consolidating with, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner) any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets other than inventory and other assets to be sold or used in the ordinary course of business consistent with past practice; 22 (E) sell, lease, grant any security interest in or otherwise dispose of or encumber any of its assets or properties, other than (i) sales of inventory in the ordinary course of business consistent with past practice, (ii) to the extent provided for in the Company Business Plan, and (iii) to the extent such transactions are not material to the Company or its Subsidiaries; (F) except for (i) the canceling of Company Options and vesting of all unvested Company Options as contemplated by Section 2.01(e), (ii) the severance and retention payments described in Section 6.05(b), and (iii) the employment agreement with Schwager described in Section 6.05(a), enter into, adopt, amend in any material respect (except as may be required by applicable law) or terminate any Company Employee Benefit Plan or other agreement, arrangement, plan or policy between the Company or one of its Subsidiaries and one or more of its directors, officers or employees, or, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits or compensation expense to the Company and its Subsidiaries taken as a whole, increase in any manner the compensation or fringe benefits of any director, officer or employee or pay any benefit not required by any plan or arrangement in effect as of the date hereof; (G) enter into any Contract or amend or modify any existing Contract, or engage in any new transaction outside the ordinary course of business consistent with past practice or not on an arm's length basis, with any affiliate of the Company or any of its Subsidiaries; (H) make any change in the lines of business in which it participates or is engaged; or (I) enter into any Contract, commitment or arrangement to do or engage in any of the foregoing. (c) Advice of Changes. The Company shall confer on a regular and frequent basis with Parent with respect to its business and operations and other matters relevant to the Merger, and shall promptly advise Parent, orally and in writing, of any change or event, including, without limitation, any complaint, investigation or hearing by any Governmental or Regulatory Authority (or communication indicating the same may be contemplated) or the institution or threat of litigation, known to the Company, having, or which, insofar as can be reasonably foreseen, would have, a Company Material Adverse Effect. 5.02 No Solicitations. From the date of this Agreement until the Effective Time or, if earlier, the termination of this Agreement in accordance with its terms, the Company agrees (a) that neither it nor any of its Subsidiaries shall, and it shall use its best efforts to cause their respective Representatives (as defined in Section 9.11) not to, knowingly initiate, solicit or encourage, directly or indirectly, any inquiries or the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its shareholders) with respect to a merger, consolidation or other business combination including the Company or any of its Subsidiaries or any acquisition or similar transaction (including, without limitation, a tender or exchange offer) involving the purchase of (i) all or any significant portion of the assets of the 23 Company and its Subsidiaries taken as a whole, (ii) 10% or more of the outstanding Company Common Shares or (iii) 10% of the outstanding capital shares of any Subsidiary of the Company (any such proposal or offer being hereinafter referred to as an "Alternative Proposal"), or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any person or group relating to an Alternative Proposal (excluding the transactions contemplated by this Agreement), or otherwise facilitate any effort or attempt to make or implement an Alternative Proposal; (b) that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties with respect to any of the foregoing, and it will take the necessary steps to inform such parties of its obligations under this Section; and (c) that it will notify Parent immediately if any such inquiries, proposals or offers are received by, any such confidential information is requested from, or any such negotiations or discussions are sought to be initiated or continued with, it or any of such persons. Notwithstanding the foregoing, nothing contained in this Section 5.02 shall prohibit the Board of Directors of the Company from (i) furnishing information to (but only pursuant to a confidentiality agreement in customary form and having terms and conditions no less favorable to the Company than the Confidentiality Agreement (as defined in Section 6.01)) or entering into discussions or negotiations with, any person or group that makes an unsolicited written Alternative Proposal, if, and only to the extent that, prior to receipt of the Company Shareholders' Approval, (A) the Board of Directors of the Company, after consultation and based on advice of outside counsel, determines in good faith that such action is required for the Board of Directors to comply with its fiduciary duties to shareholders imposed by law, (B) the Board of Directors has reasonably concluded in good faith, after consultation with its financial advisor, that such Alternative Proposal is or is reasonably likely to be more favorable to the Company's shareholders than the Merger, (C) prior to furnishing such information to, or entering into discussions or negotiations with, such person or group, the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or negotiations with, such person or group, which notice shall identify such person or group in reasonable detail, and (D) the Company keeps Parent informed of the status and substance of any such discussions or negotiations; and (ii) to the extent required, disclosing to the Company's shareholders a position with respect to a tender or exchange offer by a third party pursuant to applicable rules under the Exchange Act with regard to an Alternative Proposal or from making any similar disclosure to the extent required by applicable law. Nothing in this Section 5.02 shall (x) permit the Company to terminate this Agreement (except as specifically provided in Article VIII), (y) permit the Company to enter into any agreement with respect to an Alternative Proposal for so long as this Agreement remains in effect (it being agreed that for so long as this Agreement remains in effect, the Company shall not enter into any agreement with any person or group that provides for, or in any way facilitates, an Alternative Proposal (other than a confidentiality agreement under the circumstances described above)), or (z) affect any other obligation of the Company under this Agreement. ARTICLE VI ADDITIONAL AGREEMENTS 6.01 Access to Information; Confidentiality. The Company shall, and shall cause each of its Subsidiaries to, throughout the period from the date hereof to the Effective 24 Time, (i) provide Parent and its Representatives with full access, upon reasonable prior notice and during normal business hours, to all officers, employees, agents and accountants of the Company and its Subsidiaries and their respective assets, properties, books and records, but only to the extent that such access does not unreasonably interfere with the business and operations of the Company and its Subsidiaries, and (ii) furnish promptly to Parent (x) a copy of each report, statement, schedule and other document filed or received by the Company or any of its Subsidiaries pursuant to the requirements of federal or state securities laws and each material report, statement, schedule and other document filed with any other Governmental or Regulatory Authority, and (y) all other information and data (including, without limitation, copies of Contracts, Company Employee Benefit Plans and other books and records) concerning the business and operations of the Company and its Subsidiaries as Parent or any of such other persons reasonably may request. No investigation pursuant to this paragraph or otherwise shall affect any representation or warranty contained in this Agreement or any condition to the obligations of the parties hereto. Any such information or material obtained pursuant to this Section 6.01 that constitutes "Evaluation Material" (as such term is defined in the letter agreement dated as of June 25, 2002 between the Company and Parent (the "Confidentiality Agreement")) shall be governed by the terms of the Confidentiality Agreement. 6.02 Approval of Shareholders. (a) The Company shall, through its Board of Directors, duly call, give notice of, convene and hold a meeting of its shareholders (the "Company Shareholders' Meeting") for the purpose of, among other things, voting on the adoption of this Agreement (the "Company Shareholders' Approval") as soon as reasonably practicable after the date hereof. Subject to the exercise of fiduciary obligations as advised by outside counsel, the Company shall, through its Board of Directors, include in any materials delivered to the shareholders the recommendation of the Board of Directors of the Company that the shareholders of the Company adopt this Agreement, and shall use its best efforts to obtain such adoption. (b) Unless this Agreement has been earlier terminated in accordance with its terms, the Company shall not be relieved of its obligation under the first sentence of paragraph (a) of this Section 6.02 in the event that its Board of Directors withdraws its recommendation of this Agreement and the Merger. 6.03 Regulatory and Other Approvals. Subject to the terms and conditions of this Agreement and without limiting the provisions of Section 6.02 , each of the Company and Parent will proceed diligently and in good faith to, as promptly as practicable, (a) obtain all consents, approvals or actions of, make all filings with and give all notices to Governmental or Regulatory Authorities or any other public or private third parties required of Parent, the Company or any of their Subsidiaries to consummate the Merger and the other matters contemplated hereby, and (b) provide such other information and communications to such Governmental or Regulatory Authorities or other public or private third parties as the other party or such Governmental or Regulatory Authorities or other public or private third parties may reasonably request in connection therewith. In addition to and not in limitation of the foregoing, if any filing under the HSR Act is required, each of the parties will (x) take promptly all actions necessary to make the filings required of Parent and the Company or their affiliates under the HSR Act, (y) comply at the earliest practicable date with any request for additional information 25 received by such party or its affiliates from the Federal Trade Commission (the "FTC") or the Antitrust Division of the Department of Justice (the "Antitrust Division") pursuant to the HSR Act, and (z) cooperate with the other party in connection with such party's filings under the HSR Act and in connection with resolving any investigation or other inquiry concerning the Merger or the other matters contemplated by this Agreement commenced by either the FTC or the Antitrust Division or state attorneys general. 6.04 Indemnification; Directors' and Officers' Insurance. (a) From and after the Effective Time, Parent shall cause the Surviving Corporation to indemnify, advance expenses to, and hold harmless the present and former officers and directors of the Company and its Subsidiaries (individually, an "Indemnified Party" and collectively the "Indemnified Parties") in respect of the acts or omissions occurring prior to the Effective Time to the fullest extent provided or permitted under (i) the Company's or any Subsidiary's Articles (or Certificate) of Incorporation or Regulations (or By-laws) on the date of this Agreement, (ii) the OGCL or (iii) any agreement in effect on the date hereof. From and after the Effective Time, the Surviving Corporation shall be liable to pay and perform in a timely manner all such obligations. (b) Parent and the Surviving Corporation shall, for a period of not less than six years after the Effective Time, use its best efforts to cause to be maintained in effect, at no cost to the beneficiaries thereof, the policies of directors' and officers' liability insurance maintained by the Company and its Subsidiaries as of the date hereof (or policies of at least the same coverage and amounts containing terms that are no less advantageous to the insured parties without any gaps or lapses in coverage) with respect to acts or omissions occurring prior to the Effective Time; provided, however, that the Surviving Corporation will not be required to pay an annual premium therefore in excess of 200% of the last annual premium paid prior to the date hereof (the "Current Premium"); and, provided, further, however, that if the existing director and officer liability insurance expires, is terminated or canceled during such six-year period, the Surviving Corporation will use its best efforts to obtain as much director and officer liability insurance as can be obtained for the remainder of such period for a premium on an annualized basis not in excess of 200% of the Current Premium. (c) The obligations of Parent and the Surviving Corporation under this Section 6.04 shall survive the consummation of the Merger and shall not be terminated or modified in such a manner as to adversely affect any Indemnified Party to whom this Section 6.04 applies without the consent of such affected Indemnified Party (it being expressly agreed that the Indemnified Parties to whom this Section 6.04 applies shall be third party beneficiaries of this Section 6.04, each of whom may enforce the provisions of this Section 6.04). (d) If Parent or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 6.04. 26 6.05 Employment and Severance Agreements; Retention Plan; Severance Plans; Change in Control Plan; Bonus Plans. (a) At the Closing, the Parent shall cause the Surviving Corporation to pay in cash and provide such benefits to John L. Schwager ("Schwager") as are described in Section 6.05(a) of the Company Disclosure Schedule, whether or not Schwager's employment terminates before, during or after the Closing. The Surviving Corporation shall be liable to make all such payments to and to provide all such benefits to Schwager. Prior to and as a condition to Closing, the Company shall cause Schwager to waive any rights to any payments or benefits due from the Company or the Surviving Corporation other than the amounts and benefits set forth in Section 6.05(a) of the Company Disclosure Schedule. (b) At the Closing, the Parent shall cause the Surviving Corporation to transfer to the trust established between the Company and trustee under the Belden & Blake Corporation Retention Plan (the "Retention Plan") all amounts necessary to fund fully and completely the bonus pool described in such retention plan. Section 6.05 of the Company Disclosure Letter sets forth the amount that will be transferred to the trust to fund the bonus pool (or if such amount is not precisely determinable as of the date of this Agreement, the Company shall set forth a good faith estimate of such amount and prior to the Closing Date the Company shall notify Parent of any change in such estimate in an addendum to the Company Disclosure Letter delivered to the Parent). Prior to and as a condition to Closing, Company shall offer employees who are "disqualified individuals" (as such term is defined in Section 280G(c) of the Code) an opportunity to waive any rights to any payments or benefits that could reasonably be expected to constitute "excess parachute payments" (as defined in section 280G(b) of the Code). Upon shareholder approval according to the requirements of section 280G Q/A 7 of the Treasury Regulations, the Company may make additional payments to such individuals not to exceed the amounts waived, provided, however, that such waivers shall not be contingent upon shareholder approval of such additional payments. Prior to the Closing Date, the Company shall set forth in an addendum to the Company Disclosure Letter: (i) the amount of any such additional payments made by the Company to such individuals, (ii) a copy of the disclosures to and resolutions approved by shareholders according to the requirements of Treasury Regulation section 1.280G Q/A 7; and (iii) a copy of each such individual's waiver. (c) Except as may be amended or waived as described above, following the Effective Time, the Surviving Corporation shall be bound by each of the employment agreements, severance agreements, retention plans, severance plans, change in control protection plans and bonus plans disclosed in Section 6.05 of the Company Disclosure Letter. Parent agrees to cause the Surviving Corporation to honor the obligations of the Surviving Corporation under such agreements and plans as in effect on the date hereof. Parent agrees to provide such funds to the Surviving Corporation as may be required to enable the Surviving Corporation to satisfy such obligations. (d) The provisions of this Section 6.05 are intended for the benefit of, and shall be enforceable by, the officers and employees who are parties to such employment or severance agreements and by the participants in such severance pay, employee performance incentive and 27 bonus plans, and Parent agrees to bear and pay all of the costs and expenses that may be incurred by such persons in enforcing any such rights. (e) Except for payments made or to be made in the manner contemplated by Section 6.05(b), the Company will not take any action that would result in an obligation on the part of the Company or the Surviving Corporation to make any payments to any employees. 6.06 Expenses. Except as set forth in Section 8.02, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such cost or expense. If any filing is required under the HSR Act, Parent shall pay the filing fee in connection with the filings required under the HSR Act. 6.07 Sub. Prior to the Effective Time, Sub shall not conduct any business or make any investments other than as specifically contemplated by this Agreement and will not have any assets (other than a de minimis amount of cash paid to Sub for the issuance of its stock to Parent) or any material liabilities. Parent will take all action necessary to cause Sub to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement. 6.08 Notice and Cure. Each of Parent and the Company will notify the other of, and will use all commercially reasonable efforts to cure before the Closing, any event, transaction or circumstance, as soon as practical after it becomes known to such party, that causes or will cause any covenant or agreement of Parent or the Company under this Agreement to be breached or that renders or will render untrue any representation or warranty of Parent or the Company contained in this Agreement. Each of Parent and the Company also will notify the other in writing of, and will use all commercially reasonable efforts to cure, before the Closing, any violation or breach, as soon as practical after it becomes known to such party, of any representation, warranty, covenant or agreement made by Parent or the Company. No notice given pursuant to this Section shall have any effect on the representations, warranties, covenants or agreements contained in this Agreement for purposes of determining satisfaction of any condition contained herein. 6.09 Fulfillment of Conditions. Subject to the terms and conditions of this Agreement, each of Parent and the Company will take or cause to be taken all commercially reasonable steps necessary or desirable and proceed diligently and in good faith to satisfy each condition to the other's obligations contained in this Agreement and to consummate and make effective the transactions contemplated by this Agreement, and neither Parent nor the Company will, nor will it permit any of its Subsidiaries to, take or fail to take any action that could be reasonably expected to result in the nonfulfillment of any such condition. If the TBR Asset Sale has not closed by June 25, 2004, subject to any contractual rights of Fortuna Energy, Inc. under the TBR Asset Purchase Agreement and the other terms and conditions of this Agreement, the parties agree to use their commercially reasonable efforts to negotiate in good faith an alternative transaction for the disposition of the assets included within the TBR Asset Sale and an amendment to this Agreement to effectuate such alternative transaction within the time frame contemplated hereby, together with such adjustments to the Merger Price as necessary to 28 preserve the economic bargain between the parties as reflected in this Agreement, after taking into account any changes or increased financing or hedging costs resulting from delays in closing, that are mutually agreeable to the parties hereto, and to enter into any necessary or appropriate transition services or ancillary agreements on commercially reasonable terms and conditions. For purposes of clarification, the Company agrees to use its commercially reasonable efforts to consummate a consent solicitation and tender offer for the notes under the Indenture (the "Consent Solicitation") after the date hereof on terms reasonably requested by Parent; and the Company further agrees to cooperate reasonably with Parent to facilitate the Debt Financings and oil and gas commodity price swap transactions to be arranged by Parent for the Company in connection with the Debt Financings for the Merger (the "Hedges"). The Company and its Subsidiaries shall not make any payments to any parties to obtain any of the consents required as a condition to closing under Sections 7.02(f) or (g), (it being understood and agreed that, in connection with obtaining the agreement referenced in Section 7.02(g), the extension of a vehicle lease agreement shall not be deemed to be a prohibited payment for purposes of this sentence) or for any waivers or consents pursuant to Section 6.05 (it being understood and agreed that all amounts otherwise due to persons under Section 6.05 shall not be deemed to be prohibited payments for purposes of this sentence). 6.10 Delivery of Hedge Reports Parent and Sub agree to provide the Company with hedge quotations from J. Aron contemplated by Section 7.02(e) of this Agreement not later than the business day after Parent receives such quotations. Parent and Sub agree to use their reasonable best efforts to provide such quotations to the Company on the same day that Parent receives such quotations. ARTICLE VII CONDITIONS 7.01 Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each party to effect the Merger is subject to the fulfillment, at or prior to the Closing, of each of the following conditions: (a) Shareholder Approval. This Agreement shall have been adopted by the requisite vote of the shareholders of the Company under the OGCL and the Company's Articles of Incorporation. (b) HSR Act. If required, any waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. (c) No Injunctions or Restraints. No court of competent jurisdiction or other competent Governmental or Regulatory Authority shall have enacted, issued, promulgated, enforced or entered any law or order (whether temporary, preliminary or permanent) which is then in effect and has the effect of making illegal or otherwise restricting, preventing or prohibiting consummation of the Merger or the other transactions contemplated by this Agreement. 29 (d) Governmental and Regulatory and Other Consents and Approvals. Other than the filing provided for by Section 1.03, all consents, approvals and actions of, filings with and notices to any Governmental or Regulatory Authority or any other public or private third parties required of Parent, the Company or any of their Subsidiaries to consummate the Merger and the other matters contemplated hereby, the failure of which to be obtained or taken would be reasonably expected to have a material adverse effect on Parent and its Subsidiaries or the Surviving Corporation and its Subsidiaries, in each case taken as a whole, or on the ability of Parent and the Company to consummate the transactions contemplated hereby shall have been obtained, all in form and substance reasonably satisfactory to Parent and the Company. (e) Material Adverse Event. There shall not have occurred or exist (i) any actions, suits, arbitrations or proceedings brought or threatened against the Company other than as disclosed in the Company Disclosure Letter or in the Company SEC Reports, or any judgments with respect to any actions, suits, arbitrations or proceedings that are not covered by insurance ("Material Adverse Litigation Event"), (ii) any facts, circumstances, events or occurrences relating to the operation of the business of the Company, any of its Subsidiaries or their assets (including, without limitation, any indemnity agreements for assets previously owned or operated by the Company or its Subsidiaries), which form the basis of a violation of any Environmental Law which would have required reporting to a Governmental or Regulatory Authority, monitoring, investigation, clean-up, removal, treatment or the conduct of an environmental impact assessment or any other use, transportation, storage, handling, transfer, disposition, recycling or receipt of hazardous materials, which are not reserved against by the Company or covered by insurance or (iii) the failure of the Company or its Subsidiaries to have good and indefeasible title to their real property, mineral interests, rights of way, easements, leases, drilling or drilling project units or consolidated units, in each case under this clause (iii) that (x) would materially impair the present use of any of the Company's assets, (y) would reduce the value of such assets as set forth in the Company Reserve Report or (z) would otherwise materially detract from the value thereof (such events, in the aggregate, a "Material Adverse Event") in an amount that the parties reasonably and in good faith mutually agree exceeds $10,000,000, or, in the case of a Material Adverse Litigation Event, $3,000,000. 7.02 Conditions to Obligation of Parent and Sub to Effect the Merger. The obligation of Parent and Sub to effect the Merger is further subject to the fulfillment, at or prior to the Closing, of each of the following additional conditions (all or any of which may be waived in whole or in part by Parent and Sub in their sole discretion): (a) Representations and Warranties. The representations and warranties made by the Company in this Agreement that are qualified by materiality shall be true and correct and such representations and warranties that are not so qualified shall be true and correct in all material respects, in each case, as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date, except as affected by the transactions contemplated by this Agreement, and the Company shall have delivered to Parent a certificate, dated the Closing Date and executed in the name and on behalf of the Company by both its President and Chief Financial Officer to such effect. 30 (b) Performance of Obligations. The Company shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by the Company at or prior to the Closing, and the Company shall have delivered to Parent a certificate, dated the Closing Date and executed in the name and on behalf of the Company by both its President and Chief Financial Officer to such effect. (c) Proceedings. All proceedings to be taken on the part of the Company in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to Parent, and Parent shall have received copies of all such documents and other evidences as Parent may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith. (d) Consent Solicitation. Prior to the Closing, holders of a majority of the outstanding principal amount of the Subordinated Notes shall have consented and tendered their Subordinated Notes in accordance with the terms of the Consent Solicitation, and the Indenture trustee, the Company and applicable guarantors shall have executed and delivered a supplemental indenture as contemplated by the Consent Solicitation. (e) Financial Markets; Hedges. There shall not have occurred any disruption, adverse change or condition in the financial, banking, oil and gas, commodities or capital markets generally, or in the market for loan syndications or high yield debt in particular, which has materially impaired, or could materially impair, the successful syndication or placement of the Debt Financings (a "Financial Market Adverse Change") or the weighted average annual NYMEX based swap prices for the calendar years 2006, 2007, 2008 and 2009, weighted by the factors set forth below, as quoted by J. Aron & Company ("J. Aron") to Parent as of the closing of any trading day, is less than $4.57/MMBtu (a "Hedge Market Adverse Change"). The annual periods shall be weighted as follows: 2006 - 35%; 2007 - 25%; 2008 - 25%; and 2009 - 15%. In the event a Hedge Market Adverse Change occurs, Parent may terminate the Agreement in accordance with Section 8.01(f) within 7 days of the date of such Hedge Market Adverse Change. If Parent does not notify the Company of its desire to terminate the Agreement within 7 days of such Hedge Market Adverse Change, such event shall cease to be a Hedge Market Adverse Change, and the parties shall remain bound by the terms of this Agreement. (f) The State Treasurer of the State of Michigan, Custodian of the Public School Employees' Retirement System, State Employees Retirement System, Michigan State Police Retirement System and Michigan Judge Retirement System ("SMRS"), TPG Partners II, L.P., TPG Parallel II, L.P., TPG Investors II, L.P. and the Company shall have executed and delivered a termination, waiver and release agreement with respect to the Shareholders' Agreement, dated as of February 20, 1998 (the "Shareholders' Agreement"), by and among the Company, TPG Partners II, L.P., TPG Parallel II, L.P., TPG Investors II, L.P., and SMRS, which waiver shall (i) be issued at no cost to, and shall not be conditioned upon any payment by, the Company, (ii) include a waiver of any and all past defaults under the Shareholders' Agreement, and (iii) be in a form reasonably acceptable to counsel to Parent. 31 (g) Arrow Energy Services shall have executed and delivered an acknowledgement and agreement that the non-competition agreement contained in the Asset Purchase Agreement dated as of May 12, 2004, between Arrow Energy Services and Canton Oil & Gas Company (dba Arrow Oilfield Services), shall not apply to any affiliates of Belden & Blake Corporation that are not controlled by Belden & Blake Corporation or its subsidiaries. (h) Parent and the Company shall have received an agreement and release from TPG Partners II, L.P. setting forth all amounts due at Closing to TPG Partners II, L.P. pursuant to the Transaction Advisory Agreement dated June 27, 1997, between the Company and TPG Partners II, L.P. (the "Advisory Agreement"), and a release of any and all other claims against the Company or its Affiliates. (i) The sale of assets (the "TBR Asset Sale") pursuant to the Letter Agreement dated June 14, 2004 by and between the Company and Fortuna Energy Inc. (the "TBR Asset Purchase Agreement"), shall have been consummated at or prior to Closing in accordance with the terms of the TBR Asset Purchase Agreement at a cash purchase price not less than the Minimum TBR Price (as such term is defined in Annex I). (j) The Company shall have received all waivers described in Section 6.05(b). (k) The Company shall have received the consent of each of the executive officers of the Company listed on Section 9.11(f) of the Company Disclosure Letter who hold Company Options and other holders of Company Options to the cancellation of Company Options in accordance with the terms of this Agreement that, in the aggregate, gave such holders the option to acquire not less than eighty (80%) of the 488,843 Company Common Shares that are the subject of such Company Options. 7.03 Conditions to Obligation of the Company to Effect the Merger. The obligation of the Company to effect the Merger is further subject to the fulfillment, at or prior to the Closing, of each of the following additional conditions (all or any of which may be waived in whole or in part by the Company in its sole discretion): (a) Representations and Warranties. The representations and warranties made by Parent and Sub in this Agreement that are qualified by materiality shall be true and correct, and such representations and warranties that are not so qualified shall be true and correct in all material respects, in each case, as of the Closing Date as though made on and as of the Closing Date or, in the case of representations and warranties made as of a specified date earlier than the Closing Date, on and as of such earlier date, except as affected by the transactions contemplated by this Agreement, and Parent and Sub shall each have delivered to the Company a certificate, dated the Closing Date and executed in the name and on behalf of Parent by its general partner and in the name and on behalf of Sub by both its President and Chief Financial Officer to such effect. (b) Performance of Obligations. Parent and Sub shall have performed and complied with, in all material respects, each agreement, covenant and obligation required by this Agreement to be so performed or complied with by Parent or Sub at or prior to the Closing, and Parent and Sub shall each have delivered to the Company a certificate, dated the Closing Date 32 and executed in the name and on behalf of Parent by its general partner and in the name and on behalf of Sub by its President or Chief Financial Officer to such effect. (c) Proceedings. All proceedings to be taken on the part of Parent and Sub in connection with the transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to the Company, and the Company shall have received copies of all such documents and other evidences as the Company may reasonably request in order to establish the consummation of such transactions and the taking of all proceedings in connection therewith. (d) Availability of Funds. Parent and Sub shall have all funds or shall have arranged and obtained funds for the Company necessary to perform their obligations under this Agreement, including the payment of the amounts required under Article II of this Agreement. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.01 Termination. This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, at any time prior to the Effective Time, whether prior to or after the Company Shareholders' Approval: (a) By mutual written agreement of the parties hereto duly authorized by action taken by or on behalf of the respective Boards of Directors of the Company and Sub and the general partner of the general partner of Parent; (b) By either the Company or Parent upon written notification to the non-terminating party by the terminating party: (i) at any time after July 31, 2004 if the Merger shall not have been consummated on or prior to such date and such failure to consummate the Merger is not caused by a breach of this Agreement by the terminating party; (ii) if the Company Shareholders' Approval shall not be obtained by reason of the failure to obtain the requisite vote upon a vote held at a meeting of such shareholders, or any adjournment thereof, called therefor; (iii) if (x) there has been a material breach of any representation, warranty, covenant or agreement on the part of the non-terminating party set forth in this Agreement, which breach is not curable or, if curable, has not been cured within fifteen (15) days following receipt by the non-terminating party of notice of such breach from the terminating party and (y) the terminating party is not in material breach of any representation, warranty, covenant or agreement on the part of the terminating party set forth in this Agreement at the time of such notification; or (iv) if any court of competent jurisdiction or other competent Governmental or Regulatory Authority shall have issued an order making illegal or 33 otherwise restricting, preventing or prohibiting the Merger and such order shall have become final and nonappealable; (c) By the Company if (i) the Company shall not have breached any provision of this Agreement in any material respect, (ii) the Board of Directors of the Company authorizes the Company, subject to complying with the terms of Section 5.02 and this paragraph (c), to enter into a binding written agreement concerning a transaction that constitutes an Alternative Proposal and the Company notifies Parent in writing that it intends to enter into such an agreement, attaching the most current version of such agreement to such notice, and (iii) Parent does not make, within three business days of receipt of the Company's written notification of its intention to enter into such agreement, an offer that the Board of Directors of the Company determines, in its good faith judgment (after receipt of the advice of its financial advisor), is at least as favorable to the Company's shareholders from a financial point of view as the Alternative Proposal; (d) By Parent if the Board of Directors of the Company (or any committee thereof) shall have withdrawn or modified in a manner adverse to Parent its approval or recommendation of this Agreement or the Merger or shall have recommended an Alternative Proposal to the shareholders of the Company or failed to reconfirm its recommendation of this Agreement and the Merger within five (5) business days following a reasonable written request for such reconfirmation by Parent; or (e) By the Company at any time after July 16, 2004 if (i) the TBR Asset Sale has closed on or before June 25, 2004, (ii) the Company is not in breach of any provision of this Agreement in any material respect, (iii) the Company has satisfied as of July 16, 2004 all of the conditions required of it in order for the transactions contemplated by this Agreement to close, (iv) the conditions set forth in Sections 7.02(d), (e), (f), (g), (h), (j) and (k) have been satisfied, and (v) Parent and Sub have not satisfied as of July 16, 2004 all of the conditions required to have been satisfied by them in order for the transactions contemplated by this Agreement to close. (f) By Parent upon the occurrence of a Hedge Market Adverse Change if Parent provides written notification to the Company within seven days of the date of the Hedge Market Adverse Change. 8.02 Effect of Termination. If this Agreement is validly terminated by either the Company or Parent pursuant to Section 8.01, this Agreement will forthwith become null and void and there will be no liability or obligation on the part of either the Company or Parent (or any of their respective Representatives or affiliates), except (i) that the provisions of Section 1.07, Section 6.06 and this Section 8.02 will continue to apply following any such termination, and (ii) that nothing contained herein shall relieve any party hereto from liability for willful breach of its representations, warranties, covenants or agreements contained in this Agreement. In addition, the Confidentiality Agreement shall not be affected by the termination of this Agreement. 8.03 Amendment. This Agreement may be amended, supplemented or modified by action taken by or on behalf of the respective Boards of Directors of the parties 34 hereto at any time prior to the Effective Time, whether prior to or after the Company Shareholders' Approval shall have been obtained, but after such adoption and approval only to the extent permitted by applicable law. No such amendment, supplement or modification shall be effective unless set forth in a written instrument duly executed by or on behalf of each party hereto. 8.04 Waiver. At any time prior to the Effective Time any party hereto, by action taken by or on behalf of its Board of Directors, may to the extent permitted by applicable law (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties hereto contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any of the covenants, agreements or conditions of the other parties hereto contained herein. No such extension or waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the party extending the time of performance or waiving any such inaccuracy or non-compliance. No waiver by any party of any term or condition of this Agreement, in any one or more instances, shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. ARTICLE IX GENERAL PROVISIONS 9.01 Survival of Representations, Warranties, Covenants and Agreements. The representations, warranties, covenants and agreements contained in this Agreement shall not survive the Merger but shall terminate at the Effective Time; provided, however, that this Section 9.01 shall not limit any covenant or agreement of the parties hereto, which by its terms contemplates performance after the Effective Time or the termination of this Agreement. 9.02 Notices. All notices, requests and other communications hereunder must be in writing and will be deemed to have been duly given only if delivered personally, by facsimile transmission or by a nationally recognized overnight courier service or mailed (first class postage prepaid) to the parties at the following addresses or facsimile numbers: 35 If to Parent or Sub, to: Capital C Energy Operations, LP 333 Clay Street, Suite 4960 Houston, Texas 77002 Facsimile No.: (713) 571-9533 Attn: Frost W. Cochran with a copy to: Riverstone Holdings LLC 712 Fifth Avenue, 19th Floor New York, New York 10019 Attn: Gregory A. Beard with an additional copy to: Andrews Kurth LLP 600 Travis, Suite 4200 Houston, Texas 77002 Facsimile No.: (713) 220-4285 Attn: David C. Buck If to the Company, to: Belden & Blake Corporation 5200 Stoneham Road North Canton, Ohio 44720 Facsimile No.: (330) 498-8737 Attn: Duane Clark, Vice President, Legal Affairs/Gas Marketing with a copy to: Vorys, Sater, Seymour and Pease LLP 52 East Gay Street Columbus, Ohio 43216 Facsimile No.: (614) 464-6350 Attn: John K. Keller All such notices, requests and other communications will (i) if delivered personally or by overnight courier to the address as provided in this Section, be deemed given upon delivery, (ii) if delivered by facsimile transmission to the facsimile number as provided in this Section, be deemed given upon receipt, and (iii) if delivered by mail in the manner described above to the address as provided in this Section, be deemed given upon receipt (in each case regardless of whether such notice, request or other communication is received by any other person to whom a copy of such notice, request or other communication is to be delivered pursuant to this Section). 36 Any party from time to time may change its address, facsimile number or other information for the purpose of notices to that party by giving notice specifying such change to the other parties hereto. 9.03 Entire Agreement; Incorporation of Exhibits. (a) This Agreement supersedes all prior discussions and agreements among the parties hereto with respect to the subject matter hereof, and contains, together with the Confidentiality Agreement, the sole and entire agreement among the parties hereto with respect to the subject matter hereof. (b) The Company Disclosure Letter and any Exhibit attached to this Agreement and referred to herein are hereby incorporated herein and made a part hereof for all purposes as if fully set forth herein. 9.04 Public Announcements Except as otherwise required by law or the rules of any applicable securities exchange or national market system, so long as this Agreement is in effect, Parent and the Company will not, and will not permit any of their respective Representatives to, issue or cause the publication of any press release or make any other public announcement with respect to the transactions contemplated by this Agreement without the consent of the other party, which consent shall not be unreasonably withheld. Parent and the Company will cooperate with each other in the development and distribution of all press releases and other public announcements with respect to this Agreement and the transactions contemplated hereby, and will furnish the other with drafts of any such releases and announcements as far in advance as practicable. 9.05 No Third Party Beneficiary. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and except as provided in Section 6.04 and Section 6.05 (which are intended to be for the benefit of the persons entitled to rights thereunder and which may be enforced by any of such persons), it is not the intention of the parties to confer third-party beneficiary rights upon any other person. 9.06 No Assignment; Binding Effect. Neither this Agreement nor any right, interest or obligation hereunder may be assigned by any party hereto without the prior written consent of the other parties hereto and any attempt to do so will be void. This Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and permitted assigns. 9.07 Headings. The headings used in this Agreement have been inserted for convenience of reference only and do not define, modify or limit the provisions hereof. 9.08 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law or order, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (iii) the remaining provisions of this Agreement will remain in full force and effect 37 and will not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. 9.09 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio applicable to a contract executed and performed in such State, without giving effect to the conflicts of laws principles thereof. 9.10 Enforcement of Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement was not performed in accordance with its specified terms or was otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. 9.11 Certain Definitions. As used in this Agreement: (a) the term "affiliate," as applied to any person, shall mean 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 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; (b) a person will be deemed to "beneficially" own securities if such person would be the beneficial owner of such securities under Rule 13d-3 under the Exchange Act, including securities which such person has the right to acquire (whether such right is exercisable immediately or only after the passage of time); (c) the term "business day" means a day other than Saturday, Sunday or any day on which banks located in the States of Ohio are authorized or obligated to close; (d) any reference to any event, change or effect being "material" or "materially adverse" or having a "material adverse effect" on or with respect to an entity (or group of entities taken as a whole) means such event, change or effect is, or would reasonably be expected to be, material or materially adverse, as the case may be, to the business, operations, assets, liabilities, condition (financial or otherwise) or results of operations of such entity (or of such group of entities taken as a whole); (e) the term "Company Material Adverse Effect" means a material adverse effect on (i) the business, operations, assets, liabilities, condition (financial or otherwise) or results of operations of the Company and the Company Subsidiaries considered as a single enterprise or (ii) the ability of the Company to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement; provided, however, that any event, condition, change, occurrence or development of a state of circumstances which (x) adversely affects the oil and gas exploration and development industry generally (including 38 without limitation changes in commodity prices, general market prices and regulatory changes) or (y) arises out of general economic or industry conditions shall not be considered in determining whether a Company Material Adverse Effect has occurred. (f) the term "knowledge" or any similar formulation of "knowledge" shall mean, with respect to the Company, the actual knowledge, after reasonable inquiry, of the executive officers of the Company described in Section 9.11(f) of the Company Disclosure Letter. (g) the term "person" shall include individuals, corporations, partnerships, trusts, other entities and groups (which term shall include a "group" as such term is defined in Section 13(d)(3) of the Exchange Act); (h) the "Representatives" of any entity means such entity's directors, officers, employees, legal, investment banking and financial advisors, accountants and any other agents and representatives; and (i) the term "Subsidiary" means, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which more than fifty percent (50%) of either the equity interests in, or the voting control of, such corporation or other organization is, directly or indirectly through Subsidiaries or otherwise, beneficially owned by such party or any organization of which such party or a Subsidiary of such party is a general partner or managing member. 9.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 39 IN WITNESS WHEREOF, each party hereto has caused this Agreement to be signed by its officer thereunto duly authorized as of the date first above written. CAPITAL C ENERGY OPERATIONS, LP By: Capital C Energy, LP, it general partner By: Capital C Energy, LLC, its general partner By: /s/ Frost W. Cochran ------------------------------- Name: Frost W. Cochran Title: President and CEO CAPITAL C OHIO, INC. By: /s/ Frost W. Cochran ------------------------------- Name: Frost W. Cochran Title: President BELDEN & BLAKE CORPORATION By: /s/ John L. Schwager ------------------------------- Name: John L. Schwager Title: President and CEO 40 ANNEX I MERGER PRICE DETERMINATION Section 1.01. Capitalized terms that are not defined in this Annex I shall have the meanings ascribed to such terms in the Agreement. The following capitalized terms, when used in this Annex I, shall have the following meanings: "Arrow Adjustment" shall mean as follows: if the Arrow Asset Sale does not close as of the Effective Time, then the Arrow Adjustment shall be equal to (a) a twenty-two cent ($0.22) reduction to the Base Merger Price and (b) the distribution as part of the Merger Price of the Arrow Contingent Distribution Right. "Arrow Contingent Distribution Right" shall mean the right per Company Common Share (or, in connection with the Options, per share issuable upon the exercise of an outstanding Option) to receive a payment within 120 days from the Closing Date in an amount rounded to the nearest whole cent determined as follows: (a) first, the total cash proceeds received by the Company from the sale of the assets covered by the Arrow Asset Sale, if any, shall be reduced by any and all direct and indirect costs incurred by the Company in connection with the assets in connection with or prior to such disposition, including auctioning, broker, consulting, advisory, administrative, storage, transportation, maintenance and insurance costs, taxes (excluding income taxes), related employee costs and expenses other than for operating purposes, and any other losses and liabilities associated therewith (such amount being referred to as the "Net Proceeds"), (b) second, the Net Proceeds shall be multiplied by 62.5% (the result of such calculation, the "Adjusted Net Proceeds") and (c) third, the Adjusted Net Proceeds shall be divided by the number of Fully Diluted Common Shares. The amount determined in clause (c) shall be the amount distributed on a per share basis in connection with the Arrow Contingent Distribution Right. The manner of disposition of such assets in good faith shall be in the Company's sole discretion. "Base Merger Price" shall mean $10.45 in cash. "Fully Diluted Common Shares" shall mean all the issued and outstanding Company Common Shares plus Company Common Shares issuable upon the exercise of Options. "Minimum TBR Price" shall mean $55,250,000. "TBR Adjustment" shall mean if the cash purchase price received under the TBR Asset Purchase Agreement is less than $65 million (the "Target Price"), excluding any purchase price received pursuant to Section 4 or Exhibit "F" thereof, and not below the TBR Minimum Price, a reduction in the Base Merger Price by the amount (rounded to the nearest whole cent) determined as follows: (a) first, the Target Price minus such cash purchase price actually received under the TBR Asset Purchase Agreement (excluding any purchase price received pursuant to Section 4 or Exhibit "F") shall be determined (the "Shortfall"), (b) second, the Shortfall shall be multiplied 41 by 61.5% (the result of such calculation, the "Adjusted Shortfall") and (c) third, the Adjusted Shortfall shall be divided by the number of Fully Diluted Common Shares. The number resulting from clause (c) shall be the TBR Adjustment. Section 1.02. If, as of the Effective Time, the Company has closed (1) the TBR Asset Sale without a purchase price adjustment made under Section 6 of the TBR Asset Purchase Agreement that reduces the consideration to be paid to the Company below the amount set forth in Section 1 of the TBR Asset Purchase Agreement, and (2) the transactions contemplated by the draft prepared June 15, 2004 of the Asset Purchase Agreement between Arvilla Oilfield Services, LLC, the Company and The Canton Oil & Gas Company (the "Arrow Asset Sale") and which is attached to the Company Disclosure Letter, then the Merger Price shall be the Base Merger Price. Section 1.03. If, as of the Effective Time, (a) the Company has closed the TBR Asset Sale but with a purchase price adjustment made under Section 6 of the TBR Asset Purchase Agreement that reduces the consideration to be paid to the Company below the amount set forth in Section 1 of the TBR Asset Purchase Agreement, or (b) the Company has not closed the Arrow Asset Sale, then the Merger Price shall be equal to the Base Merger Price adjusted by the TBR Adjustment (if applicable) and the Arrow Adjustment (if applicable). 42 EXHIBIT A FORM OF VOTING AGREEMENT 43 EXHIBIT B FORM OF ESCROW AGREEMENT 44 EX-4.1 3 l08738aexv4w1.txt EXHIBIT 4.1 EXHIBIT 4.1 SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of July 2, 2004, is by and among Belden & Blake Corporation, an Ohio corporation (the "Company"), as issuer, the Subsidiary Guarantors (as defined in the Indenture), as guarantors and La Salle National Association, formerly known as La Salle National Bank (the "Trustee"), as trustee. RECITALS WHEREAS, the Company, as issuer, the Subsidiary Guarantors and the Trustee entered into that certain indenture (the "Indenture"), dated as of June 27, 1997; WHEREAS, on June 27, 1997, the Company issued $225,000,000 aggregate principal amount of its 9-7/8% Senior Subordinated Notes due 2007 (the "Notes"); WHEREAS, Section 9.2 of the Indenture provides that, with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer for the Notes), the Company, when authorized by a resolution of its Board of Directors, and the Trustee may enter into an indenture supplemental to the Indenture for the purpose of amending or supplementing any provisions of the Indenture (with certain exceptions not relevant to this Supplemental Indenture); WHEREAS, Section 9.2 of the Indenture further provides that (subject to certain exceptions not relevant to this Supplemental Indenture) the Holders of a majority in principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of the Indenture; WHEREAS, the Company and the Subsidiary Guarantors desire and have requested the Trustee to join with them in entering into this Supplemental Indenture for the purpose of amending the Indenture in certain respects as permitted by Section 9.2 of the Indenture; WHEREAS, the Company has been soliciting consents to this Supplemental Indenture upon the terms and subject to the conditions set forth in its Offer to Purchase and Consent Solicitation Statement dated June 16, 2004 and the related Consent and Letter of Transmittal (which together, including any amendments, modifications or supplements thereto, constitute the "Tender Offer"); and WHEREAS, the Company (1) has received the consent of the Holders of, and will accept for payment under the Tender Offer promptly after the Consent Payment Deadline (June 29, 2004) more than a majority in principal amount of the outstanding Notes, and will accept for payment under the Tender Offer and promptly after the Expiration Time (July 15, 2004, unless extended), any remaining Notes tendered promptly all as certified by an Officers' Certificate delivered to the Trustee simultaneously with the execution and delivery of this Supplemental Indenture, (2) has delivered to the Trustee simultaneously with the execution and delivery of this Supplemental Indenture an Opinion of Counsel relating to this Supplemental Indenture as contemplated by Section 9.6 of the Indenture and (3) has satisfied all other conditions required under Article 9 of the Indenture to enable the Company and the Trustee to enter into this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows: ARTICLE I DELETIONS 1.1 DELETION OF SECTIONS 4.3, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16 AND 4.17. Sections 4.3, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16 and 4.17 of the Indenture are hereby deleted in their entirety. ARTICLE II AMENDMENTS. 2.1 AMENDMENTS TO ARTICLE 5. Section 5.1 of the Indenture is hereby amended and restated to read as follows: Section 5.1. MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS. Except for the Acquisition, the Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to another Person, and the Company may not permit any of its Restricted Subsidiaries to enter into any such transaction or series of transactions if such transaction or series of transactions would, in the aggregate, result in a sale, assignment, transfer, lease, conveyance, or other disposition of all or substantially all of the properties or assets of the Company to another Person, in either case unless (i) the Company is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (the "Surviving Entity") is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Surviving Entity (if the Company is not the continuing obligor under this Indenture) assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemented indenture in a form reasonably satisfactory to the Trustee; and (iii) immediately before and after giving effect to such transaction or series of transactions no Default or Event of Default exists. Any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company, and any Wholly Owned Restricted Subsidiary may 2 consolidate with, merge into or transfer all or part of its properties and assets to another Wholly Owned Restricted Subsidiary. None of the provisions of this Section 5.1 shall be deemed to prevent the merger of the Company with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction. This Section 5.1 shall not apply to any consolidation, merger, sale, assignment, transfer, lease or other disposition if the Company shall have elected to redeem the Notes pursuant to Section 3.7 and such redemption takes place prior to or simultaneously with the Company's consolidation or merger with or into another Person. 2.2 AMENDMENTS TO ARTICLE 6. Section 6.1 of the Indenture is hereby amended and restated to read as follows: Section 6.1. EVENTS OF DEFAULT. An "Event of Default" occurs if: (1) the Company defaults in the payment of interest, if any, on the Notes when the same becomes due and payable and the Default continues for a period of 30 days, whether or not such payment is prohibited by the provisions of Article 10 hereof; (2) the Company defaults in the payment of the principal of or premium, if any, on the Notes, whether or not such payment is prohibited by the provisions of Article 10 hereof; (3) the Company or a Subsidiary Guarantor fails to observe or perform any covenant, condition or agreement on the part of the Company or a Subsidiary Guarantor to be observed or performed pursuant to Article 5 hereof; or (4) the Company fails to comply with any of its other agreements or covenants in, or provisions of, the Notes or this Indenture and the Default continues for 60 consecutive days after the notice specified below. A Default under clause (4) is not an Event of Default until the Trustee notifies the Company, or the Holders of at least 25% in principal amount of the then outstanding Notes notify the Company and the Trustee, of the Default and the Company does not cure the Default within 60 days after receipt of the notice. Each notice must specify the Default, demand that it be remedied and state that the notice is a "Notice of Default." 3 ARTICLE IV MISCELLANEOUS 4.1 DEFINITIONS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires, the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof. 4.2 RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURE PART OF INDENTURE. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered under the Indenture shall be bound hereby and all terms and conditions of both shall be read together as though they constitute a single instrument, except that in the case of conflict the provisions of this Supplemental Indenture shall control. 4.3 EFFECTIVE DATE. The provisions of this Supplemental Indenture shall be effective only upon execution and delivery of this instrument by the parties hereto promptly following the Consent Payment Deadline. Notwithstanding the foregoing sentence, the provisions of this Supplemental Indenture shall become operative only upon the purchase of more than a majority in principal amount of the outstanding Notes pursuant to the Tender Offer. The Company shall notify the Trustee promptly after the occurrence of such purchase. 4.4 ENDORSEMENT AND CHANGE OF FORM OF NOTES. Any Notes authenticated and delivered after the close of business on the date that this Supplemental Indenture becomes operative in substitution for Notes then outstanding and all Notes presented or delivered to the Trustee on and after that date for such purpose shall be stamped, imprinted or otherwise legended by the Trustee, with a notation as follows: "Effective as of July 7, 2004, certain restrictive covenants of the Company, certain provisions governing mergers and certain Events of Default have been eliminated or limited, as provided in the Supplemental Indenture, dated as of July 2, 2004. Reference is hereby made to said Supplemental Indenture, copies of which are on file with the Trustee, for a description of the amendments made therein." 4.5 GOVERNING LAW. This Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York. 4.6 TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture. 4.7 COUNTERPARTS. The parties may sign any number of copies or counterparts of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 4 4.8 EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction thereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. COMPANY: BELDEN & BLAKE CORPORATION By: /s/ Robert W. Peshek ------------------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer SUBSIDIARY GUARANTORS: THE CANTON OIL & GAS COMPANY By: /s/ Robert W. Peshek ------------------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer WARD LAKE DRILLING, INC. By: /s/ Richard R. Hoffman ------------------------------------- Name: Richard R. Hoffman Title: Vice President TRUSTEE: LA SALLE NATIONAL ASSOCIATION, FORMERLY KNOWN AS LA SALLE NATIONAL BANK By: /s/ Erik R. Benson ------------------------------------- Name: Erik R. Benson Title: First Vice President 6 EX-4.2 4 l08738aexv4w2.txt EXHIBIT 4.2 ' EXHIBIT 4.2 BELDEN & BLAKE CORPORATION AND EACH OF THE GUARANTORS PARTY HERETO 8.75% SENIOR SECURED NOTES DUE 2012 INDENTURE Dated as of July 7, 2004 BNY MIDWEST TRUST COMPANY as Trustee CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section 310(a)(1)................................................................... 7.10 (a)(2)................................................................... 7.10 (a)(3)................................................................... N.A. (a)(4)................................................................... N.A. (a)(5)................................................................... 7.10 (b)...................................................................... 7.10 (c)...................................................................... N.A. 311(a)...................................................................... 7.11 (b)...................................................................... 7.11 (c)...................................................................... N.A. 312(a)...................................................................... 2.05 (b)...................................................................... 12.03 (c)...................................................................... 12.03 313(a)...................................................................... 7.06 (b)(1)................................................................... N.A. (b)(2)................................................................... 7.06; 7.07 (c)...................................................................... 7.06; 12.02 (d)...................................................................... 7.06 314(a)...................................................................... 4.03;12.02; 12.05 (b)...................................................................... N.A. (c)(1)................................................................... 12.04 (c)(2)................................................................... 12.04 (c)(3)................................................................... N.A. (d)...................................................................... N.A. (e)...................................................................... 12.05 (f)...................................................................... N.A. 315(a)...................................................................... 7.01 (b)...................................................................... 7.05; 12.02 (c)...................................................................... 7.01 (d)...................................................................... 7.01 (e)...................................................................... 6.11 316(a) (last sentence)...................................................... 2.09 (a)(1)(A)................................................................ 6.05 (a)(1)(B)................................................................ 6.04 (a)(2)................................................................... N.A. (b)...................................................................... 6.07 (c)...................................................................... 2.12 317(a)(1)................................................................... 6.08 (a)(2)................................................................... 6.09 (b)...................................................................... 2.04 318(a)...................................................................... 12.01 (b)...................................................................... N.A. (c)...................................................................... 12.01
N.A. means not applicable. * This Cross Reference Table is not part of the Indenture. TABLE OF CONTENTS
Page ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions........................................................................... 1 Section 1.02 Other Definitions..................................................................... 33 Section 1.03 Incorporation by Reference of Trust Indenture Act..................................... 33 Section 1.04 Rules of Construction................................................................. 33 ARTICLE 2 THE NOTES Section 2.01 Form and Dating....................................................................... 34 Section 2.02 Execution and Authentication.......................................................... 34 Section 2.03 Registrar and Paying Agent............................................................ 35 Section 2.04 Paying Agent to Hold Money in Trust................................................... 35 Section 2.05 Holder Lists.......................................................................... 36 Section 2.06 Transfer and Exchange................................................................. 36 Section 2.07 Replacement Notes..................................................................... 47 Section 2.08 Outstanding Notes..................................................................... 47 Section 2.09 Treasury Notes........................................................................ 47 Section 2.10 Temporary Notes....................................................................... 47 Section 2.11 Cancellation.......................................................................... 48 Section 2.12 Defaulted Interest.................................................................... 48 ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee.................................................................... 48 Section 3.02 Selection of Notes to Be Redeemed or Purchased........................................ 48 Section 3.03 Notice of Redemption.................................................................. 49 Section 3.04 Effect of Notice of Redemption........................................................ 49 Section 3.05 Deposit of Redemption or Purchase Price............................................... 50 Section 3.06 Notes Redeemed or Purchased in Part................................................... 50 Section 3.07 Optional Redemption................................................................... 50 Section 3.08 Mandatory Redemption.................................................................. 51 Section 3.09 Offer to Purchase by Application of Excess Proceeds................................... 51 ARTICLE 4 COVENANTS Section 4.01 Payment of Notes...................................................................... 53 Section 4.02 Maintenance of Office or Agency....................................................... 53 Section 4.03 Reports............................................................................... 53 Section 4.04 Compliance Certificate................................................................ 54 Section 4.05 Taxes................................................................................. 55 Section 4.06 Stay, Extension and Usury Laws........................................................ 55 Section 4.07 Restricted Payments................................................................... 55 Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries........................ 58 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock............................ 59 Section 4.10 Asset Sales........................................................................... 63
i Section 4.11 Transactions with Affiliates.......................................................... 64 Section 4.12 Liens................................................................................. 65 Section 4.13 Business Activities................................................................... 66 Section 4.14 Corporate Existence................................................................... 66 Section 4.15 Offer to Repurchase Upon Change of Control............................................ 66 Section 4.16 Payments for Consent.................................................................. 68 Section 4.17 Additional Note Guarantees............................................................ 68 Section 4.18 Designation of Restricted and Unrestricted Subsidiaries............................... 68 Section 4.19 Termination of Hedge Agreement........................................................ 69 Section 4.20 Changes in Covenants When Notes Rated Investment Grade................................ 69 ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets.............................................. 69 Section 5.02 Successor Corporation Substituted..................................................... 70 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default..................................................................... 70 Section 6.02 Acceleration.......................................................................... 72 Section 6.03 Other Remedies........................................................................ 73 Section 6.04 Waiver of Past Defaults............................................................... 73 Section 6.05 Control by Majority................................................................... 73 Section 6.06 Limitation on Suits................................................................... 73 Section 6.07 Rights of Holders of Notes to Receive Payment......................................... 74 Section 6.08 Collection Suit by Trustee............................................................ 74 Section 6.09 Trustee May File Proofs of Claim...................................................... 74 Section 6.10 Priorities............................................................................ 75 Section 6.11 Undertaking for Costs................................................................. 75 ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee..................................................................... 75 Section 7.02 Rights of Trustee..................................................................... 76 Section 7.03 Individual Rights of Trustee.......................................................... 77 Section 7.04 Trustee's Disclaimer.................................................................. 77 Section 7.05 Notice of Defaults.................................................................... 77 Section 7.06 Reports by Trustee to Holders of the Notes............................................ 78 Section 7.07 Compensation and Indemnity............................................................ 78 Section 7.08 Replacement of Trustee................................................................ 79 Section 7.09 Successor Trustee by Merger, etc...................................................... 80 Section 7.10 Eligibility; Disqualification......................................................... 80 Section 7.11 Preferential Collection of Claims Against Company..................................... 80 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance.............................. 80 Section 8.02 Legal Defeasance and Discharge........................................................ 80 Section 8.03 Covenant Defeasance................................................................... 81 Section 8.04 Conditions to Legal or Covenant Defeasance............................................ 81
ii Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions............................................................................................... 82 Section 8.06 Repayment to Company.................................................................. 83 Section 8.07 Reinstatement......................................................................... 83 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes................................................... 83 Section 9.02 With Consent of Holders of Notes...................................................... 84 Section 9.03 Compliance with Trust Indenture Act................................................... 86 Section 9.04 Revocation and Effect of Consents..................................................... 86 Section 9.05 Notation on or Exchange of Notes...................................................... 86 Section 9.06 Trustee to Sign Amendments, etc....................................................... 86 ARTICLE 10 COLLATERAL AND SECURITY Section 10.01 Equal and Ratable Sharing of Collateral by Holders of Parity Lien Debt................ 87 Section 10.02 Ranking of Parity Liens............................................................... 87 Section 10.03 Release of Liens in Respect of Notes.................................................. 88 Section 10.04 Relative Rights....................................................................... 88 Section 10.05 Compliance with Trust Indenture Act................................................... 88 Section 10.06 Further Assurances; Insurance......................................................... 89 ARTICLE 11 NOTE GUARANTEES Section 11.01 Guarantee............................................................................. 90 Section 11.02 Limitation on Guarantor Liability..................................................... 91 Section 11.03 Execution and Delivery of Note Guarantee.............................................. 91 Section 11.04 Guarantors May Consolidate, etc., on Certain Terms.................................... 91 Section 11.05 Releases.............................................................................. 92 ARTICLE 12 SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge............................................................ 93 Section 12.02 Application of Trust Money............................................................ 94 ARTICLE 13 MISCELLANEOUS Section 13.01 Trust Indenture Act Controls.......................................................... 94 Section 13.02 Notices............................................................................... 94 Section 13.03 Communication by Holders of Notes with Other Holders of Notes......................... 96 Section 13.04 Certificate and Opinion as to Conditions Precedent.................................... 96 Section 13.05 Statements Required in Certificate or Opinion......................................... 96 Section 13.06 Rules by Trustee and Agents........................................................... 96 Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders.............. 96 Section 13.08 Governing Law......................................................................... 97 Section 13.09 No Adverse Interpretation of Other Agreements......................................... 97 Section 13.10 Successors............................................................................ 97 Section 13.11 Severability.......................................................................... 97 Section 13.12 Counterpart Originals................................................................. 97 Section 13.13 Table of Contents, Headings, etc...................................................... 97
iii EXHIBITS AND SCHEDULES Exhibit A FORM OF NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF NOTATION OF GUARANTEE Exhibit E FORM OF SUPPLEMENTAL INDENTURE Schedule 1 GUARANTORS iv INDENTURE dated as of July 7, 2004 among Belden & Blake Corporation, an Ohio corporation, the Guarantors (as defined) and BNY Midwest Trust Company, as trustee. The Company, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders (as defined) of the 8.75% Senior Secured Notes due 2012 (the "Notes"): ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions. "144A Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "ACNTA" means (without duplication), as of the date of determination: (1) the sum of: (A) discounted future net revenue from proved crude oil and natural gas reserves of the Company and its Restricted Subsidiaries calculated in accordance with SEC guidelines before any state or federal income taxes, as estimated in a reserve report prepared as of the end of the Company's most recently completed fiscal year, which reserve report is prepared or reviewed by independent petroleum engineers, as increased by, as of the date of determination, the discounted future net revenue of (i) estimated proved crude oil and natural gas reserves of the Company and its Restricted Subsidiaries attributable to acquisitions consummated since the date of such year-end reserve report, and (ii) estimated crude oil and natural gas reserves of the Company and its Restricted Subsidiaries attributable to extensions, discoveries and other additions and upward determinations of estimates of proved crude oil and natural gas reserves (including previously estimated development costs incurred during the period and the accretion of discount since the prior year end) due to exploration, development or exploitation, production or other activities which reserves were not reflected in such year-end reserve report, in each case calculated in accordance with SEC guidelines (utilizing the prices utilized in such year-end reserve report), and decreased by, as of the date of determination, the discounted future net revenue attributable to (iii) estimated proved crude oil and natural gas reserves of the Company and its Restricted Subsidiaries reflected in such year-end reserve report produced or disposed of since the date of such year-end reserve report and (iv) reductions in the estimated oil and gas reserves of the Company and its Restricted Subsidiaries reflected in such year-end reserve report since the 1 date of such year-end reserve report attributable to downward determinations of estimates of proved crude oil and natural gas reserves due to exploration, development or exploitation, production or other activities conducted or otherwise occurring since the date of such year-end reserve report, in each case, calculated in accordance with SEC guidelines (utilizing the prices utilized in such year-end reserve report); provided, however, that, in the case of each of the determinations made pursuant to clauses (1)(A)(i) through (iv) of this definition, such increases and decreases shall be as estimated by the Company's engineers, except that if as a result of such acquisitions, dispositions, discoveries, extensions or revisions, there is a Material Change which is an increase, then such increases and decreases in the discounted future net revenue shall be confirmed in writing by an independent petroleum engineer; (B) the capitalized costs that are attributable to crude oil and natural gas properties of the Company and its Restricted Subsidiaries to which no proved crude oil and natural gas reserves are attributed, based on the Company's books and records as of a date no earlier than the date of the Company's latest annual or quarterly financial statements; (C) the Net Working Capital on a date no earlier than the date of the Company's latest annual or quarterly financial statements; and (D) the greater of (i) the net book value on a date no earlier than the date of the Company's latest annual or quarterly financial statements; and (ii) the appraised value, as estimated by independent appraisers, of other tangible assets of the Company and its Restricted Subsidiaries as of a date no earlier than the date of the Company's latest audited financial statements (provided that the Company shall not be required to obtain such an appraisal of such assets if no such appraisal has been performed); minus (2) to the extent not otherwise taken into account in the immediately preceding clause (1), the sum of: (A) minority interests; (B) any net gas balancing liabilities of the Company and its Restricted Subsidiaries reflected in the Company's latest audited financial statements; (C) the discounted future net revenue, calculated in accordance with SEC guidelines (utilizing the same prices utilized in the Company's year-end reserve report), attributable to reserves subject to participation interests, overriding royalty interests or other interests of third parties, pursuant to participation, partnership, vendor financing or other agreements then in effect, or which otherwise are required to be delivered to third parties; (D) the discounted future net revenue, calculated in accordance with SEC guidelines (utilizing the same prices utilized in the Company's year-end reserve report), attributable to reserves that are required to be delivered to third parties to fully satisfy the obligations of the Company and its Restricted Subsidiaries with respect to volumetric Production Payments on the schedules specified with respect thereto; and 2 (E) the discounted future net revenue, calculated in accordance with SEC guidelines, attributable to reserves subject to dollar-denominated Production Payments that, based on the estimates of production included in determining the discounted future net revenue specified in paragraph (1)(A)(i) of this definition (utilizing the same prices utilized in the Company's year-end reserve report), would be necessary to satisfy fully the obligations of the Company and its Restricted Subsidiaries with respect to dollar-denominated Production Payments on the schedules specified with respect thereto. "Acquired Debt" means, with respect to any specified Person: (1) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, whether or not such Indebtedness is incurred in connection with, or in contemplation of, such other Person merging with or into, or becoming a Restricted Subsidiary of, such specified Person; and (2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Act of Required Creditors" means, as to any matter at any time: (1) prior to the Discharge of Priority Lien Obligations, a direction in writing delivered to the Collateral Trustee by or with the written consent of the Required Priority Creditors; and (2) after the Discharge of Priority Lien Obligations, a direction in writing delivered to the Collateral Trustee by or with the written consent of the Required Parity Creditors. For purposes of this definition, (a) Secured Debt registered in the name of, or beneficially owned by, the Company or any Affiliate of the Company will be deemed not to be outstanding, and (b) votes will be determined in accordance with the Collateral Trust Agreement. "Additional Notes" means additional Notes (other than the Initial Notes) issued under this Indenture in accordance with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial Notes. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. "Agent" means any Registrar, co-registrar, Paying Agent or additional paying agent. "Applicable Premium" means, with respect to any Note on any redemption date, the greater of: (1) 1.0% of the principal amount of the Note; or (2) the excess of: (A) the present value at the redemption date of (i) the redemption price of the Note at July 15, 2008 (such redemption price being set forth in the table appearing in 3 Section 3.07 hereof) plus (ii) all required interest payments due on the Note through July 15, 2008, (excluding accrued but unpaid interest to the applicable redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 75 basis points; over (B) the principal amount of the Note, if greater. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange. "Asset Sale" means: (1) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, any sale of hydrocarbons or other mineral products as a result of the creation of Production Payments and Reserve Sales); provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole shall be governed by Section 4.15 and/or Section 5.01 and not by Section 4.10; and (2) the issuance of Equity Interests in any of the Company's Restricted Subsidiaries or the sale of Equity Interests in any of its Restricted Subsidiaries. Notwithstanding the preceding, none of the following items will be deemed to be an Asset Sale: (1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $1.0 million; (2) a transfer of assets between or among the Company and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary of the Company to the Company or to a Restricted Subsidiary of the Company; (4) the sale or lease of products, services or accounts receivable in the ordinary course of business and any sale or other disposition of damaged, worn-out or obsolete assets in the ordinary course of business; (5) the sale or other disposition of cash or Cash Equivalents; (6) a Restricted Payment that does not violate Section 4.07 hereof or a Permitted Investment; (7) a disposition of oil, natural gas or other hydrocarbons or other mineral products in the ordinary course of business of the oil and gas production operations of the Company and its Subsidiaries; (8) any abandonment, relinquishment, farm-in, farm-out, lease and sublease of developed and/or undeveloped properties made or entered into in the ordinary course of business, but excluding any disposition as a result of the creation of a Production Payment and Reserve Sale; and 4 (9) the trade or exchange by the Company or any Restricted Subsidiary of the Company of any oil and gas property or interest therein owned or held by the Company or such Restricted Subsidiary for any oil and gas property or interest therein owned or held by another Person, including any cash or Cash Equivalents necessary in order to achieve an exchange of equivalent value; provided that any such cash or Cash Equivalents received by the Company or such Restricted Subsidiary shall be subject to Section 4.10, which the Board of Directors determines in good faith to be of approximately equivalent value. "Attributable Debt" in respect of a sale and leaseback transaction means, at the time of determination, the present value of the obligation of the lessee for net rental payments during the remaining term of the lease included in such sale and leaseback transaction including any period for which such lease has been extended or may, at the option of the lessor, be extended. Such present value shall be calculated using a discount rate equal to the rate of interest implicit in such transaction, determined in accordance with GAAP; provided, however, that if such sale and leaseback transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby shall be determined in accordance with the definition of "Capital Lease Obligation." "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Exchange Act), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms "Beneficially Owns" and "Beneficially Owned" have a corresponding meaning. "Board of Directors" means: (1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; (3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and (4) with respect to any other Person, the board or committee of such Person serving a similar function. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination is to be made, the amount of the liability in respect of a capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be prepaid by the lessee without payment of a penalty. 5 "Capital Stock" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. "Cash Equivalents" means: (1) United States dollars; (2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality of the United States government (provided that the full faith and credit of the United States is pledged in support of those securities) having maturities of not more than six months from the date of acquisition; (3) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case, with any lender party to the Credit Agreement or with any domestic commercial bank having capital and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of "B" or better; (4) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above; (5) commercial paper having one of the two highest ratings obtainable from Moody's Investors Service, Inc. or Standard & Poor's Rating Services and, in each case, maturing within six months after the date of acquisition; and (6) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (1) through (5) of this definition. "Casualty Event" means any taking under power of eminent domain or similar proceeding and any insured loss, in each case relating to property or other assets that constituted Collateral. "Change of Control" means the occurrence of any of the following: (1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its Subsidiaries taken as a whole to any "person" (as that term is used in Section 13(d) of the Exchange Act) other than a Principal or a Related Party of a Principal; 6 (2) the adoption of a plan relating to the liquidation or dissolution of the Company; (3) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the Beneficial Owner, directly or indirectly, of more than 50% of the Voting Stock of the Company, measured by voting power rather than number of shares; (4) the Company consolidates with, or merges with or into, any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company or such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where the Voting Stock of the Company outstanding immediately prior to such transaction is converted into or exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person constituting a majority of the outstanding shares of such Voting Stock of such surviving or transferee Person (immediately after giving effect to such issuance); or (5) after an initial public offering of the Company or any direct or indirect parent of the Company, the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Class" means (1) in the case of Parity Lien Debt, every Series of Parity Lien Debt, taken together, and (2) in the case of Priority Lien Debt, every Series of Priority Lien Debt, taken together. "Clearstream" means Clearstream Banking, S.A. "Collateral" means certain properties and assets at any time owned or acquired by the Company or any of the other Pledgors, including a substantial majority of the aggregate value of our proved producing reserves on a PV-10 basis, the capital stock of the Company and the Domestic Subsidiaries, except: (1) Excluded Assets; (2) any properties and assets in which the Collateral Trustee is required to release its Liens pursuant to the Collateral Trust Agreement; and (3) any properties and assets that no longer secure the Notes or any Obligations in respect thereof pursuant to the Collateral Trust Agreement, provided that, in the case of clauses (2) and (3), if such Liens are required to be released as a result of the sale, transfer or other disposition of any properties or assets of the Company or any other Pledgor, such assets or properties will cease to be excluded from the Collateral if the Company or any other Pledgor thereafter acquires or reacquires such assets or properties. "Collateral Trust Agreement" means the collateral trust agreement, dated as of the date of this Indenture, among the Collateral Trustee, the Administrative Agent under the Credit Agreement, the Hedge Counterparty and the Trustee, as such agreement may be amended, modified or supplemented from time to time. 7 "Collateral Trustee" means Wells Fargo Bank, N.A. (as successor by merger to Wells Fargo Bank Minnesota, N.A.), in its capacity as collateral trustee under the Collateral Trust Agreement, together with its successors in such capacity. "Company" means Belden & Blake Corporation, and any and all successors thereto. "Consolidated Cash Flow" means, with respect to any specified Person for any period, the Consolidated Net Income of such Person for such period plus, without duplication: (1) an amount equal to any extraordinary loss plus any net loss realized by such Person or any of its Restricted Subsidiaries in connection with an Asset Sale, to the extent such losses were deducted in computing such Consolidated Net Income; plus (2) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income; plus (3) the Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the extent that such Fixed Charges were deducted in computing such Consolidated Net Income; plus (4) depreciation, depletion, amortization (including amortization of intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, depletion, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income; minus (5) non-cash items increasing such Consolidated Net Income for such period, other than the accrual of revenue in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the preceding, the provision for taxes based on the income or profits of, and the depreciation, depletion and amortization and other non-cash expenses of, a Restricted Subsidiary of the Company will be added to Consolidated Net Income to compute Consolidated Cash Flow of the Company only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any specified Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that: (1) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting will be included only to the extent of the amount of dividends or similar distributions paid in cash to the specified Person or a Restricted Subsidiary of the Person; 8 (2) the Net Income of any Restricted Subsidiary will be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders; (3) the cumulative effect of a change in accounting principles will be excluded; (4) any write-downs of non-current assets will be excluded; provided, however, that, to the extent they may become applicable, ceiling limitation write-downs in accordance with generally accepted accounting principles shall be treated as capitalized costs, as if such write-down had not occurred; and (5) any unrealized non-cash gains or losses or charges in respect of hedge or non-hedge derivatives (including those resulting from the application of FAS 133) will be excluded. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who: (1) was a member of such Board of Directors on the date of this Indenture; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election. "Corporate Trust Office of the Trustee" means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at BNY Midwest Trust Company, c/o The Bank of New York, 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust Department, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company). "Credit Agreement" means that certain Credit and Guaranty Agreement, to be dated as of the date of this Indenture, by and among the Company, Goldman Sachs Credit Partners L.P. and other parties named therein, providing for up to $170.0 million aggregate principal amount of borrowings and the issuance of letters of credit, including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time. "Credit Agreement Agent" means, at any time, the Person serving at such time as the "Agent" or "Administrative Agent" under the Credit Agreement or any other representative then most recently designated in accordance with the applicable provisions of the Credit Agreement, together with its successors in such capacity. "Credit Facilities" means one or more debt facilities (including, without limitation, the Credit Agreement) or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such 9 receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, substantially in the form of Exhibit A hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Discharge of Priority Lien Obligations" means the occurrence of all of the following: (1) termination or expiration of all commitments to extend credit that would constitute Priority Lien Debt; (2) payment in full in cash of the principal of, interest and premium (if any) on, and fees with respect to, all Priority Lien Debt (other than any undrawn letters of credit); (3) discharge or cash collateralization (at the lower of (1) 105% of the aggregate undrawn amount and (2) the percentage of the aggregate undrawn amount required for release of liens under the terms of the applicable Priority Lien Document) of all outstanding letters of credit constituting Priority Lien Debt; and (4) payment in full in cash of all other Priority Lien Obligations that are outstanding and unpaid at the time the Priority Lien Debt is paid in full in cash (other than any obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no claim or demand for payment has been made at such time). "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the Capital Stock), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Company to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. The amount of Disqualified Stock deemed to be outstanding at any time for purposes of this Indenture will be the maximum amount that the Company and its Restricted Subsidiaries 10 may become obligated to pay upon the maturity of, or pursuant to any mandatory redemption provisions of, such Disqualified Stock, exclusive of accrued dividends. "Dollar Denominated Production Payments" means production payment obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith. "Domestic Subsidiary" means any Restricted Subsidiary of the Company that was formed under the laws of the United States or any state of the United States or the District of Columbia or that guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "equally and ratably" means, in reference to sharing of Liens or proceeds thereof as between holders of Secured Obligations within the same Class, that such Liens or proceeds: (1) will be allocated and distributed first to the Secured Debt Representative for each outstanding Series of Secured Debt within that Class, for the account of the holders of such Series of Secured Debt, ratably in proportion to the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made under such letters of credit) on each outstanding Series of Secured Debt within that Class when the allocation or distribution is made, and thereafter (2) will be allocated and distributed (if any remain after payment in full of all of the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made on such letters of credit) on all outstanding Secured Obligations within that Class) to the Secured Debt Representative for each outstanding Series of Secured Obligations within that Class, for the account of the holders of any remaining Secured Obligations within that Class, ratably in proportion to the aggregate unpaid amount of such remaining Secured Obligations within that Class due and demanded (with written notice to the applicable Secured Debt Representative and the Collateral Trustee) prior to the date such distribution is made. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Equity Offering" means a public or private offer and sale of Capital Stock (other than Disqualified Stock) of the Company. "Euroclear" means Euroclear Bank, S.A./N.V., as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Exchange Registration Statement" has the meaning set forth in the Registration Rights Agreement. "Excluded Assets" means each of the following: 11 (1) any lease, license, contract, general intangible, property right or agreement to which the Company or any other Pledgor is a party or any of its rights or interests thereunder if and only for so long as the grant of a Lien under the Security Documents will constitute or result in a breach, termination or default under any such lease, license, contract, property right or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the Uniform Commercial Code of any relevant jurisdiction or any other applicable law or principles of equity); provided that such lease, license, contract, general intangible, property right or agreement will be an Excluded Asset only to the extent and for so long as the consequences specified above will result and will cease to be an Excluded Asset and will become subject to the Lien granted under the Security Documents, immediately and automatically, at such time as such consequences will no longer result; (2) real property (other than Hydrocarbon Properties, pipelines and gathering systems) owned or leased by the Company or any other Pledgor to the extent that the lenders under the Credit Agreement and the Hedge Counterparty under the Hedge Agreement do not require such assets to be subject to Liens to secure the Credit Agreement and the Hedge Agreement, respectively; (3) all "securities" of any of the Company's "affiliates" (as the terms "securities" and "affiliates" are used in Rule 3-16 of Regulation S-X under the Securities Act); (4) any other property or assets in which a Lien cannot be perfected by the filing of a financing statement under the Uniform Commercial Code of the relevant jurisdiction, so long as the aggregate Fair Market Value of all such property and assets does not at any one time exceed $10.0 million; and (5) with respect to all Secured Debt other than Parity Lien Debt consisting of Indebtedness under the Hedge Agreement, the Hedge Letter of Credit issued to or for the benefit of the creditors in respect of Indebtedness under the Hedge Agreement and other hedging transactions. "Existing Indebtedness" means Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the Credit Agreement and the Hedge Agreement) in existence on the date of this Indenture, until such amounts are repaid "Fair Market Value" means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, determined in good faith by the Board of Directors of the Company (unless otherwise provided in this Indenture). "Fixed Charge Coverage Ratio" means with respect to any specified Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the specified Person or any of its Restricted Subsidiaries incurs, assumes, guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than ordinary working capital borrowings) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect to such incurrence, assumption, Guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the 12 applicable four-quarter reference period. In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations, or any Person or any of its Restricted Subsidiaries acquired by the specified Person or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date will be given pro forma effect (in accordance with Regulation S-X under the Securities Act) as if they had occurred on the first day of the four-quarter reference period; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded; (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the specified Person or any of its Restricted Subsidiaries following the Calculation Date; (4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period; (5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and (6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the Calculation Date in excess of 12 months). "Fixed Charges" means, with respect to any specified Person for any period, the sum, without duplication, of: (1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued, including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, imputed interest with respect to Attributable Debt, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedging Obligations in respect of interest rates; plus (2) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period; plus 13 (3) any interest on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon; plus (4) the product of (A) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (B) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, determined on a consolidated basis in accordance with GAAP; provided, however, that there shall be excluded from Fixed Charges any non-cash amortization or write-off of fees and expenses incurred in connection with the Merger. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect from time to time. "Global Note Legend" means the legend set forth in Section 2.06(g)(2) hereof, which is required to be placed on all Global Notes issued under this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes deposited with or on behalf of and registered in the name of the Depository or its nominee, substantially in the form of Exhibit A hereto and that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, issued in accordance with Section 2.01, 2.06(b)(3), 2.06(b)(4), 2.06(d)(2) or 2.06(f) hereof. "Government Securities" means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. "Guarantee" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, without limitation, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise). "Guarantors" means each of: (1) The Canton Oil & Gas Company and Ward Lake Drilling, Inc.; and (2) any other Subsidiary of the Company that executes a Note Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of this Indenture. 14 "Hedge Agreement" means the ISDA Master Agreement, dated June 30, 2004, with J. Aron & Company that the Company will be a party to effective as of the date of the Merger (including the schedule and credit annex thereto and the confirmations thereunder), pursuant to which the parties thereto have entered into certain gas price swaps, as such agreement may be amended or assigned from time to time. "Hedge Counterparty" means J. Aron & Company or any successor under the Hedge Agreement. "Hedge Letter of Credit" means, collectively, the $40.0 million of letters of credit issued pursuant to the letter credit facility under the Credit Agreement or cash collateral in lieu thereof to support the Hedge Agreement and $15.0 million of letters of credit issued pursuant to the revolving credit facility under the Credit Agreement; provided that each such hedge letter of credit shall be used by the Company solely to secure the Company's obligations under the Hedge Agreement and other hedging transactions. "Hedging Obligations" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; (2) other agreements or arrangements designed to manage interest rates or interest rate risk; and (3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices including, without limitation, the Hedge Agreement. "Hedge Outstanding Amount" means, in the case of Parity Lien Obligations arising under hedge agreements, the amount that would be payable in the reasonable judgment of the counterparty under the applicable hedge agreement if such hedge agreement were terminated as the result of an event of default with respect to the Company under such hedge agreement on the Business Day prior to the date of such determination or, if any hedge agreement was previously terminated, the termination amount which remains unpaid as of the Business Day preceding such date and, in the case of the Hedge Agreement, only to the extent that the Hedge Letter of Credit is not sufficient to pay such amount. "Holder" means a Person in whose name a Note is registered. "Hydrocarbon Properties" means all rights, titles, interests and estates now owned or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee or lease interests farm-ins, farm-outs, overriding royalty and royalty interests, net profit interests, oil payments, production payment interests and similar mineral interests, including any reserved or residual interest of whatever nature. "Hydrocarbons" means oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons, coal bed methane and other gaseous hydrocarbons, all products refined, separated, settled and dehydrated therefrom, including, without limitation, kerosene, liquefied petroleum gas, refined lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium, sulfur and all other minerals. "Immaterial Subsidiary" means, as of any date, any Restricted Subsidiary whose total assets, as of that date, are less than $100,000 and whose total revenues for the most recent 12-month period do not exceed $100,000; provided that a Restricted Subsidiary will not be considered to be an Immaterial 15 Subsidiary if it, directly or indirectly, guarantees or otherwise provides direct credit support for any Indebtedness of the Company. "Indebtedness" means with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables), whether or not contingent: (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof); (3) in respect of banker's acceptances; (4) representing Capital Lease Obligations or Attributable Debt in respect of sale and leaseback transactions; (5) representing the balance deferred and unpaid of the purchase price of any property or services due more than six months after such property is acquired or such services are completed; or (6) representing any Hedging Obligations, if and to the extent any of the preceding items (other than letters of credit, Attributable Debt and Hedging Obligations) would appear as a liability upon a balance sheet of the specified Person prepared in accordance with GAAP. In addition, the term "Indebtedness" includes (i) all Indebtedness of others secured by a Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the specified Person) and, to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness of any other Person and (ii) any warranties or guarantees of production or payment by such Person with respect to any Production Payment or Reserve Sale, but excludes other contractual obligations of such Person with respect to such Production Payment and Reserve Sale. "Indenture" means this Indenture, as amended or supplemented from time to time. "Indirect Participant" means a Person who holds a beneficial interest in a Global Note through a Participant. "Initial Notes" means the first $192,500,000 aggregate principal amount of Notes issued under this Indenture on the date hereof. "Insolvency or Liquidation Proceeding" means: (1) any case commenced by or against the Company or any other Pledgor under Title 11, U.S. Code or any similar federal or state law for the relief of debtors, any other proceeding for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of the Company or any other Pledgor, any receivership or assignment for the benefit of creditors relating to the Company or any other Pledgor or any similar case or proceeding relative to the Company or any other Pledgor or its creditors, as such, in each case whether or not voluntary; (2) any liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to the Company or any other Pledgor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency; or 16 (3) any other proceeding of any type or nature in which substantially all claims of creditors of the Company or any other Pledgor are determined and any payment or distribution is or may be made on account of such claims. "Investments" means, with respect to any Person, all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans (including Guarantees or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Company's Investments in such Subsidiary that were not sold or disposed of in an amount determined under Section 4.07. The acquisition by the Company or any Subsidiary of the Company of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Company or such Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined under Section 4.07(b). Except as otherwise provided in this Indenture, the amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value. "Investment Grade Rating" means a rating of "BBB-" or higher from Standard & Poor's Ratings Group (or any successor thereto) and a rating of "Baa3" or higher from Moody's Investors Service, Inc. (or any successor thereto), as the case may be. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction. "Lien Sharing and Priority Confirmation" means: (1) as to any Series of Parity Lien Debt, the written agreement of the holders of such Series of Parity Lien Debt, as set forth in the indenture, credit agreement, hedge agreement or other agreement governing such Series of Parity Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Priority Lien Debt, each existing and future Priority Lien Representative and each existing and future holder of Permitted Prior Liens: 17 (A) that all Parity Lien Obligations will be and are secured equally and ratably by all Parity Liens at any time granted by the Company or any other Pledgor to secure any Obligations in respect of such Series of Parity Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Parity Lien Debt, and that all such Parity Liens will be enforceable by the Collateral Trustee for the benefit of all holders of Parity Lien Obligations equally and ratably; (B) that the holders of Obligations in respect of such Series of Parity Lien Debt are bound by the provisions of the Collateral Trust Agreement, including the provisions relating to the ranking of Parity Liens and the order of application of proceeds from the enforcement of Parity Liens; and (C) consenting to and directing the Collateral Trustee to perform its obligations under the Collateral Trust Agreement and the other Security Documents; and (2) as to any Series of Priority Lien Debt, the written agreement of the holders of such Series of Priority Lien Debt, as set forth in the credit agreement or other agreement governing such Series of Priority Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Parity Lien Debt, each existing and future Parity Lien Representative and each existing and future holder of Permitted Prior Liens: (A) that all Priority Lien Obligations will be and are secured equally and ratably by all Priority Liens at any time granted by the Company or any other Pledgor to secure any Obligations in respect of such Series of Priority Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Priority Lien Debt, and that all such Priority Liens will be enforceable by the Collateral Trustee for the benefit of all holders of Priority Lien Obligations equally and ratably; (B) that the holders of Obligations in respect of such Series of Priority Lien Debt are bound by the provisions of the Collateral Trust Agreement, including the provisions relating to the ranking of Priority Liens and the order of application of proceeds from enforcement of Priority Liens; and (C) consenting to and directing the Collateral Trustee to perform its obligations under the Collateral Trust Agreement and the other Security Documents. "Management Agreement" means that certain management services agreement, dated as of the date of this Indenture, between the Company and the Parent. "Material Change" means an increase or decrease (excluding changes that result solely from changes in prices and changes resulting from the incurrence of previously estimated future development costs) of more than 25% during a fiscal quarter in the discounted future net revenues from proved crude oil and natural gas reserves of the Company and its Restricted Subsidiaries, calculated in accordance with clause (1)(A) of the definition of ACNTA; provided, however, that the following will be excluded from the calculation of Material Change: (1) any acquisitions during the fiscal quarter of oil and gas reserves that have been estimated by independent petroleum engineers and with respect to which a report or reports of such engineers exist; and 18 (2) any disposition of properties existing at the beginning of such fiscal quarter that have been disposed of in compliance with Section 4.10. "Net Income" means, with respect to any specified Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however: (1) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with: (A) any Asset Sale; or (B) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries; and (2) any extraordinary gain (but not loss), together with any related provision for taxes on such extraordinary gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation, legal, accounting and investment banking fees, and sales commissions, and any relocation expenses incurred as a result of the Asset Sale, taxes paid or payable as a result of the Asset Sale, in each case, after taking into account any available tax credits or deductions and any tax sharing arrangements, and amounts required to be applied to the repayment of Indebtedness, other than Indebtedness under a Credit Facility, secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Net Working Capital" means: (1) all current assets of the Company and its Restricted Subsidiaries; minus (2) all current liabilities of the Company and its Restricted Subsidiaries, except current liabilities included in Indebtedness; determined in accordance with GAAP. "Non-Recourse Debt" means Indebtedness: (1) as to which neither the Company nor any of its Restricted Subsidiaries (A) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (B) is directly or indirectly liable as a guarantor or otherwise, or (C) constitutes the lender; (2) no default with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and 19 (3) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a Person who is not a U.S. Person. "Note Documents" means this Indenture, the Notes and the Security Documents. "Note Guarantee" means the Guarantee by each Guarantor of the Company's obligations under this Indenture and the Notes, executed pursuant to the provisions of this Indenture. "Notes" has the meaning assigned to it in the preamble to this Indenture. The Initial Notes and the Additional Notes shall be treated as a single class for all purposes under this Indenture, and unless the context otherwise requires, all references to the Notes shall include the Initial Notes and any Additional Notes. "Obligations" means any principal (including reimbursement obligations with respect to letters of credit whether or not drawn), interest (including all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable post-default rate, specified in the Priority Lien Documents, even if such interest is not enforceable, allowable or allowed as a claim in such proceeding), premium (if any), fees, indemnifications, reimbursements, expenses and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 13.05 hereof. "Oil and Gas Business" means: (1) the acquisition, exploration, development, operation and disposition of interests in oil, gas and other hydrocarbon properties; (2) the gathering, marketing, distribution, treating, processing, storage, selling and transporting of any production from such interests or properties and the marketing of oil and gas obtained from unrelated Persons; (3) any business relating to exploration for or development, production, treatment, processing, storage, transportation, gathering or marketing of oil, gas and other minerals and products produced in association therewith; (4) any business relating to oilfield sales and service; and (5) any activity that is ancillary to or necessary or appropriate for the activities described in clauses (1) through (5) of this definition. 20 "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 13.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Parent" means Capital C Energy Operations, LP. "Parity Lien" means a Lien granted by a security document to the Collateral Trustee, at any time, upon any property of the Company or any other Pledgor to secure Parity Lien Obligations. "Parity Lien Debt" means: (1) the Notes issued on the date of this Indenture (including any related Exchange Notes); (2) Indebtedness under the Hedge Agreement that was permitted to be incurred and secured under each applicable Secured Debt Document (or as to which the counterparties under the Hedge Agreement obtained an Officers' Certificate at the time of incurrence to the effect that such Indebtedness was permitted to be incurred and secured by all applicable Secured Debt Documents); (3) Hedging Obligations incurred in the ordinary course of business to hedge or manage fluctuations in commodity prices (other than pursuant to the Hedge Agreement) that is secured equally and ratably with Parity Lien Debt by a Parity Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document; (4) any other Indebtedness (including Additional Notes) that is secured equally and ratably with the Parity Lien Debt by a Parity Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document; provided that: (A) the net proceeds are used to refund, refinance, replace, defease, discharge or otherwise acquire or retire Priority Lien Debt or other Parity Lien Debt; or (B) on the date of incurrence of such Indebtedness, after giving pro forma effect to the incurrence thereof and the application of the proceeds therefrom, the Secured Leverage Ratio would not be greater than 2.75 to 1.0; provided, in the case of any Indebtedness referred to in clause (3) or (4) above, that: (i) on or before the date on which such Indebtedness is incurred by the Company or the applicable Restricted Subsidiary, such Indebtedness is designated by the Company, in an Officers' Certificate delivered to each Parity Lien Representative and the Collateral Trustee, as "Parity Lien Debt" for the purposes of the Secured Debt Documents; provided that no Series of Secured Debt may be designated as both Parity Lien Debt and Priority Lien Debt; (ii) such Indebtedness is governed by an indenture, credit agreement or other agreement that includes a Lien Sharing and Priority Confirmation; and (iii) all requirements set forth in the Collateral Trust Agreement as to the confirmation, grant or perfection of the Collateral Trustee's Liens to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (C) will be conclusively established 21 if the Company delivers to the Collateral Trustee an Officers' Certificate stating that such requirements and other provisions have been satisfied and that such Indebtedness is "Parity Lien Debt"). "Parity Lien Documents" means, collectively, the Hedge Agreement, the Note Documents, this Indenture, credit agreement or other agreement governing each other Series of Parity Lien Debt and the Security Documents (other than any Security Documents that do not secure Parity Lien Obligations). "Parity Lien Obligations" means Parity Lien Debt and all other Obligations in respect thereof. "Parity Lien Representative" means: (1) in the case of the Notes, the Trustee; (2) in the case of the Hedge Agreement, the Hedge Counterparty; or (3) in the case of any other Series of Parity Debt, the trustee, agent or representative of the holders of such Series of Parity Lien Debt who maintains the transfer register for such Series of Parity Lien Debt; and (A) is appointed as a Parity Lien Representative (for purposes related to the administration of the Security Documents) pursuant to this Indenture, credit agreement or other agreement governing such Series of Parity Lien Debt, together with its successors in such capacity; and (B) has become a party to the Collateral Trust Agreement by executing a joinder in the form required under the Collateral Trust Agreement. "Participant" means, with respect to the Depositary, Euroclear or Clearstream, a Person who has an account with the Depositary, Euroclear or Clearstream, respectively (and, with respect to DTC, shall include Euroclear and Clearstream). "Permitted Investments" means: (1) any Investment in the Company or in a Restricted Subsidiary of the Company; (2) any Investment in Cash Equivalents; (3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment: (A) such Person becomes a Restricted Subsidiary of the Company; or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10; 22 (5) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (6) any Investments received in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Company or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes with Persons who are not Affiliates; (7) Investments represented by Hedging Obligations; (8) loans or advances to employees made in the ordinary course of business of the Company or the Restricted Subsidiary of the Company in an aggregate principal amount not to exceed $1.0 million at any one time outstanding; (9) repurchases of the Notes; (10) entry into operating agreements, joint ventures, partnership agreements, limited liability company agreements, working interests, royalty interests, mineral leases, processing agreements, farm-in agreements, farm-out agreements, development agreements, contracts for the sale, transportation or exchange of oil and natural gas, unitization agreements, pooling arrangements, joint bidding agreements, area of mutual interest agreements, production sharing agreements or other similar or customary agreements, transactions, properties, interests or arrangements, and Investments and expenditures in connection therewith or pursuant thereto, in each case made or entered into in the ordinary course of the Oil and Gas Business, excluding however, Investments in corporations other than any Investment received pursuant to Section 4.10; and (11) other Investments in any Person other than an Affiliate of the Company having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (11) that are at the time outstanding, not to exceed $15.0 million. "Permitted Liens" means: (1) Liens held by the Collateral Trustee securing Priority Lien Debt in an aggregate principal amount not exceeding the Priority Lien Cap and all related Priority Lien Obligations; (2) Liens held by the Collateral Trustee equally and ratably securing the Notes to be issued on the date of this Indenture, the Notes Guarantees, Indebtedness under the Hedge Agreement and all future Parity Lien Debt and other Parity Lien Obligations; (3) Liens in favor of the Company or the Guarantors; (4) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company or the Subsidiary; 23 (5) Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Company or any Subsidiary of the Company; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition; (6) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (7) Liens existing on the date of this Indenture; (8) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; (9) Liens imposed by law, such as carriers', warehousemen's, landlord's and mechanics' Liens, in each case, incurred in the ordinary course of business; (10) survey exceptions, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (11) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under this Indenture; provided, however, that: (A) the new Lien shall be limited to all or part of the same property and assets that secured or, under the written agreements pursuant to which the original Lien arose, could secure the original Lien (plus improvements and accessions to, such property or proceeds or distributions thereof); and (B) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Permitted Refinancing Indebtedness and (y) an amount necessary to pay any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge; (12) Liens on, or related to, properties or assets to secure all or part of the costs incurred in the ordinary course of the Oil and Gas Business for the exploration, drilling, development, production, processing, transportation, marketing, storage or operation thereof; (13) Liens on pipeline or pipeline facilities that arise under operation of law; (14) Liens arising under operating agreements, joint venture agreements, partnership agreements, mineral leases, processing agreements, oil and gas leases, farm-in agreements, farm-out agreements, division orders, contracts for the sale, transportation or exchange of oil or natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements, gas balancing and other agreements that are customary in the Oil and Gas Business; 24 (15) Liens reserved in oil and gas mineral leases for bonus or rental payments and for compliance with the terms of such leases; (16) Liens securing Production Payments and Reserve Sales; provided that such Liens are limited to the property that is subject to such Production Payments and Reserve Sales and are incurred after the date of this Indenture; (17) Liens securing Indebtedness incurred to finance the construction, purchase or lease of, or repairs, improvements or additions to, property, plant or equipment of such Person; provided, however, that the Lien may not extend to any other property owned by such Person or any of its Restricted Subsidiaries at the time the Lien is incurred (other than assets and property affixed or appurtenant thereto), and such Indebtedness (other than any interest thereon) secured by the Lien may not be incurred more than 180 days after the later of the acquisition, completion of construction, repair, improvement, addition or commencement of full operation of the property subject to the Lien, and such Indebtedness is incurred pursuant to Section 4.09; (18) Liens on cash or cash equivalents securing the Hedge Agreement or other hedging transactions to the extent that the sum of such cash or cash equivalents constitutes the proceeds of any draw on any letter of credit issued to secure the Hedge Agreement or such hedging transactions; and (19) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding. "Permitted Payments to Parent" means, without duplication as to amounts: (1) payments to the Parent in payment of fees not in excess of $1.0 million per annum pursuant to the Management Agreement in accordance with Section 4.11; (2) payments to the Parent to permit the Parent to pay reasonable accounting, legal and administrative expenses of the Parent when due, in an aggregate amount not to exceed $500,000 per annum; and (3) for so long as the Company is a member of a group filing a consolidated or combined tax return with the Parent, payments to the Parent in respect of an allocable portion of the tax liabilities of such group that is attributable to the Company and its Subsidiaries ("Tax Payments"). The Tax Payments shall not exceed the lesser of (i) the amount of the relevant tax (including any penalties and interest) that the Company would owe if the Company were filing a separate tax return (or a separate consolidated or combined return with its Subsidiaries that are members of the consolidated or combined group), taking into account any carryovers and carrybacks of tax attributes (such as net operating losses) of the Company and such Subsidiaries from other taxable years and (ii) the net amount of the relevant tax that the Parent actually owes to the appropriate taxing authority. Any Tax Payments received from the Company shall be paid over to the appropriate taxing authority within 30 days of the Parent's receipt of such Tax Payments or refunded to the Company. "Permitted Prior Liens" means: (1) Liens described in clause (1) of the definition of "Permitted Liens;" 25 (2) Liens described in clauses (4), (5), (7), (10), (14), (15) or (16) of the definition of "Permitted Liens;" and (3) Permitted Liens that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the Liens created by the Security Documents. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith); (2) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; (3) if the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged; and (4) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "Pledgors" means the Company, the Guarantors and any other Person (if any) that provides collateral security for any Secured Obligations. "Principals" means Parent and Carlyle/Riverstone Global Energy and Power Fund II, L.P. "Priority Lien" means a Lien granted by a security document to the Collateral Trustee, at any time, upon any property of the Company or any other Pledgor to secure Priority Lien Obligations. "Priority Lien Cap" means, as of any date, the principal amount outstanding under the Credit Agreement and/or the Indebtedness outstanding under any other Credit Facility, in an aggregate principal amount not to exceed the sum of the amount provided by clause (1) of the definition of Permitted Debt, as of any date, plus the amount provided by clause (14) of the definition of Permitted Debt, less the amount of Parity Lien Debt incurred after the date of the indenture the net proceeds of which are used to repay Priority Lien Debt. For purposes of this definition, all letters of credit will be valued at the face amount thereof, whether or not drawn and all Hedging Obligations will be valued at zero. 26 "Priority Lien Debt" means: (1) Indebtedness under the Credit Agreement that was permitted to be incurred and secured under each applicable Secured Debt Document (or as to which the lenders under the Credit Agreement obtained an Officers' Certificate at the time of incurrence to the effect that such Indebtedness was permitted to be incurred and secured by all applicable Secured Debt Documents); (2) Indebtedness under any other Credit Facility that is secured equally and ratably with the Credit Agreement by a Priority Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document; provided, in the case of any Indebtedness referred to in this clause (2), that: (A) on or before the date on which such Indebtedness is incurred by the Company or the applicable Restricted Subsidiary, such Indebtedness is designated by the Company, in an Officers' Certificate delivered to each Priority Lien Representative and the Collateral Trustee, as "Priority Lien Debt" for the purposes of the Secured Debt Documents; provided that no Series of Secured Debt may be designated as both Priority Lien Debt and Parity Lien Debt; (B) such Indebtedness is governed by a credit agreement or other agreement that includes a Lien Sharing and Priority Confirmation; and (C) all requirements set forth in the Collateral Trust Agreement as to the confirmation, grant or perfection of the Collateral Trustee's Lien to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (C) will be conclusively established if the Company delivers to the Collateral Trustee an Officers' Certificate stating that such requirements and other provisions have been satisfied and that such Indebtedness is "Priority Lien Debt"); and (3) Hedging Obligations incurred to hedge or manage interest rate risk with respect to Priority Lien Debt; provided that: (A) such Hedging Obligations are secured by a Priority Lien on all of the assets and properties that secure Indebtedness under the Credit Facility in respect of which such Hedging Obligations are incurred; and (B) such Priority Lien is senior to or on a parity with the Priority Liens securing Indebtedness under the Credit Facility in respect of which such Hedging Obligations are incurred. "Priority Lien Documents" means the Credit Agreement and any other Credit Facility pursuant to which any Priority Lien Debt is incurred and the Security Documents (other than any Security Documents that do not secure Priority Lien Obligations). "Priority Lien Obligations" means Priority Lien Debt and all other Obligations in respect of Priority Lien Debt. "Priority Lien Representative" means (1) the Credit Agreement Agent or (2) in the case of any 27 other Series of Priority Lien Debt, the trustee, agent or representative of the holders of such Series of Priority Lien Debt who maintains the transfer register for such Series of Priority Lien Debt and is appointed as a representative of the Priority Lien Debt (for purposes related to the administration of the Security Documents) pursuant to the credit agreement or other agreement governing such Series of Priority Lien Debt. "Private Placement Legend" means the legend set forth in Section 2.06(g)(1) hereof to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "Production Payment" means Dollar-Denominated Production Payments and Volumetric Production Payments, collectively. "Production Payment and Reserve Sales" means the grant or transfer by the Company or a Restricted Subsidiary of the Company to any Person of a royalty, overriding royalty, net profits interest or Production Payment in oil and natural gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties where, in the case of each of the foregoing, the holder of such interest has recourse solely to such production or proceeds of production, subject to the obligation of the grantor or transferor to operate and maintain, or cause the subject interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental, title or other matters customary in connection with the transfer of such interests. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of this Indenture, among the Company, the Guarantors and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time and, with respect to any Additional Notes, one or more registration rights agreements among the Company, the Guarantors and the other parties thereto, as such agreement(s) may be amended, modified or supplemented from time to time, relating to rights given by the Company to the purchasers of Additional Notes to register such Additional Notes under the Securities Act. "Regulation S" means Regulation S promulgated under the Securities Act. "Regulation S Global Note" means a Global Note substantially in the form of Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 903 of Regulation S. "Related Party" means: (1) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Principal; or (2) any trust, corporation, partnership, limited liability company or other entity, the beneficiaries, stockholders, partners, members, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Principals and/or such other Persons referred to in clause (1) of this definition. "Required Parity Creditors" means, at any time, the holders of more than 50% of the sum of: 28 (1) the aggregate outstanding principal amount of Parity Lien Debt (including outstanding letters of credit whether or not then available or drawn); (2) other than in connection with the exercise of remedies, the aggregate unfunded commitments to extend credit which, when funded, would constitute Parity Lien Debt; and (3) in the case of Parity Lien Obligations arising under hedge agreements, the Hedge Outstanding Amount; For purposes of this definition, (A) Parity Lien Debt registered in the name of, or beneficially owned by, the Company or any Affiliate of the Company will be deemed not to be outstanding, and (B) votes will be determined in accordance with the Collateral Trust Agreement. "Required Priority Creditors" means, at any time, the holders of more than 50% of the sum of: (1) the aggregate outstanding principal amount of Priority Lien Debt (including outstanding letters of credit whether or not then available or drawn); and (2) other than in connection with the exercise of remedies, the aggregate unfunded commitments to extend credit which, when funded, would constitute Priority Lien Debt. For purposes of this definition, (A) Priority Lien Debt registered in the name of, or beneficially owned by, the Company or any Affiliate of the Company will be deemed not to be outstanding, and (B) votes will be determined in accordance with the Collateral Trust Agreement. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated under the Securities Act. "Sale of Collateral" means any Asset Sale involving a sale or other disposition of Collateral. "SEC" means the Securities and Exchange Commission. 29 "Secured Debt" means Parity Lien Debt and Priority Lien Debt. "Secured Debt Documents" means the Parity Lien Documents and the Priority Lien Documents. "Secured Debt Representative" means each Parity Lien Representative and each Priority Lien Representative. "Secured Leverage Ratio" means, on any date, the ratio of: (1) the aggregate principal amount of Secured Debt outstanding on such date (including, without limitation, the Hedge Outstanding Amount under hedge agreements constituting Parity Lien Debt) plus all Indebtedness of Restricted Subsidiaries of the Company that are not Guarantors outstanding on such date (and, for this purpose, letters of credit will be deemed to have a principal amount equal to the face amount thereof, whether or not drawn), to: (2) the aggregate amount of the Company's Consolidated Cash Flow for the most recent four-quarter period for which financial information is available. In addition, for purposes of calculating the Secured Leverage Ratio: (1) acquisitions that have been made by the specified Person or any of its Restricted Subsidiaries, including through mergers or consolidations or acquisitions of assets, or any Person or any of its Restricted Subsidiaries acquired by merger, consolidation or the acquisition of all or substantially all of its assets by the specified Person or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the date on which the event for which the calculation of the Secured Leverage Ratio is made (the "Leverage Calculation Date") will be given pro forma effect in accordance with Regulation S-X under the Securities Act) as if they had occurred on the first day of the four-quarter reference period; (2) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses (and ownership interests therein) disposed of prior to the Leverage Calculation Date will be excluded; (3) any Person that is a Restricted Subsidiary on the Leverage Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period; and (4) any Person that is not a Restricted Subsidiary on the Leverage Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period. "Secured Obligations" means Parity Lien Obligations and Priority Lien Obligations. "Security Documents" means the Collateral Trust Agreement, each Lien Sharing and Priority Confirmation, and all security agreements, pledge agreements, collateral assignments, mortgages, deeds of trust, collateral agency agreements, control agreements or other grants or transfers for security executed and delivered by the Company or any other Pledgor creating (or purporting to create) a Lien upon Collateral in favor of the Collateral Trustee, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms and the Collateral Trust Agreement. 30 "Securities Act" means the Securities Act of 1933, as amended. "Series of Parity Lien Debt" means, severally, the Notes, the Indebtedness under the Hedge Agreement and each other issue or series of Parity Lien Debt for which a single transfer register is maintained. "Series of Priority Lien Debt" means, severally, the Indebtedness outstanding under the Credit Agreement and any other Credit Facility that constitutes Priority Lien Debt. "Series of Secured Debt" means each Series of Parity Lien Debt and each Series of Priority Lien Debt. "Shelf Registration Statement" means the Shelf Registration Statement as defined in the Registration Rights Agreement. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Special Interest" has the meaning set forth in the Registration Rights Agreement. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness as of the date of this Indenture, and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (A) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (B) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C. Sections 77aaa-77bbbb). "Treasury Rate" means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to July 15, 2008; provided, however, that if the period from the redemption date to July 15, 2008 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. 31 "Trustee" means BNY Midwest Trust Company until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Definitive Note" means a Definitive Note that does not bear and is not required to bear the Private Placement Legend. "Unrestricted Global Note" means a Global Note that does not bear and is not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary of the Company that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a resolution of the Board of Directors, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) except as permitted by Section 4.11 hereof, is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (3) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (A) to subscribe for additional Equity Interests or (B) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; and (4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries. "U.S. Person" means a U.S. Person as defined in Rule 902(k) promulgated under the Securities Act. "Volumetric Production Payments" means production payment obligations recorded as deferred revenue in accordance with GAAP, together with all undertakings and obligations in connection therewith. "Voting Stock" of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (B) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. 32 Section 1.02 Other Definitions.
Defined in Term Section ---- ------- "Affiliate Transaction"................................... 4.11 "Asset Sale Offer"........................................ 3.09 "Authentication Order".................................... 2.02 "Change of Control Offer"................................. 4.15 "Change of Control Payment"............................... 4.15 "Change of Control Payment Date".......................... 4.15 "Covenant Defeasance"..................................... 8.03 "DTC"..................................................... 2.03 "Event of Default"........................................ 6.01 "Excess Proceeds"......................................... 4.10 "incur"................................................... 4.09 "Legal Defeasance"........................................ 8.02 "Offer Amount"............................................ 3.09 "Offer Period"............................................ 3.09 "Paying Agent"............................................ 2.03 "Permitted Debt".......................................... 4.09 "Payment Default" ........................................ 6.01 "Purchase Date"........................................... 3.09 "Registrar"............................................... 2.03 "Restricted Payments"..................................... 4.07
Section 1.03 Incorporation by Reference of Trust Indenture Act. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; "indenture security Holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Note Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Note Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. Section 1.04 Rules of Construction. Unless the context otherwise requires: (a) a term has the meaning assigned to it; 33 (b) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (c) "or" is not exclusive; (d) words in the singular include the plural, and in the plural include the singular; (e) "will" shall be interpreted to express a command; (f) provisions apply to successive events and transactions; and (g) references to sections of or rules under the Securities Act will be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2 THE NOTES Section 2.01 Form and Dating. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $2,000 and integral multiples of $1,000. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibit A attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or the Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. (c) Euroclear and Clearstream Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Clearstream Banking" and "Customer Handbook" of Clearstream shall be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held by Participants through Euroclear or Clearstream. Section 2.02 Execution and Authentication. 34 One Officer shall sign the Notes for the Company by manual or facsimile signature. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon receipt of a written order of the Company signed by one Officer (an "Authentication Order"), authenticate Notes for original issue that may be validly issued under this Indenture, including any Additional Notes. The aggregate principal amount of Notes outstanding at any time may not exceed the aggregate principal amount of Notes authorized for issuance by the Company pursuant to one or more Authentication Orders, except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. Section 2.03 Registrar and Paying Agent. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where Notes may be presented for payment ("Paying Agent"), which shall be located in the Borough of Manhattan, the City of New York. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. Section 2.04 Paying Agent to Hold Money in Trust. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Special Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. 35 Section 2.05 Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). Section 2.06 Transfer and Exchange. (a) Transfer and Exchange of Global Notes. A Global Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. All Global Notes shall be exchanged by the Company for Definitive Notes if: (1) the Company delivers to the Trustee notice from the Depositary that it is unwilling or unable to continue to act as Depositary or that it is no longer a clearing agency registered under the Exchange Act and, in either case, a successor Depositary is not appointed by the Company within 120 days after the date of such notice from the Depositary; (2) the Company in its sole discretion determines that the Global Notes (in whole but not in part) should be exchanged for Definitive Notes and delivers a written notice to such effect to the Trustee; or (3) there has occurred and is continuing a Default or Event of Default with respect to the Notes. Upon the occurrence of either of the preceding events in (1) or (2) above, Definitive Notes shall be issued in such names as the Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form of, and shall be, a Global Note. A Global Note may not be exchanged for another Note other than as provided in this Section 2.06(a), however, beneficial interests in a Global Note may be transferred and exchanged as provided in Section 2.06(b), (c) or (f) hereof. (b) Transfer and Exchange of Beneficial Interests in the Global Notes. The transfer and exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Transfers of beneficial interests in the Global Notes also shall require compliance with either subparagraph (1) or (2) below, as applicable, as well as one or more of the other following subparagraphs, as applicable: (1) Transfer of Beneficial Interests in the Same Global Note. Beneficial interests in any Restricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Restricted Global Note in accordance with the transfer restrictions set forth in the Private Placement Legend. Beneficial interests in any Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in an 36 Unrestricted Global Note. No written orders or instructions shall be required to be delivered to the Registrar to effect the transfers described in this Section 2.06(b)(1). (2) All Other Transfers and Exchanges of Beneficial Interests in Global Notes. In connection with all transfers and exchanges of beneficial interests that are not subject to Section 2.06(b)(1) above, the transferor of such beneficial interest must deliver to the Registrar either: (A) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to credit or cause to be credited a beneficial interest in another Global Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given in accordance with the Applicable Procedures containing information regarding the Participant account to be credited with such increase; or (B) both: (i) a written order from a Participant or an Indirect Participant given to the Depositary in accordance with the Applicable Procedures directing the Depositary to cause to be issued a Definitive Note in an amount equal to the beneficial interest to be transferred or exchanged; and (ii) instructions given by the Depositary to the Registrar containing information regarding the Person in whose name such Definitive Note shall be registered to effect the transfer or exchange referred to in (1) above; Upon consummation of an Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(2) shall be deemed to have been satisfied upon receipt by the Registrar of the instructions contained in the Letter of Transmittal delivered by the Holder of such beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the requirements for transfer or exchange of beneficial interests in Global Notes contained in this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee shall adjust the principal amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof. (3) Transfer of Beneficial Interests to Another Restricted Global Note. A beneficial interest in any Restricted Global Note may be transferred to a Person who takes delivery thereof in the form of a beneficial interest in another Restricted Global Note if the transfer complies with the requirements of Section 2.06(b)(2) above and the Registrar receives the following: (A) if the transferee will take delivery in the form of a beneficial interest in the 144A Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; and (B) if the transferee will take delivery in the form of a beneficial interest in the Regulation S Global Note, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof. 37 (4) Transfer and Exchange of Beneficial Interests in a Restricted Global Note for Beneficial Interests in an Unrestricted Global Note. A beneficial interest in any Restricted Global Note may be exchanged by any holder thereof for a beneficial interest in an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer complies with the requirements of Section 2.06(b)(2) above and: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of the beneficial interest to be transferred, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(a) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of a beneficial interest in an Unrestricted Global Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount of beneficial interests transferred pursuant to subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global Note. 38 (c) Transfer or Exchange of Beneficial Interests for Definitive Notes. (1) Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes. If any holder of a beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then, upon receipt by the Registrar of the following documentation: (A) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for a Restricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (2)(a) thereof; (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such beneficial interest is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such beneficial interest is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such beneficial interest is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (F) if such beneficial interest is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest shall instruct the Registrar through instructions from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note pursuant to this Section 2.06(c)(1) shall bear the Private Placement Legend and shall be subject to all restrictions on transfer contained therein. (2) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if: 39 (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the holder of such beneficial interest, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the holder of such beneficial interest in a Restricted Global Note proposes to exchange such beneficial interest for an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit C hereto, including the certifications in item (1)(b) thereof; or (ii) if the holder of such beneficial interest in a Restricted Global Note proposes to transfer such beneficial interest to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest in an Unrestricted Global Note proposes to exchange such beneficial interest for a Definitive Note or to transfer such beneficial interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon satisfaction of the conditions set forth in Section 2.06(b)(2) hereof, the Trustee shall cause the aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute and the Trustee shall authenticate and deliver to the Person designated in the instructions a Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) shall be registered in such name or names and in such authorized denomination or denominations as the holder of such beneficial interest requests through instructions to the Registrar from or through the Depositary and the Participant or Indirect Participant. The Trustee shall deliver such Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive Note issued in exchange for a beneficial interest pursuant to this Section 2.06(c)(3) shall not bear the Private Placement Legend. (d) Transfer and Exchange of Definitive Notes for Beneficial Interests. 40 (1) Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes. If any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in a Restricted Global Note, then, upon receipt by the Registrar of the following documentation: (A) if the Holder of such Restricted Definitive Note proposes to exchange such Note for a beneficial interest in a Restricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (2)(b) thereof; (B) if such Restricted Definitive Note is being transferred to a QIB in accordance with Rule 144A, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (1) thereof; (C) if such Restricted Definitive Note is being transferred to a Non-U.S. Person in an offshore transaction in accordance with Rule 903 or Rule 904, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (2) thereof; (D) if such Restricted Definitive Note is being transferred pursuant to an exemption from the registration requirements of the Securities Act in accordance with Rule 144, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(a) thereof; (E) if such Restricted Definitive Note is being transferred to the Company or any of its Subsidiaries, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(b) thereof; or (F) if such Restricted Definitive Note is being transferred pursuant to an effective registration statement under the Securities Act, a certificate to the effect set forth in Exhibit B hereto, including the certifications in item (3)(c) thereof, the Trustee shall cancel the Restricted Definitive Note, increase or cause to be increased the aggregate principal amount of, in the case of clause (A) above, the appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note, and in the case of clause (C) above, the Regulation S Global Note. (2) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note only if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; 41 (C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Definitive Notes proposes to exchange such Notes for a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(c) thereof; or (ii) if the Holder of such Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of a beneficial interest in the Unrestricted Global Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests or if the Applicable Procedures so require, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. Upon satisfaction of the conditions of any of the subparagraphs in this Section 2.06(d)(2), the Trustee shall cancel the Definitive Notes and increase or cause to be increased the aggregate principal amount of the Unrestricted Global Note. (3) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial interest in an Unrestricted Global Note or transfer such Definitive Notes to a Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note at any time. Upon receipt of a request for such an exchange or transfer, the Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be increased the aggregate principal amount of one of the Unrestricted Global Notes. If any such exchange or transfer from a Definitive Note to a beneficial interest is effected pursuant to subparagraphs (2)(B), (2)(D) or (3) above at a time when an Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of Definitive Notes so transferred. (e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon request by a Holder of Definitive Notes and such Holder's compliance with the provisions of this Section 2.06(e), the Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in writing. In addition, the requesting Holder shall provide any additional certifications, documents and information, as applicable, required pursuant to the following provisions of this Section 2.06(e). 42 (1) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted Definitive Note may be transferred to and registered in the name of Persons who take delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the following: (A) if the transfer will be made pursuant to Rule 144A, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (1) thereof; (B) if the transfer will be made pursuant to Rule 903 or Rule 904, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications in item (2) thereof; and (C) if the transfer will be made pursuant to any other exemption from the registration requirements of the Securities Act, then the transferor must deliver a certificate in the form of Exhibit B hereto, including the certifications, certificates and Opinion of Counsel required by item (3) thereof, if applicable. (2) Restricted Definitive Notes to Unrestricted Definitive Notes. Any Restricted Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note or transferred to a Person or Persons who take delivery thereof in the form of an Unrestricted Definitive Note if: (A) such exchange or transfer is effected pursuant to the Exchange Offer in accordance with the Registration Rights Agreement and the Holder, in the case of an exchange, or the transferee, in the case of a transfer, certifies in the applicable Letter of Transmittal that it is not (i) a Broker-Dealer, (ii) a Person participating in the distribution of the Exchange Notes or (iii) a Person who is an affiliate (as defined in Rule 144) of the Company; (B) any such transfer is effected pursuant to the Shelf Registration Statement in accordance with the Registration Rights Agreement; (C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer Registration Statement in accordance with the Registration Rights Agreement; or (D) the Registrar receives the following: (i) if the Holder of such Restricted Definitive Notes proposes to exchange such Notes for an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit C hereto, including the certifications in item (1)(d) thereof; or (ii) if the Holder of such Restricted Definitive Notes proposes to transfer such Notes to a Person who shall take delivery thereof in the form of an Unrestricted Definitive Note, a certificate from such Holder in the form of Exhibit B hereto, including the certifications in item (4) thereof; and, in each such case set forth in this subparagraph (D), if the Registrar so requests, an Opinion of Counsel in form reasonably acceptable to the Registrar to the effect that such exchange or transfer is in compliance with the Securities Act and that the restrictions on 43 transfer contained herein and in the Private Placement Legend are no longer required in order to maintain compliance with the Securities Act. (3) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the instructions from the Holder thereof. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate: (1) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes accepted for exchange in the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company; and (2) Unrestricted Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer by Persons that certify in the applicable Letters of Transmittal that (A) they are not Broker-Dealers, (B) they are not participating in a distribution of the Exchange Notes and (C) they are not affiliates (as defined in Rule 144) of the Company. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Unrestricted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture. (1) Private Placement Legend. (A) Except as permitted by subparagraph (B) below, each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTE EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION 44 REQUIREMENTS OF THE SECURITIES ACT OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to subparagraphs (b)(4), (c)(2), (c)(3), (d)(2), (d)(3), (e)(2), (e)(3) or (f) of this Section 2.06 (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (2) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (1) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (2) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (3) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (4) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be returned to or retained and canceled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who shall take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such 45 other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (1) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar's request. (2) No service charge shall be made to a Holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (3) The Registrar shall not be required to register the transfer of or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (4) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. (5) Neither the Registrar nor the Company shall be required: (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection; (B) to register the transfer of or to exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (6) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (7) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (8) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. 46 Section 2.07 Replacement Notes. If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. Section 2.08 Outstanding Notes. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(a) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. Section 2.09 Treasury Notes. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company or any Guarantor, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any Guarantor, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. Section 2.10 Temporary Notes. Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. 47 Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. Section 2.11 Cancellation. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and will dispose of canceled Notes in accordance with its customary procedure (subject to the record retention requirement of the Exchange Act). Upon written request, certification of the disposition of all canceled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. Section 2.12 Defaulted Interest. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date may be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3 REDEMPTION AND PREPAYMENT Section 3.01 Notices to Trustee. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth: (a) the clause of this Indenture pursuant to which the redemption shall occur; (b) the redemption date; (c) the principal amount of Notes to be redeemed; and (d) the redemption price. Section 3.02 Selection of Notes to Be Redeemed or Purchased. If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select Notes for redemption or purchase on a pro rata basis except: (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed; or 48 (b) if otherwise required by law. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase. Section 3.03 Notice of Redemption. Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction and discharge of this Indenture pursuant to Articles 8 or 12 hereof. The notice shall identify the Notes to be redeemed (including the CUSIP numbers) and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. Section 3.04 Effect of Notice of Redemption. 49 Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. Section 3.05 Deposit of Redemption or Purchase Price. Prior to 11:00 a.m. Eastern Time on the redemption or purchase date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest and Special Interest, if any, on all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest and Special Interest, if any, on, all Notes to be redeemed or purchased. If the Company complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 3.06 Notes Redeemed or Purchased in Part. Upon surrender of a Note that is redeemed or purchased in part, the Company shall issue and, upon receipt of an Authentication Order, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered. Section 3.07 Optional Redemption. (a) At any time prior to July 15, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture at a redemption price of 108.750% of the principal amount thereof, plus accrued and unpaid interest and Special Interest, if any, to the redemption date, with the net cash proceeds of one or more Equity Offerings or a contribution to the Company's common equity capital made with the net cash proceeds of a concurrent offering of common stock of the Company's direct parent; provided that: (1) at least 65% of the aggregate principal amount of Notes (including any Additional Notes) issued under this Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption; and (2) the redemption occurs within 60 days of the date of the closing of such Equity Offering or such contribution to the Company's common equity capital, as applicable. (b) At any time prior to July 15, 2008, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus 50 the Applicable Premium as of, and accrued and unpaid interest and Special Interest, if any, to the date of redemption, subject to the rights of Holders of Notes on the relevant record date to receive interest due on the relevant interest payment date. (c) Except pursuant to Sections 3.07(a) and (b) hereof, the Notes shall not be redeemable at the Company's option prior to July 15, 2008. (d) On or after July 15, 2008, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Special Interest, if any, on the Notes redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:
Year Percentage ---- ---------- 2008........................... 104.375% 2009........................... 102.188% 2010 and thereafter............ 100.000%
Unless the Company defaults in the payment of the redemption price, interest shall cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date. (e) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. Section 3.08 Mandatory Redemption. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. Section 3.09 Offer to Purchase by Application of Excess Proceeds. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall be made to all Holders and all holders of other Indebtedness that is pari passu with the Notes containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets. The Asset Sale Offer shall remain open for a period of at least 20 Business Days following its commencement and not more than 30 Business Days, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than three Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall apply all Excess Proceeds (the "Offer Amount") to the purchase of Notes and such other pari passu Indebtedness (on a pro rata basis, if applicable) or, if less than the Offer Amount has been tendered, all Notes and other Indebtedness tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest and Special Interest, if any, shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. 51 Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer will remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment will continue to accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer will cease to accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in integral multiples of $1,000 only; (f) that Holders electing to have Notes purchased pursuant to any Asset Sale Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" attached to the Notes completed, or transfer by book-entry transfer, to the Company, a Depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders will be entitled to withdraw their election if the Company, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes and other pari passu Indebtedness surrendered by holders thereof exceeds the Offer Amount, the Company shall select the Notes and other pari passu Indebtedness to be purchased on a pro rata basis based on the principal amount of Notes and such other pari passu Indebtedness surrendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $2,000, or integral multiples of $1,000, will be purchased); and (i) that Holders whose Notes were purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company, shall authenticate and mail or deliver (or cause 52 to be transferred by book entry) such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4 COVENANTS Section 4.01 Payment of Notes. The Company shall pay or cause to be paid the principal of, premium, if any, and interest and Special Interest, if any, on, the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Special Interest, if any will be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 11:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Special Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 1% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Special Interest (without regard to any applicable grace period) at the same rate to the extent lawful. Section 4.02 Maintenance of Office or Agency. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an Affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange, where Notes may be presented for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03 hereof. Section 4.03 Reports. 53 (a) Whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes or cause the Trustee to furnish to the Holders of Notes, within the time periods specified in the SEC's rules and regulations: (1) all quarterly and annual reports that would be required to be filed with the SEC on Forms 10-Q and 10-K if the Company were required to file reports; and (2) all current reports that would be required to be filed with the SEC on Form 8-K if the Company were required to file such reports. All such reports shall be prepared in all material respects in accordance with all of the rules and regulations applicable to such reports. Each annual report on Form 10-K shall include a report on the Company's consolidated financial statements by the Company's certified independent accountants. In addition, the Company shall file a copy of each of the reports referred to in clauses (1) and (2) above with the SEC for public availability within the time periods specified in the rules and regulations applicable to such reports (unless the SEC will not accept such a filing) and shall post the reports on its website within those time periods. If, at any time, the Company is no longer subject to the periodic reporting requirements of the Exchange Act for any reason, the Company shall nevertheless continue filing the reports specified in the preceding paragraph with the SEC within the time periods specified above unless the SEC will not accept such a filing. The Company shall not take any action for the purpose of causing the SEC not to accept any such filings. If, notwithstanding the foregoing, the SEC will not accept the Company's filings for any reason, the Company shall post the reports referred to in the preceding paragraph on its website within the time periods that would apply if the Company were required to file those reports with the SEC. (b) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual financial information required by paragraph (a) of this Section 4.03 shall include a reasonably detailed presentation, either on the face of the financial statements or in the footnotes thereto, and in Management's Discussion and Analysis of Financial Condition and Results of Operations, of the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. (c) For so long as any Notes remain outstanding, if at any time they are not required to file with the SEC the reports required by paragraphs (a) and (b) of this Section 4.03, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. (d) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). Section 4.04 Compliance Certificate. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate, one of the signers of which shall be the Chief Executive Officer, Chief Financial Officer or Chief Accounting Officer, stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to 54 determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture and the Security Documents, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture the Security Documents and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture the Security Documents (or, if a Default or Event of Default has occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as any of the Notes are outstanding, the Company shall deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. Section 4.05 Taxes. The Company will pay, and will cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. Section 4.06 Stay, Extension and Usury Laws. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. Section 4.07 Restricted Payments. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company and other than dividends or distributions payable to the Company or a Restricted Subsidiary of the Company); (2) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Company or any direct or indirect parent of the Company; 55 (3) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Company or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee (excluding any intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries), except a payment of interest or principal at the Stated Maturity thereof; or (4) make any Restricted Investment (all such payments and other actions set forth in these clauses (1) through (4) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (1) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; (2) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof; and (3) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries since the date of this Indenture (excluding Restricted Payments permitted by clauses (2), (3), (4), (5), (7) and (9) of paragraph (b) of this Section 4.07), is less than the sum, without duplication, of: (A) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit); plus (B) 100% of the aggregate net proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Company that have been converted into or exchanged for such Equity Interests (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Subsidiary of the Company); plus (C) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (i) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (ii) the initial amount of such Restricted Investment; plus (D) to the extent that any Unrestricted Subsidiary of the Company designated as such after the date of this Indenture is redesignated as a Restricted Subsidiary after the date of this Indenture, the lesser of (i) the Fair Market Value of the Company's Investment in such Subsidiary as of the date of such redesignation and (ii) such Fair 56 Market Value as of the date on which such Subsidiary was originally designated as an Unrestricted Subsidiary after the date of this Indenture; plus (E) 100% of any dividends received by the Company or a Restricted Subsidiary of the Company after the date of this Indenture from an Unrestricted Subsidiary of the Company, to the extent that such dividends were not otherwise included in the Consolidated Net Income of the Company for such period. (b) The provisions of Section 4.07(a) hereof shall not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of this Indenture; (2) the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests of the Company (other than Disqualified Stock) or from the substantially concurrent contribution of common equity capital to the Company; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment shall be excluded from clause (3)(B) of Section 4.07(a) hereof; (3) the repurchase, redemption, defeasance or other acquisition or retirement for value of the Company's 9-7/8% Senior Subordinated Notes due 2007 with the net proceeds of this offer of the Notes and Indebtedness under the Credit Facilities; (4) the repurchase, redemption, defeasance or other acquisition or retirement for value of any Indebtedness of the Company or any Guarantor that is contractually subordinated to the Notes or to any Note Guarantee (in addition to that referred to in clause (3) above) with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness; (5) so long as no Default has occurred and is continuing or would be caused thereby, the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Company to the holders of its Equity Interests on a pro rata basis; (6) so long as no Default has occurred and is continuing or would be caused thereby, the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company held by any current or former officer, director or employee of the Company or any of its Restricted Subsidiaries pursuant to any equity subscription agreement, stock option agreement, shareholders' agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $2.0 million in any twelve-month period; (7) so long as no Default has occurred and is continuing or would be caused thereby, the repurchase of Equity Interests deemed to occur upon the exercise of stock options to the extent such Equity Interests represent a portion of the exercise price of those stock options; (8) so long as no Default has occurred and is continuing or would be caused thereby, the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Company or any Restricted Subsidiary of the Company issued 57 on or after the date of this Indenture in accordance with the Fixed Charge Coverage Ratio test described in Section 4.09 hereof; (9) Permitted Payments to Parent; and (10) so long as no Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $15.0 million since the date of this Indenture. The amount of all Restricted Payments (other than cash) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. The Fair Market Value of any assets or securities that are required to be valued by this Section 4.07 will be determined by the Board of Directors of the Company whose resolution with respect thereto will be delivered to the Trustee. The Board of Directors' determination must be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if the Fair Market Value exceeds $25.0 million. Section 4.08 Dividend and Other Payment Restrictions Affecting Subsidiaries. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to: (1) pay dividends or make any other distributions on its Capital Stock to the Company or any of its Restricted Subsidiaries, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Company or any of its Restricted Subsidiaries; (2) make loans or advances to the Company or any of its Restricted Subsidiaries; or (3) sell, lease or transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. (b) The restrictions in Section 4.08(a) hereof shall not apply to encumbrances or restrictions existing under or by reason of: (1) agreements governing Existing Indebtedness, the Credit Facilities and the Hedging Agreement as in effect on the date of this Indenture and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the date of this Indenture; (2) this Indenture, the Notes and the Note Guarantees; (3) applicable law, rule, regulation or order; (4) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except 58 to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred; (5) customary non-assignment provisions in contracts and licenses entered into in the ordinary course of business; (6) purchase money obligations for property acquired in the ordinary course of business and Capital Lease Obligations that impose restrictions on the property purchased or leased of the nature described in clause (3) of Section 4.08(a) hereof; (7) any agreement for the sale or other disposition of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending the sale or other disposition; (8) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced; (9) Liens permitted to be incurred under the provisions of Section 4.12 hereof that limit the right of the debtor to dispose of the assets subject to such Liens; (10) provisions limiting the disposition or distribution of assets or property in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements entered into with the approval of the Company's Board of Directors, which limitation is applicable only to the assets that are the subject of such agreements; (11) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; (12) restrictions on cash or other deposits by parties under agreements entered into in the ordinary course of the Oil and Gas Business of the types described in the definition of Permitted Investments; and (13) customary restrictions on the disposition or distribution of assets or property in agreements entered into the ordinary course of business of the Oil and Gas Business of the types described in the definition of Permitted Investments. Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), and the Company shall not issue any Disqualified Stock and shall not permit any of its Restricted Subsidiaries to issue any shares of preferred stock; provided, however, that the Company may incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and the Guarantors may incur Indebtedness (including Acquired Debt) or issue preferred stock, if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such 59 Disqualified Stock or such preferred stock is issued, as the case may be, would have been at least 2.5 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock or the preferred stock had been issued, as the case may be, at the beginning of such four-quarter period. (b) The provisions of Section 4.09(a) hereof shall not prohibit the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (1) the incurrence by the Company and any Guarantor of additional Indebtedness and letters of credit under Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (1) (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Restricted Subsidiaries thereunder) not to exceed: (A) prior to July 7, 2008, the greater of (i) $170.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Restricted Subsidiaries since the date of this Indenture to repay any term Indebtedness under a Credit Facility or to repay any revolving credit Indebtedness under a Credit Facility and effect a corresponding commitment reduction thereunder pursuant to Section 4.10 hereof less any amount that is released by the Hedge Counterparty under the Hedge Letter of Credit and (ii) 30% of ACNTA as of the date of such incurrence; and (B) on or after July 7, 2008, the greater of (i) $130.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Company or any of its Restricted Subsidiaries since the date of this Indenture to repay any term Indebtedness under a Credit Facility or to repay any revolving credit Indebtedness under a Credit Facility and effect a corresponding commitment reduction thereunder pursuant to Section 4.10 hereof less any amount that is released by the Hedge Counterparty under the Hedge Letter of Credit and (ii) 30% of ACNTA as of the date of such incurrence less $40.0 million; provided that such amounts in the foregoing clauses (i) and (ii) of this paragraph shall be reduced by an additional $10.0 million on each of the fifth, sixth and seventh anniversaries of the date of this Indenture; (2) the incurrence by the Company and any Guarantor of Indebtedness under the Hedge Agreement; (3) the incurrence by the Company and its Restricted Subsidiaries of the Existing Indebtedness; (4) the incurrence by the Company and the Guarantors of Indebtedness represented by the Notes and the related Note Guarantees to be issued on the date of this Indenture and the Exchange Notes and the related Note Guarantees to be issued pursuant to the Registration Rights Agreement; (5) the incurrence by the Company or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted by this Indenture to be incurred under Section 4.09(a) hereof or clauses (3), (4), (5) or (14) of this Section 4.09(b); 60 (6) the incurrence by the Company or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Company and any of its Restricted Subsidiaries; provided, however, that: (A) if the Company or any Guarantor is the obligor on such Indebtedness and the payee is not the Company or a Guarantor, such Indebtedness must be expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Notes, in the case of the Company, or the Note Guarantee, in the case of a Guarantor; and (B) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Restricted Subsidiary of the Company and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Restricted Subsidiary of the Company, will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (6); (7) the issuance by any of the Company's Restricted Subsidiaries to the Company or to any of its Restricted Subsidiaries of shares of preferred stock; provided, however, that: (A) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than the Company or a Restricted Subsidiary of the Company; and (B) any sale or other transfer of any such preferred stock to a Person that is not either the Company or a Restricted Subsidiary of the Company, shall be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (7); (8) the incurrence by the Company or any of its Restricted Subsidiaries of Hedging Obligations in the ordinary course of business (other than pursuant to the Hedge Agreement); (9) the guarantee by the Company or any of the Guarantors of Indebtedness of the Company or a Restricted Subsidiary of the Company that was permitted to be incurred by another provision of this Section 4.09; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with the Notes, then the Guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness guaranteed; (10) in-kind obligations relating to net oil and natural gas balancing positions arising in the ordinary course of business; (11) any obligation arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, guarantee, adjustment of purchase price, holdback, contingency payment obligations based on the performance of the acquired or disposed asset or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business, asset or Capital Stock of a Restricted Subsidiary of the Company; 61 (12) the incurrence by the Company or any of the Guarantors of Indebtedness in respect of workers' compensation claims, self-insurance obligations, bankers' acceptances, performance and surety bonds in the ordinary course of business; (13) the incurrence by the Company or any of the Guarantors of Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within five Business Days; and (14) the incurrence by the Company or any of the Guarantors of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (14), not to exceed $25.0 million. The Company shall not incur, and shall not permit any Guarantor to incur, any Indebtedness (including Permitted Debt) that is contractually subordinated in right of payment to any other Indebtedness of the Company or such Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Note Guarantee on substantially identical terms; provided, however, that no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Company solely by virtue of being unsecured or by virtue of being secured on a first or junior Lien basis. For purposes of determining compliance with this Section 4.09, in the event that an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (1) through (14) above, or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Company shall be permitted to classify such item of Indebtedness on the date of its incurrence, or later reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Section 4.09. Indebtedness under Credit Facilities outstanding on the date on which Notes are first issued and authenticated under this Indenture will initially be deemed to have been incurred on such date in reliance on the exception provided by clause (1) of the definition of Permitted Debt. The accrual of interest, the accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, the reclassification of preferred stock as Indebtedness due to a change in accounting principles, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock shall not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount of any such accrual, accretion or payment is included in Fixed Charges of the Company as accrued. The amount of any premium payable on Indebtedness upon the prepayment, redemption or other retirement for value of such Indebtedness shall be disregarded in determining the amount of such Indebtedness. Notwithstanding any other provision of this Section 4.09, the maximum amount of Indebtedness that the Company or any Restricted Subsidiary may incur pursuant to this Section 4.09 shall not be deemed to be exceeded solely as a result of fluctuations in exchange rates or currency values. The amount of any Indebtedness outstanding as of any date shall be: (1) the accreted value of the Indebtedness, in the case of any Indebtedness issued with original issue discount; (2) the principal amount of the Indebtedness, in the case of any other Indebtedness; and 62 (3) in respect of Indebtedness of another Person secured by a Lien on the assets of the specified Person, the lesser of: (A) the Fair Market Value of such assets at the date of determination; and (B) the amount of the Indebtedness of the other Person. Section 4.10 Asset Sales. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of the Asset Sale at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and (2) at least 75% of the consideration received in the Asset Sale by the Company or such Restricted Subsidiary is in the form of cash. For purposes of this provision, each of the following shall be deemed to be cash: (A) any liabilities, as shown on the Company's most recent consolidated balance sheet, of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability; (B) any securities, Notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are, within 90 days by the Company or such Restricted Subsidiary, converted by the Company or such Restricted Subsidiary into cash, to the extent of the cash received in that conversion; and (C) any stock or assets of the kind referred to in Section 4.10(b)(2) or (4) hereof. (b) Within 360 days after the receipt of any Net Proceeds from an Asset Sale, other than a Sale of Collateral, the Company (or the applicable Restricted Subsidiary, as the case may be) may apply such Net Proceeds at its option: (1) to repay Priority Lien Debt and, if such Priority Lien Debt is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto; (2) to acquire all or substantially all of the assets of, or any Capital Stock of, another Oil and Gas Business, if, after giving effect to any such acquisition of Capital Stock, the Oil and Gas Business is or becomes a Restricted Subsidiary of the Company; (3) to make a capital expenditure; or (4) to acquire other assets that are not classified as current assets under GAAP and that are used or useful in an Oil and Gas Business. (c) Within 360 days after the receipt of any Net Proceeds from an Asset Sale that constitutes a Sale of Collateral or from a Casualty Event, the Company (or the Restricted Subsidiary that owned those 63 assets, as the case may be) may apply those Net Proceeds to purchase other long-term assets that would constitute Collateral or to repay Priority Lien Debt and, if such Priority Lien Debt is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto. (d) Any Net Proceeds from Asset Sales or Casualty Events that are not applied or invested as provided in Section 4.10(b) or (c) hereof shall constitute "Excess Proceeds." If following such application or investment, the percentage of the Company's expected production volumes hedged exceeds a range to be agreed between the Hedge Counterparty and the Company at the time each hedge transaction is consummated, then the Company shall terminate that portion of the hedges necessary in order to have the volumes hedged be within such range, and shall apply Excess Proceeds to effect such termination. When the aggregate amount of Excess Proceeds not so applied exceeds $15.0 million, within ten days thereof, the Company shall make an Asset Sale Offer to all Holders of Notes and all holders of other Parity Lien Debt containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets in accordance with Section 3.09 hereof to purchase the maximum principal amount of Notes and such other Parity Lien Debt that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal to 100% of the principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase and shall be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and other Parity Lien Debt tendered pursuant to such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Parity Lien Debt to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. (e) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Asset Sale provisions of this Indenture by virtue of such compliance. Section 4.11 Transactions with Affiliates. (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Company (each, an "Affiliate Transaction"), unless: (1) the Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person; and (2) the Company delivers to the Trustee: (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, a resolution of the Board of Directors of the Company set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with this Section 4.11 and that such Affiliate 64 Transaction has been approved by a majority of the disinterested members of the Board of Directors, if any, of the Company; and (B) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, an opinion as to the fairness to the Company or such Subsidiary of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. (b) The following items shall not be deemed to be Affiliate Transactions and, therefore, shall not be subject to the provisions of Section 4.11(a) hereof: (1) any employment agreement, employee benefit plan, officer or director indemnification agreement or any similar arrangement entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business and payments pursuant thereto; (2) transactions between or among the Company and/or its Restricted Subsidiaries; (3) transactions with a Person (other than an Unrestricted Subsidiary of the Company) that is an Affiliate of the Company solely because the Company owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person; (4) payment of reasonable directors' fees to Persons who are not otherwise Affiliates of the Company; (5) any issuance of Equity Interests (other than Disqualified Stock) of the Company to Affiliates of the Company; (6) Restricted Payments or Permitted Investments that do not violate Section 4.07 hereof; (7) payment of fees not in excess of $1.0 million per annum pursuant to the Management Agreement as in effect on the date of this Indenture, including any amendment or replacement agreement that is no more disadvantageous to the Holders of the Notes in any material respect than the original Management Agreement; provided that the amount of the fee shall not exceed $1.0 million per annum at any time; (8) payment of fees of $1,415,105, payable to Parent, upon the consummation of the Merger; (9) payment of fees not in excess of $5.9 million, payable to TPG Partners II L.P., upon the consummation of the Merger, pursuant to the Transaction Advisory Agreement as in effect on the date of this Indenture; (10) loans or advances to employees in the ordinary course of business not to exceed $1.0 million in the aggregate at any one time outstanding; and (11) Permitted Payments to Parent (without duplication of amounts permitted pursuant to clause (7) above). Section 4.12 Liens. 65 The Company shall not and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind (other than Permitted Liens) securing Indebtedness, Attributable Debt or trade payables upon any of their property or assets, now owned or hereafter acquired, unless all payments due under this Indenture and the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligations are no longer secured by a Lien. Section 4.13 Business Activities. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, engage in any business other than Oil and Gas Businesses, except to such extent as would not be material to the Company and its Restricted Subsidiaries taken as a whole. Section 4.14 Corporate Existence. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect: (a) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary; and (b) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. Section 4.15 Offer to Repurchase Upon Change of Control. (a) Upon the occurrence of a Change of Control, the Company will make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple of $1,000) of that Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Special Interest, if any, on the Notes repurchased to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date (the "Change of Control Payment"). Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and stating: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered will be accepted for payment; (2) the purchase price and the purchase date, which shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (3) that any Note not tendered will continue to accrue interest; 66 (4) that, unless the Company defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender the Notes, with the form entitled "Option of Holder to Elect Purchase" attached to the Notes completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than the close of business on the second Business Day preceding the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have the Notes purchased; and (7) that Holders whose Notes are being purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered, which unpurchased portion must be equal to $1,000 in principal amount or an integral multiple thereof. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change in Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Sections 3.09 or 4.15 hereof, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under Section 3.09 hereof or this Section 4.15 by virtue of such compliance. (b) On the Change of Control Payment Date, the Company will, to the extent lawful: (1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered; and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Company. The Paying Agent will promptly mail (but in any case not later than five days after the Change of Control Payment Date) to each Holder of Notes properly tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.15 and Section 3.09 hereof and purchases all Notes properly tendered and not 67 withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to Section 3.07 hereof, unless and until there is a default in payment of the applicable redemption price. Section 4.16 Payments for Consent. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. Section 4.17 Additional Note Guarantees. If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic Subsidiary after the date of this Indenture, which Domestic Subsidiary guarantees any Priority Lien Debt, then that newly acquired or created Domestic Subsidiary shall become a Guarantor and execute a supplemental indenture and deliver an Opinion of Counsel satisfactory to the Trustee and deliver an Opinion of Counsel to the Trustee within 10 Business Days of the date on which it was acquired or created to the effect that such supplemental indenture has been duly authorized, executed and delivered by that Domestic Subsidiary and constitutes a valid and binding agreement of that Domestic Subsidiary, enforceable in accordance with its terms (subject to customary exceptions); provided that any Domestic Subsidiary that constitutes an Immaterial Subsidiary need not become a Guarantor until such time as it ceases to be an Immaterial Subsidiary. The form of such Note Guarantee is attached as Exhibit D hereto. Section 4.18 Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors of the Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Company and its Restricted Subsidiaries in the Subsidiary designated as Unrestricted shall be deemed to be an Investment made as of the time of the designation and shall reduce the amount available for Restricted Payments under Section 4.07 hereof or under one or more clauses of the definition of Permitted Investments, as determined by the Company. That designation shall only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The Board of Directors of the Company may redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if that redesignation would not cause a Default. Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the preceding conditions and was permitted by Section 4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09, the Company shall be in default of such covenant. The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary, and such designation shall only be permitted if 68 (1) such Indebtedness is permitted under Section 4.09 calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period; and (2) no Default or Event of Default would be in existence following such designation. Section 4.19 Termination of Hedge Agreement. The Company shall not, and shall not permit any of the Guarantors to, terminate the Hedge Agreement or the obligations thereunder during the term of the Notes other than in connection with a partial termination in connection with an Asset Sale or Casualty Event. Section 4.20 Changes in Covenants When Notes Rated Investment Grade. (a) If on any date following the date of this Indenture: (1) the Notes have an Investment Grade Rating; and (2) no Default or Event of Default shall have occurred and be continuing, then, beginning on that day and subject to the provisions of the following paragraph, the covenants under Sections 4.07, 4.08, 4.09, 4.10, 4.11 and 5.01(a)(4) shall be suspended. (b) Notwithstanding the foregoing, if the rating assigned by either such rating agency should subsequently decline to below the Investment Grade Rating, the foregoing covenants shall be reinstituted as of and from the date of such rating decline. Calculations under the reinstated Section 4.07 shall be made as if Section 4.07 had been in effect since the date of this Indenture except that no default shall be deemed to have occurred solely by reason of a Restricted Payment made while Section 4.07 was suspended. ARTICLE 5 SUCCESSORS Section 5.01 Merger, Consolidation, or Sale of Assets. (a) The Company shall not, directly or indirectly: consolidate or merge with or into another Person (whether or not the Company is the surviving Person); or sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another Person, unless: (1) either: (A) the Company is the surviving Person; or (B) the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, conveyance or other disposition has been made is either (i) a corporation organized or existing under the laws of the United States, any state of the United States or the District of Columbia, or (ii) a partnership or limited liability company organized or existing under the laws of the United States, any state thereof or the District of Columbia that has at least one Restricted Subsidiary that is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia, which corporation becomes a co-issuer of the Notes pursuant to a supplemental indenture duly and validly executed by the Trustee; (2) the Person formed by or surviving any such consolidation or merger (if other than the Company) or the Person to which such sale, assignment, transfer, conveyance or other disposition 69 has been made assumes all the obligations of the Company under the Notes, this Indenture and the Registration Rights Agreement pursuant to agreements reasonably satisfactory to the Trustee; (3) immediately after such transaction, no Default or Event of Default exists; (4) the Company or the Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, conveyance or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09(a) hereof, and (5) the Trustee shall have received an opinion of counsel satisfactory to the Trustee stating that the Parity Lien granted under the Security Documents on the Collateral to secure the Notes shall be an enforceable and perfected second-priority Lien after giving effect to such consolidation, merger, sale, assignment, transfer, conveyance or other disposition. In addition, the Company shall not, directly or indirectly, lease all or substantially all of the properties and assets of it and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to any other Person. (b) Section 5.01(a) shall not apply to: (1) a merger of the Company with an Affiliate solely for the purpose of reincorporating the Company in another jurisdiction; or (2) any consolidation or merger, or any sale, assignment, transfer, conveyance, lease or other disposition of assets between or among the Company and its Restricted Subsidiaries. Section 5.02 Successor Corporation Substituted. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the properties or assets of the Company in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof, the successor Person formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, assignment, transfer, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor Person and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets in a transaction that is subject to, and that complies with the provisions of, Section 5.01 hereof. ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default. Each of the following is an "Event of Default": 70 (a) default for 30 days in the payment when due of interest on, or Special Interest, if any, with respect to, the Notes; (b) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the Notes; (c) failure by the Company or any of its Restricted Subsidiaries to comply with Sections 4.07, 4.09, 4.10, 4.15 or 5.01 hereof; (d) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in this Indenture or the Security Documents; (e) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), including, without limitation, the Hedge Agreement, whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, if that default: (1) is caused by a failure to pay principal of, or interest or premium, if any, on, such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default"); or (2) results in the acceleration of such Indebtedness prior to its express maturity, and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10.0 million or more; (f) failure by the Company or any of its Restricted Subsidiaries to pay final judgments entered by a court or courts of competent jurisdiction aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (g) the occurrence of any of the following: (1) except as permitted by this Indenture, any security document ceases for any reason to be fully enforceable; provided, that it will not be an Event of Default under this clause (g)(1) if the sole result of the failure of one or more Security Documents to be fully enforceable is that any Parity Lien purported to be granted under such Security Documents on Collateral, individually or in the aggregate, having a Fair Market Value of not more than $10.0 million ceases to be an enforceable and perfected third-priority Lien, subject only to Permitted Prior Liens; (2) any Parity Lien purported to be granted under any security document on Collateral, individually or in the aggregate, having a Fair Market Value in excess of $10.0 million ceases to be an enforceable and perfected second-priority Lien, subject only to Permitted Prior Liens; or (3) the Company or any other Pledgor, or any Person acting on behalf of any of them, denies or disaffirms, in writing, any obligation of the Company or any other Pledgor set forth in or arising under any security document; 71 (h) except as permitted by this Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee; (i) the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (1) commences a voluntary case; (2) consents to the entry of an order for relief against it in an involuntary case; (3) consents to the appointment of a custodian of it or for all or substantially all of its property; (4) makes a general assignment for the benefit of its creditors; or (5) generally is not paying its debts as they become due; and (j) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (1) is for relief against the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary in an involuntary case; (2) appoints a custodian of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary; or (3) orders the liquidation of the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days. Section 6.02 Acceleration. In the case of an Event of Default specified in clause (h) or (i) of Section 6.01 hereof, with respect to the Company, any Restricted Subsidiary of the Company that is a Significant Subsidiary or any group of Restricted Subsidiaries of the Company that, taken together, would constitute a Significant Subsidiary, all outstanding Notes shall become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately, Upon any such declaration, the Notes shall become due and payable immediately. 72 The Holders of a majority in aggregate principal amount of the then outstanding Notes by written notice to the Trustee may, on behalf of all of the Holders, rescind an acceleration and its consequences, if the rescission would not conflict with any judgment or decree and if all existing Events of Default (except nonpayment of principal, interest or premium or Special Interest, if any, that has become due solely because of the acceleration) have been cured or waived. Section 6.03 Other Remedies. If an Event of Default occurs and is continuing, the Trustee may, subject to the provisions of the Collateral Trust Agreement, pursue any available remedy to collect the payment of principal, premium and Special Interest, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. Section 6.04 Waiver of Past Defaults. Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive an existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Special Interest, if any, or interest on, the Notes (including in connection with an offer to purchase); provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration. Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. Section 6.05 Control by Majority. Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. Section 6.06 Limitation on Suits. Subject to Article 7, in case an Event of Default occurs and is continuing, the Trustee shall be under no obligation to exercise any of the rights or powers under this Indenture at the request or direction of any Holders of Notes unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest or Special Interest, if any, when due, no Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless: (a) such Holder gives to the Trustee written notice that an Event of Default is continuing; 73 (b) Holders of at least 25% in aggregate principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer and, if requested, provide to the Trustee security or indemnity reasonably satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (e) during such 60-day period, Holders of a majority in aggregate principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with such request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. Section 6.07 Rights of Holders of Notes to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium and Special Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder; provided that a Holder shall not have the right to institute any such suit for the enforcement of payment if and to the extent that the institution or prosecution thereof or the entry of judgment therein would, under applicable law, result in the surrender, impairment, waiver or loss of the Lien of this Indenture upon any property subject to such Lien. Section 6.08 Collection Suit by Trustee. If an Event of Default specified in Section 6.01(a) or (b) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as Trustee of an express trust against the Company for the whole amount of principal of, premium and Special Interest, if any, and interest remaining unpaid on, the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 6.09 Trustee May File Proofs of Claim. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and 74 other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. Section 6.10 Priorities. If the Trustee collects any money pursuant to this Article 6, to the extent such money is not required to be paid to the Collateral Trustee for application in accordance with the Collateral Trust Agreement, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Special Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Special Interest, if any and interest, respectively; and Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. Section 6.11 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in aggregate principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE Section 7.01 Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (1) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this 75 Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section 7.01; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section 7.01. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder has offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. Section 7.02 Rights of Trustee. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. 76 (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable indemnity or security against the losses, liabilities and expenses that might be incurred by it in compliance with such request or direction. (g) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney at the sole cost of the Company and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation. (h) In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action. (i) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Securities and this Indenture. (j) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder. Section 7.03 Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as Trustee (if this Indenture has been qualified under the TIA) or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. Section 7.04 Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. Section 7.05 Notice of Defaults. 77 If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default in payment of principal of, premium or Special Interest, if any, or interest on, any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes. Section 7.06 Reports by Trustee to Holders of the Notes. (a) Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). (b) A copy of each report at the time of its mailing to the Holders of Notes shall be mailed by the Trustee to the Company and filed by the Trustee with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. Section 7.07 Compensation and Indemnity. (a) The Company shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as shall be agreed in writing between the Company and the Trustee. The Trustee's compensation shall not be limited by any law on compensation of a Trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. (b) The Company and the Guarantors shall, jointly and severally, indemnify the Trustee and any successor Trustee against any and all losses, damages, claims, liabilities or expenses, including taxes (other than those based upon, measured by or determined by the income of the Trustee), incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company and the Guarantors (including this Section 7.07) and defending itself against any claim (whether asserted by the Company, the Guarantors, any Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, damage, claim, liability or expense may be attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company or any of the Guarantors of their obligations hereunder. The Company or such Guarantor shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. Neither the Company nor any Guarantor need pay for any settlement made without its consent, which consent shall not be unreasonably withheld. (c) The obligations of the Company and the Guarantors under this Section 7.07 shall survive the satisfaction and discharge and the resignation or removal of the Trustee of this Indenture. 78 (d) To secure the Company's and the Guarantors' payment obligations in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. (e) When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(h) or (i) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. (f) The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. Section 7.08 Replacement of Trustee. (a) A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section 7.08. (b) The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in aggregate principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10 hereof; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a custodian or public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. (c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in aggregate principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. (d) If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in aggregate principal amount of the then outstanding Notes may petition any court of competent jurisdiction at the expense of the Company (in the case of the Trustee) for the appointment of a successor Trustee. (e) If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 79 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. Section 7.09 Successor Trustee by Merger, etc. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. Section 7.10 Eligibility; Disqualification. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50.0 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). Section 7.11 Preferential Collection of Claims Against Company. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance. The Company may at any time, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8. Section 8.02 Legal Defeasance and Discharge. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Company and each of the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes (including the Note Guarantees) and pursuant to Section 10.03 hereof, the Collateral Trustee's Liens upon the Collateral in respect of the Notes shall be terminated and discharged, on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Note Guarantees), which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in clauses (1) and (2) below, and to have satisfied all their other obligations under such Notes, the Note Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder: 80 (a) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, or interest or premium and Special Interest, if any, on, such Notes when such payments are due from the trust referred to in Section 8.04 hereof; (b) the Company's obligations with respect to such Notes under Article 2 and Section 4.02 hereof; (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's and the Guarantors' obligations in connection therewith; and (d) this Article 8. Subject to compliance with this Article 8, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof. Section 8.03 Covenant Defeasance. Upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Company and each of the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from each of their obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19 and 4.20 hereof and clause (4) of Section 5.01 hereof with respect to the outstanding Notes (including the Note Guarantees) and pursuant to Section 10.03 hereof, the Collateral Trustee's Liens upon the Collateral in respect of the Notes shall be terminated and discharged, on and after the date the conditions set forth in Section 8.04 hereof are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes and Note Guarantees, the Company and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant (or such Note Guarantee), whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 hereof of the option applicable to this Section 8.03, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(e) hereof shall not constitute Events of Default. Section 8.04 Conditions to Legal or Covenant Defeasance. In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.02 or 8.03 hereof: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized investment bank, appraisal firm, or firm of independent public accountants, to pay the principal of, premium and Special Interest, if any, and interest on, the outstanding Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to such stated date for payment or to a particular redemption date; 81 (b) in the case of an election under Section 8.02 hereof, the Company must deliver to the Trustee an Opinion of Counsel confirming that: (1) the Company has received from, or there has been published by, the Internal Revenue Service a ruling; or (2) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.03 hereof, the Company must deliver to the Trustee an Opinion of Counsel confirming that the Holders of the outstanding Notes shall not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and shall be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit shall not result in a breach or violation of, or constitute a default under, any other instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than this Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding any creditors of the Company or others; and (g) the Company must deliver to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or the Covenant Defeasance have been complied with. Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.06 hereof, all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become 82 due thereon in respect of principal, premium and Special Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.04 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Notwithstanding anything in this Article 8 to the contrary, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or non-callable Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. Section 8.06 Repayment to Company. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium or Special Interest, if any, or interest on, any Note and remaining unclaimed for two years after such principal, premium or Special Interest, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter be permitted to look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Company. Section 8.07 Reinstatement. If the Trustee or Paying Agent is unable to apply any U.S. dollars or non-callable Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's and the Guarantors' obligations under this Indenture and the Notes and the Note Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company makes any payment of principal of, premium or Special Interest, if any, or interest on, any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent. ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders of Notes. 83 Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors and the Trustee may amend or supplement this Indenture or the Notes or the Note Guarantees without the consent of any Holder of Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's or a Guarantor's obligations to the Holders of the Notes and Note Guarantees by a successor to the Company or such Guarantor pursuant to Article 5 or Article 11 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder; (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (f) to make, complete or confirm any grant of Collateral permitted or required by this Indenture or any of the Security Documents or any release of Collateral that becomes effective as set forth in this Indenture or any of the Security Documents; (g) to conform the text of this Indenture, the Note Guarantees, the Security Documents and/or the Notes to any provision of the "Description of Notes" section of the Company's Offering Circular dated July 1, 2004, relating to the initial offering of the Notes, to the extent that such provision in that "Description of Notes" was intended to be a verbatim recitation of a provision of this Indenture, the Note Guarantees, the Security Documents or the Notes; (h) to provide for the issuance of Additional Notes in accordance with the limitations set forth in this Indenture as of the date hereof; or (i) to allow any Guarantor to execute a supplemental indenture and/or a Note Guarantee with respect to the Notes. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise. Section 9.02 With Consent of Holders of Notes. Except as provided below in this Section 9.02, the Company and the Trustee may amend or supplement this Indenture (including, without limitation, Section 3.09, 4.10 and 4.15 hereof) and the Notes and the Note Guarantees with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the 84 principal of, premium or Special Interest, if any, or interest on, the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes (including, without limitation, Additional Notes, if any) voting as a single class (including, without limitation, consents obtained in connection with a tender offer or exchange offer for, or purchase of, the Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It is not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment, supplement or waiver, but it is sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes or the Note Guarantees. However, without the consent of each Holder affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter or waive any of the provisions with respect to the redemption of the Notes (except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof); (c) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (d) waive a Default or Event of Default in the payment of principal of, or premium or Special Interest, if any, or interest on, the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of, or interest or premium or Special Interest, if any, on, the Notes; 85 (g) waive a redemption payment with respect to any Note (other than a payment required by Sections 3.09, 4.10 or 4.15 hereof); (h) release any Guarantor from any of its obligations under its Note Guarantee or this Indenture, except in accordance with the terms of this Indenture; or (i) make any change in the preceding amendment and waiver provisions. In addition, any amendment to, or waiver of, the provisions of this Indenture or any security document that has the effect of releasing any portion of the Collateral from the Liens securing the Notes shall require the consent of the Holders of at least 66-2/3% in aggregate principal amount of the Notes then outstanding. Section 9.03 Compliance with Trust Indenture Act. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental indenture that complies with the TIA as then in effect. Section 9.04 Revocation and Effect of Consents. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. Section 9.05 Notation on or Exchange of Notes. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. Section 9.06 Trustee to Sign Amendments, etc. The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amended or supplemental indenture until the Board of Directors of the Company approves it. In executing any amended or supplemental indenture, the Trustee shall receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 13.04 hereof, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10 COLLATERAL AND SECURITY 86 Section 10.01 Equal and Ratable Sharing of Collateral by Holders of Parity Lien Debt. Notwithstanding: (1) anything to the contrary contained in the Security Documents; (2) the time of incurrence of any Series of Parity Lien Debt; (3) the order or method of attachment or perfection of any Liens securing any Series of Parity Lien Debt; (4) the time or order of filing or recording of financing statements, mortgages or other documents filed or recorded to perfect any Lien upon any Collateral; (5) the time of taking possession or control over any Collateral; (6) that any Parity Lien may not have been perfected or may be or have become subordinated, by equitable subordination or otherwise, to any other Lien; or (7) the rules for determining priority under any law governing relative priorities of Liens: (a) all Parity Liens granted at any time by the Company or any other Pledgor shall secure, equally and ratably, all present and future Parity Lien Obligations; and (b) all proceeds of all Parity Liens granted at any time by the Company or any other Pledgor shall be allocated and distributed equally and ratably on account of the Parity Lien Debt and other Parity Lien Obligations. The foregoing provision is intended for the benefit of, and shall be enforceable as a third party beneficiary by, each present and future holder of Parity Lien Obligations, each present and future Parity Lien Representative and the Collateral Trustee as holder of Parity Liens. The Parity Lien Representative of each future Series of Parity Lien Debt shall be required to deliver a Lien Sharing and Priority Confirmation to the Collateral Trustee and the Trustee at the time of incurrence of such Series of Parity Lien Debt. Section 10.02 Ranking of Parity Liens. Notwithstanding: (1) anything to the contrary contained in the Security Documents; (2) the time of incurrence of any Series of Secured Debt; (3) the order or method of attachment or perfection of any Liens securing any Series of Secured Debt; (4) the time or order of filing or recording of financing statements, mortgages or other documents filed or recorded to perfect any Lien upon any Collateral; (5) the time of taking possession or control over any Collateral; (6) that any Priority Lien may not have been perfected or may be or have become subordinated, by equitable subordination or otherwise, to any other Lien; or (7) the rules for determining priority under any law governing relative priorities of Liens, all Parity Liens at any time granted by the Company or any other Pledgor shall be subject and subordinate to all Priority Liens securing Priority Lien Obligations up to the Priority Lien Cap. The foregoing provision is intended for the benefit of, and shall be enforceable as a third party beneficiary by, each present and future holder of Priority Lien Obligations, each present and future Priority Lien Representative and the Collateral Trustee as holder of the Priority Liens. No other Person shall be entitled to rely on, have the benefit of or enforce those provisions. The Parity Lien Representative of each future Series of Parity Lien Debt shall be required to deliver a Lien Sharing and Priority Confirmation to the Collateral Trustee and each Priority Lien Representative at the time of incurrence of such Series of Parity Lien Debt. In addition, the foregoing provision is intended solely to set forth the relative ranking, as Liens, of the Liens securing Parity Lien Debt as against the Priority Liens. Neither the Notes, the creditors in respect of Indebtedness under the Hedge Agreement nor any holder of other Parity Lien Obligations nor the exercise or enforcement of any right or remedy for the payment or collection thereof are intended to be, or shall ever be by reason of the foregoing provision, in any respect subordinated, deferred, postponed, restricted or prejudiced. 87 Section 10.03 Release of Liens in Respect of Notes. The Collateral Trustee's Liens upon the Collateral shall no longer secure the Notes outstanding under this Indenture or any other Obligations under this Indenture, and the right of the Holders of the Notes and such Obligations to the benefits and proceeds of the Collateral Trustee's Liens on the Collateral shall terminate and be discharged: (a) upon satisfaction and discharge of this Indenture as set forth under Article 12 hereof; (b) upon a Legal Defeasance or Covenant Defeasance of the Notes as set forth under Article 8 hereof; (c) upon payment in full and discharge of all Notes outstanding under this Indenture and all Obligations that are outstanding, due and payable under this Indenture at the time the Notes are paid in full and discharged; (d) in whole or in part, with the consent of the Holders of the requisite percentage of Notes in accordance with Article 9 hereof; or (e) upon release of the Liens securing the Priority Lien Debt and the Hedge Agreement; provided, however, that if, at any time following such release, any Liens upon the Collateral are granted to secure any Priority Lien Debt or the Hedge Agreement, then such liens shall also be granted to secure the Notes. Section 10.04 Relative Rights. Nothing in the Note Documents shall: (a) impair, as between the Company and the Holders of the Notes, the obligation of the Company to pay principal of, premium and interest and Special Interest, if any, on the Notes in accordance with their terms or any other obligation of the Company or any other Pledgor; (b) affect the relative rights of Holders of Notes as against any other creditors of the Company or any other Pledgor (other than holders of Priority Liens, Permitted Prior Liens or other Parity Liens); (c) restrict the right of any Holder of Notes to sue for payments that are then due and owing (but not enforce any judgment in respect thereof against any Collateral to the extent specifically prohibited under the Collateral Trust Agreement); (d) restrict or prevent any Holder of Notes, any creditor in respect of Indebtedness under the Hedge Agreement or any holder of other Parity Lien Obligations, the Collateral Trustee or any Parity Lien Representative from exercising any of its rights or remedies upon a Default or Event of Default not specifically restricted or prohibited by the Collateral Trust Agreement; or (e) restrict or prevent any Holder of Notes, any creditor in respect of Indebtedness under the Hedge Agreement or any holder of other Parity Lien Obligations, the Collateral Trustee or any Parity Lien Representative from taking any lawful action in an Insolvency or Liquidation Proceeding not specifically restricted or prohibited by the Collateral Trust Agreement. Section 10.05 Compliance with Trust Indenture Act. 88 The Company shall comply with the provisions of TIA Section 314. To the extent applicable, the Company shall cause TIA Section 313(b), relating to reports, and TIA Section 314(d), relating to the release of property or securities subject to the Lien of the Security Documents, to be complied with. Any certificate or opinion required by TIA Section 314(d) may be made by an Officer of the Company except in cases where TIA Section 314(d) requires that such certificate or opinion be made by an independent Person, which Person shall be an independent engineer, appraiser or other expert selected by or reasonably satisfactory to the Trustee. Notwithstanding anything to the contrary in this paragraph, the Company shall not be required to comply with all or any portion of TIA Section 314(d) if it determines, in good faith based on advice of counsel, that under the terms of TIA Section 314(d) and/or any interpretation or guidance as to the meaning thereof of the SEC and its staff, including "no action" letters or exemptive orders, all or any portion of TIA Section 314(d) is inapplicable to one or a series of released Collateral. Section 10.06 Further Assurances; Insurance. (a) The Company and each of the other Pledgors shall do or cause to be done all acts and things that may be required, or that the Collateral Trustee from time to time may reasonably request, to assure and confirm that the Collateral Trustee holds, for the benefit of the holders of Secured Obligations, duly created and enforceable and perfected Liens upon the Collateral (including any property or assets that are acquired or otherwise become Collateral after the Notes are issued), in each case, as contemplated by, and with the Lien priority required under, the Secured Debt Documents. If the Company or any of the Pledgors acquires any material proved producing Hydrocarbon Properties or develops any Hydrocarbon Properties that are producing in commercial quantities, then the Company or such Pledgor shall, not less than semi-annually, take all such actions and execute all documents that the Collateral Trustee may reasonably request to create in favor of the Collateral Trustee, for the benefit of the holders of the Secured Obligations, valid and perfected security interests in such Hydrocarbon Properties. Upon the reasonable request of the Collateral Trustee or any Secured Debt Representative at any time and from time to time, the Company and each of the other Pledgors shall promptly execute, acknowledge and deliver such Security Documents, instruments, certificates, notices and other documents, and take such other actions as shall be reasonably required, or that the Collateral Trustee may reasonably request, to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred, in each case as contemplated by the Secured Debt Documents for the benefit of the holders of Secured Obligations. (b) The Company and the other Pledgors shall: (1) keep their properties adequately insured at all times by financially sound and reputable insurers; (2) maintain such other insurance, to such extent and against such risks (and with such deductibles, retentions and exclusions), including fire and other risks insured against by extended coverage and coverage for acts of terrorism, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by them; (3) maintain such other insurance as may be required by law; and 89 (4) maintain such other insurance as may be required by the Security Documents. (c) Upon the request of the Collateral Trustee, the Company and the other Pledgors shall furnish to the Collateral Trustee full information as to their property and liability insurance carriers. Holders of Secured Obligations, as a class, shall be named as additional insureds, with a waiver of subrogation, on all insurance policies of the Company and the other Pledgors and the Collateral Trustee shall be named as loss payee, with 30 days' notice of cancellation or material change, on all property and casualty insurance policies of the Company and the other Pledgors. ARTICLE 11 NOTE GUARANTEES Section 11.01 Guarantee. (a) Subject to this Article 12, each of the Guarantors hereby, jointly and severally, unconditionally guarantees on a second-priority basis to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (1) the principal, premium and Special Interest, if any, and interest on, the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (2) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. (b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Note Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. (c) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. 90 (d) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Note Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Note Guarantee. Section 11.02 Limitation on Guarantor Liability. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor shall be limited to the maximum amount that shall, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Section 11.03 Execution and Delivery of Note Guarantee. To evidence its Note Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees that a notation of such Note Guarantee substantially in the form attached as Exhibit D hereto shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by one of its Officers. Each Guarantor hereby agrees that its Note Guarantee set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. If an Officer whose signature is on this Indenture or on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company or any of its Restricted Subsidiaries creates or acquires any Domestic Subsidiary after the date of this Indenture, if required by Section 4.17 hereof, the Company shall cause such Domestic Subsidiary to comply with the provisions of Section 4.17 hereof and this Article 11, to the extent applicable. Section 11.04 Guarantors May Consolidate, etc., on Certain Terms. 91 Except as otherwise provided in Section 11.05 hereof, no Guarantor may sell or otherwise dispose of all or substantially all of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person, other than the Company or another Guarantor, unless: (a) immediately after giving effect to such transaction, no Default or Event of Default exists; and (b) either: (1) subject to Section 11.05 hereof, the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation or merger unconditionally assumes all the obligations of that Guarantor under this Indenture, its Note Guarantee and the Registration Rights Agreement on the terms set forth herein or therein, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee; or (2) the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation, Section 4.10 hereof. In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor Person, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Note Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor Person shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor Person thereupon may cause to be signed any or all of the Note Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Note Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Note Guarantees had been issued at the date of the execution hereof. Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses (b)(1) and (b)(2) above, nothing contained in this Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or substantially as an entirety to the Company or another Guarantor. Section 11.05 Releases. (a) The Guarantee of a Guarantor shall be released: (1) In the event of any sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor, in each case to a Person that is not (either before or after giving effect to such transactions) the Company or a Restricted Subsidiary of the Company, then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Note Guarantee; provided that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of this Indenture, including without limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to 92 the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.10 hereof, the Trustee will execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Note Guarantee. (2) Upon designation of any Guarantor as an Unrestricted Subsidiary in accordance with the terms of this Indenture, such Guarantor will be released and relieved of any obligations under its Note Guarantee. (3) If any Guarantor is released from its Guarantee of Priority Lien Debt and the Hedge Agreement, such Guarantor will be released and relieved of any obligations under its Note Guarantee; provided, however, that if, at any time following such release, that Guarantor provides a Guarantee of any Priority Lien Debt or the Hedge Agreement, then such Guarantor shall be required to provide a Note Guarantee at such time. (4) Upon Legal Defeasance or Covenant Defeasance in accordance with Article 8 hereof or satisfaction and discharge of this Indenture in accordance with Article 12 hereof, each Guarantor will be released and relieved of any obligations under its Note Guarantee. Any Guarantor not released from its obligations under its Note Guarantee as provided in this Section 11.05 shall remain liable for the full amount of principal of and interest and premium and Special Interest, if any, on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12 SATISFACTION AND DISCHARGE Section 12.01 Satisfaction and Discharge. This Indenture shall be discharged and shall cease to be of further effect as to all Notes issued hereunder, when: (a) either: (1) all Notes that have been authenticated, except lost, stolen or destroyed Notes that have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Company, have been delivered to the Trustee for cancellation; or (2) all Notes that have not been delivered to the Trustee for cancellation have become due and payable by reason of the mailing of a notice of redemption or otherwise or shall become due and payable within one year and the Company or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee as trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as shall be sufficient, without consideration of any reinvestment of interest, to pay and discharge the entire Indebtedness on the Notes not delivered to the Trustee for cancellation for principal, premium and Special Interest, if any, and accrued interest to the date of maturity or redemption; (b) no Default or Event of Default has occurred and is continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) and the deposit shall not result in a breach or violation of, or constitute a default under, any other 93 instrument to which the Company or any Guarantor is a party or by which the Company or any Guarantor is bound; (c) the Company or any Guarantor has paid or caused to be paid all sums payable by it under this Indenture; and (d) the Company has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be. In addition, the Company must deliver an Officers' Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied. Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to subclause (b) of clause (1) of this Section 12.01, the provisions of Sections 11.02 and 8.06 hereof shall survive. In addition, nothing in this Section 12.01 shall be deemed to discharge those provisions of Section 7.07 hereof, that, by their terms, survive the satisfaction and discharge of this Indenture. Section 12.02 Application of Trust Money. Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 12.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Special Interest, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law. If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 12.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's and any Guarantor's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 12.01 hereof; provided that if the Company has made any payment of principal of, premium or Special Interest, if any, or interest on, any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent. ARTICLE 13 MISCELLANEOUS Section 13.01 Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. Section 13.02 Notices. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or by first class mail (registered or certified, return receipt 94 requested), facsimile transmission or overnight air courier guaranteeing next day delivery, to the others' address: If to the Company and/or any Guarantor: Belden & Blake Corporation 5200 Stoneham Road North Canton, OH 44720 Facsimile No.: (330) 497-5463 Attention: Robert W. Peshek With copies to: Bricker & Eckler LLP 100 South Third Street Columbus, OH 43215 Facsimile No.: (614) 227-2390 Attention: John Cook, Esq. and Vinson & Elkins LLP. 666 Fifth Avenue, 26th Floor New York, NY 10103-0040 Facsimile No.: (330) 497-5463 Attention: Allan Reiss, Esq. If to the Trustee: BNY Midwest Trust Company Corporate Trust Department 2 N. LaSalle Street, Suite 1020 Chicago, IL 60602 Facsimile No.: (312) 827-8542 Attention: Linda Garcia The Company, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if transmitted by facsimile; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. 95 If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. Section 13.03 Communication by Holders of Notes with Other Holders of Notes. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). Section 13.04 Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which must include the statements set forth in Section 13.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. Section 13.05 Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) must comply with the provisions of TIA Section 314(e) and must include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. Section 13.06 Rules by Trustee and Agents. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. Section 13.07 No Personal Liability of Directors, Officers, Employees and Stockholders. 96 No director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or the Guarantors under the Notes, this Indenture, the Note Guarantees, the Note Documents or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. The waiver may not be effective to waive liabilities under the federal securities laws. Section 13.08 Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES. Section 13.09 No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. Section 13.10 Successors. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 11.05 hereof. Section 13.11 Severability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 13.12 Counterpart Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. Section 13.13 Table of Contents, Headings, etc. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 97 SIGNATURES Dated as of July 7, 2004 BELDEN & BLAKE CORPORATION By: /s/ Robert W. Peshek --------------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer THE CANTON OIL & GAS COMPANY By: /s/ Robert W. Peshek --------------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer WARD LAKE DRILLING, INC. By: /s/ Robert W. Peshek --------------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer BNY MIDWEST TRUST COMPANY By: /s/ L. Garcia --------------------------------- Name: L. Garcia Title: Assistant Vice President [Face of Global Note] CUSIP/CINS _________ 8.75% Senior Secured Notes due 2012 No. ___ $____________ BELDEN & BLAKE CORPORATION promises to pay to [____________] or registered assigns, the principal sum of __________________________________________________________ DOLLARS on _____________, 2012. Interest Payment Dates: January 15 and July 15 Record Dates: January 1 and July 1 Dated: July __, 2004 BELDEN & BLAKE CORPORATION By: _________________________________ Name: Title: This is one of the Global Notes referred to in the within-mentioned Indenture: BNY MIDWEST TRUST COMPANY, as Trustee By: _______________________________________ Authorized Signatory A-1 [Back of Global Note] 8.75% Senior Secured Notes due 2012 [Insert the Global Note Legend, if applicable, pursuant to the provisions of the Indenture] [Insert the Private Placement Legend, if applicable, pursuant to the provisions of the Indenture] Capitalized terms used herein have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. (1) INTEREST. Belden & Blake Corporation, an Ohio corporation (the "Company"), promises to pay interest on the principal amount of this Note at 8.75% per annum from July 7, 2004 until maturity and shall pay the Special Interest, if any, payable pursuant to Section 2 of the Registration Rights Agreement referred to below. The Company will pay interest and Special Interest, if any, semi-annually in arrears on January 15 and July 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided further that the first Interest Payment Date shall be January 15, 2005. The Company will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at a rate that is 1% per annum in excess of the rate then in effect to the extent lawful; it will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Special Interest, if any, (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. (2) METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Special Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the January 1 or July 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. The Notes will be payable as to principal, premium and Special Interest, if any, and interest at the office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Special Interest, if any, may be made by check mailed to the Holders at their addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Special Interest, if any, on, all Global Notes and all other Notes the Holders of which will have provided wire transfer instructions to the Company or the Paying Agent. Such payment will be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. (3) PAYING AGENT AND REGISTRAR. Initially, BNY Midwest Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. A-2 (4) INDENTURE. The Company issued the Notes under an Indenture dated as of July 7, 2004 (the "Indenture") among the Company, the Guarantors and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the TIA. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are secured obligations of the Company. The Notes are secured by security interests in the Collateral pursuant to the Security Documents. (5) OPTIONAL REDEMPTION. (a) Except as set forth in subparagraphs (b) and (c) of this Paragraph 5, the Company will not have the option to redeem the Notes prior to July 15, 2008. On or after July 15, 2008, the Company will have the option to redeem all or a part of the Notes upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Special Interest, if any, on the Notes redeemed to the applicable redemption date, if redeemed during the twelve-month period beginning on July 15 of the years indicated below, subject to the rights of Holders on the relevant record date to receive interest on the relevant interest payment date:
Year Percentage ---- ---------- 2008............................... 104.375% 2009............................... 102.188% 2009 and thereafter................ 100.000%
Unless the Company defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date. (b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 5, at any time prior to July 15, 2007, the Company may on any one or more occasions redeem up to 35% of the aggregate principal amount of Notes (including any Additional Notes) issued under the Indenture at a redemption price of 108.750% of the principal amount, plus accrued and unpaid interest and Special Interest, if any, to the redemption date, with the net cash proceeds of an one or more Equity Offerings or a contribution to the Company's common equity capital made with the net cash proceeds of a concurrent offering of common stock of the Company's direct parent; provided that at least 65% in aggregate principal amount of the Notes (including any Additional Notes) issued under the Indenture (excluding Notes held by the Company and its Subsidiaries) remains outstanding immediately after the occurrence of such redemption and the redemption occurs within 60 days of the date of the closing of such Equity Offering or such contribution to the Company's common equity capital, as applicable. (c) Notwithstanding the provisions of subparagraphs (a) or (b) of this Paragraph 5, at any time prior to July 15, 2008, the Company may also redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to each Holder's registered address, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Special Interest, if any, to the date of redemption, subject to the rights of Holders of Notes on the relevant record date to receive interest due on the relevant interest payment date. (6) MANDATORY REDEMPTION. A-3 The Company is not be required to make mandatory redemption or sinking fund payments with respect to the Notes. (7) REPURCHASE AT THE OPTION OF HOLDER. (a) If there is a Change of Control, the Company will be required to make an offer (a "Change of Control Offer") to each Holder to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Special Interest, if any, thereon to the date of purchase, subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company will mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. (b) Any Net Proceeds from Asset Sales or Casualty Events that are not applied or invested as described in Section 4.10 of the Indenture will constitute "Excess Proceeds." If following such application or investment, the percentage of the Company's expected production volumes hedged exceeds a range to be agreed between the Hedge Counterparty and the Company at the time each hedge transaction is consummated, then the Company shall terminate that portion of the hedges necessary in order to have the volumes hedged be within such range, and shall apply Excess Proceeds to effect such termination. When the aggregate amount of Excess Proceeds not so applied exceeds $15.0 million, within ten days thereof, the Company will make an Asset Sale Offer to all Holders of Notes and all holders of other Parity Lien Debt containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets to purchase the maximum principal amount of Notes and such other Parity Lien Debt that may be purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest and Special Interest, if any, to the date of purchase and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use those Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and other Parity Lien Debt tendered pursuant to such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee will select the Notes and such other Parity Lien Debt to be purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Company prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" attached hereto. (8) NOTICE OF REDEMPTION. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder whose Notes are to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of the Notes or a satisfaction or discharge of the Indenture. Notes in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. (9) DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by A-4 law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, the Company need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. (10) PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. (11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture or the Notes or the Note Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class, and any existing Default or Event or Default or compliance with any provision of the Indenture or the Notes or the Note Guarantees may be waived with the consent of the Holders of a majority in aggregate principal amount of the then outstanding Notes including Additional Notes, if any, voting as a single class. Without the consent of any Holder of a Note, the Indenture or the Notes or the Note Guarantees may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's or a Guarantor's obligations to Holders of the Notes and Note Guarantees in case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, to comply with the requirements of the SEC in order to effect or maintain the qualification of the Indenture under the TIA, to make, complete or confirm any grant of Collateral permitted or required by the Indenture or any of the Security Documents or any release of Collateral that becomes effective as set forth in the Indenture or any of the Security Documents, to conform the text of the Indenture, the Note Guarantees, the Security Documents and/or the Notes to any provision of the "Description of Notes" section of the Company's Offering Memorandum dated July 1, 2004, relating to the initial offering of the Notes, to the extent that such provision in that "Description of Notes" was intended to be a verbatim recitation of a provision of the Indenture, the Note Guarantees, the Security Documents or the Notes, to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Indenture, or to allow any Guarantor to execute a supplemental indenture to the Indenture and/or a Note Guarantee with respect to the Notes. (12) DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Special Interest, if any, with respect to the Notes; (ii) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the Notes; (iii) failure by the Company or any of its Restricted Subsidiaries to comply with Section 4.07, 4.09, 4.10, 4.15 or 5.01 of the Indenture; (iv) failure by the Company or any of its Restricted Subsidiaries for 60 days after notice to the Company by the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the other agreements in the Indenture or the Security Documents; (v) default under one of more instruments evidencing or securing Indebtedness of the Company or any of its Restricted Subsidiaries having an outstanding principal amount of $10.0 million or more that has resulted in the acceleration of the payment of such Indebtedness or failure to pay principal of, or interest or premium, if any, when due, subject to certain exceptions; (vi) one of more final judgments for the payment of money in an amount of $10.0 million or more that remain undischarged for a period of 60 days; (vii) the occurrence of (a) any Security Document ceasing to be enforceable. with certain exceptions, (b) any Parity Lien, individually or in the aggregate, having a Fair Market Value in excess of $10.0 million, ceasing to A-5 be an enforceable and perfect second-priority Lien, subject to Permitted Prior Liens or (c) the Company or any other Pledgor denies or disaffirms in writing any obligations of the Company or any other Pledgor set forth in or arising under any Security Document; (viii) except as permitted by the Indenture, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect, or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee; and (ix) certain events of bankruptcy or insolvency with respect to the Company or any of its Restricted Subsidiaries that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest or premium or Special Interest, if any) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may, on behalf of the Holders of all of the Notes, rescind an acceleration or waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest or premium or Special Interest, if any, on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. (13) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee. (14) NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder of the Company or any of the Guarantors, as such, will not have any liability for any obligations of the Company or the Guarantors under the Notes, the Note Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. (15) AUTHENTICATION. This Note will not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. (16) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). (17) ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes will have all the rights set A-6 forth in the Registration Rights Agreement dated as of July 7, 2004, among the Company, the Guarantors and the other parties named on the signature pages thereof or, in the case of Additional Notes, Holders of Restricted Global Notes and Restricted Definitive Notes will have the rights set forth in one or more registration rights agreements, if any, among the Company, the Guarantors and the other parties thereto, relating to rights given by the Company and the Guarantors to the purchasers of any Additional Notes (collectively, the "Registration Rights Agreement"). (18) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption, and reliance may be placed only on the other identification numbers placed thereon. (19) GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK WILL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THIS NOTE AND THE NOTE GUARANTEES. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: Belden & Blake Corporation 5200 Stoneham Road North Canton, Ohio 44720 Attention: Corporate Secretary A-7 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to: __________________________________ (Insert assignee's legal name) ________________________________________________________________________________ (Insert assignee's soc. sec. or tax I.D. no.) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Print or type assignee's name, address and zip code) and irrevocably appoint ________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: _______________ Your Signature:_______________________________________ (Sign exactly as your name appears on the face of this Note) Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-8 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: Section 4.10 Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $______________ Date: _______________ Your Signature:______________________________________ (Sign exactly as your name appears on the face of this Note) Tax Identification No.: _____________________________ Signature Guarantee*: _________________________ * Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee). A-9 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE * The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Principal Amount of this Global Note Signature of Amount of decrease Amount of increase in following such authorized officer in Principal Amount Principal Amount of decrease of Trustee or Date of Exchange of this Global Note this Global Note (or increase) Custodian - ---------------- ------------------- ---------------- ------------- ---------
* This schedule should be included only if the Note is issued in global form. A-10 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER Belden & Blake Corporation 5200 Stoneham Road North Canton, Ohio 44720 [Registrar address block] Re: 8.75% Senior Secured Notes Due 2012 Reference is hereby made to the Indenture, dated as of July 7, 2004 (the "Indenture"), among Belden & Blake Corporation, as issuer (the "Company"), the Guarantors party thereto and BNY Midwest Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ___________________, (the "Transferor") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to ___________________________ (the "Transferee"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A, and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE REGULATION S GLOBAL NOTE OR A RESTRICTED DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act and, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an Initial Purchaser)]. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be B-1 subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Restricted Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL IN A RESTRICTED DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the B-2 restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _______________________________________ [Insert Name of Transferor] By:____________________________________ Name: Title: Dated: _______________________ B-3 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP _________), or (iii) [ ] Unrestricted Global Note (CUSIP _________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. B-4 EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE Belden & Blake Corporation 5200 Stoneham Road North Canton, Ohio 44720 [Registrar address block] Re: 8.75% Senior Secured Notes Due 2012 (CUSIP ____________) Reference is hereby made to the Indenture, dated as of July 7, 2004 (the "Indenture"), among Belden & Blake Corporation, as issuer (the "Company"), the Guarantors party thereto and BNY Midwest Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. __________________________, (the "Owner") owns and proposes to exchange the Note[s] or interest in such Note[s] specified herein, in the principal amount of $____________ in such Note[s] or interests (the "Exchange"). In connection with the Exchange, the Owner hereby certifies that: 1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the Securities Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. C-1 (c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. (d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's own account without transfer, (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue sky securities laws of any state of the United States. 2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES (a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of the Owner's beneficial interest in a Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner hereby certifies that the Restricted Definitive Note is being acquired for the Owner's own account without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and in the Indenture and the Securities Act. (b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange of the Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, the Owner hereby certifies (i) the beneficial interest is being acquired for the Owner's own account without transfer and (ii) such Exchange has been effected in compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to and in accordance with the Securities Act, and in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Exchange in accordance with the terms of the Indenture, the beneficial interest issued will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the relevant Restricted Global Note and in the Indenture and the Securities Act. C-2 This certificate and the statements contained herein are made for your benefit and the benefit of the Company. _______________________________________ [Insert Name of Transferor] By:____________________________________ Name: Title: Dated: _______________________ C-3 EXHIBIT D FORM OF NOTATION OF GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture and subject to the provisions in the Indenture dated as of July 7, 2004 (the "Indenture") among Belden & Blake Corporation, (the "Company"), the Guarantors party thereto and BNY Midwest Trust Company, as trustee (the "Trustee"), (a) the due and punctual payment of the principal of, premium and Special Interest, if any, and interest on, the Notes, whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal of and interest on the Notes, if any, if lawful, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Note Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of the Note Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose. Capitalized terms used but not defined herein have the meanings given to them in the Indenture. [NAME OF GUARANTOR(S)] By: __________________________________ Name: Title: D-1 EXHIBIT E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, 200__, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of Belden & Blake Corporation (or its permitted successor), an Ohio corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and BNY Midwest Trust Company, as trustee under the Indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of July 7, 2004 providing for the issuance of 8.75% Senior Secured Notes due 2012 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Note Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to provide an unconditional Guarantee on the terms and subject to the conditions set forth in the Note Guarantee and in the Indenture including but not limited to Article 11 thereof. 4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Note Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE. 6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. E-1 7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof. 8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. E-2 IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, 20___ [GUARANTEEING SUBSIDIARY] By: _________________________________ Name: Title: BELDEN & BLAKE CORPORATION By: _________________________________ Name: Title: THE CANTON OIL & GAS COMPANY By: _________________________________ Name: Title: WARD LAKE DRILLING, INC. By: _________________________________ Name: Title: BNY MIDWEST TRUST COMPANY, as Trustee By: _________________________________ Authorized Signatory E-3 SCHEDULE 1 GUARANTORS The following schedule lists each Guarantor of the Notes as of the date of the Indenture:
GUARANTORS STATE OF INCORPORATION OR FORMATION ---------- ----------------------------------- 1. The Canton Oil & Gas Company Ohio 2. Ward Lake Drilling, Inc. Michigan
Schedule 1 EX-10.1 5 l08738aexv10w1.txt EXHIBIT 10.1 EXHIBIT 10.1 (MULTICURRENCY -- CROSS BORDER) ISDA(R) International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of June 30, 2004 J. ARON & COMPANY CAPITAL C OHIO, INC. and have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: -- 1. INTERPRETATION (a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) INCONSISTENCY. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. OBLIGATIONS (a) GENERAL CONDITIONS. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. Copyright (C) 1992 by International Swap Dealers Association, Inc. (b) CHANGE OF ACCOUNT. Either party may change its account for receiving a payment or delivery by giving notice to the other parry at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) NETTING. If on any date amounts would otherwise be payable: -- (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries. (d) DEDUCTION OR WITHHOLDING FOR TAX. (i) GROSS-UP. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party ("X") will: -- (1) promptly notify the other party ("Y") of such requirement; (2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y; (3) promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for: -- (A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or (B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law. 2 ISDA(R) 1992 (ii) LIABILITY. If: -- (1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4); (2) X does not so deduct or withhold; and (3) a liability resulting from such Tax is assessed directly against X, then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)). (e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that: -- (a) BASIC REPRESENTATIONS. (i) STATUS. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (ii) POWERS. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorize such execution, delivery and performance; (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (iv) CONSENTS. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in mil force and effect and all conditions of any such consents have been complied with; and (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). 3 ISDA(R) 1992 (b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default or. to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. (e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true. (f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true. 4. AGREEMENTS Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: -- (a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs: -- (i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation; (ii) any other documents specified in the Schedule or any Confirmation; and (iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification, in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) COMPLY WITH LAWS. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. (d) TAX AGREEMENT. It will give notice of any failure of a representation made by it under Section 3(1) to be accurate and true promptly upon learning of such failure. (e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, 4 ISDA(R) 1992 organized, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party. 5. EVENTS OF DEFAULT AND TERMINATION EVENTS (a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:-- (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) CREDIT SUPPORT DEFAULT. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) MISREPRESENTATION. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however 5 ISDA(R) 1992 described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) BANKRUPTCY. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party: -- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: -- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) TERMINATION EVENTS. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event 6 ISDA(R) 1992 Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below: -- (i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party): -- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B)); (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii); (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 7 ISDA(R) 1992 6. EARLY TERMINATION (a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If. however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT. (i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under Section 5(b)(i)(l) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist. If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i). Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed. (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(l) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iv) RIGHT TO TERMINATE. If: -- (1) a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party, either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then 8 ISDA(R) 1992 continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) EFFECT OF DESIGNATION. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) CALCULATIONS. (i) STATEMENT. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) PAYMENT DATE. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of Default: -- (1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the 9 ISDA(R) 1992 Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) TERMINATION EVENTS. If the Early Termination Date results from a Termination Event: (1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties: -- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (1) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 10 ISDA(R) 1992 7. TRANSFER Subject to Section 6(b)(ii). neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: -- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. CONTRACTUAL CURRENCY (a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess. (b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency. (c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement. (d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made. 11 ISDA(R) 1992 9. MISCELLANEOUS (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) AMENDMENTS. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) COUNTERPARTS AND CONFIRMATIONS. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall he entered into as soon as practicable and may he executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) HEADINGS. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 10. OFFICES; MULTIBRANCH PARTIES (a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organization of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into. (b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party. (c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation. 11. EXPENSES A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document 12 ISDA(R) 1992 to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 12. NOTICES (a) EFFECTIVENESS. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated: -- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) CHANGE OF ADDRESSES. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 13. GOVERNING LAW AND JURISDICTION (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) JURISDICTION. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably: -- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any 13 ISDA(R) 1992 reason any party's Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law. (d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 14. DEFINITIONS As used in this Agreement: -- "ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b). "AFFECTED PARTY" has the meaning specified in Section 5(b). "AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "AFFILIATE" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "APPLICABLE RATE" means: -- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "BURDENED PARTY" has the meaning specified in Section 5(b). "CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into. "CONSENT" includes a consent, approval, action, authorization, exemption, notice, filing, registration or exchange control consent. "CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b). "CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as such in this Agreement. "CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule. "DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. 14 ISDA(R) 1992 "DEFAULTING PARTY" has the meaning specified in Section 6(a). "EARLY TERMINATION DATE" means the date determined in accordance with Section 6(a) or 6(h)(iv). "EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "ILLEGALITY" has the meaning specified in Section 5(b). "INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organized, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document). "LAW" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and "LAWFUL" and "UNLAWFUL" will be construed accordingly. "LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the panics in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "LOSS" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(l) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "MARKET QUOTATION" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have 15 ISDA(R) 1992 been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations arc provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "NON-DEFAULTING PARTY" has the meaning specified in Section 6(a). "OFFICE" means a branch or office of a party, which may be such party's head or home office. "POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organized, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made. "SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "SET-OFF" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination Date, the sum of: -- (a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "SPECIFIED ENTITY" has the meanings specified in the Schedule. 16 ISDA(R) 1992 "SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "STAMP TAX" means any stamp, registration, documentation or similar tax. "TAX" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax. "TAX EVENT" has the meaning specified in Section 5(b). "TAX EVENT UPON MERGER" has the meaning specified in Section 5(b). "TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "TERMINATION CURRENCY" has the meaning specified in the Schedule. "TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties. "TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market 17 ISDA(R) 1992 value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. J. ARON & COMPANY CAPITAL C OHIO, INC. ------------------------- --------------------------- (Name of Party) (Name of Party) By: /s/ L. PETER O'HAGAN BY: /s/ GREGORY BEARD ----------------------- ------------------------- Name: L. PETER O'HAGAN Name: GREGORY BEARD Title: Title: Date: Date: 18 ISDA(R) 1992 SCHEDULE TO THE ISDA MASTER AGREEMENT DATED AS OF JUNE 30, 2004 BETWEEN J. ARON & COMPANY, A GENERAL PARTNERSHIP ORGANIZED UNDER THE LAWS OF THE STATE OF NEW YORK ("J. ARON"), AND CAPITAL C OHIO, INC., A CORPORATION ORGANIZED UNDER THE LAWS OF OHIO ("CAPITAL C OHIO"). IN RELATION TO TRANSACTIONS ENTERED INTO IN ANTICIPATION OF AND IN CONNECTION WITH THE MERGER OF CAPITAL C OHIO WITH AND INTO BELDEN &BLAKE CORPORATION PART 1. TERMINATION PROVISIONS. (a) "SPECIFIED ENTITY" (i) means, in relation to J. Aron, not applicable; and (ii) means, in relation to Capital C Ohio, not applicable (b) "SPECIFIED TRANSACTION" will have the meaning specified in Section 14 of the Agreement and will also include any transaction that is or includes a forward, swap, future or option on or involving any commodity (including, but not limited to, natural gas and oil). The "CROSS DEFAULT" provisions of Section 5(a)(vi) will apply to J. Aron and Capital C Ohio (and following the Merger, to Belden & Blake and any Credit Support Provider of Belden & Blake), provided that (i) the phrase "or becoming capable at such time of being declared" shall be deleted from clause (1) of such Section 5(a)(vi) so that only Specified Indebtedness that has actually been accelerated triggers this Event of Default; and (ii) the following language shall be added to the end thereof: "Notwithstanding the foregoing, the default shall not constitute an Event of Default if (i) the default was caused solely by error or omission of an administrative or operational nature; and (ii) with respect to a default under subsection (2) hereof, funds were available to enable the party to make the payment when due, and the payment is made within two Local Business Days of such party's receipt of written notice of its failure to pay." "SPECIFIED INDEBTEDNESS" will have the meaning specified in Section 14 of this Schedule. 1 (c) "THRESHOLD AMOUNT" means in relation to J. Aron, US$50,000,000 (or its equivalent in another currency) and in relation to Capital C Ohio, $500,000, and following the consummation of the Merger, in relation to Belden & Blake, US$10,000,000 (or its equivalent in another currency). The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will apply to J. Aron but will not apply to Belden & Blake; the "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will not apply to the Merger of Capital C Ohio into Belden & Blake in accordance with the provisions of the Merger Agreement. (d) The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will not apply to J. Aron and will not apply to Capital C Ohio and Belden & Blake. (e) PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e): (i) Market Quotation will apply. (ii) The Second Method will apply. (f) "TERMINATION CURRENCY" means United States Dollars. (g) ADDITIONAL EVENTS OF DEFAULT WITH RESPECT TO CAPITAL C OHIO. Prior to the consummation of the Merger but not thereafter, Section 5(a) is hereby amended by including the following as clause (ix) and upon the occurrence of one or more of the events or circumstance set forth in such clause (ix) an Event of Default shall have occurred with respect to Capital C Ohio as Defaulting Party: "(ix) ADDITIONAL EVENTS OF DEFAULT WITH RESPECT TO CAPITAL C OHIO: (1) IMPERMISSIBLE INDEBTEDNESS. Capital C Ohio directly or indirectly, creates, incurs, assumes or guaranties, or otherwise becomes or remains directly or indirectly liable with respect to any Indebtedness other than Indebtedness (i) incurred pursuant to this Agreement and the Transactions entered into hereunder and (ii) incurred pursuant to the Merger Agreement. (2) IMPERMISSIBLE LIENS. Capital C Ohio directly or indirectly, creates, incurs, assumes or permits to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Capital C Ohio, whether now or hereafter acquired, or any income or profits therefrom, or files or permits the filing of, or permits to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC of any State or under any similar recording or notice statute other than Liens to secure its obligations under this Agreement and the Transactions entered into hereunder. (3) IMPERMISSIBLE BUSINESS ACTIVITIES. Capital C Ohio engages in any activities other than entering into this Agreement, the Merger and activities reasonably necessary to consummate or perform any of the foregoing. 2 (4) FAILURE TO MAINTAIN REQUIRED CASH/CASH EQUIVALENTS. (i) Failure of Capital C Ohio to own or maintain at any time prior to the consummation of the Merger Cash and/or Cash Equivalents in an amount equal to or greater than the Required Base Capital Amount; or (ii) Failure of Capital C Ohio to own or maintain within two Local Business Days of delivery by J. Aron of an Additional Capital Requirement Notice Cash and/or Cash Equivalents in an amount equal to or greater than the sum of the Required Base Capital Amount and the Additional Capital Amount. The following terms have the meanings specified below for purposes of this provision: "Required Base Capital Amount" means $20,000,000; "Additional Capital Requirement Notice" means a written notice from J. Aron to Capital C Ohio delivered on any Local Business Day on or after July 7, 2004 and before the consummation of the Merger (i) stating that in J. Aron's reasonable judgment the Merger is unlikely to be consummated prior to July 31, 2004 and (ii) setting forth the Additional Capital Amount; and "Additional Capital Amount" means the amount (if positive) equal to the difference of (x) the amount that would be owing by Capital C Ohio to J. Aron if all the Transactions under this Agreement were to be terminated on a determination date in accordance with Section 6(e) of this Agreement based on the occurrence of an Event of Default with respect to Capital C Ohio minus (y) the sum of (i) $10,000,000 and (ii) any Additional Capital Amount held by Capital C Ohio as of such determination date. (5) FAILURE TO CONSUMMATE MERGER OR DELEGATE LIABILITIES UNDER THE AGREEMENT TO AN ACCEPTABLE AFFILIATED ENTITY. Either (i) the Merger is not consummated on or before July 16, 2004 and Capital C Ohio is not acting diligently and in good faith to seek an affiliated entity to assume all liability under this Agreement from Capital C Ohio that would be acceptable to J. Aron in its discretion or (ii) the Merger is not consummated on or before July 31, 2004 and the liabilities of Capital C Ohio under this Agreement have not been assumed by an affiliated entity acceptable to J. Aron in its discretion on or before July 31, 2004. (6) TERMINATION OF TRANSACTIONS. On any Local Business Day prior to July 31, 2004, Capital C Ohio notifies J. Aron in writing that Capital C Ohio is designating a day, not earlier than the Local Business Day next following the date on which such notice is received by J. Aron, as an Early Termination Date." (h) ADDITIONAL EVENTS OF DEFAULT WITH RESPECT TO BELDEN & BLAKE. Following the consummation of the Merger, Section 5(a) is hereby amended by including the 3 following as clause (ix) and upon the occurrence of one or more of the events or circumstance set forth in such clause (ix) an Event of Default shall have occurred with respect to Belden & Blake as Defaulting Party:, "(ix) ADDITIONAL EVENTS OF DEFAULT WITH RESPECT TO BELDEN & BLAKE: (a) Failure of Belden & Blake to comply with any of the covenants set forth in Sections 5.1(b), (c), (d), (e), (f), (g), (j), (n), (o) and (p) (Financial Statements and Other Information), 5.11 (Additional Material Real Estate Assets), 6.1 (Indebtedness), 6.2 (Liens), 6.3 (Equitable Lien), 6.4 (No Further Negative Pledges), 6.8 (Financial Covenants), 6.9 (Fundamental Changes; Disposition of Assets), 6.10 (Disposition of Subsidiary Interests), 6.15 (Amendments or Waivers of Certain Related Agreements) and 6.16 (Amendment of Senior Secured Indebtedness), as such covenants are amended, modified, supplemented or waived by the Requisite Lenders (as defined in the Credit Agreement); provided that for purposes of this clause (ix) (i) any reference to the Administrative Agent shall be deemed to be J. Aron; and (ii) any reference to the "Obligations" shall include the obligations under this Agreement (provided that any such reference shall not effect the ranking of the security interest granted to J. Aron). (b) Failure of Belden & Blake to comply with any of the covenants set forth in Section 4.09 (Incurrence of Indebtedness and Issuance of Preferred Stock) and Section 4.12 (Permitted Liens) as such Sections relate to the incurrence of any Parity Lien Debt and any liens in connection therewith pursuant to the definition of `Parity Lien Debt' and clause (2) of the definition of `Permitted Liens,' as such covenants are in effect as of the date of the Merger." (i) EARLY TERMINATION. Notwithstanding anything to the contrary in Section 6(a) or Section 6(b), the parties agree that the Non-defaulting Party or the party that is not the Affected Party (in a case where a Termination Event under Section 5(b)(iv) has occurred) is not required to terminate the Transactions on a single day, but rather may terminate the Transactions over a commercially reasonable period of time (not to exceed ten days) (the "Early Termination Period"). The last day of the Early Termination Period shall be the Early Termination Date for purposes of Section 6; provided, however, that interest shall accrue on the Transactions terminated during the Early Termination Period prior to the Early Termination Date at the Non-default Rate. PART 2. TAX REPRESENTATIONS. (a) PAYER TAX REPRESENTATIONS. For the purposes of Section 3(e), J. Aron, Capital C Ohio and Belden & Blake make the following representation: It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii), or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this 4 representation, it may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement, and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement, and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position. (b) PAYEE TAX REPRESENTATIONS. For the purposes of Section 3(f), each of J. Aron, Capital C Ohio and Belden & Blake make the following representations: (i) It is not acting as an agent or intermediary for any foreign person with respect to the payments received or to be received by it in connection with this Agreement. (ii) It is a United States person within the meaning of Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended. PART 3. AGREEMENT TO DELIVER DOCUMENTS (a) For the purpose of Section 4(a): Tax forms, documents, or certificates to be delivered are:
PARTY REQUIRED TO DATE BY WHICH DELIVER DOCUMENT FORMS/DOCUMENTS/CERTIFICATES TO BE DELIVERED - ----------------------- ------------------------------ --------------------------------- J. Aron, Capital C Ohio United States Internal Revenue (i) On a date which is before the and Belden & Blake Service Form W-9, or any first Scheduled Payment Date successor form. under this Agreement, (ii) promptly upon reasonable demand by the other party, and (iii) promptly upon learning that any such form previously provided by the other party has become obsolete, incorrect, or ineffective.
(b) Other documents to be delivered are:
PARTY COVERED BY REQUIRED TO DATE BY WHICH TO BE SECTION 3(d) DELIVER FORM/DOCUMENT/CERTIFICATE DELIVERED REPRESENTATION J. Aron, Evidence of authority of signatories Upon execution of this Yes Capital C Ohio Agreement and promptly and Belden & following reasonable demand by
5 Blake the other party J. Aron Guaranty of the party's Credit Upon execution of this No Support Provider Agreement, if not already provided J. Aron, Copy of the most recent, publicly available Promptly following Yes Capital C Ohio audited annual financial statements and/or of reasonable demand by the and Belden & the unaudited quarterly financial statements other party Blake of, in the case of J. Aron, The Goldman Sachs Group, Inc. or its successor ("Goldman Group"), and, in the case of Capital C Ohio, the pro forma unaudited financial statements dated ______, 2004 prepared in accordance with generally accepted accounting principles in the country in which the party is organized. Following the Merger, the financial reports of Belden & Blake shall be delivered pursuant to Part 1(h). Capital C Certified resolutions of its board of Upon execution of this Yes Ohio, Belden directors or other governing body authorizing Agreement in the case of & Blake this Agreement and the Transactions Capital C Ohio, and upon contemplated hereby consummation of the Merger in the case of Belden & Blake Capital C Ohio Evidence of ownership of Cash and Cash Upon execution of this Yes Equivalents in an amount not less than the Agreement and, thereafter, amount specified in Part 1(g)(4) within two Business Days of a written request by J. Aron Belden & Legal Opinion as to the authorization, Upon consummation of the No Blake execution and delivery of this Agreement and Merger the legal, valid and binding nature of this Agreement against Belden & Blake. J. Aron shall also receive a reliance letter with respect to each opinion delivered to the Administrative Agent or the Lenders under the Credit Agreement.
PART 4. MISCELLANEOUS (a) ADDRESSES FOR NOTICES. For the purpose of Section 12(a): 6 Address for notices or communications to J. Aron: Address: J. Aron & Company 85 Broad Street New York, New York 10004 NATURAL GAS Attention: Energy Operations Telephone: (212) 357-0326 Facsimile: (212) 493-9849 OIL Attention: Energy Operations Telephone: (212) 357-0326 Facsimile: (212) 493-9849 Address for notices or communications to Capital C Ohio (prior to the consummation of the Merger): Address: Capital C Ohio 333 Clay Street, Suite 4960 Houston, TX 77002 Attention: Frost Cochran Telephone: (713) 571-9393 Facsimile: (713) 571-9533 Address for notices or communications to Belden & Blake (following the consummation of the Merger only): Address: Belden & Blake Corporation 5200 Stoneham Road North Canton, OH 44720-0500 Attention: Duane Clark Telephone: (330) 498-5737 Facsimile: (330) 498-8737 (b) PROCESS AGENT. For the purpose of Section 13(c): J. Aron appoints as its Process Agent: Not applicable. Capital C Ohio, and subsequent to the consummation of the Merger, Belden & Blake appoints as its Process Agent: Not applicable. (c) OFFICES. The provisions of Section 10(a) will apply to this Agreement. (d) MULTIBRANCH PARTY. For the purpose of Section 10(c): J. Aron is not a Multibranch Party. Neither Capital C Ohio nor, subsequent to the consummation of the Merger, Belden & Blake is a Multibranch Party. 7 (e) CALCULATION AGENT. The Calculation Agent is J. Aron. (f) CREDIT SUPPORT DOCUMENT. Details of any other Credit Support Document, each of which is incorporated by reference in, and made part of, this Agreement and each Confirmation (unless provided otherwise in a Confirmation) as if set forth in full in this Agreement or such Confirmation: Any guaranty or other form of credit support provided on behalf of Belden & Blake at any time shall constitute a Credit Support Document with respect to the obligations of Belden & Blake. Each of the Collateral Trust Agreement and the mortgages, security agreements and pledge agreements constituting Senior Secured Note Documents (as defined in the Collateral Trust Agreement) shall constitute Credit Support Documents with respect to Belden & Blake. Belden & Blake and J. Aron acknowledge and agree that the Senior Secured Note Documents constitute a source of credit support for the obligations of Belden & Blake that is separate from, independent of, and not limited by, the Credit Support Annex. Guaranty by The Goldman Sachs Group, Inc. ("Goldman Group") in favor of Belden & Blake as beneficiary thereof shall constitute a Credit Support Document with respect to the obligations of J. Aron; and (g) CREDIT SUPPORT PROVIDER. Credit Support Provider means in relation to J. Aron, Goldman Group. Credit Support Provider means in relation to Belden & Blake, each of the wholly owned subsidiaries of Belden & Blake that are Guarantors under the Credit Agreement and any party that at any time provides a guaranty or other form of credit support on behalf of Belden & Blake but shall not include any issuer of a Letter of Credit under the terms of the Credit Support Annex. Capital C Ohio shall not be required to have a Credit Support Provider prior to the consummation of the Merger. (h) GOVERNING LAW. Section 13(a) is hereby replaced with the following: (i) GOVERNING LAW. This Agreement, each Transaction entered into hereunder, and all matters arising in connection with this Agreement will be governed by, and construed and enforced in accordance with, the law of the State of New York. (i) JURISDICTION. Section 13(b) is hereby amended by: (i) deleting in the second line of subparagraph (i) thereof the word "non-"; and (ii) deleting the final paragraph thereof. (j) NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) will not apply to Transactions. 8 PART 5. OTHER PROVISIONS. (a) ACCURACY OF SPECIFIED INFORMATION. Section 3(d) is hereby amended by adding in the third line thereof after the word "respect" and before the period, the phrase "or, in the case of audited or unaudited financial statements, a fair presentation in all material respects of the financial condition of the relevant person subject, in the case of any unaudited financial statements, to changes resulting from audit and normal year-end adjustments ." (b) SCOPE OF AGREEMENT. Notwithstanding anything contained in this Agreement to the contrary, any transaction which may otherwise constitute a "Specified Transaction" for purposes of this Agreement which has been or will be entered into between J. Aron and Capital C Ohio, and subsequent to the consummation of the Merger, Belden & Blake, shall constitute a "Transaction" which is subject to, governed by, and construed in accordance with the terms of this Agreement, unless the Confirmation thereto expressly provides otherwise. (c) ADDITIONAL REPRESENTATIONS. The parties agree to amend Section 3 by adding new Sections 3(g), (h), (i), and (j) as follows: (i) ELIGIBLE CONTRACT PARTICIPANT. It is an "eligible contract participant" as defined in the U.S. Commodity Exchange Act. (ii) NON-RELIANCE. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. (iii) ASSESSMENT AND UNDERSTANDING. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. (iv) STATUS OF PARTIES. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction. (d) TRANSFER. The following amendments are hereby made to Section 7: (i) In the third line, insert the words "which consent will not be arbitrarily withheld or delayed," immediately before the word "except"; and 9 (ii) in clause (a), insert the words "or reorganization, incorporation, reincorporation, or reconstitution into or as," immediately before the word "another." (iii) The following new sentence is added after clause (b): "Nothing in this Section 7 shall prevent (A) a party from granting a security interest in this Agreement and the Transactions entered into pursuant to this Agreement to secure its obligations to its creditors or any one or more groups of its creditors and (B) such party's secured creditors from exercising remedies available to them in respect of this Agreement; provided, however, that in all cases the grant of such a security interest and the exercise of such remedies shall be subject to the rights of the other party to this Agreement to exercise its contractual and other rights (including, without limitation, the right to designate an Early Termination Date and effect rights to terminate, liquidate and net Transactions, to exercise rights with respect to Posted Credit Support and to exercise rights of set-off)." (e) CONSENT TO RECORDING. The parties agree that each party or its agent may electronically record all telephone conversations between them, with or without the use of a warning tone, and that, it may be used in a Proceeding solely for the purpose of establishing, and only to the extent reasonably necessary to establish, the existence of a Transaction and the terms thereof. (f) DEFINITIONS. The following amendments are hereby made to Section 14: (i) "DEFAULT RATE" shall be the overnight London Interbank Offered Rate, as determined by the relevant payee in a commercially reasonable manner plus 1%, and (ii) "TERMINATION CURRENCY" means U.S. Dollars. (g) SEVERABILITY. If any term, provision, covenant, or condition of this Agreement, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or in part) for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full force and effect as if this Agreement had been executed with the invalid or unenforceable portion eliminated, so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits or expectations of the parties to this Agreement; provided, however, that this Agreement shall be deemed to be invalid and unenforceable if any provision of Sections 1(c), 2, 5, 6, or 13 (or any definition or provision in Section 14 to the extent it relates to, or is used in or in connection with, any such Section) shall be so held to be invalid or unenforceable. (h) SET-OFF. The parties agree to amend Section 6 by adding a new Section 6(f) as follows: 10 "(f) Upon the occurrence of an Event of Default or Termination Event under Section 5(b)(iv) with respect to a party ("X"), the other party ("Y") will have the right (but not be obliged) without prior notice to X or any other person to set-off or apply any obligation of X owed to Y (whether or not matured or contingent and whether or not arising under this Agreement, and regardless of the currency, place of payment or booking office of the obligation) against any obligation of Y owed to X (whether or not matured or contingent and whether or not arising under this Agreement, and regardless of the currency, place of payment or booking office of the obligation). Y will give notice to the other party of any set-off effected under this Section 6(f). Amounts (or the relevant portion of such amounts) subject to set-off may be converted by Y into the Termination Currency at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency. If any obligation is unascertained, Y may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. Nothing in this Section 6(f) shall be effective to create a charge or other security interest. This Section 6(f) shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise)." (i) DEFINITIONS. This Agreement, each Confirmation and each Transaction is subject to the 2000 ISDA Definitions and the 1993 ISDA Commodity Derivatives Definitions as supplemented by the 2000 Supplement to the 1993 ISDA Commodity Derivatives Definitions as published by the International Swaps and Derivatives Association, Inc. ("ISDA") and the 1998 FX and Currency Option Definitions as published by ISDA, the Emerging Markets Traders Association, and the Foreign Exchange Committee (together, the "Definitions"), and will be governed in all respects by the Definitions (except that references to "Swap Transactions" in the Definitions will be deemed to be references to "Transactions"). The Definitions are incorporated by reference in, and made part of, this Agreement and each Confirmation as if set forth in full in this Agreement and such Confirmations. In the event of any inconsistency between the provisions of this Agreement and the Definitions, this Agreement will prevail. Subject to Section 1(b), in the event of any inconsistency between the provisions of any Confirmation, this Agreement, and the Definitions, such Confirmation will prevail for the purpose of the relevant Transaction. (j) MARKET DISRUPTION EVENTS; DISRUPTION FALLBACKS. The following will constitute Market Disruption Events within the meaning of the Definitions: Price Source Disruption, Trading Suspension, Disappearance of Commodity Reference Price, Material Change in Formula, Material Change in Content. In the event of a Market Disruption Event, the following Disruption Fallbacks will apply in the order specified: (i) Fallback Reference Price, (ii) Postponement (with two Maximum Days of Disruption), (iii) Negotiated Fallback and (iv) Calculation Agent Determination. "Additional Market Disruption Events" shall apply only if so specified in the relevant Confirmation. 11 (k) WAIVER OF TRIAL BY JURY. Each party hereby irrevocably waives any and all right to trial by jury in any Proceeding. (l) COLLATERAL. So long as any Transaction is outstanding under this Agreement and until termination of the obligations of Belden & Blake under this Agreement, J. Aron shall have the benefit of a second priority lien in the collateral identified in the Collateral Documents. Other than as provided in the Collateral Trust Agreement, no such Collateral shall be released by Belden & Blake or any other owner of such Collateral without the prior written consent of J. Aron. (m) MERGER. For the avoidance of doubt, notwithstanding any provision in this Agreement to the contrary, all obligations of Capital C Ohio under this Agreement shall be assumed by Belden & Blake upon consummation of the Merger. (n) BANKRUPTCY. For purposes of this Agreement, Section 5(b)(ii) is hereby modified by deleting the number "30" as it appears after the word "within" and before the word "days" in the tenth and eighteenth lines thereof and inserting the number "60" in place thereof. (o) TAX EVENT. For purpose of this Agreement, Section 5(b)(ii) is hereby amended to delete the words ", or there is a substantial likelihood that it will," as they appear after the word "will" and before the word "on" in the fourth line thereof. (p) CONFIRMATIONS. Section 9(e)(ii) is hereby amended by deleting the second sentence thereof and inserting the following in its place: "On or promptly following a Trade Date of a Transaction, J. Aron will send to Capital C Ohio (or after the Merger, Belden & Blake) a Confirmation. Capital C Ohio (or after the Merger, Belden & Blake) will promptly thereafter confirm the accuracy of, or require the correction of, such Confirmation. If any disputes shall arise as to whether an error exists in a Confirmation. If any disputes shall arise as to whether an error exists in a Confirmation, the parties shall in good faith make reasonable efforts to resolve the dispute. If Capital C Ohio (or after the Merger, Belden & Blake) fails to accept or dispute the Confirmation in the manner described above within five (5) Local Business Days after such Confirmation was sent by J. Aron, the Confirmation shall be deemed to correctly reflect the parties' agreement on the terms of the Transaction referred to therein, absent manifest error. (q) LIMITATION OF LIABILITY. NO PARTY SHALL BE REQUIRED TO PAY OR BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES (WHETHER OR NOT ARISING FROM ITS NEGLIGENCE) TO THE OTHER PARTY; PROVIDED, HOWEVER, THAT NOTHING IN THIS PROVISION SHALL AFFECT THE ENFORCEABILITY OR OPERATION OF SECTION 6(E) OF THIS AGREEMENT. IF AND TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO THIS AGREEMENT IS DEEMED TO CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE AND AGREE THAT SUCH DAMAGES ARE DIFFICULAT OR IMPOSSIBLE TO 12 DETERMINE AND THAT SUCH PAYMENT IS INTENDED TO BE A REASONABLE APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES AND NOT A PENALTY. (r) APPLICATION OF UNIFORM COMMERCIAL CODE. The parties agree that Section 2-609 of the New York Uniform Commercial Code and any analogous common law rights shall not apply to this Agreement. (s) ADDITIONAL DEFINITIONS. Section 14 is hereby amended to include the following definitions in applicable alphabetical order: "Cash" means money, currency or a credit balance in any demand or Deposit Account. "Cash Equivalents" means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing no more than two months after such date; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing no more than two months after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from Standard & Poor's Ratings Group ("S&P") or at least P-1 from Moody's Investor's Services, Inc. ("Moody's"); (iii) commercial paper maturing no more than two months from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing no more than two months after such date and issued or accepted by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (v) shares of any money market mutual fund that (a) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) through (iv) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's. "Credit Agreement" means the Credit and Guaranty Agreement to be entered into by and among Belden & Blake Corporation, certain Subsidiaries of Belden & Blake Corporation, as Guarantors, various Lenders, Goldman Sachs Credit Partners, L.P. as Lead Arranger, Sole Bookrunner, Syndication Agent and Administrative Agent, and entity to be identified as Documentation Agent. "Collateral Trust Agreement" has the meaning specified in the Credit Agreement on the date of this Agreement. "Deposit Account" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. 13 "Indebtedness", as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with United States generally accepted accounting principles; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under the Employment Retirement Income Security Act of 1974, as amended from time to time), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that person regardless of whether the indebtedness secured thereby shall have been assumed by that person or is nonrecourse to the credit of that person; (vi) the face amount of any letter of credit issued for the account of that person or as to which that person is otherwise liable for reimbursement of drawings; (vii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such person of the obligation of another; (viii) any obligation of such person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; (ix) any liability of such person for an obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above; and (x) all obligations of such person in respect of any exchange traded or over the counter derivative transaction whether entered into for hedging or speculative purposes. "Indenture" means the Indenture to be entered into by and among Belden & Blake, certain subsidiaries of Belden & Blake, and The Bank of New York, as Indenture Trustee. "LC Facility" means the Hedge L/C Commitment under the Credit Agreement providing for the issuance of letters of credit having an aggregate face amount not to exceed $40 million. "Lien" means (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities. 14 "Merger" means the merger of Capital C Ohio with and into Belden & Blake pursuant to the Merger Agreement. "Merger Agreement" means the Agreement and Plan of Merger between Capital C Ohio and Belden & Blake dated as of June 15, 2004. "Securities" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. The defined terms used in this Agreement and not otherwise defined shall have the respective meanings set forth in the Credit Agreement as of the date of the consummation of the Merger; provided that the definitions "CASH", "CASH EQUIVALENTS", "DEPOSIT ACCOUNT", "INDEBTEDNESS", "LIEN" set forth herein shall only be effective until the consummation of the Merger. 15 IN WITNESS WHEREOF, the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. CAPITAL C OHIO, INC. J. ARON & COMPANY By: /s/ GREGORY BEARD By: /s/ L. PETER O'HAGAN -------------------- ------------------------- Name: GREGORY BEARD Name: L. PETER O'HAGAN Title: Title: Date: Date: 16 (BILATERAL FORM) (ISDA AGREEMENTS SUBJECT TO NEW YORK LAW ONLY) ISDA(R) International Swap and Derivatives Association, Inc. CREDIT SUPPORT ANNEX to the Schedule to the ISDA Master Agreement ________________________________________________________ dated as of June 30, 2004 J. ARON & COMPANY CAPITAL C OHIO, INC. between _____________________________________ and _____________________________________ ("Party A") ("Party B") This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows:-- PARAGRAPH 1. INTERPRETATION (a) DEFINITIONS AND INCONSISTENCY. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail. (b) SECURED PARTY AND PLEDGOR. All references in this Annex to the "Secured Party" will be to either party when acting in that capacity and all corresponding references to the "Pledgor" will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties. PARAGRAPH 2. SECURITY INTEREST Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party. Copyright(C)1994 by International Swaps and Derivatives Association, Inc. PARAGRAPH 3. CREDIT SUPPORT OBLIGATIONS (a) DELIVERY AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledger's Minimum Transfer Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "DELIVERY AMOUNT" applicable to the Pledgor for any Valuation Date will equal the amount by which: (i) the Credit Support Amount exceeds (ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party. (b) RETURN AMOUNT. Subject to Paragraphs 4 and 5. upon a demand made by the Pledgor on or promptly following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds the Secured Party's Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "RETURN AMOUNT" applicable to the Secured Party for any Valuation Date will equal the amount by which: (i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party exceeds (ii) the Credit Support Amount. "CREDIT SUPPORT AMOUNT" means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero. PARAGRAPH 4. CONDITIONS PRECEDENT, TRANSFER TIMING, CALCULATIONS AND SUBSTITUTIONS (a) CONDITIONS PRECEDENT. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii). 5 and 6(d) is subject to the conditions precedent that: (i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is continuing with respect to the other party; and (ii) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the other party. (b) TRANSFER TIMING. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter. (c) CALCULATIONS. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation). 2 ISDA(R)1994 (d) SUBSTITUTIONS. (i) Unless otherwise specified in Paragraph 13. upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the "Substitute Credit Support"); and (ii) subject to Paragraph 4(a). the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the Pledgor in its notice not later than the Local Business Day following the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified in Paragraph 13 (the "Substitution Date"); provided that the Secured Party will only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support. PARAGRAPH 5. DISPUTE RESOLUTION If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day following (X) the dale that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) if they fail to resolve the dispute by the Resolution Time, then: (i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by: (A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute; (B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid-market from Reference Market-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent's original calculations will be used for that Transaction (or Swap Transaction); and (C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit Support. (ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support, the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13. Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification Time on the Local Business Day following the Resolution Time. The appropriate party will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer. 3 ISDA(R)1994 PARAGRAPH 6. HOLDING AND USING POSTED COLLATERAL (a) CARE OF POSTED COLLATERAL. Without limiting the Secured Party's rights under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto. (b) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS. (i) GENERAL. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a "Custodian") to hold Posted Collateral for the Secured Party. Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor's obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting. (ii) FAILURE TO SATISFY CONDITIONS. If the Secured Party or its Custodian fails to satisfy any conditions for holding Posted Collateral, then upon a demand made by the Pledgor, the Secured Party will, not later than five Local Business Days after the demand, Transfer or cause its Custodian to Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions or to the Secured Party if it satisfies those conditions. (iii) LIABILITY. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions. (c) USE OF POSTED COLLATERAL. Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9-207 of the New York Uniform Commercial Code, have the right to: (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and (ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for either. For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above. (d) DISTRIBUTIONS AND INTEREST AMOUNT. (i) DISTRIBUTIONS. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). 4 ISDA(R)1994 (ii) INTEREST AMOUNT. Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2. PARAGRAPH 7. EVENTS OF DEFAULT For purposes of Section 5(a)(iii)(l) of this Agreement, an Event of Default will exist with respect to a party if: (i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that party; (ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or (iii) that party fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is given to that party. PARAGRAPH 8. CERTAIN RIGHTS AND REMEDIES (a) SECURED PARTY'S RIGHTS AND REMEDIES. If at any time (1) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless the Pledgor has paid in full all of its Obligations that are then due, the Secured Party may exercise one or more of the following rights and remedies: (i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party; (ii) any other rights and remedies available to the Secured Party under the terms of Other Posted Support, if any: (iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect. Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledgor is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be waived. 5 ISDA(R)1994 (b) PLEDGOR'S RIGHTS AND REMEDIES. If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (except in the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its obligations that arc then due under Section 6(e) of this Agreement): (i) the Pledgor may exercise all rights and remedies available to a pledgor under applicable law with respect to Posted Collateral held by the Secured Party; (ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of Other Posted Support, if any; (iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and (iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may: (A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (B) to the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral held by the Secured Party, until that Posted Collateral is Transferred to the Pledgor. (c) DEFICIENCIES AND EXCESS PROCEEDS. The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b). (d) FINAL RETURNS. When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any. PARAGRAPH 9. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that: (i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien; (ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2; (iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex, the Secured Party will have a valid and perfected first priority security interest therein (assuming that any central clearing corporation or any third-party financial intermediary or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and (iv) the performance by it of its obligations under this Annex will not result in the creation of any security interest, hen or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2. 6 ISDA(R)1994 PARAGRAPH 10. EXPENSES (a) GENERAL. Except as otherwise provided in Paragraphs 10(b) and 10(c). each party will pay its own costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith. (b) POSTED CREDIT SUPPORT. The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that result from the exercise of the Secured Party's rights under Paragraph 6(c). (c) LIQUIDATION/APPLICATION OF POSTED CREDIT SUPPORT. All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledgor in connection with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties. PARAGRAPH 11. MISCELLANEOUS (a) DEFAULT INTEREST. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obligated to pay the Pledgor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (b) FURTHER ASSURANCES. Promptly following a demand made by a party, the other party will execute, deliver, file and record any Financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on Posted Collateral or an Interest Amount. (c) FURTHER PROTECTION. The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party's rights under Paragraph 6(c). (d) GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner. (e) DEMANDS AND NOTICES. All demands and notices made by a party under this Annex will be made as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13. (f) SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as being specified in Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly. 7 ISDA(R)1994 PARAGRAPH 12. DEFINITIONS As used in this Annex:-- "CASH" means the lawful currency of the United States of America. "CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph 3. "CUSTODIAN" has the meaning specified in Paragraphs 6(b)(i) and 13. "DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a). "DISPUTING PARTY" has the meaning specified in Paragraph 5. "DISTRIBUTIONS" means with respect to Posted Collateral other than Cash, all principal, interest and other payments and distributions of cash or other property with respect thereto, regardless of whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include any item of property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral or, with respect to any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified herein. "ELIGIBLE COLLATERAL" means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. "ELIGIBLE CREDIT SUPPORT" means Eligible Collateral and Other Eligible Support. "EXPOSURE" means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions) were being terminated as of the relevant Valuation Time; provided that Market Quotation will be determined by the Valuation Agent using its estimates at mid-market of the amounts that would be paid for Replacement Transactions (as that term is defined in the definition of "Market Quotation"). "INDEPENDENT AMOUNT" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "INTEREST AMOUNT" means, with respect to an Interest Period, the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows: (x) the amount of that Cash on that day; multiplied by (y) the Interest Rate in effect for that day; divided by (z) 360. "INTEREST PERIOD" means the period from (and including) the last Local Business Day on which an Interest Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted Collateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local Business Day on which the current Interest Amount is to be Transferred. "INTEREST RATE" means the rate specified in Paragraph 13. "LOCAL BUSINESS DAY", unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a Transfer under this Annex. 8 ISDA(R)1994 "MINIMUM TRANSFER AMOUNT" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "NOTIFICATION TIME" has the meaning specified in Paragraph 13. "OBLIGATIONS" means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13. "OTHER ELIGIBLE SUPPORT" means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. "OTHER POSTED SUPPORT" means all Other Eligible Support Transferred to the Secured Party that remains in effect for the benefit of that Secured Party. "PLEDGOR" means either party, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a). "POSTED COLLATERAL" means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any Interest Amount or portion thereof not Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in the form of Cash. "POSTED CREDIT SUPPORT" means Posted Collateral and Other Posted Support. "RECALCULATION DATE" means the Valuation Date that gives rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the "Recalculation Date" means the most recent Valuation Date under Paragraph 3. "RESOLUTION TIME" has the meaning specified in Paragraph 13. "RETURN AMOUNT" has the meaning specified in Paragraph 3(b). "SECURED PARTY" means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support. "SPECIFIED CONDITION" means, with respect to a party, any event specified as such for that party in Paragraph 13. "SUBSTITUTE CREDIT SUPPORT" has the meaning specified in Paragraph 4(d)(i). "SUBSTITUTION DATE" has the meaning specified in Paragraph 4(d)(ii). "THRESHOLD" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "TRANSFER" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable: (i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified by the recipient; (ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient; (iii) in the case of securities that can be paid or delivered by book-entry, the giving of written instructions to the relevant depository institution or other entity specified by the recipient, together with a written copy thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant interest to the recipient; and (iv) in the case of Other Eligible Support or Other Posted Support, as specified in Paragraph 13. 9 ISDA(R)1994 "VALUATION AGENT" has the meaning specified in Paragraph 13. "VALUATION DATE" means each date specified in or otherwise determined pursuant to Paragraph 13. "VALUATION PERCENTAGE" means, for any item of Eligible Collateral, the percentage specified in Paragraph 13. "VALUATION TIME" has the meaning specified in Paragraph 13. "VALUE" means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in the case of a dispute, with respect to: (i) Eligible Collateral or Posted Collateral that is: (A) Cash, the amount thereof; and (B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation Percentage, if any; (ii) Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and (iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13. 10 ISDA(R)1994 CREDIT SUPPORT ANNEX TO THE SCHEDULE TO THE MASTER AGREEMENT DATED AS OF JUNE 30, 2004, BETWEEN J. ARON & COMPANY ("J. ARON") AND CAPITAL C OHIO, INC. ("CAPITAL C OHIO"). IN RELATION TO TRANSACTIONS ENTERED INTO IN ANTICIPATION OF AND IN CONNECTION WITH THE MERGER OF CAPITAL C OHIO WITH AND INTO BELDEN &BLAKE CORPORATION PARAGRAPH 13. ELECTIONS AND VARIABLES (a) SECURITY INTEREST FOR "OBLIGATIONS". The term "OBLIGATIONS" as used in this Annex includes the following additional obligations: With respect to Belden & Blake: Not applicable. (b) CREDIT SUPPORT OBLIGATIONS. (i) DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT. (A) "DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a). Notwithstanding anything to the contrary in subparagraph 3(a), in respect of the Delivery Amount applicable to Belden & Blake for any Valuation Date: a) if at any time between the date of the Credit Agreement and the date that is 18 months following the date of the Credit Agreement, the Delivery Amount would otherwise exceed $55,000,000 then the Delivery Amount shall be deemed to be $55,000,000; and - 1 - b) if at any time from and after the date that is 18 months following the date of the Credit Agreement, the Delivery Amount would otherwise exceed the Applicable Delivery Amount Cap, then the Delivery Amount shall be deemed to be the Applicable Delivery Amount Cap. For purposes of this provision, the "Applicable Delivery Amount Cap" means, as of any determination date, the lesser of $40,000,000 and the lowest Potential Exposure Amount for J. Aron determined for all Credit Support Annex Determination Dates occurring on or before such determination date. "Potential Exposure" means the amount that J. Aron could be owed if it were to terminate the Transactions under this Agreement based on the occurrence of an Event of Default with respect to Belden & Blake on any Credit Support Annex Determination Date determined by J. Aron in a commercially reasonable manner and consistent with its practices for determining potential exposures for transactions of the same type as the Transactions under this Agreement using statistical analysis of historical data with 95th percentile confidence interval and "Credit Support Annex Determination Date" means each of July 15, 2005, January 15, 2006, July 15, 2006, January 15, 2007, July 15, 2007, January 15, 2008, July 15, 2008, January 15, 2009, July 15, 2009, January 15, 2010, July 15, 2010, January 15, 2011, July 15, 2011, January 15, 2012 and July 15, 2012; provided, however that if any of the foregoing days is not a Local Business Day then the Applicable Credit Support Annex Determination Date that would have otherwise occurred on such date shall be deemed to be the next following day that is a Local Business Day. The parties acknowledge that Capital C Ohio (or Belden & Blake after the Merger) intends, from time to time, to enter into additional hedging arrangements and may approach J. Aron to request a review of the Applicable Delivery Amount Cap and that J. Aron will act in a commercially reasonable manner in consideration of such requests taking into account the value of the Collateral provided under the Collateral Trust Agreement. (B) "RETURN AMOUNT" has the meaning specified in Paragraph 3(b). (C) "CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph 3. (ii) ELIGIBLE COLLATERAL. The following items will qualify as "ELIGIBLE COLLATERAL" for the party specified:
VALUATION BELDEN & BLAKE PERCENTAGE (A) Cash [X] 100% (B) Negotiable debt obligations issued by the U.S. Treasury Department having an original maturity at issuance of not more than one year ("Treasury Bills") and maturing not more than 180 days from the date of Transfer by the Pledgor to the Secured Party [X] 98.5%
- 2 - (iii) OTHER ELIGIBLE SUPPORT. Letter of Credit as defined in Paragraph 13(j)(v) and any other mutually acceptable collateral will qualify as "OTHER ELIGIBLE SUPPORT" for either party (provided that the Collateral shall not constitute "OTHER ELIGIBLE SUPPORT"). In this regard, the parties acknowledge and agree that it is the intention of Belden & Blake to utilize the LC Facility to meet its obligations under the Annex and that it shall constitute an Event of Default with respect to Belden & Blake for the LC Facility to be used for any other purpose except to the extent that the Applicable Delivery Amount Cap is less than $40 million. (iv) THRESHOLDS. (A) "INDEPENDENT AMOUNT" MEANS with respect to Belden & Blake : (i) at all times prior to July 15, 2008, $20,000,000 and (ii) after July 15, 2008, an amount equal to the lesser of $20,000,000 and the lowest Maximum Exposure Amount determined for all Credit Support Annex Determination Dates. For this purpose, "Maximum Exposure Amount" means the largest exposure that J. Aron could have to Belden & Blake during the course of three consecutive Local Business Days in respect of Transactions under this Agreement (taking into account the cost associated with terminating such Transactions) as determined by J. Aron on each Credit Support Annex Determination Date. (B) "THRESHOLD" means with respect to Belden & Blake : $0 (C) "MINIMUM TRANSFER AMOUNT" means with respect to Belden & Blake : $0 (D) ROUNDING. The Delivery Amount and the Return Amount will be rounded up and down to the nearest integral multiple of $5,000,000 respectively. (c) VALUATION AND TIMING. (i) "VALUATION AGENT" means, for the purposes of this Annex, J. Aron. (ii) "VALUATION DATE" means each New York Business Day (as defined below) which, if treated as a Valuation Date, would result in a Delivery Amount or a Return Amount. A notice of the Valuation Agent's calculations may be combined with a demand for a Delivery Amount or a Return Amount. (iii) "VALUATION TIME" means the close of business in New York City on the Valuation Date; provided that the calculations of Value and Exposure will be made as of approximately the same time on the same date. (iv) "NOTIFICATION TIME" means 12:00 noon, New York time, on a New York Business Day. Notwithstanding Paragraph 4(b), if on any New York Business Day a demand for - 3 - Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made by the close of business on the third following New York Business Day and, if any such demand is made after the Notification Time, the relevant Transfer will be made by the close of business on the fourth following New York Business Day. (v) "NEW YORK BUSINESS DAY" means a Local Business Day in New York City. (d) CONDITIONS PRECEDENT AND SECURED PARTY'S RIGHTS AND REMEDIES. The following Termination Event(s) will be a "SPECIFIED CONDITION" for the party specified (that party being the Affected Party if the Termination Event occurs with respect to that party):
BELDEN & J. ARON BLAKE Illegality [ ] [ ] Tax Event [ ] [ ] Tax Event Upon Merger [ ] [ ] Credit Event Upon Merger [ x ] [ ] Additional Termination Event(s): [ ] [ ]
(e) SUBSTITUTION. (i) "SUBSTITUTION DATE" has the meaning specified in Paragraph 4(d)(ii). (ii) CONSENT. If specified here as applicable, then the Pledgor must obtain the Secured Party's consent for any substitution pursuant to Paragraph 4(d): Inapplicable. (f) DISPUTE RESOLUTION. (i) "RESOLUTION TIME" means 1:00 p.m., New York time, on the Local Business Day following the date on which notice of the dispute is given under Paragraph 5. (ii) "VALUE". For purposes of Paragraphs 5(i)(c) and 5(ii), disputes over Value will be resolved by the Valuation Agent seeking three mid-market quotes as of the relevant Valuation Date or date of Transfer from parties that regularly act as dealers in the securities or other property in question. The Value will be the arithmetic mean of the quotes received by the Valuation Agent. (iii) "ALTERNATIVE". The provisions of Paragraph 5 will apply; provided, however, that notwithstanding any contrary provision of Paragraph 5, the full amount of each Delivery Amount as calculated by the Valuation Agent shall be transferred by the Pledgor to the - 4 - Secured Party in accordance with the requirements of Paragraphs 4(b) and 13(c)(iv). The parties agree that the mechanisms herein providing for resolution of disputes shall not be used if the amount in dispute does not exceed US$500,000. (g) HOLDING AND USING POSTED COLLATERAL. (i) ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS. J. Aron and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied: (1) J. Aron is not a Defaulting Party and there is no Specified Condition that has occurred or is continuing with respect to J. Aron. (2) Posted Collateral may be held only in the United States. Initially, the CUSTODIAN for J. Aron is Goldman Sachs & Co. (ii) USE OF POSTED COLLATERAL. The provisions of Paragraph 6(c) will apply to each party, provided that J. Aron will attempt to draw on the Eligible Collateral and Other Eligible Support prior to seeking to receive any portion of the Collateral upon the liquidation or other disposition thereof pursuant to the Collateral Documents. (h) DISTRIBUTIONS AND INTEREST AMOUNT. (i) INTEREST RATE. The "INTEREST RATE" will be the Federal Funds (Effective) rate minus 25 basis points as displayed on Telerate page 120. Notwithstanding anything herein to the contrary, each calendar month shall be an "INTEREST PERIOD." (ii) TRANSFER OF INTEREST AMOUNT. The Transfer of the Interest Amount will be made on the third New York Business Day following the end of each Interest Period and on termination pursuant to Section 6 of this Agreement. (iii) ALTERNATIVE TO INTEREST AMOUNT. The provisions of Paragraph 6(d)(ii) will apply. (i) ADDITIONAL REPRESENTATIONS. none. (j) OTHER ELIGIBLE SUPPORT AND OTHER POSTED SUPPORT. (i) "VALUE" with respect to Other Eligible Support and Other Posted Support means: the Valuation Percentage multiplied by the stated amount (undrawn portion) of any Letter of Credit maintained by the Pledgor (or its Credit Support Provider) for the benefit of the Secured Party. (ii) "TRANSFER" with respect to Other Eligible Support and Other Posted Support means: - 5 - (1) For purposes of Paragraph 3(a), delivery of the Letter of Credit by the Pledgor or issuer of the Letter of Credit to the Secured Party at the address of the Secured Party specified in the "Notices" Section of this Agreement, or delivery of an executed amendment to such Letter of Credit in form and substance satisfactory to the Secured Party (extending the term or increasing the amount available to the Secured Party thereunder) by the Pledgor or the issuer of the Letter of Credit to the Secured Party at the address of the Secured Party specified in the "Notices" Section of this Agreement; and (2) For purposes of Paragraph 3(b), by the return of an outstanding Letter of Credit by the Secured Party to the Pledgor, at the address of the Pledgor specified in the "Notices" Section of this Agreement, or delivery of an executed amendment to the Letter of Credit in form and substance satisfactory to the Secured Party (reducing the amount available to the Secured Party thereunder) by the Pledgor or the issuer of the Letter of Credit to the Secured Party at the Secured Party's address specified in the "Notices" Section of this Agreement. If a transfer is to be effected by a reduction in the amount of an outstanding Letter of Credit previously issued for the benefit of the Secured Party, the Secured Party shall not unreasonably withhold its consent to a commensurate reduction in the amount of such Letter of Credit and shall take such action as is reasonably necessary to effectuate such reduction. (iii) LETTER OF CREDIT PROVISIONS. Other Eligible Support and Other Posted Support provided in the form of a Letter of Credit shall be subject to the following provisions: (1) Unless otherwise agreed in writing by the parties, each Letter of Credit shall be provided in accordance with the provisions of this Agreement, and each Letter of Credit shall be maintained for the benefit of the Secured Party. The Pledgor shall (i) renew or cause renewal of each outstanding Letter of Credit on a timely basis as provided in the relevant Letter of Credit, (ii) if the bank that issued an outstanding Letter of Credit has indicated its intent not to renew such Letter of Credit, provide a substitute Letter of Credit at least ten (10) Business Days prior to the expiration of the outstanding Letter of Credit, and (iii) if a bank issuing a Letter of Credit shall fail to honor the Secured Party's properly documented request to draw on an outstanding Letter of Credit, provide for the benefit of the Secured Party, (x) a substitute Letter of Credit, that is issued by a bank acceptable to the Secured Party, other than the bank failing to honor the outstanding Letter of Credit, or (y) Eligible Collateral, in each case within one (1) Business Day after the Pledgor receives notice of such failure; provided that, at the time the Pledgor is required to perform in accordance with (i), (ii), or (iii) above, the Delivery Amount applicable to the Pledgor equals or exceeds the Pledgor's Minimum Transfer Amount. (2) If Letter of Credit is to expire within ten (10) Business Days, the Secured Party - 6 - shall have the right to draw on such Letter of Credit and utilize the proceeds of such draw as Eligible Collateral to satisfy the Credit Support Obligations owing to it under this Annex. (3) As one method of providing Eligible Credit Support, the Pledgor may increase the amount of an outstanding Letter of Credit or establish one or more additional Letters of Credit. (4) If the Pledgor shall fail to renew, substitute, or sufficiently increase the amount of an outstanding Letter of Credit (as the case may be), or establish one or more additional Letters of Credit, or otherwise provide sufficient Eligible Credit Support and if the Delivery Amount applicable to the Pledgor equals or exceeds the Pledgor's Minimum Transfer Amount as a result of such failure, then the Secured Party may draw on the entire, undrawn portion of any outstanding Letter of Credit upon submission to the bank issuing such Letter of Credit of one or more certificates specifying the amounts due and owing to the Secured Party in accordance with the specific requirements of the Letter of Credit. The Pledgor shall remain liable for any amounts due and owing to the Secured Party and remaining unpaid after the application of the amounts so drawn by the Secured Party. (5) If a party's Credit Support Provider shall furnish a Letter of Credit hereunder, the amount otherwise required under such Letter of Credit may at the option of such Credit Support Provider be reduced by the amount of any Letter of Credit established by such party (but only for such time as such party's Letter of Credit shall be in effect). If a party shall be required to furnish a Letter of Credit hereunder, the amount otherwise required under such Letter of Credit may at the option of such party be reduced by the amount of any Letter of Credit established by such party's Credit Support Provider (but only for such time as such Credit Support Provider's Letter of Credit shall be in effect). (6) Upon the occurrence of a Letter of Credit Default, the Pledgor agrees to deliver a substitute Letter of Credit or other Eligible Credit Support to the Secured Party in an amount at least equal to that of the Letter of Credit to be replaced on or before the first (1st) Business Day after written demand by the Secured Party (or the fourth (4th) Business Day if only clause (i) under the definition of Letter of Credit Default applies) and failure to do so shall constitute an Event of Default within the terms of clause 5(a)(iii) of the Master Agreement (it being understood that if the relevant Letter of Credit has been drawn and the proceeds are held by the Secured Party as Eligible Credit Support, then the Pledgor shall not be obligated to replace such Letter of Credit). (7) Notwithstanding Paragraph 10, in all cases, the costs and expenses (including but not limited to the reasonable costs, expenses, and external attorneys' fees of the Secured Party) of establishing, renewing, substituting, canceling, increasing, and - 7 - reducing the amount of (as the case may be) one or more Letters of Credit shall be borne by the Pledgor. (iv) CERTAIN RIGHTS AND REMEDIES. (1) SECURED PARTY'S RIGHTS AND REMEDIES. For purposes of Paragraph 8(a)(ii), the Secured Party may draw on any outstanding Letter of Credit (Other Posted Support) in an amount equal to any amounts payable by the Pledgor with respect to any Obligations. (2) PLEDGOR'S RIGHTS AND REMEDIES. For purposes of Paragraph 8(b)(ii), (i) the Secured Party will be obligated immediately to Transfer any Letter of Credit (Other Posted Support) to the Pledgor and (ii) the Pledgor may do any one or more the following: (x) to the extent that the Letter of Credit (Other Posted Support) is not Transferred to the Pledgor as required pursuant to (i) above, Set-off any amounts payable by the Pledgor with respect to any Obligations against any such Letter of Credit (Other Posted Support) held by the Secured Party and to the extent its rights to Set-off are not exercised, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral and the Value of any Letter of Credit (Other Posted Support) held by the Secured Party, until any such Posted Collateral and such Letter of Credit (Other Posted Support) is transferred to the Pledgor; and (y) exercise rights and remedies available to the Pledgor under the terms of the Letter of Credit. (v) ADDITIONAL DEFINITIONS. As used in this Agreement: "LETTER OF CREDIT" shall mean an irrevocable, transferable, standby Letter of Credit substantially in the form attached in the Schedule, issued by a major U.S. commercial bank or a foreign bank with a U.S. branch office, with the respective rating then assigned to its unsecured and senior, long-term debt or deposit obligations (not supported by third party credit enhancement) by S&P or Moody's (the "Letter of Credit Issuer Rating") of at least "A-" by S&P or "A3" by Moody's. "LETTER OF CREDIT DEFAULT" shall mean with respect to an outstanding Letter of Credit, the occurrence of any of the following events: (i) the Letter of Credit Issuer Rating ceases to be at least "A-" by S&P or "A3" by Moody's; (ii) the issuer of the Letter of Credit shall fail to comply with or perform its obligations under such Letter of Credit if such failure shall be continuing after the lapse of any applicable grace period; (iii) the issuer of such Letter of Credit shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit; (iv) such Letter of Credit shall expire or terminate prior to being drawn by the beneficiary thereof, or shall fail or cease to be in full force and effect at any time during the term of any Transaction under this Agreement, in each case, without having been replaced by another Letter of Credit; or (v) any event analogous to an event specified in Section 5(a)(vii) of this Agreement shall occur with respect to the issuer of such Letter of Credit; provided, however, that no Letter of Credit - 8 - Default shall occur in any event with respect to a Letter of Credit after the time such Letter of Credit is required to be canceled or returned to the Pledgor in accordance with the terms of this Agreement. (k) DEMANDS AND NOTICES. All demands, specifications and notices under this Annex will be made pursuant to the Notices Section of this Agreement, unless otherwise specified here: J. Aron: as specified in Part 4 of the Schedule to the Agreement. Belden & Blake: as specified in Part 4 of the Schedule to the Agreement. (l) ADDRESSES FOR TRANSFERS. J. Aron: as notified in writing from time to time. Belden & Blake : as notified in writing from time to time. (m) OTHER PROVISIONS. (i) In Paragraph 4(d)(ii), the phrase "(or less than, but as close as practicable to)" shall be inserted in the second-to-last line after the words "equal to." (iii) Paragraph 8(a) is amended as follows: In the second line, the words "Early Termination Period has commenced or an" are inserted before the term "Early Termination Date," and on the fourth-from-last line, the words "or commodities" are inserted after the phrase "in the form of securities." (iv) Paragraph 1(b) is deleted and replaced by the following: "(b) Secured Party and Pledgor. All references in this Annex to the `Secured Party' will be to J. Aron and all corresponding references to the `Pledgor' will be to Belden & Blake; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as beneficiary thereof to provisions of law generally relating to security interest and secured parties." (v) Modifications to Paragraph 12. The following definitions of "Pledgor" and "Secured Party" are substituted for the definitions of those terms contained in Paragraph 12 of this Annex: - 9 - `Pledgor' means Belden & Blake, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a). `Secured Party' means J. Aron, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Collateral." (vi) Belden & Blake , J. Aron and Goldman, Sachs & Co. ("GS&Co.") hereby agree that Posted Credit Support may be held by GS&Co. as agent and securities intermediary on behalf of J. Aron. Belden & Blake acknowledges and GS&Co. agrees that GS&Co. will take only such actions with respect to such Posted Credit Support as J. Aron shall direct (including, but not limited to, instructions from J. Aron directing transfer of Posted Credit Support in circumstances prescribed by the provisions of this Annex), and in no event shall any consent of Belden & Blake be required for the taking of any such action by GS&Co. (vii) The provisions of this Annex shall not be effective until consummation of the Merger. - 10 - CAPITAL C OHIO INC. J. ARON & COMPANY By: /s/ GREGORY A. BEARD By: /s/ L. PETER O'HAGAN ----------------------- ----------------------------- Name: GREGORY A. BEARD Name: L. PETER O'HAGAN Title: Title: GOLDMAN SACHS & CO., SOLELY IN ITS CAPACITY AS AN AGENT AND SECURITIES INTERMEDIARY OF J. ARON & COMPANY WITH RESPECT TO PARAGRAPH 13(m)(vi) HEREOF By: /s/ L. PETER O'HAGAN -------------------------------- Name: L. PETER O'HAGAN Title: - 11 - Schedule "Standard" letter of credit format for securing collateral obligations WE HEREBY ESTABLISH OUR IRREVOCABLE STAND-BY LETTER OF CREDIT NO._____________ IN FAVOR OF: J. ARON & COMPANY 85 BROAD STREET NEW YORK, NY 10004 Attn : Sherry Lankford Telex : 6720148 GSPNY BY ORDER AND FOR THE ACCOUNT OF: (insert full style and address) FOR AN AMOUNT OF: US DOLLARS _________________________ (UNITED STATES DOLLARS __________________________________) AVAILABLE FOR PAYMENT AT SIGHT UPON PRESENTATION AT OUR COUNTERS IN (insert city and country where documents are to be presented) OF THE FOLLOWING DOCUMENT: STATEMENT SIGNED BY A PURPORTEDLY AUTHORIZED REPRESENTATIVE OF J. ARON AND COMPANY CERTIFYING THAT EITHER (I) (insert your company name) HAS NOT PERFORMED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT(S) BETWEEN J. ARON AND COMPANY AND (insert your company name) OR (II) THIS LETTER OF CREDIT IS TO EXPIRE WITHIN TEN (10) BUSINESS DAYS AND THAT THE AMOUNT BEING DRAWN OF USD_____________ DOES NOT EXCEED THAT AMOUNT WHICH J. ARON AND COMPANY IS ENTITLED TO DRAW. SPECIAL CONDITIONS: 1. PARTIAL AND MULTIPLE DRAWINGS ARE PERMITTED. 2. ALL CHARGES RELATED TO THIS LETTER OF CREDIT ARE FOR OPENER'S ACCOUNT. 3. DOCUMENTS MUST BE PRESENTED NOT LATER THAN (insert expiry date) OR IN THE EVENT OF FORCE MAJEURE INTERRUPTING OUR BUSINESS, WITHIN THIRTY (30) DAYS AFTER RESUMPTION OF OUR BUSINESS, WHICHEVER IS LATER. UPON RECEIPT OF DOCUMENTS ISSUED IN COMPLIANCE WITH THE TERMS OF THIS CREDIT, WE HEREBY IRREVOCABLY UNDERTAKE TO COVER YOU AS PER YOUR INSTRUCTIONS WITH VALUE ONE BANK WORKING DAY. - 12 - THIS STANDBY CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS 1993 REVISION), I.C.C. PUBLICATION 500. - 13 - EX-10.2 6 l08738aexv10w2.txt EXHIBIT 10.2 EXHIBIT 10.2 CREDIT AND GUARANTY AGREEMENT DATED AS OF JULY 7, 2004, AND AMENDED AS OF JULY 22, 2004 AMONG BELDEN & BLAKE CORPORATION, CERTAIN SUBSIDIARIES OF BELDEN & BLAKE CORPORATION, AS GUARANTORS, VARIOUS LENDERS, GOLDMAN SACHS CREDIT PARTNERS L.P., AS SOLE LEAD ARRANGER, SOLE BOOKRUNNER, SYNDICATION AGENT AND ADMINISTRATIVE AGENT, GENERAL ELECTRIC CAPITAL CORPORATION, AS CO-DOCUMENTATION AGENT AND NATIONAL CITY BANK, AS CO-DOCUMENTATION AGENT -------------------------------------------------------- $170,000,000 SENIOR SECURED CREDIT FACILITIES -------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- SECTION 1. DEFINITIONS AND INTERPRETATION............................................................. 2 1.1. DEFINITIONS...................................................................................... 2 1.2. ACCOUNTING TERMS................................................................................. 40 1.3. INTERPRETATION, ETC.............................................................................. 41 SECTION 2. LOANS AND LETTERS OF CREDIT................................................................ 41 2.1. TERM LOANS....................................................................................... 41 2.2. REVOLVING LOANS.................................................................................. 42 2.3. RESERVED......................................................................................... 43 2.4. ISSUANCE OF LETTERS OF CREDIT AND HEDGE LETTERS OF CREDIT AND PURCHASE OF PARTICIPATIONS THEREIN. 43 2.5. PRO RATA SHARES; AVAILABILITY OF FUNDS........................................................... 50 2.6. USE OF PROCEEDS.................................................................................. 51 2.7. EVIDENCE OF DEBT; REGISTER; LENDERS' BOOKS AND RECORDS; NOTES.................................... 51 2.8. INTEREST ON LOANS................................................................................ 52 2.9. CONVERSION/CONTINUATION.......................................................................... 55 2.10. DEFAULT INTEREST................................................................................ 55 2.11. FEES ....................................................................................... 56 2.12. SCHEDULED PAYMENTS/COMMITMENT REDUCTIONS........................................................ 57 2.13. VOLUNTARY PREPAYMENTS/COMMITMENT REDUCTIONS..................................................... 58 2.14. MANDATORY PREPAYMENTS/COMMITMENT REDUCTIONS..................................................... 59 2.15. APPLICATION OF PREPAYMENTS/REDUCTIONS........................................................... 61 2.16. GENERAL PROVISIONS REGARDING PAYMENTS........................................................... 62 2.17. RATABLE SHARING................................................................................. 64 2.18. MAKING OR MAINTAINING EURODOLLAR RATE LOANS..................................................... 64 2.19. INCREASED COSTS; CAPITAL ADEQUACY............................................................... 66 2.20. TAXES; WITHHOLDING, ETC......................................................................... 68 2.21. OBLIGATION TO MITIGATE.......................................................................... 71 2.22. DEFAULTING LENDERS.............................................................................. 72 2.23. REMOVAL OR REPLACEMENT OF A LENDER.............................................................. 73 SECTION 3. CONDITIONS PRECEDENT....................................................................... 74 3.1. CLOSING DATE..................................................................................... 74 3.2. CONDITIONS TO EACH CREDIT EXTENSION.............................................................. 80 SECTION 4. REPRESENTATIONS AND WARRANTIES............................................................. 82 4.1. ORGANIZATION; REQUISITE POWER AND AUTHORITY; QUALIFICATION....................................... 82 4.2. CAPITAL STOCK AND OWNERSHIP...................................................................... 82 4.3. DUE AUTHORIZATION................................................................................ 83 4.4. NO CONFLICT...................................................................................... 83 4.5. GOVERNMENTAL CONSENTS............................................................................ 83
ii 4.6. BINDING OBLIGATION............................................................................... 83 4.7. HISTORICAL FINANCIAL STATEMENTS.................................................................. 84 4.8. PROJECTIONS...................................................................................... 84 4.9. NO MATERIAL ADVERSE CHANGE....................................................................... 84 4.10. NO RESTRICTED JUNIOR PAYMENTS................................................................... 84 4.11. NO RESERVE WRITE-DOWNS.......................................................................... 84 4.12. ADVERSE PROCEEDINGS, ETC........................................................................ 85 4.13. PAYMENT OF TAXES................................................................................ 85 4.14. PROPERTIES...................................................................................... 85 4.15. ENVIRONMENTAL MATTERS........................................................................... 86 4.16. NO DEFAULTS..................................................................................... 87 4.17. MATERIAL CONTRACTS.............................................................................. 87 4.18. GOVERNMENTAL REGULATION......................................................................... 87 4.19. MARGIN STOCK.................................................................................... 87 4.20. EMPLOYEE MATTERS................................................................................ 87 4.21. EMPLOYEE BENEFIT PLANS.......................................................................... 88 4.22. CERTAIN FEES.................................................................................... 89 4.23. SOLVENCY........................................................................................ 89 4.24. RELATED AGREEMENTS.............................................................................. 89 4.25. COMPLIANCE WITH STATUTES, ETC................................................................... 90 4.26. FUTURE COMMITMENTS.............................................................................. 90 4.27. DISCLOSURE...................................................................................... 90 SECTION 5. AFFIRMATIVE COVENANTS...................................................................... 91 5.1. FINANCIAL STATEMENTS AND OTHER REPORTS........................................................... 91 5.2. EXISTENCE........................................................................................ 96 5.3. PAYMENT OF TAXES AND CLAIMS...................................................................... 96 5.4. MAINTENANCE OF PROPERTIES........................................................................ 96 5.5. INSURANCE........................................................................................ 96 5.6. BOOKS AND RECORDS; INSPECTIONS................................................................... 97 5.7. LENDERS MEETINGS................................................................................. 97 5.8. COMPLIANCE WITH LAWS............................................................................. 97 5.9. ENVIRONMENTAL.................................................................................... 98 5.10. SUBSIDIARIES.................................................................................... 99 5.11. ADDITIONAL MATERIAL REAL ESTATE ASSETS.......................................................... 100 5.12. INTEREST RATE PROTECTION........................................................................ 101 5.13. SWAP AGREEMENT.................................................................................. 101 5.14. FURTHER ASSURANCES.............................................................................. 101 5.15. NON-CONSOLIDATION............................................................................... 101 5.16. POST-CLOSING REFINANCING........................................................................ 101
iii SECTION 6. NEGATIVE COVENANTS......................................................................... 102 6.1. INDEBTEDNESS..................................................................................... 102 6.2. LIENS ....................................................................................... 104 6.3. EQUITABLE LIEN................................................................................... 107 6.4. NO FURTHER NEGATIVE PLEDGES...................................................................... 107 6.5. RESTRICTED JUNIOR PAYMENTS....................................................................... 107 6.6. RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS......................................................... 108 6.7. INVESTMENTS...................................................................................... 108 6.8. FINANCIAL COVENANTS.............................................................................. 109 6.9. FUNDAMENTAL CHANGES; DISPOSITION OF ASSETS; ACQUISITIONS......................................... 114 6.10. DISPOSAL OF SUBSIDIARY INTERESTS................................................................ 116 6.11. SALES AND LEASE-BACKS........................................................................... 116 6.12. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES................................................... 116 6.13. CONDUCT OF BUSINESS............................................................................. 116 6.14. FORWARD SALES................................................................................... 117 6.15. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS............................................. 117 6.16. AMENDMENTS OR WAIVERS OF WITH RESPECT TO SENIOR SECURED INDEBTEDNESS............................ 117 6.17. FISCAL YEAR..................................................................................... 117 SECTION 7. GUARANTY................................................................................... 117 7.1. GUARANTY OF THE OBLIGATIONS...................................................................... 117 7.2. CONTRIBUTION BY GUARANTORS....................................................................... 118 7.3. PAYMENT BY GUARANTORS............................................................................ 119 7.4. LIABILITY OF GUARANTORS ABSOLUTE................................................................. 119 7.5. WAIVERS BY GUARANTORS............................................................................ 121 7.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC............................................. 122 7.7. SUBORDINATION OF OTHER OBLIGATIONS............................................................... 123 7.8. CONTINUING GUARANTY.............................................................................. 123 7.9. AUTHORITY OF GUARANTORS OR COMPANY............................................................... 123 7.10. FINANCIAL CONDITION OF COMPANY.................................................................. 123 7.11. BANKRUPTCY, ETC................................................................................. 124 7.12. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR.................................................... 125 SECTION 8. EVENTS OF DEFAULT.......................................................................... 125 8.1. EVENTS OF DEFAULT................................................................................ 125 SECTION 9. AGENTS..................................................................................... 129 9.1. APPOINTMENT OF AGENTS............................................................................ 129 9.2. POWERS AND DUTIES................................................................................ 129 9.3. GENERAL IMMUNITY................................................................................. 129 9.4. AGENTS ENTITLED TO ACT AS LENDER................................................................. 131 9.5. LENDERS' REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENT.......................................... 132
iv 9.6. RIGHT TO INDEMNITY............................................................................... 132 9.7. SUCCESSOR ADMINISTRATIVE AGENT................................................................... 133 9.8. COLLATERAL DOCUMENTS AND GUARANTY................................................................ 133 SECTION 10. MISCELLANEOUS............................................................................. 134 10.1. NOTICES......................................................................................... 134 10.2. EXPENSES........................................................................................ 135 10.3. INDEMNITY....................................................................................... 135 10.4. SET-OFF......................................................................................... 136 10.5. AMENDMENTS AND WAIVERS.......................................................................... 137 10.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS.......................................................... 139 10.7. INDEPENDENCE OF COVENANTS....................................................................... 143 10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......................................... 143 10.9. NO WAIVER; REMEDIES CUMULATIVE.................................................................. 144 10.10. MARSHALLING; PAYMENTS SET ASIDE................................................................ 144 10.11. SEVERABILITY................................................................................... 144 10.12. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS..................................... 144 10.13. HEADINGS....................................................................................... 145 10.14. APPLICABLE LAW................................................................................. 145 10.15. CONSENT TO JURISDICTION........................................................................ 145 10.16. WAIVER OF JURY TRIAL........................................................................... 146 10.17. CONFIDENTIALITY................................................................................ 146 10.18. USURY SAVINGS CLAUSE........................................................................... 147 10.19. COUNTERPARTS................................................................................... 147 10.20. EFFECTIVENESS.................................................................................. 148 10.21. USA PATRIOT ACT................................................................................ 148
v APPENDICES: A-1 Term Loan Commitments A-2 Revolving Commitments A-3 Hedge L/C Commitments B Notice Addresses SCHEDULES: 3.1(i) Closing Date Mortgaged Properties 4.1 Jurisdictions of Organization and Qualification 4.2 Capital Stock and Ownership 4.13 Taxes 4.14 Real Estate Assets; Hydrocarbon Interests 4.17 Material Contracts 6.1 Certain Indebtedness 6.2 Certain Liens 6.7 Certain Investments 6.12 Certain Affiliate Transactions EXHIBITS: A-1 Funding Notice A-2 Conversion/Continuation Notice A-3 Issuance Notice B-1 Term Loan Note B-2 Revolving Loan Note B-3 Hedge L/C Loan Note C Compliance Certificate D Opinions of Counsel E Assignment Agreement F Certificate Re Non-bank Status G-1 Closing Date Certificate G-2 Solvency Certificate H Counterpart Agreement I Pledge and Security Agreement J Sponsor Pledge Agreement K Mortgage L Landlord Waiver and Consent Agreement M Collateral Trust Agreement vi CREDIT AND GUARANTY AGREEMENT This CREDIT AND GUARANTY AGREEMENT, dated as of July 7, 2004 and amended as of July 21, 2004, is entered into by and among BELDEN & BLAKE CORPORATION, an Ohio corporation ("COMPANY"), CERTAIN SUBSIDIARIES OF COMPANY, as Guarantors, the Lenders party hereto from time to time, GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as Sole Lead Arranger, Sole Book Runner, Syndication Agent (in such capacities, "SYNDICATION AGENT"), and Administrative Agent (together with its permitted successors in such capacity, "ADMINISTRATIVE AGENT"), GENERAL ELECTRIC CAPITAL CORPORATION ("GECC"), as Co-Documentation Agent, and NATIONAL CITY BANK ("NATIONAL CITY"), as Co-Documentation Agent (together with GECC, the "DOCUMENTATION AGENTS"). RECITALS: WHEREAS, capitalized terms used in these Recitals shall have the respective meanings set forth for such terms in Section 1.1 hereof; WHEREAS, concurrently with transactions contemplated hereunder, Capital C Ohio, Inc., an Ohio corporation and wholly-owned Subsidiary of Capital C Energy Operations, LP (the "SPONSOR") shall, pursuant to the Merger Agreement, merge with and into Company and Company shall be the surviving corporation (the "ACQUISITION"); WHEREAS, Lenders have agreed to extend certain credit facilities to Company, in an aggregate amount not to exceed $170,000,000, consisting of (i) $100,000,000 aggregate principal amount of Term Loans, (ii) up to $30,000,000 aggregate principal amount of Revolving Commitments and (iii) up to $40,000,000 aggregate principal amount of Hedge L/C Commitments. The proceeds of the Term Loans will be used to finance a portion of the Acquisition, including the refinancing of Existing Indebtedness and the payment of Transaction Costs. Amounts available under the Revolving Commitments shall be used for working capital requirements and other general corporate purposes of Company; provided that (i) up to $15,000,000 of the Revolving Commitments shall be available for the issuance of Letters of Credit to provide credit support to Company's obligations under the Swap Agreement in excess of the Hedge L/C Commitments from the Closing Date through the Revolving Commitment Termination Date and (ii) an additional $5,000,000 of the Revolving Commitments shall be available for the issuance of Letters of Credit for general corporate purposes through the Revolving Commitment Termination Date. Amounts available under the Hedge L/C Commitments shall be used solely to provide credit support to Company's obligations under the Swap Agreement; WHEREAS, Company has agreed to secure all of its Obligations by granting to Collateral Trustee, for the benefit of Secured Parties, a First Priority Lien on its assets, including a pledge of all of the Capital Stock of each of its Domestic Subsidiaries and 65% of all the Capital Stock of each of its Foreign Subsidiaries and Sponsor has agreed to pledge to Collateral Trustee all of the Capital Stock of Company; and WHEREAS, Guarantors have agreed to guarantee the obligations of Company hereunder and to secure their respective Obligations by granting to Collateral Trustee, for the benefit of Secured Parties, a First Priority Lien on their respective assets, including a pledge of all of the Capital Stock of each of their respective Domestic Subsidiaries and 65% of all the Capital Stock of each of their respective Foreign Subsidiaries. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto agree as follows: SECTION 1. DEFINITIONS AND INTERPRETATION 1.1. DEFINITIONS. The following terms used herein, including in the preamble, recitals, exhibits and schedules hereto, shall have the following meanings: "ACCOUNTING CHANGE" as defined in Section 1.2(b). "ACQUISITION" as defined in the preamble hereto. "ADJUSTED EURODOLLAR RATE" means, for any Interest Rate Determination Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per annum obtained by dividing (and rounding upward to the next whole multiple of 1/16 of 1%) (i) (a) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate which appears on the page of the Telerate Screen which displays an average British Bankers Association Interest Settlement Rate (such page currently being page number 3740 or 3750, as applicable) for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, or (b) in the event the rate referenced in the preceding clause (a) does not appear on such page or service or if such page or service shall cease to be available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service which displays an average British Bankers Association Interest Settlement Rate for deposits (for delivery on the first day of such period) with a term equivalent to such period in Dollars, determined as of approximately 11:00 a.m. (London, England time) on such Interest 2 Rate Determination Date, or (c) in the event the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum (rounded to the nearest 1/100 of 1%) equal to the offered quotation rate to first class banks in the London interbank market by GSCP for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the applicable Loan of Administrative Agent, in its capacity as a Lender, for which the Adjusted Eurodollar Rate is then being determined with maturities comparable to such period as of approximately 11:00 a.m. (London, England time) on such Interest Rate Determination Date, by (ii) an amount equal to (a) one minus (b) the Applicable Reserve Requirement. "ADMINISTRATIVE AGENT" as defined in the preamble hereto. "ADVERSE PROCEEDING" means any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any Governmental Authority, domestic or foreign (including any Environmental Claims), whether pending or, to the knowledge of Company or any of its Subsidiaries, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries. "AFFECTED LENDER" as defined in Section 2.18(b). "AFFECTED LOANS" as defined in Section 2.18(b). "AFFILIATE" means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the 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 the possession, directly or indirectly, of the power (i) to vote 5% or more of the Securities having ordinary voting power for the election of directors of such Person or (ii) to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise. "AGENT" means each of Syndication Agent, Administrative Agent and Documentation Agents. "AGGREGATE AMOUNTS DUE" as defined in Section 2.17. "AGGREGATE PAYMENTS" as defined in Section 7.2. 3 "AGREEMENT" means this Credit and Guaranty Agreement, dated as of July 7, 2004, as it may be amended, supplemented or otherwise modified from time to time. "APPLICABLE MARGIN" means (i) with respect to Loans that are Eurodollar Rate Loans, (a) from the Closing Date until the six month anniversary of the Closing Date, a percentage, per annum, determined by reference for the respective Loan to the following table as if the Senior Leverage Ratio then in effect were 1.50:1.00; and (b) thereafter, a percentage, per annum, determined by reference for the respective Loan to the Senior Leverage Ratio in effect from time to time as set forth below:
APPLICABLE MARGIN SENIOR LEVERAGE FOR REVOLVING LOANS AND HEDGE APPLICABLE MARGIN RATIO L/C LOANS FOR TERM LOANS - ----------------- ----------------------------- ----------------- > or = 1.50:1.00 2.75% 2.75% < 1.50:1.00 2.50% 2.50% > or = 0.75:1.00 < 0.75:1.00 2.25% 2.50%
and (ii) with respect to Loans that are Base Rate Loans, an amount equal to (a) the Applicable Margin for Eurodollar Rate Loans as set forth in clause (i)(a) or (i)(b) above, as applicable, minus (b) 1.00% per annum. No change in the Applicable Margin shall be effective until three Business Days after the date on which Administrative Agent shall have received the applicable financial statements and a Compliance Certificate pursuant to Section 5.1(d) calculating the Senior Leverage Ratio. At any time Company has not submitted to Administrative Agent the applicable information as and when required under Section 5.1(d), the Applicable Margin shall be determined as if the Senior Leverage Ratio were in excess of 1.50:1.00. Within one Business Day of receipt of the applicable information under Section 5.1(d), Administrative Agent shall give each Lender telefacsimile or telephonic notice (confirmed in writing) of the Applicable Margin in effect from such date. "APPLICABLE RESERVE REQUIREMENT" means, at any time, for any Eurodollar Rate Loan, the maximum rate, expressed as a decimal, at which reserves (including, without limitation, any basic marginal, special, supplemental, emergency or other reserves) are required to be maintained with respect thereto against "Eurocurrency liabilities" (as such term is defined in Regulation D) under regulations issued from time to time by the Board of Governors of the Federal Reserve System or other applicable banking regulator. Without limiting the effect of the foregoing, the Applicable Reserve Requirement shall reflect any other reserves required to be 4 maintained by such member banks with respect to (i) any category of liabilities which includes deposits by reference to which the applicable Adjusted Eurodollar Rate or any other interest rate of a Loan is to be determined, or (ii) any category of extensions of credit or other assets which include Eurodollar Rate Loans. A Eurodollar Rate Loan shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credit for proration, exceptions or offsets that may be available from time to time to the applicable Lender. The rate of interest on Eurodollar Rate Loans shall be adjusted automatically on and as of the effective date of any change in the Applicable Reserve Requirement. "APPLICATIONS" as defined in Section 2.4(l). "ASSET SALE" means a sale, lease or sub-lease (as lessor or sublessor), sale and leaseback, assignment, conveyance, transfer or other disposition to, or any exchange of property with, any Person (other than Company or any Guarantor Subsidiary), in one transaction or a series of transactions, of all or any part of Company's or any of its Subsidiaries' businesses, assets or properties of any kind, including Production Payments, whether real, personal, or mixed and whether tangible or intangible, whether now owned or hereafter acquired, including, without limitation, the Capital Stock of any of Company's Subsidiaries, other than (i) Hydrocarbons (or other assets) sold or leased in the ordinary course of business (excluding any such sales by operations or divisions discontinued or to be discontinued), and (ii) sales of other assets for aggregate consideration of less than $1,000,000 with respect to any transaction or series of related transactions and less than $5,000,000 in the aggregate during any Fiscal Year. "ASSIGNMENT AGREEMENT" means an Assignment and Assumption Agreement substantially in the form of Exhibit E, with such amendments or modifications as may be approved by Administrative Agent. "ASSIGNMENT EFFECTIVE DATE" as defined in Section 10.6(b). "AUTHORIZED OFFICER" means, as applied to any Person, any individual holding the position of chairman of the board (if an officer), chief executive officer, president or one of its vice presidents (or the equivalent thereof), and such Person's chief financial officer or treasurer. "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute. "BASE RATE" means, for any day, a rate per annum equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal Funds Effective Rate in effect on such day plus -1/2 of 1%. Any change in the Base Rate due to a change in the Prime Rate or the Federal 5 Funds Effective Rate shall be effective on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "BASE RATE LOAN" means a Loan bearing interest at a rate determined by reference to the Base Rate. "BASIS DIFFERENTIAL" means, in the case of any Oil and Gas Property, the difference between the NYMEX futures contract prices and the sales prices at the delivery point where the gas or oil, as the case may be, produced by such Oil and Gas Property is sold. "BENEFICIARY" means each Agent, Issuing Bank, Lender and Lender Counterparty. "BUSINESS DAY" means (i) any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in such state are authorized or required by law or other governmental action to close and (ii) with respect to all notices, determinations, fundings and payments in connection with the Adjusted Eurodollar Rate or any Eurodollar Rate Loans, the term "BUSINESS DAY" shall mean any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market. "CAPITAL LEASE" means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. "CAPITAL STOCK" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing. "CASH" means money, currency or a credit balance in any Deposit Account. "CASH EQUIVALENTS" means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing no more than one year after such date; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing no more than one year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iii) 6 commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing no more than one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (v) shares of any money market mutual fund that (a) has substantially all of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's. "CERTIFICATE RE NON-BANK STATUS" means a certificate substantially in the form of Exhibit F. "CHANGE OF CONTROL" means, at any time, (i) Sponsor shall cease to beneficially own and control at least 60% on a fully diluted basis of the economic and voting interests in the Capital Stock of Company; (ii) any Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) other than Sponsor (a) shall have acquired beneficial ownership of 25% or more on a fully diluted basis of the voting and/or economic interest in the Capital Stock of Company or (b) shall have obtained the power (whether or not exercised) to elect a majority of the members of the board of directors (or similar governing body) of Company; (iii) the majority of the seats (other than vacant seats) on the board of directors (or similar governing body) of Company cease to be occupied by Persons who either (a) were members of the board of directors of Company on the Closing Date or (b) were nominated for election by the board of directors of Company, a majority of whom were directors on the Closing Date or whose election or nomination for election was previously approved by a majority of such directors; or (iv) any "change of control" or similar event under the Senior Secured Notes shall occur. "CLASS" means (i) with respect to Lenders, each of the following classes of Lenders: (a) Lenders having Term Loan Exposure, (b) Lenders having Revolving Exposure and (c) Lenders having Hedge L/C Exposure, and (ii) with respect to Loans, each of the following classes of Loans: (a) Term Loans, (b) Revolving Loans and (c) Hedge L/C Loans. "CLOSING DATE" means the date on which the conditions precedent set forth in Section 3.1 shall have been satisfied or waived. "CLOSING DATE CERTIFICATE" means a Closing Date Certificate substantially in the form of Exhibit G-1. "CLOSING DATE MORTGAGED PROPERTY" as defined in Section 3.1(i). 7 "COLLATERAL" means, collectively, all of the real, personal and mixed property (including Capital Stock) in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations; provided, the term "Collateral" shall not include any TBR Delayed Transfer Assets. "COLLATERAL DOCUMENTS" means the Pledge and Security Agreement, the Sponsor Pledge Agreement, the Mortgages, the Landlord Personal Property Collateral Access Agreements, if any, the Collateral Trust Agreement and all other instruments, documents and agreements delivered by any Credit Party pursuant to this Agreement or any of the other Credit Documents in order to grant to Collateral Trustee, for the benefit of the Secured Parties, a Lien on any real, personal or mixed property of that Credit Party as security for the Obligations. "COLLATERAL QUESTIONNAIRE" means a certificate in form satisfactory to Administrative Agent that provides information with respect to the personal or mixed property of each Credit Party. "COLLATERAL TRUST AGREEMENT" means a Collateral Trust Agreement substantially in the form of Exhibit M, as it may be amended, supplemented or otherwise modified from time to time. "COLLATERAL TRUSTEE" means Wells Fargo Bank, N.A. "COMBINED CAPITAL EXPENDITURES" means, for any period, the sum of the aggregate of Consolidated Capital Expenditures and Consolidated Other Capital Expenditures for such period. "COMMITMENT" means any Revolving Commitment, Term Loan Commitment, or Hedge L/C Commitment. "COMPANY" as defined in the preamble hereto. "COMPLIANCE CERTIFICATE" means a Compliance Certificate substantially in the form of Exhibit C. "CONSOLIDATED ADJUSTED EBITDA" means, for any period, an amount determined for Company and its Subsidiaries on a consolidated basis equal to (i) Consolidated Net Income plus the sum, without duplication and to the extent deducted in determining Consolidated Net Income, of the amounts for such period of (a) Consolidated Interest Expense, (b) provisions for taxes based on income, (c) total depreciation, depletion and impairment expense, (d) total amortization expense, (e) other non-Cash items reducing Consolidated Net Income (excluding any such non-Cash item to the extent that it represents an accrual or reserve 8 for potential Cash items in any future period or amortization of a prepaid Cash item that was paid in a prior period), (f) the aggregate amount of seismic and delay rentals expenses relating to undeveloped acreage and exploratory dry-hole costs for that period and (g) costs and expenses related to the Merger not in excess of $36,000,000, minus (ii) other non-Cash items increasing Consolidated Net Income for such period (excluding any such non-Cash item to the extent it represents the reversal of an accrual or reserve for potential Cash item in any prior period); provided, however, prior to the first anniversary of the Closing Date, Consolidated Adjusted EBITDA shall be adjusted as if the TBR Assets and Arrow Oilfield Services division were sold as at the beginning of the period tested. Notwithstanding anything to the contrary contained herein, Consolidated Adjusted EBITDA shall be deemed to be $15,486,000 for the Fiscal Quarter ended March 31, 2004. "CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the aggregate of all expenditures of Company and its Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included in "purchase of property and equipment" or similar items (including, without limitation, (i) field enhancement, infrastructure and plug and abandonment, and (ii) general and administrative) reflected in the consolidated statement of cash flows of Company and its Subsidiaries. Consolidated Capital Expenditures shall not include Consolidated Other Capital Expenditures or Discretionary Capital Expenditures, expenditures of insurance proceeds to rebuild or replace assets of Company and its Subsidiaries that have been damaged or destroyed, and assets acquired pursuant to the reinvestment provisions of Section 2.14(a). "CONSOLIDATED CASH INTEREST EXPENSE" means, for any period, Consolidated Interest Expense for such period, excluding any amount not payable in Cash. "CONSOLIDATED CURRENT ASSETS" means, as at any date of determination, the total assets of Company and its Subsidiaries on a consolidated basis that may properly be classified as current assets in conformity with GAAP, excluding Cash and Cash Equivalents. "CONSOLIDATED CURRENT LIABILITIES" means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a consolidated basis that may properly be classified as current liabilities in conformity with GAAP, excluding the current portion of long term debt. "CONSOLIDATED EXCESS CASH FLOW" means, for any period, an amount (if positive) equal to: (i) the sum, without duplication, of the amounts for such period of (a) Consolidated Adjusted EBITDA, plus (b) the Consolidated Working Capital Adjustment, minus (ii) the sum, without duplication, of the amounts for such period of (a) voluntary and scheduled repayments of Consolidated Total Debt (excluding repayments of Revolving Loans except to the extent the Revolving Commitments are permanently reduced in connection with such 9 repayments), (b) Consolidated Capital Expenditures and Consolidated Other Capital Expenditures (net of any proceeds of (y) any related financings with respect to such expenditures and (z) any sales of assets used to finance such expenditures), (c) Consolidated Cash Interest Expense, (d) provisions for current taxes based on income of Company and its Subsidiaries and payable in cash with respect to such period, and (e) proceeds of Asset Sales to the extent such proceeds are held pending reinvestment in productive assets as permitted by Section 2.14(a). Consolidated Excess Cash Flow for the Fiscal Year ending December 31, 2004 shall be deemed to be the Consolidated Excess Cash Flow for the period beginning on the Closing Date and ending December 31, 2004. "CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest net of payments received under Interest Rate Agreements) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and net costs under Interest Rate Agreements, but excluding, however, any amounts referred to in Section 2.11(e) payable on or before the Closing Date. Notwithstanding anything to the contrary contained herein, for purposes of determining Consolidated Interest Expense for any period ending prior to the first anniversary of the Closing Date, Consolidated Interest Expense shall be an amount equal to actual Consolidated Interest Expense from the Closing Date through the date of determination multiplied by a fraction the numerator of which is 365 and the denominator of which is the number of days from the Closing Date through the date of determination. "CONSOLIDATED NET INCOME" means, for any period, (i) the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP, minus (ii) (a) the income (or loss) of any Person (other than a Subsidiary of Company) in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries by such Person during such period, (b) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with Company or any of its Subsidiaries or that Person's assets are acquired by Company or any of its Subsidiaries, (c) the income of any Subsidiary of Company to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary, (d) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, (e) any unrealized non-cash gains or losses attributable to mark-to-market treatment of derivatives (including those 10 resulting from the application of FAS 133), and (f) (to the extent not included in clauses (a) through (e) above) any net extraordinary gains or net extraordinary losses. "CONSOLIDATED OTHER CAPITAL EXPENDITURES" means, for any period, the aggregate of all expenditures of Company and its Subsidiaries with respect to drilling and exploration of oil and gas during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included in capital expenditures or similar items reflected in the consolidated statement of cash flows of Company and its Subsidiaries. Consolidated Other Capital Expenditures shall not include Consolidated Capital Expenditures or Discretionary Capital Expenditures, expenditures of insurance proceeds to rebuild or replace assets of Company and its Subsidiaries that have been damaged or destroyed, and assets acquired pursuant to the reinvestment provisions of Section 2.14(a). "CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED WORKING CAPITAL" means, as at any date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities, in each case calculated without taking into account (i) any unrealized non-cash gains or losses attributable to mark-to-market treatment of derivatives (including those resulting from the application of FAS 133) and (ii) deferred tax assets or deferred tax liabilities relating to derivatives that arise as a result of the application of hedge accounting to such hedge derivatives. "CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any period on a consolidated basis, the amount (which may be a negative number) by which Consolidated Working Capital as of the beginning of such period exceeds (or is less than) Consolidated Working Capital as of the end of such period. "CONTRACTUAL OBLIGATION" means, as applied to any Person, any provision of any Security issued by that Person or of any indenture, mortgage, deed of trust, contract, undertaking, agreement or other instrument to which that Person is a party or by which it or any of its properties is bound or to which it or any of its properties is subject. "CONTRIBUTING GUARANTORS" as defined in Section 7.2. "CONVERSION/CONTINUATION DATE" means the effective date of a continuation or conversion, as the case may be, as set forth in the applicable Conversion/Continuation Notice. "CONVERSION/CONTINUATION NOTICE" means a Conversion/Continuation Notice substantially in the form of Exhibit A-2. 11 "COUNTERPART AGREEMENT" means a Counterpart Agreement substantially in the form of Exhibit H delivered by a Credit Party pursuant to Section 5.10. "CREDIT DATE" means the date of a Credit Extension. "CREDIT DOCUMENT" means any of this Agreement, the Notes, if any, the Collateral Documents, any documents or certificates executed by Company in favor of Issuing Bank relating to Letters of Credit or Hedge Letters of Credit, and all other documents, instruments or agreements executed and delivered by a Credit Party for the benefit of any Agent, Issuing Bank or any Lender in connection herewith. "CREDIT EXTENSION" means the making of a Loan or the issuing of a Letter of Credit or Hedge Letter of Credit. "CREDIT PARTY" means each Person (other than any Agent, Issuing Bank or any Lender or any other representative thereof) from time to time party to a Credit Document. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement, each of which is for the purpose of hedging the foreign currency risk associated with Company's and its Subsidiaries' operations and not for speculative purposes. "CURRENT ISSUING BANK" as defined in Section 2.4(j). "DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "DEFAULT EXCESS" means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate outstanding principal amount of Loans or participations in Letters of Credit or Hedge Letters of Credit of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulted Loans) over the aggregate outstanding principal amount of all Loans and participations in Letters of Credit or Hedge Letters of Credit of such Defaulting Lender. "DEFAULT PERIOD" means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (i) the date on which all Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (ii) the date on which (a) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by the non-pro rata application of any voluntary or mandatory prepayments of the Loans in 12 accordance with the terms of Section 2.13 or Section 2.14 or by a combination thereof) and (b) such Defaulting Lender shall have delivered to Company and Administrative Agent a written reaffirmation of its intention to honor its obligations hereunder with respect to its Commitments, and (iii) the date on which Company, Administrative Agent, each Issuing Bank and Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing. "DEFAULTED LOAN" as defined in Section 2.22. "DEFAULTING LENDER" as defined in Section 2.22. "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "DISCRETIONARY CAPITAL EXPENDITURES" means, for any period, expenditures of Company and its Subsidiaries with respect to drilling and exploration of oil and gas during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included in capital expenditures or similar items reflected in the consolidated statement of cash flows of Company and its Subsidiaries. Discretionary Capital Expenditures shall not include Consolidated Capital Expenditures or Consolidated Other Capital Expenditures, expenditures of insurance proceeds to rebuild or replace assets of Company and its Subsidiaries that have been damaged or destroyed, and assets acquired pursuant to the reinvestment provisions of Section 2.14(a). "DOCUMENTATION AGENTS" as defined in the preamble hereto. "DOLLAR-DENOMINATED PRODUCTION PAYMENTS" means production payment obligations of Company or any Guarantor Subsidiary which are payable from a specified share of proceeds received from production from specific Properties, together with all undertakings and obligations in connection therewith. "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "DOMESTIC SUBSIDIARY" means any Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia. "ELIGIBLE ASSIGNEE" means (i) any Lender, any Affiliate of any Lender and any Related Fund (any two or more Related Funds being treated as a single Eligible Assignee for all purposes hereof), and (ii) any commercial bank, insurance company, investment or mutual fund or other entity that is an "accredited investor" (as defined in Regulation D under the Securities 13 Act) and which extends credit or buys loans as one of its businesses; provided, no Affiliate of Company or Sponsor shall be an Eligible Assignee. "EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was sponsored, maintained or contributed to by, or required to be contributed by, Company, any of its Subsidiaries or any of their respective ERISA Affiliates. "ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive, by any Governmental Authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law; (ii) in connection with any Hazardous Material or any actual or alleged Hazardous Materials Activity; or (iii) in connection with any actual or alleged damage, injury, threat or harm to health, safety, natural resources or the environment. "ENVIRONMENTAL LAWS" means any and all current or future foreign or domestic, federal or state (or any subdivision of either of them), statutes, ordinances, orders, rules, regulations, judicial or administrative judgments, Governmental Authorizations, or any other requirements of Governmental Authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity; (ii) the generation, use, storage, transportation or disposal of Hazardous Materials; or (iii) occupational safety and health, industrial hygiene or land use, in any manner applicable to Company or any of its Subsidiaries or any Facility. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor thereto. "ERISA AFFILIATE" means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Company or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Company or any such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Company or such Subsidiary and with respect to liabilities arising after such period for which Company or such Subsidiary could be liable under the Internal Revenue Code or ERISA. 14 "ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability to Company, any of its Subsidiaries or any of their respective Affiliates pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of proceedings to terminate any Pension Plan, or the occurrence of any event or condition which might constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefore, or the receipt by Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Company, any of its Subsidiaries or any of their respective ERISA Affiliates of material fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. 15 "EURODOLLAR RATE LOAN" means a Loan bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate. "EVENT OF DEFAULT" means each of the conditions or events set forth in Section 8.1. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute. "EXISTING INDEBTEDNESS" means (i) Indebtedness and other obligations outstanding under that certain Credit Agreement dated as of August 23, 2000 between Company and Ableco Finance LLC, as collateral agent and administrative agent, as amended prior to the Closing Date and (ii) the Existing Subordinated Notes. "EXISTING SUBORDINATED NOTES" means Company's existing 9-7/8% senior subordinated notes due 2007 issued pursuant to that certain indenture dated June 27, 1997 between Company and LaSalle National Bank as Trustee. "FACILITY" means any real property (including all buildings, fixtures or other improvements located thereon but excluding any Hydrocarbon Interests) now, hereafter or heretofore owned, leased, operated or used by Company or any of its Subsidiaries or any of their respective Affiliates. "FAIR SHARE CONTRIBUTION AMOUNT" as defined in Section 7.2. "FAIR SHARE" as defined in Section 7.2. "FEDERAL FUNDS EFFECTIVE RATE" means for any day, the rate per annum (expressed, as a decimal, rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided, (i) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Administrative Agent, in its capacity as a Lender, on such day on such transactions as determined by Administrative Agent. "FINANCIAL OFFICER" means the chief financial officer, treasurer, assistant treasurer or controller of Company. 16 "FINANCIAL OFFICER CERTIFICATION" means, with respect to the financial statements for which such certification is required, the certification of a Financial Officer of Company (in his or her capacity as an officer of Company and not in his or her individual capacity) that such financial statements fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. "FINANCIAL PLAN" as defined in Section 5.1(i). "FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that such Lien is the only Lien to which such Collateral is subject, other than any Permitted Lien. "FISCAL QUARTER" means a fiscal quarter of any Fiscal Year. "FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on December 31 of each calendar year. "FLOOD HAZARD PROPERTY" means any Real Estate Asset subject to a mortgage in favor of Collateral Trustee, for the benefit of the Secured Parties, and located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. "FOREIGN SUBSIDIARY" means any Subsidiary that is not a Domestic Subsidiary. "FUNDING DEFAULT" as defined in Section 2.22. "FUNDING GUARANTORS" as defined in Section 7.2. "FUNDING NOTICE" means a notice substantially in the form of Exhibit A-1. "GAAP" means, subject to the limitations on the application thereof set forth in Section 1.2, United States generally accepted accounting principles in effect as of the date of determination thereof. "GAIATECH REPORT" means the report entitled Environmental Due Diligence Review of Belden & Blake Corporation conducted by GaiaTech Incorporated and dated June 21, 2004. "GOVERNMENTAL ACTS" means any act or omission, whether rightful or wrongful, of any Governmental Authority. 17 "GOVERNMENTAL AUTHORITY" means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization, directive, consent order or consent decree of or from any Governmental Authority. "GRANTOR" as defined in the Pledge and Security Agreement. "GSCP" as defined in the preamble hereto "GUARANTEED OBLIGATIONS" as defined in Section 7.1. "GUARANTOR" means each Domestic Subsidiary of Company other than Engine Power Systems, Inc. and Great West Operating Company, L.C. "GUARANTOR SUBSIDIARY" means each Guarantor. "GUARANTY" means the guaranty of each Guarantor set forth in Section 7. "HAZARDOUS MATERIALS" means any chemical, material or substance, exposure to which is prohibited, limited or regulated under any Environmental Law by any Governmental Authority or which is otherwise defined, listed or regulated as a pollutant, contaminant, or a hazardous, extremely hazardous or toxic substance, material or waste under any Environmental Law, a radioactive material, or Hydrocarbon, petroleum or petroleum waste, petroleum breakdown material or petroleum product or byproduct. "HAZARDOUS MATERIALS ACTIVITY" means any activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, treatment, abatement, removal, remediation, disposal or handling of any Hazardous Materials and any corrective action or response action with respect to any of the foregoing. "HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency Agreement entered into with a Lender Counterparty or the Lead Arranger in order to satisfy the requirements of this Agreement or otherwise in the ordinary course of Company's or any of its Subsidiaries' businesses but not for speculative purposes. 18 "HEDGE L/C COMMITMENT" means the commitment of a Lender to acquire participations in Hedge Letters of Credit "HEDGE L/C COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount of each Lender's Hedge L/C Commitment, if any, is set forth on Appendix A-4 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Hedge L/C Commitments as of the Closing Date is $40,000,000. "HEDGE L/C COMMITMENT PERIOD" means the period from the Closing Date to but excluding the Hedge L/C Commitment Termination Date. "HEDGE L/C COMMITMENT TERMINATION DATE" means the earliest to occur of (i) the 6th anniversary of the Closing Date, (ii) the date the Hedge L/C Commitments are permanently reduced to zero pursuant to Section 2.13(b) or 2.14, and (iii) the date of the termination of the Hedge L/C Commitments pursuant to Section 8.1. "HEDGE L/C EXPOSURE" means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Hedge L/C Commitments, that Lender's Hedge L/C Commitment; and (ii) after the termination of the Hedge L/C Commitments, the sum of (a) the aggregate outstanding principal amount of the Hedge L/C Loans of that Lender, (b) in the case of Issuing Bank, the aggregate Hedge Letter of Credit Usage in respect of all Hedge Letters of Credit issued by that Lender (net of any participations by Lenders in such Hedge Letters of Credit) and (c) the aggregate amount of all participations by that Lender in any outstanding Hedge Letters of Credit or any unreimbursed drawing under any Hedge Letter of Credit. "HEDGE L/C LOAN" " means a Loan made by a Lender to Company pursuant to Section 2.4(i). "HEDGE L/C LOAN NOTE" means a promissory note in the form of Exhibit B-3, as it may be amended, supplemented or otherwise modified from time to time. "HEDGE L/C REIMBURSEMENT DATE" as defined in Section 2.4(i). "HEDGE LETTER OF CREDIT" means a letter of credit issued or to be issued by Issuing Bank pursuant to Section 2.4(h) of this Agreement. "HEDGE LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is, or at any time thereafter may become, available for drawing under all Hedge Letters of Credit then outstanding, and (ii) the aggregate amount of all drawings under Hedge Letters of Credit honored by Issuing Bank and not theretofore reimbursed by or on behalf of Company. 19 "HEDGE SUPPORT LETTER OF CREDIT" as defined in Section 2.4(a). "HEDGE SUPPORT LETTER OF CREDIT SUBLIMIT" means the lesser of (i) $15,000,000 and (ii) the aggregate unused amount of the Revolving Commitments then in effect. "HIGHEST LAWFUL RATE" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to any Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow. "HISTORICAL FINANCIAL STATEMENTS" means as of the Closing Date, (i) the audited financial statements of Company and its Subsidiaries, for the immediately preceding three Fiscal Years, consisting of consolidated balance sheets and the related consolidated statements of income, stockholders' equity and cash flows for such Fiscal Years, and (ii) the unaudited financial statements of Company and its Subsidiaries for the three-month period ending March 31, 2004, consisting of a consolidated balance sheet and the related consolidated statements of income, stockholders' equity and cash flows for the three-, six-or nine-month period, as applicable, ending on such date, and, in the case of clauses (i) and (ii), certified by the chief financial officer of Company that they fairly present, in all material respects, the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments. "HYDROCARBON INTERESTS" means all rights, titles, interests and estates now owned or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee or lease interests, farm-outs, overriding royalty and royalty interests, net profit interests, oil payments, production payment interests and similar mineral interests, including any reserved or residual interest of whatever nature. "HYDROCARBONS" means oil, gas, casinghead gas, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, all products refined, separated, settled and dehydrated therefrom, including, without limitation, kerosene, liquefied petroleum gas, refined lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium, sulfur and all other minerals. "INCREASED-COST LENDERS" as defined in Section 2.23. "INDEBTEDNESS", as applied to any Person, means, without duplication, (i) all indebtedness for borrowed money; (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP; (iii) notes payable and drafts accepted representing extensions of credit whether or not representing 20 obligations for borrowed money; (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument; (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person; (vi) the face amount of any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings; (vii) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another; (viii) any obligation of such Person the primary purpose or intent of which is to provide assurance to an obligee that the obligation of the obligor thereof will be paid or discharged, or any agreement relating thereto will be complied with, or the holders thereof will be protected (in whole or in part) against loss in respect thereof; (ix) any liability of such Person for an obligation of another through any agreement (contingent or otherwise) (a) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (b) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (a) or (b) of this clause (ix), the primary purpose or intent thereof is as described in clause (viii) above; (x) all obligations of such Person in respect of any exchange traded or over the counter derivative transaction, including, without limitation, the Swap Agreement and any Interest Rate Agreement and Currency Agreement, whether entered into for hedging or speculative purposes; provided, in no event shall obligations under any Interest Rate Agreement, any Currency Agreement or the Swap Agreement be deemed "Indebtedness" for any purpose under Section 6.8; and (xi) all Production Payments granted by any Person but solely to the extent of any warranties or guaranties of production or payment by such Person with respect to such Production Payment. "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial 21 laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby (including the Lenders' agreement to make Credit Extensions or the use or intended use of the proceeds thereof, or any enforcement of any of the Credit Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty)); (ii) the statements contained in the commitment letter delivered by any Lender to Company or Sponsor with respect to the transactions contemplated by this Agreement; or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries. "INDEMNIFIED TAXES" as defined in Section 2.20(a). "INDEMNITEE" as defined in Section 10.3. "INSTALLMENT" as defined in Section 2.12(a). "INSTALLMENT DATE" as defined in Section 2.12(a). "INTEREST COVERAGE RATIO" means the ratio as of the last day of any Fiscal Quarter of (i) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period then ended, to (ii) Consolidated Cash Interest Expense for such four-Fiscal Quarter period. "INTEREST PAYMENT DATE" means with respect to (i) any Revolving Loan or Hedge L/C Loan that is a Base Rate Loan, each March 31, June 30, September 30 and December 31 of each year, commencing on the first such date to occur after the Closing Date and the final maturity date of such Loan; (ii) any Revolving Loan or Hedge L/C Loan that is a Eurodollar Rate Loan, the last day of each Interest Period applicable to such Loan; provided, in the case of each Interest Period of longer than three months "Interest Payment Date" shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period and (iii) Term Loans, each April 1, July 1, October 1 and January 1 of each year, commencing on October 1, 2004 through the final maturity date of such Loan. "INTEREST PERIOD" means, in connection with a Eurodollar Rate Loan, an interest period of one-, two-, three- or six-months, as selected by Company in the applicable Funding Notice or Conversion/Continuation Notice, (i) initially, commencing on the Credit Date or Conversion/Continuation Date thereof, as the case may be; and (ii) thereafter, commencing on the day on which the immediately preceding Interest Period expires; provided, (a) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day unless no further Business Day occurs in such 22 month, in which case such Interest Period shall expire on the immediately preceding Business Day; (b) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clauses (c) and (d), of this definition, end on the last Business Day of a calendar month; (c) no Interest Period with respect to any Term Loans shall extend beyond the Term Loan Maturity Date; and (d) no Interest Period with respect to any portion of the Revolving Loans shall extend beyond the Revolving Commitment Termination Date. "INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement, each of which is for the purpose of hedging the interest rate exposure associated with Company's and its Subsidiaries' operations and not for speculative purposes. "INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period, the date that is two Business Days prior to the first day of such Interest Period. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute. "INVESTMENT" means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interest in, any of the Securities of any other Person (other than a Guarantor Subsidiary); (ii) any direct or indirect redemption, retirement, purchase or other acquisition for value, by any Subsidiary of Company from any Person (other than Company or any Guarantor Subsidiary), of any Capital Stock of such Person; and (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Company or any of its Subsidiaries to any other Person (other than Company or any Guarantor Subsidiary), including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "ISSUANCE NOTICE" means an Issuance Notice substantially in the form of Exhibit A-3. "ISSUING BANK" means (i) GSCP or a bank or other legally authorized Person selected by or acceptable to Administrative Agent in such Person's capacity as an issuer of a Letter of Credit or Hedge Letter of Credit; provided GSCP may appoint a bank or other legally 23 authorized Person meeting the Letter of Credit Issuer Rating to issue a Letter of Credit or Hedge Letter of Credit for the account of GSCP and (ii) any Replacement Issuing Bank. "JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; provided, in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "LANDLORD CONSENT AND ESTOPPEL" means, with respect to any Leasehold Property, a letter, certificate or other instrument in writing from the lessor under the related lease, pursuant to which, among other things, the landlord consents to the granting of a Mortgage on such Leasehold Property by the Credit Party tenant, such Landlord Consent and Estoppel to be in form and substance acceptable to Administrative Agent in its reasonable discretion, but in any event sufficient for Collateral Trustee to obtain a Title Policy with respect to such Mortgage. "LANDLORD PERSONAL PROPERTY COLLATERAL ACCESS AGREEMENT" means a Landlord Waiver and Consent Agreement substantially in the form of Exhibit L with such amendments or modifications as may be approved by Administrative Agent. "LEAD ARRANGER" as defined in the preamble hereto. "LEASEHOLD PROPERTY" means any leasehold interest of any Credit Party as lessee under any lease of real property, other than any such leasehold interest designated from time to time by Administrative Agent in its sole discretion as not being required to be included in the Collateral; provided that Leasehold Property shall exclude Hydrocarbon Interests. "LENDER" means each financial institution listed on the signature pages hereto as a Lender, and any other Person that becomes a party hereto pursuant to an Assignment Agreement. "LENDER COUNTERPARTY" means each Lender or any Affiliate of a Lender counterparty to a Hedge Agreement (including any Person who is a Lender (and any Affiliate thereof) as of the Closing Date but subsequently, whether before or after entering into a Hedge Agreement, ceases to be a Lender) including, without limitation, each such Affiliate that enters into a joinder agreement with Collateral Trustee. "LETTER OF CREDIT" means a commercial or standby letter of credit (other than a Hedge Letter of Credit) issued or to be issued by Issuing Bank pursuant to this Agreement. "LETTER OF CREDIT COMMITMENT PERIOD" means the period from the Closing Date to but excluding the Revolving Commitment Termination Date. 24 "LETTER OF CREDIT ISSUER RATING" has the meaning provided that term in the ISDA Master Agreement (and related Schedules) referred to in clause (i) of the definition of Swap Agreement. "LETTER OF CREDIT SUBLIMIT" means the lesser of (i) $5,000,000 and (ii) the aggregate unused amount of the Revolving Commitments then in effect. "LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate amount which is, or at any time thereafter may become, available for drawing under all Letters of Credit then outstanding, and (ii) the aggregate amount of all drawings under Letters of Credit honored by Issuing Bank and not theretofore reimbursed by or on behalf of Company. "LEVERAGE RATIO" means the ratio as of the last day of any Fiscal Quarter or other date of determination of (i) Consolidated Total Debt as of such day to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period ending on such date (or if such date of determination is not the last day of a Fiscal Quarter, for the four-Fiscal Quarters period ending as of the most recently concluded Fiscal Quarter). "LIEN" means (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities. "LOAN" means a Term Loan, a Revolving Loan and a Hedge L/C Loan. "MANAGEMENT AGREEMENT" means the Management Services Agreement, dated July 7, 2004 between Company and the Sponsor, as amended through the date hereof and as may be further amended if permitted pursuant to Section 6.15. "MARGIN STOCK" as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "MATERIAL ADVERSE EFFECT" means a material adverse effect on and/or material adverse developments with respect to (i) the business operations, properties, assets, condition (financial or otherwise) or prospects of Company and its Subsidiaries taken as a whole; (ii) the ability of any Credit Party to fully and timely perform its Obligations; (iii) the legality, validity, binding effect or enforceability against a Credit Party of a Credit Document to which it is a 25 party; or (v) the rights, remedies and benefits available to, or conferred upon, any Agent and any Lender or any Secured Party under any Credit Document. "MATERIAL CONTRACT" means any contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Credit Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect, including, without limitation, the Swap Agreement. "MATERIAL REAL ESTATE ASSET" means (i) (a) any fee-owned Real Estate Asset having a fair market value in excess of $2,500,000 as of the date of the acquisition thereof and (b) all Leasehold Properties other than those with respect to which the aggregate payments under the term of the lease are less than $250,000 per annum or (ii) any Real Estate Asset that the Requisite Lenders have determined is material to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any Subsidiary thereof, including Company. "MAXIMUM DELIVERY AMOUNT" shall mean, as of any date, the maximum amount that could be required to be delivered on such date as specified in paragraph 13(b)(i)(A) of the Credit Support Annex, dated as of June 30, 2004, and entered into in connection with the Swap Agreement described in clause (i) of the definition of Swap Agreement. "MERGER AGREEMENT" means that certain Agreement and Plan of Merger, dated as of June 15, 2004, by and between Sponsor, Capital C Ohio Inc. and Company, as such agreement may be amended pursuant to Section 6.15. "MOODY'S" means Moody's Investor Services, Inc. "MORTGAGE" means a Mortgage substantially in the form of Exhibit K, as it may be amended, supplemented or otherwise modified from time to time. "MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer plan" as defined in Section 3(37) of ERISA. "NAIC" means The National Association of Insurance Commissioners, and any successor thereto. "NARRATIVE REPORT" means, with respect to the financial statements for which such narrative report is required, a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management thereof for the applicable Fiscal Year. 26 "NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, an amount equal to: (i) Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by Company or any of its Subsidiaries from such Asset Sale, minus (ii) any bona fide direct costs (including the fees and expenses of attorneys, investment banking, accounting and other advisors) incurred in connection with such Asset Sale, including (a) income or gains taxes payable by the seller as a result of any gain recognized in connection with such Asset Sale, (b) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale and (c) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller's indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Company or any of its Subsidiaries in connection with such Asset Sale. "NET INSURANCE/CONDEMNATION PROCEEDS" means an amount equal to: (i) any Cash payments or proceeds received by Company or any of its Subsidiaries (a) under any casualty insurance policy in respect of a covered loss thereunder or (b) as a result of the taking of any assets of Company or any of its Subsidiaries by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, minus (ii) (a) any actual and reasonable costs incurred by Company or any of its Subsidiaries in connection with the adjustment or settlement of any claims of Company or such Subsidiary in respect thereof, and (b) any bona fide direct costs incurred in connection with any sale of such assets as referred to in clause (i)(b) of this definition, including income taxes payable as a result of any gain recognized in connection therewith. "NON-CONSENTING LENDER" as defined in Section 2.23(c). "NON-US LENDER" as defined in Section 2.20(c). "NOTE" means a Term Note, a Revolving Loan Note or a Hedge L/C Loan Note. "NOTICE" means a Funding Notice, an Issuance Notice, or a Conversion/Continuation Notice. "NYMEX" means the New York Mercantile Exchange or its successor entity. "NYMEX STRIP PRICE" means as of any date of determination, (i) for the 36 month period commencing with the month in which the date of determination occurs, the average of the 36 succeeding monthly futures contract prices, commencing with the month during which the determination date occurs, for each of the appropriate crude oil and natural gas 27 categories included in the most recent Reserve Report provided by Company to the Administrative Agent pursuant to subsection 5.1(p), as quoted on the NYMEX, and (ii) for periods after such 36 month period, the average of the quoted prices for the period from and including the 25th month in such 36 month period through the 36th month in such period; provided, that if the NYMEX no longer provides futures contract price quotes or has ceased to operate, the comparable futures contract prices quoted on such other nationally recognized commodities exchange as the Administrative Agent shall designate. "OBLIGATIONS" means all obligations of every nature of each Credit Party from time to time owed to the Agents (including former Agents), the Collateral Trustee, the Lenders or any of them, each Issuing Bank and Lender Counterparties, under any Credit Document or Hedge Agreement (including, without limitation, with respect to a Hedge Agreement, obligations owed thereunder to any person who was a Lender or an Affiliate of a Lender at the time such Hedge Agreement was entered into), whether for principal, interest (including interest which, but for the filing of a petition in bankruptcy with respect to such Credit Party, would have accrued on any Obligation, whether or not a claim is allowed against such Credit Party for such interest in the related bankruptcy proceeding), reimbursement of amounts drawn under Letters of Credit or Hedge Letters of Credit, payments for early termination of Hedge Agreements, and all other fees, expenses, indemnification obligations and other amounts or obligations. "OBLIGEE GUARANTOR" as defined in Section 7.7. "OIL AND GAS BUSINESS" means (a) the acquisition, exploration, exploitation, development, operation and disposition of interests in oil and gas properties and Hydrocarbons, (b) the gathering, marketing, treating, processing, storage, selling and transporting of any production from such interests or properties, including, without limitation, the marketing of Hydrocarbons obtained from unrelated Persons; (c) any business relating to or arising from exploration for or development, production, treatment, processing, storage, transportation or marketing of oil, gas and other minerals and products produced in association therewith; (d) any business relating to oilfield sales and service; and (e) any activity that is ancillary or necessary or desirable to facilitate the activities described in clauses (a) through (d) of this definition, excluding, for the avoidance of doubt, refining of hydrocarbons. "OIL AND GAS PROPERTIES" means Hydrocarbon Interests; the Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all presently existing or future unitization, pooling agreements and declarations of pooled units and the units created thereby (including without limitation all units created under orders, regulations and rules of any Governmental Authority having jurisdiction) which may affect all or any portion of the Hydrocarbon Interests; all pipelines, gathering lines, compression facilities, tanks and processing plants; all interests held in royalty trusts whether presently existing or hereafter created; all Hydrocarbons in and under and which may be produced, saved, processed or attributable to the 28 Hydrocarbon Interests, the lands covered thereby and all hydrocarbons in pipelines, gathering lines, tanks and processing plants and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and Properties in any way appertaining, belonging, affixed or incidental to the Hydrocarbon Interests, and all rights, titles, interests and estates described or referred to above, including any and all real property, now owned or hereafter acquired, used or held for use in connection with the operating, working or development of any of such Hydrocarbon Interests or Property and including any and all surface leases, rights-of-way, easements and servitude together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing; all oil, gas and mineral leasehold and fee interests, all overriding royalty interests, mineral interests, royalty interests, net profits interests, net revenue interests, oil payments, production payments, carried interests and any and all other interests in Hydrocarbons. For the avoidance of doubt, this definition applies to Oil and Gas Properties and Hydrocarbon Interests now owned or hereafter acquired directly or indirectly by the Company or its Subsidiaries. "ORGANIZATIONAL DOCUMENTS" means (i) with respect to any corporation, its certificate or articles of incorporation or organization, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, and (iv) with respect to any limited liability company, its articles of organization, as amended, and its operating agreement, as amended. In the event any term or condition of this Agreement or any other Credit Document requires any Organizational Document to be certified by a secretary of state or similar governmental official, the reference to any such "Organizational Document" shall only be to a document of a type customarily certified by such governmental official. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. "PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "PERMITTED ACQUISITION" means any acquisition by Company or any of its wholly-owned Subsidiaries, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the Capital Stock of, or a business line or unit or a division of, any Person or any Hydrocarbon Interest of any Person; provided, except with respect to Permitted Acquisitions of Hydrocarbon Interests having a value of less than $2,000,000, (i) immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom; 29 (ii) all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity with all applicable Governmental Authorizations; (iii) in the case of the acquisition of Capital Stock, all of the Capital Stock (except for any such Securities in the nature of directors' qualifying shares required pursuant to applicable law) acquired or otherwise issued by such Person or any newly formed Subsidiary of Company in connection with such acquisition shall be owned 100% by Company or a Guarantor Subsidiary thereof, and Company shall have taken, or caused to be taken, as of the date such Person becomes a Subsidiary of Company, each of the actions set forth in Sections 5.10 and/or 5.11, as applicable; (iv) Company and its Subsidiaries shall be in compliance with the financial covenants set forth in Section 6.8 on a pro forma basis after giving effect to such acquisition as of the last day of the Fiscal Quarter most recently ended, (as determined in accordance with Section 6.8(h); (v) Company shall have delivered to Administrative Agent (A) at least 5 Business Days prior to such proposed acquisition, a Compliance Certificate evidencing compliance with Section 6.8 as required under clause (iv) above, together with all relevant financial information with respect to such acquired assets, including, without limitation, the aggregate consideration for such acquisition and any other information required to demonstrate compliance with Section 6.8; and (vi) any Person or assets or division as acquired in accordance herewith (y) shall be in same business or lines of business in which Company and/or its Subsidiaries are engaged as of the Closing Date and (z) shall have generated positive cash flow for the four quarter period most recently ended prior to the date of such acquisition. "PERMITTED BUSINESS INVESTMENTS" means investments made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business as a means of actively exploiting, exploring for, acquiring, developing, processing, gathering, marketing or transporting oil and gas through agreements, transactions, interests or arrangements which permit one to share risks of costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of Oil and Gas Business jointly or with third parties, including, without limitation, the entry into operating agreements, working interests, royalty interests, mineral leases, processing agreements, farm-out and farm-in agreements, division orders, contracts for the sale, transportation or exchange of oil or natural gas, unitization and pooling declarations and agreements and area of mutual interest agreements, production sharing agreements or other similar or customary agreements, transactions, properties, interests, and investments and expenditures in connection therewith; 30 provided that (i) an investment in capital stock, partnership interests, joint venture interests, limited liability company interests or other similar equity interests in a Person shall not constitute a Permitted Business Investment and (ii) Volumetric Production Payments shall not constitute a Permitted Business Investment. "PERMITTED LIENS" means each of the Liens permitted pursuant to Section 6.2. "PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and Governmental Authorities. "PLEDGE AND SECURITY AGREEMENT" means the Priority Lien Pledge and Security Agreement to be executed by Company and each Guarantor substantially in the form of Exhibit I, as it may be amended, supplemented or otherwise modified from time to time. "PRIME RATE" means the rate of interest quoted in The Wall Street Journal, Money Rates Section as the Prime Rate (currently defined as the base rate on corporate loans posted by at least 75% of the nation's thirty (30) largest banks), as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Agent or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "PRINCIPAL OFFICE" means, for each of Administrative Agent and Issuing Bank, such Person's "Principal Office" as set forth on Appendix B, or such other office or office of a third party or sub-agent, as appropriate, as such Person may from time to time designate in writing to Company, Administrative Agent and each Lender. "PRO RATA SHARE" means (i) with respect to all payments, computations and other matters relating to the Term Loan of any Lender, the percentage obtained by dividing (a) the Term Loan Exposure of that Lender by (b) the aggregate Term Loan Exposure of all Lenders; (ii) with respect to all payments, computations and other matters relating to the Revolving Commitment or Revolving Loans of any Lender or any Letters of Credit issued or participations purchased therein by any Lender, the percentage obtained by dividing (a) the Revolving Exposure of that Lender by (b) the aggregate Revolving Exposure of all Lenders; and (iii) with respect to all payments, computations and other matters relating to the Hedge L/C Commitment or Hedge L/C Loans of any Lender or any Hedge Letters of Credit issued or participations purchased therein by any Lender, the percentage obtained by dividing (a) the Hedge L/C Exposure of that Lender by (b) the aggregate Hedge L/C Exposure of all Lenders. For all other purposes with respect to each Lender, "Pro Rata Share" means the percentage 31 obtained by dividing (A) an amount equal to the sum of the Term Loan Exposure, the Revolving Exposure and the Hedge L/C Exposure of that Lender, by (B) an amount equal to the sum of the aggregate Term Loan Exposure, the aggregate Revolving Exposure and the aggregate Hedge L/C Exposure of all Lenders. "PRODUCTION PAYMENTS" means, collectively, Dollar-Denominated Production Payments and Volumetric Production Payments. "PROJECTIONS" as defined in Section 4.8. "PROPERTIES" means any kind of facility, fixture, property or asset, whether real, personal or mixed, or tangible or intangible owned, leased or operated by the Borrower or any Subsidiary. "PROVED DEVELOPED PRODUCING RESERVES" means those Oil and Gas Properties designated as "proved developed producing" (applying the reporting standards prescribed by the SEC) in the Reserve Report. "PROVED RESERVES" means those Oil and Gas Properties designated as "proved" (applying the reporting standards prescribed by the SEC) in the Reserve Report. "PV-10 VALUE" means as of any date of determination, the sum of the present values of the amounts of net revenues before income taxes expected to be received in each of the months following the date of determination on the basis of estimated production from Proved Reserves during such months determined as follows: (i) each such monthly net revenue amount shall be calculated (x) on the basis of the applicable NYMEX Strip Price for the appropriate category of oil or gas as of such date of determination, adjusting such price to reflect (A) the appropriate Basis Differential with respect to Hydrocarbons produced from specific Oil and Gas Properties of Company, (B) the prices for fixed price contracts for such month, (C) the prices for hedged volumes for such month and (D) Btu content, (y) assuming that production costs remain constant throughout the periods of the calculation of such monthly net revenues, and (z) otherwise applying the financial accounting and reporting standards prescribed by the SEC for application of the successful efforts method of accounting for such revenues under Rule 4-10 of Regulation S-X as promulgated by the SEC from time to time; and (ii) the present value of each such monthly net revenue amount shall be determined by discounting each such monthly net revenue amount from the month in which it is expected to be received, on a monthly basis, to such date of determination at a rate of 10% per annum. 32 "REAL ESTATE ASSET" means, at any time of determination, any interest (fee, leasehold or otherwise) then owned by any Credit Party in any real property, other than Hydrocarbon Interests. "RECORD DOCUMENT" means, with respect to any Leasehold Property, (i) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, or (ii) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by such holder, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Administrative Agent. "RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document has been recorded in all places necessary or desirable, in Administrative Agent's reasonable judgment, to give constructive notice of such Leasehold Property to third-party purchasers and encumbrancers of the affected real property. "REGISTER" as defined in Section 2.7(b). "REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "REIMBURSEMENT DATE" as defined in Section 2.4(d). "RELATED AGREEMENTS" means, collectively, the Merger Agreement, the Senior Secured Debt Documents, the Swap Agreement and the Management Agreement. "RELATED FUND" means, with respect to any Lender that is an investment fund, any other investment fund that invests in commercial loans and that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "RELEASE" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material), including the movement of any Hazardous Material through the air, soil, surface water or groundwater. "REPLACEMENT ISSUING BANK" as defined in Section 2.4(j). "REPLACEMENT LENDER" as defined in Section 2.23. 33 "REQUISITE CLASS LENDERS" means, at any time of determination, (i) for the Class of Lenders having Term Loan Exposure, Lenders holding more than 50% of the aggregate Term Loan Exposure of all Lenders; (ii) for the Class of Lenders having Revolving Exposure, Lenders holding more than 50% of the aggregate Revolving Exposure of all Lenders; and (iii) for each Class of Lenders having Hedge L/C Exposure, Lenders holding more than 50% of the aggregate Hedge L/C Exposure of that Class. "REQUISITE LENDERS" means one or more Lenders having or holding Term Loan Exposure, Hedge L/C Exposure and/or Revolving Exposure and representing more than 50% of the sum of (i) the aggregate Term Loan Exposure of all Lenders, (ii) the aggregate Revolving Exposure of all Lenders, and (iii) the aggregate Hedge L/C Exposure of all Lenders. "RESERVE LEVERAGE RATIO" means the ratio as of the last day of any Fiscal Quarter or other date of determination of (i) Senior Debt as of such day to (ii) the PV-10 Value of Proved Reserves as of such date (or if such date of determination is not the last day of a Fiscal Quarter, as of the last day of the most recently concluded Fiscal Quarter). "RESERVE REPORT" means a report setting forth, as of June 30 or December 31 (i) the volumetric quantity and both the PV-10 Value and the SEC Value, of the oil and gas reserves attributable to the Oil and Gas Properties of Company and Guarantor Subsidiaries, together with a projection of the rate of production and future net income, taxes, operating expenses and capital expenditures with respect thereto as of such date, and (ii) such other information as the Administrative Agent may reasonably request. "RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class; (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding; (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding; (iv) management or similar fees payable to Sponsor or any of its Affiliates; and (v) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any subordinated Indebtedness. "REVOLVING COMMITMENT" means the commitment of a Lender to make or otherwise fund any Revolving Loan and to acquire participations in Letters of Credit hereunder and "REVOLVING COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount of each Lender's Revolving Commitment, if any, is set forth on Appendix A-3 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms 34 and conditions hereof. The aggregate amount of the Revolving Commitments as of the Closing Date is $30,000,000. "REVOLVING COMMITMENT PERIOD" means the period from the Closing Date to but excluding the Revolving Commitment Termination Date. "REVOLVING COMMITMENT TERMINATION DATE" means the earliest to occur of (i) the 6th anniversary of the Closing Date, (ii) the date the Revolving Commitments are permanently reduced to zero pursuant to Section 2.13(b) or 2.14, and (iii) the date of the termination of the Revolving Commitments pursuant to Section 8.1. "REVOLVING EXPOSURE" means, with respect to any Lender as of any date of determination, (i) prior to the termination of the Revolving Commitments, that Lender's Revolving Commitment; and (ii) after the termination of the Revolving Commitments, the sum of (a) the aggregate outstanding principal amount of the Revolving Loans of that Lender, (b) in the case of Issuing Bank, the aggregate Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (net of any participations by Lenders in such Letters of Credit) and (c) the aggregate amount of all participations by that Lender in any outstanding Letters of Credit or any unreimbursed drawing under any Letter of Credit. "REVOLVING LOAN" means a Loan made by a Lender to Company pursuant to Section 2.2(a) and/or 2.22. "REVOLVING LOAN NOTE" means a promissory note in the form of Exhibit B-2, as it may be amended, supplemented or otherwise modified from time to time. "S&P" means Standard & Poor's Ratings Group, a division of The McGraw Hill Corporation. "SEC" means the Securities and Exchange Commission. "SEC VALUE" means the future net revenues before income taxes from Proved Reserves, estimated utilizing the price for the appropriate category of oil or gas as of the date of determination and assuming that oil and natural gas prices and production costs thereafter remain constant, then discounted at the rate of 10% per year to obtain the present value, and otherwise applying the financial accounting and reporting standards prescribed by the SEC for application of the successful efforts method of accounting under Rule 4-10 of Regulation S-X as promulgated by the SEC from time to time. "SECTION 29 PROPERTIES" as defined in subsection 6.9(h). 35 "SECURED PARTIES" has the meaning assigned to that term in the Pledge and Security Agreement. "SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute. "SENIOR DEBT" means, as at any date of determination, the aggregate principal amount of Loans outstanding as of such date. "SENIOR LEVERAGE RATIO" means the ratio as of the last day of any Fiscal Quarter or other date of determination of (i) Senior Debt as of such day to (ii) Consolidated Adjusted EBITDA for the four-Fiscal Quarter period ending on such date (or if such date of determination is not the last day of a Fiscal Quarter, for the four-Fiscal Quarters period ending as of the most recently concluded Fiscal Quarter). "SENIOR SECURED DEBT DOCUMENTS" means the Senior Secured Note Indenture, the Senior Secured Notes and each other document executed in connection with the Senior Secured Notes, and any documents executed in connection with any refinancings or replacements thereof to the extent permitted under Section 6.16, as each such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.16. "SENIOR SECURED INDEBTEDNESS" means the obligations of Company pursuant to the Senior Secured Debt Documents. "SENIOR SECURED NOTE INDENTURE" means the indenture dated July 7, 2004, pursuant to which the Senior Secured Notes are issued, and any indenture pursuant to which the Senior Secured Notes are refinanced or replaced pursuant to a transaction permitted under Section 6.1, in each case as such indenture may thereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.16. "SENIOR SECURED NOTES" means the Senior Secured Notes of Company in the aggregate principal amount of not less than $192,500,000 and issued pursuant to the Senior 36 Secured Note Indenture, and any subordinated promissory notes issued in respect of any refinancing or replacement of such Senior Secured Notes in a transaction permitted under Section 6.1, in each case as such notes may thereafter be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.16. "SETTLEMENT CONFIRMATION" as defined in Section 10.6(b). "SETTLEMENT SERVICE" as defined in Section 10.6(d). "SOLVENCY CERTIFICATE" means a Solvency Certificate of the chief financial officer of Company substantially in the form of Exhibit G-2. "SOLVENT" means, with respect to any Credit Party, that as of the date of determination, both (i) (a) the sum of such Credit Party's debt (including contingent liabilities) does not exceed the present fair saleable value of such Credit Party's present assets; (b) such Credit Party's capital is not unreasonably small in relation to its business as contemplated on the Closing Date and reflected in the Projections or with respect to any transaction contemplated or undertaken after the Closing Date; and (c) such Person has not incurred and does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise); and (ii) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No.5). "SPONSOR" as defined in the recitals hereto. "SPONSOR PLEDGE AGREEMENT" means the First Priority Lien Pledge and Security Agreement to be executed by Sponsor substantially in the form of Exhibit J, as it may be amended, supplemented or otherwise modified from time to time. "SUBJECT TRANSACTION" as defined in Section 6.8(h). "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time 37 owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a "qualifying share" of the former Person shall be deemed to be outstanding. "SWAP AGREEMENT" means (i) the ISDA Master Agreement dated as of June 30, 2004 by and between J. Aron & Company and Capital C Ohio, Inc. (and assumed by Company in the Acquisition) (including the Schedule thereto and the confirmations thereunder), pursuant to which the parties thereto have entered into certain gas and oil price swaps and (ii) any ISDA Master Agreement entered into after the Closing Date by the Company and/or its Subsidiaries (including the Schedule thereto and the confirmations thereunder), pursuant to which the parties thereto enter into certain gas and oil price swaps, as each such document referred to in clauses (i) or (ii) may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15. "SWAP AGREEMENT DOCUMENTS" means the Swap Agreement and each other document executed in connection with the Swap Agreement, and any documents executed in connection with any refinancings or replacements thereof to the extent permitted under Section 6.15, as each such document may be amended, restated, supplemented or otherwise modified from time to time to the extent permitted under Section 6.15. "SYNDICATION AGENT" as defined in the preamble hereto. "TAX" means any present or future tax, levy, impost, duty, assessment, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; provided, "Tax on the overall net income" of a Person shall be construed as a reference to a tax imposed by the jurisdiction in which that Person is organized or in which that Person's applicable principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits or gains (whether worldwide, or only insofar as such income, profits or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its applicable lending office). "TBR ASSETS" means those assets of Company sold to Fortuna Energy, Inc. pursuant to the Letter Agreement, dated June 14, 2004, by and between Company and Fortuna Energy, Inc. "TBR DELAYED TRANSFER ASSETS" means those assets of Company sold to Fortuna Energy, Inc. prior to the Closing Date pursuant to the Letter Agreement, dated June 14, 2004, by and between Company and Fortuna Energy, Inc. title to which has not been conveyed by 38 Company to Fortuna Energy, Inc. as of the Closing Date; provided, such assets shall cease to be TBR Delayed Transfer Assets if such title has not been subsequently conveyed to Fortuna Energy, Inc. within 180 days of the Closing Date. "TERM LOAN" means a Term Loan made by a Lender to Company pursuant to Section 2.1(a). "TERM LOAN COMMITMENT" means the commitment of a Lender to make or otherwise fund a Term Loan and "TERM LOAN COMMITMENTS" means such commitments of all Lenders in the aggregate. The amount of each Lender's Term Loan Commitment, if any, is set forth on Appendix A-1 or in the applicable Assignment Agreement, subject to any adjustment or reduction pursuant to the terms and conditions hereof. The aggregate amount of the Term Loan Commitments as of the Closing Date is $100,000,000. "TERM LOAN EXPOSURE" means, with respect to any Lender, as of any date of determination, the outstanding principal amount of the Term Loans of such Lender; provided, at any time prior to the making of the Term Loans, the Term Loan Exposure of any Lender shall be equal to such Lender's Term Loan Commitment. "TERM LOAN MATURITY DATE" means the earlier of (i) the 7th anniversary of the Closing Date, and (ii) the date that all Term Loans shall become due and payable in full hereunder, whether by acceleration or otherwise. "TERM LOAN NOTE" means a promissory note in the form of Exhibit B-1, as it may be amended, supplemented or otherwise modified from time to time. "TERMINATED LENDER" as defined in Section 2.23. "TITLE POLICY" as defined in Section 3.1(i). "TOTAL UTILIZATION OF REVOLVING COMMITMENTS" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Revolving Loans (other than Revolving Loans made for the purpose of reimbursing Issuing Bank for any amount drawn under any Letter of Credit, but not yet so applied) and (ii) the Letter of Credit Usage. "TOTAL UTILIZATION OF HEDGE L/C COMMITMENTS" means, as at any date of determination, the sum of (i) the aggregate principal amount of all outstanding Hedge L/C Loans (other than Hedge L/C Loans made for the purpose of reimbursing Issuing Bank for any amount drawn under any Letter of Credit, but not yet so applied) and (ii) the Hedge Letter of Credit Usage. 39 "TRANSACTION COSTS" means the fees, costs and expenses payable by Company or any of Company's Subsidiaries on or before the Closing Date in connection with the transactions contemplated by the Credit Documents and the Related Agreements. "TYPE OF LOAN" means a Base Rate Loan or a Eurodollar Rate Loan. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. "UNADJUSTED EURODOLLAR RATE COMPONENT" means that component of the interest costs to Company in respect of a Eurodollar Rate Loan that is based upon the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate. "UNPAID REFINANCING AMOUNT" as defined in Section 3.1(f). "VOLUMETRIC PRODUCTION PAYMENTS" means production payment obligations, royalties or overriding royalties of Company or any of its Subsidiaries which are payable from a specified share of production from specific properties together with all undertakings and obligations in connection therewith. 1.2. ACCOUNTING TERMS. (a) Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to Section 5.1(a) and 5.1(b) shall be prepared in accordance with GAAP as in effect at the time of such preparation (and delivered together with the reconciliation statements provided for in Section 5.1(e), if applicable). Subject to the foregoing, calculations in connection with the definitions, covenants and other provisions hereof shall utilize accounting principles and policies in conformity with those used to prepare the Historical Financial Statements. (b) In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then Company and the Administrative Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as equitably to reflect such Accounting Change with the desired result that the criteria for evaluating Company's and its Subsidiaries' financial condition shall be the same after such Accounting Change as if such Accounting Change had not been made. Until such time as such an amendment shall have been executed and delivered by Company, the Administrative Agent and the Requisite Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Change had not occurred. "ACCOUNTING CHANGE" refers to any change in accounting principles required by the promulgation of any rule, regulation, 40 pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the Securities and Exchange Commission. 1.3. INTERPRETATION, ETC. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically provided. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not no limiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. SECTION 2. LOANS AND LETTERS OF CREDIT 2.1. TERM LOANS (a) Loan Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make, on the Closing Date, a Term Loan to Company in an amount equal to such Lender's Term Loan Commitment. Company may make only one borrowing under the Term Loan Commitment which shall be on the Closing Date. Any amount borrowed under this Section 2.1(a) and subsequently repaid or prepaid may not be reborrowed. Subject to Sections 2.13(a) and 2.14, all amounts owed hereunder with respect to the Term Loans shall be paid in full no later than the Term Loan Maturity Date. Each Lender's Term Loan Commitment shall terminate immediately and without further action on the Closing Date after giving effect to the funding of such Lender's Term Loan Commitment on such date. (b) Borrowing Mechanics for Term Loans. (i) Company shall deliver to Administrative Agent a fully executed Funding Notice no later than three Business Days prior to the Closing Date (in the case of Eurodollar Rate Loans) and one Business Day prior to the Closing Date (in the case of Base Rate Loans). Promptly upon receipt by Administrative Agent of such Certificate, Administrative Agent shall notify each Lender of the proposed borrowing. 41 (ii) Each Lender shall make its Term Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the Closing Date, by wire transfer of same day funds in Dollars, at the Principal Office designated by Administrative Agent. Upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of the Term Loans available to Company on the Closing Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Loans received by Administrative Agent from Lenders to be credited to the account of Company at the Principal Office designated by Administrative Agent or to such other account as may be designated in writing to Administrative Agent by Company. 2.2. REVOLVING LOANS. (a) Revolving Commitments. During the Revolving Commitment Period, subject to the terms and conditions hereof, each Lender severally agrees to make Revolving Loans to Company in an aggregate amount up to but not exceeding such Lender's Revolving Commitment; provided, that after giving effect to the making of any Revolving Loans in no event shall the Total Utilization of Revolving Commitments exceed the Revolving Commitments then in effect. Amounts borrowed pursuant to this Section 2.2(a) may be repaid and reborrowed during the Revolving Commitment Period. Each Lender's Revolving Commitment shall expire on the Revolving Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Commitments shall be paid in full no later than such date. (b) Borrowing Mechanics for Revolving Loans. (i) Except pursuant to 2.4(d), Revolving Loans shall be made in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount. (ii) Whenever Company desires that Lenders make Revolving Loans, Company shall deliver to Administrative Agent a fully executed and delivered Funding Notice no later than 10:00 a.m. (New York City time) at least three Business Days in advance of the proposed Credit Date in the case of a Eurodollar Rate Loan, and at least one Business Day in advance of the proposed Credit Date in the case of a Revolving Loan that is a Base Rate Loan. Except as otherwise provided herein, a Funding Notice for a Revolving Loan that is a Eurodollar Rate Loan shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. 42 (iii) Notice of receipt of each Funding Notice in respect of Revolving Loans, together with the amount of each Lender's Pro Rata Share thereof, if any, together with the applicable interest rate, shall be provided by Administrative Agent to each applicable Lender by telefacsimile with reasonable promptness, but (provided Administrative Agent shall have received such notice by 10:00 a.m. (New York City time)) not later than 2:00 p.m. (New York City time) on the same day as Administrative Agent's receipt of such Notice from Company. (iv) Each Lender shall make the amount of its Revolving Loan available to Administrative Agent not later than 12:00 p.m. (New York City time) on the applicable Credit Date by wire transfer of same day funds in Dollars, at the Principal Office designated by Administrative Agent. Except as provided herein, upon satisfaction or waiver of the conditions precedent specified herein, Administrative Agent shall make the proceeds of such Revolving Loans available to Company on the applicable Credit Date by causing an amount of same day funds in Dollars equal to the proceeds of all such Revolving Loans received by Administrative Agent from Lenders to be credited to the account of Company at the Principal Office designated by Administrative Agent or such other account as may be designated in writing to Administrative Agent by Company. 2.3. RESERVED 2.4. ISSUANCE OF LETTERS OF CREDIT AND HEDGE LETTERS OF CREDIT AND PURCHASE OF PARTICIPATIONS THEREIN. (a) Letters of Credit. During the Revolving Commitment Period, subject to the terms and conditions hereof, Issuing Bank agrees to issue Letters of Credit for the account of Company in the aggregate amount up to but not exceeding (i) the Hedge Support Letter of Credit Sublimit; provided that (1) each such Letter of Credit shall be used by Company solely to secure Company's obligations under the Swap Agreement only to the extent there is no availability under the Hedge L/C Commitments and (2) each such Letter of Credit shall only be for the benefit of J. Aron & Company prior to January 1, 2006 (such Letter of Credit being a "HEDGE SUPPORT LETTER OF CREDIT") and (ii) the Letter of Credit Sublimit with respect to Letters of Credit to be used for general corporate purposes and not pursuant to clause (i) of this Section 2.4(a); provided, further, (i) each Letter of Credit shall be denominated in Dollars; (ii) the stated amount of each Letter of Credit shall be such amount as is acceptable to Issuing Bank; (iii) after giving effect to such issuance, in no event shall the Total Utilization of Revolving Commitments exceed the Revolving Commitments then in effect; (iv) after giving effect to such issuance, in no event shall the Letter of Credit Usage exceed (1) with respect to Hedge Support Letters of Credit, the Hedge Support Letter of Credit Sublimit then in effect and (2) with respect to other Letters of 43 Credit excluding the Hedge Support Letters of Credit, the Letter of Credit Sublimit then in effect; (v) in no event shall any standby Letter of Credit have an expiration date later than the earlier of (1) the Revolving Commitment Termination Date and (2) the date which is one year from the date of issuance of such standby Letter of Credit; and (vi) in no event shall any commercial Letter of Credit have an expiration date later than the earlier of (1) the Revolving Loan Commitment Termination Date and (2) the date which is 180 days from the date of issuance of such commercial Letter of Credit. Subject to the foregoing, Issuing Bank may agree that a standby Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each, unless Issuing Bank elects not to extend for any such additional period; provided, Issuing Bank shall not extend any such Letter of Credit if it has received written notice that an Event of Default has occurred and is continuing at the time Issuing Bank must elect to allow such extension. (b) Notice of Issuance. Whenever Company desires the issuance (or amendment) of a Letter of Credit or a Hedge Letter of Credit, it shall deliver to Issuing Bank and Administrative Agent an Issuance Notice no later than 12:00 p.m. (New York City time) at least two Business Days in the case of standby letters of credit and Hedge Letters of Credit or five Business Days in the case of commercial letters of credit, or in each case such shorter period as may be agreed to by Issuing Bank in any particular instance, in advance of the proposed date of issuance or amendment that increases or decreases the stated amount. Upon satisfaction or waiver of the conditions set forth in Section 3.2, Issuing Bank shall issue the requested Letter of Credit or Hedge Letter of Credit only in accordance with Issuing Bank's standard operating procedures. Upon the issuance of any Letter of Credit or Hedge Letter of Credit or amendment or modification to a Letter of Credit or Hedge Letter of Credit, Issuing Bank shall promptly notify each Lender of such issuance, which notice shall be accompanied by a copy of such Letter of Credit or Hedge Letter of Credit or amendment or modification to a Letter of Credit or Hedge Letter of Credit and the amount of such Lender's respective participation in such Letter of Credit or Hedge Letter of Credit pursuant to Section 2.4(e). (c) Responsibility of Issuing Bank With Respect to Requests for Drawings and Payments. In determining whether to honor any drawing under any Letter of Credit or Hedge Letter of Credit by the beneficiary thereof, Issuing Bank shall be responsible only to examine the documents delivered under such Letter of Credit or Hedge Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit or Hedge Letter of Credit. Subject to the last sentence of this Section 2.4(c), as between Company and Issuing Bank, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit or Hedge Letters of Credit issued by Issuing Bank, by the respective beneficiaries of such Letters of Credit or Hedge Letters of Credit. In furtherance and not in limitation of the foregoing, Issuing Bank shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document 44 submitted by any party in connection with the application for and issuance of any such Letter of Credit or Hedge Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or Hedge Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit or Hedge Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit or Hedge Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or Hedge Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit or Hedge Letter of Credit of the proceeds of any drawing under such Letter of Credit or Hedge Letter of Credit; or (viii) any consequences arising from causes beyond the control of Issuing Bank, including any Governmental Acts; none of the above shall affect or impair, or prevent the vesting of, any of Issuing Bank's rights or powers hereunder. Without limiting the foregoing and in furtherance thereof, any action taken or omitted by Issuing Bank under or in connection with the Letters of Credit or Hedge Letters of Credit or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not give rise to any liability on the part of Issuing Bank to Company. Notwithstanding anything to the contrary contained in this Section 2.4(c), Company shall retain any and all rights it may have against Issuing Bank for any liability arising solely out of the gross negligence or willful misconduct of Issuing Bank. (d) Reimbursement by Company of Amounts Drawn or Paid Under Letters of Credit. In the event Issuing Bank has determined to honor a drawing under a Letter of Credit, it shall immediately notify Company and Administrative Agent, and Company shall reimburse Issuing Bank on or before the Business Day immediately following the date on which such drawing is honored (the "REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal to the amount of such honored drawing; provided, anything contained herein to the contrary notwithstanding, (i) unless Company shall have notified Administrative Agent and Issuing Bank prior to 10:00 a.m. (New York City time) on the date such drawing is honored that Company intends to reimburse Issuing Bank for the amount of such honored drawing with funds other than the proceeds of Revolving Loans, Company shall be deemed to have given a timely Funding Notice to Administrative Agent requesting Lenders to make Revolving Loans that are Base Rate Loans on the Reimbursement Date in an amount in Dollars equal to the amount of such honored drawing, and (ii) subject to satisfaction or waiver of the conditions specified in Section 3.2, Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans in the amount of such honored drawing, the proceeds of which shall be applied directly by Administrative Agent to reimburse Issuing Bank for the amount of such honored 45 drawing; and provided further, if for any reason proceeds of Revolving Loans are not received by Issuing Bank on the Reimbursement Date in an amount equal to the amount of such honored drawing, Company shall reimburse Issuing Bank, on demand, in an amount in same day funds equal to the excess of the amount of such honored drawing over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this Section 2.4(d) shall be deemed to relieve any Lender from its obligation to make Revolving Loans on the terms and conditions set forth herein, and Company shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Revolving Loans under this Section 2.4(d). (e) Lenders' Purchase of Participations in Letters of Credit and Hedge Letters of Credit. Immediately upon the issuance of each Letter of Credit or Hedge Letter of Credit, each Lender having a Revolving Commitment or Hedge L/C Commitment, as applicable, shall be deemed to have purchased, and hereby agrees to irrevocably purchase, from Issuing Bank a participation in such Letter of Credit or Hedge Letter of Credit, as the case may be, and any drawings honored thereunder in an amount equal to such Lender's Pro Rata Share (with respect to the Revolving Commitments or Hedge L/C Commitments, as applicable) of the maximum amount which is or at any time may become available to be drawn thereunder. In the event that Company shall fail for any reason to reimburse Issuing Bank as provided in Section 2.4(d) (with respect to Letters of Credit) or Section 2.4(i) (with respect to Hedge Letters of Credit), and in each case as the same has not been repaid from the proceeds of Revolving Loans in accordance with Section 2.4(d) or a Hedge L/C Loan in accordance with Section 2.4(i), Issuing Bank shall promptly notify each Lender of the unreimbursed amount of such honored drawing and of such Lender's respective participation therein based on such Lender's Pro Rata Share of the Revolving Commitments or the Hedge L/C Commitments, as applicable. Each Lender shall make available to Issuing Bank an amount equal to its respective participation, in Dollars and in same day funds, at the office of Issuing Bank specified in such notice, not later than 12:00 p.m. (New York City time) on the first business day (under the laws of the jurisdiction in which such office of Issuing Bank is located) after the date notified by Issuing Bank. In the event that any Lender fails to make available to Issuing Bank on such business day the amount of such Lender's participation in such Letter of Credit or Hedge Letter of Credit, as applicable, as provided in this Section 2.4(e), Issuing Bank shall be entitled to recover such amount on demand from such Lender together with interest thereon for three Business Days at the rate customarily used by Issuing Bank for the correction of errors among banks and thereafter at the Base Rate. Nothing in this Section 2.4(e) shall be deemed to prejudice the right of any Lender to recover from Issuing Bank any amounts made available by such Lender to Issuing Bank pursuant to this Section in the event that it is determined that the payment with respect to a Letter of Credit or Hedge Letter of Credit in respect of which payment was made by such Lender constituted gross negligence or willful misconduct on the part of Issuing Bank. In the event Issuing Bank shall have been reimbursed by other Lenders pursuant to this Section 2.4(e) for all or any portion of any drawing honored by 46 Issuing Bank under a Letter of Credit or Hedge Letter of Credit, such Issuing Bank shall distribute to each Lender which has paid all amounts payable by it under this Section 2.4(e) with respect to such honored drawing such Lender's Pro Rata Share of all payments subsequently received by Issuing Bank from Company in reimbursement of such honored drawing when such payments are received. Any such distribution shall be made to a Lender at its primary address set forth below its name on Appendix B or at such other address as such Lender may request. (f) Obligations Absolute. The obligation of Company to reimburse Issuing Bank for drawings honored under the Letters of Credit or Hedge Letters of Credit issued by it and to repay any Revolving Loans made by Lenders pursuant to Section 2.4(d) and the obligations of Lenders under Section 2.4(e) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms hereof under all circumstances including any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit or Hedge Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit or Hedge Letter of Credit (or any Persons for whom any such transferee may be acting), Issuing Bank, Lender or any other Person or, in the case of a Lender, against Company, whether in connection herewith, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company or one of its Subsidiaries and the beneficiary for which any Letter of Credit or Hedge Letter of Credit was procured); (iii) any draft or other document presented under any Letter of Credit or Hedge Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by Issuing Bank under any Letter of Credit or Hedge Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit or Hedge Letter of Credit; (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (vi) any breach hereof or any other Credit Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Default shall have occurred and be continuing; provided, in each case, that payment by Issuing Bank under the applicable Letter of Credit or Hedge Letter of Credit shall not have constituted gross negligence or willful misconduct of Issuing Bank under the circumstances in question. (g) Indemnification. Without duplication of any obligation of Company under Section 10.2 or 10.3, in addition to amounts payable as provided herein, Company hereby agrees to protect, indemnify, pay and save harmless Issuing Bank from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which Issuing Bank may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit or Hedge Letter of Credit by Issuing Bank, other than as a result of (1) the gross 47 negligence or willful misconduct of Issuing Bank or (2) the wrongful dishonor by Issuing Bank of a proper demand for payment made under any Letter of Credit or Hedge Letter of Credit issued by it, or (ii) the failure of Issuing Bank to honor a drawing under any such Letter of Credit or Hedge Letter of Credit as a result of any Governmental Act. (h) Hedge Letters of Credit. During the Hedge L/C Commitment Period, subject to the terms and conditions hereof, Issuing Bank hereby agrees to issue Hedge Letters of Credit for the account of Company in an amount not to exceed the aggregate Hedge L/C Commitments; provided that each such Hedge Letter of Credit shall be used by Company solely to secure Company's obligations under the Swap Agreement. The aggregate outstanding amount of Hedge Letters of Credit shall not exceed the aggregate Hedge L/C Commitment at any time. Each of the Lenders, the Agents, the Issuing Bank and Company agrees that (A) the obligations related to each such Hedge Letter of Credit shall constitute Obligations for all purposes of this Agreement and the other Credit Documents, unless otherwise specifically excluded therefrom and (B) each such Hedge Letter of Credit shall be entitled and subject to all other rights, remedies, benefits, duties and obligations contained in the Credit Documents, including, without limitation, the benefits of the Liens of the Collateral Trustee on the Collateral. In no event shall any Hedge Letter of Credit have an expiration date later than the earlier of (1) the Hedge L/C Commitment Termination Date and (2) the date which is one year from the date of issuance of such Hedge Letter of Credit. Subject to the foregoing, Issuing Bank may agree that a Hedge Letter of Credit will automatically be extended for one or more successive periods not to exceed one year each, unless Issuing Bank elects not to extend for any such additional period; provided, Issuing Bank shall not extend any such Hedge Letter of Credit if it has received written notice that an Event of Default has occurred and is continuing at the time Issuing Bank must elect to allow such extension; provided, further, in the event a Funding Default exists, Issuing Bank shall not be required to issue any Hedge Letter of Credit unless Issuing Bank has entered into arrangements satisfactory to it and Company to eliminate Issuing Bank's risk with respect to the participation in Hedge Letters of Credit of the Defaulting Lender, including by cash collateralizing such Defaulting Lender's Pro Rata Share of the Hedge Letter of Credit Usage. (i) Drawing and Reimbursement re Hedge Letters of Credit. The payment by the Issuing Bank of a drawing under a Hedge Letter of Credit shall constitute the making by the Issuing Bank of a loan in the amount of such payment. In the event Issuing Bank has determined to honor a drawing under a Hedge Letter of Credit, it shall immediately notify Company and Administrative Agent, and Company shall reimburse Issuing Bank on or before the Business Day immediately following the date on which such drawing is honored (the "HEDGE L/C REIMBURSEMENT DATE") in an amount in Dollars and in same day funds equal to the amount of such honored drawing; provided, anything contained herein to the contrary notwithstanding, (i) unless Company shall have notified Administrative Agent and Issuing Bank prior to 10:00 a.m. (New York City time) on the date such drawing is honored that Company intends to reimburse 48 Issuing Bank for the amount of such honored drawing with funds other than the proceeds of Hedge L/C Loans, Company shall be deemed to have given a timely Funding Notice to Administrative Agent requesting Lenders to make Hedge L/C Loans that are Base Rate Loans on the Hedge L/C Reimbursement Date in an amount in Dollars equal to the amount of such honored drawing, and (ii) subject to satisfaction or waiver of the conditions specified in Section 3.2, Lenders shall, on the Hedge L/C Reimbursement Date, make Hedge L/C Loans that are Base Rate Loans in the amount of such honored drawing, the proceeds of which shall be applied directly by Administrative Agent to reimburse Issuing Bank for the amount of such honored drawing; and provided further, if for any reason proceeds of Hedge L/C Loans are not received by Issuing Bank on the Hedge L/C Reimbursement Date in an amount equal to the amount of such honored drawing, Company shall reimburse Issuing Bank, on demand, in an amount in same day funds equal to the excess of the amount of such honored drawing over the aggregate amount of such Hedge L/C Loans, if any, which are so received. Nothing in this Section 2.4(i) shall be deemed to relieve any Lender from its obligation to make Hedge L/C Loans on the terms and conditions set forth herein, and Company shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Hedge L/C Loans under this Section 2.4(i). (j) Replacement of Issuing Bank. If the Issuing Bank (the "CURRENT ISSUING BANK") fails to meet the Letter of Credit Issuer Rating or defaults in making any required payment pursuant to a Letter of Credit or Hedge Letter of Credit, it shall promptly notify the Administrative Agent and the Company. If the Issuing Bank fails to meet the Letter of Credit Issuer Rating or defaults in making any required payment pursuant to a Letter of Credit or Hedge Letter of Credit, and regardless of whether Company or Administrative Agent shall have received the notice referred to in the immediately preceding sentence, (i) Company shall be permitted to locate a banking institution (including any Lender) to act as the new Issuing Bank (the "REPLACEMENT ISSUING BANK") and (ii) the Administrative Agent shall use commercially reasonable efforts to assist the Company in locating a Replacement Issuing Bank. Any Replacement Issuing Bank must meet the Letter of Credit Issuer Rating. In connection with such replacement, Company shall have caused each outstanding Letter of Credit or Hedge Letter of Credit, as applicable, issued thereby to be cancelled or returned to the Current Issuing Bank. Current Issuing Bank agrees to cooperate and provide all needed documentation reasonably required to effect the foregoing replacement. (k) Swap Agreement Support. Notwithstanding anything herein to the contrary, the Company shall (i) from the Closing Date through such time as the Senior Leverage Ratio (determined for such period by reference to the most recent Compliance Certificate delivered pursuant to Section 5.1(d) calculating the Senior Leverage Ratio) shall be first determined to be 0.75:1.00 or less, have requested issuance of, and maintained, Hedge Letters of Credit and, if required, Hedge Support Letters of Credit in an aggregate amount of not less than the Maximum 49 Delivery Amount and (ii) thereafter, have requested issuance of, and maintained, Hedge Letters of Credit and, if required, Hedge Support Letters of Credit in an aggregate amount as may be required pursuant to the credit support requirements under any applicable Swap Agreements. (l) Letter of Credit Applications. If required by its standard operating procedures, the Issuing Bank may require Company to execute and deliver one or more letter of credit applications or similar documents ("APPLICATIONS") in connection with the issuance by the Issuing Bank of any Letter of Credit or Hedge Letter of Credit. Notwithstanding the terms and provisions of any such Application and the fact that Company executes and delivers such Application after the date this Agreement is executed and delivered, any provision of any Application that purports to add additional interest, charges or rights to indemnification not found in this Agreement, that provides for additional or different defaults, events of default, or grace periods not found in this Agreement, that purports to create additional security interests not provided for in this Agreement or any Credit Document, that purports to require the posting of additional cash collateral or other security, or that is otherwise inconsistent with, or in conflict with, any provision of this Agreement or any Credit Document, shall not have any force or effect and the provisions of this Agreement and the Credit Documents shall apply. 2.5. PRO RATA SHARES; AVAILABILITY OF FUNDS. (a) Pro Rata Shares. All Loans shall be made, and all participations purchased, by Lenders simultaneously and proportionately to their respective Pro Rata Shares, it being understood that no Lender shall be responsible for any default by any other Lender in such other Lender's obligation to make a Loan requested hereunder or purchase a participation required hereby nor shall any Term Loan Commitment, any Revolving Commitment or Hedge L/C Commitment of any Lender be increased or decreased as a result of a default by any other Lender in such other Lender's obligation to make a Loan requested hereunder or purchase a participation required hereby. (b) Availability of Funds. Unless Administrative Agent shall have been notified by any Lender prior to the applicable Credit Date that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Loan requested on such Credit Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Credit Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Credit Date. If such corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the customary rate set by Administrative Agent for the correction of errors among banks for three Business Days and 50 thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Credit Date until the date such amount is paid to Administrative Agent, at the rate payable hereunder for Base Rate Loans for such Class of Loans. Nothing in this Section 2.5(b) shall be deemed to relieve any Lender from its obligation to fulfill its Term Loan Commitments and Revolving Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. 2.6. USE OF PROCEEDS. The proceeds of the Term Loans will be used to finance a portion of the Acquisition, including the refinancing of Existing Indebtedness and the payment of Transaction Costs. Amounts available under the Revolving Commitments shall be used for working capital requirements and other general corporate purposes of Company, including Permitted Acquisitions; provided that (i) up to $15,000,000 of the Revolving Commitments shall be available for the issuance of Hedge Support Letters of Credit from the Closing Date through the Revolving Commitment Termination Date and (ii) up to an additional $5,000,000 of the Revolving Commitments shall be available for the issuance of Letters of Credit for general corporate purposes from the Closing Date through the Revolving Commitment Termination Date. Amounts available under the Hedge L/C Commitments shall be used solely to provide credit support to Company's obligations under the Swap Agreement. No portion of the proceeds of any Credit Extension shall be used in any manner that causes or might cause such Credit Extension or the application of such proceeds to violate Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation thereof or to violate the Exchange Act. 2.7. EVIDENCE OF DEBT; REGISTER; LENDERS' BOOKS AND RECORDS; NOTES. (a) Lenders' Evidence of Debt. Each Lender shall maintain on its internal records an account or accounts evidencing the Obligations of Company to such Lender, including the amounts of the Loans made by it and each repayment and prepayment in respect thereof. Any such recordation shall be conclusive and binding on Company, absent manifest error; provided, that the failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Revolving Commitments or Company's Obligations in respect of any applicable Loans; and provided further, in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern. (b) Register. Administrative Agent (or its agent or sub-agent appointed by it) shall maintain at the Principal Office a register for the recordation of the names and addresses of 51 Lenders and the Revolving Commitments, the Hedge L/C Commitments and Loans of each Lender from time to time (the "REGISTER"). The Register, as in effect at the close of business on the preceding Business Day, shall be available for inspection by Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. Administrative Agent shall record, or shall cause to be recorded, in the Register the Revolving Commitments, Hedge L/C Commitments and the Loans in accordance with the provisions of Section 10.6, and each repayment or prepayment in respect of the principal amount of the Loans, and any such recordation shall be conclusive and binding on Company and each Lender, absent manifest error; provided, failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Revolving Commitments, Hedge L/C Commitments or Company's Obligations in respect of any Loan. Company hereby designates GSCP to serve as Company's agent solely for purposes of maintaining the Register as provided in this Section 2.7, and Company hereby agrees that, GSCP and its officers, directors, employees, agents, sub-agents and affiliates shall constitute "Indemnitees." (c) Notes. If so requested by any Lender by written notice to Company (with a copy to Administrative Agent) at least two Business Days prior to the Closing Date, or at any time thereafter, Company shall execute and deliver to such Lender (and/or, if applicable and if so specified in such notice, to any Person who is an assignee of such Lender pursuant to Section 10.6) on the Closing Date (or, if such notice is delivered after the Closing Date, promptly after Company's receipt of such notice) a Note or Notes to evidence such Lender's Term Loan, Revolving Loan or Hedge L/C Loan, as the case may be. 2.8. INTEREST ON LOANS. (a) Except as otherwise set forth herein, each Class of Loan shall bear interest on the unpaid principal amount thereof from the date made through repayment (whether by acceleration or otherwise) thereof as follows: (i) in the case of Revolving Loans and Hedge L/C Loans: (1) if a Base Rate Loan, at the Base Rate plus the Applicable Margin; or (2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus the Applicable Margin; and (ii) in the case of Term Loans: 52 (1) if a Base Rate Loan, at the Base Rate plus the Applicable Margin; or (2) if a Eurodollar Rate Loan, at the Adjusted Eurodollar Rate plus the Applicable Margin. (b) The basis for determining the rate of interest with respect to any Loan, and the Interest Period with respect to any Eurodollar Rate Loan, shall be selected by Company and notified to Administrative Agent and Lenders pursuant to the applicable Funding Notice or Conversion/Continuation Notice, as the case may be; provided, the Term Loans initially shall be made as Base Rate Loans until the date which is thirty (30) days following the Closing Date. If on any day a Loan is outstanding with respect to which a Funding Notice or Conversion/Continuation Notice has not been delivered to Administrative Agent in accordance with the terms hereof specifying the applicable basis for determining the rate of interest, then for that day such Loan shall be a Base Rate Loan. (c) In connection with Eurodollar Rate Loans there shall be no more than five (5) Interest Periods outstanding at any time. In the event Company fails to specify between a Base Rate Loan or a Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, such Loan (if outstanding as a Eurodollar Rate Loan) will be automatically converted into a Base Rate Loan on the last day of the then-current Interest Period for such Loan (or if outstanding as a Base Rate Loan will remain as, or (if not then outstanding) will be made as, a Base Rate Loan). In the event Company fails to specify an Interest Period for any Eurodollar Rate Loan in the applicable Funding Notice or Conversion/Continuation Notice, Company shall be deemed to have selected an Interest Period of one month. As soon as practicable after 10:00 a.m. (New York City time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be final, conclusive and binding upon all parties) the interest rate that shall apply to the Eurodollar Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender. (d) Interest payable pursuant to Section 2.8(a) shall be computed (i) in the case of Base Rate Loans on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Eurodollar Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Term Loan, the last Interest Payment Date with respect to such Term Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period 53 applicable to such Loan or, with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the case may be, shall be excluded; provided, if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. (e) Except as otherwise set forth herein, interest on each Loan (i) with respect to Revolving Loans and Hedge L/C Loans, shall accrue on a daily basis and shall be payable in arrears on each Interest Payment Date with respect to interest accrued on and to each such payment date; (ii) with respect to Term Loans, shall accrue on a daily basis on and to the most recent March 31st, June 30th, September 30th and December 31st prior to such Interest Payment Date and shall be payable in arrears on each Interest Payment Date; (iii) shall accrue on a daily basis and shall be payable in arrears upon any prepayment of that Loan, whether voluntary or mandatory, to the extent accrued on the amount being prepaid; and (iv) shall accrue on a daily basis and shall be payable in arrears at maturity of the Loans, including final maturity of the Loans; provided, however, with respect to any voluntary prepayment of a Base Rate Loan, accrued interest shall instead be payable on the applicable Interest Payment Date. (f) Company agrees to pay to Issuing Bank, with respect to drawings honored under any Letter of Credit or Hedge Letter of Credit, interest on the amount paid by Issuing Bank in respect of each such honored drawing from the date such drawing is honored to but excluding the date such amount is reimbursed by or on behalf of Company at a rate equal to (i) for the period from the date such drawing is honored to but excluding the applicable Reimbursement Date, the rate of interest otherwise payable hereunder with respect to Revolving Loans that are Base Rate Loans, and (ii) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable hereunder with respect to Revolving Loans that are Base Rate Loans. (g) Interest payable pursuant to Section 2.8(f) shall be computed on the basis of a 365/366-day year for the actual number of days elapsed in the period during which it accrues, and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit or Hedge Letter of Credit, as the case may be, is reimbursed in full. Promptly upon receipt by Issuing Bank of any payment of interest pursuant to Section 2.8(f), Issuing Bank shall distribute to each Lender, out of the interest received by Issuing Bank in respect of the period from the date such drawing is honored to but excluding the date on which Issuing Bank is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of any Revolving Loans or Hedge L/C Loan), the amount that such Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit or Hedge Letter of Credit, as the case may be, for such period if no drawing had been honored under such Letter of Credit or Hedge Letter of Credit. In the event Issuing Bank shall have been reimbursed by Lenders for all or any portion of such honored drawing, Issuing Bank shall distribute to each Lender which has paid all amounts payable by it under Section 2.4(e) with respect to such honored drawing such Lender's Pro Rata 54 Share of any interest received by Issuing Bank in respect of that portion of such honored drawing so reimbursed by Lenders for the period from the date on which Issuing Bank was so reimbursed by Lenders to but excluding the date on which such portion of such honored drawing is reimbursed by Company. 2.9. CONVERSION/CONTINUATION. (a) Subject to Section 2.18 and so long as no Default or Event of Default shall have occurred and then be continuing, Company shall have the option: (i) to convert at any time all or any part of any Term Loan, Revolving Loan or Hedge L/C Loan equal to $1,000,000 and integral multiples of $1,000,000 in excess of that amount from one Type of Loan to another Type of Loan; provided, a Eurodollar Rate Loan may only be converted on the expiration of the Interest Period applicable to such Eurodollar Rate Loan unless Company shall pay all amounts due under Section 2.18 in connection with any such conversion; or (ii) upon the expiration of any Interest Period applicable to any Eurodollar Rate Loan, to continue all or any portion of such Loan equal to $5,000,000 and integral multiples of $1,000,000 in excess of that amount as a Eurodollar Rate Loan. (b) Company shall deliver a Conversion/Continuation Notice to Administrative Agent no later than 10:00 a.m. (New York City time) at least one Business Day in advance of the proposed conversion date (in the case of a conversion to a Base Rate Loan) and at least three Business Days in advance of the proposed conversion/continuation date (in the case of a conversion to, or a continuation of, a Eurodollar Rate Loan). Except as otherwise provided herein, a Conversion/Continuation Notice for conversion to, or continuation of, any Eurodollar Rate Loans (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance therewith. 2.10. DEFAULT INTEREST. Upon the occurrence and during the continuance of an Event of Default under Section 8.1(a), the overdue principal amount of all Loans outstanding and, to the extent permitted by applicable law, any overdue interest payments on the Loans or any overdue fees or other amounts owed hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable on demand at a rate that is 2% per annum in excess of the interest rate otherwise payable hereunder with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate 55 Loans); provided, in the case of Eurodollar Rate Loans, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans and any overdue principal amount thereof shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable hereunder for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this Section 2.10 is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Administrative Agent or any Lender. 2.11. FEES. (a) Company agrees to pay to Lenders having Revolving Exposure: (i) commitment fees equal to (1) the average of the daily difference between (a) the Revolving Commitments, and (b) the Total Utilization of Revolving Commitments, times (2) 0.50% per annum; and (ii) during the Letter of Credit Commitment Period, letter of credit fees equal to (1) the Applicable Margin for Revolving Loans that are Eurodollar Rate Loans, times (2) the average aggregate daily maximum amount available to be drawn under all such Letters of Credit (regardless of whether any conditions for drawing could then be met and determined as of the close of business on any date of determination). All fees referred to in this Section 2.11(a) shall be paid to Administrative Agent at its Principal Office and upon receipt, Administrative Agent shall promptly distribute to each Lender its Pro Rata Share thereof. (b) Company agrees to pay to Lenders having Hedge L/C Exposure: (i) commitment fees equal to (1) the average of the daily difference between (a) the Hedge L/C Commitments, and (b) the sum of (x) the aggregate principal amount of outstanding Hedge L/C Loans plus (y) the Hedge Letter of Credit Usage, times (2) 0.50% per annum; and (ii) letter of credit fees equal to (1) the Applicable Margin for Revolving Loans that are Eurodollar Rate Loans, times (2) the average aggregate daily maximum amount available to be drawn under all such Hedge Letters of Credit (regardless of whether any conditions for drawing could then be met and determined as of the close of business on any date of determination). 56 (c) Company agrees to pay directly to Issuing Bank, for its own account, the following fees: (i) a fronting fee with respect to Letters of Credit and Hedge Letters of Credit to be agreed between Issuing Bank and Company; and (ii) such documentary and processing charges for any issuance, amendment, transfer or payment of a Letter of Credit or Hedge Letter of Credit, as the case may be, as are in accordance with Issuing Bank's standard schedule for such charges and as in effect at the time of such issuance, amendment, transfer or payment, as the case may be. (d) All fees referred to in Sections 2.11(a), (b) and (c)(i) shall be calculated on the basis of a 360-day year and the actual number of days elapsed and shall be payable quarterly in arrears on April 1, July 1, October 1 and January 1 of each year during the Revolving Commitment Period or Hedge L/C Commitment Period, as applicable, commencing on the first such date to occur after the Closing Date, and on the Revolving Commitment Termination Date with respect to the fees referred to in Sections 2.11(a)(i) and (c)(i) (with respect to Letters of Credit) and (iii) on the Hedge L/C Commitment Termination Date with respect to the fees referred to in Section 2.11(b) and (c)(i) (with respect to Hedge Letters of Credit). (e) In addition to any of the foregoing fees, Company agrees to pay to Agents such other fees in the amounts and at the times separately agreed upon. 2.12. SCHEDULED PAYMENTS/COMMITMENT REDUCTIONS. (a) Scheduled Installments. The principal amounts of the Term Loans shall be repaid in consecutive quarterly installments (each, an "INSTALLMENT") in the aggregate amounts set forth below on the four quarterly scheduled Interest Payment Dates applicable to Term Loans (each, an "INSTALLMENT DATE"), commencing September 30, 2004:
FISCAL QUARTER TERM LOAN INSTALLMENTS - ---------------------------------- ----------------------- Each Installment Date prior to July $250,000.00 7, 2010 Each Installment Date during the $23,500,000.00 period commencing July 7, 2010 through the Term
57
FISCAL QUARTER TERM LOAN INSTALLMENTS - ---------------------------------- ----------------------- Loan Maturity Date
Notwithstanding the foregoing, (x) such Installments shall be reduced in connection with any voluntary or mandatory prepayments of the Term Loans in accordance with Sections 2.13, 2.14 and 2.15, as applicable; and (y) the Term Loans, together with all other amounts owed hereunder with respect thereto, shall, in any event, be paid in full no later than the Term Loan Maturity Date, respectively. (b) Commitment Reductions. The Revolving Commitments and Hedge L/C Commitments, as the case may be, shall be permanently reduced in connection with any voluntary or mandatory reductions of the Revolving Commitments or Hedge L/C Commitments, as the case may be, in accordance with Sections 2.13, 2.14, and 2.15, as applicable, and all other amounts owed hereunder with respect thereto shall, in any event, be paid in full on the Revolving Commitment Termination Date and Hedge L/C Commitment Termination Date, respectively. 2.13. VOLUNTARY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) Voluntary Prepayments. (i) Any time and from time to time, Company may prepay any Loans on any Business Day in whole or in part, in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount. (ii) All such prepayments shall be made: (1) upon not less than one Business Day's prior written or telephonic notice in the case of Base Rate Loans; and (2) upon not less than three Business Days' prior written or telephonic notice in the case of Eurodollar Rate Loans. in each case given to Administrative Agent, by 12:00 p.m. (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent (and Administrative Agent will promptly transmit such telephonic or original notice for Term Loans or Revolving Loans, as the case may be, by telefacsimile or telephone to each Lender). Upon the giving of any such notice, the principal amount of the Loans specified in such notice shall 58 become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in Section 2.15(a). (b) Voluntary Commitment Reductions. (i) Company may, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each applicable Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Commitments in an amount up to the amount by which the Revolving Commitments exceed the Total Utilization of Revolving Commitments at the time of such proposed termination or reduction; provided, any such partial reduction of the Revolving Commitments shall be in an aggregate minimum amount of $1,000,000 and integral multiples of $1,000,000 in excess of that amount. (ii) Company's notice to Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Commitments shall be effective on the date specified in Company's notice and shall reduce the Revolving Commitment of each Lender proportionately to its Pro Rata Share thereof. 2.14. MANDATORY PREPAYMENTS/COMMITMENT REDUCTIONS. (a) Asset Sales. No later than the first Business Day following the date of receipt by Company or any of its Subsidiaries of any Net Asset Sale Proceeds, Company shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.15(b) in an aggregate amount equal to such Net Asset Sale Proceeds; provided, (i) so long as no Default or Event of Default shall have occurred and be continuing, and (ii) to the extent that aggregate Net Asset Sale Proceeds from the Closing Date through the applicable date of determination do not exceed $60,000,000, Company shall have the option, directly or through one or more of its Subsidiaries, to invest Net Asset Sale Proceeds within three hundred sixty days of receipt thereof in productive assets of the general type used in the business of Company and its Subsidiaries; provided further, pending any such investment all such Net Asset Sale Proceeds shall be applied to prepay Revolving Loans to the extent outstanding (without a reduction in Revolving Commitments). (b) Insurance/Condemnation Proceeds. No later than the first Business Day following the date of receipt by Company or any of its Subsidiaries, or Administrative Agent as loss payee, of any Net Insurance/Condemnation Proceeds, Company shall prepay the Loans 59 and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.15(b) in an aggregate amount equal to such Net Insurance/Condemnation Proceeds; provided, (i) so long as no Default or Event of Default shall have occurred and be continuing, and (ii) to the extent that aggregate Net Insurance/Condemnation Proceeds from the Closing Date through the applicable date of determination do not exceed $25,000,000, Company shall have the option, directly or through one or more of its Subsidiaries to invest such Net Insurance/Condemnation Proceeds within three hundred sixty days of receipt thereof in productive assets of the general type used in the business of Company and its Subsidiaries, which investment may include the repair, restoration or replacement of the applicable assets thereof; provided further, pending any such investment all such Net Insurance/Condemnation Proceeds, as the case may be, shall be applied to prepay Revolving Loans to the extent outstanding (without a reduction in Revolving Commitments). (c) Issuance of Equity Securities. On the date of receipt by Company of any Cash proceeds from a capital contribution to, or the issuance of any Capital Stock of, Company or any of its Subsidiaries (other than pursuant to any employee stock or stock option compensation plan or capital contribution made by Company to any Subsidiary), Company shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.15(b) in an aggregate amount equal to 50% of such Cash proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses. (d) Issuance of Debt. On the date of receipt by Company or any of its Subsidiaries of any Cash proceeds from the incurrence of any Indebtedness of Company or any of its Subsidiaries (other than Cash proceeds of any Indebtedness permitted to be incurred pursuant to Section 6.1), Company shall prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.15(b) in an aggregate amount equal to 100% of such Cash proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses. (e) Consolidated Excess Cash Flow. In the event that there shall be Consolidated Excess Cash Flow for any Fiscal Year (commencing with Fiscal Year 2004), Company shall, no later than one hundred and five (105) days after the end of such Fiscal Year, prepay the Loans and/or the Revolving Commitments shall be permanently reduced as set forth in Section 2.15(b) in an aggregate amount equal to 100% of such Consolidated Excess Cash Flow; provided, during any period in which the Senior Leverage Ratio (determined for any such period by reference to the most recent Compliance Certificate delivered pursuant to Section 5.1(d) calculating the Senior Leverage Ratio) shall be 0.75:1.00 or less, Company shall only be required to make the prepayments and/or reductions otherwise required hereby in an amount equal to 75% of such Consolidated Excess Cash Flow. 60 (f) Revolving Loans; Hedge L/C Loans. (i) Company shall from time to time prepay the Revolving Loans to the extent necessary so that the Total Utilization of Revolving Commitments shall not at any time exceed the Revolving Commitments then in effect and (ii) Company shall from time to time prepay the Hedge L/C Loans to the extent necessary so that the Total Utilization of Hedge L/C Commitments shall not at any time exceed the Hedge L/C Commitments then in effect. (g) Prepayment Certificate. Concurrently with any prepayment of the Loans and/or reduction of the Revolving Commitments pursuant to Sections 2.14(a) through 2.14(e), Company shall deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the calculation of the amount of the applicable net proceeds or Consolidated Excess Cash Flow, as the case may be. In the event that Company shall subsequently determine that the actual amount received exceeded the amount set forth in such certificate, Company shall promptly make an additional prepayment of the Loans and/or the Revolving Commitments shall be permanently reduced in an amount equal to such excess, and Company shall concurrently therewith deliver to Administrative Agent a certificate of an Authorized Officer demonstrating the derivation of such excess. 2.15. APPLICATION OF PREPAYMENTS/REDUCTIONS. (a) Application of Voluntary Prepayments by Type of Loans. Any prepayment of any Loan pursuant to Section 2.13(a) shall be applied as specified by Company in the applicable notice of prepayment; provided, in the event Company fails to specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied as follows: first, to repay outstanding Revolving Loans to the full extent thereof; second, to repay outstanding Hedge L/C Loans to the full extent thereof; and third, to prepay the Term Loans. Any prepayment of any Term Loan pursuant to Section 2.13(a) shall be further applied on a pro rata basis to reduce the scheduled remaining Installments of principal on such Term Loan. (b) Application of Mandatory Prepayments by Type of Loans. Any amount required to be paid pursuant to Sections 2.14(a) through 2.14(e) shall be applied as follows: 61 first, to prepay Term Loans on a pro rata basis to reduce the scheduled remaining Installments of principal of the Term Loans; second, to prepay the Revolving Loans to the full extent thereof and, except as provided in Sections 2.14(a) and (b), to permanently reduce the Revolving Commitments by the amount of such prepayment; third, to prepay the Hedge L/C Loans to the full extent thereof; fourth, to prepay outstanding reimbursement obligations with respect to Letters of Credit and to further permanently reduce the Revolving Loan Commitments by the amount of such prepayment; fifth, to prepay outstanding reimbursement obligations with respect to Hedge Letters of Credit; sixth, to cash collateralize Letters of Credit and to further permanently reduce the Revolving Loan Commitments by the amount of such cash collateralization; seventh, to cash collateralize Hedge Letters of Credit; eighth, to further permanently reduce the Revolving Commitments to the full extent thereof; and ninth, to permanently reduce the Hedge L/C Commitments to the full extent thereof. (c) Application of Prepayments of Loans to Base Rate Loans and Eurodollar Rate Loans. Considering each Class of Loans being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to Eurodollar Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to Section 2.18(c). 2.16. GENERAL PROVISIONS REGARDING PAYMENTS. (a) All payments by Company of principal, interest, fees and other Obligations shall be made in Dollars in same day funds, without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 p.m. (New York City time) on the date due at the Principal Office designated by Administrative Agent for the account of Lenders; for purposes of computing interest and fees, funds received by 62 Administrative Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. (b) All payments in respect of the principal amount of any Loan (other than voluntary prepayments of Revolving Loans) shall be accompanied by payment of accrued interest on the principal amount being repaid or prepaid. (c) Administrative Agent (or its agent or sub-agent appointed by it) shall promptly distribute to each Lender at such address as such Lender shall indicate in writing, such Lender's applicable Pro Rata Share of all payments and prepayments of principal and interest due hereunder, together with all other amounts due thereto, including, without limitation, all fees payable with respect thereto, to the extent received by Administrative Agent. (d) Notwithstanding the foregoing provisions hereof, if any Conversion/Continuation Notice is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter. (e) Subject to the provisos set forth in the definition of "Interest Period" as they may apply to Revolving Loans or Hedge L/C Loans, whenever any payment to be made hereunder with respect to any Loan shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and, with respect to Revolving Loans and Hedge L/C Loans only, such extension of time shall be included in the computation of the payment of interest hereunder or of the Revolving Commitment fees hereunder. (f) Company hereby authorizes Administrative Agent to charge Company's accounts with Administrative Agent in order to cause timely payment to be made to Administrative Agent of all principal, interest, fees and expenses due hereunder (subject to sufficient funds being available in its accounts for that purpose). (g) Administrative Agent shall deem any payment by or on behalf of Company hereunder that is not made in same day funds prior to 12:00 p.m. (New York City time) to be a non-conforming payment. Any such payment shall not be deemed to have been received by Administrative Agent until the later of (i) the time such funds become available funds, and (ii) the applicable next Business Day. Administrative Agent shall give prompt telephonic notice to Company and each applicable Lender (confirmed in writing) if any payment is non-conforming. Any non-conforming payment may constitute or become a Default or Event of Default in accordance with the terms of Section 8.1(a). Interest shall continue to accrue on any principal as to which a non-conforming payment is made until such funds become available funds (but in no event less than the period from the date of such payment to the next succeeding applicable 63 Business Day) at the rate determined pursuant to Section 2.10 from the date such amount was due and payable until the date such amount is paid in full. (h) If an Event of Default shall have occurred and not otherwise been waived, and the maturity of the Obligations shall have been accelerated pursuant to Section 8.1, all payments or proceeds received by Agents hereunder in respect of any of the Obligations, shall be applied in accordance with the application arrangements described in Section 7.2 of the Pledge and Security Agreement. 2.17. RATABLE SHARING. Lenders hereby agree among themselves that, except as otherwise provided in the Collateral Documents with respect to amounts realized from the exercise of rights with respect to Liens on the Collateral, if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms hereof), through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Credit Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, amounts payable in respect of Hedge Letters of Credit, fees and other amounts then due and owing to such Lender hereunder or under the other Credit Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (a) notify Administrative Agent and each other Lender of the receipt of such payment and (b) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; provided, if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. 2.18. MAKING OR MAINTAINING EURODOLLAR RATE LOANS. 64 (a) Inability to Determine Applicable Interest Rate. In the event that Administrative Agent shall have determined (which determination shall be final and conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Eurodollar Rate Loans, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Eurodollar Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender of such determination, whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans until such time as Administrative Agent notifies Company and Lenders that the circumstances giving rise to such notice no longer exist, and (ii) any Funding Notice or Conversion/Continuation Notice given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. (b) Illegality or Impracticability of Eurodollar Rate Loans. In the event that on any date any Lender shall have determined (which determination shall be final and conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful as a result of compliance by such Lender in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful), or (ii) has become impracticable, as a result of contingencies occurring after the date hereof which materially and adversely affect the London interbank market or the position of such Lender in that market, then, and in any such event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter (1) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (2) to the extent such determination by the Affected Lender relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Funding Notice or a Conversion/Continuation Notice, the Affected Lender shall make such Loan as (or continue such Loan as or convert such Loan to, as the case may be) a Base Rate Loan, (3) the Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (4) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to a Eurodollar Rate Loan then being requested by Company pursuant to a Funding Notice or a Conversion/Continuation Notice, Company shall have the option, subject to the provisions of Section 2.18(c), to rescind such Funding Notice or Conversion/Continuation Notice as to all 65 Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this Section 2.18(b) shall affect the obligation of any Lender other than an Affected Lender to make or maintain Loans as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms hereof. (c) Compensation for Breakage or Non-Commencement of Interest Periods. Company shall compensate each Lender, upon written request by such Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by such Lender to Lenders of funds borrowed by it to make or carry its Eurodollar Rate Loans and any loss, expense or liability sustained by such Lender in connection with the liquidation or re-employment of such funds but excluding loss of anticipated profits) which such Lender may sustain: (i) if for any reason (other than a default by such Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date specified therefor in a Funding Notice or a telephonic request for borrowing, or a conversion to or continuation of any Eurodollar Rate Loan does not occur on a date specified therefor in a Conversion/Continuation Notice or a telephonic request for conversion or continuation; (ii) if any prepayment or other principal payment of, or any conversion of, any of its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan; or (iii) if any prepayment of any of its Eurodollar Rate Loans is not made on any date specified in a notice of prepayment given by Company. (d) Booking of Eurodollar Rate Loans. Any Lender may make, carry or transfer Eurodollar Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of such Lender. (e) Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation of all amounts payable to a Lender under this Section 2.18 and under Section 2.19 shall be made as though such Lender had actually funded each of its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of such Lender to a domestic office of such Lender in the United States of America; provided, however, each Lender may fund each of its Eurodollar Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this Section 2.18 and under Section 2.19. 2.19. INCREASED COSTS; CAPITAL ADEQUACY. 66 (a) Compensation For Increased Costs and Taxes. Subject to the provisions of Section 2.20 (which shall be controlling with respect to the matters covered thereby), in the event that any Lender (which term shall include Issuing Bank for purposes of this Section 2.19(a)) shall determine (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender with any guideline, request or directive issued or made after the date hereof by any central bank or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable lending office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of the other Credit Documents or any of its obligations hereunder or thereunder or any payments to such Lender (or its applicable lending office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Eurodollar Rate Loans that are reflected in the definition of Adjusted Eurodollar Rate or with respect to Base Rate Loans that are included in the determination of the Prime Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable lending office) or its obligations hereunder or the London interbank market; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable lending office) with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder; provided that Company shall not be required to compensate a Lender pursuant to this Section for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender notifies Company of the change in law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor (except that, if the change in law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof). Such Lender shall deliver to Company (with a copy to Administrative 67 Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this Section 2.19(a), which statement shall be conclusive and binding upon all parties hereto absent manifest error. (b) Capital Adequacy Adjustment. In the event that any Lender (which term shall include Issuing Bank for purposes of this Section 2.19(b)) shall have determined that the adoption, effectiveness, phase-in or applicability after the Closing Date of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its applicable lending office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such Governmental Authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender as a consequence of, or with reference to, such Lender's Loans or Revolving Commitments or Letters of Credit or Hedge Letters of Credit, or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit or Hedge Letters of Credit to a level below that which such Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender of the statement referred to in the next sentence, Company shall pay to such Lender such additional amount or amounts as will compensate such Lender or such controlling corporation on an after-tax basis for such reduction. Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.19(b), which statement shall be conclusive and binding upon all parties hereto absent manifest error. 2.20 TAXES; WITHHOLDING, ETC. (a) Payments to Be Free and Clear. All sums payable by any Credit Party hereunder and under the other Credit Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of any Credit Party or by any federation or organization of which the United States of America or any jurisdiction is a member at the time of payment ("INDEMNIFIED TAXES"). 68 (b) Withholding of Taxes. If any Credit Party or any other Person is required by law to make any deduction or withholding on account of any Indemnified Taxes from any sum paid or payable by any Credit Party to Administrative Agent or any Lender (which term shall include Issuing Bank for purposes of this Section 2.20(b)) under any of the Credit Documents: (i) Company shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (ii) Company shall pay any Indemnified Taxes before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on any Credit Party) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender; (iii) the sum payable by such Credit Party in respect of which the relevant deduction, withholding or payment of Indemnified Taxes is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and (iv) within thirty days after paying any sum from which it is required by law to make any deduction or withholding of Indemnified Taxes, and within thirty days after the due date of payment of any Indemnified Taxes which it is required by clause (ii) above to pay, Company shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; provided, no such additional amount shall be required to be paid to any Lender under clause (iii) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof on the Closing Date) or after the effective date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date hereof or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender. (c) Treatment of Certain Refunds. If the Administrative Agent, a Lender or the Issuing Bank determines, in its sole judgment, that it has received a refund of any Taxes as to which it has been indemnified by Company or with respect to which Company has paid additional amounts pursuant to this Section 2.20, it shall pay to Company an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by Company under this Section 2.20 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Lender or the Issuing Bank, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that Company, upon the request of the Administrative Agent, such Lender or the Issuing Bank, agrees to repay the amount paid over to Company (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Lender or the Issuing Bank in the event the 69 Administrative Agent, such Lender or the Issuing Bank is required to repay such refund to such Governmental Authority. This paragraph shall not be construed to require the Administrative Agent, any Lender or the Issuing Bank to make available its tax returns (or any other information relating to its taxes that it deems confidential) to Company or any other Person. (d) Evidence of Exemption From Withholding Tax. Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the relevant Credit Party is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any Loan Document shall deliver to such Credit Party (with a copy to the Administrative Agent), at the time or times prescribed by applicable law and reasonably requested by such Credit Party or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by Company or the Administrative Agent, shall deliver such other documentation prescribed by applicable law and reasonably requested by Company or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Without limiting any of the foregoing, each Lender that is not a United States Person (as such term is defined in Section 7701(a)(30) of the Internal Revenue Code) for U.S. federal income tax purposes (a "NON-US LENDER") shall deliver to Administrative Agent for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof on the Closing Date) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), (i) two original copies of Internal Revenue Service Form W-8BEN (claiming benefits under an applicable treaty) or W-8ECI (or any successor forms), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Company to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Credit Documents, or (ii) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver Internal Revenue Service Forms W-8BEN or W-8ECI pursuant to clause (i) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8BEN (or any successor form), properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Company to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Credit Documents. Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to this Section 2.20(d) hereby agrees, from time to time after the initial delivery by such Lender of 70 such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly deliver to Administrative Agent for transmission to Company two new original copies of Internal Revenue Service Form W-8BEN or W-8ECI, or a Certificate re Non-Bank Status and two original copies of Internal Revenue Service Form W-8BEN (or any successor form), as the case may be, properly completed and duly executed by such Lender, and such other documentation required under the Internal Revenue Code and reasonably requested by Company to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Credit Documents, or notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence. Company shall not be required to pay any additional amount to any Non-US Lender in respect of Indemnified Taxes under Section 2.20(b) if such Lender shall have failed (1) to deliver the forms, certificates or other evidence referred to in the second sentence of this Section 2.20(d), or (2) to notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence, as the case may be; provided, if such Lender shall have satisfied the requirements of the first sentence of this Section 2.20(d) on the Closing Date or on the date of the Assignment Agreement pursuant to which it became a Lender, as applicable, nothing in this last sentence of Section 2.20(d) shall relieve Company of its obligation to pay any additional amounts in respect of Indemnified Taxes pursuant this Section 2.20 in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described herein. (e) To the extent required by any applicable law, the Administrative Agent may withhold from any interest payment to any Lender an amount equivalent to any applicable withholding tax. If any governmental authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred. 2.21. OBLIGATION TO MITIGATE. Each Lender (which term shall include Issuing Bank for purposes of this Section 2.21) agrees that, as promptly as practicable after the officer of such Lender responsible for 71 administering its Loans or Letters of Credit or Hedge Letters of Credit, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender to receive payments under Section 2.18, 2.19 or 2.20, it will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (a) make, issue, fund or maintain its Credit Extensions, including any Affected Loans, through another office of such Lender, or (b) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender pursuant to Section 2.18, 2.19 or 2.20 would be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of such Revolving Commitments, Loans or Letters of Credit or Hedge Letters of Credit through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Revolving Commitments, Loans or Letters of Credit or Hedge Letters of Credit or the interests of such Lender; provided, such Lender will not be obligated to utilize such other office pursuant to this Section 2.21 unless Company agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described in clause (i) above. A certificate as to the amount of any such expenses payable by Company pursuant to this Section 2.21 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender to Company (with a copy to Administrative Agent) shall be conclusive absent manifest error. 2.22. DEFAULTING LENDERS. Anything contained herein to the contrary notwithstanding, in the event that any Lender, other than at the direction or request of any regulatory agency or authority, defaults (a "DEFAULTING LENDER") in its obligation to fund (a "FUNDING DEFAULT") any Revolving Loan or Hedge L/C Loan or its portion of any unreimbursed payment or participation obligations under Section 2.2(b)(iv), 2.4(d), 2.4(e) or 2.4(i) (in each case, a "DEFAULTED LOAN"), then (a) during any Default Period with respect to such Defaulting Lender, such Defaulting Lender shall be deemed not to be a "Lender" for purposes of voting on any matters (including the granting of any consents or waivers) with respect to any of the Credit Documents; (b) to the extent permitted by applicable law, until such time as the Default Excess with respect to such Defaulting Lender shall have been reduced to zero, (i) any voluntary prepayment of the Revolving Loans shall, if Company so directs at the time of making such voluntary prepayment, be applied to the Revolving Loans of other Lenders as if such Defaulting Lender had no Revolving Loans outstanding and the Revolving Exposure of such Defaulting Lender were zero, and (ii) any mandatory prepayment of the Revolving Loans shall, if Company so directs at the time of making such mandatory prepayment, be applied to the Revolving Loans of other Lenders (but not to the Revolving Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender, it being understood and agreed that Company 72 shall be entitled to retain any portion of any mandatory prepayment of the Revolving Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); (c) such Defaulting Lender's Revolving Commitment and outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage shall be excluded for purposes of calculating the Revolving Commitment fee payable to Lenders in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any Revolving Commitment fee pursuant to Section 2.11 with respect to such Defaulting Lender's Revolving Commitment in respect of any Default Period with respect to such Defaulting Lender; and (d) the Total Utilization of Revolving Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting Lender. No Revolving Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this Section 2.22, performance by Company of its obligations hereunder and the other Credit Documents shall not be excused or otherwise modified as a result of any Funding Default or the operation of this Section 2.22. The rights and remedies against a Defaulting Lender under this Section 2.22 are in addition to other rights and remedies which Company may have against such Defaulting Lender with respect to any Funding Default and which Administrative Agent or any Lender may have against such Defaulting Lender with respect to any Funding Default. 2.23. REMOVAL OR REPLACEMENT OF A LENDER. Anything contained herein to the contrary notwithstanding, in the event that: (a) (i) any Lender (an "INCREASED-COST LENDER") shall give notice to Company that such Lender is an Affected Lender or that such Lender is entitled to receive payments under Section 2.18, 2.19 or 2.20, (ii) the circumstances which have caused such Lender to be an Affected Lender or which entitle such Lender to receive such payments shall remain in effect, and (iii) such Lender shall fail to withdraw such notice within five Business Days after Company's request for such withdrawal; or (b) (i) any Lender shall become a Defaulting Lender, (ii) the Default Period for such Defaulting Lender shall remain in effect, and (iii) such Defaulting Lender shall fail to cure the default as a result of which it has become a Defaulting Lender within five Business Days after Company's request that it cure such default; or (c) in connection with any proposed amendment, modification, termination, waiver or consent with respect to any of the provisions hereof as contemplated by Section 10.5(b), the consent of Requisite Lenders shall have been obtained but the consent of one or more of such other Lenders (each a "NON-CONSENTING LENDER") whose consent is required shall not have been obtained; then, with respect to each such Increased-Cost Lender, Defaulting Lender or Non-Consenting Lender (the "TERMINATED LENDER"), Company may, by giving written notice to Administrative Agent and any Terminated Lender of its election to do so, elect to cause such Terminated Lender (and such Terminated Lender hereby irrevocably agrees) to assign its outstanding Loans, its Revolving Commitments, and its Hedge L/C Commitment, if any, in full to one or more Eligible Assignees (each a "REPLACEMENT LENDER") in accordance with the provisions of Section 10.6 and Terminated 73 Lender shall pay any fees payable thereunder in connection with such assignment; provided, (1) on the date of such assignment, the Replacement Lender shall pay to Terminated Lender an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Terminated Lender, (B) an amount equal to all unreimbursed drawings that have been funded by such Terminated Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid fees owing to such Terminated Lender pursuant to Section 2.11; (2) on the date of such assignment, Company shall pay any amounts payable to such Terminated Lender pursuant to Section 2.18(c), 2.19 or 2.20; or otherwise as if it were a prepayment and (3) in the event such Terminated Lender is a Non-Consenting Lender, each Replacement Lender shall consent, at the time of such assignment, to each matter in respect of which such Terminated Lender was a Non-Consenting Lender; provided, Company may not make such election with respect to any Terminated Lender that is also an Issuing Bank unless, prior to the effectiveness of such election, Company shall have caused each outstanding Letter of Credit or Hedge Letter of Credit, as applicable, issued thereby to be cancelled. Upon the prepayment of all amounts owing to any Terminated Lender and the termination of such Terminated Lender's Revolving Commitments, if any, such Terminated Lender shall no longer constitute a "Lender" for purposes hereof; provided, any rights of such Terminated Lender to indemnification hereunder shall survive as to such Terminated Lender. SECTION 3. CONDITIONS PRECEDENT 3.1. CLOSING DATE. The obligation of any Lender to make a Credit Extension on the Closing Date is subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions on or before the Closing Date: (a) Credit Documents. Administrative Agent shall have received sufficient copies of each Credit Document originally executed and delivered by each applicable Credit Party for each Lender. (b) Organizational Documents; Incumbency. Administrative Agent shall have received (i) sufficient copies of each Organizational Document executed and delivered by each Credit Party, as applicable, and, to the extent applicable, certified as of a recent date by the appropriate governmental official, for each Lender, each dated the Closing Date or a recent date prior thereto; (ii) signature and incumbency certificates of the officers of such Person executing the Credit Documents to which it is a party; (iii) resolutions of the Board of Directors or similar governing body of each Credit Party approving and authorizing the execution, delivery and performance of this Agreement and the other Credit Documents and the Related Agreements to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of 74 the Closing Date by its secretary or an assistant secretary as being in full force and effect without modification or amendment; (iv) a good standing certificate from the applicable Governmental Authority of each Credit Party's jurisdiction of incorporation, organization or formation and in each jurisdiction in which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the Closing Date; and (v) such other documents as Administrative Agent may reasonably request. (c) Organizational and Capital Structure. The organizational structure and capital structure of Company and its Subsidiaries, both before and after giving effect to the Merger, shall be as set forth on Schedules 4.1 and 4.2. (d) Capitalization of Company. On or before the Closing Date: (i) Company shall have received the gross proceeds from the issuance of the Senior Secured Notes in an aggregate amount in cash of not less than $192,500,000; and (ii) Company shall have received the gross proceeds from the Sponsor of equity contributions in an aggregate amount not less than $77,500,000. (e) Consummation of Transactions Contemplated by Related Agreements. (i) (1) All conditions to the transactions contemplated by each of the Related Agreements shall have been satisfied or the fulfillment of any such conditions shall have been waived with the consent of Syndication Agent and Administrative Agent, (2) the Acquisition shall have become effective in accordance with the terms of the Merger Agreement and (3) the aggregate cash consideration paid to the selling shareholders in connection with the Acquisition shall not exceed $115,000,000. (ii) Syndication Agent and Administrative Agent shall each have received a fully executed or conformed copy of each Related Agreement and any documents executed in connection therewith, together with copies of each of the opinions of counsel delivered to the parties under the Related Agreements, accompanied by a letter from each such counsel (to the extent not inconsistent with such counsel's established internal policies) authorizing Lenders to rely upon such opinion to the same extent as though it were addressed to Lenders. Each Related Agreement shall be in full force and effect, shall include terms and provisions reasonably satisfactory to Administrative Agent and Syndication Agent and no provision thereof shall have been modified or waived in any respect determined by Syndication Agent or Administrative Agent to be material, in each case without the consent of Syndication Agent and Administrative Agent. 75 (f) Existing Indebtedness. On the Closing Date, Company and its Subsidiaries shall have (i) repaid in full all Existing Indebtedness, except for any amounts of the Existing Subordinated Notes not tendered as of the Closing Date (the "UNPAID REFINANCING AMOUNT"), (ii) terminated any commitments to lend or make other extensions of credit thereunder, (iii) delivered to Syndication Agent and Administrative Agent a payoff letter with respect to the Indebtedness described in clause (i) of the definition of Existing Indebtedness releasing all Liens securing such Indebtedness and made arrangements satisfactory to the Administrative Agent for the delivery of all documents or instruments necessary to terminate of record all Liens securing such Existing Indebtedness, and (iv) made arrangements satisfactory to Syndication Agent and Administrative Agent with respect to the cancellation of any letters of credit outstanding thereunder or the issuance of Letters of Credit to support the obligations of Company and its Subsidiaries with respect thereto. (g) Transaction Costs. On or prior to the Closing Date, Company shall have delivered to Administrative Agent Company's reasonable best estimate of the Transactions Costs (other than fees payable to any Agent). (h) Governmental Authorizations and Consents. Each Credit Party shall have obtained all Governmental Authorizations (other than the filing of UCC financing statements and the Mortgages) and all consents of other Persons, in each case that are necessary in connection with the transactions contemplated by the Credit Documents and the Related Agreements and each of the foregoing shall be in full force and effect and in form and substance reasonably satisfactory to Syndication Agent and Administrative Agent. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the transactions contemplated by the Credit Documents or the Related Agreements or the financing thereof and no action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. (i) Real Estate Assets; Hydrocarbon Interests. In order to create in favor of Collateral Trustee, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interest in certain Real Estate Assets and certain Hydrocarbon Interests, Collateral Trustee shall have received from Company and each applicable Guarantor: (i) fully executed and notarized Mortgages, in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering each Real Estate Asset listed in Schedule 3.1(i) (each, a "CLOSING DATE MORTGAGED PROPERTY") and each Hydrocarbon Interest listed on Schedule 3.1(i), which Hydrocarbon Interests shall represent no less than 87.5% of the Proved Developed Producing Reserves of the 76 Company and the Guarantor Subsidiaries as of the Closing Date, including no less than 66% of the Proved Reserves of Company and the Guarantor Subsidiaries as of the Closing Date (as valued based on the reserve report (Job #:04.780) effective as of January 1, 2004 using a 10% present value discount rate and excluding the TBR Assets); (ii) (a) an opinion of counsel (which counsel shall be reasonably satisfactory to Administrative Agent) in each state in which a Closing Date Mortgaged Property is located with respect to the enforceability of the form(s) of Mortgages to be recorded in such state and such other matters as Administrative Agent may reasonably request, in each case in form and substance reasonably satisfactory to Administrative Agent and (b) bring-downs of title opinions previously delivered to Company or its predecessors with respect to fifty (50) (or such lesser number as the Administrative Agent may approve) of Company's and Guarantors' wells previously identified by the Administrative Agent in writing to Company in form and substance reasonably satisfactory to Administrative Agent; (iii) [Reserved]; (iv) (a) ALTA mortgagee title insurance policies or unconditional commitments therefor issued by one or more title companies reasonably satisfactory to Administrative Agent with respect to each Closing Date Mortgaged Property (each, a "TITLE POLICY"), in amounts not less than the fair market value of each Closing Date Mortgaged Property, together with a title report issued by a title company with respect thereto, dated not more than thirty days prior to the Closing Date and copies of all recorded documents listed as exceptions to title or otherwise referred to therein, each in form and substance reasonably satisfactory to Administrative Agent and (B) evidence satisfactory to Administrative Agent that such Credit Party has paid to the title company or to the appropriate governmental authorities all expenses and premiums of the title company and all other sums required in connection with the issuance of each Title Policy, with respect to each Closing Date Mortgaged Property, and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Mortgages for each Closing Date Mortgaged Property in the appropriate real estate records; (v) evidence of flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, in form and substance reasonably satisfactory to Administrative Agent; and 77 (vi) ALTA surveys of all Closing Date Mortgaged Properties which are not Leasehold Properties, certified to Collateral Trustee and dated not more than thirty days prior to the Closing Date. (j) Personal Property Collateral. In order to create in favor of Collateral Trustee, for the benefit of Secured Parties, a valid, perfected First Priority security interest in the personal property Collateral, Collateral Trustee shall have received: (i) evidence satisfactory to Collateral Trustee of the compliance by each Credit Party with its obligations under the Pledge and Security Agreement and the other Collateral Documents (including, without limitation, their obligations to execute and deliver UCC financing statements, deliver originals of certificated securities, instruments and chattel paper, and execute and deliver control agreements with respect to deposit and/or securities accounts as provided therein); (ii) a completed Collateral Questionnaire dated the Closing Date and executed by an Authorized Officer of each Credit Party, together with all attachments contemplated thereby, including (A) the results of a recent search, by a Person satisfactory to Administrative Agent, of all effective UCC financing statements (or equivalent filings) made with respect to any personal or mixed property of any Credit Party in the jurisdictions specified in the Collateral Questionnaire, together with copies of all such filings disclosed by such search, and (B) UCC termination statements (or similar documents) duly authorized by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements (or equivalent filings) disclosed in such search (other than any such financing statements in respect of Permitted Liens); (iii) opinions of counsel (which counsel shall be reasonably satisfactory to Administrative Agent) with respect to the creation and perfection of the security interests in favor of Collateral Trustee in such Collateral and such other matters governed by the laws of each jurisdiction in which any Credit Party or any personal property Collateral is located as Administrative Agent may reasonably request, in each case in form and substance reasonably satisfactory to Administrative Agent; and (iv) evidence that each Credit Party shall have taken or caused to be taken any other action, executed and delivered or caused to be executed and delivered any other agreement, document and instrument and made or caused to be made any other filing and recording (other than as set forth herein) reasonably required by Administrative Agent. 78 (k) Environmental Reports. Syndication Agent and Administrative Agent shall have received the GaiaTech Report and a reliance letter authorizing reliance by Administrative Agent on the GaiaTech Report. (l) Financial Statements; Projections; Loan to Value. Lenders shall have received from Company (i) the Historical Financial Statements, (ii) pro forma consolidated balance sheets of Company and its Subsidiaries as at the Closing Date, and reflecting the consummation of the Acquisition, the transactions contemplated by the Swap Agreement, the related financings and the other transactions contemplated by the Credit Documents to occur on or prior to the Closing Date, which pro forma financial statements shall be in form and substance satisfactory to Administrative Agent and Syndication Agent, (iii) the Projections and (iv) a certificate from the chief financial officer of Company certifying that the proceeds of the Term Loans shall account for no more than 25% of the value of the total Proved Reserves of Company and its Subsidiaries (based on the Wright & Company reserve report effective as of April 1, 2004 which excludes the TBR Assets). (m) Evidence of Insurance. Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to Section 5.5 is in full force and effect, together with endorsements naming the Collateral Trustee, for the benefit of the Secured Parties, as additional insured and loss payee thereunder to the extent required under Section 5.5. (n) Opinions of Counsel to Credit Parties. Lenders and their respective counsel shall have received originally executed copies of the favorable written opinions of each of (i) Vinson & Elkins LLP, New York counsel, (ii) Andrews Kurth LLP, Texas counsel, (iii) Bricker & Eckler LLP, Ohio counsel, (iv) Dickinson Wright PLLC, Michigan counsel, and (v) Culbertson, Weiss, Schetroma and Schug, P.C., Pennsylvania counsel, each respectively in the form of Exhibit D, covering, among other things and as applicable, the matters referred to in Section 3.1(i)(ii) and 3.1(j(iii), and such other matters as Administrative Agent or Syndication Agent may reasonably request, dated as of the Closing Date and otherwise in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent (and each Credit Party hereby instructs such counsel to deliver such opinions to Agents and Lenders). (o) Fees. Company shall have paid to Syndication Agent and Administrative Agent the fees payable on the Closing Date referred to in Section 2.11(d). (p) Solvency Certificate. On the Closing Date, Syndication Agent and Administrative Agent shall have received a Solvency Certificate from the chief financial officer of Company dated the Closing Date, with appropriate attachments and demonstrating that after giving effect to the consummation of the Acquisition, Company and its Subsidiaries are and will be Solvent. 79 (q) Closing Date Certificate. Company shall have delivered to Syndication Agent and Administrative Agent an originally executed Closing Date Certificate, together with all attachments thereto. (r) Credit Rating. The credit facilities provided for under this Agreement shall have been assigned a credit rating by either S&P and/or Moody's. (s) Closing Date. Lenders shall have made the Term Loans to Company on or before July 31, 2004. (t) No Litigation. There shall not exist any action, suit, investigation, litigation or proceeding, pending or threatened in any court or before any arbitrator or Governmental Authority that, in the reasonable opinion of Administrative Agent and Syndication Agent, singly or in the aggregate, materially impairs the Acquisition, the financing thereof or any of the other transactions contemplated by the Credit Documents or the Related Agreements, or that could reasonably be expected to have a Material Adverse Effect. (u) Completion of Proceedings. All partnership, corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by Administrative Agent or Syndication Agent and its counsel shall be satisfactory in form and substance to Administrative Agent and Syndication Agent and such counsel, and Administrative Agent, Syndication Agent and such counsel shall have received all such counterpart originals or certified copies of such documents as Administrative Agent or Syndication Agent may reasonably request. Each Lender, by delivering its signature page to this Agreement and funding a Loan on the Closing Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Credit Document and each other document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable on the Closing Date. 3.2. CONDITIONS TO EACH CREDIT EXTENSION. (a) Conditions Precedent. The obligation of each Lender to make any Loan, or Issuing Bank to issue any Letter of Credit or Hedge Letter of Credit, on any Credit Date, including the Closing Date, are subject to the satisfaction, or waiver in accordance with Section 10.5, of the following conditions precedent: (i) Administrative Agent shall have received a fully executed and delivered Funding Notice or Issuance Notice, as the case may be; 80 (ii) after making the Credit Extensions requested on such Credit Date, (A) the Total Utilization of Revolving Commitments shall not exceed the aggregate Revolving Commitments then in effect and (B) the Total Utilization of Hedge L/C Commitments shall not exceed the aggregate Hedge L/C Commitments then in effect; (iii) as of such Credit Date, the representations and warranties of the Credit Parties contained herein and in the other Credit Documents shall be true and correct in all material respects on and as of that Credit Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date; (iv) as of such Credit Date, no event shall have occurred and be continuing or would result from the consummation of the applicable Credit Extension that would constitute an Event of Default or a Default; (v) on or before the date of issuance of any Letter of Credit or Hedge Letter of Credit, Administrative Agent shall have received all other information required by the applicable Issuance Notice, and such other documents or information as Issuing Bank may reasonably require in connection with the issuance of such Letter of Credit or Hedge Letter of Credit; and (vi) as of such Credit Date, the Leverage Ratio determined as of such date after giving effect to the contemplated Credit Extension shall not exceed the maximum Leverage Ratio permitted as of the last day of the immediately succeeding Fiscal Quarter pursuant to Section 6.8; and (viii) after giving effect to such Credit Extension, the aggregate Cash and Cash Equivalents of Company and its subsidiaries will not exceed $5,000,000; provided, however, this clause (viii) shall not be applicable (i) to any Credit Extension constituting the Term Loan, any Hedge Letter of Credit or any Letter of Credit and (ii) with respect to Revolving Loans, if the Administrative Agent shall have received, concurrently with the Funding Notice, a certificate from a Financial Officer of the Company certifying that the proceeds of such Credit Extension shall be used in accordance with Section 2.6 within thirty (30) days of the proposed Credit Date. Any Agent or Requisite Lenders shall be entitled, but not obligated to, request and receive, prior to the making of any Credit Extension, additional information reasonably satisfactory to the requesting party confirming the satisfaction of any of the foregoing if, in the good faith judgment of such Agent or Requisite Lender such request is warranted under the circumstances. 81 (b) Notices. Any Notice shall be executed by an Authorized Officer in a writing delivered to Administrative Agent. In lieu of delivering a Notice, Company may give Administrative Agent telephonic notice by the required time of any proposed borrowing, conversion/continuation or issuance of a Letter of Credit or the Hedge Letter of Credit, as the case may be; provided each such notice shall be promptly confirmed in writing by delivery of the applicable Notice to Administrative Agent on or before the applicable date of borrowing, continuation/conversion or issuance. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized on behalf of Company or for otherwise acting in good faith. SECTION 4. REPRESENTATIONS AND WARRANTIES In order to induce Lenders and Issuing Bank to enter into this Agreement and to make each Credit Extension to be made thereby, each Credit Party represents and warrants to each Lender and Issuing Bank, on the Closing Date and on each Credit Date, that the following statements are true and correct (it being understood and agreed that the representations and warranties made on the Closing Date are deemed to be made concurrently with the consummation of the Acquisition and other transactions contemplated by Related Agreements): 4.1. ORGANIZATION; REQUISITE POWER AND AUTHORITY; QUALIFICATION. Each of Company and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization as identified in Schedule 4.1, (b) has all requisite power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Credit Documents to which it is a party and to carry out the transactions contemplated thereby, and (c) is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had, and could not be reasonably expected to have, a Material Adverse Effect. 4.2. CAPITAL STOCK AND OWNERSHIP. The Capital Stock of each of Company and its Subsidiaries has been duly authorized and validly issued and is fully paid and non-assessable. As of the Closing Date, except as set forth on Schedule 4.2, there is no existing option, warrant, call, right, commitment or other agreement to which Company or any of its Subsidiaries is a party requiring, and there is no membership interest or other Capital Stock of Company or any of its Subsidiaries outstanding which upon conversion or exchange would require, the issuance by Company or any of its Subsidiaries of any additional membership interests or other Capital Stock of Company or any of its Subsidiaries or other Securities convertible into, exchangeable for or evidencing the right to 82 subscribe for or purchase, a membership interest or other Capital Stock of Company or any of its Subsidiaries. Schedule 4.2 correctly sets forth the ownership interest of Company and each of its Subsidiaries in their respective Subsidiaries as of the Closing Date both before and after giving effect to the Acquisition. 4.3. DUE AUTHORIZATION. The execution, delivery and performance of the Credit Documents have been duly authorized by all necessary action on the part of each Credit Party that is a party thereto. 4.4. NO CONFLICT. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not (a) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, any of the Organizational Documents of Company or any of its Subsidiaries, or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries; (b) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Company or any of its Subsidiaries, except to the extent such conflict or breach could not reasonably be expected to have a Material Adverse Effect; (c) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Credit Documents in favor of Collateral Agent, on behalf of Secured Parties); or (d) require any approval of stockholders, members or partners or any approval or consent of any Person under any Contractual Obligation of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date and disclosed in writing to Lenders and except for any approval, the failure to obtain of which could not reasonably be expected to have a Material Adverse Effect. 4.5. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Credit Parties of the Credit Documents to which they are parties and the consummation of the transactions contemplated by the Credit Documents do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any Governmental Authority except as otherwise set forth in the Merger Agreement, and except for filings and recordings with respect to the Collateral to be made, or otherwise delivered to Collateral Trustee for filing and/or recordation, as of and after the Closing Date, and routine filings required to be made in the ordinary course of business pursuant to the requirements of applicable law. 4.6. BINDING OBLIGATION. Each Credit Document has been duly executed and delivered by each Credit Party that is a party thereto and is the legally valid and binding obligation of such Credit Party, enforceable 83 against such Credit Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. 4.7. HISTORICAL FINANCIAL STATEMENTS. The Historical Financial Statements were prepared in conformity with GAAP and fairly present, in all material respects, the financial position, on a consolidated basis, of Company and its Subsidiaries as at the respective dates thereof and the results of operations and cash flows, on a consolidated basis, of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from audit and normal year-end adjustments. As of the Closing Date, neither Company nor any of its Subsidiaries has any contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the Historical Financial Statements or the notes thereto and which in any such case is material in relation to the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company and any of its Subsidiaries taken as a whole. 4.8. PROJECTIONS. On and as of the Closing Date, the Projections of Company and its Subsidiaries for the period Fiscal Year 2004 through and including Fiscal Year 2011 (the "PROJECTIONS") are based on good faith estimates and assumptions made by the management of Company; provided, the Projections are not to be viewed as facts and that actual results during the period or periods covered by the Projections may differ from such Projections and that the differences may be material; provided further, as of the Closing Date, management of Company believed that the Projections were reasonable. 4.9. NO MATERIAL ADVERSE CHANGE. Since December 31, 2003, no event, circumstance or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. 4.10. NO RESTRICTED JUNIOR PAYMENTS. Other than the purchase of the Existing Subordinated Notes that have been tendered to Company on or prior to the Closing Date, since December 31, 2003, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted pursuant to Section 6.5. 4.11. NO RESERVE WRITE-DOWNS. As of the Closing Date and since December 31, 2003, Company has not reduced the volume of its reserves by more than 5% excluding reserves sold pursuant to sales previously disclosed to the Administrative Agent prior to the Closing Date. 84 4.12. ADVERSE PROCEEDINGS, ETC. There are no Adverse Proceedings, individually or in the aggregate, that could reasonably be expected to have a Material Adverse Effect. Neither Company nor any of its Subsidiaries (a) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect, or (b) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 4.13. PAYMENT OF TAXES. Except as described on Schedule 4.13, and except as otherwise permitted under Section 5.3, all tax returns and reports of Company and its Subsidiaries required to be filed by any of them have been timely filed (taking into account any extensions), and all taxes shown on such tax returns to be due and payable and all material assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Company knows of no proposed tax assessment against Company or any of its Subsidiaries which is not being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; provided, such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 4.14. PROPERTIES. (a) Title. Each of Company and its Subsidiaries has (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), and (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in their respective Historical Financial Statements referred to in Section 4.5 and in the most recent financial statements delivered pursuant to Section 5.1, in each case except for (a) assets disposed of since the date of such financial statements pursuant to (x) the Letter Agreement, dated June 14, 2004, by and between Company and Fortuna Energy, Inc. or (y) the Asset Purchase Agreement dated as of May 12, 2004, between Arrow Energy Services and Canton Oil & Gas Company, (b) assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under Section 6.9, (c) Permitted Liens and (d) with respect to Oil and Gas Properties, such imperfections of title which do not in the aggregate materially detract from the value thereof to, or the use thereof in, the business of Company or any of its Subsidiaries. All such properties and assets are free and clear of Liens except Permitted Liens. 85 (b) Real Estate. As of the Closing Date, Schedule 4.14 contains a true, accurate and complete list of (i) all Material Real Estate Assets, (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Material Real Estate Asset of any Credit Party, regardless of whether such Credit Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment and (iii) the working interest and net revenue interest in each Hydrocarbon Interest of each Credit Party. Each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and Company does not have knowledge of any default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Credit Party, enforceable against such Credit Party in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles. As of the Closing Date, with respect to each Hydrocarbon Interest set forth on Schedule 4.14, each Credit Party has a net revenue interest no less than the net revenue interest set forth on such Schedule. 4.15. ENVIRONMENTAL MATTERS. Neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to any Environmental Law, any Environmental Claim, or any Hazardous Materials Activity that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither Company nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any comparable state law that relates to an actual or potential Environmental Claim or other liability that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. There are and, to each of Company's and its Subsidiaries' knowledge, have been, no conditions, occurrences, or Hazardous Materials Activities on, under or adjacent to, Facilities or Oil and Gas Properties, which could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. Neither Company nor any of its Subsidiaries nor, to any of Company and its Subsidiaries' knowledge, any predecessor of Company or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of Company's or any of its Subsidiaries' operations involves the generation, transportation, treatment or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent, except where doing so could not reasonably be expected to have a Material Adverse Effect. Compliance with all current or reasonably foreseeable future requirements pursuant to or under Environmental Laws could not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect and no event or condition has occurred or is occurring with 86 respect to Company or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity which individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect. 4.16. NO DEFAULTS. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its Contractual Obligations, and no condition exists which, with the giving of notice or the lapse of time or both, could constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect. 4.17. MATERIAL CONTRACTS. Schedule 4.17 contains a true, correct and complete list of all the Material Contracts in effect on the Closing Date, and except as described thereon, all such Material Contracts are in full force and effect and no defaults currently exist thereunder, except where the consequences, direct or indirect, of such default or defaults, if any, could not reasonably be expected to have a Material Adverse Effect. 4.18. GOVERNMENTAL REGULATION. Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. Neither Company nor any of its Subsidiaries is a "registered investment company" or a company "controlled" by a "registered investment company" or a "principal underwriter" of a "registered investment company" as such terms are defined in the Investment Company Act of 1940. 4.19. MARGIN STOCK. Neither Company nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any Margin Stock. No part of the proceeds of the Loans made to such Credit Party will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or for any purpose that violates, or is inconsistent with, the provisions of Regulation T, U or X of said Board of Governors. 4.20. EMPLOYEE MATTERS. Neither Company nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (a) no unfair labor practice complaint pending against Company or any of its Subsidiaries, or to the best knowledge of Company, threatened against any of them before the National Labor Relations Board and no 87 grievance or arbitration proceeding arising out of or under any collective bargaining agreement that is so pending against Company or any of its Subsidiaries or to the best knowledge of Company, threatened against any of them, (b) no strike or work stoppage in existence or threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect, and (c) to the best knowledge of Company, no union representation question existing with respect to the employees of Company or any of its Subsidiaries and, to the best knowledge of Company, no union organization activity that is taking place, except (with respect to any matter specified in clause (a), (b) or (c) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. 4.21. EMPLOYEE BENEFIT PLANS. Company, each of its Subsidiaries and each of their respective ERISA Affiliates are in compliance in all material respects with all applicable provisions and requirements of ERISA and the Internal Revenue Code and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed in all material respects their obligations under each Employee Benefit Plan. Each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code has received a favorable determination letter from the Internal Revenue Service indicating that such Employee Benefit Plan is so qualified and nothing has occurred subsequent to the issuance of such determination letter which would cause such Employee Benefit Plan to lose its qualified status. No material liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Employee Benefit Plan or any trust established under Title IV of ERISA has been or is expected to be incurred by Company, any of its Subsidiaries or any of their ERISA Affiliates. No ERISA Event has occurred or is reasonably expected to occur. Except to the extent required under Section 4980B of the Internal Revenue Code or similar state laws, no Employee Benefit Plan provides health or welfare benefits (through the purchase of insurance or otherwise) for any retired or former employee of Company, any of its Subsidiaries or any of their respective ERISA Affiliates. The present value of the aggregate benefit liabilities under each Pension Plan sponsored, maintained or contributed to by Company, any of its Subsidiaries or any of their ERISA Affiliates (determined as of the end of the most recent plan year on the basis of the actuarial assumptions specified for funding purposes in the most recent actuarial valuation for such Pension Plan), did not exceed the aggregate current value of the assets of such Pension Plan. As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available, the potential liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA is zero. Company, each of its Subsidiaries and each of their ERISA Affiliates have complied with the requirements of Section 515 of ERISA with respect to each 88 Multiemployer Plan and are not in material "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan. 4.22. CERTAIN FEES. No broker's or finder's fee or commission will be payable with respect hereto or any of the transactions contemplated hereby, other than (i) the transaction fees payable pursuant to the Transaction Advisory Agreement, dated June 27, 1997 between certain of the sellers under the Merger Agreement and Company, (ii) a fee to the Sponsor on the Closing Date equal to $1,415,105 and (iii) the fees to Randall & Dewey. 4.23. SOLVENCY. Each Credit Party is and, upon the incurrence of any Obligation by such Credit Party on any date on which this representation and warranty is made, will be, Solvent. 4.24. RELATED AGREEMENTS. (a) Delivery. Company has delivered to Syndication Agent and Administrative Agent complete and correct copies of (i) each Related Agreement and of all exhibits and schedules thereto as of the date hereof and (ii) copies of any material amendment, restatement, supplement or other modification to or waiver of each Related Agreement entered into after the date hereof. (b) Representations and Warranties. Except to the extent otherwise expressly set forth herein or in the schedules hereto, and subject to the qualifications set forth therein, each of the representations and warranties given by any Credit Party in any Related Agreement is true and correct in all material respects as of the Closing Date (or as of any earlier date to which such representation and warranty specifically relates). Notwithstanding anything in the Related Agreement to the contrary, the representations and warranties of each Credit Party set forth in this Section 4.24 shall, solely for purposes hereof, survive the Closing Date for the benefit of Lenders. (c) Governmental Approvals. All Governmental Authorizations and all other authorizations, approvals and consents of any other Person required by the Related Agreements or to consummate the Acquisition and other transactions contemplated by the Related Agreements have been obtained and are in full force and effect, except for (i) filings and recordings with respect to the Collateral to be made on or after the Closing Date, (ii) routine filings required to be made in the ordinary course of business pursuant to the requirements of applicable law, and (iii) consents, the failure to obtain of which would not reasonably be expected to have a Material Adverse Effect. 89 (d) Conditions Precedent. On the Closing Date, (i) all of the conditions to effecting or consummating the Acquisition and other transactions contemplated by the Related Agreements have been duly satisfied or, with the consent of Administrative Agent and Syndication Agent, waived, and (ii) the Acquisition and other transactions contemplated by the Related Agreements has been consummated in accordance with the Related Agreements and all applicable laws. 4.25. COMPLIANCE WITH STATUTES, ETC. Each of Company and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all Governmental Authorities, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws), except such non-compliance that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 4.26. FUTURE COMMITMENTS. Except with respect to gas imbalances, take-or-pay or other prepayments with respect to any Oil and Gas Property of Company or any of its Subsidiaries which would require Company or any of its Subsidiaries either (a) to deliver Hydrocarbons produced from Oil and Gas Properties or (b) to make cash settlements for such products with a value not in excess of $1,000,000, on a net basis there are no gas imbalances, take-or-pay or other prepayments with respect to any Oil and Gas Property of Company or any of its Subsidiaries or any cash settlement for such products at some future time without then or thereafter receiving full payment therefor. 4.27. DISCLOSURE. No representation or warranty of any Credit Party contained in any Credit Document or in any other documents, certificates or written statements furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact (known to Company, in the case of any document not furnished by either of them) necessary in order to make the statements contained herein or therein, taken as a whole, not misleading in light of the circumstances in which the same were made. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known to Company (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates, reports and statements furnished to Lenders for use in connection with the transactions contemplated hereby. 90 Notwithstanding the foregoing, no representation or warranty is made in this Section 4 (or any subsequently delivered agreement or certificate referencing this Section 4) with respect to any TBR Delayed Transfer Assets. SECTION 5. AFFIRMATIVE COVENANTS Each Credit Party covenants and agrees that so long as any Commitment is in effect and until payment in full of all Obligations and cancellation or expiration of all Letters of Credit, each Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 5. 5.1. FINANCIAL STATEMENTS AND OTHER REPORTS. Company will deliver to Administrative Agent and Lenders: (a) Quarterly Financial Statements. As soon as available, and in any event within forty-five (45) days after the end of each of the first three Fiscal Quarters of each Fiscal Year, the consolidated balance sheets of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and the corresponding figures from the Financial Plan for the current Fiscal Year, all in reasonable detail, together with a Financial Officer Certification; (b) Annual Financial Statements. As soon as available, and in any event no later than the earlier of (x) one hundred five (105) days after the end of each Fiscal Year and (y) five days after Company is required, under the Exchange Act, to file its Annual Report on Form 10-K, (i) the consolidated balance sheets of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year and the corresponding figures from the Financial Plan for the Fiscal Year covered by such financial statements, in reasonable detail, together with a Financial Officer Certification and a Narrative Report with respect thereto; and (ii) with respect to such consolidated financial statements a report thereon of Ernst & Young LLP or other independent certified public accountants of recognized national standing selected by Company (which report shall be unqualified as to going concern and scope of audit, and shall state that such consolidated financial statements fairly present, in all material respects, the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise 91 disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards) together with a written statement by such independent certified public accountants stating (1) that their audit examination has included a review of the terms of the Credit Documents, (2) whether, in connection therewith, any condition or event that constitutes a Default or an Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof (it being understood that such examination and statement shall be limited to the items that independent certified public accountants are permitted to cover in such statements pursuant to their professional standards and customs of the profession), and (3) that nothing has come to their attention that causes them to believe that the information contained in any Compliance Certificate is not correct or that the matters set forth in such Compliance Certificate are not stated in accordance with the terms hereof; (c) [Reserved]; (d) Compliance Certificate. Together with each delivery of financial statements of Company and its Subsidiaries pursuant to Sections 5.1(a) and 5.1(b), a duly executed and completed Compliance Certificate and Financial Officer certificate pursuant to Section 6.8(g); (e) Statements of Reconciliation after Change in Accounting Principles. If, as a result of any change in accounting principles and policies from those used in the preparation of the Historical Financial Statements, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to Section 5.1(a) or 5.1(b) will differ in any material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made, then, together with the first delivery of such financial statements after such change, one or more statements of reconciliation for the Fiscal Year immediately prior to the then current Fiscal Year in form and substance satisfactory to Administrative Agent; (f) Notice of Default. Promptly upon any officer of Company obtaining knowledge (i) of any condition or event that constitutes a Default or an Event of Default or that notice has been given to Company with respect thereto; (ii) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to any event or condition set forth in Section 8.1(b); or (iii) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, a certificate of its Authorized Officers specifying the nature and period of existence of such condition, event or change, or specifying the notice given and action taken by any such Person and the nature of such claimed Event of Default, Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; 92 (g) Notice of Litigation. Promptly upon any officer of Company obtaining knowledge of (i) the institution of, or non-frivolous threat of, any Adverse Proceeding not previously disclosed in writing by Company to Lenders, or (ii) any material development in any Adverse Proceeding that, in the case of either (i) or (ii) could be reasonably expected to have a Material Adverse Effect, or seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby, written notice thereof together with such other information as may be reasonably available to Company to enable Lenders and their counsel to evaluate such matters; (h) ERISA. (i) Promptly upon any officer of Company obtaining knowledge of the occurrence of or forthcoming occurrence of any ERISA Event, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; and (ii) with reasonable promptness, copies of (1) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by Company, any of its Subsidiaries or any of their respective ERISA Affiliates with the Internal Revenue Service with respect to each Pension Plan; (2) all notices received by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor concerning an ERISA Event; and (3) copies of such other documents or governmental reports or filings relating to any Employee Benefit Plan as Administrative Agent shall reasonably request; (i) Financial Plan. As soon as practicable and in any event no later than thirty days after the beginning of each Fiscal Year, a consolidated plan and financial forecast for such Fiscal Year and each Fiscal Year (or portion thereof) through the final maturity date of the Loans (a "FINANCIAL PLAN"), including (i) a forecasted consolidated balance sheet and forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each such Fiscal Year, together with pro forma Compliance Certificates for each such Fiscal Year and an explanation of the assumptions on which such forecasts are based, (ii) forecasted consolidated statements of income and cash flows of Company and its Subsidiaries for each quarter of the first two Fiscal Years following the Closing Date, and annually for each subsequent Fiscal Year, (iii) forecasts addressing Company's projected compliance with the requirements of Section 6.8 through the final maturity date of the Loans and (iv) forecasts addressing Company's liquidity through the final maturity date of the Loans without giving effect to any additional debt or equity offerings not reflected in the Projections, together, in each case, with an explanation of the assumptions on which such forecasts are based all in form and substance reasonably satisfactory to Agents; (j) Insurance Report. As soon as practicable and in any event by the last day of each Fiscal Year, a report in form and substance satisfactory to Administrative Agent outlining all material insurance coverage maintained as of the date of such report by Company and its 93 Subsidiaries and all material insurance coverage planned to be maintained by Company and its Subsidiaries in the immediately succeeding Fiscal Year; (k) Notice of Change in Board of Directors. With reasonable promptness, written notice of any change in the board of directors (or similar governing body) of Company; (l) Notice Regarding Material Contracts. Promptly, and in any event within ten Business Days (i) after any Material Contract of Company or any of its Subsidiaries is terminated or amended in a manner that is materially adverse to Company or such Subsidiary, as the case may be, or (ii) any new Material Contract is entered into, a written statement describing such event, with copies of such material amendments or new contracts, delivered to Administrative Agent (to the extent such delivery is permitted by the terms of any such Material Contract, provided, no such prohibition on delivery shall be effective if it were bargained for by Company or its applicable Subsidiary with the intent of avoiding compliance with this Section 5.1(l)), and an explanation of any actions being taken with respect thereto; (m) Asset Sales. Company will furnish to Collateral Trustee prompt written notice, with a copy to Administrative Agent, of any Asset Sales entered into pursuant to Section 6.9(c); (n) Information Regarding Collateral. Company will furnish to Collateral Trustee prompt written notice, with a copy to Administrative Agent, of any change (i) in any Credit Party's corporate name, (ii) in any Credit Party's identity or corporate structure or (iii) in any Credit Party's Federal Taxpayer Identification Number. Company agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for Collateral Trustee to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral and for the Collateral at all times following such change to have a valid, legal and perfected security interest as contemplated in the Collateral Documents. Company also agrees promptly to notify Collateral Trustee if any material portion of the Collateral is damaged or destroyed; (o) Annual Collateral Verification. Each year, at the time of delivery of annual financial statements with respect to the preceding Fiscal Year pursuant to Section 5.1(b), Company shall deliver to Collateral Trustee, with a copy to Administrative Agent, an Officer's Certificate (i) either confirming that there has been no change in such information since the date of the Collateral Questionnaire delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section and/or identifying such changes (ii) certifying that all Uniform Commercial Code financing statements (including fixtures filings, as applicable) or other appropriate filings, recordings or registrations, have been filed of record in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to 94 clause (i) above to the extent necessary to protect and perfect the security interests under the Collateral Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period); (p) Reserve Report. Not later than 60 days after June 30th and Dec ember 31st of each year, a Reserve Report, prepared (i) with respect to the June 30th Reserve Report, under the supervision of the chief engineer of Company and (ii) with respect to the December 31st Reserve Report, prepared by Wright & Company, Inc. or another independent petroleum engineer of recognized national standing as may be selected by Company with the consent of the Administrative Agent, in each case who shall certify such Reserve Report to be true and accurate and to have been prepared in accordance with the standard procedures used in the Oil and Gas Business, and together with each such Reserve Report, a certificate of a Responsible Officer (in his or her capacity as an officer of Company and not in his or her individual capacity) certifying that, to the best of his knowledge (1) the information contained in the Reserve Report and any other information delivered in connection therewith is true and correct in all material respects, (2) Company and its Subsidiaries own good and defensible title to its Oil and Gas Properties evaluated in such Reserve Report and such Properties are free and clear of all Liens except for Permitted Liens, (3) except as set forth on an exhibit to the certificate, on a net basis there are no gas imbalances, take-or-pay, Production Payments or other prepayments with respect to its Oil and Gas Properties evaluated in such Reserve Report which would require Company or its Subsidiaries to deliver Hydrocarbons produced from such Oil and Gas Properties or make cash payments at some future time without then or thereafter receiving full payment therefor, and (4) except as set forth on an exhibit to the certificate, none of its Oil and Gas Properties have been sold since the date of the Reserve Report, most recently delivered pursuant to this subsection 5.1(p), which exhibit shall list all of its Oil and Gas Properties sold and in such detail as is reasonably required by the Administrative Agent; (q) Reserve Notification. Within sixty-five (65) days of the last day of each Fiscal Quarter, a certificate from a Financial Officer (in his or her capacity as an officer of Company and not his or her individual capacity) of the Company notifying the Administrative Agent of any changes of more than 10% of the aggregate volume of Proved Reserves during such Fiscal Quarter or confirming that there has been no such change during such Fiscal Quarter; and (r) Other Information. (A) Promptly upon their becoming available, copies of (i) all financial statements, reports, notices and proxy statements sent or made available generally by Company to its security holders (other than the Sponsor and other non-public shareholders of Company) acting in such capacity or by any Subsidiary of Company to its security holders other than Company or another Subsidiary of Company, (ii) all regular and periodic reports and all registration statements and prospectuses, if any, filed by Company or any of its Subsidiaries with 95 any securities exchange or with the Securities and Exchange Commission and (iii) all press releases and other statements made available generally by Company or any of its Subsidiaries to the public concerning material developments in the business of Company or any of its Subsidiaries, and (B) such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by Administrative Agent or any Lender. 5.2. EXISTENCE. Except as otherwise permitted under Section 6.9, each Credit Party will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its existence and all rights and franchises, licenses and permits material to its business except where failure to maintain such rights, franchises, licenses and permits either is no longer required by applicable law or could not reasonably be expected to have a Material Adverse Effect or that the loss thereof is not disadvantageous in any material respect to such Person or to Lenders. 5.3. PAYMENT OF TAXES AND CLAIMS. Each Credit Party will, and will cause each of its Subsidiaries to, pay all Taxes imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises before any penalty or fine accrues thereon, and all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided, no such Tax or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (a) adequate reserve or other appropriate provision, as shall be required in conformity with GAAP shall have been made therefor, and (b) in the case of a Tax or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such Tax or claim. No Credit Party will, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries). 5.4. MAINTENANCE OF PROPERTIES. Each Credit Party will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used or useful in the business of Company and its Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. 5.5. INSURANCE. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in 96 respect of the assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for such Persons. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (a) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (b) casualty insurance on the Collateral under such policies of insurance, with such insurance companies, in such amounts, with such deductibles, and covering such risks as are at all times carried or maintained under similar circumstances by Persons of established reputation engaged in similar businesses. Each such policy of insurance shall (i) name Collateral Trustee, on behalf of Secured Parties as an additional insured thereunder as its interests may appear and (ii) in the case of each casualty insurance policy, contain a standard loss payable clause or endorsement that names Collateral Trustee, on behalf of Secured Parties as the loss payee thereunder and provides for at least thirty days' prior written notice to Collateral Trustee of any modification or cancellation of such policy. 5.6. BOOKS AND RECORDS; INSPECTIONS. Each Credit Party will, and will cause each of its Subsidiaries to (i) keep proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of Company and each of its Subsidiaries in accordance with GAAP and (ii) permit, upon notice to Administrative Agent by a Lender, any authorized representatives designated by any such Lender to visit and inspect any of the properties of any Credit Party and any of its respective Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested. 5.7. LENDERS MEETINGS. Company will, upon the request of Administrative Agent or Requisite Lenders, participate in a meeting of Administrative Agent and Lenders once during each Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Administrative Agent) at such time as may be agreed to by Company and Administrative Agent. 5.8. COMPLIANCE WITH LAWS. Each Credit Party will comply, and shall use reasonable efforts to cause each of its Subsidiaries and all other Persons, if any, on or occupying any Facilities to comply, with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority 97 (including all Environmental Laws), noncompliance with which could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.9. ENVIRONMENTAL. (a) Environmental Disclosure. Company will deliver to Administrative Agent and Lenders: (i) as soon as practicable following receipt thereof, notification of, and, upon request, copies of all material environmental audits, investigations, analyses and reports (except where doing so would, upon advice of Company counsel, jeopardize an applicable privilege), whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility or with respect to any Environmental Claims; (ii) promptly upon the occurrence thereof, written notice describing in reasonable detail (1) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws that could reasonably result in a Material Adverse Effect, (2) any remedial action taken by Company or any other Person in response to any Hazardous Materials Activities, or any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of resulting in a Material Adverse Effect, and (3) Company's discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws; (iii) as soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any material written communications (except where doing so would, upon advice of Company counsel, jeopardize an applicable privilege) with respect to (1) any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect, (2) any Release required to be reported to any federal, state or local governmental or regulatory agency that could reasonably result in a material Environmental Claim, and (3) any written request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity; (iv) prompt written notice describing in reasonable detail (1) any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries 98 that could reasonably be expected to expose Company or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (2) any proposed action to be taken by Company or any of its Subsidiaries to modify current operations in a manner that could reasonably be expected to subject Company or any of its Subsidiaries to any additional material obligations or requirements under any Environmental Laws that could reasonably result in a Material Adverse Effect; and (v) with reasonable promptness, such other documents and information as from time to time may be reasonably requested by Administrative Agent in relation to any matters disclosed pursuant to this Section 5.9(a). (b) Hazardous Materials Activities, Etc. Each Credit Party shall promptly take, and shall use reasonable efforts to cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by Company or its Subsidiaries that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (ii) promptly discharge any Environmental Claim against Company or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder where failure to do so could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 5.10. SUBSIDIARIES. In the event that (i) any Person becomes a Domestic Subsidiary of Company or (ii) any Domestic Subsidiary of Company in existence as of the Closing Date which is not a Guarantor (x) generates total revenue for any twelve-month period of $100,000 or greater or (y) at any time after owns total assets with an aggregate fair market value of $100,000 or greater, then in each case of clauses (i) and (ii) Company shall (a) promptly cause such Domestic Subsidiary to become a Guarantor hereunder and a Grantor under the Pledge and Security Agreement by executing and delivering to Administrative Agent and Collateral Trustee a Counterpart Agreement, and (b) take all such actions and execute and deliver, or cause to be executed and delivered, all such documents, instruments, agreements, and certificates as are similar to those described in Sections 3.1(b), 3.1(i) (provided that Mortgages on Hydrocarbon Interests shall be required only to the extent provided in Section 5.11), 3.1(j) and 3.1(n), and in the case of each Leasehold Property that is a Closing Date Mortgaged Property, (1) a Landlord Consent and Estoppel and (2) Evidence that such Leasehold Property is a Recorded Leasehold Interest. In the event that any Person becomes a Foreign Subsidiary of Company, and the ownership interests of such Foreign Subsidiary are owned by Company or by any Domestic Subsidiary thereof, Company shall, or shall cause such Domestic Subsidiary to, deliver, all such documents, instruments, agreements, and certificates as are similar to those described in Sections 3.1(b), and Company shall take, or shall cause such Domestic Subsidiary to take, all of the actions referred to in Section 3.1(j)(i) necessary to grant and to perfect a First Priority Lien in favor of Collateral 99 Trustee, for the benefit of Secured Parties, under the Pledge and Security Agreement in 65% of such ownership interests. With respect to each such Subsidiary, Company shall promptly send to Administrative Agent written notice setting forth with respect to such Person (i) the date on which such Person became a Subsidiary of Company, and (ii) all of the data required to be set forth in Schedules 4.1 and 4.2 with respect to all Subsidiaries of Company; provided, such written notice shall be deemed to supplement Schedule 4.1 and 4.2 for all purposes hereof. 5.11. ADDITIONAL MATERIAL REAL ESTATE ASSETS. (a) In the event that any Credit Party (i) acquires a Material Real Estate Asset, (ii) acquires any Hydrocarbon Interests which Hydrocarbon Interest produces in commercially reasonable quantities, or (iii) develops a previously undeveloped Hydrocarbon Interest, such Hydrocarbon Interest produces in commercially reasonable quantities and such Hydrocarbon Interest has not otherwise been made subject to the Lien of the Collateral Documents in favor of Collateral Trustee, for the benefit of Secured Parties, or (iv) a Real Estate Asset owned or leased on the Closing Date becomes a Material Real Estate Asset and such interest has not otherwise been made subject to the Lien of the Collateral Documents in favor of Collateral Trustee, for the benefit of Secured Parties, then in each case such Credit Party, contemporaneously with the occurrence of any of the events described in clauses (i) or (iv) of this Section 5.11 and semi-annually with respect to the events described in clauses (ii) and (iii) of this Section 5.11, shall take all such actions and execute and deliver, or cause to be executed and delivered, all such mortgages, documents, instruments, agreements, opinions and certificates similar to those described in Sections 3.1(i), 3.1(j) and 3.1(k) with respect to each such Material Real Estate Asset or Hydrocarbon Interests that Administrative Agent shall reasonably request to create in favor of Collateral Trustee, for the benefit of Secured Parties, a valid and, subject to any filing and/or recording referred to herein, perfected First Priority security interest in such Material Real Estate Assets or Hydrocarbon Interests. In addition to the foregoing, Company shall, at the request of Requisite Lenders, deliver, from time to time, to Administrative Agent such appraisals as are required by law or regulation of Real Estate Assets with respect to which Collateral Trustee has been granted a Lien, but, other than after the occurrence and during the continuance of an Event of Default, not more than one such appraisal in any twelve month period. (b) No later than ninety (90) days after June 30th and December 31st of each year, Company and the Guarantors shall, if required, take all such actions and execute and deliver, or cause to be executed and delivered, all such mortgages, documents, instruments, agreements, opinions and certificates similar to those described in Section 3.1(i) with respect to additional Hydrocarbon Interests which have not otherwise been made subject to the Lien of the Collateral Documents in favor of Collateral Trustee, for the benefit of Secured Parties, such that the aggregate of Hydrocarbon Interests subject to the Lien of the Collateral Documents in favor of Collateral Trustee, for the benefit of Secured Parties, shall represent no less than 90% of the PV-10 Value of Proved Developed Producing Reserves of the Company and the Guarantor 100 Subsidiaries, including no less than 70% of the PV-10 Value of Proved Reserves of Company and the Guarantor Subsidiaries. 5.12. INTEREST RATE PROTECTION. No later than one hundred twenty (120) days following the Closing Date, Company shall maintain, or caused to be maintained, in effect one or more Interest Rate Agreements for a term of not less than three years (or for the remaining term of this Agreement) and otherwise in form and substance reasonably satisfactory to Administrative Agent and Syndication Agent, which Interest Rate Agreements shall effectively limit the Unadjusted Eurodollar Rate Component of the interest costs to Company such that not less than 50% of the aggregate principal amount of the Term Loans and Senior Secured Notes as of the Closing Date is either (i) subject to such Interest Rate Agreements or (ii) fixed rate indebtedness. 5.13. SWAP AGREEMENT. Company shall cause the Swap Agreement to remain in place during the term of this Agreement on terms and conditions satisfactory to the Administrative Agent. 5.14. FURTHER ASSURANCES. At any time or from time to time upon the request of Administrative Agent, each Credit Party will, at its expense, promptly execute, acknowledge and deliver such further documents and do such other acts and things as Administrative Agent or Collateral Trustee may reasonably request in order to effect fully the purposes of the Credit Documents, including providing Lenders with any information requested pursuant to Section 10.21. In furtherance and not in limitation of the foregoing, each Credit Party shall take such actions as Administrative Agent or Collateral Trustee may reasonably request from time to time to ensure that the Obligations are guarantied by the Guarantors and, subject to the limitations set forth in Section 5.11(b) above and the limitations on security provided in the Collateral Documents, are secured by substantially all of the assets of Company, and its Subsidiaries and all of the outstanding Capital Stock of Company and its Subsidiaries (subject to limitations contained in the Credit Documents with respect to Foreign Subsidiaries). 5.15. NON-CONSOLIDATION. Unless otherwise consented to by Agents or Requisite Lenders, Company will and will cause each of its Subsidiaries to: (i) maintain entity records and books of account separate from those of any other entity which is an Affiliate of such entity; (ii) not commingle its funds or assets with those of any other entity which is an Affiliate of such entity; and (iii) provide that its board of directors or other analogous governing body will hold all appropriate meetings to authorize and approve such entity's actions, which meetings will be separate from those of other entities. 5.16. POST-CLOSING REFINANCING. 101 Within forty-five (45) Business Days after the Closing Date, Company shall repay in full the Unpaid Refinancing Amount. SECTION 6. NEGATIVE COVENANTS Each Credit Party covenants and agrees that, so long as any Commitment is in effect and until payment in full of all Obligations and cancellation or expiration of all Letters of Credit, such Credit Party shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1. INDEBTEDNESS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except: (a) the Obligations; (b) unsecured Indebtedness of any Guarantor Subsidiary to Company or to any other Guarantor Subsidiary, or of Company to any Guarantor Subsidiary; (c) Senior Secured Indebtedness; (d) Indebtedness incurred by Company or any of its Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, or from guaranties or letters of credit, surety bonds or performance bonds securing the performance of Company or any such Subsidiary pursuant to such agreements, in connection with Permitted Acquisitions or permitted dispositions of any business, assets or Subsidiary of Company or any of its Subsidiaries; (e) Indebtedness which may be deemed to exist pursuant to any guaranties, performance, surety, statutory, appeal or similar obligations incurred in the ordinary course of business; (f) Indebtedness in respect of netting services, overdraft protections and otherwise in connection with deposit accounts; (g) guaranties in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Company and its Subsidiaries; (h) guaranties by Company of Indebtedness of a Guarantor Subsidiary or guaranties by a Subsidiary of Company of Indebtedness of Company or a Guarantor Subsidiary 102 with respect, in each case, to Indebtedness otherwise permitted to be incurred pursuant to this Section 6.1; (i) Indebtedness described in Schedule 6.1, but not any extensions, renewals or replacements of such Indebtedness except (i) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the date of this Agreement and (ii) refinancings and extensions of any such Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Lenders than the Indebtedness being refinanced or extended, and the average life to maturity thereof is greater than or equal to that of the Indebtedness being refinanced or extended; provided, such Indebtedness permitted under the immediately preceding clause (i) or (ii) above shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced, (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced or (C) be incurred, created or assumed if any Default or Event of Default has occurred and is continuing or would result therefrom; (j) Indebtedness incurred under the Swap Agreement as of the Closing Date; (k) additional Indebtedness incurred under the Swap Agreement after the Closing Date or any replacement thereof with respect to up to 60% of the Proved Reserves as set forth in the most recent Reserve Report delivered pursuant to Section 5.1(p) but in no event exceeding 100% of proved developed producing reserves; (l) Indebtedness incurred under any Interest Rate Agreement to satisfy the requirements of Section 5.12 and any Interest Rate Agreement otherwise entered into in the ordinary course of Company's or any of its Subsidiaries' businesses and not for speculative purposes; (m) [Reserved]; (n) in-kind obligations relating to net oil and natural gas balancing positions arising in the ordinary course of business; (o) any obligation arising from agreements of Company or a Subsidiary of Company providing for indemnification, guarantee, contingency payment obligation based on the performance of the acquired or disposed asset or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business, asset or Capital Stock of a Guarantor Subsidiary, to the extent permitted hereunder; (p) Indebtedness with respect to Capital Leases and purchase money Indebtedness secured by Liens permitted by Section 6.2 (including any Indebtedness acquired in 103 connection with a Permitted Acquisition) in an aggregate amount not to exceed at any time $5,000,000; provided, that such purchase money Indebtedness (other than Indebtedness acquired in connection with a Permitted Acquisition) (i) shall be secured only by the asset acquired in connection with the incurrence of such Indebtedness, and (ii) shall constitute not less than 80% and not more than 100% of the aggregate consideration paid with respect to such asset; (q) other unsecured Indebtedness of Company and its Subsidiaries, in an aggregate amount not to exceed at any time $5,000,000; and (r) up to $20,000,000 aggregate principal amount of subordinated debt outstanding at any one time; provided any such Indebtedness incurred pursuant to this Section 6.1(r) in an aggregate principal amount of $10,000,000 or more in any one transaction or series of related transactions shall be on subordination terms and conditions reasonably acceptable to the Administrative Agent. 6.2. LIENS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the UCC of any State or under any similar recording or notice statute, except: (a) Liens in favor of Collateral Trustee for the benefit of Secured Parties granted pursuant to any Credit Document; (b) Liens for Taxes (i) not yet due and payable or (ii) if obligations with respect to such Taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as adequate reserves or other appropriate provision, as shall be required in conformity with GAAP, shall have been made with respect to such Taxes; (c) statutory Liens of landlords, banks (and rights of set-off), of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law (other than any such Lien imposed pursuant to Section 401 (a)(29) or 412(n) of the Internal Revenue Code or by ERISA), in each case incurred in the ordinary course of business (i) for amounts not yet overdue or (ii) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of five days) are being contested in good faith by appropriate proceedings, so long as such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts; 104 (d) Liens incurred in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money or other Indebtedness), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof; (e) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries; (f) any interest or title of a lessor or sublessor under any lease of real estate permitted hereunder; (g) Liens solely on any cash earnest money deposits made by Company or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder; (h) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business; (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (j) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; (k) licenses of patents, trademarks and other intellectual property rights granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any respect with the ordinary conduct of the business of Company or such Subsidiary; (l) Liens described in Schedule 6.2 or on a title report delivered pursuant to Section 3.1(i)(iv); (m) Liens reserved in oil and gas mineral leases for bonus or rental payments payable to the lessor thereunder and for compliance with the terms of such leases; provided that the amount of any obligations secured thereby that are delinquent, that are not diligently contested in good faith and for which adequate reserves are not maintained by Company or the applicable Subsidiary, as the case may be, do not exceed, at any time outstanding, the amount 105 owing by Company or any Subsidiary, as applicable, for one month's payments as due thereunder; (n) Liens arising under operating agreements, joint venture agreements, partnership agreements, oil and gas leases, farm-out and farm-in agreements, division orders, contracts for the sale, transportation or exchange of oil or natural gas, unitization and pooling declarations and agreements, area of mutual interest agreements that are customary in the Oil and Gas Business; provided that the amount of any obligations secured thereby that are delinquent, that are not diligently contested in good faith and for which adequate reserves are not maintained by Company or the applicable Subsidiary, as the case may be, do not exceed, at any time outstanding, the amount owing by Company or any Subsidiary, as applicable, for one month's billed operating expenses or other expenditures attributable to such entity's interest in the Property covered thereby; (o) Liens on, or related to, properties or assets to secure all or part of the costs incurred in the ordinary course, and consistent with past practice, of the Oil and Gas Business for the exploration, drilling, development, production, processing, transportation, marketing, storage or operation thereof; (p) Liens securing Indebtedness under the Senior Secured Debt Documents, the Swap Agreement or Indebtedness permitted under Section 6.1(k); provided such Liens are (i) subordinate to the Liens incurred hereunder and pursuant to the Collateral Documents and (ii) subject to the Collateral Trust Agreement; (q) Liens on cash or cash equivalents securing the Swap Agreement or Indebtedness permitted under Section 6.1(k) to the extent that the sum of such cash or cash equivalents constitutes the proceeds of any draw on any letter of credit issued to secure the Swap Agreement or Indebtedness permitted under Section 6.1(k); (r) Liens on property (including Capital Stock) existing at the time of acquisition of the property by Company or any Subsidiary; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition; (s) Liens on property of a Person existing at the time such Person is merged with or into or consolidated with Company or any Subsidiary; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with Company or the Subsidiary; (t) Liens securing Indebtedness incurred pursuant to Section 6.1(p); and 106 (u) Liens on the TBR Delayed Transfer Assets in favor of Fortuna Energy, Inc. 6.3. EQUITABLE LIEN. If any Credit Party or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Permitted Liens, it shall make or cause to be made effective provisions whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; provided, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not otherwise permitted hereby. 6.4. NO FURTHER NEGATIVE PLEDGES. Except with respect to (a) specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to a permitted asset sale (including the TBR Delayed Transfer Assets), (b) restrictions by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses and similar agreements entered into in the ordinary course of business (provided that such restrictions are limited to the property or assets secured by such Liens or the property or assets subject to such leases, licenses or similar agreements, as the case may be) and (c) restrictions pursuant to the Credit Documents, the Senior Secured Debt Documents or the Swap Agreement Documents, no Credit Party nor any of its Subsidiaries shall enter into any agreement prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired. 6.5. RESTRICTED JUNIOR PAYMENTS. Except for any Restricted Junior Payment made in connection with the consummation of transactions contemplated by Section 3.1 (including the Merger), no Credit Party shall, nor shall it permit any of its Subsidiaries or Affiliates through any manner or means or through any other Person to, directly or indirectly, declare, order, pay, make or set apart, or agree to declare, order, pay, make or set apart, any sum for any Restricted Junior Payment except that (a) Company may make regularly scheduled payments of interest in respect of any subordinated Indebtedness in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the indenture or other agreement pursuant to which such subordinated Indebtedness was issued; (b) so long as no Default or Event of Default shall have occurred and be continuing or shall be caused thereby, Company may make Restricted Junior Payments to Sponsor pursuant to the terms of the Management Agreement as in effect on the date hereof and (c) Company may make Restricted Junior Payments to the extent necessary to pay the Unpaid Refinancing Amount, if any, provided such Restricted Junior Payment is made, or funds are set aside for such payment, within forty-five (45) Business Days of the Closing Date. 107 6.6. RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS. Except as provided herein, no Credit Party shall, nor shall it permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any Subsidiary of Company to (a) pay dividends or make any other distributions on any of such Subsidiary's Capital Stock owned by Company or any other Subsidiary of Company, (b) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (c) make loans or advances to Company or any other Subsidiary of Company, or (d) transfer any of its property or assets to Company or any other Subsidiary of Company other than restrictions by reason of customary provisions restricting assignments, subletting or other transfers contained in leases, licenses, joint venture agreements and similar agreements entered into in the ordinary course of business or that are or were created by virtue of any transfer of, agreement to transfer or option or right with respect to any property, assets or Capital Stock not otherwise prohibited under this Agreement, provided that the foregoing shall not apply to customary restrictions or conditions imposed by (i) law or (ii) any of the Credit Documents, Senior Secured Debt Documents or the Swap Agreement Documents. 6.7. INVESTMENTS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including without limitation any Joint Venture, except: (a) Investments in Cash and Cash Equivalents; (b) equity Investments owned as of the Closing Date in any Subsidiary and Investments made after the Closing Date in any wholly-owned Guarantor Subsidiaries of Company; (c) Investments (i) consisting of trade receivables arising in the ordinary course of business and consistent with past practices, (ii) in any Securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors and (ii) deposits, prepayments and other credits to suppliers made in the ordinary course of business consistent with the past practices of Company and its Subsidiaries; (d) intercompany loans to the extent permitted under Section 6.1(b); (e) Consolidated Capital Expenditures, Consolidated Other Capital Expenditures and Discretionary Capital Expenditures permitted by Sections 6.8(d), (e) and (g) respectively; 108 (f) loans and advances to employees of Company and its Subsidiaries made in the ordinary course of business in an aggregate principal amount not to exceed $2,000,000 in the aggregate outstanding at any time; (g) Investments made in connection with Permitted Acquisitions permitted pursuant to Section 6.9; (h) Investments described in Schedule 6.7; (i) Investments in any Interest Rate Agreement, Currency Agreement, or the Swap Agreement; and (j) Permitted Business Investments in an aggregate amount not to exceed at any time $10,000,000. Notwithstanding the foregoing, in no event shall any Credit Party make any Investment which results in or facilitates in any manner any Restricted Junior Payment not otherwise permitted under the terms of Section 6.5. 6.8. FINANCIAL COVENANTS. (a) Interest Coverage Ratio. Company shall not permit the Interest Coverage Ratio as of the last day of any Fiscal Quarter, beginning with the Fiscal Quarter ending December 31, 2004, to be less than the correlative ratio indicated: 109
INTEREST FISCAL QUARTER COVERAGE RATIO - ----------------------- -------------- Q4 2004 through Q4 2005 2.00:1.00 Q1 2006 through Q2 2006 2.25:1.00 Q3 2006 2.50:1.00 Q4 2006 through Q4 2008 2.75:1.00 Q1 2009 and thereafter 3.00:1.00
(b) Leverage Ratio. Company shall not permit the Leverage Ratio as of the last day of any Fiscal Quarter, beginning with the Fiscal Quarter ending December 31, 2004, to exceed the correlative ratio indicated:
FISCAL LEVERAGE QUARTER RATIO - ----------------------- ---------- Q4 2004 through Q4 2005 5.75:1.00 Q1 2006 5.50:1.00 Q2 2006 5.00:1.00 Q3 2006 4.50:1.00 Q4 2006 4.25:1.00
110
FISCAL LEVERAGE QUARTER RATIO - ----------------------- ---------- Q1 2007 through Q4 2007 4.00:1.00 Q1 2008 and thereafter 3.75:1.00
(c) Maximum Reserve Leverage Ratio. Company shall not permit the Reserve Leverage Ratio as of the last day of any Fiscal Quarter, beginning with the Fiscal Quarter ending December 31, 2004, to exceed the correlative ratio indicated:
FISCAL RESERVE LEVERAGE QUARTER RATIO - ----------------------- ---------------- Q4 2004 through Q3 2005 0.275:1.00 Q4 2005 through Q1 2006 0.25:1.00 Q2 2006 through Q3 2006 0.225:1.00 Q4 2006 through Q2 2007 0.20:1.00 Q3 2007 and thereafter 0.175:1.00
(d) Maximum Consolidated Capital Expenditures. Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures (which shall not 111 include Permitted Acquisitions for purposes of this Section 6.8(d)), in any Fiscal Year indicated below, in an aggregate amount for Company and its Subsidiaries in excess of the corresponding amount set forth below opposite such Fiscal Year; provided, such amount for any Fiscal Year shall be increased by an amount equal to the excess, if any, (but in no event more than $500,000) of such amount for the previous Fiscal Year (as adjusted in accordance with this proviso) over the actual amount of Consolidated Capital Expenditures for such previous Fiscal Year; provided such amount with respect to Fiscal Year 2004 shall be from the Closing Date through December 31, 2004:
CONSOLIDATED CAPITAL FISCAL YEAR EXPENDITURES - ----------------- ------------ 2004 $1,500,000 2005 through 2011 $3,000,000
At the request of Company, and upon demonstration by Company to the Administrative Agent of Company's compelling need to make Consolidated Capital Expenditures in excess of the limitations referred to in the first sentence of this subsection (d), the Administrative Agent in its sole discretion shall be entitled to approve an increase in the Consolidated Capital Expenditures limitations for any Fiscal Year set forth above of up to 5% of the aggregate amount set forth above with respect to such Fiscal Year. (e) Maximum Consolidated Other Capital Expenditures. Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Other Capital Expenditures (which shall not include Permitted Acquisitions for purposes of this Section 6.8(e)) in any Fiscal Year in excess of 115% of the amount of capital expenditures for Proved Reserves as set forth in the most recent Reserve Report delivered pursuant to Section 5.1(p)(ii); provided (i) the first 100% of such amount shall only be utilized on expenditures in any of those locations indicated in such Reserve Report to contain such Proved Reserves and (ii) the balance in excess of such 100% may be utilized on expenditures in locations which Company in good faith believes contain reserves and are low to moderate risk locations for the Oil and Gas Business; provided, further, notwithstanding the foregoing, with respect to the period commencing on the Closing Date through December 31, 2004, such Consolidated Other Capital Expenditures shall not exceed $11,000,000. 112 (f) Maximum Combined Capital Expenditures. Company shall not, and shall not permit its Subsidiaries to, make or incur Combined Capital Expenditures (which shall not include Permitted Acquisitions for purposes of this Section 6.8(f)), in any Fiscal Year indicated below, in an aggregate amount for Company and its Subsidiaries in excess of the corresponding amount set forth below opposite such Fiscal Year; provided such amounts for any Fiscal Year shall be increased by an amount equal to the excess, if any (but in no event more than $5,000,000) of such amount for the previous Fiscal Year (as adjusted in accordance with this proviso) over the actual amount of Combined Capital Expenditures for such previous Fiscal Year. Such amount with respect to Fiscal Year 2004 shall be from the Closing Date through December 31, 2004.
MAXIMUM COMBINED FISCAL YEAR CAPITAL EXPENDITURES - --------------------- -------------------- 2004 $12,500,000 2005 $36,000,000 2006 $44,000,000 2007 and thereafter $52,000,000
(g) Maximum Discretionary Capital Expenditures. Company shall not, and shall not permit its Subsidiaries to, make or incur Discretionary Capital Expenditures (which shall not include Permitted Acquisitions for purposes of this Section 6.8(g)), in any Fiscal Year, in an aggregate amount for Company and its Subsidiaries (i) in excess of $10,000,000 for such Fiscal Year and (ii) in excess of the lesser of (x) the cash-on-hand at the Company as of the Closing Date and (y) $20,000,000, in each case in the aggregate from the Closing Date through the date of determination; provided, such amount in clause (ii) shall be reduced by any use for any purposes (including, without limitation, working capital purposes or for Permitted Acquisitions) of the cash-on-hand as of the Closing Date as shall be set forth in a certificate from a Financial Officer of the Company (in his or her capacity as an officer of the Company and not in his or her individual capacity) to be delivered with each Compliance Certificate delivered pursuant to Section 5.1(d) which certificate shall set forth the amount and use, if any, of such cash during the previous Fiscal Quarter; provided further such Discretionary Capital Expenditures may be utilized only with respect to locations which Company in good faith believes contain reserves and are low to moderate risk locations for the Oil and Gas Business. (h) Certain Calculations. With respect to any period during which a Permitted Acquisition or an Asset Sale has occurred (each, a "SUBJECT TRANSACTION"), for purposes of 113 determining compliance with the financial covenants set forth in this Section 6.8 (but not for purposes of determining the Applicable Margin), Consolidated Adjusted EBITDA shall be calculated with respect to such period on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to a specific transaction, are factually supportable and are expected to have a continuing impact, in each case determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act and as interpreted by the staff of the Securities and Exchange Commission, which would include cost savings resulting from head count reduction, closure of facilities and similar restructuring charges, which pro forma adjustments shall be certified by the chief financial officer of Company) using the historical audited financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of Company and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period (and assuming that such Indebtedness bears interest during any portion of the applicable measurement period prior to the relevant acquisition at the weighted average of the interest rates applicable to outstanding Loans incurred during such period). 6.9. FUNDAMENTAL CHANGES; DISPOSITION OF ASSETS; ACQUISITIONS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), exchange, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, assets or property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, whether now owned or hereafter acquired, or acquire by purchase or otherwise (other than purchases or other acquisitions of inventory, materials and equipment and Consolidated Capital Expenditures and Consolidated Other Capital Expenditures in the ordinary course of business) the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person or any division or line of business or other business unit of any Person, except: (a) any Subsidiary of Company may be merged with or into Company or any Guarantor Subsidiary, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any Guarantor Subsidiary; provided, in the case of such a merger, Company or such Guarantor Subsidiary, as applicable shall be the continuing or surviving Person; (b) sales or other dispositions of assets that do not constitute Asset Sales; (c) Asset Sales, the proceeds of which (valued at the principal amount thereof in the case of non-Cash proceeds consisting of notes or other debt Securities and valued at fair 114 market value in the case of other non-Cash proceeds) (i) are less than $5,000,000 with respect to any single Asset Sale or series of related Asset Sales and (ii) when aggregated with the proceeds of all other Asset Sales made within the same Fiscal Year, are less than $10,000,000; provided (1) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof (determined in good faith by a Financial Officer of Company), (2) no less than 75% thereof shall be paid in Cash, and (3) the Net Asset Sale Proceeds thereof shall be applied as required by Section 2.14(a); (d) disposals of obsolete, worn out or surplus property; (e) Permitted Acquisitions, the consideration for which constitutes less than $10,000,000, in the aggregate in any Fiscal Year regardless of the source of funds for such consideration; provided, that in connection with any Permitted Acquisition any Subsidiary of Company may be merged with or into any company acquired in such Permitted Acquisition so long as such Guarantor Subsidiary shall be the continuing or surviving Person; (f) the sale of Oil and Gas Properties not containing Proved Reserves in the ordinary course of business; provided, that, the aggregate value of Oil and Gas Properties so abandoned, farmed-out or subleased during any six-month period commencing January 1 and ending June 30 or commencing July 1 and ending December 31 shall not exceed $2,500,000; (g) the trade or exchange by Company or any Subsidiary of any Oil and Gas Property or interest therein owned or held by Company or such Subsidiary for any Oil and Gas Property or interest therein owned or held by another Person, including any cash or Cash Equivalents necessary in order to achieve an exchange of equivalent value; provided, that, the aggregate value of trades or exchanges permitted by this paragraph (g) shall not exceed $5,000,000 during any six-month period commencing January 1 and ending June 30 or commencing July 1 and ending December 31; (h) the sale of Oil and Gas Properties in connection with tax credit transactions complying with Section 29 of the Internal Revenue of 1986, as amended from time to time ("SECTION 29 PROPERTIES"), which sale does not result in a reduction in Company's or its Subsidiaries', as the case may be, right to receive the cash flow from such Oil and Gas Properties through the Term Loan Maturity Date and which sale is on terms reasonably acceptable to the Administrative Agent; (i) Investments made in accordance with Section 6.7; and (j) the transfer of the TBR Delayed Transfer Assets to Fortuna Energy, Inc. (or as Fortuna Energy, Inc. may otherwise direct). 115 6.10. DISPOSAL OF SUBSIDIARY INTERESTS. Except for (i) any sale of all of its interests in the Capital Stock of any of its Subsidiaries in compliance with the provisions of Section 6.9 and (ii) any pledge of the Capital Stock of Company or its Subsidiaries to secure the Obligations hereunder or the Obligations under the Senior Secured Notes or any Swap Agreement, no Credit Party shall, nor shall it permit any of its Subsidiaries to, (a) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries, except to qualify directors if required by applicable law; or (b) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any Capital Stock of any of its Subsidiaries, except to another Credit Party (subject to the restrictions on such disposition otherwise imposed hereunder), or to qualify directors if required by applicable law. 6.11. SALES AND LEASE-BACKS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, become or remain liable as lessee or as a guarantor or other surety with respect to any lease of any property (whether real, personal or mixed), whether now owned or hereafter acquired, which such Credit Party (a) has sold or transferred or is to sell or to transfer to any other Person (other than Company or any of its Subsidiaries), or (b) intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by such Credit Party to any Person (other than Company or any of its Subsidiaries) in connection with such lease. 6.12. TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. No Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of Capital Stock of Company or any of its Subsidiaries or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from a Person who is not such a holder or Affiliate; provided, the foregoing restriction shall not apply to (a) any transaction between Company and any Guarantor Subsidiary; (b) reasonable and customary fees paid to members of the board of directors (or similar governing body) of Company and its Subsidiaries; (c) compensation arrangements for officers and other employees of Company and its Subsidiaries entered into in the ordinary course of business; (d) Company may pay management fees to Sponsor pursuant to the terms of the Management Agreement as in effect on the date hereof; and (e) transactions described in Schedule 6.12. 6.13. CONDUCT OF BUSINESS. From and after the Closing Date, no Credit Party shall, nor shall it permit any of its Subsidiaries to, engage in any business other than (i) the businesses engaged in by such Credit Party on the Closing Date and similar or related businesses and (ii) such other lines of business as may be consented to by Requisite Lenders. 116 6.14. FORWARD SALES. Except in accordance with ordinary practice in the Oil and Gas Business, enter into or permit to exist any advance payment agreement or other arrangement pursuant to which Company or any of its Subsidiaries, having received full or substantial payment of the purchase price for a specified quantity of Hydrocarbons upon entering such agreement or arrangement, is required to deliver, in one or more installments subsequent to the date of such agreement or arrangement, such quantity of Hydrocarbons pursuant to and during the terms of such agreement or arrangement; provided that any Production Payment is prohibited without the consent of the Requisite Lenders. 6.15. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS. No Credit Party shall nor shall it permit any of its Subsidiaries to, agree to any material amendment, restatement, supplement or other modification to, or waiver of, any of its material rights under any Related Agreement (other than the Senior Secured Indebtedness and future transactions otherwise permitted by the terms of this Agreement) after the Closing Date without in each case obtaining the prior written consent of Requisite Lenders to such amendment, restatement, supplement or other modification or waiver. 6.16. AMENDMENTS OR WAIVERS OF WITH RESPECT TO SENIOR SECURED INDEBTEDNESS. No Credit Party shall, nor shall it permit any of its Subsidiaries to, amend or otherwise change the terms of any Senior Secured Indebtedness, or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on such Senior Secured Indebtedness, change (to earlier dates) any dates upon which payments of principal or interest are due thereon, change any event of default or condition to an event of default with respect thereto (other than to eliminate any such event of default or increase any grace period related thereto), change the redemption, prepayment or defeasance provisions thereof, change the lien subordination provisions of such Senior Secured Indebtedness (or of any guaranty thereof), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase materially the obligations of the obligor thereunder or to confer any additional rights on the holders of such Senior Secured Indebtedness (or a trustee or other representative on their behalf) which would be adverse in any material respect to any Credit Party or Lenders. 6.17. FISCAL YEAR. No Credit Party shall, nor shall it permit any of its Subsidiaries to change its Fiscal Year-end from December 31. SECTION 7. GUARANTY 7.1. GUARANTY OF THE OBLIGATIONS. 117 Subject to the provisions of Section 7.2, Guarantors jointly and severally hereby irrevocably and unconditionally guaranty to Administrative Agent for the ratable benefit of the Beneficiaries the due and punctual payment in full of all Obligations when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) (collectively, the "GUARANTEED OBLIGATIONS"). 7.2. CONTRIBUTION BY GUARANTORS. All Guarantors desire to allocate among themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a "FUNDING GUARANTOR") under this Guaranty such that its Aggregate Payments exceeds its Fair Share as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in an amount sufficient to cause each Contributing Guarantor's Aggregate Payments to equal its Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount with respect to such Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors multiplied by (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. "FAIR SHARE CONTRIBUTION AMOUNT" means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any comparable applicable provisions of state law; provided, solely for purposes of calculating the "FAIR SHARE CONTRIBUTION AMOUNT" with respect to any Contributing Guarantor for purposes of this Section 7.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including, without limitation, in respect of this Section 7.2), minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under this Section 7.2. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 7.2 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. 118 Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 7.2. 7.3. PAYMENT BY GUARANTORS. Subject to Section 7.2, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which any Beneficiary may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of Company to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), Guarantors will upon demand pay, or cause to be paid, in Cash, to Administrative Agent for the ratable benefit of Beneficiaries, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for Company's becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against Company for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to Beneficiaries as aforesaid. 7.4. LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows: (a) this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety; (b) Administrative Agent may enforce this Guaranty upon the occurrence of an Event of Default notwithstanding the existence of any dispute between Company and any Beneficiary with respect to the existence of such Event of Default; (c) the obligations of each Guarantor hereunder are independent of the obligations of Company and the obligations of any other guarantor (including any other Guarantor) of the obligations of Company, and a separate action or actions may be brought and prosecuted against such Guarantor whether or not any action is brought against Company or any of such other guarantors and whether or not Company is joined in any such action or actions; (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor's liability for any 119 portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if Administrative Agent is awarded a judgment in any suit brought to enforce any Guarantor's covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor, limit, affect, modify or abridge any other Guarantor's liability hereunder in respect of the Guaranteed Obligations; (e) any Beneficiary, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor's liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of such Beneficiary in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that such Beneficiary may have against any such security, in each case as such Beneficiary in its discretion may determine consistent herewith or the applicable Hedge Agreement and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against Company or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Credit Documents or the Hedge Agreements; and (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy 120 (whether arising under the Credit Documents or the Hedge Agreements, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, any of the other Credit Documents, any of the Hedge Agreements or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or such Credit Document, such Hedge Agreement or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the other Credit Documents or any of the Hedge Agreements or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though any Beneficiary might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) any Beneficiary's consent to the change, reorganization or termination of the corporate structure or existence of Company or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or counterclaims which Company may allege or assert against any Beneficiary in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations. 7.5. WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit of Beneficiaries: (a) any right to require any Beneficiary, as a condition of payment or performance by such Guarantor, to (i) proceed against Company, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from Company, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Deposit Account or credit on the books of any Beneficiary in favor of Company or any other Person, or (iv) pursue any other remedy in the power of any Beneficiary whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Company or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Company or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any 121 defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon any Beneficiary's errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor's obligations hereunder, (ii) to the extent permitted by law, the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that any Beneficiary protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, the Hedge Agreements or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to Company and notices of any of the matters referred to in Section 7.4 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof. 7.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the Guaranteed Obligations shall have been indefeasibly paid in full and the Revolving Commitments shall have terminated and all Letters of Credit and Hedge Letters of Credit shall have expired or been cancelled, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Company or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Company with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that any Beneficiary now has or may hereafter have against Company, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by any Beneficiary. In addition, until the Guaranteed Obligations shall have been indefeasibly paid in full and the Revolving Commitments shall have terminated and all Letters of Credit and Hedge Letters of Credit shall have expired or been cancelled, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including, without limitation, any such right of contribution as contemplated by Section 7.2. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction 122 to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Company or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights any Beneficiary may have against Company, to all right, title and interest any Beneficiary may have in any such collateral or security, and to any right any Beneficiary may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. 7.7. SUBORDINATION OF OTHER OBLIGATIONS. Any Indebtedness of Company or any Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR") is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by the Obligee Guarantor after an Event of Default has occurred and is continuing shall be held in trust for Administrative Agent on behalf of Beneficiaries and shall forthwith be paid over to Administrative Agent for the benefit of Beneficiaries to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof. 7.8. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full and the Revolving Commitments shall have terminated and all Letters of Credit and Hedge Letters of Credit shall have expired or been cancelled. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations. 7.9. AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for any Beneficiary to inquire into the capacity or powers of any Guarantor or Company or the officers, directors or any agents acting or purporting to act on behalf of any of them. 7.10. FINANCIAL CONDITION OF COMPANY. Any Credit Extension may be made to Company or continued from time to time, and any Hedge Agreements may be entered into from time to time, in each case without notice to or authorization from any Guarantor regardless of the financial or other condition of Company at the time of any such grant or continuation or at the time such Hedge Agreement is entered into, as the case may be. No Beneficiary shall have any obligation to disclose or discuss with any 123 Guarantor its assessment, or any Guarantor's assessment, of the financial condition of Company. Each Guarantor has adequate means to obtain information from Company on a continuing basis concerning the financial condition of Company and its ability to perform its obligations under the Credit Documents and the Hedge Agreements, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Company and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of any Beneficiary to disclose any matter, fact or thing relating to the business, operations or conditions of Company now known or hereafter known by any Beneficiary. 7.11. BANKRUPTCY, ETC. (a) So long as any Guaranteed Obligations remain outstanding, no Guarantor shall, without the prior written consent of Administrative Agent acting pursuant to the instructions of Requisite Lenders, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against Company or any other Guarantor. The obligations of Guarantors hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Company or any other Guarantor or by any defense which Company or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. (b) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors and Beneficiaries that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve Company of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Administrative Agent, or allow the claim of Administrative Agent in respect of, any such interest accruing after the date on which such case or proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Obligations are paid by Company, the obligations of Guarantors hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from any Beneficiary as a preference, fraudulent 124 transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder. 7.12. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the Capital Stock of any Guarantor or any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) in accordance with the terms and conditions hereof, the Guaranty of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by any Beneficiary or any other Person effective as of the time of such Asset Sale. Notwithstanding anything herein to the contrary, each Guarantor confirms that it is its intention that the guaranty by such Guarantor pursuant to this Guaranty not constitute a fraudulent transfer or conveyance for purposes of any federal, state or foreign law. To effectuate the foregoing intention, each Guarantor hereby irrevocably agrees that the obligations of each Guarantor under this Guaranty shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guaranty, result in the obligations of such Guarantor under this Guaranty not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law. SECTION 8. EVENTS OF DEFAULT 8.1. EVENTS OF DEFAULT. If any one or more of the following conditions or events shall occur: (a) Failure to Make Payments When Due. Failure by Company to pay (i) when due any installment of principal of any Loan, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; (ii) when due any amount payable to Issuing Bank in reimbursement of any drawing under a Letter of Credit or Hedge Letter of Credit; or (iii) any interest on any Loan or any fee or any other amount due hereunder within five days after the date due; or (b) Default in Other Agreements. (i) Failure of any Credit Party or any of their respective Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in Section 8.1(a)) in a principal amount of $10,000,000 or more beyond the grace period, if any, provided therefor; or (ii) breach or default by any Credit Party with respect to any other material term of (1) one or more items of Indebtedness in the individual or principal amounts referred to in clause (i) above or (2) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness, in each case beyond the grace period, if any, provided therefor, if 125 the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness (or a trustee on behalf of such holder or holders), to cause, that Indebtedness to become or be declared due and payable (or redeemable) prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be; or (iii) breach or default by Company under the Swap Agreement, if the effect of such breach or default is to permit the holder or holders of that Indebtedness to terminate the Swap Agreement and all or substantially all of the outstanding transactions thereunder; or (c) Breach of Certain Covenants. Failure of any Credit Party to perform or comply with any term or condition contained in Section 2.6, Section 5.2 (as to the existence of any Credit Party) or Section 6; or (d) Breach of Representations, etc. Any representation, warranty, certification or other statement made or deemed made by any Credit Party in any Credit Document or in any statement or certificate at any time given by any Credit Party or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect as of the date made or deemed made; or (e) Other Defaults Under Credit Documents. Any Credit Party shall default in the performance of or compliance with any term contained herein or any of the other Credit Documents, other than any such term referred to in any other Section of this Section 8.1, and such default shall not have been remedied or waived within thirty days after the earlier of (i) an officer of such Credit Party becoming aware of such default or (ii) receipt by Company of notice from Administrative Agent or any Lender of such default; or (f) Involuntary Bankruptcy; Appointment of Receiver, etc. (i) A court of competent jurisdiction shall enter a decree or order for relief in respect of Company or any of its Subsidiaries in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Company or any of its Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries, or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Subsidiaries, and any such event described in this clause (ii) shall continue for sixty days without having been dismissed, bonded or discharged; or 126 (g) Voluntary Bankruptcy; Appointment of Receiver, etc.. (i) Company or any of its Subsidiaries shall have an order for relief entered with respect to it or shall commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Subsidiaries shall make any assignment for the benefit of creditors; or (ii) Company or any of its Subsidiaries shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the board of directors (or similar governing body) of Company or any of its Subsidiaries (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to herein or in Section 8.1(f); or (h) Judgments and Attachments. Any money judgment, writ or warrant of attachment or similar process involving (i) in any individual case an amount in excess of $3,000,000 or (ii) in the aggregate at any time an amount in excess of $10,000,000 (in either case to the extent not adequately covered by insurance as to which a solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of sixty days (or in any event later than five days prior to the date of any proposed sale thereunder); or (i) Dissolution. Any order, judgment or decree shall be entered against any Credit Party decreeing the dissolution or split up of such Credit Party and such order shall remain undischarged or unstayed for a period in excess of thirty days; or (j) Employee Benefit Plans. (i) There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $10,000,000 during the term hereof; or (ii) there exists any fact or circumstance that reasonably could be expected to result in the imposition of a Lien or security interest under Section 412(n) of the Internal Revenue Code or under ERISA; or (k) Change of Control. A Change of Control shall occur; or (l) Guaranties, Collateral Documents and other Credit Documents. At any time after the execution and delivery thereof, (i) the Guaranty for any reason, other than the satisfaction in full of all Obligations, shall cease to be in full force and effect (other than in accordance with its terms) or shall be declared to be null and void or any Guarantor shall repudiate its obligations thereunder, (ii) this Agreement or any Collateral Document ceases to be in full force and effect (other than by reason of a release of Collateral in accordance with the 127 terms hereof or thereof or the satisfaction in full of the Obligations in accordance with the terms hereof) or shall be declared null and void, or Collateral Trustee shall not have or shall cease to have a valid and perfected Lien in any Collateral purported to be covered by the Collateral Documents with the priority required by the relevant Collateral Document, in each case for any reason other than the failure of Collateral Trustee or any Secured Party to take any action within its control, or (iii) any Credit Party shall contest the validity or enforceability of any Credit Document in writing or deny in writing that it has any further liability, including with respect to future advances by Lenders, under any Credit Document to which it is a party; or (m) Subordination. The lien subordination provisions contained in the Collateral Trust Agreement shall cease, for any reason, to be in full force and effect, or any Person that is a party thereto or holders of at least 25% the aggregate principal amount of the Senior Secured Notes shall so assert; THEN, (1) upon the occurrence of any Event of Default described in Section 8.1(f) or 8.1(g), automatically, and (2) upon the occurrence of any other Event of Default, at the request of (or with the consent of) Requisite Lenders, upon notice to Company by Administrative Agent, (A) the Revolving Commitments, if any, of each Lender having such Revolving Commitments and the obligation of Issuing Bank to issue any Letter of Credit shall immediately terminate; (B) the Hedge L/C Commitments, if any, of each Lender having such Hedge L/C Commitments and the obligation of Issuing Bank to issue any Hedge Letter of Credit shall immediately terminate, (C) each of the following shall immediately become due and payable, in each case without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by each Credit Party: (I) the unpaid principal amount of and accrued interest on the Loans, (II) an amount, to be held as cash collateral, equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (regardless of whether any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letters of Credit), (III) an amount, to be held as cash collateral, equal to the maximum amount that may at any time be drawn under all Hedge Letters of Credit then outstanding (regardless of whether any beneficiary under any such Hedge Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under the Hedge Letters of Credit) and (IV) all other Obligations; provided, the foregoing shall not affect in any way the obligations of Lenders under Section 2.4(e); (D) Administrative Agent may cause Collateral Trustee to enforce any and all Liens and security interests created pursuant to Collateral Documents; and (E) Administrative Agent shall direct Company to pay (and Company hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 8.1(f) and (g) to pay) to Administrative Agent such additional amounts of cash, to be held as security for Company's reimbursement Obligations in respect of (i) Letters of 128 Credit then outstanding, equal to the Letter of Credit Usage at such time and (ii) Hedge Letters of Credit then outstanding, equal to the Hedge Letter of Credit Usage at such time. SECTION 9. AGENTS 9.1. APPOINTMENT OF AGENTS. GSCP is hereby appointed Syndication Agent hereunder, and each Lender hereby authorizes Syndication Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. GSCP is hereby appointed Administrative Agent hereunder and under the other Credit Documents and each Lender hereby authorizes Administrative Agent to act as its agent in accordance with the terms hereof and the other Credit Documents. GECC is hereby appointed Co-Documentation Agent hereunder and National City is hereby appointed Co-Documentation Agent hereunder, and each Lender hereby authorizes the Documentation Agents to act as their agent in accordance with the terms hereof and the other Credit Documents. Each Agent hereby agrees to act upon the express conditions contained herein and the other Credit Documents, as applicable. The provisions of this Section 9 are solely for the benefit of Agents and Lenders and no Credit Party shall have any rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, each Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. Each of Syndication Agent and Documentation Agents, without consent of or notice to any party hereto, may assign any and all of its rights or obligations hereunder to any of its Affiliates. As of the Closing Date, neither GSCP, in its capacity as Syndication Agent, nor GECC and National City, in their capacity as Documentation Agents, shall have any obligations but shall be entitled to all benefits of this Section 9. 9.2. POWERS AND DUTIES. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Credit Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified herein and the other Credit Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason hereof or any of the other Credit Documents, a fiduciary relationship in respect of any Lender; and nothing herein or any of the other Credit Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect hereof or any of the other Credit Documents except as expressly set forth herein or therein. 9.3. GENERAL IMMUNITY. 129 (a) No Responsibility for Certain Matters. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency hereof or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by any Agent to Lenders or by or on behalf of any Credit Party, any Lender or any person providing the Settlement Service to any Agent or any Lender in connection with the Credit Documents and the transactions contemplated thereby or for the financial condition or business affairs of any Credit Party or any other Person liable for the payment of any Obligations, nor shall any Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Credit Documents or as to the use of the proceeds of the Loans or as to the existence or possible existence of any Event of Default or Default or to make any disclosures with respect to the foregoing. Anything contained herein to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or Hedge Letter of Credit Usage or the component amounts thereof. (b) Exculpatory Provisions. No Agent nor any of its officers, partners, directors, employees or agents shall be liable to Lenders for any action taken or omitted by any Agent under or in connection with any of the Credit Documents except to the extent caused by such Agent's gross negligence or willful misconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection herewith or any of the other Credit Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, including any Settlement Confirmation or other communication issues by any Settlement Service, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting hereunder or any of the other Credit Documents in accordance 130 with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under Section 10.5). (c) Delegation of Duties. Administrative Agent may perform any and all of its duties and exercise its rights and powers under this Agreement or under any other Credit Document by or through any one or more sub-agents appointed by Administrative Agent. Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates. The exculpatory, indemnification and other provisions of this Section 9.3 and of Section 9.6 shall apply to any the Affiliates of Administrative Agent and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. All of the rights, benefits, and privileges (including the exculpatory and indemnification provisions) of this Section 9.3 and of Section 9.6 shall apply to any such sub-agent and to the Affiliates of any such sub-agent, and shall apply to their respective activities as sub-agent as if such sub-agent and Affiliates were named herein. Notwithstanding anything herein to the contrary, with respect to each sub-agent appointed by the Administrative Agent, (i) such sub-agent shall be a third party beneficiary under this Agreement with respect to all such rights, benefits and privileges (including exculpatory rights and rights to indemnification) and shall have all of the rights and benefits of a third party beneficiary, including an independent right of action to enforce such rights, benefits and privileges (including exculpatory rights and rights to indemnification) directly, without the consent or joinder of any other Person, against any or all of the Credit Parties and the Lenders, (ii) such rights, benefits and privileges (including exculpatory rights and rights to indemnification) shall not be modified or amended without the consent of such sub-agent, and (iii) such sub-agent shall only have obligations to Administrative Agent and not to any Credit Party, Lender or any other Person and no Credit Party, Lender or any other Person shall have any rights, directly or indirectly, as a third party beneficiary or otherwise, against such sub-agent. 9.4. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit and Hedge Letters of Credit, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as if it were not performing the duties and functions delegated to it hereunder, and the term "Lender" shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Any Agent and its Affiliates may accept deposits from, lend money to, own securities of, and generally engage in any kind of banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from 131 Company for services in connection herewith and otherwise without having to account for the same to Lenders. 9.5. LENDERS' REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGMENT. (a) Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with Credit Extensions hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. (b) Each Lender, by delivering its signature page to this Agreement and funding its Term Loan and/or Revolving Loans on the Closing Date, shall be deemed to have acknowledged receipt of, and consented to and approved, each Credit Document and each other document required to be approved by any Agent, Requisite Lenders or Lenders, as applicable on the Closing Date and posted to IntraLinks. 9.6. RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent and each Issuing Bank, to the extent that such Agent or Issuing Bank shall not have been reimbursed by any Credit Party, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including reasonable counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent or Issuing Bank in exercising its powers, rights and remedies or performing its duties hereunder or under the other Credit Documents or otherwise in its capacity as such Agent or Issuing Bank in any way relating to or arising out of this Agreement or the other Credit Documents; provided, no Lender 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 or Issuing Bank's gross negligence or willful misconduct. If any indemnity furnished to any Agent or Issuing Bank for any purpose shall, in the opinion of such Agent or Issuing Bank, be insufficient or become impaired, such Agent or Issuing Bank may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall this sentence require any Lender to indemnify any Agent against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Lender's Pro Rata Share thereof; and provided further, this sentence shall not be deemed to require any 132 Lender to indemnify any Agent or Issuing Bank against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding sentence. 9.7. SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may resign at any time by giving thirty days' prior written notice thereof to Lenders and Company, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Administrative Agent and signed by Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five Business Days' notice to Company, and in consultation with Company, to appoint a successor Administrative Agent. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, that successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and the retiring or removed Administrative Agent shall promptly (i) transfer to such successor Administrative Agent all sums, Securities and other items of Collateral held under the Collateral Documents, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Administrative Agent under the Credit Documents, and (ii) execute and deliver to such successor Administrative Agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Administrative Agent of the security interests created under the Collateral Documents, whereupon such retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring or removed Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent hereunder. 9.8. COLLATERAL DOCUMENTS AND GUARANTY. (a) Agents under Collateral Documents and Guaranty. Each Lender hereby further authorizes Administrative Agent or any other Person appointed by Administrative Agent, on behalf of and for the benefit of Lenders, to (i) be the agent for and representative of Lenders with respect to the Guaranty, the Collateral and the Collateral Documents and (ii) enter into the Collateral Trust Agreement and appoint the Collateral Trustee to act on behalf of the Agents and the Lenders with respect to the Collateral, and each Lender agrees to be bound by the terms of the Collateral Trust Agreement. Subject to Section 10.5, without further written consent or authorization from Lenders, Administrative Agent or any other Person appointed by Administrative Agent may execute any documents or instruments necessary to (i) in accordance with the terms of the Collateral Trust Agreement and the Collateral Documents, release, or authorize the release of, any Lien encumbering any item of Collateral that is the subject of a sale 133 or other disposition of assets permitted hereby or to which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented or (ii) release any Guarantor from the Guaranty pursuant to Section 7.12 or with respect to which Requisite Lenders (or such other Lenders as may be required to give such consent under Section 10.5) have otherwise consented; provided that Administrative Agent shall not enter into or consent to any material amendment, modification, termination or waiver of the Collateral Trust Agreement without the prior consent of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.5). (b) Right to Realize on Collateral and Enforce Guaranty. Anything contained in any of the Credit Documents to the contrary notwithstanding, Company, Administrative Agent and each Lender hereby agree that (i) no Lender shall have any right individually to realize upon any of the Collateral or to enforce the Guaranty, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by Administrative Agent, on behalf of Lenders in accordance with the terms hereof and all powers, rights and remedies under the Collateral Documents may be exercised solely by Administrative Agent or Collateral Trustee, as applicable, and (ii) in the event of a foreclosure by Collateral Trustee on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Secured Parties (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) 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 any of the Obligations as a credit on account of the purchase price for any collateral payable by Administrative Agent at such sale. SECTION 10. MISCELLANEOUS 10.1. NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to a Credit Party, Syndication Agent, Administrative Agent, Issuing Bank or Documentation Agent, shall be sent to such Person's address as set forth on Appendix B or in the other relevant Credit Document, and in the case of any Lender, the address as indicated on Appendix B or otherwise indicated to Administrative Agent in writing. Each notice hereunder shall be in writing and may be personally served, telexed or sent by telefacsimile or United States mail or courier service and shall be deemed to have been given when delivered in person or by courier service and signed for against receipt thereof, upon receipt of telefacsimile or telex, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; provided, no notice to any Agent shall be effective until received by such Agent; provided further, any such notice or other communication 134 shall at the request of the Administrative Agent be provided to any sub-agent appointed pursuant to Section 9.3(c) hereto as designated by the Administrative Agent from time to time. 10.2. EXPENSES. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (a) all the actual and reasonable costs and expenses of preparation of the Credit Documents and any consents, amendments, waivers or other modifications thereto; (b) all the costs of furnishing all opinions by counsel for Company and the other Credit Parties; (c) the reasonable fees, expenses and disbursements of counsel to Agents in connection with the negotiation, preparation, execution and administration of the Credit Documents and any consents, amendments, waivers or other modifications thereto and any other documents or matters requested by Company; (d) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Collateral Trustee, for the benefit of Administrative Agent and Lenders pursuant hereto, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums and reasonable fees, expenses and disbursements of counsel to each Agent and Collateral Trustee and of counsel providing any opinions that any Agent, Collateral Trustee or Requisite Lenders may request in respect of the Collateral or the Liens created pursuant to the Collateral Documents; (e) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any appraisers, consultants, advisors and agents employed or retained by Collateral Trustee and Administrative Agent and their respective counsel) in connection with the custody or preservation of any of the Collateral; (g) all other actual and reasonable costs and expenses incurred by each Agent in connection with the syndication of the Loans and Commitments and the negotiation, preparation and execution of the Credit Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (h) after the occurrence of a Default or an Event of Default, all costs and expenses, including reasonable attorneys' fees and costs of settlement, incurred by any Agent, Collateral Trustee and Lenders in enforcing any Obligations of or in collecting any payments due from any Credit Party hereunder or under the other Credit Documents by reason of such Default or Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided hereunder in the nature of a "work-out" or pursuant to any insolvency or bankruptcy cases or proceedings. 10.3. INDEMNITY. (a) In addition to the payment of expenses pursuant to Section 10.2, whether or not the transactions contemplated hereby shall be consummated, each Credit Party agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless, each Agent, each Issuing Bank and Lender and the officers, partners, directors, trustees, advisors, 135 employees, agents, sub-agents and Affiliates of each Agent, the Collateral Trustee and each Lender (each, an "INDEMNITEE"), from and against any and all Indemnified Liabilities; provided, no Credit Party shall have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise from the gross negligence or willful misconduct of that Indemnitee. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this Section 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, the applicable Credit Party shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. (b) To the extent permitted by applicable law, no Credit Party shall assert, and each Credit Party hereby waives, any claim against Lenders, Agents, each Issuing Bank and their respective Affiliates, directors, employees, attorneys, agents or sub-agents, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable legal requirement) arising out of, in connection with, arising out of, as a result of, or in any way related to, this Agreement or any Credit Document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and Company hereby waives, releases and agrees not to sue upon any such claim or any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. 10.4. SET-OFF. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Issuing Bank and Lender is hereby authorized by each Credit Party at any time or from time to time subject to the consent of Administrative Agent (such consent not to be unreasonably withheld or delayed), without notice to any Credit Party or to any other Person (other than Administrative Agent), any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by such Issuing Bank or Lender to or for the credit or the account of any Credit Party against and on account of the obligations and liabilities of any Credit Party to such Issuing Bank or Lender hereunder, the Letters of Credit and Hedge Letters of Credit and participations therein and under the other Credit Documents, including all claims of any nature or description arising out of or connected hereto, the Letters of Credit and Hedge Letters of Credit and participations therein or with any other Credit Document, irrespective of whether or not (a) such Issuing Bank or Lender shall have made any demand hereunder or (b) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or Hedge Letters of 136 Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 2 and although such obligations and liabilities, or any of them, may be contingent or unmatured. 10.5. AMENDMENTS AND WAIVERS. (a) Requisite Lenders' Consent. Subject to Section 10.5(b) and 10.5(c), no amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall in any event be effective without the written concurrence of the Requisite Lenders. (b) Affected Lenders' Consent. Without the written consent of each Lender (other than a Defaulting Lender) that would be affected thereby, no amendment, modification, termination, or consent shall be effective if the effect thereof would: (i) extend the scheduled final maturity of any Loan or Note; (ii) waive, reduce or postpone any scheduled repayment (but not prepayment); (iii) (x) extend the stated expiration date of any Letter of Credit beyond the Revolving Commitment Termination Date or (y) extend the stated expiration date of any Hedge Letter of Credit beyond the Hedge L/C Commitment Termination Date; (iv) reduce the rate of interest on any Loan (other than any waiver of any increase in the interest rate applicable to any Loan pursuant to Section 2.10) or any fee payable hereunder; (v) extend the time for payment of any such interest or fees; (vi) reduce or forgive the principal amount of any Loan or any reimbursement obligation in respect of any Letter of Credit or Hedge Letter of Credit; (vii) amend, modify, terminate or waive any provision of this Section 10.5(b) or Section 10.5(c); (viii) amend the definition of "REQUISITE LENDERS" or "PRO RATA SHARE"; provided, with the consent of Requisite Lenders, additional extensions of credit pursuant hereto may be included in the determination of "REQUISITE LENDERS" or "PRO RATA SHARE" on substantially the same basis as the Term Loan Commitments, the Term 137 Loans, the Revolving Commitments, the Revolving Loans, the Hedge L/C Commitments and the Hedge L/C Loans are included on the Closing Date; (ix) release all or substantially all of the Collateral or all Guarantors or any material Guarantor from the Guaranty except as expressly provided in the Credit Documents; (x) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under any Credit Document; or (xi) amend any provision in Section 10.6 which has the effect of further restricting Lenders' ability to assign or transfer all or a portion of their rights and obligations under this Agreement, other than any amendments with respect to the settlement of assignments through a Settlement Service. (c) Other Consents. No amendment, modification, termination or waiver of any provision of the Credit Documents, or consent to any departure by any Credit Party therefrom, shall: (i) increase any Revolving Commitment of any Lender over the amount thereof then in effect without the consent of such Lender; provided, no amendment, modification or waiver of any condition precedent, covenant, Default or Event of Default shall constitute an increase in any Revolving Commitment of any Lender; (ii) amend the definition of "REQUISITE CLASS LENDERS" without the consent of Requisite Class Lenders of each Class; provided, with the consent of the Requisite Lenders, additional extensions of credit pursuant hereto may be included in the determination of such "REQUISITE CLASS LENDERS" on substantially the same basis as the Term Loan Commitments, the Term Loans, the Revolving Commitments and the Revolving Loans are included on the Closing Date; (iii) alter the requirement to make, or the required application of any repayments or prepayments as between Classes pursuant to Sections 2.14 or 2.15 hereof or Section 7.2 of the Pledge and Security Agreement without the consent of Requisite Class Lenders of each Class which would receive a lesser repayment or prepayment as a result thereof; [provided, Requisite Lenders may waive, in whole or in part, any prepayment so long as the application, as between Classes, of any portion of such prepayment which is still required to be made is not altered]; (iv) amend, modify, terminate or waive (A) any obligation of Lenders relating to the purchase of participations in Letters of Credit or Hedge Letter of Credit as 138 provided in Section 2.4(e) or any other provision set forth in Section 2.4 without the written consent of Administrative Agent and of Issuing Bank or (B) the last paragraph of Section 8.1 as it relates to the cash collateralization of letter of credit obligations without the prior written consent of each Issuing Bank; or (v) amend, modify, terminate or waive any provision of Section 9 as the same applies to any Agent, or any other provision hereof as the same applies to the rights or obligations of any Agent, in each case without the consent of such Agent. (d) Execution of Amendments, etc. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of such Lender. Any waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this Section 10.5 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by a Credit Party, on such Credit Party. 10.6. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a) Generally. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders. No Credit Party's rights or obligations hereunder nor any interest therein may be assigned or delegated by any Credit Party without the prior written consent of all Lenders. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, Affiliates of each of the Agents and Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Register. Company, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case, unless and until recorded in the Register following receipt of (x) a written or electronic confirmation of an assignment issued by a Settlement Service pursuant to Section 10.6(d) (a "SETTLEMENT CONFIRMATION") or (y) an Assignment Agreement effecting the assignment or transfer thereof, in each case, as provided in Section 10.6(d). Each assignment shall be recorded in the Register on the Business Day the Settlement Confirmation or Assignment Agreement is received by the Administrative Agent, if received by 12:00 noon New York City time, and on the following Business Day if received after 139 such time, prompt notice thereof shall be provided to Company and a copy of such Assignment Agreement or Settlement Confirmation shall be maintained, as applicable. The date of such recordation of a transfer shall be referred to herein as the "ASSIGNMENT EFFECTIVE DATE." Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. (c) Right to Assign. Each Lender shall have the right at any time to sell, assign or transfer all or a portion of its rights and obligations under this Agreement, including, without limitation, all or a portion of its Commitment or Loans owing to it or other Obligation (provided, however, that each such assignment shall be of a uniform, and not varying, percentage of all rights and obligations under and in respect of any Loan and any related Commitments): (i) to any Person meeting the criteria of clause (i) of the definition of the term of "Eligible Assignee" upon the giving of notice to Company and Administrative Agent; and (ii) to any Person meeting the criteria of clause (ii) of the definition of the term of "Eligible Assignee" and, in the case of assignments of Revolving Loans, Revolving Commitments, Hedge L/C Loans or Hedge L/C Commitments to any such Person (except in the case of assignments made by or to GSCP) consented to by each of Company, each Issuing Bank and Administrative Agent (such consent not to be (x) unreasonably withheld or delayed or, (y) in the case of Company, required at any time an Event of Default shall have occurred and then be continuing); provided, further each such assignment pursuant to this Section 10.6(c)(ii) shall be in an aggregate amount of not less than (A) $1,000,000 (or such lesser amount as may be agreed to by Company and Administrative Agent or as shall constitute the aggregate amount of the Revolving Commitments and Revolving Loans or Hedge L/C Loans or Hedge L/C Commitments of the assigning Lender) with respect to the assignment of the Revolving Commitments and Revolving Loans or Hedge L/C Loans or Hedge L/C Commitments and (B) $1,000,000 (or such lesser amount as may be agreed to by Company and Administrative Agent or as shall constitute the aggregate amount of the Term Loan of the assigning Lender) with respect to the assignment of Term Loans; provided such minimum assignment amount for Term Loans shall be $500,000 until the date which is thirty (30) days following the Closing Date. (d) Mechanics. Assignments of Term Loans by Lenders may be made via an electronic settlement system acceptable to Administrative Agent as designated in writing from time to time to the Lenders by Administrative Agent (the "SETTLEMENT SERVICE"). Each such assignment shall be effected by the assigning Lender and proposed assignee pursuant to the procedures then in effect under the Settlement Service, which procedures shall be consistent with 140 the other provisions of this Section 10.6. Each assignor Lender and proposed assignee shall comply with the requirements of the Settlement Service in connection with effecting any transfer of Loans pursuant to the Settlement Service. Administrative Agent's and Company's consent shall be deemed to have been granted pursuant to Section 10.6(c)(ii) with respect to any transfer effected through the Settlement Service. Subject to the other requirements of this Section 10.6, assignments and assumptions of Term Loans may also be effected by manual execution delivery to the Administrative Agent of an Assignment Agreement with, in the case of assignments to Persons meeting the requirements of clause (ii) of the definition of "Eligible Assignee", the prior written consent (except in the case of assignments made by or to GSCP) of each of Company and Administrative Agent (such consent not to be (x) unreasonably withheld or delayed or (y) in the case of Company, required at any time an Event of Default shall have occurred and then be continuing). Initially, assignments and assumptions of Term Loans shall be effected by such manual execution until Administrative Agent notifies Lenders to the contrary. Assignments and assumptions of Revolving Loans, Revolving Commitments, Hedge L/C Loans and Hedge L/C Commitments shall only be effected by manual execution and delivery to the Administrative Agent of an Assignment Agreement. Assignments made pursuant to the foregoing provision shall be effective as of the Assignment Effective Date. In connection with all assignments there shall be delivered to Administrative Agent such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver pursuant to Section 2.20(c). Notwithstanding anything herein or in any Assignment Agreement to the contrary and (i) unless notice to the contrary is delivered to the Lenders from the Administrative Agent or (ii) so long as no Default or Event of Default has occurred and is continuing, payment to the assignor by the assignee in respect of the settlement of an assignment of any Term Loan (but not any Revolving Loan or Revolving Commitment) shall include such compensation to the assignor as may be agreed upon by the assignor and the assignee with respect to all unpaid interest which has accrued on such Term Loan to but excluding the Assignment Effective Date. On and after the applicable Assignment Effective Date, the applicable assignee shall be entitled to receive all interest paid or payable with respect to the assigned Term Loan, whether such interest accrued before or after the applicable Assignment Effective Date. (e) Representations and Warranties of Assignee. Each Lender, upon execution and delivery hereof or upon succeeding to an interest in the Commitments and Loans, as the case may be, represents and warrants as of the Closing Date or as of the Assignment Effective Date that (i) it is an Eligible Assignee; (ii) it has experience and expertise in the making of or investing in commitments or loans such as the applicable Commitments or Loans, as the case may be; and (iii) it will make or invest in, as the case may be, its Commitments or Loans for its own account in the ordinary course of its business and without a view to distribution of such Commitments or Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this Section 10.6, the 141 disposition of such Revolving Commitments or Loans or any interests therein shall at all times remain within its exclusive control). (f) Effect of Assignment. Subject to the terms and conditions of this Section 10.6, as of the Assignment Effective Date: (i) the assignee thereunder shall have the rights and obligations of a "Lender" hereunder to the extent of its interest in the Loans and Commitments as reflected in the Register and shall thereafter be a party hereto and a "Lender" for all purposes hereof; (ii) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned to the assignee, relinquish its rights (other than any rights which survive the termination hereof under Section 10.8) and be released from its obligations hereunder (and, in the case of an assignment covering all or the remaining portion of an assigning Lender's rights and obligations hereunder, such Lender shall cease to be a party hereto on the Assignment Effective Date; provided, anything contained in any of the Credit Documents to the contrary notwithstanding, (y) Issuing Bank shall continue to have all rights and obligations thereof with respect to such Letters of Credit or Hedge Letters of Credit, as the case may be, until the cancellation or expiration of such Letters of Credit or Hedge Letters of Credit, as applicable, and the reimbursement of any amounts drawn thereunder and (z) such assigning Lender shall continue to be entitled to the benefit of all indemnities hereunder as specified herein with respect to matters arising out of the prior involvement of such assigning Lender as a Lender hereunder); (iii) the Commitments shall be modified to reflect the Commitment of such assignee and any Revolving Commitment of such assigning Lender, if any; and (iv) if any such assignment occurs after the issuance of any Note hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to Administrative Agent for cancellation, and thereupon Company shall issue and deliver new Notes, if so requested by the assignee and/or assigning Lender, to such assignee and/or to such assigning Lender, with appropriate insertions, to reflect the new Revolving Commitments and/or outstanding Loans of the assignee and/or the assigning Lender. (g) Participations. Each Lender shall have the right at any time to sell one or more participations to any Person (other than Company, any of its Subsidiaries or any of its Affiliates) in all or any part of its Commitments, Loans or in any other Obligation. The holder of any such participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except with respect to any amendment, modification or waiver that would (i) extend the final scheduled maturity of any Loan, Note, Letter of Credit or Hedge Letter of Credit (unless such Letter of Credit or Hedge Letter of Credit is not extended beyond the Revolving Commitment Termination Date or Hedge L/C Commitment Termination Date, as applicable) in which such participant is participating, or reduce the rate or extend the time of payment of interest or fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's 142 participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under the Collateral Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating. Company agrees that each participant shall be entitled to the benefits of Sections 2.18(c), 2.19 and 2.20 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (c) of this Section; provided, (i) a participant shall not be entitled to receive any greater payment under Section 2.19 or 2.20 than the applicable Lender would have been entitled to receive with respect to the participation sold to such participant, unless the sale of the participation to such participant is made with Company's prior written consent and (ii) a participant that would be a Non-US Lender if it were a Lender shall not be entitled to the benefits of Section 2.20 unless Company is notified of the participation sold to such participant and such participant agrees, for the benefit of Company, to comply with Section 2.20 as though it were a Lender. To the extent permitted by law, each participant also shall be entitled to the benefits of Section 10.4 as though it were a Lender, provided such Participant agrees to be subject to Section 2.17 as though it were a Lender. (i) Certain Other Assignments. In addition to any other assignment permitted pursuant to this Section 10.6, (i) any Lender may assign and/or pledge all or any portion of its Loans, the other Obligations owed by or to such Lender, and its Notes, if any, to secure obligations of such Lender including, without limitation, any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; provided, no Lender, as between Company and such Lender, shall be relieved of any of its obligations hereunder as a result of any such assignment and pledge, and provided further, in no event shall the applicable Federal Reserve Bank, pledgee or trustee be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. 10.7. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. 10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All representations, warranties and agreements made herein shall survive the execution and delivery hereof and the making of any Credit Extension. Notwithstanding anything herein or 143 implied by law to the contrary, the agreements of each Credit Party set forth in Sections 2.18(c), 2.19, 2.20, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in Sections 2.17, 9.3(b) and 9.6 shall survive the payment of the Loans, the cancellation or expiration of the Letters of Credit and the Hedge Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination hereof. 10.9. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. The rights, powers and remedies given to each Agent and each Lender hereby are cumulative and shall be in addition to and independent of all rights, powers and remedies existing by virtue of any statute or rule of law or in any of the other Credit Documents or any of the Hedge Agreements. Any forbearance or failure to exercise, and any delay in exercising, any right, power or remedy hereunder shall not impair any such right, power or remedy or be construed to be a waiver thereof, nor shall it preclude the further exercise of any such right, power or remedy. 10.10. MARSHALLING; PAYMENTS SET ASIDE. Neither any Agent nor any Lender shall be under any obligation to marshal any assets in favor of any Credit Party or any other Person or against or in payment of any or all of the Obligations. To the extent that any Credit Party makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent, on behalf of Lenders), or Administrative Agent or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.11. SEVERABILITY. In case any provision in or obligation hereunder or any Note 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. 10.12. OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. 144 The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitment of any other Lender hereunder. Nothing contained herein or in any other Credit Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out hereof and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.13. HEADINGS. Section headings herein are included herein for convenience of reference only and shall not constitute a part hereof for any other purpose or be given any substantive effect. 10.14. APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 10.15. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY CREDIT PARTY ARISING OUT OF OR RELATING HERETO OR ANY OTHER CREDIT DOCUMENT, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH CREDIT PARTY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE CREDIT PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 10.1; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (C) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE CREDIT PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY 145 OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION. 10.16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER CREDIT DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/COMPANY RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 10.16 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER CREDIT DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 10.17. CONFIDENTIALITY. Each Lender shall hold all non-public information regarding Company and its Subsidiaries and their businesses identified as such by Company and obtained by such Lender pursuant to the requirements hereof in accordance with such Lender's customary procedures for handling confidential information of such nature, it being understood and agreed by Company that, in any event, a Lender may make (i) disclosures of such information to Affiliates of such Lender and to their agents, trustees and advisors (and to other persons authorized by a Lender or Agent to organize, present or disseminate such information in connection with disclosures otherwise made 146 in accordance with this Section 10.17), (ii) disclosures of such information reasonably required by any bona fide or potential assignee, transferee or participant in connection with the contemplated assignment, transfer or participation by such Lender of any Loans or any participations therein or by any direct or indirect contractual counterparties (or the professional advisors thereto) in Hedge Agreements (provided, such counterparties and advisors are advised of and agree to be bound by the provisions of this Section 10.17), (iii) disclosure to any rating agency when required by it, provided that, prior to any disclosure, such rating agency shall undertake in writing to preserve the confidentiality of any confidential information relating to the Credit Parties received by it from any of the Agents or any Lender, and (iv) disclosures required or requested by any governmental agency or representative thereof or by the NAIC or pursuant to legal or judicial process; provided, unless specifically prohibited by applicable law or court order, each Lender shall make reasonable efforts to notify Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition or other routine examination of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information. 10.18. USURY SAVINGS CLAUSE. Notwithstanding any other provision herein, the aggregate interest rate charged with respect to any of the Obligations, including all charges or fees in connection therewith deemed in the nature of interest under applicable law shall not exceed the Highest Lawful Rate. If the rate of interest (determined without regard to the preceding sentence) under this Agreement at any time exceeds the Highest Lawful Rate, the outstanding amount of the Loans made hereunder shall bear interest at the Highest Lawful Rate until the total amount of interest due hereunder equals the amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect. In addition, if when the Loans made hereunder are repaid in full the total interest due hereunder (taking into account the increase provided for above) is less than the total amount of interest which would have been due hereunder if the stated rates of interest set forth in this Agreement had at all times been in effect, then to the extent permitted by law, Company shall pay to Administrative Agent an amount equal to the difference between the amount of interest paid and the amount of interest which would have been paid if the Highest Lawful Rate had at all times been in effect. Notwithstanding the foregoing, it is the intention of Lenders and Company to conform strictly to any applicable usury laws. Accordingly, if any Lender contracts for, charges, or receives any consideration which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be cancelled automatically and, if previously paid, shall at such Lender's option be applied to the outstanding amount of the Loans made hereunder or be refunded to Company. 10.19. COUNTERPARTS. 147 This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument. 10.20. EFFECTIVENESS. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Administrative Agent of written or telephonic notification of such execution and authorization of delivery thereof. Upon the effectiveness of this Agreement and the occurrence of the Closing Date, the Commitment Letter, dated as of June 15, 2004, by GSCP in favor of Company shall have no further force or effect, except with respect to such provisions which explicitly survive the termination of the Commitment Letter by reason of the occurrence of the Closing Date. Each of the parties hereto agrees that this Agreement as amended as of the date hereof supersedes the Agreement as executed on July 7, 2004. In addition, unless specifically amended hereby, each of the Credit Documents, the Exhibits and Schedules to this Agreement shall continue in full force and effect. 10.21. USA PATRIOT ACT. Each Lender hereby notifies Company that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Patriot Act"), it is required to obtain, verify and record information that identifies Company, which information includes the name and address of Company and other information that will allow such Lender to identify Company in accordance with the Patriot Act. 10.22. ELECTRONIC EXECUTION OF ASSIGNMENTS. The words "execution," "signed," "signature," and words of like import in any Assignment Agreement shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act. [Remainder of page intentionally left blank] 148 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BELDEN & BLAKE CORPORATION By: /s/ Robert W. Peshek -------------------------------------------- Name: Robert W. Peshek Title: Senior Vice President THE CANTON OIL & GAS COMPANY By: /s/ Robert W. Peshek -------------------------------------------- Name: Robert W. Peshek Title: Senior Vice President WARD LAKE DRILLING, INC. By: /s/ Robert W. Peshek -------------------------------------------- Name: Robert W. Peshek Title: Senior Vice President S-1 GOLDMAN SACHS CREDIT PARTNERS L.P., as Lead Arranger, Syndication Agent, Administrative Agent and a Lender By: /s/ William W. Archer ---------------------------------- Authorized Signatory S-2 NATIONAL CITY BANK, as Issuing Bank, Co-Documentation Agent and a Lender By: /s/ Tom Gurbach --------------------------------------- Authorized Signatory S-3 GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Documentation Agent and a Lender By: /s/ John A. Urauhort ---------------------------------- Authorized Signatory S-4 APPENDIX A-1 TO CREDIT AND GUARANTY AGREEMENT TERM LOAN COMMITMENTS
LENDER TERM LOAN COMMITMENT PRO RATA SHARE ------ -------------------- -------------- Goldman Sachs Credit Partners L.P. $100,000,000.00 100.0% TOTAL $100,000,000.00 100%
APPENDIX A-1-1 APPENDIX A-2 TO CREDIT AND GUARANTY AGREEMENT REVOLVING COMMITMENTS
LENDER REVOLVING COMMITMENT PRO RATA SHARE ------ -------------------- -------------- Goldman Sachs Credit Partners L.P. $30,000,000.00 100.0% TOTAL $30,000,000.00 100%
APPENDIX A-2-1 APPENDIX A-3 TO CREDIT AND GUARANTY AGREEMENT HEDGE L/C COMMITMENTS
LENDER HEDGE L/C COMMITMENT PRO RATA SHARE ------ -------------------- -------------- Goldman Sachs Credit Partners L.P. $40,000,000.00 100.0% TOTAL $40,000,000.00 100%
APPENDIX A-3-1 APPENDIX B TO CREDIT AND GUARANTY AGREEMENT NOTICE ADDRESSES BELDEN & BLAKE CORPORATION THE CANTON OIL & GAS COMPANY WARD LAKE DRILLING, INC. 5200 Stoneham Road, Suite 2500 North Canton, OH 44720-0500 Attention: Robert W. Peshek, Senior Vice President and Chief Financial Officer Telephone: (330) 499-1660 Telecopier: (330) 497-5470 in each case, with copies to: Bricker & Eckler LLP 100 South Third Street Columbus, OH 43215 Facsimile No.: (614) 227-2390 Attention: John Cook, Esq. and Vinson & Elkins L.L.P. 666 Fifth Avenue, 26th Floor New York, NY 10103-0040 Facsimile No.: (212) 237-0100 Attention: Allan Reiss, Esq. APPENDIX B-2 GOLDMAN SACHS CREDIT PARTNERS L.P., as Lead Arranger, Syndication Agent, Administrative Agent and a Lender Goldman Sachs Credit Partners L.P. 85 Broad Street New York, New York 10004 Attention: Stephen King Telecopier: (212) 357-0932 with a copy to: Goldman Sachs Credit Partners L.P. 85 Broad Street New York, New York 10004 Attention: John Makrinos Telecopier: (212) 357-4597 APPENDIX B-3 NATIONAL CITY BANK, as Issuing Bank and Co-Documentation Agent National City Bank ____________________________ ____________________________ Attention: Telecopier: APPENDIX B-4 GENERAL ELECTRIC CAPITAL CORPORATION, as Co-Documentation Agent General Electric Capital Corporation 120 Long Ridge Road Stamford, Connecticut 06927 Attention: Chris Matteson, Senior Vice President Telecopier: 203-357-4890 Telephone: 203-961-2220 APPENDIX B-5 EX-10.3 7 l08738aexv10w3.txt EXHIBIT 10.3 EXHIBIT 10.3 PRIORITY LIEN PLEDGE AND SECURITY AGREEMENT DATED AS OF JULY 7, 2004 BETWEEN BELDEN & BLAKE CORPORATION, EACH OF THE OTHER GRANTORS PARTY HERETO AND WELLS FARGO BANK, N.A., AS COLLATERAL TRUSTEE TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS; GRANT OF SECURITY............................................................... 1 1.1 General Definitions.......................................................................... 1 1.2 Definitions; Interpretation.................................................................. 8 SECTION 2. GRANT OF SECURITY............................................................................ 8 2.1 Grant of Security............................................................................ 8 2.2 Certain Limited Exclusions................................................................... 9 SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE............................................. 10 3.1 Security for Obligations..................................................................... 10 3.2 Continuing Liability Under Collateral........................................................ 10 SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS................................................. 11 4.1 Generally.................................................................................... 11 4.2 As-extracted Collateral, Equipment and Inventory............................................. 13 4.3 Receivables.................................................................................. 14 4.4 Investment Related Property.................................................................. 16 4.5 Material Contracts........................................................................... 22 4.6 Letter of Credit Rights...................................................................... 23 4.7 Intellectual Property........................................................................ 23 4.8 Commercial Tort Claims....................................................................... 26 SECTION 5. FURTHER ASSURANCES; ADDITIONAL GRANTORS...................................................... 26 5.1 [Reserved]................................................................................... 26 5.2 Further Assurances........................................................................... 26 5.3 Additional Grantors.......................................................................... 27 SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT................................................ 28 6.1 Power of Attorney............................................................................ 28 6.2 No Duty on the Part of Collateral Trustee or Secured Parties................................. 29 SECTION 7. REMEDIES..................................................................................... 29 7.1 Generally.................................................................................... 29 7.2 Application of Proceeds...................................................................... 30 7.3 Sales on Credit.............................................................................. 31 7.4 Deposit Accounts............................................................................. 31 7.5 Investment Related Property.................................................................. 31 7.6 Intellectual Property........................................................................ 32 7.7 Cash Proceeds................................................................................ 33 7.8 Notice of Sole Control....................................................................... 34 SECTION 8. COLLATERAL TRUSTEE........................................................................... 34 SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.............................................. 35
i SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM............................................ 35 SECTION 11. MISCELLANEOUS............................................................................... 35
SCHEDULE 4.1 -- GENERAL INFORMATION SCHEDULE 4.2 -- LOCATION OF WELLHEAD, EQUIPMENT AND INVENTORY SCHEDULE 4.4 -- INVESTMENT RELATED PROPERTY SCHEDULE 4.5 -- MATERIAL CONTRACTS SCHEDULE 4.6 -- DESCRIPTION OF LETTERS OF CREDIT SCHEDULE 4.7 -- INTELLECTUAL PROPERTY - EXCEPTIONS SCHEDULE 4.8 -- COMMERCIAL TORT CLAIMS EXHIBIT A -- PLEDGE SUPPLEMENT EXHIBIT B -- UNCERTIFICATED SECURITIES CONTROL AGREEMENT EXHIBIT C -- SECURITIES ACCOUNT CONTROL AGREEMENT EXHIBIT D -- DEPOSIT ACCOUNT CONTROL AGREEMENT ii This PRIORITY LIEN PLEDGE AND SECURITY AGREEMENT, dated as of July 7, 2004 (this "AGREEMENT"), between EACH OF THE UNDERSIGNED, whether as an original signatory hereto or as an Additional Grantor (as herein defined) (each, a "GRANTOR"), and WELLS FARGO BANK, N.A., as collateral trustee for the Secured Parties (as herein defined) (in such capacity as collateral trustee, the "COLLATERAL TRUSTEE"). RECITALS: WHEREAS, reference is made to that certain Credit and Guaranty Agreement, dated as of the date hereof (as it may be amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), by and among BELDEN & BLAKE CORPORATION., an Ohio corporation ("COMPANY"), CERTAIN SUBSIDIARIES OF COMPANY, as Guarantors, the lenders party thereto from time to time (the "LENDERS"), GOLDMAN SACHS CREDIT PARTNERS L.P., as Lead Arranger, Sole Book Runner and Syndication Agent and Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT"), and [DOCUMENTATION AGENT], as Documentation Agent; WHEREAS, subject to the terms and conditions of the Credit Agreement, certain Grantors may enter into one or more Hedge Agreements (as defined in the Credit Agreement) with one or more Lender Counterparties; and WHEREAS, in consideration of the extensions of credit and other accommodations of Lenders and Lender Counterparties as set forth in the Credit Agreement and the Hedge Agreements, respectively, each Grantor has agreed to secure such Grantor's obligations under the Credit Documents and the Hedge Agreements as set forth herein. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each Grantor and the Collateral Trustee agree as follows: SECTION 1. DEFINITIONS; GRANT OF SECURITY. 1.1 GENERAL DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "ACCOUNT DEBTOR" shall mean each Person who is obligated on a Receivable or any Supporting Obligation related thereto. "ACCOUNTS" shall mean all "accounts" as defined in Article 9 of the UCC. "ADDITIONAL GRANTORS" shall have the meaning assigned in Section 5.3. "AGREEMENT" shall have the meaning set forth in the preamble. "AS-EXTRACTED COLLATERAL" shall mean all "as-extracted collateral" as defined in Article 9 of the UCC. "ASSIGNED AGREEMENTS" shall mean all agreements and contracts to which such Grantor is a party as of the date hereof, or to which such Grantor becomes a party after the date hereof, including, without limitation, each Material Contract, as each such agreement may be amended, supplemented or otherwise modified from time to time. "BANKRUPTCY CODE" shall mean Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "CASH PROCEEDS" shall have the meaning assigned in Section 7.7. "CHATTEL PAPER" shall mean all "chattel paper" as defined in Article 9 of the UCC, including, without limitation, "electronic chattel paper" or "tangible chattel paper", as each term is defined in Article 9 of the UCC. "COLLATERAL" shall have the meaning assigned in Section 2.1. "COLLATERAL ACCOUNT" shall mean any account established by the Collateral Trustee. "COLLATERAL TRUSTEE" shall have the meaning set forth in the preamble. "COLLATERAL TRUST AGREEMENT" means the Collateral Trust Agreement dated as of the date hereof, among the Collateral Trustee, the Administrative Agent, J. Aron & Company and BNY Midwest Trust Company. "COLLATERAL RECORDS" shall mean books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon. "COLLATERAL SUPPORT" shall mean all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property. "COMMERCIAL TORT CLAIMS" shall mean all "commercial tort claims" as defined in Article 9 of the UCC, including, without limitation, all commercial tort claims listed on Schedule 4.8 (as such schedule may be amended or supplemented from time to time). "COMMODITIES ACCOUNTS" (i) shall mean all "commodity accounts" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under the heading "COMMODITIES ACCOUNTS" (as such schedule may be amended or supplemented from time to time). "COMPANY" shall have the meaning set forth in the recitals. "CONTROLLED FOREIGN CORPORATION" shall mean "controlled foreign corporation" as defined in the Tax Code. "COPYRIGHT LICENSES" shall mean any and all agreements providing for the granting of any right in or to Copyrights (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(B) (as such schedule may be amended or supplemented from time to time). "COPYRIGHTS" shall mean all United States, and foreign copyrights (including Community designs), including but not limited to copyrights in software and databases, and all 2 Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, and, with respect to any and all of the foregoing: (i) all registrations and applications therefor including, without limitation, the registrations and applications referred to in Schedule 4.7(A) (as such schedule may be amended or supplemented from time to time), (ii) all extensions and renewals thereof, (iii) all rights corresponding thereto throughout the world, (iv) all rights to sue for past, present and future infringements thereof, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages and proceeds of suit. "CREDIT AGREEMENT" shall have the meaning set forth in the recitals. "DEFEASANCE ACCOUNT" shall mean any Deposit Account to be titled "Defeasance Account" or words of similar nature established or maintained for the benefit of the holders of Senior Secured Note Obligations (as defined in the Collateral Trust Agreement). "DEPOSIT ACCOUNTS" (i) shall mean all "deposit accounts" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under the heading "Deposit Accounts" (as such schedule may be amended or supplemented from time to time). "DOCUMENTS" shall mean all "documents" as defined in Article 9 of the UCC. "EQUIPMENT" shall mean: (i) all "equipment" as defined in Article 9 of the UCC, (ii) all machinery, manufacturing equipment, data processing equipment, computers, office equipment, furnishings, furniture, appliances, fixtures, tools, oil wells, gas wells, injection wells or other wells or well equipment, field separators, liquid extraction plants, plant compressors, pumps, pumping units, pipelines, sales and flow lines, gathering lines, field gathering systems, salt water disposal facilities, tanks and tank batteries, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires towers, casing, tubing and rods, power and telephone and telegraph lines (in each case, regardless of whether characterized as equipment under the UCC) and (iii) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefor, wherever located, now or hereafter existing, including any fixtures. "GENERAL INTANGIBLES" (i) shall mean all "general intangibles" as defined in Article 9 of the UCC, including "payment intangibles" also as defined in Article 9 of the UCC and (ii) shall include, without limitation, all interest rate or currency protection or hedging arrangements, all tax refunds, all licenses, permits, concessions and authorizations, all Assigned Agreements and all Intellectual Property (in each case, regardless of whether characterized as general intangibles under the UCC). "GOODS" (i) shall mean all "goods" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all Inventory and Equipment (in each case, regardless of whether characterized as goods under the UCC). "GRANTORS" shall have the meaning set forth in the preamble. "HYDROCARBONS" shall mean, collectively, oil, gas, casinghead gas, condensate, natural gas liquids finished and unfinished petroleum products and other liquid or gaseous 3 hydrocarbons (including, without limitation, all liquefiable hydrocarbons and other products that may be extracted from gas and gas condensate by processing thereof in a gas processing plant). "INSTRUMENTS" shall mean all "instruments" as defined in Article 9 of the UCC. "INSURANCE" shall mean (i) all insurance policies covering any or all of the Collateral (regardless of whether the Collateral Trustee is the loss payee thereof) and (ii) any key man life insurance policies. "INTELLECTUAL PROPERTY" shall mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses. "INVENTORY" shall mean (i) all "inventory" as defined in Article 9 of the UCC, and (ii) all goods (including oil, gas and other minerals after extraction) held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any Grantor's business; all goods in which any Grantor has an interest in mass or a joint or other interest or right of any kind; and all goods which are returned to or repossessed by any Grantor, all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC). "INVESTMENT ACCOUNTS" shall mean the Collateral Account, Securities Accounts, Commodities Accounts and Deposit Accounts. "INVESTMENT RELATED PROPERTY" shall mean: (i) all "investment property" (as such term is defined in Article 9 of the UCC) and (ii) all of the following (regardless of whether classified as investment property under the UCC): all Pledged Equity Interests, Pledged Debt, the Investment Accounts and certificates of deposit. "LENDER" shall have the meaning set forth in the recitals. "LETTER OF CREDIT RIGHT" shall mean "letter-of-credit right" as defined in Article 9 of the UCC. "LIEN" shall mean (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Pledged Equity Interests, any purchase option, call or similar right of a third party with respect to such Pledged Equity Interests. "MONEY" shall mean "money" as defined in the UCC. "NON-ASSIGNABLE CONTRACT" shall mean any agreement, contract or license to which any Grantor is a party that by its terms purports to restrict or prevent the assignment or granting of a security interest therein (either by its terms or by any federal or state statutory prohibition or otherwise irrespective of whether such prohibition or restriction is enforceable under Section 9-406 through 409 of the UCC). 4 "PATENT LICENSES" shall mean all agreements providing for the granting of any right in or to Patents (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(D) (as such schedule may be amended or supplemented from time to time). "PATENTS" shall mean all United States and foreign patents and certificates of invention, or similar industrial property rights, and applications for any of the foregoing, including, but not limited to: (i) each patent and patent application referred to in Schedule 4.7(C) hereto (as such schedule may be amended or supplemented from time to time), (ii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iii) all rights corresponding thereto throughout the world, (iv) all inventions and improvements described therein, (v) all rights to sue for past, present and future infringements thereof, (vi) all licenses, claims, damages, and proceeds of suit arising therefrom, and (vii) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "PLEDGE SUPPLEMENT" shall mean any supplement to this agreement in substantially the form of Exhibit A. "PLEDGED DEBT" shall mean all Indebtedness owed to such Grantor, including, without limitation, all Indebtedness described on Schedule 4.4(A) under the heading "Pledged Debt" (as such schedule may be amended or supplemented from time to time), issued by the obligors named therein, the instruments evidencing such Indebtedness, and all interest, cash, 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 Indebtedness. "PLEDGED EQUITY INTERESTS" shall mean all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests. "PLEDGED LLC INTERESTS" shall mean all interests in any limited liability company including, without limitation, all limited liability company interests listed on Schedule 4.4(A) under the heading "Pledged LLC Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such limited liability company interests and any interest of such Grantor on the books and records of such limited liability company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 limited liability company interests. "PLEDGED PARTNERSHIP INTERESTS" shall mean all interests in any general partnership, limited partnership, limited liability partnership or other partnership including, without limitation, all partnership interests listed on Schedule 4.4(A) under the heading "Pledged Partnership Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such partnership interests and any interest of such Grantor on the books and records of such partnership or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 partnership interests. 5 "PLEDGED STOCK" shall mean all shares of capital stock owned by such Grantor, including, without limitation, all shares of capital stock described on Schedule 4.4(A) under the heading "Pledged Stock" (as such schedule may be amended or supplemented from time to time), and the certificates, if any, representing such shares and any interest of such Grantor in the entries on the books of the issuer of such shares or on the books of any securities intermediary pertaining to such shares, and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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. "PLEDGED TRUST INTERESTS" shall mean all interests in a Delaware business trust or other trust including, without limitation, all trust interests listed on Schedule 4.4(A) under the heading "Pledged Trust Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such trust interests and any interest of such Grantor on the books and records of such trust or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 trust interests. "PROCEEDS" shall mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Investment Related Property and (iii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. "RECEIVABLES" shall mean all rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, including, without limitation all such rights constituting or evidenced by any As-extracted Collateral, Account, Chattel Paper, Instrument, General Intangible or Investment Related Property, together with all of Grantor's rights, if any, in any goods or other property giving rise to such right to payment and all Collateral Support and Supporting Obligations related thereto and all Receivables Records. "RECEIVABLES RECORDS" shall mean (i) all original copies of all documents, instruments or other writings or electronic records or other Records evidencing the Receivables, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to Receivables, including, without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping systems and other papers and documents relating to the Receivables, whether in the possession or under the control of Grantor or any computer bureau or agent from time to time acting for Grantor or otherwise, (iii) all evidences of the filing of financing statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including, without limitation, lien search reports, from filing or other registration officers, (iv) all credit information, reports and memoranda relating thereto and (v) all other written or nonwritten forms of information related in any way to the foregoing or any Receivable. "RECORD" shall have the meaning specified in Article 9 of the UCC. "REDEMPTION ACCOUNT" shall mean any Deposit Account to be titled "Redemption Account" or words of similar nature established or maintained for the benefit of the holders of Senior Secured Note Obligations (as defined in the Collateral Trust Agreement). 6 "SECURED OBLIGATIONS" shall have the meaning assigned in Section 3.1. "SECURED PARTIES" shall mean the Lenders, the Lender Counterparties, Agents and Collateral Trustee, and shall include, without limitation, all former Lenders, Lender Counterparties, Agents and Collateral Trustee to the extent that any Obligations owing to such Persons were incurred while such Persons were Lenders , Lender Counterparties, Agents or Collateral Trustee and such Obligations have not been paid or satisfied in full. "SECURITIES" shall mean any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACCOUNTS" (i) shall mean all "securities accounts" as defined in Article 8 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4(A) under the heading "Securities Accounts" (as such schedule may be amended or supplemented from time to time). "SUPPORTING OBLIGATION" shall mean all "supporting obligations" as defined in Article 9 of the UCC. "TAX CODE" shall mean the United States Internal Revenue Code of 1986, as amended from time to time. "TRADEMARK LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trademarks (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(F) (as such schedule may be amended or supplemented from time to time). "TRADEMARKS" shall mean all United States, and foreign trademarks, trade names, corporate names, company names, business names, fictitious business names, Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, all registrations and applications for any of the foregoing including, but not limited to: (i) the registrations and applications referred to in Schedule 4.7(E) (as such schedule may be amended or supplemented from time to time), (ii) all extensions or renewals of any of the foregoing, (iii) all of the goodwill of the business connected with the use of and symbolized by the foregoing, (iv) the right to sue for past, present and future infringement or dilution of any of the foregoing or for any injury to goodwill, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "TRADE SECRET LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trade Secrets (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(G) (as such schedule may be amended or supplemented from time to time). "TRADE SECRETS" shall mean all trade secrets and all other confidential or proprietary information and know-how whether or not such Trade Secret has been reduced to a 7 writing or other tangible form, including all documents and things embodying, incorporating, or referring in any way to such Trade Secret, including but not limited to: (i) the right to sue for past, present and future misappropriation or other violation of any Trade Secret, and (ii) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction. "UNITED STATES" shall mean the United States of America. 1.1 DEFINITIONS; INTERPRETATION. All capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement or, if not defined therein, in the UCC. References to "Sections," "Exhibits" and "Schedules" shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. If any conflict or inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shall govern. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC. SECTION 2. GRANT OF SECURITY. 2.1 GRANT OF SECURITY 2.1.1 . Each Grantor hereby grants to the Collateral Trustee for the benefit of the Secured Parties a security interest in and continuing lien on all of such Grantor's right, title and interest in, to and under all personal property of such Grantor including, but not limited to the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the "Collateral"): (a) Accounts; (b) As-extracted Collateral; (c) Chattel Paper; (d) Documents; (e) General Intangibles; 8 (f) Goods; (g) Instruments; (h) Insurance; (i) Intellectual Property; (j) Investment Related Property; (k) Letter of Credit Rights; (l) Money; (m) Receivables and Receivable Records; (n) Commercial Tort Claims; (o) each contract and other agreements of Grantor relating to the sale or other disposition of Hydrocarbons, Inventory, Equipment or other goods or products, and all operating agreements, farm-out agreements, farm-in agreements, development agreements, participation agreements, area of mutual interest agreements, equipment leases, purchase agreements, sale agreements, option agreements and other agreements which cover, affect or otherwise relate to the production, sale, purchase, exchange, processing, handling, storing, transporting or marketing of the Hydrocarbons; (p) all rights, titles, interests and estates now owned or hereafter acquired by Grantor in and to all Hydrocarbons, including, without limitation, all oil and gas in tanks and all rents, issues, profits, proceeds (including, without limitation, all prepayment for production not taken or payments in lieu of production), products and revenues; (q) all Documents or other receipts of Grantor covering, evidencing or representing the sale of Hydrocarbons, Inventory, Equipment or other goods or products; (r) all rights, claims and benefits of Grantor against any Person arising out of, relating to or in connection with the purchasing by Grantor of any rights, titles, interests and estates in any minerals including Hydrocarbons, Inventory, Equipment or such other goods and products, including, without limitation, any such rights, claims or benefits against any Person storing or transporting such items; (s) to the extent not otherwise included above, all Collateral Records, Collateral Support and Supporting Obligations relating to any of the foregoing; and (t) to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing. 2.2 CERTAIN LIMITED EXCLUSIONS 2.2.1 . Notwithstanding anything herein to the contrary, in no event shall the security interest granted under Section 2.1 hereof attach to (a) any lease, license, contract, property rights or agreement to which any Grantor is a party or any of its rights or interests thereunder if and for so long as the grant of such security interest shall constitute or result in (i) 9 the abandonment, invalidation or unenforceability of any right, title or interest of any Grantor therein or (ii) in a breach or termination pursuant to the terms of, or a default under, any such lease, license, contract property rights or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity), provided however that such security interest shall attach immediately at such time as the condition causing such abandonment, invalidation or unenforceability shall be remedied and to the extent severable, shall attach immediately to any portion of such Lease, license, contract, property rights or agreement that does not result in any of the consequences specified in (i) or (ii) above; (b) in any of the outstanding capital stock of a Controlled Foreign Corporation in excess of 65% of the voting power of all classes of capital stock of such Controlled Foreign Corporation entitled to vote; provided that immediately upon the amendment of the Tax Code to allow the pledge of a greater percentage of the voting power of capital stock in a Controlled Foreign Corporation without adverse tax consequences, the Collateral shall include, and the security interest granted by each Grantor shall attach to, such greater percentage of capital stock of each Controlled Foreign Corporation; (c) any TBR Delayed Transfer Assets; (d) any Redemption Account or Defeasance Account; or (e) any other assets constituting real property. SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE. 3.1 SECURITY FOR OBLIGATIONS 3.1.1 . This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) (and any successor provision thereof)), of all Obligations with respect to every Grantor (the "Secured Obligations"). 3.2 CONTINUING LIABILITY UNDER COLLATERAL 3.2.1 . Notwithstanding anything herein to the contrary, (i) each Grantor shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Collateral Trustee or any Secured Party, (ii) each Grantor shall remain liable under each of the agreements included in the Collateral, including, without limitation, any agreements relating to Pledged Partnership Interests or Pledged LLC Interests, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and neither the Collateral Trustee nor any Secured Party shall have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Collateral Trustee nor any Secured Party have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, including, without limitation, any agreements relating to Pledged Partnership Interests or Pledged LLC Interests, and (iii) the exercise by the Collateral Trustee of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral. 10 SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS. 4.1 GENERALLY. (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) it owns the Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Collateral, except as otherwise permitted by the Credit Agreement, in each case free and clear of any and all Liens, rights or claims of all other Persons, including, without limitation, liens arising as a result of such Grantor becoming bound (as a result of merger or otherwise) as debtor under a security agreement entered into by another Person other than Permitted Liens; (ii) it has indicated on Schedule 4.1(A)(as such schedule may be amended or supplemented from time to time): (w) the type of organization of such Grantor, (x) the jurisdiction of organization of such Grantor, (y) its organizational identification number and (z) the jurisdiction where the chief executive office or its sole place of business is, and for the one-year period preceding the date hereof has been, located. (iii) the full legal name of such Grantor is as set forth on Schedule 4.1(A) and it has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name) except for those names set forth on Schedule 4.1(B) (as such schedule may be amended or supplemented from time to time); (iv) except as provided on Schedule 4.1(C), it has not changed its name, jurisdiction of organization, chief executive office or sole place of business or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) within the past five (5) years; (v) it has not within the last five (5) years become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not heretofore been terminated other than the agreements identified on Schedule 4.1(D) hereof (as such schedule may be amended or supplemented from time to time); (vi) with respect to each agreement identified on Schedule 4.1(D), it has indicated on Schedule 4.1 (A) and Schedule 4.1(B) the information required pursuant to Section 4.1(a)(ii), (iii) and (iv) with respect to the debtor under each such agreement; (vii) (u) upon the filing of all UCC financing statements naming each Grantor as "debtor" and the Collateral Trustee as "secured party" and describing the Collateral in the filing offices set forth opposite such Grantor's name on Schedule 4.1(E) hereof (as such schedule may be amended or supplemented from time to time) and other filings delivered by each Grantor, (v) upon delivery of all Instruments, Chattel Paper and certificated Pledged Equity Interests and Pledged Debt, (w) upon sufficient identification of Commercial Tort Claims, (x) upon execution of a control agreement establishing the 11 Collateral Trustee's "control" (within the meaning of Section 9-806, 9-106 or 9-104 of the UCC, as applicable) with respect to any Investment Account, (y) upon consent of the issuer with respect to Letter of Credit Rights, and (z) to the extent not subject to Article 9 of the UCC, upon recordation of the security interests granted hereunder in Patents, Trademarks and Copyrights in the applicable intellectual property registries, including but not limited to the United States Patent and Trademark Office and the United States Copyright Office, the security interests granted to the Collateral Trustee hereunder constitute valid and perfected first priority Liens (subject in the case of priority only to Permitted Liens and to the rights of the United States government (including any agency or department thereof) with respect to United States government Receivables) on all of the Collateral; (viii) all actions and consents, including all filings, notices, registrations and recordings necessary or desirable for the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect of the Collateral have been made or obtained or otherwise authorized for filing; (ix) other than the financing statements filed in favor of the Collateral Trustee, no effective UCC financing statement, fixture filing or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for (x) financing statements for which proper termination statements have been delivered to the Collateral Trustee for filing and (y) financing statements filed in connection with Permitted Liens; (x) no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for either (i) the pledge or grant by any Grantor of the Liens purported to be created in favor of the Collateral Trustee hereunder or (ii) the exercise by Collateral Trustee of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by clause (vii) above and (B) as may be required, in connection with the disposition of any Investment Related Property, by laws generally affecting the offering and sale of Securities; (xi) all information supplied by any Grantor with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects; (xii) none of the Collateral constitutes, or is the Proceeds of, "farm products" (as defined in the UCC); (xiii) it does not own any timber to be cut; (xiv) except as described on Schedule 4.1(D), such Grantor has not become bound as a debtor, either by contract or by operation of law, by a security agreement previously entered into by another Person; and (xv) such Grantor has been duly organized as an entity of the type as set forth opposite such Grantor's name on Schedule 4.1(A) solely under the laws of the jurisdiction as set forth opposite such Grantor's name on Schedule 4.1(A) and remains 12 duly existing as such. Such Grantor has not filed any certificates of domestication, transfer or continuance in any other jurisdiction. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that: (i) it shall not produce, use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement; (ii) it shall not change such Grantor's name, identity, corporate structure (e.g., by merger, consolidation, change in corporate form or otherwise) sole place of business (or principal residence if such Grantor is a natural person), chief executive office, type of organization or jurisdiction of organization or establish any trade names unless it shall have (a) notified the Collateral Trustee in writing, by executing and delivering to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure, sole place of business (or principal residence if such Grantor is a natural person), chief executive office, jurisdiction of organization or trade name and providing such other information in connection therewith as the Collateral Trustee may reasonably request and (b) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Trustee's security interest in the Collateral intended to be granted and agreed to hereby; (iii) it shall not take or permit any action which could impair the Collateral Trustee's rights in the Collateral except as otherwise permitted by the Credit Agreement; and (iv) it shall not sell, transfer or assign (by operation of law or otherwise) any Collateral except as otherwise permitted by the Credit Agreement. 4.2 AS-EXTRACTED COLLATERAL, EQUIPMENT AND INVENTORY (i) . (a) Representations and Warranties. Each Grantor represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.2 (as such schedule may be amended or supplemented from time to time) sets forth all of the locations of the wellheads of the As-extracted Collateral; (ii) all of the Inventory included in the Collateral is kept for the past four (4) years only at the locations specified in Schedule 4.2 (as such schedule may be amended or supplemented from time to time); and (iii) none of the Inventory or Equipment is in the possession of an issuer of a negotiable document (as defined in Section 7-104 of the UCC) therefor or otherwise in the possession of a bailee or a warehouseman. 13 (b) Covenants and Agreements. Each Grantor covenants and agrees that: (i) it shall keep the Inventory and any Documents evidencing any Equipment and Inventory in the locations specified on Schedule 4.2 (as such schedule may be amended or supplemented from time to time) unless it shall have (a) notified the Collateral Trustee in writing, by executing and delivering to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any change in locations, identifying such new locations and providing such other information in connection therewith as the Collateral Trustee may reasonably request and (b) taken all actions reasonably necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Trustee's security interest in the Collateral intended to be granted and agreed to hereby, or to enable the Collateral Trustee to exercise and enforce its rights and remedies hereunder, with respect to the Equipment and Inventory; (ii) it shall not deliver any Document evidencing any Equipment and Inventory to any Person other than the issuer of such Document to claim the Goods evidenced therefor or the Collateral Trustee; (iii) if any Equipment or Inventory is in possession or control of any third party, each Grantor shall join with the Collateral Trustee in notifying the third party of the Collateral Trustee's security interest and obtaining an acknowledgment from the third party that it is holding the Equipment and Inventory for the benefit of the Collateral Trustee; and (iv) with respect to any item of Equipment which is covered by a certificate of title under a statute of any jurisdiction under the law of which indication of a security interest on such certificate is required as a condition of perfection thereof, upon the reasonable request of the Collateral Trustee, (A) provide information with respect to any such Equipment in excess of $100,000 individually or $500,000 in the aggregate, (B) execute and file with the registrar of motor vehicles or other appropriate authority in such jurisdiction an application or other document requesting the notation or other indication of the security interest created hereunder on such certificate of title, and (C) deliver to the Collateral Trustee copies of all such applications or other documents filed during such calendar quarter and copies of all such certificates of title issued during such calendar quarter indicating the security interest created hereunder in the items of Equipment covered thereby. 4.3 RECEIVABLES 4.3.1 . (a) Representations and Warranties. Each Grantor represents and warrants, on the Closing Date and on each Credit Date, that: (i) each Receivable (a) is and will be the legal, valid and binding obligation of the Account Debtor in respect thereof, representing an unsatisfied obligation of such Account Debtor, (b) is and will be enforceable in accordance with its terms, (c) is not and will not be subject to any setoffs, defenses, taxes, counterclaims (except with respect to disputes, refunds, returns and allowances in the ordinary course of business) 14 and (d) is and will be in compliance with all applicable laws, whether federal, state, local or foreign; (ii) none of the Account Debtors in respect of any Receivable in excess of $5,000 is the government of the United States, any agency or instrumentality thereof, any state or municipality or any foreign sovereign. No Receivable in excess of $5,000 requires the consent of the Account Debtor in respect thereof in connection with the pledge hereunder, except any consent which has been obtained; (iii) no Receivable is evidenced by, or constitutes, an Instrument or Chattel Paper which has not been delivered to, or otherwise subjected to the control of, the Collateral Trustee to the extent required by, and in accordance with Section 4.3(c); and (iv) each Grantor has delivered to the Collateral Trustee a complete and correct copy of each standard form of document under which a Receivable may arise. (b) Covenants and Agreements: Each Grantor hereby covenants and agrees that: (i) it shall keep and maintain at its own cost and expense satisfactory and complete records of the Receivables, including, but not limited to, the originals of all documentation with respect to all Receivables and records of all payments received and all credits granted on the Receivables, all merchandise returned and all other dealings therewith; (ii) it shall perform in all material respects all of its material obligations with respect to the Receivables; (iii) it shall not amend, modify, terminate or waive any provision of any Receivable in any manner which could reasonably be expected to have a Material Adverse Effect on the value of such Receivable as Collateral. Other than in the ordinary course of business as generally conducted by it on and prior to the date hereof, and other than as permitted by the Credit Agreement and except as otherwise provided in subsection (iv) below, following an Event of Default, such Grantor shall not (w) grant any extension or renewal of the time of payment of any Receivable, (x) compromise or settle any dispute, claim or legal proceeding with respect to any Receivable for less than the total unpaid balance thereof, (y) release, wholly or partially, any Person liable for the payment thereof, or (z) allow any credit or discount thereon; (iv) except as otherwise provided in this subsection, each Grantor shall continue to collect all amounts due or to become due to such Grantor under the Receivables and any Supporting Obligation and diligently exercise each material right it may have under any Receivable any Supporting Obligation or Collateral Support, in each case, at its own expense, and in connection with such collections and exercise, such Grantor shall take such action as such Grantor or the Collateral Trustee may deem necessary or advisable. Notwithstanding the foregoing, the Collateral Trustee shall have the right at any time to notify, or require any Grantor to notify, any Account Debtor of the Collateral Trustee's security interest in the Receivables and any Supporting Obligation and, in addition, at any time following the occurrence and during the continuation of an Event of Default, the Collateral Trustee may: (1) direct the Account 15 Debtors under any Receivables to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Trustee; (2) notify, or require any Grantor to notify, each Person maintaining a lockbox or similar arrangement to which Account Debtors under any Receivables have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to the Collateral Trustee; and (3) enforce, at the expense of such Grantor, collection of any such Receivables and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. If the Collateral Trustee notifies any Grantor that it has elected to collect the Receivables in accordance with the preceding sentence, any payments of Receivables received by such Grantor shall be forthwith (and in any event within two (2) Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Trustee if required, in the Collateral Account maintained under the sole dominion and control of the Collateral Trustee, and until so turned over, all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Receivables, any Supporting Obligation or Collateral Support shall be received in trust for the benefit of the Collateral Trustee hereunder and shall be segregated from other funds of such Grantor and such Grantor shall not adjust, settle or compromise the amount or payment of any Receivable, or release wholly or partly any Account Debtor or obligor thereof, or allow any credit or discount thereon; and (v) it shall use its best efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Receivable. (vi) Delivery and Control of Receivables. With respect to any Receivables in excess of $10,000 individually or $100,000 in the aggregate that is evidenced by, or constitutes, Chattel Paper or Instruments, each Grantor shall cause each originally executed copy thereof to be delivered to the Collateral Trustee (or its agent or designee) appropriately indorsed to the Collateral Trustee or indorsed in blank: (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor acquiring rights therein. With respect to any Receivables in excess of $10,000 individually or $100,000 in the aggregate which would constitute "electronic chattel paper" under Article 9 of the UCC, each Grantor shall take all steps necessary to give the Collateral Trustee control over such Receivables (within the meaning of Section 9-105 of the UCC): (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor acquiring rights therein. Any Receivable not otherwise required to be delivered or subjected to the control of the Collateral Trustee in accordance with this subsection (c) shall be delivered or subjected to such control upon request of the Collateral Trustee. 4.4 INVESTMENT RELATED PROPERTY 4.4.1.1 4.4.1 INVESTMENT RELATED PROPERTY GENERALLY (a) Covenants and Agreements. Each Grantor hereby covenants and agrees that: 16 (i) in the event it acquires rights in any Investment Related Property after the date hereof, it shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, reflecting such new Investment Related Property and all other Investment Related Property. Notwithstanding the foregoing, it is understood and agreed that the security interest of the Collateral Trustee shall attach to all Investment Related Property immediately upon any Grantor's acquisition of rights therein and shall not be affected by the failure of any Grantor to deliver a supplement to Schedule 4.4 as required hereby; (ii) except as provided in the next sentence, in the event such Grantor receives any dividends, interest or distributions on any Investment Related Property, or any securities or other property upon the merger, consolidation, liquidation or dissolution of any issuer of any Investment Related Property, then (a) such dividends, interest or distributions and securities or other property shall be included in the definition of Collateral without further action and (b) such Grantor shall immediately take all steps, if any, reasonably necessary or advisable to ensure the validity, perfection, priority and, if applicable, control of the Collateral Trustee over such Investment Related Property (including, without limitation, delivery thereof to the Collateral Trustee) and pending any such action such Grantor shall be deemed to hold such dividends, interest, distributions, securities or other property in trust for the benefit of the Collateral Trustee and shall segregate such dividends, distributions, Securities or other property from all other property of such Grantor. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, the Collateral Trustee authorizes each Grantor to retain all ordinary cash dividends and distributions paid in the normal course of the business of the issuer and consistent with the past practice of the issuer and all scheduled payments of interest; (iii) each Grantor consents to the grant by each other Grantor of a Security Interest in all Investment Related Property to the Collateral Trustee. (b) Delivery and Control. (i) Each Grantor agrees that with respect to any Investment Related Property in which it currently has rights it shall comply with the provisions of this Section 4.4.1(b) on or before the Credit Date and with respect to any Investment Related Property hereafter acquired by such Grantor it shall comply with the provisions of this Section 4.4.1(b) immediately upon acquiring rights therein, in each case in form and substance satisfactory to the Collateral Trustee. With respect to any Investment Related Property that is represented by a certificate or that is an "instrument" (other than any Investment Related Property credited to a Securities Account) it shall cause such certificate or instrument to be delivered to the Collateral Trustee, indorsed in blank by an "effective indorsement" (as defined in Section 8-107 of the UCC), regardless of whether such certificate constitutes a "certificated security" for purposes of the UCC. With respect to any Investment Related Property that is an "uncertificated security" for purposes of the UCC (other than any "uncertificated securities" credited to a Securities Account), it shall cause the issuer of such uncertificated security to either (i) register the Collateral Trustee as the registered owner thereof on the books and records of the issuer or (ii) execute an agreement substantially in the form of Exhibit B hereto, pursuant to which such issuer agrees to comply with the Collateral Trustee's instructions with respect to such uncertificated security without further consent by such Grantor. 17 (c) Voting and Distributions. (i) So long as no Event of Default shall have occurred and be continuing: (1) except as otherwise provided under the covenants and agreements relating to investment related property in this Agreement or elsewhere herein or in the Credit Agreement, each Grantor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Investment Related Property or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; and (2) the Collateral Trustee shall promptly execute and deliver (or cause to be executed and delivered) to each Grantor all proxies, and other instruments as such Grantor may from time to time reasonably request for the purpose of enabling such Grantor to exercise the voting and other consensual rights when and to the extent which it is entitled to exercise pursuant to clause (1) above; (3) Upon the occurrence and during the continuation of an Event of Default: (A) all rights of each Grantor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Collateral Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights; and (B) in order to permit the Collateral Trustee to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (1) each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Trustee all proxies, dividend payment orders and other instruments as the Collateral Trustee may from time to time reasonably request and (2) each Grantor acknowledges that the Collateral Trustee may utilize the power of attorney set forth in Section 6.1. 4.4.2 PLEDGED EQUITY INTERESTS (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.4(A) (as such schedule may be amended or supplemented from time to time) sets forth under the headings "Pledged Stock, "Pledged LLC Interests," "Pledged Partnership Interests" and "Pledged Trust Interests," respectively, all of the Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests owned by any Grantor and such Pledged Equity Interests constitute the percentage of issued and outstanding shares of stock, percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the respective issuers thereof indicated on such Schedule; 18 (ii) except as set forth on Schedule 4.4(B), it has not acquired any equity interests of another entity or substantially all the assets of another entity within the past five (5) years; (iii) it is the record and beneficial owner of the Pledged Equity Interests free of all Liens, rights or claims of other Persons other than Permitted Liens and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any Pledged Equity Interests; (iv) without limiting the generality of Section 4.1(a)(x), no consent of any Person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Collateral Trustee in any Pledged Equity Interests or the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof; (v) none of the Pledged LLC Interests nor Pledged Partnership Interests are or represent interests in issuers that: (a) are registered as investment companies or (b) are dealt in or traded on securities exchanges or markets; and (vi) other than with respect to Great West Operating Company, L.C., all of the Pledged LLC Interests and Pledged Partnership Interests are or represent interests in issuers that have opted to be treated as securities under the uniform commercial code of any jurisdiction. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that: (i) without the prior written consent of the Collateral Trustee, it shall not vote to enable or take any other action to: (a) amend or terminate any partnership agreement, limited liability company agreement, certificate of incorporation, by-laws or other organizational documents in any way that materially changes the rights of such Grantor with respect to any Investment Related Property or adversely affects the validity, perfection or priority of the Collateral Trustee's security interest, (b) permit any issuer of any Pledged Equity Interest to issue any additional stock, partnership interests, limited liability company interests or other equity interests of any nature or to issue securities convertible into or granting the right of purchase or exchange for any stock or other equity interest of any nature of such issuer, (c) other than as permitted under the Credit Agreement, permit any issuer of any Pledged Equity Interest to dispose of all or a material portion of their assets, (d) waive any default under or breach of any terms of any organizational document relating to the issuer of any Pledged Equity Interest or the terms of any Pledged Debt, if such default or breach could reasonably be expected to result in a Material Adverse Effect, or (e) cause any issuer of any Pledged Partnership Interests or Pledged LLC Interests which are not securities (for purposes of the UCC) on the date hereof to elect or otherwise take any action to cause such Pledged Partnership Interests or Pledged LLC Interests to be treated as securities for purposes of the UCC; provided, however, notwithstanding the foregoing, if any issuer of any Pledged Partnership Interests or Pledged LLC Interests takes any such action in violation of the foregoing in this clause (e), such Grantor shall promptly notify the Collateral Trustee in writing of any 19 such election or action and, in such event, shall take all steps reasonably necessary or advisable to establish the Collateral Trustee's "control" thereof; (ii) it shall comply with all of its obligations under any partnership agreement or limited liability company agreement relating to Pledged Partnership Interests or Pledged LLC Interests and shall enforce all of its rights with respect to any Investment Related Property, except where such failure to comply or enforce could not reasonably be expected to have a Material Adverse Effect; (iii) without the prior written consent of the Collateral Trustee, it shall not permit any issuer of any Pledged Equity Interest to merge or consolidate unless (i) such issuer creates a security interest that is perfected by a filed financing statement (that is not effective solely under section 9-508 of the UCC) in collateral in which such new debtor has or acquires rights, and (ii) all the outstanding capital stock or other equity interests of the surviving or resulting corporation, limited liability company, partnership or other entity is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding equity interests of any other constituent Grantor; provided that if the surviving or resulting Grantors upon any such merger or consolidation involving an issuer which is a Controlled Foreign Corporation, then such Grantor shall only be required to pledge equity interests in accordance with Section 2.2; and (iv) each Grantor consents to the grant by each other Grantor of a security interest in all Investment Related Property to the Collateral Trustee and, without limiting the foregoing, consents to the transfer of any Pledged Partnership Interest and any Pledged LLC Interest to the Collateral Trustee or its nominee following an Event of Default and to the substitution of the Collateral Trustee or its nominee as a partner in any partnership or as a member in any limited liability company with all the rights and powers related thereto. 4.4.3 PLEDGED DEBT (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and each Credit Date, that Schedule 4.4 (as such schedule may be amended or supplemented from time to time) sets forth under the heading "Pledged Debt" all of the Pledged Debt owned by any Grantor and all of such Pledged Debt has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default and constitutes all of the issued and outstanding inter-company Indebtedness. 4.4.4 INVESTMENT ACCOUNTS (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and each Credit Date, that: (i) Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to time) sets forth under the headings "Securities Accounts" and "Commodities Accounts," respectively, all of the Securities Accounts and Commodities Accounts in which each Grantor has an interest. Each Grantor is the sole entitlement holder of each such Securities Account and Commodity Account, and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral 20 Trustee pursuant hereto) having "control" (within the meanings of Sections 8-106 and 9-106 of the UCC) over, or any other interest in, any such Securities Account or Commodity Account or securities or other property credited thereto; (ii) Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to time) sets forth under the headings "Deposit Accounts" all of the Deposit Accounts in which each Grantor has an interest. Each Grantor is the sole account holder of each such Deposit Account and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral Trustee pursuant hereto) having either sole dominion and control (within the meaning of common law) or "control" (within the meanings of Section 9-104 of the UCC) over, or any other interest in, any such Deposit Account or any money or other property deposited therein; and (iii) Each Grantor has taken all actions necessary or desirable, including those specified in Section 4.4.4(c), to: (a) establish Collateral Trustee's "control" (within the meanings of Sections 8-106 and 9-106 of the UCC) over any portion of the Investment Related Property constituting Certificated Securities, Uncertificated Securities, Securities Accounts, Securities Entitlements or Commodities Accounts (each as defined in the UCC); (b) establish the Collateral Trustee's "control" (within the meaning of Section 9-104 of the UCC) over all Deposit Accounts; and (c) deliver all Instruments to the Collateral Trustee. (b) Covenant and Agreement. Each Grantor hereby covenants and agrees with the Collateral Trustee and each other Secured Party that it shall not close or terminate any Investment Account without the prior consent of the Collateral Trustee and unless a successor or replacement account has been established with the consent of the Collateral Trustee with respect to which successor or replacement account a control agreement has been entered into by the appropriate Grantor, Collateral Trustee and securities intermediary or depository institution at which such successor or replacement account is to be maintained in accordance with the provisions of Section 4.4.4(c). (c) Delivery and Control (i) With respect to any Investment Related Property consisting of Securities Accounts or Securities Entitlements, it shall cause the securities intermediary maintaining such Securities Account or Securities Entitlement to enter into an agreement substantially in the form of Exhibit C hereto pursuant to which it shall agree to comply with the Collateral Trustee's "entitlement orders" without further consent by such Grantor. With respect to any Investment Related Property that is a "Deposit Account," it shall cause the depositary institution maintaining such account to enter into an agreement substantially in the form of Exhibit D hereto, pursuant to which the Collateral Trustee shall have "control" (within the meaning of Section 9-104 of the UCC) over such Deposit Account. Each Grantor shall have entered into such control agreement or agreements with respect to: (i) any Securities Accounts, Securities Entitlements or Deposit Accounts that exist on the Credit Date, as of or prior to the Credit Date and (ii) any Securities Accounts, Securities Entitlements or Deposit Accounts that are created or acquired after the Credit Date, as of or prior to the deposit or transfer of any such Securities Entitlements or funds, whether constituting moneys or investments, into such Securities Accounts or Deposit Accounts. 21 In addition to the foregoing, if any issuer of any Investment Related Property is located in a jurisdiction outside of the United States, each Grantor shall take such additional actions, including, without limitation, causing the issuer to register the pledge on its books and records or making such filings or recordings, in each case as may be necessary or advisable, under the laws of such issuer's jurisdiction to insure the validity, perfection and priority of the security interest of the Collateral Trustee. Upon the occurrence of an Event of Default, the Collateral Trustee shall have the right, without notice to any Grantor, to transfer all or any portion of the Investment Related Property to its name or the name of its nominee or agent. In addition, the Collateral Trustee shall have the right at any time, without notice to any Grantor, to exchange any certificates or instruments representing any Investment Related Property for certificates or instruments of smaller or larger denominations. 4.5 MATERIAL CONTRACTS. (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.5 (as such schedule may be amended or supplemented from time to time) sets forth all of the Material Contracts to which such Grantor has rights; and (ii) no Material Contract (other than any Non-Assignable Contracts) prohibits assignment or requires consent of or notice to any Person in connection with the assignment to the Collateral Trustee hereunder, except such as has been given or made or is currently sought pursuant to Section 4.5 (b)(vii) hereof. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that: (i) in addition to any rights under the Section of this Agreement relating to Receivables, the Collateral Trustee may at any time notify, or require any Grantor to so notify, the counterparty on any Material Contract of the security interest of the Collateral Trustee therein. In addition, after the occurrence and during the continuance of an Event of Default, the Collateral Trustee may upon written notice to the applicable Grantor, notify, or require any Grantor to notify, the counterparty to make all payments under the Material Contracts directly to the Collateral Trustee; (ii) it shall perform in all material respects all of its material obligations with respect to the Material Contracts; (iii) it shall use its best efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Material Contract; and (iv) each Grantor shall, within thirty (30) days of the date hereof with respect to any Non-Assignable Contract that is a Material Contract (other than the Credit Agreement, the Hedge Agreement (as defined in the Collateral Trust Agreement) or the Indenture (as defined in the Collateral Trust Agreement)) in effect on the date hereof and within thirty (30) days after entering into any Non-Assignable Contract that is a Material 22 Contract (other than the Credit Agreement, the Hedge Agreement (as defined in the Collateral Trust Agreement) or the Indenture (as defined in the Collateral Trust Agreement)) after the Closing Date, request in writing the consent of the counterparty or counterparties to such Non-Assignable Contract pursuant to the terms of such Non-Assignable Contract or applicable law to the assignment or granting of a security interest in such Non-Assignable Contract to Secured Party and use its best efforts to obtain such consent as soon as practicable thereafter. 4.6 LETTER OF CREDIT RIGHTS 4.6.1 . (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) all material letters of credit to which such Grantor has rights is listed on Schedule 4.6 (as such schedule may be amended or supplemented from time to time) hereto; and (ii) it has obtained the consent of each issuer of any material letter of credit to the assignment of the proceeds of the letter of credit to the Collateral Trustee. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that with respect to any material letter of credit hereafter arising it shall obtain the consent of the issuer thereof to the assignment of the proceeds of the letter of credit to the Collateral Trustee and shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto. 4.7 INTELLECTUAL PROPERTY. (a) Representations and Warranties. Except as disclosed in Schedule 4.7(H) (as such schedule may be amended or supplemented from time to time), each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.7 (as such schedule may be amended or supplemented from time to time) sets forth a true and complete list of (i) all United States, state and foreign registrations of and applications for Patents, Trademarks, and Copyrights owned by each Grantor and (ii) all Patent Licenses, Trademark Licenses, Trade Secret Licenses and Copyright Licenses in each case material to the business of such Grantor; (ii) it is the sole and exclusive owner of the entire right, title, and interest in and to all Intellectual Property listed on Schedule 4.7 (as such schedule may be amended or supplemented from time to time), and owns or has the valid right to use all other Intellectual Property used in or necessary to conduct its business, free and clear of all Liens, claims, encumbrances and licenses, except for Permitted Liens and the licenses set forth on Schedule 4.7(B), (D), (F) and (G) (as each may be amended or supplemented from time to time); (iii) all Intellectual Property listed on Schedule 4.7 is subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and each Grantor has 23 performed all acts and has paid all renewal, maintenance, and other fees and taxes required to maintain each and every registration and application of Copyrights, Patents and Trademarks in full force and effect; (iv) all Intellectual Property listed on Schedule 4.7 is valid and enforceable; no holding, decision, or judgment has been rendered in any action or proceeding before any court or administrative authority challenging the validity of, such Grantor's right to register, or such Grantor's rights to own or use, any such Intellectual Property and no such action or proceeding is pending or, to the best of such Grantor's knowledge, threatened; (v) all registrations and applications for Copyrights, Patents and Trademarks are standing in the name of each Grantor, and none of the Trademarks, Patents, Copyrights or Trade Secrets has been licensed by any Grantor to any Affiliate or third party, except as disclosed in Schedule 4.7(B), (D), (F), or (G) (as each may be amended or supplemented from time to time); (vi) each Grantor has been using appropriate statutory notice of registration in connection with its use of registered Trademarks, proper marking practices in connection with the use of Patents, and appropriate notice of copyright in connection with the publication of Copyrights material to the business of such Grantor; (vii) the conduct of such Grantor's business does not infringe upon or otherwise violate any trademark, patent, copyright, trade secret or other intellectual property right owned or controlled by a third party; no claim has been made that the use of any Intellectual Property owned or used by Grantor (or any of its respective licensees) violates the asserted rights of any third party; (viii) to the best of each Grantor's knowledge, no third party is infringing upon or otherwise violating any rights in any Intellectual Property owned or used by such Grantor, or any of its respective licensees; (ix) no settlement or consents, covenants not to sue, nonassertion assurances, or releases have been entered into by Grantor or to which Grantor is bound that adversely affect Grantor's rights to own or use any Intellectual Property listed on Schedule 4.7; and (x) each Grantor has not made a previous assignment, sale, transfer or agreement constituting a present or future assignment, sale, transfer or agreement of any Intellectual Property listed on Schedule 4.7 that has not been terminated or released. There is no effective financing statement or other document or instrument now executed, or on file or recorded in any public office, granting a security interest in or otherwise encumbering any part of the Intellectual Property listed on Schedule 4.7, other than in favor of the Collateral Trustee. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees as follows: (i) it shall not do any act or omit to do any act whereby any of the Intellectual Property which is material to the business of Grantor may lapse, or become 24 abandoned, dedicated to the public, or unenforceable, or which would adversely affect the validity, grant, or enforceability of the security interest granted therein; (ii) it shall not, with respect to any Trademarks which are material to the business of any Grantor, cease the use of any of such Trademarks or fail to maintain the level of the quality of products sold and services rendered under any of such Trademark at a level at least substantially consistent with the quality of such products and services as of the date hereof, and each Grantor shall take all steps necessary to insure that licensees of such Trademarks use such consistent standards of quality; (iii) it shall, within thirty (30) days of the creation or acquisition of any Copyrightable work which is material to the business of Grantor, apply to register the Copyright in the United States Copyright Office; (iv) it shall promptly notify the Collateral Trustee if it knows or has reason to know that any item of the Intellectual Property that is material to the business of any Grantor may become (a) abandoned or dedicated to the public or placed in the public domain, (b) invalid or unenforceable, or (c) subject to any adverse determination or development (including the institution of proceedings) in any action or proceeding in the United States Patent and Trademark Office, the United States Copyright Office, any state registry, any foreign counterpart of the foregoing, or any court; (v) it shall take all reasonable steps in the United States Patent and Trademark Office, the United States Copyright Office, any state registry or any foreign counterpart of the foregoing, to pursue any application and maintain any registration of each Trademark, Patent, and Copyright owned by any Grantor and material to its business which is now or shall become included in the Intellectual Property including, but not limited to, those items on Schedule 4.7(A), (C) and (E) (as each may be amended or supplemented from time to time); (vi) in the event that any Intellectual Property listed on Schedule 4.7 owned by or exclusively licensed to any Grantor is infringed, misappropriated, or diluted by a third party, such Grantor shall promptly take all reasonable actions to stop such infringement, misappropriation, or dilution and protect its rights in such Intellectual Property including, but not limited to, the initiation of a suit for injunctive relief and to recover damages; (vii) it shall promptly (but in no event more than thirty (30) days after any Grantor obtains knowledge thereof) report to the Collateral Trustee (i) the filing of any application to register any Intellectual Property listed on Schedule 4.7 with the United States Patent and Trademark Office, the United States Copyright Office, or any state registry or foreign counterpart of the foregoing (whether such application is filed by such Grantor or through any agent, employee, licensee, or designee thereof) and (ii) the registration of any Intellectual Property listed on Schedule 4.7 by any such office, in each case by executing and delivering to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto; (viii) it shall, promptly upon the reasonable request of the Collateral Trustee, execute and deliver to the Collateral Trustee any document required to acknowledge, confirm, register, record, or perfect the Collateral Trustee's interest in any 25 part of the Intellectual Property listed on Schedule 4.7, whether now owned or hereafter acquired; (ix) except with the prior consent of the Collateral Trustee or as permitted under the Credit Agreement, each Grantor shall not execute, and there will not be on file in any public office, any financing statement or other document or instruments, except financing statements or other documents or instruments filed or to be filed in favor of the Collateral Trustee and each Grantor shall not sell, assign, transfer, license, grant any option, or create or suffer to exist any Lien upon or with respect to the Intellectual Property, except for the Lien created by and under this Agreement and the other Credit Documents; (x) it shall take all steps reasonably necessary to protect the secrecy of all Trade Secrets, including, without limitation, entering into confidentiality agreements with employees and labeling and restricting access to secret information and documents; (xi) it shall use proper statutory notice in connection with its use of any of the Intellectual Property; and (xii) it shall continue to collect, at its own expense, all amounts due or to become due to such Grantor in respect of the Intellectual Property or any portion thereof. In connection with such collections, each Grantor may take (and, at the Collateral Trustee's reasonable direction, shall take) such action as such Grantor or the Collateral Trustee may deem reasonably necessary or advisable to enforce collection of such amounts. Notwithstanding the foregoing, the Collateral Trustee shall have the right at any time, to notify, or require any Grantor to notify, any obligors with respect to any such amounts of the existence of the security interest created hereby. 4.8 COMMERCIAL TORT CLAIMS (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that Schedule 4.8 (as such schedule may be amended or supplemented from time to time) sets forth all Commercial Tort Claims of each Grantor; and (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that with respect to any Commercial Tort Claim in excess of $500,000 individually or $1,000,000 in the aggregate hereafter arising it shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, identifying such new Commercial Tort Claims. SECTION 5. FURTHER ASSURANCES; ADDITIONAL GRANTORS. 5.1 [RESERVED]. 5.2 FURTHER ASSURANCES. 26 (a) Each Grantor agrees that from time to time, at the expense of such Grantor, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary, or that the Collateral Trustee may reasonably request, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted hereby or to enable the Collateral Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor shall: (i) file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be reasonably necessary, or as the Collateral Trustee may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (ii) take all actions necessary to ensure the recordation of appropriate evidence of the liens and security interest granted hereunder in the Intellectual Property with any intellectual property registry in which said Intellectual Property is registered or in which an application for registration is pending including, without limitation, the United States Patent and Trademark Office, the United States Copyright Office, the various Secretaries of State, and the foreign counterparts on any of the foregoing; and (iii) at the Collateral Trustee's request, appear in and defend any action or proceeding that may affect such Grantor's title to or the Collateral Trustee's security interest in all or any material part of the Collateral. (b) Each Grantor hereby authorizes the Collateral Trustee to file a Record or Records, including, without limitation, financing or continuation statements, and amendments thereto, in any jurisdictions and with any filing offices as the Collateral Trustee may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Collateral Trustee herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Collateral Trustee may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Collateral Trustee herein, including, without limitation, describing such property as "all assets" or "all personal property, whether now owned or hereafter acquired." Each Grantor shall furnish to the Collateral Trustee from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Trustee may reasonably request, all in reasonable detail. (c) Each Grantor hereby authorizes the Collateral Trustee to modify this Agreement after obtaining such Grantor's approval of or signature to such modification by amending Schedule 4.7 (as such schedule may be amended or supplemented from time to time) to include reference to any right, title or interest in any existing Intellectual Property or any Intellectual Property acquired or developed by any Grantor after the execution hereof or to delete any reference to any right, title or interest in any Intellectual Property in which any Grantor no longer has or claims any right, title or interest. 5.3 ADDITIONAL GRANTORS. 27 From time to time subsequent to the date hereof, additional Persons may become parties hereto as additional Grantors (each, an "Additional Grantor"), by executing a Counterpart Agreement. Upon delivery of any such Counterpart Agreement to the Collateral Trustee, notice of which is hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall be as fully a party hereto as if Additional Grantor were an original signatory hereto. Each Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of Collateral Trustee not to cause any Subsidiary of Company to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder. SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT. 6.1 POWER OF ATTORNEY. Each Grantor hereby irrevocably appoints the Collateral Trustee (such appointment being coupled with an interest) as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, the Collateral Trustee or otherwise, from time to time in the Collateral Trustee's discretion to take any action and to execute any instrument that the Collateral Trustee may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following: (a) upon the occurrence and during the continuance of any Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to the Collateral Trustee pursuant to the Credit Agreement; (b) upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (c) upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (b) above; (d) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that the Collateral Trustee may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Trustee with respect to any of the Collateral; (e) to prepare and file any UCC financing statements against such Grantor as debtor; (f) to prepare, sign, and file for recordation in any intellectual property registry, appropriate evidence of the lien and security interest granted herein in the Intellectual Property in the name of such Grantor as debtor; (g) to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens (other than Permitted Liens) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to 28 discharge the same to be determined by the Collateral Trustee in its sole discretion, any such payments made by the Collateral Trustee to become obligations of such Grantor to the Collateral Trustee, due and payable immediately without demand; and (h) upon the occurrence and during the continuance of any Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Trustee were the absolute owner thereof for all purposes, and to do, at the Collateral Trustee's option and such Grantor's expense, at any time or from time to time, all acts and things that the Collateral Trustee deems reasonably necessary to protect, preserve or realize upon the Collateral and the Collateral Trustee's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. 6.2 NO DUTY ON THE PART OF COLLATERAL TRUSTEE OR SECURED PARTIES. The powers conferred on the Collateral Trustee hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral Trustee or any Secured Party to exercise any such powers. The Collateral Trustee and the Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. SECTION 7. REMEDIES. 7.1 GENERALLY. (a) If any Event of Default shall have occurred and be continuing, the Collateral Trustee may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it at law or in equity, all the rights and remedies of the Collateral Trustee on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect, enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and also may pursue any of the following separately, successively or simultaneously: (i) require any Grantor to, and each Grantor hereby agrees that it shall at its expense and promptly upon request of the Collateral Trustee forthwith, assemble all or part of the Collateral as directed by the Collateral Trustee and make it available to the Collateral Trustee at a place to be designated by the Collateral Trustee that is reasonably convenient to both parties; (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process; (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Collateral Trustee deems appropriate; and (iv) without notice except as specified below or under the UCC, sell, assign, lease, license (on an exclusive or nonexclusive basis) or otherwise dispose of the 29 Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Trustee'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 the Collateral Trustee may deem commercially reasonable. (b) The Collateral Trustee or any Secured Party may be the purchaser of any or all of the Collateral at any public or private (to the extent to the portion of the Collateral being privately sold is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations) sale in accordance with the UCC and the Collateral Trustee, as Collateral Trustee for and representative of the Secured Parties, 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 sale made in accordance with the UCC, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Trustee 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 any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Trustee 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. Each Grantor agrees that it would not be commercially unreasonable for the Collateral Trustee to dispose of the Collateral or any portion thereof by using Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Each Grantor hereby waives any claims against the Collateral Trustee arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Trustee accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantors shall be liable for the deficiency and the fees of any attorneys employed by the Collateral Trustee to collect such deficiency. Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Trustee, that the Collateral Trustee has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of the Collateral Trustee hereunder. (c) The Collateral Trustee may sell the Collateral without giving any warranties as to the Collateral. The Collateral Trustee may specifically disclaim or modify any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. (d) The Collateral Trustee shall have no obligation to marshal any of the Collateral. 7.2 APPLICATION OF PROCEEDS. 30 Except as expressly provided elsewhere in this Agreement, all proceeds received by the Collateral Trustee in respect of any sale, any collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by the Collateral Trustee against, the Secured Obligations in the following order of priority: first, to the payment of all reasonable costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Trustee and its agents and counsel, and all other reasonable expenses, liabilities and advances made or incurred by the Collateral Trustee in connection therewith, and all amounts for which the Collateral Trustee is entitled to indemnification hereunder (in its capacity as the Collateral Trustee and not as a Lender) and all advances made by the Collateral Trustee hereunder for the account of the applicable Grantor, and to the payment of all reasonable costs and expenses paid or incurred by the Collateral Trustee in connection with the exercise of any right or remedy hereunder or under the Credit Agreement, all in accordance with the terms hereof or thereof; second, to the extent of any excess of such proceeds, to the payment of all other Secured Obligations for the ratable benefit of the Lenders and the Lender Counterparties; and third, to the extent of any excess of such proceeds, to the payment to or upon the order of such Grantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 7.3 SALES ON CREDIT. If Collateral Trustee sells any of the Collateral upon credit, Grantor will be credited only with payments actually made by purchaser and received by Collateral Trustee and applied to indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Collateral Trustee may resell the Collateral and Grantor shall be credited with proceeds of the sale. 7.4 DEPOSIT ACCOUNTS. If any Event of Default shall have occurred and be continuing, the Collateral Trustee may apply the balance from any Deposit Account or instruct the bank at which any Deposit Account is maintained to pay the balance of any Deposit Account to or for the benefit of the Collateral Trustee. 7.5 INVESTMENT RELATED PROPERTY. Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Collateral Trustee may be compelled, with respect to any sale of all or any part of the Investment Related Property conducted without prior registration or qualification of such Investment Related Property under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Investment Related Property for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Investment Related Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If the Collateral Trustee determines to exercise its right to sell any or all of the Investment 31 Related Property, upon written request, each Grantor shall and shall cause each issuer of any Pledged Stock to be sold hereunder, each partnership and each limited liability company from time to time to furnish to the Collateral Trustee all such information as the Collateral Trustee may request in order to determine the number and nature of interest, shares or other instruments included in the Investment Related Property which may be sold by the Collateral Trustee in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. 7.6 INTELLECTUAL PROPERTY. (a) Anything contained herein to the contrary notwithstanding, upon the occurrence and during the continuation of an Event of Default: (i) the Collateral Trustee shall have the right (but not the obligation) to bring suit or otherwise commence any action or proceeding in the name of any Grantor, the Collateral Trustee or otherwise, in the Collateral Trustee's sole discretion, to enforce any Intellectual Property, in which event such Grantor shall, at the request of the Collateral Trustee, do any and all lawful acts and execute any and all documents required by the Collateral Trustee in aid of such enforcement and such Grantor shall promptly, upon demand, reimburse and indemnify the Collateral Trustee as provided in Section 10 hereof in connection with the exercise of its rights under this Section, and, to the extent that the Collateral Trustee shall elect not to bring suit to enforce any Intellectual Property as provided in this Section, each Grantor agrees to use all reasonable measures, whether by action, suit, proceeding or otherwise, to prevent the infringement or other violation of any of such Grantor's rights in the Intellectual Property by others and for that purpose agrees to diligently maintain any action, suit or proceeding against any Person so infringing as shall be necessary to prevent such infringement or violation; (ii) upon written demand from the Collateral Trustee, each Grantor shall grant, assign, convey or otherwise transfer to the Collateral Trustee an absolute assignment of all of such Grantor's right, title and interest in and to the Intellectual Property and shall execute and deliver to the Collateral Trustee such documents as are necessary or appropriate to carry out the intent and purposes of this Agreement; (iii) each Grantor agrees that such an assignment and/or recording shall be applied to reduce the Secured Obligations outstanding only to the extent that the Collateral Trustee (or any Secured Party) receives cash proceeds in respect of the sale of, or other realization upon, the Intellectual Property; (iv) within five (5) Business Days after written notice from the Collateral Trustee, each Grantor shall make available to the Collateral Trustee, to the extent within such Grantor's power and authority, such personnel in such Grantor's employ on the date of such Event of Default as the Collateral Trustee may reasonably designate, by name, title or job responsibility, to permit such Grantor to continue, directly or indirectly, to produce, advertise and sell the products and services sold or delivered by such Grantor under or in connection with the Trademarks, Trademark Licenses, such persons to be available to perform their prior functions on the Collateral Trustee's behalf and to be compensated by the Collateral Trustee at such Grantor's expense on a per diem, pro-rata basis consistent with the salary and benefit structure applicable to each as of the date of such Event of Default; and 32 (v) the Collateral Trustee shall have the right to notify, or require each Grantor to notify, any obligors with respect to amounts due or to become due to such Grantor in respect of the Intellectual Property, of the existence of the security interest created herein, to direct such obligors to make payment of all such amounts directly to the Collateral Trustee, and, upon such notification and at the expense of such Grantor, to enforce collection of any such amounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done; (1) all amounts and proceeds (including checks and other instruments) received by Grantor in respect of amounts due to such Grantor in respect of the Collateral or any portion thereof shall be received in trust for the benefit of the Collateral Trustee hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to the Collateral Trustee in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 7.7 hereof; and (2) Grantor shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon. (b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment or other transfer to the Collateral Trustee of any rights, title and interests in and to the Intellectual Property shall have been previously made and shall have become absolute and effective, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Grantor, the Collateral Trustee shall promptly execute and deliver to such Grantor, at such Grantor's sole cost and expense, such assignments or other transfer as may be necessary to reassign to such Grantor any such rights, title and interests as may have been assigned to the Collateral Trustee as aforesaid, subject to any disposition thereof that may have been made by the Collateral Trustee; provided, after giving effect to such reassignment, the Collateral Trustee's security interest granted pursuant hereto, as well as all other rights and remedies of the Collateral Trustee granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of any other Liens granted by or on behalf of the Collateral Trustee and the Secured Parties. (c) Solely for the purpose of enabling the Collateral Trustee to exercise rights and remedies under this Section 7 and at such time as the Collateral Trustee shall be lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Trustee, to the extent it has the right to do so, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Grantor), subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Grantor to avoid the risk of invalidation of said Trademarks, to use, operate under, license, or sublicense any Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located. 7.7 CASH PROCEEDS. After an Event of Default shall have occurred and be continuing, upon receipt of any Collateral consisting of cash, checks and other non-cash items (collectively, "CASH 33 PROCEEDS") by any Grantor, such Grantor shall turn over all such Cash Proceeds to the Collateral Trustee. Any Cash Proceeds shall be applied by the Collateral Trustee against the Secured Obligations then due and owing. 7.8 NOTICE OF SOLE CONTROL. The Collateral Trustee agrees that it shall not issue any notice of sole control pursuant to any control agreement entered into pursuant to the terms of this Agreement unless there shall have occurred and be continuing an Event of Default. SECTION 8. COLLATERAL TRUSTEE. The Collateral Trustee has been appointed to act as Collateral Trustee by the Administrative Agent under the Collateral Trust Agreement and, by their acceptance of the benefits hereof, the other Secured Parties. The Collateral Trustee shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement; provided, the Collateral Trustee shall, after payment in full of all Obligations under the Credit Agreement and the other Credit Documents, exercise, or refrain from exercising, any remedies provided for herein in accordance with the instructions of the holders of a majority of the aggregate notional amount (or, with respect to any Hedge Agreement that has been terminated in accordance with its terms, the amount then due and payable (exclusive of expenses and similar payments but including any early termination payments then due) under such Hedge Agreement) under all Hedge Agreements. In furtherance of the foregoing provisions of this Section, each Secured Party, by its acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Secured Party that all rights and remedies hereunder may be exercised solely by the Collateral Trustee for the benefit of Secured Parties in accordance with the terms of this Section. Collateral Trustee may resign at any time by giving thirty (30) days' prior written notice thereof to Lenders and the Grantors, and Collateral Trustee may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Grantors and Collateral Trustee signed by the Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five (5) Business Days' notice to the Administrative Agent, to appoint a successor Collateral Trustee. Upon the acceptance of any appointment as Collateral Trustee hereunder by a successor Collateral Trustee, that successor Collateral Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Trustee under this Agreement, and the retiring or removed Collateral Trustee under this Agreement shall promptly (i) transfer to such successor Collateral Trustee all sums, Securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Trustee under this Agreement, and (ii) execute and deliver to such successor Collateral Trustee or otherwise authorize the filing of such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Trustee of the security interests created hereunder, whereupon such retiring or removed Collateral Trustee shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Trustee's resignation or removal hereunder as the Collateral Trustee, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Trustee hereunder. 34 SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, be binding upon each Grantor, its successors and assigns, and inure, together with the rights and remedies of the Collateral Trustee hereunder, to the benefit of the Collateral Trustee and its successors, transferees and assigns. Without limiting the generality of the foregoing, but subject to the terms of the Credit Agreement, any Lender may assign or otherwise transfer any Loans held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Lenders herein or otherwise. Upon the payment in full of all Secured Obligations, the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, the security interest granted hereby shall terminate hereunder and of record and all rights to the Collateral shall revert to Grantors. Upon any such termination the Collateral Trustee shall, at Grantors' expense, execute and deliver to Grantors such documents as Grantors shall reasonably request to evidence such termination. SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM. The powers conferred on the Collateral Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Collateral Trustee shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Trustee accords its own property. Neither the Collateral Trustee nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or otherwise. If any Grantor fails to perform any agreement contained herein, the Collateral Trustee may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Trustee incurred in connection therewith shall be payable by each Grantor under Section 10.2 of the Credit Agreement. SECTION 11. MISCELLANEOUS. Any notice required or permitted to be given under this Agreement shall be given in accordance with Section 10.1 of the Credit Agreement. No failure or delay on the part of the Collateral Trustee in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Credit Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 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. All covenants hereunder shall be given independent effect so that if a 35 particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. This Agreement shall be binding upon and inure to the benefit of the Collateral Trustee and Grantors and their respective successors and assigns. No Grantor shall, without the prior written consent of the Collateral Trustee given in accordance with the Credit Agreement, assign any right, duty or obligation hereunder. This Agreement and the other Credit Documents embody the entire agreement and understanding between Grantors and the Collateral Trustee and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Credit Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAWS). [The remainder of this page is intentionally left blank.] 36 IN WITNESS WHEREOF, each Grantor and the Collateral Trustee have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BELDEN & BLAKE CORPORATION By: /s/ Frost W. Cochran ----------------------------------- Name: Frost W. Cochran Title: President THE CANTON OIL & GAS COMPANY By: /s/ Frost W. Cochran ----------------------------------- Name: Frost W. Cochran Title: President WARD LAKE DRILLING, INC. By: /s/ Frost W. Cochran ----------------------------------- Name: Frost W. Cochran Title: Chief Executive Officer WELLS FARGO BANK, N.A., as Collateral Trustee By: /s/ Jane Y. Schweiger ----------------------------------- Name: Jane Y. Schweiger Title: Vice President SCHEDULE 4.1 TO PLEDGE AND SECURITY AGREEMENT GENERAL INFORMATION (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business (or Residence if Grantor is a Natural Person) and Organizational Identification Number of each Grantor:
Chief Executive Office/Sole Place of Business (or Residence Type of Jurisdiction of if Grantor is a Natural Full Legal Name Organization Organization Person) Organization I.D.# - --------------- ------------ --------------- ----------------------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted business for the past five (5) years:
Full Legal Name Trade Name or Fictitious Business Name - --------------- --------------------------------------
(C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years:
Name of Grantor Date of Change Description of Change - --------------- -------------- ---------------------
(D) Agreements pursuant to which any Grantor is found as debtor within past five (5) years:
Name of Grantor Description of Agreement - --------------- ------------------------
(E) Financing Statements:
Name of Grantor Filing Jurisdiction(s) - --------------- ----------------------
SCHEDULE 4.1-1 SCHEDULE 4.2 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Location of Wellhead, Equipment and Inventory - --------------- ---------------------------------------------
SCHEDULE 4.2-1 SCHEDULE 4.4 TO PLEDGE AND SECURITY AGREEMENT INVESTMENT RELATED PROPERTY (A) Pledged Stock:
% OF STOCK NO. OF OUTSTANDING STOCK CLASS OF CERTIFICATED CERTIFICATE PLEDGED STOCK OF THE GRANTOR ISSUER STOCK (Y/N) NO. PAR VALUE STOCK STOCK ISSUER - ------- ------ ----- ----- --- --------- ----- ------------
Pledged LLC Interests:
% OF OUTSTANDING LLC INTERESTS OF LIMITED LIABILITY CERTIFICATE NO. NO. OF PLEDGED THE LIMITED GRANTOR COMPANY CERTIFICATED (Y/N) (IF ANY) UNITS LIABILITY COMPANY - ------- ------- ------------------ -------- ----- -----------------
Pledged Partnership Interests:
TYPE OF PARTNERSHIP % OF OUTSTANDING INTERESTS (E.G., PARTNERSHIP GENERAL OR CERTIFICATE NO. INTERESTS OF THE GRANTOR PARTNERSHIP LIMITED) CERTIFICATED (Y/N) (IF ANY) PARTNERSHIP - ------- ----------- -------- ------------------ -------- -----------
Pledged Trust Interests:
CLASS OF TRUST CERTIFICATE NO. % OF OUTSTANDING TRUST GRANTOR TRUST INTERESTS CERTIFICATED (Y/N) (IF ANY) INTERESTS OF THE TRUST - ------- ----- --------- ------------------ -------- ----------------------
EXHIBIT 4.4-1 Pledged Debt:
ORIGINAL PRINCIPAL OUTSTANDING GRANTOR ISSUER AMOUNT PRINCIPAL BALANCE ISSUE DATE MATURITY DATE - ------- ------ ------ ----------------- ---------- -------------
Securities Account:
SHARE OF SECURITIES GRANTOR INTERMEDIARY ACCOUNT NUMBER ACCOUNT NAME - ------- ------------ -------------- ------------
Commodities Accounts:
NAME OF COMMODITIES GRANTOR INTERMEDIARY ACCOUNT NUMBER ACCOUNT NAME - ------- ------------ -------------- ------------
Deposit Accounts:
NAME OF DEPOSITARY GRANTOR BANK ACCOUNT NUMBER ACCOUNT NAME - ------- ---- -------------- ------------
(B)
Name of Grantor Date of Acquisition Description of Acquisition
EXHIBIT 4.4-2 SCHEDULE 4.5 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Description of Material Contract - --------------- --------------------------------
SCHEDULE 4.5-1 SCHEDULE 4.6 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Description of Letters of Credit - --------------- --------------------------------
SCHEDULE 4.6-1 SCHEDULE 4.7 TO PLEDGE AND SECURITY AGREEMENT INTELLECTUAL PROPERTY (A) Copyrights (B) Copyright Licenses (C) Patents (D) Patent Licenses (E) Trademarks (F) Trademark Licenses (G) Trade Secret Licenses (H) Intellectual Property Exceptions SCHEDULE 4.7-1 SCHEDULE 4.8 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Commercial Tort Claims - --------------- ----------------------
SCHEDULE 4.8-1 EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT PLEDGE SUPPLEMENT This PLEDGE SUPPLEMENT, dated [mm/dd/yy], is delivered by [NAME OF GRANTOR] a [NAME OF STATE OF INCORPORATION] [Corporation] (the "GRANTOR") pursuant to the Pledge and Security Agreement, dated as of June __, 2004 (as it may be from time to time amended, restated, modified or supplemented, the "Security Agreement"), among BELDEN & BLAKE CORPORATION, the other Grantors named therein, and WELLS FARGO BANK, N.A., as Collateral Trustee. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement. Grantor hereby confirms the grant to the Collateral Trustee set forth in the Security Agreement of, and does hereby grant to the Collateral Trustee, a security interest in all of Grantor's right, title and interest in and to all Collateral to secure the Secured Obligations, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located. Grantor represents and warrants that the attached Supplements to Schedules accurately and completely set forth all additional information required pursuant to the Security Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the Schedules to the Security Agreement. IN WITNESS WHEREOF, Grantor has caused this Pledge Supplement to be duly executed and delivered by its duly authorized officer as of [MM/DD/YY]. [NAME OF GRANTOR] By:___________________________________ Name: Title: EXHIBIT A-1 SUPPLEMENT TO SCHEDULE 4.1 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business (or Residence if Grantor is a Natural Person) and Organizational Identification Number of each Grantor:
Chief Executive Office/Sole Place of Business (or Residence Jurisdiction of if Grantor is a Natural Full Legal Name Type of Organization Organization Person) Organization I.D.# - --------------- -------------------- ------------ ------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted business for the past five (5) years:
Full Legal Name Trade Name or Fictitious Business Name - --------------- --------------------------------------
(C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years:
Name of Grantor Date of Change Description of Change - --------------- -------------- ---------------------
(D) Agreements pursuant to which any Grantor is found as debtor within past five (5) years:
Name of Grantor Description of Agreement - --------------- ------------------------
(E) Financing Statements: EXHIBIT A-2
Name of Grantor Filing Jurisdiction(s) - --------------- ----------------------
EXHIBIT A-3 SUPPLEMENT TO SCHEDULE 4.2 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Location of Wellhead, Equipment and Inventory - --------------- ---------------------------------------------
EXHIBIT A-4 SUPPLEMENT TO SCHEDULE 4.4 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Pledged Stock: Pledged Partnership Interests: Pledged LLC Interests: Pledged Trust Interests: Pledged Debt: Securities Account: Commodities Accounts: Deposit Accounts: (B)
Name of Grantor Date of Acquisition Description of Acquisition - --------------- ------------------- --------------------------
EXHIBIT A-5 SUPPLEMENT TO SCHEDULE 4.5 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Description of Material Contract - --------------- --------------------------------
EXHIBIT A-6 SUPPLEMENT TO SCHEDULE 4.6 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Description of Letters of Credit - --------------- --------------------------------
EXHIBIT A-7 SUPPLEMENT TO SCHEDULE 4.7 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Copyrights (B) Copyright Licenses (C) Patents (D) Patent Licenses (E) Trademarks (F) Trademark Licenses (G) Trade Secret Licenses (H) Intellectual Property Exceptions EXHIBIT A-8 SUPPLEMENT TO SCHEDULE 4.8 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Commercial Tort Claims - --------------- ----------------------
EXHIBIT A-9 EXHIBIT B TO PLEDGE AND SECURITY AGREEMENT UNCERTIFICATED SECURITIES CONTROL AGREEMENT This Uncertificated Securities Control Agreement dated as of _________, 200__ among ________________ (the "PLEDGOR"), WELLS FARGO BANK, N.A., as Collateral Trustee for the Secured Parties, (the "COLLATERAL TRUSTEE") and ____________, a ________corporation (the "ISSUER"). Capitalized terms used but not defined herein shall have the meaning assigned in the Pledge and Security Agreement dated [as of the date hereof], among the Pledgor, the other Grantors party thereto and the Collateral Trustee (the "SECURITY AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. SECTION 1. REGISTERED OWNERSHIP OF SHARES. The Issuer hereby confirms and agrees that as of the date hereof the Pledgor is the registered owner of __________ shares of the Issuer's [common] stock (the "PLEDGED SHARES") and the Issuer shall not change the registered owner of the Pledged Shares without the prior written consent of the Collateral Trustee. SECTION 2. INSTRUCTIONS. If at any time the Issuer shall receive instructions originated by the Collateral Trustee relating to the Pledged Shares, the Issuer shall comply with such instructions without further consent by the Pledgor or any other person. SECTION 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer hereby represents and warrants to the Collateral Trustee: (a) It has not entered into, and until the termination of this agreement will not enter into, any agreement with any other person relating the Pledged Shares pursuant to which it has agreed to comply with instructions issued by such other person; and (b) It has not entered into, and until the termination of this agreement will not enter into, any agreement with the Pledgor or the Collateral Trustee purporting to limit or condition the obligation of the Issuer to comply with Instructions as set forth in Section 2 hereof. (c) Except for the claims and interest of the Collateral Trustee and of the Pledgor in the Pledged Shares, the Issuer does not know of any claim to, or interest in, the Pledged Shares. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Shares, the Issuer will promptly notify the Collateral Trustee and the Pledgor thereof. (d) This Uncertificated Securities Control Agreement is the valid and legally binding obligation of the Issuer. SECTION 4. CHOICE OF LAW. This Agreement shall be governed by the laws of the State of [New York]. SECTION 5. CONFLICT WITH OTHER AGREEMENTS. In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered Exhibit B-1 into, the terms of this Agreement shall prevail. No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto. SECTION 6. VOTING RIGHTS. Until such time as the Collateral Trustee shall otherwise instruct the Issuer in writing, the Pledgor shall have the right to vote the Pledged Shares. SECTION 7. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Issuer and by sending written notice of such assignment to the Pledgor. SECTION 8. INDEMNIFICATION OF ISSUER. The Pledgor and the Collateral Trustee hereby agree that (a) the Issuer is released from any and all liabilities to the Pledgor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Issuer with the terms hereof, except to the extent that such liabilities arise from the Issuer's negligence and (b) the Pledgor, its successors and assigns shall at all times indemnify and save harmless the Issuer from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Issuer with the terms hereof, except to the extent that such arises from the Issuer's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 9. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Pledgor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Issuer: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 10. TERMINATION. The obligations of the Issuer to the Collateral Trustee pursuant to this Control Agreement shall continue in effect until the security interests of the Collateral Trustee in the Pledged Shares have been terminated pursuant to the terms of the Security Agreement and the Collateral Trustee has notified the Issuer of such termination in Exhibit B-2 writing. The Collateral Trustee agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Issuer upon the request of the Pledgor on or after the termination of the Collateral Trustee's security interest in the Pledged Shares pursuant to the terms of the Security Agreement. The termination of this Control Agreement shall not terminate the Pledged Shares or alter the obligations of the Issuer to the Pledgor pursuant to any other agreement with respect to the Pledged Shares. SECTION 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. [NAME OF PLEDGOR] By:__________________________________ Name: Title: WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: [NAME OF ISSUER] By:__________________________________ Name: Title: Exhibit B-3 Exhibit A [Letterhead of Collateral Trustee] [Date] [Name and Address of Issuer] Attention:_______________________ Re: Termination of Control Agreement You are hereby notified that the Uncertificated Securities Control Agreement between you, [the Pledgor] and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to Pledged Shares (as defined in the Uncertificated Control Agreement) from [the Pledgor]. This notice terminates any obligations you may have to the undersigned with respect to the Pledged Shares, however nothing contained in this notice shall alter any obligations which you may otherwise owe to [the Pledgor] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [insert name of Pledgor]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: Exhibit B-A-1 EXHIBIT C TO PLEDGE AND SECURITY AGREEMENT SECURITIES ACCOUNT CONTROL AGREEMENT This Securities Account Control Agreement dated as of __________, 2004 (this "AGREEMENT") among ___________ (the "DEBTOR"), WELLS FARGO BANK, N.A., as collateral trustee for the holders of Priority Lien Obligations and as collateral trustee for the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE" and ____________, in its capacity as a "bank" as defined in Section 9-102 of the UCC (in such capacity, the "FINANCIAL INSTITUTION"). Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Collateral Trust Agreement, dated [as of the date hereof], between the Debtor, the other Grantors party thereto, BNY Midwest Trust Company, as Indenture Trustee, J. Aron & Company, as Hedge Counterparty, and the Collateral Trustee (as amended, restated, supplemented or otherwise modified from time to time, the "TRUST AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of [New York]. SECTION 1. ESTABLISHMENT OF SECURITIES ACCOUNT. The Securities Intermediary hereby confirms and agrees that: (a) The Securities Intermediary has established account number [IDENTIFY ACCOUNT NUMBER] in the name "[IDENTIFY EXACT TITLE OF ACCOUNT]" (such account and any successor account, the "SECURITIES ACCOUNT") and the Securities Intermediary shall not change the name or account number of the Securities Account without the prior written consent of the Collateral Trustee; (b) All securities or other property underlying any financial assets credited to the Securities Account shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any financial asset credited to the Securities Account be registered in the name of the Debtor, payable to the order of the Debtor or specially indorsed to the Debtor except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank; (c) All property delivered to the Securities Intermediary pursuant to the Security Agreement will be promptly credited to the Securities Account; and (d) The Securities Account is a "securities account" within the meaning of Section 8-501 of the UCC. SECTION 2. "FINANCIAL ASSETS" ELECTION. The Securities Intermediary hereby agrees that each item of property (including, without limitation, any investment property, financial asset, security, instrument, general intangible or cash) credited to the Securities Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. Exhibit C-1 SECTION 3. CONTROL OF THE SECURITIES ACCOUNT. If at any time the Securities Intermediary shall receive any order from the Collateral Trustee directing transfer or redemption of any financial asset relating to the Securities Account, the Securities Intermediary shall comply with such entitlement order without further consent by the Debtor or any other person. If the Debtor is otherwise entitled to issue entitlement orders and such orders conflict with any entitlement order issued by the Collateral Trustee, the Securities Intermediary shall follow the orders issued by the Collateral Trustee. SECTION 4. SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Securities Intermediary has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Securities Account or any security entitlement credited thereto, the Securities Intermediary hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Trustee. The financial assets and other items deposited to the Securities Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Collateral Trustee (except that the Securities Intermediary may set off (i) all amounts due to the Securities Intermediary in respect of customary fees and expenses for the routine maintenance and operation of the Securities Account and (ii) the face amount of any checks which have been credited to such Securities Account but are subsequently returned unpaid because of uncollected or insufficient funds). SECTION 5. CHOICE OF LAW. This Agreement and the Securities Account shall each be governed by the laws of the State of [New York]. Regardless of any provision in any other agreement, for purposes of the UCC, [New York] shall be deemed to be the Securities Intermediary's jurisdiction (within the meaning of Section 8-110 of the UCC) and the Securities Account (as well as the securities entitlements related thereto) shall be governed by the laws of the State of [New York]. SECTION 6. CONFLICT WITH OTHER AGREEMENTS. (a) In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail; (b) No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto; (c) The Securities Intermediary hereby confirms and agrees that: (i) There are no other control agreements entered into between the Securities Intermediary and the Debtor with respect to the Securities Account; (ii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating to the Securities Account and/or any financial assets credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the UCC) of such other person; and (iii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with the Debtor or the Collateral Trustee Exhibit C-2 purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in Section 3 hereof. SECTION 7. ADVERSE CLAIMS. Except for the claims and interest of the Collateral Trustee and of the Debtor in the Securities Account, the Securities Intermediary does not know of any claim to, or interest in, the Securities Account or in any "financial asset" (as defined in Section 8-102(a) of the UCC) credited thereto. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Securities Account or in any financial asset carried therein, the Securities Intermediary will promptly notify the Collateral Trustee and the Debtor thereof. SECTION 8. MAINTENANCE OF SECURITIES ACCOUNT. In addition to, and not in lieu of, the obligation of the Securities Intermediary to honor entitlement orders as agreed in Section 3 hereof, the Securities Intermediary agrees to maintain the Securities Account as follows: (a) Notice of Sole Control. If at any time the Collateral Trustee delivers to the Securities Intermediary a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Securities Intermediary agrees that after receipt of such notice, it will take all instruction with respect to the Securities Account solely from such Collateral Trustee. (b) Voting Rights. Until such time as the Securities Intermediary receives a Notice of Sole Control pursuant to subsection (a) of this Section 8, the Debtor shall direct the Securities Intermediary with respect to the voting of any financial assets credited to the Securities Account. (c) Permitted Investments. Until such time as the Securities Intermediary receives a Notice of Sole Control signed by the Collateral Trustee, the Debtor shall direct the Securities Intermediary with respect to the selection of investments to be made for the Securities Account; provided, however, that the Securities Intermediary shall not honor any instruction to purchase any investments other than investments of a type described on Exhibit B hereto. (d) Statements and Confirmations. The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Securities Account and/or any financial assets credited thereto simultaneously to each of the Debtor and the Collateral Trustee at the address for each set forth in Section 12 of this Agreement. (e) Tax Reporting. All items of income, gain, expense and loss recognized in the Securities Account shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor. SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SECURITIES INTERMEDIARY. The Securities Intermediary hereby makes the following representations, warranties and covenants: (a) The Securities Account has been established as set forth in Section 1 above and such Securities Account will be maintained in the manner set forth herein until termination of this Agreement; and (b) This Agreement is the valid and legally binding obligation of the Securities Intermediary. Exhibit C-3 SECTION 10 INDEMNIFICATION OF SECURITIES INTERMEDIARY. The Debtor and the Collateral Trustee hereby agree that (a) the Securities Intermediary is released from any and all liabilities to the Debtor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Securities Intermediary with the terms hereof, except to the extent that such liabilities arise from the Securities Intermediary's negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Securities Intermediary from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Securities Intermediary with the terms hereof, except to the extent that such arises from the Securities Intermediary's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 11. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Securities Intermediary and by sending written notice of such assignment to the Debtor. SECTION 12. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Debtor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Securities Intermediary: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 13. TERMINATION. The obligations of the Financial Institution to the Collateral Trustee pursuant to this Agreement shall continue in effect until the security interest of the Collateral Trustee in the Securities Account has been terminated pursuant to the terms of the applicable Security Agreements and the Collateral Trustee have notified the Financial Institution of such termination in writing. The Collateral Trustee agrees to provide Notice of Termination of Securities Account Control Agreement in substantially the form of Exhibit C hereto to the Financial Institution upon the request of the Debtor on or after the termination of the Collateral Trustee' security interest in the Securities Account pursuant to the terms of the applicable Security Agreement. The termination of this Agreement shall not terminate the Securities Exhibit C-4 Account or alter the obligations of the Financial Institution to the Debtor pursuant to any other agreement with respect to the Securities Account. SECTION 14. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. Exhibit C-5 IN WITNESS WHEREOF, the parties hereto have caused this Securities Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. [DEBTOR] By:__________________________________ Name: Title: WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: [NAME OF SECURITIES INTERMEDIARY], as Securities Intermediary By:__________________________________ Name: Title: Exhibit C-6 EXHIBIT A TO SECURITIES ACCOUNT CONTROL AGREEMENT [Letterhead of Collateral Trustee] [Date] [Name and Address of Securities Intermediary] Attention: Re: Notice of Sole Control Ladies and Gentlemen: As referenced in the Securities Account Control Agreement dated as of _______, 200__ among [NAME OF THE DEBTOR], you and the undersigned (a copy of which is attached), we hereby give you notice of our sole control over securities account number ____________ (the "SECURITIES ACCOUNT") and all financial assets credited thereto. You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Securities Account or the financial assets credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: cc: [NAME OF THE DEBTOR] Exhibit C-A-1 EXHIBIT B TO SECURITIES ACCOUNT CONTROL AGREEMENT Permitted Investments [TO COME] Exhibit C-B-1 EXHIBIT C TO SECURITIES ACCOUNT CONTROL AGREEMENT [Letterhead of the Collateral Trustee] [Date] [Name and Address of Securities Intermediary] Attention: Re: Termination of Securities Account Control Agreement You are hereby notified that the Securities Account Control Agreement dated as of __________, 2004 among you, [NAME OF THE DEBTOR], WELLS FARGO BANK, N.A., in its capacity as collateral trustee on behalf of the holders of Priority Lien Obligations and the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE") (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: EXHIBIT D TO PLEDGE AND SECURITY AGREEMENT DEPOSIT ACCOUNT CONTROL AGREEMENT This Deposit Account Control Agreement dated as of __________, 2004 (this "AGREEMENT") among ___________ (the "DEBTOR"), WELLS FARGO BANK, N.A., as collateral trustee for the holders of Priority Lien Obligations and the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE") and ____________, in its capacity as a "bank" as defined in Section 9-102 of the UCC (in such capacity, the "FINANCIAL INSTITUTION"). Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Collateral Trust Agreement, dated [as of the date hereof], between the Debtor, the other Grantors party thereto, BNY Midwest Trust Company, as Indenture Trustee, J. Aron & Company, as Hedge Counterparty, and the Collateral Trustee (as amended, restated, supplemented or otherwise modified from time to time, the "TRUST AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of [New York]. SECTION 1. ESTABLISHMENT OF DEPOSIT ACCOUNT. The Financial Institution hereby confirms and agrees that: (a) The Financial Institution has established account number [IDENTIFY ACCOUNT NUMBER] in the name "[IDENTIFY EXACT TITLE OF ACCOUNT]" (such account and any successor account, the "DEPOSIT ACCOUNT") and the Financial Institution shall not change the name or account number of the Deposit Account without the prior written consent of the Collateral Trustee and, prior to delivery of a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Debtor; and (b) The Deposit Account is a "deposit account" within the meaning of Section 9-102(a)(29) of the UCC. SECTION 2. CONTROL OF THE DEPOSIT ACCOUNT. If at any time the Financial Institution shall receive any instructions originated by the Collateral Trustee directing the disposition of funds in the Deposit Account, the Financial Institution shall comply with such instructions without further consent by the Debtor or any other person. The Financial Institution hereby acknowledges that it has received notice of the security interest of the Collateral Trustee in the Deposit Account and hereby acknowledges and consents to such liens. SECTION 3. SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Financial Institution has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Deposit Account or any funds credited thereto, the Financial Institution hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Trustee. Money and other items credited to the Deposit Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Collateral Trustee (except that the Financial Institution may set off (i) all amounts due to the Financial Institution in respect of customary fees and expenses for the routine maintenance and operation of the Deposit Account and (ii) the face amount of any checks which have been credited to such Deposit Account but are subsequently returned unpaid because of uncollected or insufficient funds). SECTION 4. CHOICE OF LAW. This Agreement and the Deposit Account shall each be governed by the laws of the State of [New York]. Regardless of any provision in any other agreement, for purposes of the UCC, [New York] shall be deemed to be the Financial Institution's jurisdiction (within the meaning of Section 9-304 of the UCC) and the Deposit Account shall be governed by the laws of the State of [New York]. SECTION 5. CONFLICT WITH OTHER AGREEMENTS. (a) In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail; (b) No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto; and (c) The Financial Institution hereby confirms and agrees that: (i) There are no other agreements entered into between the Financial Institution and the Debtor with respect to the Deposit Account; and (ii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating the Deposit Account and/or any funds credited thereto pursuant to which it has agreed to comply with instructions originated by such persons as contemplated by Section 9-104 of the UCC. SECTION 6. ADVERSE CLAIMS. The Financial Institution does not know of any liens, claims or encumbrances relating to the Deposit Account. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Deposit Account, the Financial Institution will promptly notify the Collateral Trustee and the Debtor thereof. SECTION 7. MAINTENANCE OF DEPOSIT ACCOUNT. In addition to, and not in lieu of, the obligation of the Financial Institution to honor instructions as set forth in Section 2 hereof, the Financial Institution agrees to maintain the Deposit Account as follows: (a) Statements and Confirmations. The Financial Institution will promptly send copies of all statements, confirmations and other correspondence concerning the Deposit Account simultaneously to each of the Debtor and the Collateral Trustee at the address for each set forth in Section 11 of this Agreement; and (b) Tax Reporting. All interest, if any, relating to the Deposit Account, shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor. SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FINANCIAL INSTITUTION. The Financial Institution hereby makes the following representations, warranties and covenants: (a) The Deposit Account has been established as set forth in Section 1 and such Deposit Account will be maintained in the manner set forth herein until termination of this Agreement; and (b) This Agreement is the valid and legally binding obligation of the Financial Institution. SECTION 9. INDEMNIFICATION OF FINANCIAL INSTITUTION. The Debtor and the Collateral Trustee hereby agree that (a) the Financial Institution is released from any and all liabilities to the Debtor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Financial Institution with the terms hereof, except to the extent that such liabilities arise from the Financial Institution's negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Financial Institution from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Financial Institution with the terms hereof, except to the extent that such arises from the Financial Institution's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 10. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Financial Institution and by sending written notice of such assignment to the Debtor. SECTION 11. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Debtor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Financial Institution: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 12. TERMINATION. The obligations of the Financial Institution to the Collateral Trustee pursuant to this Agreement shall continue in effect until the security interest of the Collateral Trustee in the Deposit Account has been terminated pursuant to the terms of the applicable Security Agreements and the Collateral Trustee have notified the Financial Institution of such termination in writing. The Collateral Trustee agrees to provide Notice of Termination of Deposit Account Control Agreement in substantially the form of Exhibit B hereto to the Financial Institution upon the request of the Debtor on or after the termination of the Collateral Trustee' security interest in the Deposit Account pursuant to the terms of the applicable Security Agreement. The termination of this Agreement shall not terminate the Deposit Account or alter the obligations of the Financial Institution to the Debtor pursuant to any other agreement with respect to the Deposit Account. SECTION 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. IN WITNESS WHEREOF, the parties hereto have caused this Deposit Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. [DEBTOR] By:__________________________________ Name: Title: WELLS FARGO BANK, N.A., Collateral Trustee By:__________________________________ Name: Title: [NAME OF FINANCIAL INSTITUTION], as Financial Institution By:__________________________________ Name: Title: EXHIBIT A TO DEPOSIT ACCOUNT CONTROL AGREEMENT [Letterhead of Collateral Trustee] [Date] [Name and Address of Financial Institution] Attention: Re: Notice of Sole Control Ladies and Gentlemen: As referenced in the Deposit Account Control Agreement dated as of _______, 200__ among [NAME OF THE DEBTOR], you and the undersigned (a copy of which is attached), we hereby give you notice of our sole control over deposit account number ____________ (the "DEPOSIT ACCOUNT") and all financial assets credited thereto. You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Deposit Account or the financial assets credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: cc: [NAME OF THE DEBTOR] Exhibit D-A-1 EXHIBIT B NOTICE OF TERMINATION OF DEPOSIT ACCOUNT CONTROL AGREEMENT [Letterhead of the Collateral Agent] [Date] [Name and Address of Financial Institution] Attention: Re: Termination of Deposit Account Control Agreement You are hereby notified that the Deposit Account Control Agreement dated as of __________, 2004 among you, [NAME OF THE DEBTOR], and WELLS FARGO BANK, N.A., in its capacity as collateral trustee on behalf of the holders of Priority Lien Obligations and the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE") (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to account number(s) from [NAME OF THE DEBTOR]. This notice terminates any obligations you may have to the Collateral Trustee with respect to such account(s), however nothing contained in this notice shall alter any obligations which you may otherwise owe to [NAME OF THE DEBTOR] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A. as Collateral Trustee By:__________________________________ Name: Title: Exhibit D-A-2 EX-10.4 8 l08738aexv10w4.txt EXHIBIT 10.4 EXHIBIT 10.4 PARITY LIEN PLEDGE AND SECURITY AGREEMENT DATED AS OF JULY 7, 2004 BETWEEN BELDEN & BLAKE CORPORATION, EACH OF THE OTHER GRANTORS PARTY HERETO AND WELLS FARGO BANK, N.A., AS COLLATERAL TRUSTEE TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS; GRANT OF SECURITY............................................................... 2 1.1 GENERAL DEFINITIONS.......................................................................... 2 1.2 DEFINITIONS; INTERPRETATION.................................................................. 9 SECTION 2. GRANT OF SECURITY............................................................................ 9 2.1 GRANT OF SECURITY............................................................................ 9 2.2 CERTAIN LIMITED EXCLUSIONS................................................................... 10 SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE............................................. 11 3.1 SECURITY FOR OBLIGATIONS..................................................................... 11 3.2 CONTINUING LIABILITY UNDER COLLATERAL........................................................ 11 SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS................................................. 12 4.1 GENERALLY.................................................................................... 12 4.2 AS-EXTRACTED COLLATERAL, EQUIPMENT AND INVENTORY............................................. 14 4.3 RECEIVABLES.................................................................................. 15 4.4 INVESTMENT RELATED PROPERTY.................................................................. 18 4.5 MATERIAL CONTRACTS........................................................................... 23 4.6 LETTER OF CREDIT RIGHTS...................................................................... 24 4.7 INTELLECTUAL PROPERTY........................................................................ 24 4.8 COMMERCIAL TORT CLAIMS....................................................................... 27 SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES; ADDITIONAL GRANTORS. .................... 27 5.1 ACCESS; RIGHT OF INSPECTION.................................................................. 28 5.2 FURTHER ASSURANCES........................................................................... 28 5.3 ADDITIONAL GRANTORS.......................................................................... 29 SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT................................................ 29 6.1 POWER OF ATTORNEY............................................................................ 29 6.2 NO DUTY ON THE PART OF COLLATERAL TRUSTEE OR SECURED PARTIES................................. 30 SECTION 7. REMEDIES..................................................................................... 30 7.1 GENERALLY.................................................................................... 30 7.2 APPLICATION OF PROCEEDS...................................................................... 32 7.3 SALES ON CREDIT.............................................................................. 32 7.4 DEPOSIT ACCOUNTS............................................................................. 32 7.5 INVESTMENT RELATED PROPERTY.................................................................. 32 7.6 INTELLECTUAL PROPERTY........................................................................ 33 7.7 CASH PROCEEDS................................................................................ 35 SECTION 8. COLLATERAL TRUSTEE........................................................................... 35 SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.............................................. 36
i SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM............................................ 36 SECTION 11. MISCELLANEOUS............................................................................... 36
SCHEDULE 4.1 -- GENERAL INFORMATION SCHEDULE 4.2 -- LOCATION OF WELLHEAD, EQUIPMENT AND INVENTORY SCHEDULE 4.4 -- INVESTMENT RELATED PROPERTY SCHEDULE 4.5 -- MATERIAL CONTRACTS SCHEDULE 4.6 -- DESCRIPTION OF LETTERS OF CREDIT SCHEDULE 4.7 -- INTELLECTUAL PROPERTY - EXCEPTIONS SCHEDULE 4.8 -- COMMERCIAL TORT CLAIMS EXHIBIT A -- PLEDGE SUPPLEMENT EXHIBIT B -- UNCERTIFICATED SECURITIES CONTROL AGREEMENT EXHIBIT C -- SECURITIES ACCOUNT CONTROL AGREEMENT EXHIBIT D -- DEPOSIT ACCOUNT CONTROL AGREEMENT ii This PARITY LIEN PLEDGE AND SECURITY AGREEMENT, dated as of July 7, 2004 (this "AGREEMENT"), between EACH OF THE UNDERSIGNED, whether as an original signatory hereto or as an Additional Grantor (as herein defined) (each, a "GRANTOR"), and WELLS FARGO BANK, N.A., as collateral trustee for the Secured Parties (as herein defined) (in such capacity as collateral trustee, the "COLLATERAL TRUSTEE"). RECITALS: WHEREAS, reference is made to that certain Indenture dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "INDENTURE"), among BELDEN & BLAKE CORPORATION, an Ohio corporation (together with any successor, the "COMPANY"), the GUARANTORS PARTY THERETO, and BNY MIDWEST TRUST COMPANY, as trustee (in such capacity and together with its successors in such capacity, the "INDENTURE TRUSTEE") pursuant to which the Company intends to issue 8.75% Senior Secured Notes due 2012 (including any related exchange notes, the "NOTES") in an aggregate principal amount of $192,500,000; WHEREAS, reference is made to that certain ISDA Master Agreement (together with the schedule thereto and the confirmations thereunder, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "HEDGE AGREEMENT"), dated as of June 30, 2004, by and between Capital C Ohio, Inc. and J. Aron & Company (together with its successors, the "HEDGE COUNTERPARTY"), and assumed by Company as of the date hereof pursuant to the merger between Company and Capital C Ohio Inc., pursuant to which the Company and the Hedge Counterparty have entered into certain gas price swaps; WHEREAS, pursuant to the Indenture and the Hedge Agreement, each Grantor is required to execute and deliver this Agreement; WHEREAS, the Grantors may, from time to time, incur Parity Lien Debt (as defined in the Collateral Trust Agreement referred to below) that will, subject to the terms and conditions of the Indenture and the Hedge Agreement, be secured on a second priority basis by the Collateral (as defined herein) and constitute Secured Obligations (as defined herein) hereunder; WHEREAS, as of the date hereof, the Grantors have also entered into (a) that certain Credit and Guaranty Agreement, dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), by and among the Grantors, the lenders party thereto from time to time (collectively, the "Lenders"), Goldman Sachs Credit Partners L.P., as Sole Lead Arranger, Sole Book Runner, Sole Syndication Agent and Administrative Agent (the "ADMINISTRATIVE AGENT"), and [DOCUMENTATION AGENT], as Documentation Agent, and (b) that Priority Lien Pledge and Security Agreement, dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to time, the "PRIORITY LIEN SECURITY AGREEMENT"), by and between each Grantor and Wells Fargo Bank, N.A., as Collateral Trustee, for the benefit of the holders of Priority Lien Obligations (as defined in the Collateral Trust Agreement referred to below), pursuant to which each Grantor has granted a first priority Lien on the Collateral to secure the such Grantor's obligations under the Credit Documents (as defined in the Credit Agreement); WHEREAS the Grantors, the Administrative Agent, the Indenture Trustee, the Hedge Counterparty and the Collateral Trustee have entered into a Collateral Trust Agreement, dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to time, the "COLLATERAL TRUST AGREEMENT"); and WHEREAS, in consideration of the accommodations of the holders of the Notes, the Hedge Counterparty and other holders of Parity Lien Obligations, each Grantor has agreed to secure such Grantor's obligations under the Senior Secured Note Documents and the Hedge Agreement Documents and the other Parity Lien Documents (as each term is defined in the Collateral Trust Agreement) as set forth herein. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, each Grantor and the Collateral Trustee agree as follows: SECTION 1. DEFINITIONS; GRANT OF SECURITY. 1.1 GENERAL DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "ACCOUNT DEBTOR" shall mean each Person who is obligated on a Receivable or any Supporting Obligation related thereto. "ACCOUNTS" shall mean all "accounts" as defined in Article 9 of the UCC. "ADDITIONAL GRANTORS" shall have the meaning assigned in Section 5.3. "AGREEMENT" shall have the meaning set forth in the preamble. "AS-EXTRACTED COLLATERAL" shall mean all "as-extracted collateral" as defined in Article 9 of the UCC. "ASSIGNED AGREEMENTS" shall mean all agreements and contracts to which such Grantor is a party as of the date hereof, or to which such Grantor becomes a party after the date hereof, including, without limitation, each Material Contract, as each such agreement may be amended, supplemented or otherwise modified from time to time. "BANKRUPTCY CODE" shall mean Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "CASH PROCEEDS" shall have the meaning assigned in Section 7.7. "CHATTEL PAPER" shall mean all "chattel paper" as defined in Article 9 of the UCC, including, without limitation, "electronic chattel paper" or "tangible chattel paper", as each term is defined in Article 9 of the UCC. "COLLATERAL" shall have the meaning assigned in Section 2.1. "COLLATERAL ACCOUNT" shall mean any account established by the Collateral Trustee. "COLLATERAL TRUSTEE" shall have the meaning set forth in the preamble. "COLLATERAL TRUST AGREEMENT" shall have the meaning set forth in the recitals. "COLLATERAL RECORDS" shall mean books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, 2 computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon. "COLLATERAL SUPPORT" shall mean all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a lien or security interest in such real or personal property. "COMMERCIAL TORT CLAIMS" shall mean all "commercial tort claims" as defined in Article 9 of the UCC, including, without limitation, all commercial tort claims listed on Schedule 4.8 (as such schedule may be amended or supplemented from time to time). "COMMODITIES ACCOUNTS" (i) shall mean all "commodity accounts" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under the heading "COMMODITIES ACCOUNTS" (as such schedule may be amended or supplemented from time to time). "COMPANY" shall have the meaning set forth in the recitals. "CONTROLLED FOREIGN CORPORATION" shall mean "controlled foreign corporation" as defined in the Tax Code. "COPYRIGHT LICENSES" shall mean any and all agreements providing for the granting of any right in or to Copyrights (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(B) (as such schedule may be amended or supplemented from time to time). "COPYRIGHTS" shall mean all United States, and foreign copyrights (including Community designs), including but not limited to copyrights in software and databases, and all Mask Works (as defined under 17 U.S.C. 901 of the U.S. Copyright Act), whether registered or unregistered, and, with respect to any and all of the foregoing: (i) all registrations and applications therefor including, without limitation, the registrations and applications referred to in Schedule 4.7(A) (as such schedule may be amended or supplemented from time to time), (ii) all extensions and renewals thereof, (iii) all rights corresponding thereto throughout the world, (iv) all rights to sue for past, present and future infringements thereof, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages and proceeds of suit. "CREDIT AGREEMENT" shall have the meaning set forth in the recitals. "DEFEASANCE ACCOUNT" shall mean any Deposit Account to be titled "Defeasance Account" or words of similar nature established or maintained for the benefit of the holders of Senior Secured Note Obligations (as defined in the Collateral Trust Agreement). "DEPOSIT ACCOUNTS" (i) shall mean all "deposit accounts" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4 under the heading "Deposit Accounts" (as such schedule may be amended or supplemented from time to time). "DOCUMENTS" shall mean all "documents" as defined in Article 9 of the UCC. 3 "EQUIPMENT" shall mean: (i) all "equipment" as defined in Article 9 of the UCC, (ii) all machinery, manufacturing equipment, data processing equipment, computers, office equipment, furnishings, furniture, appliances, fixtures, tools, oil wells, gas wells, injection wells or other wells or well equipment, field separators, liquid extraction plants, plant compressors, pumps, pumping units, pipelines, sales and flow lines, gathering lines, field gathering systems, salt water disposal facilities, tanks and tank batteries, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires towers, casing, tubing and rods, power and telephone and telegraph lines (in each case, regardless of whether characterized as equipment under the UCC) and (iii) all accessions or additions thereto, all parts thereof, whether or not at any time of determination incorporated or installed therein or attached thereto, and all replacements therefor, wherever located, now or hereafter existing, including any fixtures. "EVENT OF DEFAULT" shall have the meaning set forth in the Indenture and the Hedge Agreement. "GENERAL INTANGIBLES" (i) shall mean all "general intangibles" as defined in Article 9 of the UCC, including "payment intangibles" also as defined in Article 9 of the UCC and (ii) shall include, without limitation, all interest rate or currency protection or hedging arrangements, all tax refunds, all licenses, permits, concessions and authorizations, all Assigned Agreements and all Intellectual Property (in each case, regardless of whether characterized as general intangibles under the UCC). "GOODS" (i) shall mean all "goods" as defined in Article 9 of the UCC and (ii) shall include, without limitation, all Inventory and Equipment (in each case, regardless of whether characterized as goods under the UCC). "GRANTORS" shall have the meaning set forth in the preamble. "HEDGE COUNTERPARTY" shall have the meaning set forth in the recitals. "INDENTURE TRUSTEE" shall have the meaning set forth in the recitals. "HYDROCARBONS" shall mean, collectively, oil, gas, casinghead gas, condensate, natural gas liquids finished and unfinished petroleum products and other liquid or gaseous hydrocarbons (including, without limitation, all liquefiable hydrocarbons and other products that may be extracted from gas and gas condensate by processing thereof in a gas processing plant). "INSTRUMENTS" shall mean all "instruments" as defined in Article 9 of the UCC. "INSURANCE" shall mean (i) all insurance policies covering any or all of the Collateral (regardless of whether the Collateral Trustee is the loss payee thereof) and (ii) any key man life insurance policies. "INTELLECTUAL PROPERTY" shall mean, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses. "INVENTORY" shall mean (i) all "inventory" as defined in Article 9 of the UCC, and (ii) all goods (including oil, gas and other minerals after extraction) held for sale or lease or to be furnished under contracts of service or so leased or furnished, all raw materials, work in 4 process, finished goods, and materials used or consumed in the manufacture, packing, shipping, advertising, selling, leasing, furnishing or production of such inventory or otherwise used or consumed in any Grantor's business; all goods in which any Grantor has an interest in mass or a joint or other interest or right of any kind; and all goods which are returned to or repossessed by any Grantor, all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC). "INVESTMENT ACCOUNTS" shall mean the Collateral Account, Securities Accounts, Commodities Accounts and Deposit Accounts. "INVESTMENT RELATED PROPERTY" shall mean: (i) all "investment property" (as such term is defined in Article 9 of the UCC) and (ii) all of the following (regardless of whether classified as investment property under the UCC): all Pledged Equity Interests, Pledged Debt, the Investment Accounts and certificates of deposit. "LENDER" shall have the meaning set forth in the recitals. "LETTER OF CREDIT RIGHT" shall mean "letter-of-credit right" as defined in Article 9 of the UCC. "LIEN" shall mean (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Pledged Equity Interests, any purchase option, call or similar right of a third party with respect to such Pledged Equity Interests. "MONEY" shall mean "money" as defined in the UCC. "NON-ASSIGNABLE CONTRACT" shall mean any agreement, contract or license to which any Grantor is a party that by its terms purports to restrict or prevent the assignment or granting of a security interest therein (either by its terms or by any federal or state statutory prohibition or otherwise irrespective of whether such prohibition or restriction is enforceable under Section 9-406 through 409 of the UCC). "NOTES" shall have the meaning set forth in the recitals. "PATENT LICENSES" shall mean all agreements providing for the granting of any right in or to Patents (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(D) (as such schedule may be amended or supplemented from time to time). "PATENTS" shall mean all United States and foreign patents and certificates of invention, or similar industrial property rights, and applications for any of the foregoing, including, but not limited to: (i) each patent and patent application referred to in Schedule 4.7(C) hereto (as such schedule may be amended or supplemented from time to time), (ii) all reissues, divisions, continuations, continuations-in-part, extensions, renewals, and reexaminations thereof, (iii) all rights corresponding thereto throughout the world, (iv) all inventions and improvements described therein, (v) all rights to sue for past, present and future infringements thereof, (vi) all licenses, claims, damages, and proceeds of suit arising therefrom, and (vii) all Proceeds of the 5 foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "PLEDGE SUPPLEMENT" shall mean any supplement to this agreement in substantially the form of Exhibit A. "PLEDGED DEBT" shall mean all Indebtedness owed to such Grantor, including, without limitation, all Indebtedness described on Schedule 4.4(A) under the heading "Pledged Debt" (as such schedule may be amended or supplemented from time to time), issued by the obligors named therein, the instruments evidencing such Indebtedness, and all interest, cash, 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 Indebtedness. "PLEDGED EQUITY INTERESTS" shall mean all Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests. "PLEDGED LLC INTERESTS" shall mean all interests in any limited liability company including, without limitation, all limited liability company interests listed on Schedule 4.4(A) under the heading "Pledged LLC Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such limited liability company interests and any interest of such Grantor on the books and records of such limited liability company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 limited liability company interests. "PLEDGED PARTNERSHIP INTERESTS" shall mean all interests in any general partnership, limited partnership, limited liability partnership or other partnership including, without limitation, all partnership interests listed on Schedule 4.4(A) under the heading "Pledged Partnership Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such partnership interests and any interest of such Grantor on the books and records of such partnership or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 partnership interests. "PLEDGED STOCK" shall mean all shares of capital stock owned by such Grantor, including, without limitation, all shares of capital stock described on Schedule 4.4(A) under the heading "Pledged Stock" (as such schedule may be amended or supplemented from time to time), and the certificates, if any, representing such shares and any interest of such Grantor in the entries on the books of the issuer of such shares or on the books of any securities intermediary pertaining to such shares, and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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. "PLEDGED TRUST INTERESTS" shall mean all interests in a Delaware business trust or other trust including, without limitation, all trust interests listed on Schedule 4.4(A) under the heading "Pledged Trust Interests" (as such schedule may be amended or supplemented from time to time) and the certificates, if any, representing such trust interests and any interest of such Grantor on the books and records of such trust or on the books and records of any securities 6 intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 trust interests. "PROCEEDS" shall mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Investment Related Property and (iii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. "PRIORITY LIEN SECURITY AGREEMENT" shall have the meaning set forth in the recitals. "RECEIVABLES" shall mean all rights to payment, whether or not earned by performance, for goods or other property sold, leased, licensed, assigned or otherwise disposed of, or services rendered or to be rendered, including, without limitation all such rights constituting or evidenced by any As-extracted Collateral, Account, Chattel Paper, Instrument, General Intangible or Investment Related Property, together with all of Grantor's rights, if any, in any goods or other property giving rise to such right to payment and all Collateral Support and Supporting Obligations related thereto and all Receivables Records. "RECEIVABLES RECORDS" shall mean (i) all original copies of all documents, instruments or other writings or electronic records or other Records evidencing the Receivables, (ii) all books, correspondence, credit or other files, Records, ledger sheets or cards, invoices, and other papers relating to Receivables, including, without limitation, all tapes, cards, computer tapes, computer discs, computer runs, record keeping systems and other papers and documents relating to the Receivables, whether in the possession or under the control of Grantor or any computer bureau or agent from time to time acting for Grantor or otherwise, (iii) all evidences of the filing of financing statements and the registration of other instruments in connection therewith, and amendments, supplements or other modifications thereto, notices to other creditors or secured parties, and certificates, acknowledgments, or other writings, including, without limitation, lien search reports, from filing or other registration officers, (iv) all credit information, reports and memoranda relating thereto and (v) all other written or nonwritten forms of information related in any way to the foregoing or any Receivable. "RECORD" shall have the meaning specified in Article 9 of the UCC. "REDEMPTION ACCOUNT" shall mean any Deposit Account to be titled "Redemption Account" or words of similar nature established or maintained for the benefit of the holders of Senior Secured Note Obligations (as defined in the Collateral Trust Agreement). "SECURED OBLIGATIONS" shall have the meaning assigned in Section 3.1. "SECURED PARTIES" shall mean the holders of the Notes, the Hedge Counterparty, the Indenture Trustee, the Collateral Trustee and the other holders of Parity Lien Obligations and shall include, without limitation, all former holders of the Notes, the Hedge Counterparty, the Indenture Trustee, the Collateral Trustee and other holders of Parity Lien Obligations to the extent that any Obligations owing to such Persons were incurred while such Persons were holders of the Notes, the Hedge Counterparty, the Indenture Trustee, the Collateral Trustee and other holders of Parity Lien Obligations and such Obligations have not been paid or satisfied in full. 7 "SECURITIES" shall mean any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACCOUNTS" (i) shall mean all "securities accounts" as defined in Article 8 of the UCC and (ii) shall include, without limitation, all of the accounts listed on Schedule 4.4(A) under the heading "Securities Accounts" (as such schedule may be amended or supplemented from time to time). "SUPPORTING OBLIGATION" shall mean all "supporting obligations" as defined in Article 9 of the UCC. "TAX CODE" shall mean the United States Internal Revenue Code of 1986, as amended from time to time. "TRADEMARK LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trademarks (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(F) (as such schedule may be amended or supplemented from time to time). "TRADEMARKS" shall mean all United States, and foreign trademarks, trade names, corporate names, company names, business names, fictitious business names, Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, all registrations and applications for any of the foregoing including, but not limited to: (i) the registrations and applications referred to in Schedule 4.7(E) (as such schedule may be amended or supplemented from time to time), (ii) all extensions or renewals of any of the foregoing, (iii) all of the goodwill of the business connected with the use of and symbolized by the foregoing, (iv) the right to sue for past, present and future infringement or dilution of any of the foregoing or for any injury to goodwill, and (v) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. "TRADE SECRET LICENSES" shall mean any and all agreements providing for the granting of any right in or to Trade Secrets (whether such Grantor is licensee or licensor thereunder) including, without limitation, each agreement referred to in Schedule 4.7(G) (as such schedule may be amended or supplemented from time to time). "TRADE SECRETS" shall mean all trade secrets and all other confidential or proprietary information and know-how whether or not such Trade Secret has been reduced to a writing or other tangible form, including all documents and things embodying, incorporating, or referring in any way to such Trade Secret, including but not limited to: (i) the right to sue for past, present and future misappropriation or other violation of any Trade Secret, and (ii) all Proceeds of the foregoing, including, without limitation, licenses, royalties, income, payments, claims, damages, and proceeds of suit. 8 "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction. "UNITED STATES" shall mean the United States of America. 1.2 DEFINITIONS; INTERPRETATION. All capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the Collateral Trust Agreement or, if not defined therein, in the UCC. References to "Sections," "Exhibits" and "Schedules" shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. Notwithstanding anything herein to the contrary, the Lien and security interest granted to the Collateral Trustee pursuant to this Agreement and the exercise of any right or remedy by such Collateral Trustee hereunder are subject to the provisions of the Collateral Trust Agreement. In the event of any conflict between the terms of the Collateral Trust Agreement and this Agreement, the terms of the Collateral Trust Agreement will govern. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC. SECTION 2. GRANT OF SECURITY. 2.1 GRANT OF SECURITY. Each Grantor hereby grants to the Collateral Trustee for the benefit of the Secured Parties a security interest in and continuing lien on all of such Grantor's right, title and interest in, to and under all personal property of such Grantor including, but not limited to the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the "COLLATERAL"): (a) Accounts; (b) As-extracted Collateral; (c) Chattel Paper; (d) Documents; (e) General Intangibles; (f) Goods; 9 (g) Instruments; (h) Insurance; (i) Intellectual Property; (j) Investment Related Property; (k) Letter of Credit Rights; (l) Money; (m) Receivables and Receivable Records; (n) Commercial Tort Claims; (o) each contract and other agreements of Grantor relating to the sale or other disposition of Hydrocarbons, Inventory, Equipment or other goods or products, and all operating agreements, farm-out agreements, farm-in agreements, development agreements, participation agreements, area of mutual interest agreements, equipment leases, purchase agreements, sale agreements, option agreements and other agreements which cover, affect or otherwise relate to the production, sale, purchase, exchange, processing, handling, storing, transporting or marketing of the Hydrocarbons; (p) all rights, titles, interests and estates now owned or hereafter acquired by Grantor in and to all Hydrocarbons, including, without limitation, all oil and gas in tanks and all rents, issues, profits, proceeds (including, without limitation, all prepayment for production not taken or payments in lieu of production), products and revenues; (q) all Documents or other receipts of Grantor covering, evidencing or representing the sale of Hydrocarbons, Inventory, Equipment or other goods or products; (r) all rights, claims and benefits of Grantor against any Person arising out of, relating to or in connection with the purchasing by Grantor of any rights, titles, interests and estates in any minerals including Hydrocarbons, Inventory, Equipment or such other goods and products, including, without limitation, any such rights, claims or benefits against any Person storing or transporting such items; (s) to the extent not otherwise included above, all Collateral Records, Collateral Support and Supporting Obligations relating to any of the foregoing; and (t) to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing. 2.2 CERTAIN LIMITED EXCLUSIONS. Notwithstanding anything herein to the contrary, in no event shall the security interest granted under Section 2.1 hereof attach to (a) any lease, license, contract, property rights or agreement to which any Grantor is a party or any of its rights or interests thereunder if and for so long as the grant of such security interest shall constitute or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of any Grantor therein or (ii) in a 10 breach or termination pursuant to the terms of, or a default under, any such lease, license, contract property rights or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions) of any relevant jurisdiction or any other applicable law (including the Bankruptcy Code) or principles of equity), provided however that such security interest shall attach immediately at such time as the condition causing such abandonment, invalidation or unenforceability shall be remedied and to the extent severable, shall attach immediately to any portion of such Lease, license, contract, property rights or agreement that does not result in any of the consequences specified in (i) or (ii) above; (b) in any of the outstanding capital stock of a Controlled Foreign Corporation in excess of 65% of the voting power of all classes of capital stock of such Controlled Foreign Corporation entitled to vote; provided that immediately upon the amendment of the Tax Code to allow the pledge of a greater percentage of the voting power of capital stock in a Controlled Foreign Corporation without adverse tax consequences, the Collateral shall include, and the security interest granted by each Grantor shall attach to, such greater percentage of capital stock of each Controlled Foreign Corporation; (c) any TBR Delayed Transfer Assets; (d) any Redemption Account or Defeasance Account; or (e) any other assets constituting real property. 2.3 SUBORDINATION. Notwithstanding anything herein to the contrary, it is the understanding of the parties that the Liens granted pursuant to Section 2.1 shall, prior to the Discharge of Priority Lien Obligations, be subject and subordinate to the Liens granted to the Collateral Trustee for the benefit of the holders of the Priority Lien Obligations to secure the Priority Lien Obligations pursuant to Priority Lien Pledge Agreement and all other rights and remedies of the Collateral Trustee and the other Secured Parties are further subject to the intercreditor and subordination provisions of the Collateral Trustee Agreement. SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE. 3.1 SECURITY FOR OBLIGATIONS. This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) (and any successor provision thereof)), of all Parity Lien Obligations with respect to every Grantor (the "SECURED OBLIGATIONS"). 3.2 CONTINUING LIABILITY UNDER COLLATERAL. Notwithstanding anything herein to the contrary, (i) each Grantor shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Collateral Trustee or any Secured Party, (ii) each Grantor shall remain liable under each of the agreements included in the Collateral, including, without limitation, any agreements relating to Pledged Partnership Interests or Pledged LLC Interests, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and neither the Collateral Trustee nor any Secured Party shall have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Collateral Trustee nor any Secured Party have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, including, without limitation, any agreements relating to Pledged 11 Partnership Interests or Pledged LLC Interests, and (iii) the exercise by the Collateral Trustee of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral. SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS. 4.1 GENERALLY. (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) it owns the Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Collateral, except as otherwise permitted by the Parity Lien Documents, in each case free and clear of any and all Liens, rights or claims of all other Persons, including, without limitation, liens arising as a result of such Grantor becoming bound (as a result of merger or otherwise) as debtor under a security agreement entered into by another Person other than Permitted Liens (as defined in the Indenture); (ii) it has indicated on Schedule 4.1(A)(as such schedule may be amended or supplemented from time to time): (w) the type of organization of such Grantor, (x) the jurisdiction of organization of such Grantor, (y) its organizational identification number and (z) the jurisdiction where the chief executive office or its sole place of business is, and for the one-year period preceding the date hereof has been, located. (iii) the full legal name of such Grantor is as set forth on Schedule 4.1(A) and it has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name) except for those names set forth on Schedule 4.1(B) (as such schedule may be amended or supplemented from time to time); (iv) except as provided on Schedule 4.1(C), it has not changed its name, jurisdiction of organization, chief executive office or sole place of business or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) within the past five (5) years; (v) it has not within the last five (5) years become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not heretofore been terminated other than the agreements identified on Schedule 4.1(D) hereof (as such schedule may be amended or supplemented from time to time); (vi) with respect to each agreement identified on Schedule 4.1(D), it has indicated on Schedule 4.1 (A) and Schedule 4.1(B) the information required pursuant to Section 4.1(a)(ii), (iii) and (iv) with respect to the debtor under each such agreement; (vii) (u) upon the filing of all UCC financing statements naming each Grantor as "debtor" and the Collateral Trustee as "secured party" and describing the 12 Collateral in the filing offices set forth opposite such Grantor's name on Schedule 4.1(E) hereof (as such schedule may be amended or supplemented from time to time) and other filings delivered by each Grantor, (v) upon delivery of all Instruments, Chattel Paper and certificated Pledged Equity Interests and Pledged Debt in accordance with the Collateral Trust Agreement, (w) upon sufficient identification of Commercial Tort Claims, (x) upon execution of a control agreement establishing the Collateral Trustee's "control" (within the meaning of Section 9-806, 9-106 or 9-104 of the UCC, as applicable) with respect to any Investment Account, (y) upon consent of the issuer with respect to Letter of Credit Rights, and (z) to the extent not subject to Article 9 of the UCC, upon recordation of the security interests granted hereunder in Patents, Trademarks and Copyrights in the applicable intellectual property registries, including but not limited to the United States Patent and Trademark Office and the United States Copyright Office, the security interests granted to the Collateral Trustee hereunder constitute valid and perfected first priority Liens (subject in the case of priority only to Permitted Liens (as defined in the Indenture) and to the rights of the United States government (including any agency or department thereof) with respect to United States government Receivables) on all of the Collateral; (viii) all actions and consents, including all filings, notices, registrations and recordings necessary or desirable for the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect of the Collateral have been made or obtained or otherwise authorized for filing; (ix) other than the financing statements filed in favor of the Collateral Trustee, no effective UCC financing statement, fixture filing or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for (x) financing statements for which proper termination statements have been delivered to the Collateral Trustee for filing and (y) financing statements filed in connection with Permitted Liens (as defined in the Indenture); (x) no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for either (i) the pledge or grant by any Grantor of the Liens purported to be created in favor of the Collateral Trustee hereunder or (ii) the exercise by Collateral Trustee of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by clause (vii) above and (B) as may be required, in connection with the disposition of any Investment Related Property, by laws generally affecting the offering and sale of Securities; (xi) all information supplied by any Grantor with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects; (xii) none of the Collateral constitutes, or is the Proceeds of, "farm products" (as defined in the UCC); (xiii) it does not own any timber to be cut; 13 (xiv) except as described on Schedule 4.1(D), such Grantor has not become bound as a debtor, either by contract or by operation of law, by a security agreement previously entered into by another Person; and (xv) such Grantor has been duly organized as an entity of the type as set forth opposite such Grantor's name on Schedule 4.1(A) solely under the laws of the jurisdiction as set forth opposite such Grantor's name on Schedule 4.1(A) and remains duly existing as such. Such Grantor has not filed any certificates of domestication, transfer or continuance in any other jurisdiction. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that: (i) it shall not produce, use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement; (ii) it shall not change such Grantor's name, identity, corporate structure (e.g., by merger, consolidation, change in corporate form or otherwise) sole place of business (or principal residence if such Grantor is a natural person), chief executive office, type of organization or jurisdiction of organization or establish any trade names unless it shall have (a) notified the Collateral Trustee in writing, by executing and delivering to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure, sole place of business (or principal residence if such Grantor is a natural person), chief executive office, jurisdiction of organization or trade name and providing such other information in connection therewith as the Collateral Trustee may reasonably request and (b) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Trustee's security interest in the Collateral intended to be granted and agreed to hereby; (iii) it shall not take or permit any action which could impair the Collateral Trustee's rights in the Collateral except as otherwise permitted by the Parity Lien Documents; and (iv) it shall not sell, transfer or assign (by operation of law or otherwise) any Collateral except as otherwise permitted by the Parity Lien Documents. 4.2 AS-EXTRACTED COLLATERAL, EQUIPMENT AND INVENTORY. (a) Representations and Warranties. Each Grantor represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.2 (as such schedule may be amended or supplemented from time to time) sets forth all of the locations of the wellheads of the As-extracted Collateral; 14 (ii) all of the Inventory included in the Collateral is kept for the past four (4) years only at the locations specified in Schedule 4.2 (as such schedule may be amended or supplemented from time to time); and (iii) none of the Inventory or Equipment is in the possession of an issuer of a negotiable document (as defined in Section 7-104 of the UCC) therefor or otherwise in the possession of a bailee or a warehouseman. (b) Covenants and Agreements. Each Grantor covenants and agrees that: (i) it shall keep the Inventory and any Documents evidencing any Equipment and Inventory in the locations specified on Schedule 4.2 (as such schedule may be amended or supplemented from time to time) unless it shall have (a) notified the Collateral Trustee in writing, by executing and delivering to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any change in locations, identifying such new locations and providing such other information in connection therewith as the Collateral Trustee may reasonably request and (b) taken all actions reasonably necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Trustee's security interest in the Collateral intended to be granted and agreed to hereby, or to enable the Collateral Trustee to exercise and enforce its rights and remedies hereunder, with respect to the Equipment and Inventory; (ii) it shall not deliver any Document evidencing any Equipment and Inventory to any Person other than the issuer of such Document to claim the Goods evidenced therefor or the Collateral Trustee; (iii) if any Equipment or Inventory is in possession or control of any third party, each Grantor shall join with the Collateral Trustee in notifying the third party of the Collateral Trustee's security interest and obtaining an acknowledgment from the third party that it is holding the Equipment and Inventory for the benefit of the Collateral Trustee; and (iv) with respect to any item of Equipment which is covered by a certificate of title under a statute of any jurisdiction under the law of which indication of a security interest on such certificate is required as a condition of perfection thereof, upon the reasonable request of the Collateral Trustee, (A) provide information with respect to any such Equipment in excess of $100,000 individually or $500,000 in the aggregate, (B) execute and file with the registrar of motor vehicles or other appropriate authority in such jurisdiction an application or other document requesting the notation or other indication of the security interest created hereunder on such certificate of title, and (C) deliver to the Collateral Trustee copies of all such applications or other documents filed during such calendar quarter and copies of all such certificates of title issued during such calendar quarter indicating the security interest created hereunder in the items of Equipment covered thereby. 4.3 RECEIVABLES. 15 (a) Representations and Warranties. Each Grantor represents and warrants, on the Closing Date and on each Credit Date, that: (i) each Receivable (a) is and will be the legal, valid and binding obligation of the Account Debtor in respect thereof, representing an unsatisfied obligation of such Account Debtor, (b) is and will be enforceable in accordance with its terms, (c) is not and will not be subject to any setoffs, defenses, taxes, counterclaims (except with respect to disputes, refunds, returns and allowances in the ordinary course of business) and (d) is and will be in compliance with all applicable laws, whether federal, state, local or foreign; (ii) none of the Account Debtors in respect of any Receivable in excess of $5,000 is the government of the United States, any agency or instrumentality thereof, any state or municipality or any foreign sovereign. No Receivable in excess of $5,000 requires the consent of the Account Debtor in respect thereof in connection with the pledge hereunder, except any consent which has been obtained; (iii) no Receivable is evidenced by, or constitutes, an Instrument or Chattel Paper which has not been delivered to, or otherwise subjected to the control of, the Collateral Trustee to the extent required by, and in accordance with Section 4.3(c); and (iv) each Grantor has delivered to the Collateral Trustee a complete and correct copy of each standard form of document under which a Receivable may arise. (b) Covenants and Agreements: Each Grantor hereby covenants and agrees that: (i) it shall keep and maintain at its own cost and expense satisfactory and complete records of the Receivables, including, but not limited to, the originals of all documentation with respect to all Receivables and records of all payments received and all credits granted on the Receivables, all merchandise returned and all other dealings therewith; (ii) it shall perform in all material respects all of its material obligations with respect to the Receivables; (iii) it shall not amend, modify, terminate or waive any provision of any Receivable in any manner which could reasonably be expected to have a Material Adverse Effect on the value of such Receivable as Collateral. Other than in the ordinary course of business as generally conducted by it on and prior to the date hereof, and other than as permitted by the Parity Lien Documents and except as otherwise provided in subsection (iv) below, following an Event of Default, such Grantor shall not (w) grant any extension or renewal of the time of payment of any Receivable, (x) compromise or settle any dispute, claim or legal proceeding with respect to any Receivable for less than the total unpaid balance thereof, (y) release, wholly or partially, any Person liable for the payment thereof, or (z) allow any credit or discount thereon; (iv) except as otherwise provided in this subsection, each Grantor shall continue to collect all amounts due or to become due to such Grantor under the 16 Receivables and any Supporting Obligation and diligently exercise each material right it may have under any Receivable any Supporting Obligation or Collateral Support, in each case, at its own expense, and in connection with such collections and exercise, such Grantor shall take such action as such Grantor or the Collateral Trustee may deem necessary or advisable. Notwithstanding the foregoing, the Collateral Trustee shall have the right at any time to notify, or require any Grantor to notify, any Account Debtor of the Collateral Trustee's security interest in the Receivables and any Supporting Obligation and, in addition, at any time following the occurrence and during the continuation of an Event of Default, the Collateral Trustee may: (1) direct the Account Debtors under any Receivables to make payment of all amounts due or to become due to such Grantor thereunder directly to the Collateral Trustee; (2) notify, or require any Grantor to notify, each Person maintaining a lockbox or similar arrangement to which Account Debtors under any Receivables have been directed to make payment to remit all amounts representing collections on checks and other payment items from time to time sent to or deposited in such lockbox or other arrangement directly to the Collateral Trustee; and (3) enforce, at the expense of such Grantor, collection of any such Receivables and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. If the Collateral Trustee notifies any Grantor that it has elected to collect the Receivables in accordance with the preceding sentence, any payments of Receivables received by such Grantor shall be forthwith (and in any event within two (2) Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Collateral Trustee if required, in the Collateral Account maintained under the sole dominion and control of the Collateral Trustee, and until so turned over, all amounts and proceeds (including checks and other instruments) received by such Grantor in respect of the Receivables, any Supporting Obligation or Collateral Support shall be received in trust for the benefit of the Collateral Trustee hereunder and shall be segregated from other funds of such Grantor and such Grantor shall not adjust, settle or compromise the amount or payment of any Receivable, or release wholly or partly any Account Debtor or obligor thereof, or allow any credit or discount thereon; and (v) it shall use its best efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Receivable. (c) Delivery and Control of Receivables. With respect to any Receivables in excess of $10,000 individually or $100,000 in the aggregate that is evidenced by, or constitutes, Chattel Paper or Instruments, each Grantor shall cause each originally executed copy thereof to be delivered to the Collateral Trustee (or its agent or designee) or otherwise in accordance with the Collateral Trust Agreement appropriately indorsed to the Collateral Trustee or indorsed in blank: (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor acquiring rights therein. With respect to any Receivables in excess of $10,000 individually or $100,000 in the aggregate which would constitute "electronic chattel paper" under Article 9 of the UCC, each Grantor shall take all steps necessary to give the Collateral Trustee control over such Receivables (within the meaning of Section 9-105 of the UCC): (i) with respect to any such Receivables in existence on the date hereof, on or prior to the date hereof and (ii) with respect to any such Receivables hereafter arising, within ten (10) days of such Grantor acquiring rights therein. Subject to the Collateral Trustee Agreement, any Receivable not otherwise required to be delivered or subjected to the control of the Collateral Trustee in accordance with this subsection (c) shall be delivered or subjected to such control upon request of the Collateral Trustee. 17 4.4 INVESTMENT RELATED PROPERTY 4.4.1 4.4.1 INVESTMENT RELATED PROPERTY GENERALLY (a) Covenants and Agreements. Each Grantor hereby covenants and agrees that: (i) in the event it acquires rights in any Investment Related Property after the date hereof, it shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, reflecting such new Investment Related Property and all other Investment Related Property. Notwithstanding the foregoing, it is understood and agreed that the security interest of the Collateral Trustee shall attach to all Investment Related Property immediately upon any Grantor's acquisition of rights therein and shall not be affected by the failure of any Grantor to deliver a supplement to Schedule 4.4 as required hereby; (ii) except as provided in the next sentence, in the event such Grantor receives any dividends, interest or distributions on any Investment Related Property, or any securities or other property upon the merger, consolidation, liquidation or dissolution of any issuer of any Investment Related Property, then (a) such dividends, interest or distributions and securities or other property shall be included in the definition of Collateral without further action and (b) such Grantor shall immediately take all steps, if any, reasonably necessary or advisable to ensure the validity, perfection, priority and, if applicable, control of the Collateral Trustee over such Investment Related Property (including, without limitation, delivery thereof to the Collateral Trustee) and pending any such action such Grantor shall be deemed to hold such dividends, interest, distributions, securities or other property in trust for the benefit of the Collateral Trustee and shall segregate such dividends, distributions, Securities or other property from all other property of such Grantor. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, the Collateral Trustee authorizes each Grantor to retain all ordinary cash dividends and distributions paid in the normal course of the business of the issuer and consistent with the past practice of the issuer and all scheduled payments of interest; (iii) each Grantor consents to the grant by each other Grantor of a Security Interest in all Investment Related Property to the Collateral Trustee. (b) Delivery and Control. (i) Each Grantor agrees that with respect to any Investment Related Property in which it currently has rights it shall comply with the provisions of this Section 4.4.1(b) on or before the Credit Date and with respect to any Investment Related Property hereafter acquired by such Grantor it shall comply with the provisions of this Section 4.4.1(b) immediately upon acquiring rights therein, in each case in form and substance satisfactory to the Collateral Trustee. With respect to any Investment Related Property that is represented by a certificate or that is an "instrument" (other than any Investment Related Property credited to a Securities Account) it shall cause such certificate or instrument to be delivered to the Collateral Trustee, indorsed in blank by an 18 "effective indorsement" (as defined in Section 8-107 of the UCC), regardless of whether such certificate constitutes a "certificated security" for purposes of the UCC. With respect to any Investment Related Property that is an "uncertificated security" for purposes of the UCC (other than any "uncertificated securities" credited to a Securities Account), it shall cause the issuer of such uncertificated security to either (i) register the Collateral Trustee as the registered owner thereof on the books and records of the issuer or (ii) execute an agreement substantially in the form of Exhibit B hereto, pursuant to which such issuer agrees to comply with the Collateral Trustee's instructions with respect to such uncertificated security without further consent by such Grantor. (c) Voting and Distributions. (i) So long as no Event of Default shall have occurred and be continuing: (1) except as otherwise provided under the covenants and agreements relating to investment related property in this Agreement or elsewhere herein or in the Parity Lien Documents, each Grantor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Investment Related Property or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Parity Lien Documents; and (2) the Collateral Trustee shall promptly execute and deliver (or cause to be executed and delivered) to each Grantor all proxies, and other instruments as such Grantor may from time to time reasonably request for the purpose of enabling such Grantor to exercise the voting and other consensual rights when and to the extent which it is entitled to exercise pursuant to clause (1) above; (3) Upon the occurrence and during the continuation of an Event of Default: (A) all rights of each Grantor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Collateral Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights; and (B) in order to permit the Collateral Trustee to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (1) each Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Trustee all proxies, dividend payment orders and other instruments as the Collateral Trustee may from time to time reasonably request and (2) each Grantor acknowledges that the Collateral Trustee may utilize the power of attorney set forth in Section 6.1. 4.4.2 PLEDGED EQUITY INTERESTS (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: 19 (i) Schedule 4.4(A) (as such schedule may be amended or supplemented from time to time) sets forth under the headings "Pledged Stock, "Pledged LLC Interests," "Pledged Partnership Interests" and "Pledged Trust Interests," respectively, all of the Pledged Stock, Pledged LLC Interests, Pledged Partnership Interests and Pledged Trust Interests owned by any Grantor and such Pledged Equity Interests constitute the percentage of issued and outstanding shares of stock, percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the respective issuers thereof indicated on such Schedule; (ii) except as set forth on Schedule 4.4(B), it has not acquired any equity interests of another entity or substantially all the assets of another entity within the past five (5) years; (iii) it is the record and beneficial owner of the Pledged Equity Interests free of all Liens, rights or claims of other Persons other than Permitted Liens (as defined in the Indenture) and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any Pledged Equity Interests; (iv) without limiting the generality of Section 4.1(a)(x), no consent of any Person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Collateral Trustee in any Pledged Equity Interests or the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof; (v) none of the Pledged LLC Interests nor Pledged Partnership Interests are or represent interests in issuers that: (a) are registered as investment companies or (b) are dealt in or traded on securities exchanges or markets; and (vi) other than with respect to Great West Operating Company, L.C., all of the Pledged LLC Interests and Pledged Partnership Interests are or represent interests in issuers that have opted to be treated as securities under the uniform commercial code of any jurisdiction. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that: (i) without the prior written consent of the Collateral Trustee, it shall not vote to enable or take any other action to: (a) amend or terminate any partnership agreement, limited liability company agreement, certificate of incorporation, by-laws or other organizational documents in any way that materially changes the rights of such Grantor with respect to any Investment Related Property or adversely affects the validity, perfection or priority of the Collateral Trustee's security interest, (b) permit any issuer of any Pledged Equity Interest to issue any additional stock, partnership interests, limited liability company interests or other equity interests of any nature or to issue securities convertible into or granting the right of purchase or exchange for any stock or other equity interest of any nature of such issuer, (c) other than as permitted under the Parity Lien Documents, permit any issuer of any Pledged Equity Interest to dispose of all 20 or a material portion of their assets, (d) waive any default under or breach of any terms of any organizational document relating to the issuer of any Pledged Equity Interest or the terms of any Pledged Debt, if such default or breach could reasonably be expected to result in a Material Adverse Effect, or (e) cause any issuer of any Pledged Partnership Interests or Pledged LLC Interests which are not securities (for purposes of the UCC) on the date hereof to elect or otherwise take any action to cause such Pledged Partnership Interests or Pledged LLC Interests to be treated as securities for purposes of the UCC; provided, however, notwithstanding the foregoing, if any issuer of any Pledged Partnership Interests or Pledged LLC Interests takes any such action in violation of the foregoing in this clause (e), such Grantor shall promptly notify the Collateral Trustee in writing of any such election or action and, in such event, shall take all steps reasonably necessary or advisable to establish the Collateral Trustee's "control" thereof; (ii) it shall comply with all of its obligations under any partnership agreement or limited liability company agreement relating to Pledged Partnership Interests or Pledged LLC Interests and shall enforce all of its rights with respect to any Investment Related Property, except where such failure to comply or enforce could not reasonably be expected to have a Material Adverse Effect; (iii) without the prior written consent of the Collateral Trustee, it shall not permit any issuer of any Pledged Equity Interest to merge or consolidate unless (i) such issuer creates a security interest that is perfected by a filed financing statement (that is not effective solely under section 9-508 of the UCC) in collateral in which such new debtor has or acquires rights, and (ii) all the outstanding capital stock or other equity interests of the surviving or resulting corporation, limited liability company, partnership or other entity is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding equity interests of any other constituent Grantor; provided that if the surviving or resulting Grantors upon any such merger or consolidation involving an issuer which is a Controlled Foreign Corporation, then such Grantor shall only be required to pledge equity interests in accordance with Section 2.2; and (iv) each Grantor consents to the grant by each other Grantor of a security interest in all Investment Related Property to the Collateral Trustee and, without limiting the foregoing, consents to the transfer of any Pledged Partnership Interest and any Pledged LLC Interest to the Collateral Trustee or its nominee following an Event of Default and to the substitution of the Collateral Trustee or its nominee as a partner in any partnership or as a member in any limited liability company with all the rights and powers related thereto. 4.4.3 PLEDGED DEBT Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and each Credit Date, that Schedule 4.4 (as such schedule may be amended or supplemented from time to time) sets forth under the heading "Pledged Debt" all of the Pledged Debt owned by any Grantor and all of such Pledged Debt has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof and is not in default and constitutes all of the issued and outstanding inter-company Indebtedness. 4.4.4 INVESTMENT ACCOUNTS 21 (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and each Credit Date, that: (i) Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to time) sets forth under the headings "Securities Accounts" and "Commodities Accounts," respectively, all of the Securities Accounts and Commodities Accounts in which each Grantor has an interest. Each Grantor is the sole entitlement holder of each such Securities Account and Commodity Account, and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral Trustee pursuant hereto) having "control" (within the meanings of Sections 8-106 and 9-106 of the UCC) over, or any other interest in, any such Securities Account or Commodity Account or securities or other property credited thereto; (ii) Schedule 4.4 hereto (as such schedule may be amended or supplemented from time to time) sets forth under the headings "Deposit Accounts" all of the Deposit Accounts in which each Grantor has an interest. Each Grantor is the sole account holder of each such Deposit Account and such Grantor has not consented to, and is not otherwise aware of, any Person (other than the Collateral Trustee pursuant hereto) having either sole dominion and control (within the meaning of common law) or "control" (within the meanings of Section 9-104 of the UCC) over, or any other interest in, any such Deposit Account or any money or other property deposited therein; and (iii) Each Grantor has taken all actions necessary or desirable, including those specified in Section 4.4.4(c), to: (a) establish Collateral Trustee's "control" (within the meanings of Sections 8-106 and 9-106 of the UCC) over any portion of the Investment Related Property constituting Certificated Securities, Uncertificated Securities, Securities Accounts, Securities Entitlements or Commodities Accounts (each as defined in the UCC); (b) establish the Collateral Trustee's "control" (within the meaning of Section 9-104 of the UCC) over all Deposit Accounts; and (c) deliver all Instruments to the Collateral Trustee in accordance with the Collateral Trust Agreement. (b) Covenant and Agreement. Each Grantor hereby covenants and agrees with the Collateral Trustee and each other Secured Party that it shall not close or terminate any Investment Account without the prior consent of the Collateral Trustee and unless a successor or replacement account has been established with the consent of the Collateral Trustee with respect to which successor or replacement account a control agreement has been entered into by the appropriate Grantor, Collateral Trustee and securities intermediary or depository institution at which such successor or replacement account is to be maintained in accordance with the provisions of Section 4.4.4(c). (c) Delivery and Control (i) With respect to any Investment Related Property consisting of Securities Accounts or Securities Entitlements, it shall cause the securities intermediary maintaining such Securities Account or Securities Entitlement to enter into an agreement substantially in the form of Exhibit C hereto pursuant to which it shall agree to comply with the Collateral Trustee's "entitlement orders" without further consent by such Grantor. With respect to any Investment Related Property that is a "Deposit Account," it shall cause the depositary institution maintaining such account to enter into an agreement substantially in the form of Exhibit D hereto, pursuant to which the Collateral Trustee shall have "control" (within the meaning of Section 9-104 of the UCC) 22 over such Deposit Account. Each Grantor shall have entered into such control agreement or agreements with respect to: (i) any Securities Accounts, Securities Entitlements or Deposit Accounts that exist on the Credit Date, as of or prior to the Credit Date and (ii) any Securities Accounts, Securities Entitlements or Deposit Accounts that are created or acquired after the Credit Date, as of or prior to the deposit or transfer of any such Securities Entitlements or funds, whether constituting moneys or investments, into such Securities Accounts or Deposit Accounts. In addition to the foregoing, if any issuer of any Investment Related Property is located in a jurisdiction outside of the United States, each Grantor shall take such additional actions, including, without limitation, causing the issuer to register the pledge on its books and records or making such filings or recordings, in each case as may be necessary or advisable, under the laws of such issuer's jurisdiction to insure the validity, perfection and priority of the security interest of the Collateral Trustee. Upon the occurrence of an Event of Default, the Collateral Trustee shall have the right, without notice to any Grantor, to transfer all or any portion of the Investment Related Property to its name or the name of its nominee or agent. In addition, the Collateral Trustee shall have the right at any time, without notice to any Grantor, to exchange any certificates or instruments representing any Investment Related Property for certificates or instruments of smaller or larger denominations. 4.5 MATERIAL CONTRACTS. (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.5 (as such schedule may be amended or supplemented from time to time) sets forth all of the Material Contracts to which such Grantor has rights; and (ii) no Material Contract (other than any Non-Assignable Contracts) prohibits assignment or requires consent of or notice to any Person in connection with the assignment to the Collateral Trustee hereunder, except such as has been given or made or is currently sought pursuant to Section 4.5 (b)(vii) hereof. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that: (i) in addition to any rights under the Section of this Agreement relating to Receivables, the Collateral Trustee may at any time notify, or require any Grantor to so notify, the counterparty on any Material Contract of the security interest of the Collateral Trustee therein. In addition, after the occurrence and during the continuance of an Event of Default, the Collateral Trustee may upon written notice to the applicable Grantor, notify, or require any Grantor to notify, the counterparty to make all payments under the Material Contracts directly to the Collateral Trustee; (ii) it shall perform in all material respects all of its material obligations with respect to the Material Contracts; 23 (iii) it shall use its best efforts to keep in full force and effect any Supporting Obligation or Collateral Support relating to any Material Contract; and (iv) each Grantor shall, within thirty (30) days of the date hereof with respect to any Non-Assignable Contract that is a Material Contract (other than the Credit Agreement, the Hedge Agreement or the Indenture) in effect on the date hereof and within thirty (30) days after entering into any Non-Assignable Contract that is a Material Contract (other than the Credit Agreement, the Hedge Agreement or the Indenture) after the Closing Date, request in writing the consent of the counterparty or counterparties to such Non-Assignable Contract pursuant to the terms of such Non-Assignable Contract or applicable law to the assignment or granting of a security interest in such Non-Assignable Contract to Secured Party and use its best efforts to obtain such consent as soon as practicable thereafter. 4.6 LETTER OF CREDIT RIGHTS. (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) all material letters of credit to which such Grantor has rights is listed on Schedule 4.6 (as such schedule may be amended or supplemented from time to time) hereto; and (ii) it has obtained the consent of each issuer of any material letter of credit to the assignment of the proceeds of the letter of credit to the Collateral Trustee. (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that with respect to any material letter of credit hereafter arising it shall obtain the consent of the issuer thereof to the assignment of the proceeds of the letter of credit to the Collateral Trustee and shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto. 4.7 INTELLECTUAL PROPERTY. (a) Representations and Warranties. Except as disclosed in Schedule 4.7(H) (as such schedule may be amended or supplemented from time to time), each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.7 (as such schedule may be amended or supplemented from time to time) sets forth a true and complete list of (i) all United States, state and foreign registrations of and applications for Patents, Trademarks, and Copyrights owned by each Grantor and (ii) all Patent Licenses, Trademark Licenses, Trade Secret Licenses and Copyright Licenses in each case material to the business of such Grantor; (ii) it is the sole and exclusive owner of the entire right, title, and interest in and to all Intellectual Property listed on Schedule 4.7 (as such schedule may be amended or supplemented from time to time), and owns or has the valid right to use all 24 other Intellectual Property used in or necessary to conduct its business, free and clear of all Liens, claims, encumbrances and licenses, except for Permitted Liens (as defined in the Indenture) and the licenses set forth on Schedule 4.7(B), (D), (F) and (G) (as each may be amended or supplemented from time to time); (iii) all Intellectual Property listed on Schedule 4.7 is subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and each Grantor has performed all acts and has paid all renewal, maintenance, and other fees and taxes required to maintain each and every registration and application of Copyrights, Patents and Trademarks in full force and effect; (iv) all Intellectual Property listed on Schedule 4.7 is valid and enforceable; no holding, decision, or judgment has been rendered in any action or proceeding before any court or administrative authority challenging the validity of, such Grantor's right to register, or such Grantor's rights to own or use, any such Intellectual Property and no such action or proceeding is pending or, to the best of such Grantor's knowledge, threatened; (v) all registrations and applications for Copyrights, Patents and Trademarks are standing in the name of each Grantor, and none of the Trademarks, Patents, Copyrights or Trade Secrets has been licensed by any Grantor to any Affiliate or third party, except as disclosed in Schedule 4.7(B), (D), (F), or (G) (as each may be amended or supplemented from time to time); (vi) each Grantor has been using appropriate statutory notice of registration in connection with its use of registered Trademarks, proper marking practices in connection with the use of Patents, and appropriate notice of copyright in connection with the publication of Copyrights material to the business of such Grantor; (vii) the conduct of such Grantor's business does not infringe upon or otherwise violate any trademark, patent, copyright, trade secret or other intellectual property right owned or controlled by a third party; no claim has been made that the use of any Intellectual Property owned or used by Grantor (or any of its respective licensees) violates the asserted rights of any third party; (viii) to the best of each Grantor's knowledge, no third party is infringing upon or otherwise violating any rights in any Intellectual Property owned or used by such Grantor, or any of its respective licensees; (ix) no settlement or consents, covenants not to sue, nonassertion assurances, or releases have been entered into by Grantor or to which Grantor is bound that adversely affect Grantor's rights to own or use any Intellectual Property listed on Schedule 4.7; and (x) each Grantor has not made a previous assignment, sale, transfer or agreement constituting a present or future assignment, sale, transfer or agreement of any Intellectual Property listed on Schedule 4.7 that has not been terminated or released. There is no effective financing statement or other document or instrument now executed, or on file or recorded in any public office, granting a security interest in or otherwise encumbering any part of the Intellectual Property listed on Schedule 4.7, other than in favor of the Collateral Trustee. 25 (b) Covenants and Agreements. Each Grantor hereby covenants and agrees as follows: (i) it shall not do any act or omit to do any act whereby any of the Intellectual Property which is material to the business of Grantor may lapse, or become abandoned, dedicated to the public, or unenforceable, or which would adversely affect the validity, grant, or enforceability of the security interest granted therein; (ii) it shall not, with respect to any Trademarks which are material to the business of any Grantor, cease the use of any of such Trademarks or fail to maintain the level of the quality of products sold and services rendered under any of such Trademark at a level at least substantially consistent with the quality of such products and services as of the date hereof, and each Grantor shall take all steps necessary to insure that licensees of such Trademarks use such consistent standards of quality; (iii) it shall, within thirty (30) days of the creation or acquisition of any Copyrightable work which is material to the business of Grantor, apply to register the Copyright in the United States Copyright Office; (iv) it shall promptly notify the Collateral Trustee if it knows or has reason to know that any item of the Intellectual Property that is material to the business of any Grantor may become (a) abandoned or dedicated to the public or placed in the public domain, (b) invalid or unenforceable, or (c) subject to any adverse determination or development (including the institution of proceedings) in any action or proceeding in the United States Patent and Trademark Office, the United States Copyright Office, any state registry, any foreign counterpart of the foregoing, or any court; (v) it shall take all reasonable steps in the United States Patent and Trademark Office, the United States Copyright Office, any state registry or any foreign counterpart of the foregoing, to pursue any application and maintain any registration of each Trademark, Patent, and Copyright owned by any Grantor and material to its business which is now or shall become included in the Intellectual Property including, but not limited to, those items on Schedule 4.7(A), (C) and (E) (as each may be amended or supplemented from time to time); (vi) in the event that any Intellectual Property listed on Schedule 4.7 owned by or exclusively licensed to any Grantor is infringed, misappropriated, or diluted by a third party, such Grantor shall promptly take all reasonable actions to stop such infringement, misappropriation, or dilution and protect its rights in such Intellectual Property including, but not limited to, the initiation of a suit for injunctive relief and to recover damages; (vii) it shall promptly (but in no event more than thirty (30) days after any Grantor obtains knowledge thereof) report to the Collateral Trustee (i) the filing of any application to register any Intellectual Property listed on Schedule 4.7 with the United States Patent and Trademark Office, the United States Copyright Office, or any state registry or foreign counterpart of the foregoing (whether such application is filed by such Grantor or through any agent, employee, licensee, or designee thereof) and (ii) the registration of any Intellectual Property listed on Schedule 4.7 by any such office, in each case by executing and delivering to the Collateral Trustee a completed Pledge 26 Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto; (viii) it shall, promptly upon the reasonable request of the Collateral Trustee, execute and deliver to the Collateral Trustee any document required to acknowledge, confirm, register, record, or perfect the Collateral Trustee's interest in any part of the Intellectual Property listed on Schedule 4.7, whether now owned or hereafter acquired; (ix) except with the prior consent of the Collateral Trustee or as permitted under the Parity Lien Documents, each Grantor shall not execute, and there will not be on file in any public office, any financing statement or other document or instruments, except financing statements or other documents or instruments filed or to be filed in favor of the Collateral Trustee and each Grantor shall not sell, assign, transfer, license, grant any option, or create or suffer to exist any Lien upon or with respect to the Intellectual Property, except for the Lien created by and under this Agreement and the other Parity Lien Documentss; (x) it shall take all steps reasonably necessary to protect the secrecy of all Trade Secrets, including, without limitation, entering into confidentiality agreements with employees and labeling and restricting access to secret information and documents; (xi) it shall use proper statutory notice in connection with its use of any of the Intellectual Property; and (xii) it shall continue to collect, at its own expense, all amounts due or to become due to such Grantor in respect of the Intellectual Property or any portion thereof. In connection with such collections, each Grantor may take (and, at the Collateral Trustee's reasonable direction, shall take) such action as such Grantor or the Collateral Trustee may deem reasonably necessary or advisable to enforce collection of such amounts. Notwithstanding the foregoing, the Collateral Trustee shall have the right at any time, to notify, or require any Grantor to notify, any obligors with respect to any such amounts of the existence of the security interest created hereby. 4.8 COMMERCIAL TORT CLAIMS (a) Representations and Warranties. Each Grantor hereby represents and warrants, on the Closing Date and on each Credit Date, that Schedule 4.8 (as such schedule may be amended or supplemented from time to time) sets forth all Commercial Tort Claims of each Grantor; and (b) Covenants and Agreements. Each Grantor hereby covenants and agrees that with respect to any Commercial Tort Claim in excess of $500,000 individually or $1,000,000 in the aggregate hereafter arising it shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, identifying such new Commercial Tort Claims. SECTION 5. FURTHER ASSURANCES; ADDITIONAL GRANTORS. 27 5.1 [RESERVED]. 5.2 FURTHER ASSURANCES. (a) Each Grantor agrees that from time to time, at the expense of such Grantor, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary, or that the Collateral Trustee may reasonably request in accordance with the Collateral Trust Agreement, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted hereby or to enable the Collateral Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Grantor shall: (i) file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be reasonably necessary, or as the Collateral Trustee may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (ii) take all actions necessary to ensure the recordation of appropriate evidence of the liens and security interest granted hereunder in the Intellectual Property with any intellectual property registry in which said Intellectual Property is registered or in which an application for registration is pending including, without limitation, the United States Patent and Trademark Office, the United States Copyright Office, the various Secretaries of State, and the foreign counterparts on any of the foregoing; and (iii) at the Collateral Trustee's request, appear in and defend any action or proceeding that may affect such Grantor's title to or the Collateral Trustee's security interest in all or any material part of the Collateral. (b) Each Grantor hereby authorizes the Collateral Trustee to file a Record or Records, including, without limitation, financing or continuation statements, and amendments thereto, in any jurisdictions and with any filing offices as the Collateral Trustee may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Collateral Trustee herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Collateral Trustee may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Collateral Trustee herein, including, without limitation, describing such property as "all assets" or "all personal property, whether now owned or hereafter acquired." Each Grantor shall furnish to the Collateral Trustee from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Trustee may reasonably request, all in reasonable detail. (c) Each Grantor hereby authorizes the Collateral Trustee to modify this Agreement after obtaining such Grantor's approval of or signature to such modification by 28 amending Schedule 4.7 (as such schedule may be amended or supplemented from time to time) to include reference to any right, title or interest in any existing Intellectual Property or any Intellectual Property acquired or developed by any Grantor after the execution hereof or to delete any reference to any right, title or interest in any Intellectual Property in which any Grantor no longer has or claims any right, title or interest. 5.3 ADDITIONAL GRANTORS. From time to time subsequent to the date hereof, additional Persons may become parties hereto as additional Grantors (each, an "Additional Grantor"), by executing a Counterpart Agreement. Upon delivery of any such Counterpart Agreement to the Collateral Trustee, notice of which is hereby waived by Grantors, each Additional Grantor shall be a Grantor and shall be as fully a party hereto as if Additional Grantor were an original signatory hereto. Each Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of Collateral Trustee not to cause any Subsidiary of Company to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder. SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT. 6.1 POWER OF ATTORNEY. Each Grantor hereby irrevocably appoints the Collateral Trustee (such appointment being coupled with an interest) as such Grantor's attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor, the Collateral Trustee or otherwise, from time to time in the Collateral Trustee's discretion to take any action and to execute any instrument that the Collateral Trustee may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following: (a) upon the occurrence and during the continuance of any Event of Default, to obtain and adjust insurance required to be maintained by such Grantor or paid to the Collateral Trustee pursuant to the Parity Lien Documents; (b) upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (c) upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (b) above; (d) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that the Collateral Trustee may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Trustee with respect to any of the Collateral; (e) to prepare and file any UCC financing statements against such Grantor as debtor; 29 (f) to prepare, sign, and file for recordation in any intellectual property registry, appropriate evidence of the lien and security interest granted herein in the Intellectual Property in the name of such Grantor as debtor; (g) to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens (other than Permitted Liens (as defined in the Indenture)) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Collateral Trustee in its sole discretion, any such payments made by the Collateral Trustee to become obligations of such Grantor to the Collateral Trustee, due and payable immediately without demand; and (h) upon the occurrence and during the continuance of any Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Trustee were the absolute owner thereof for all purposes, and to do, at the Collateral Trustee's option and such Grantor's expense, at any time or from time to time, all acts and things that the Collateral Trustee deems reasonably necessary to protect, preserve or realize upon the Collateral and the Collateral Trustee's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. 6.2 NO DUTY ON THE PART OF COLLATERAL TRUSTEE OR SECURED PARTIES. The powers conferred on the Collateral Trustee hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral Trustee or any Secured Party to exercise any such powers. The Collateral Trustee and the Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. SECTION 7. REMEDIES. 7.1 GENERALLY. (a) If any Event of Default shall have occurred and be continuing, the Collateral Trustee may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it at law or in equity, all the rights and remedies of the Collateral Trustee on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect, enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and also may pursue any of the following separately, successively or simultaneously: (i) require any Grantor to, and each Grantor hereby agrees that it shall at its expense and promptly upon request of the Collateral Trustee forthwith, assemble all or part of the Collateral as directed by the Collateral Trustee and make it available to the Collateral Trustee at a place to be designated by the Collateral Trustee that is reasonably convenient to both parties; 30 (ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process; (iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Collateral Trustee deems appropriate; and (iv) without notice except as specified below or under the UCC, sell, assign, lease, license (on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Trustee'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 the Collateral Trustee may deem commercially reasonable. (b) The Collateral Trustee or any Secured Party may be the purchaser of any or all of the Collateral at any public or private (to the extent to the portion of the Collateral being privately sold is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations) sale in accordance with the UCC and the Collateral Trustee, as Collateral Trustee for and representative of the Secured Parties, 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 sale made in accordance with the UCC, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Trustee 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 any Grantor, and each Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Trustee 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. Each Grantor agrees that it would not be commercially unreasonable for the Collateral Trustee to dispose of the Collateral or any portion thereof by using Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Each Grantor hereby waives any claims against the Collateral Trustee arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Trustee accepts the first offer received and does not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantors shall be liable for the deficiency and the fees of any attorneys employed by the Collateral Trustee to collect such deficiency. Each Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Trustee, that the Collateral Trustee has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of the Collateral Trustee hereunder. 31 (c) The Collateral Trustee may sell the Collateral without giving any warranties as to the Collateral. The Collateral Trustee may specifically disclaim or modify any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. (d) The Collateral Trustee shall have no obligation to marshal any of the Collateral. 7.2 APPLICATION OF PROCEEDS. Except as expressly provided elsewhere in this Agreement, all proceeds received by the Collateral Trustee in respect of any sale, any collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by the Collateral Trustee against, the Secured Obligations in the following order of priority: first, to the payment of all reasonable costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Trustee and its agents and counsel, and all other reasonable expenses, liabilities and advances made or incurred by the Collateral Trustee in connection therewith, and all amounts for which the Collateral Trustee is entitled to indemnification hereunder (in its capacity as the Collateral Trustee and not as a holder of Notes) and all advances made by the Collateral Trustee hereunder for the account of the applicable Grantor, and to the payment of all reasonable costs and expenses paid or incurred by the Collateral Trustee in connection with the exercise of any right or remedy hereunder or under the Parity Lien Documents, all in accordance with the terms hereof or thereof; second, to the extent of any excess of such proceeds, to the payment of all other Secured Obligations for the ratable benefit of the holders of the Parity Lien Obligations; and third, to the extent of any excess of such proceeds, to the payment to or upon the order of such Grantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 7.3 SALES ON CREDIT. If Collateral Trustee sells any of the Collateral upon credit, Grantor will be credited only with payments actually made by purchaser and received by Collateral Trustee and applied to indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Collateral Trustee may resell the Collateral and Grantor shall be credited with proceeds of the sale. 7.4 DEPOSIT ACCOUNTS. If any Event of Default shall have occurred and be continuing, the Collateral Trustee may apply the balance from any Deposit Account or instruct the bank at which any Deposit Account is maintained to pay the balance of any Deposit Account to or for the benefit of the Collateral Trustee. 7.5 INVESTMENT RELATED PROPERTY. Each Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Collateral Trustee may be compelled, with respect to any sale of all or any part of the Investment Related Property conducted without prior registration or qualification of such Investment Related Property under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Investment Related Property for their own account, for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges that any such private sale may be at 32 prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Investment Related Property for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If the Collateral Trustee determines to exercise its right to sell any or all of the Investment Related Property, upon written request, each Grantor shall and shall cause each issuer of any Pledged Stock to be sold hereunder, each partnership and each limited liability company from time to time to furnish to the Collateral Trustee all such information as the Collateral Trustee may request in order to determine the number and nature of interest, shares or other instruments included in the Investment Related Property which may be sold by the Collateral Trustee in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. 7.6 INTELLECTUAL PROPERTY. (a) Anything contained herein to the contrary notwithstanding, upon the occurrence and during the continuation of an Event of Default: (i) the Collateral Trustee shall have the right (but not the obligation) to bring suit or otherwise commence any action or proceeding in the name of any Grantor, the Collateral Trustee or otherwise, in the Collateral Trustee's sole discretion, to enforce any Intellectual Property, in which event such Grantor shall, at the request of the Collateral Trustee, do any and all lawful acts and execute any and all documents required by the Collateral Trustee in aid of such enforcement and such Grantor shall promptly, upon demand, reimburse and indemnify the Collateral Trustee as provided in Section 10 hereof in connection with the exercise of its rights under this Section, and, to the extent that the Collateral Trustee shall elect not to bring suit to enforce any Intellectual Property as provided in this Section, each Grantor agrees to use all reasonable measures, whether by action, suit, proceeding or otherwise, to prevent the infringement or other violation of any of such Grantor's rights in the Intellectual Property by others and for that purpose agrees to diligently maintain any action, suit or proceeding against any Person so infringing as shall be necessary to prevent such infringement or violation; (ii) upon written demand from the Collateral Trustee, each Grantor shall grant, assign, convey or otherwise transfer to the Collateral Trustee an absolute assignment of all of such Grantor's right, title and interest in and to the Intellectual Property and shall execute and deliver to the Collateral Trustee such documents as are necessary or appropriate to carry out the intent and purposes of this Agreement; (iii) each Grantor agrees that such an assignment and/or recording shall be applied to reduce the Secured Obligations outstanding only to the extent that the Collateral Trustee (or any Secured Party) receives cash proceeds in respect of the sale of, or other realization upon, the Intellectual Property; 33 (iv) within five (5) Business Days after written notice from the Collateral Trustee, each Grantor shall make available to the Collateral Trustee, to the extent within such Grantor's power and authority, such personnel in such Grantor's employ on the date of such Event of Default as the Collateral Trustee may reasonably designate, by name, title or job responsibility, to permit such Grantor to continue, directly or indirectly, to produce, advertise and sell the products and services sold or delivered by such Grantor under or in connection with the Trademarks, Trademark Licenses, such persons to be available to perform their prior functions on the Collateral Trustee's behalf and to be compensated by the Collateral Trustee at such Grantor's expense on a per diem, pro-rata basis consistent with the salary and benefit structure applicable to each as of the date of such Event of Default; and (v) the Collateral Trustee shall have the right to notify, or require each Grantor to notify, any obligors with respect to amounts due or to become due to such Grantor in respect of the Intellectual Property, of the existence of the security interest created herein, to direct such obligors to make payment of all such amounts directly to the Collateral Trustee, and, upon such notification and at the expense of such Grantor, to enforce collection of any such amounts and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done; (1) all amounts and proceeds (including checks and other instruments) received by Grantor in respect of amounts due to such Grantor in respect of the Collateral or any portion thereof shall be received in trust for the benefit of the Collateral Trustee hereunder, shall be segregated from other funds of such Grantor and shall be forthwith paid over or delivered to the Collateral Trustee in the same form as so received (with any necessary endorsement) to be held as cash Collateral and applied as provided by Section 7.7 hereof; and (2) Grantor shall not adjust, settle or compromise the amount or payment of any such amount or release wholly or partly any obligor with respect thereto or allow any credit or discount thereon. (b) If (i) an Event of Default shall have occurred and, by reason of cure, waiver, modification, amendment or otherwise, no longer be continuing, (ii) no other Event of Default shall have occurred and be continuing, (iii) an assignment or other transfer to the Collateral Trustee of any rights, title and interests in and to the Intellectual Property shall have been previously made and shall have become absolute and effective, and (iv) the Secured Obligations shall not have become immediately due and payable, upon the written request of any Grantor, the Collateral Trustee shall promptly execute and deliver to such Grantor, at such Grantor's sole cost and expense, such assignments or other transfer as may be necessary to reassign to such Grantor any such rights, title and interests as may have been assigned to the Collateral Trustee as aforesaid, subject to any disposition thereof that may have been made by the Collateral Trustee; provided, after giving effect to such reassignment, the Collateral Trustee's security interest granted pursuant hereto, as well as all other rights and remedies of the Collateral Trustee granted hereunder, shall continue to be in full force and effect; and provided further, the rights, title and interests so reassigned shall be free and clear of any other Liens granted by or on behalf of the Collateral Trustee and the Secured Parties. (c) Solely for the purpose of enabling the Collateral Trustee to exercise rights and remedies under this Section 7 and at such time as the Collateral Trustee shall be 34 lawfully entitled to exercise such rights and remedies, each Grantor hereby grants to the Collateral Trustee, to the extent it has the right to do so, an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to such Grantor), subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Grantor to avoid the risk of invalidation of said Trademarks, to use, operate under, license, or sublicense any Intellectual Property now owned or hereafter acquired by such Grantor, and wherever the same may be located. 7.7 CASH PROCEEDS (a) . After an Event of Default shall have occurred and be continuing, upon receipt of any Collateral consisting of cash, checks and other non-cash items (collectively, "CASH PROCEEDS") by any Grantor, such Grantor shall turn over all such Cash Proceeds to the Collateral Trustee. Any Cash Proceeds shall be applied by the Collateral Trustee against the Secured Obligations then due and owing. 7.8 NOTICE OF SOLE CONTROL. The Collateral Trustee agrees that it shall not issue any notice of sole control pursuant to any control agreement entered into pursuant to the terms of this Agreement unless there shall have occurred and be continuing an Event of Default. SECTION 8. COLLATERAL TRUSTEE. The Collateral Trustee has been appointed to act as Collateral Trustee by the Indenture Trustee and the Hedge Counterparty under the Collateral Trust Agreement and, by their acceptance of the benefits hereof, the other Secured Parties. The Collateral Trustee shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Parity Lien Documents. In furtherance of the foregoing provisions of this Section, each Secured Party, by its acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Secured Party that all rights and remedies hereunder may be exercised solely by the Collateral Trustee for the benefit of Secured Parties in accordance with the terms of this Section. Collateral Trustee may resign at any time by giving thirty (30) days' prior written notice thereof to Parity Lien Representative and the Grantors, and Collateral Trustee may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Grantors and Collateral Trustee signed by the Parity Lien Representative. Upon any such notice of resignation or any such removal, Parity Lien Representative shall have the right, to appoint a successor Collateral Trustee. Upon the acceptance of any appointment as Collateral Trustee hereunder by a successor Collateral Trustee, that successor Collateral Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Trustee under this Agreement, and the retiring or removed Collateral Trustee under this Agreement shall promptly (i) transfer to such successor Collateral Trustee all sums, Securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Trustee under this Agreement, and (ii) execute and deliver to such successor Collateral Trustee or otherwise authorize the filing of such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Trustee of the security interests created hereunder, whereupon such 35 retiring or removed Collateral Trustee shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Trustee's resignation or removal hereunder as the Collateral Trustee, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Trustee hereunder. SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations and shall be binding upon each Grantor, its successors and assigns, and inure, together with the rights and remedies of the Collateral Trustee hereunder, to the benefit of the Collateral Trustee and its successors, transferees and assigns. Without limiting the generality of the foregoing, but subject to the terms of the Parity Lien Documents, any Secured Party may assign or otherwise transfer any Obligations held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise. Upon the payment in full of all Secured Obligations, the security interest granted hereby shall terminate hereunder and of record and all rights to the Collateral shall revert to Grantors. Upon any such termination the Collateral Trustee shall, at Grantors' expense, execute and deliver to Grantors such documents as Grantors shall reasonably request to evidence such termination. SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM. The powers conferred on the Collateral Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Collateral Trustee shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Trustee accords its own property. Neither the Collateral Trustee nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or otherwise. If any Grantor fails to perform any agreement contained herein, the Collateral Trustee may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Trustee incurred in connection therewith shall be payable by each Grantor in accordance with the Parity Lien Documents. SECTION 11. MISCELLANEOUS. Any notice required or permitted to be given under this Agreement shall be given in accordance with Section 7.7 of the Collateral Trust Agreement. No failure or delay on the part of the Collateral Trustee in the exercise of any power, right or privilege hereunder or under any other Parity Lien Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Credit Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any 36 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. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. This Agreement shall be binding upon and inure to the benefit of the Collateral Trustee and Grantors and their respective successors and assigns. No Grantor shall, without the prior written consent of the Collateral Trustee given in accordance with the Parity Lien Documents, assign any right, duty or obligation hereunder. This Agreement and the other Credit Documents embody the entire agreement and understanding between Grantors and the Collateral Trustee and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Credit Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATION LAWS). [The remainder of this page is intentionally left blank.] 37 IN WITNESS WHEREOF, each Grantor and the Collateral Trustee have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. BELDEN & BLAKE CORPORATION By: /s/ Frost W. Cochran ------------------------------------- Name: Frost W. Cochran Title: President THE CANTON OIL & GAS COMPANY By: /s/ Frost W. Cochran ------------------------------------- Name: Frost W. Cochran Title: President WARD LAKE DRILLING, INC. By: /s/ Frost W. Cochran ------------------------------------- Name: Frost W. Cochran Title: Chief Executive Officer WELLS FARGO BANK, N.A., as Collateral Trustee By: /s/ Jane Y. Schweiger ------------------------------------- Name: Jane Y. Schweiger Title: Vice President 2 SCHEDULE 4.1 TO PLEDGE AND SECURITY AGREEMENT GENERAL INFORMATION (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business (or Residence if Grantor is a Natural Person) and Organizational Identification Number of each Grantor:
Chief Executive Office/Sole Place of Business (or Type of Jurisdiction of Residence if Grantor Full Legal Name Organization Organization is a Natural Person) Organization I.D.# - --------------- ------------ ------------ -------------------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted business for the past five (5) years:
Full Legal Name Trade Name or Fictitious Business Name - --------------- --------------------------------------
(C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years:
Name of Grantor Date of Change Description of Change - --------------- -------------- ---------------------
(D) Agreements pursuant to which any Grantor is found as debtor within past five (5) years:
Name of Grantor Description of Agreement - --------------- ------------------------
(E) Financing Statements:
Name of Grantor Filing Jurisdiction(s) - --------------- ----------------------
SCHEDULE 4.1-1 SCHEDULE 4.2 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Location of Wellhead, Equipment and Inventory
SCHEDULE 4.2-1 SCHEDULE 4.4 TO PLEDGE AND SECURITY AGREEMENT INVESTMENT RELATED PROPERTY (A) Pledged Stock:
% OF STOCK NO. OF OUTSTANDING STOCK CLASS OF CERTIFICATED CERTIFICATE PLEDGED STOCK OF THE GRANTOR ISSUER STOCK (Y/N) NO. PAR VALUE STOCK STOCK ISSUER - ------- ------ -------- ------------ ----------- --------- ------- ------------
Pledged LLC Interests:
% OF OUTSTANDING LLC INTERESTS OF LIMITED LIABILITY CERTIFICATE NO. NO. OF PLEDGED THE LIMITED GRANTOR COMPANY CERTIFICATED (Y/N) (IF ANY) UNITS LIABILITY COMPANY - ------- ----------------- ----------------- --------------- -------------- -----------------
Pledged Partnership Interests:
TYPE OF PARTNERSHIP % OF OUTSTANDING INTERESTS (E.G., PARTNERSHIP GENERAL OR CERTIFICATE NO. INTERESTS OF THE GRANTOR PARTNERSHIP LIMITED) CERTIFICATED (Y/N) (IF ANY) PARTNERSHIP - ------- ----------- --------------- ----------------- --------------- -----------------
Pledged Trust Interests:
CLASS OF TRUST CERTIFICATE NO. % OF OUTSTANDING TRUST GRANTOR TRUST INTERESTS CERTIFICATED (Y/N) (IF ANY) INTERESTS OF THE TRUST - ------- ----- --------- ------------------ -------- ----------------------
EXHIBIT 4.4-1 Pledged Debt:
ORIGINAL PRINCIPAL OUTSTANDING GRANTOR ISSUER AMOUNT PRINCIPAL BALANCE ISSUE DATE MATURITY DATE - ------- ------ ------ ----------------- ---------- -------------
Securities Account:
SHARE OF SECURITIES GRANTOR INTERMEDIARY ACCOUNT NUMBER ACCOUNT NAME - ------- ------------ -------------- ------------
Commodities Accounts:
NAME OF COMMODITIES GRANTOR INTERMEDIARY ACCOUNT NUMBER ACCOUNT NAME - ------- ------------ -------------- ------------
Deposit Accounts:
NAME OF DEPOSITARY GRANTOR BANK ACCOUNT NUMBER ACCOUNT NAME - ------- ---- -------------- ------------
(B)
Name of Grantor Date of Acquisition Description of Acquisition - --------------- ------------------- --------------------------
EXHIBIT 4.4-2 SCHEDULE 4.5 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Description of Material Contract - --------------- --------------------------------
SCHEDULE 4.5-1 SCHEDULE 4.6 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Description of Letters of Credit - --------------- --------------------------------
SCHEDULE 4.6-1 SCHEDULE 4.7 TO PLEDGE AND SECURITY AGREEMENT INTELLECTUAL PROPERTY (A) Copyrights (B) Copyright Licenses (C) Patents (D) Patent Licenses (E) Trademarks (F) Trademark Licenses (G) Trade Secret Licenses (H) Intellectual Property Exceptions SCHEDULE 4.7-1 SCHEDULE 4.8 TO PLEDGE AND SECURITY AGREEMENT
Name of Grantor Commercial Tort Claims - --------------- ----------------------
SCHEDULE 4.8-1 EXHIBIT A TO PLEDGE AND SECURITY AGREEMENT PLEDGE SUPPLEMENT This PLEDGE SUPPLEMENT, dated [mm/dd/yy], is delivered by [NAME OF GRANTOR] a [NAME OF STATE OF INCORPORATION] [Corporation] (the "GRANTOR") pursuant to the Pledge and Security Agreement, dated as of June __, 2004 (as it may be from time to time amended, restated, modified or supplemented, the "Security Agreement"), among BELDEN & BLAKE CORPORATION, the other Grantors named therein, and WELLS FARGO BANK, N.A., as Collateral Trustee. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Security Agreement. Grantor hereby confirms the grant to the Collateral Trustee set forth in the Security Agreement of, and does hereby grant to the Collateral Trustee, a security interest in all of Grantor's right, title and interest in and to all Collateral to secure the Secured Obligations, in each case whether now or hereafter existing or in which Grantor now has or hereafter acquires an interest and wherever the same may be located. Grantor represents and warrants that the attached Supplements to Schedules accurately and completely set forth all additional information required pursuant to the Security Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the Schedules to the Security Agreement. IN WITNESS WHEREOF, Grantor has caused this Pledge Supplement to be duly executed and delivered by its duly authorized officer as of [MM/DD/YY]. [NAME OF GRANTOR] By:______________________________________ Name: Title: EXHIBIT A-1 SUPPLEMENT TO SCHEDULE 4.1 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business (or Residence if Grantor is a Natural Person) and Organizational Identification Number of each Grantor:
Chief Executive Office/Sole Place of Business (or Residence Jurisdiction of if Grantor is a Natural Full Legal Name Type of Organization Organization Person) Organization I.D.# - --------------- -------------------- ------------ ------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which each Grantor has conducted business for the past five (5) years:
Full Legal Name Trade Name or Fictitious Business Name - --------------- --------------------------------------
(C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years:
Name of Grantor Date of Change Description of Change - --------------- -------------- ---------------------
(D) Agreements pursuant to which any Grantor is found as debtor within past five (5) years:
Name of Grantor Description of Agreement - --------------- ------------------------
(E) Financing Statements: EXHIBIT A-2
Name of Grantor Filing Jurisdiction(s) - --------------- ----------------------
EXHIBIT A-3 SUPPLEMENT TO SCHEDULE 4.2 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Location of Wellhead, Equipment and Inventory - --------------- ---------------------------------------------
EXHIBIT A-4 SUPPLEMENT TO SCHEDULE 4.4 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Pledged Stock: Pledged Partnership Interests: Pledged LLC Interests: Pledged Trust Interests: Pledged Debt: Securities Account: Commodities Accounts: Deposit Accounts: (B)
Name of Grantor Date of Acquisition Description of Acquisition - --------------- ------------------- --------------------------
EXHIBIT A-5 SUPPLEMENT TO SCHEDULE 4.5 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Description of Material Contract - --------------- --------------------------------
EXHIBIT A-6 SUPPLEMENT TO SCHEDULE 4.6 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Description of Letters of Credit - --------------- --------------------------------
EXHIBIT A-7 SUPPLEMENT TO SCHEDULE 4.7 TO PLEDGE AND SECURITY AGREEMENT Additional Information: (A) Copyrights (B) Copyright Licenses (C) Patents (D) Patent Licenses (E) Trademarks (F) Trademark Licenses (G) Trade Secret Licenses (H) Intellectual Property Exceptions EXHIBIT A-8 SUPPLEMENT TO SCHEDULE 4.8 TO PLEDGE AND SECURITY AGREEMENT Additional Information:
Name of Grantor Commercial Tort Claims - --------------- ----------------------
EXHIBIT A-9 EXHIBIT B TO PLEDGE AND SECURITY AGREEMENT UNCERTIFICATED SECURITIES CONTROL AGREEMENT This Uncertificated Securities Control Agreement dated as of _________, 200__ among ________________ (the "PLEDGOR"), WELLS FARGO BANK, N.A., as Collateral Trustee for the Secured Parties, (the "COLLATERAL TRUSTEE") and ____________, a ________corporation (the "ISSUER"). Capitalized terms used but not defined herein shall have the meaning assigned in the Pledge and Security Agreement dated [as of the date hereof], among the Pledgor, the other Grantors party thereto and the Collateral Trustee (the "SECURITY AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. SECTION 1. REGISTERED OWNERSHIP OF SHARES. The Issuer hereby confirms and agrees that as of the date hereof the Pledgor is the registered owner of __________ shares of the Issuer's [common] stock (the "PLEDGED SHARES") and the Issuer shall not change the registered owner of the Pledged Shares without the prior written consent of the Collateral Trustee. SECTION 2. INSTRUCTIONS. If at any time the Issuer shall receive instructions originated by the Collateral Trustee relating to the Pledged Shares, the Issuer shall comply with such instructions without further consent by the Pledgor or any other person. SECTION 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer hereby represents and warrants to the Collateral Trustee: (a) It has not entered into, and until the termination of this agreement will not enter into, any agreement with any other person relating the Pledged Shares pursuant to which it has agreed to comply with instructions issued by such other person; and (b) It has not entered into, and until the termination of this agreement will not enter into, any agreement with the Pledgor or the Collateral Trustee purporting to limit or condition the obligation of the Issuer to comply with Instructions as set forth in Section 2 hereof. (c) Except for the claims and interest of the Collateral Trustee and of the Pledgor in the Pledged Shares, the Issuer does not know of any claim to, or interest in, the Pledged Shares. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Shares, the Issuer will promptly notify the Collateral Trustee and the Pledgor thereof. (d) This Uncertificated Securities Control Agreement is the valid and legally binding obligation of the Issuer. SECTION 4. CHOICE OF LAW. This Agreement shall be governed by the laws of the State of [New York]. SECTION 5. CONFLICT WITH OTHER AGREEMENTS. In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered Exhibit B-1 into, the terms of this Agreement shall prevail. No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto. SECTION 6. VOTING RIGHTS. Until such time as the Collateral Trustee shall otherwise instruct the Issuer in writing, the Pledgor shall have the right to vote the Pledged Shares. SECTION 7. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Issuer and by sending written notice of such assignment to the Pledgor. SECTION 8. INDEMNIFICATION OF ISSUER. The Pledgor and the Collateral Trustee hereby agree that (a) the Issuer is released from any and all liabilities to the Pledgor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Issuer with the terms hereof, except to the extent that such liabilities arise from the Issuer's negligence and (b) the Pledgor, its successors and assigns shall at all times indemnify and save harmless the Issuer from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Issuer with the terms hereof, except to the extent that such arises from the Issuer's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 9. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Pledgor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Issuer: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 10. TERMINATION. The obligations of the Issuer to the Collateral Trustee pursuant to this Control Agreement shall continue in effect until the security interests of the Collateral Trustee in the Pledged Shares have been terminated pursuant to the terms of the Security Agreement and the Collateral Trustee has notified the Issuer of such termination in Exhibit B-2 writing. The Collateral Trustee agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Issuer upon the request of the Pledgor on or after the termination of the Collateral Trustee's security interest in the Pledged Shares pursuant to the terms of the Security Agreement. The termination of this Control Agreement shall not terminate the Pledged Shares or alter the obligations of the Issuer to the Pledgor pursuant to any other agreement with respect to the Pledged Shares. SECTION 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. [NAME OF PLEDGOR] By:__________________________________ Name: Title: WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: [NAME OF ISSUER] By:__________________________________ Name: Title: Exhibit B-3 Exhibit A [Letterhead of Collateral Trustee] [Date] [Name and Address of Issuer] Attention:_______________________ Re: Termination of Control Agreement You are hereby notified that the Uncertificated Securities Control Agreement between you, [the Pledgor] and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to Pledged Shares (as defined in the Uncertificated Control Agreement) from [the Pledgor]. This notice terminates any obligations you may have to the undersigned with respect to the Pledged Shares, however nothing contained in this notice shall alter any obligations which you may otherwise owe to [the Pledgor] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [insert name of Pledgor]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________________ Name: Title: Exhibit B-A-1 EXHIBIT C TO PLEDGE AND SECURITY AGREEMENT SECURITIES ACCOUNT CONTROL AGREEMENT This Securities Account Control Agreement dated as of __________, 2004 (this "AGREEMENT") among ___________ (the "DEBTOR"), WELLS FARGO BANK, N.A., as collateral trustee for the holders of Priority Lien Obligations and as collateral trustee for the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE" and ____________, in its capacity as a "bank" as defined in Section 9-102 of the UCC (in such capacity, the "FINANCIAL INSTITUTION"). Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Collateral Trust Agreement, dated [as of the date hereof], between the Debtor, the other Grantors party thereto, BNY Midwest Trust Company, as Indenture Trustee, J. Aron & Company, as Hedge Counterparty, and the Collateral Trustee (as amended, restated, supplemented or otherwise modified from time to time, the "TRUST AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of [New York]. SECTION 1. ESTABLISHMENT OF SECURITIES ACCOUNT. The Securities Intermediary hereby confirms and agrees that: (a) The Securities Intermediary has established account number [IDENTIFY ACCOUNT NUMBER] in the name "[IDENTIFY EXACT TITLE OF ACCOUNT]" (such account and any successor account, the "SECURITIES ACCOUNT") and the Securities Intermediary shall not change the name or account number of the Securities Account without the prior written consent of the Collateral Trustee; (b) All securities or other property underlying any financial assets credited to the Securities Account shall be registered in the name of the Securities Intermediary, indorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary and in no case will any financial asset credited to the Securities Account be registered in the name of the Debtor, payable to the order of the Debtor or specially indorsed to the Debtor except to the extent the foregoing have been specially indorsed to the Securities Intermediary or in blank; (c) All property delivered to the Securities Intermediary pursuant to the Security Agreement will be promptly credited to the Securities Account; and (d) The Securities Account is a "securities account" within the meaning of Section 8-501 of the UCC. SECTION 2. "FINANCIAL ASSETS" ELECTION. The Securities Intermediary hereby agrees that each item of property (including, without limitation, any investment property, financial asset, security, instrument, general intangible or cash) credited to the Securities Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. Exhibit C-1 SECTION 3. CONTROL OF THE SECURITIES ACCOUNT. If at any time the Securities Intermediary shall receive any order from the Collateral Trustee directing transfer or redemption of any financial asset relating to the Securities Account, the Securities Intermediary shall comply with such entitlement order without further consent by the Debtor or any other person. If the Debtor is otherwise entitled to issue entitlement orders and such orders conflict with any entitlement order issued by the Collateral Trustee, the Securities Intermediary shall follow the orders issued by the Collateral Trustee. SECTION 4. SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Securities Intermediary has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Securities Account or any security entitlement credited thereto, the Securities Intermediary hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Trustee. The financial assets and other items deposited to the Securities Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Collateral Trustee (except that the Securities Intermediary may set off (i) all amounts due to the Securities Intermediary in respect of customary fees and expenses for the routine maintenance and operation of the Securities Account and (ii) the face amount of any checks which have been credited to such Securities Account but are subsequently returned unpaid because of uncollected or insufficient funds). SECTION 5. CHOICE OF LAW. This Agreement and the Securities Account shall each be governed by the laws of the State of [New York]. Regardless of any provision in any other agreement, for purposes of the UCC, [New York] shall be deemed to be the Securities Intermediary's jurisdiction (within the meaning of Section 8-110 of the UCC) and the Securities Account (as well as the securities entitlements related thereto) shall be governed by the laws of the State of [New York]. SECTION 6. CONFLICT WITH OTHER AGREEMENTS. (a) In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail; (b) No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto; (c) The Securities Intermediary hereby confirms and agrees that: (i) There are no other control agreements entered into between the Securities Intermediary and the Debtor with respect to the Securities Account; (ii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating to the Securities Account and/or any financial assets credited thereto pursuant to which it has agreed to comply with entitlement orders (as defined in Section 8-102(a)(8) of the UCC) of such other person; and (iii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with the Debtor or the Collateral Trustee Exhibit C-2 purporting to limit or condition the obligation of the Securities Intermediary to comply with entitlement orders as set forth in Section 3 hereof. SECTION 7. ADVERSE CLAIMS. Except for the claims and interest of the Collateral Trustee and of the Debtor in the Securities Account, the Securities Intermediary does not know of any claim to, or interest in, the Securities Account or in any "financial asset" (as defined in Section 8-102(a) of the UCC) credited thereto. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Securities Account or in any financial asset carried therein, the Securities Intermediary will promptly notify the Collateral Trustee and the Debtor thereof. SECTION 8. MAINTENANCE OF SECURITIES ACCOUNT. In addition to, and not in lieu of, the obligation of the Securities Intermediary to honor entitlement orders as agreed in Section 3 hereof, the Securities Intermediary agrees to maintain the Securities Account as follows: (a) Notice of Sole Control. If at any time the Collateral Trustee delivers to the Securities Intermediary a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Securities Intermediary agrees that after receipt of such notice, it will take all instruction with respect to the Securities Account solely from such Collateral Trustee. (b) Voting Rights. Until such time as the Securities Intermediary receives a Notice of Sole Control pursuant to subsection (a) of this Section 8, the Debtor shall direct the Securities Intermediary with respect to the voting of any financial assets credited to the Securities Account. (c) Permitted Investments. Until such time as the Securities Intermediary receives a Notice of Sole Control signed by the Collateral Trustee, the Debtor shall direct the Securities Intermediary with respect to the selection of investments to be made for the Securities Account; provided, however, that the Securities Intermediary shall not honor any instruction to purchase any investments other than investments of a type described on Exhibit B hereto. (d) Statements and Confirmations. The Securities Intermediary will promptly send copies of all statements, confirmations and other correspondence concerning the Securities Account and/or any financial assets credited thereto simultaneously to each of the Debtor and the Collateral Trustee at the address for each set forth in Section 12 of this Agreement. (e) Tax Reporting. All items of income, gain, expense and loss recognized in the Securities Account shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor. SECTION 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SECURITIES INTERMEDIARY. The Securities Intermediary hereby makes the following representations, warranties and covenants: (a) The Securities Account has been established as set forth in Section 1 above and such Securities Account will be maintained in the manner set forth herein until termination of this Agreement; and (b) This Agreement is the valid and legally binding obligation of the Securities Intermediary. Exhibit C-3 SECTION 10 INDEMNIFICATION OF SECURITIES INTERMEDIARY. The Debtor and the Collateral Trustee hereby agree that (a) the Securities Intermediary is released from any and all liabilities to the Debtor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Securities Intermediary with the terms hereof, except to the extent that such liabilities arise from the Securities Intermediary's negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Securities Intermediary from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Securities Intermediary with the terms hereof, except to the extent that such arises from the Securities Intermediary's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 11. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Securities Intermediary and by sending written notice of such assignment to the Debtor. SECTION 12. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Debtor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Securities Intermediary: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 13. TERMINATION. The obligations of the Financial Institution to the Collateral Trustee pursuant to this Agreement shall continue in effect until the security interest of the Collateral Trustee in the Securities Account has been terminated pursuant to the terms of the applicable Security Agreements and the Collateral Trustee have notified the Financial Institution of such termination in writing. The Collateral Trustee agrees to provide Notice of Termination of Securities Account Control Agreement in substantially the form of Exhibit C hereto to the Financial Institution upon the request of the Debtor on or after the termination of the Collateral Trustee' security interest in the Securities Account pursuant to the terms of the applicable Security Agreement. The termination of this Agreement shall not terminate the Securities Exhibit C-4 Account or alter the obligations of the Financial Institution to the Debtor pursuant to any other agreement with respect to the Securities Account. SECTION 14. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. Exhibit C-5 IN WITNESS WHEREOF, the parties hereto have caused this Securities Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. [DEBTOR] By:____________________________ Name: Title: WELLS FARGO BANK, N.A., as Collateral Trustee By:____________________________ Name: Title: [NAME OF SECURITIES INTERMEDIARY], as Securities Intermediary By:____________________________ Name: Title: Exhibit C-6 EXHIBIT A TO SECURITIES ACCOUNT CONTROL AGREEMENT [Letterhead of Collateral Trustee] [Date] [Name and Address of Securities Intermediary] Attention: Re: Notice of Sole Control Ladies and Gentlemen: As referenced in the Securities Account Control Agreement dated as of _______, 200__ among [NAME OF THE DEBTOR], you and the undersigned (a copy of which is attached), we hereby give you notice of our sole control over securities account number ____________ (the "SECURITIES ACCOUNT") and all financial assets credited thereto. You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Securities Account or the financial assets credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:________________________ Name: Title: cc: [NAME OF THE DEBTOR] Exhibit C-A-1 EXHIBIT B TO SECURITIES ACCOUNT CONTROL AGREEMENT Permitted Investments [TO COME] Exhibit C-B-1 EXHIBIT C TO SECURITIES ACCOUNT CONTROL AGREEMENT [Letterhead of the Collateral Trustee] [Date] [Name and Address of Securities Intermediary] Attention: Re: Termination of Securities Account Control Agreement You are hereby notified that the Securities Account Control Agreement dated as of __________, 2004 among you, [NAME OF THE DEBTOR], WELLS FARGO BANK, N.A., in its capacity as collateral trustee on behalf of the holders of Priority Lien Obligations and the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE") (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:________________________ Name: Title: EXHIBIT D TO PLEDGE AND SECURITY AGREEMENT DEPOSIT ACCOUNT CONTROL AGREEMENT This Deposit Account Control Agreement dated as of __________, 2004 (this "AGREEMENT") among ___________ (the "DEBTOR"), WELLS FARGO BANK, N.A., as collateral trustee for the holders of Priority Lien Obligations and the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE") and ____________, in its capacity as a "bank" as defined in Section 9-102 of the UCC (in such capacity, the "FINANCIAL INSTITUTION"). Capitalized terms used but not defined herein shall have the meaning assigned thereto in the Collateral Trust Agreement, dated [as of the date hereof], between the Debtor, the other Grantors party thereto, BNY Midwest Trust Company, as Indenture Trustee, J. Aron & Company, as Hedge Counterparty, and the Collateral Trustee (as amended, restated, supplemented or otherwise modified from time to time, the "TRUST AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of [New York]. SECTION 1. ESTABLISHMENT OF DEPOSIT ACCOUNT. The Financial Institution hereby confirms and agrees that: (a) The Financial Institution has established account number [IDENTIFY ACCOUNT NUMBER] in the name "[IDENTIFY EXACT TITLE OF ACCOUNT]" (such account and any successor account, the "DEPOSIT ACCOUNT") and the Financial Institution shall not change the name or account number of the Deposit Account without the prior written consent of the Collateral Trustee and, prior to delivery of a Notice of Sole Control in substantially the form set forth in Exhibit A hereto, the Debtor; and (b) The Deposit Account is a "deposit account" within the meaning of Section 9-102(a)(29) of the UCC. SECTION 2. CONTROL OF THE DEPOSIT ACCOUNT. If at any time the Financial Institution shall receive any instructions originated by the Collateral Trustee directing the disposition of funds in the Deposit Account, the Financial Institution shall comply with such instructions without further consent by the Debtor or any other person. The Financial Institution hereby acknowledges that it has received notice of the security interest of the Collateral Trustee in the Deposit Account and hereby acknowledges and consents to such liens. SECTION 3. SUBORDINATION OF LIEN; WAIVER OF SET-OFF. In the event that the Financial Institution has or subsequently obtains by agreement, by operation of law or otherwise a security interest in the Deposit Account or any funds credited thereto, the Financial Institution hereby agrees that such security interest shall be subordinate to the security interest of the Collateral Trustee. Money and other items credited to the Deposit Account will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Collateral Trustee (except that the Financial Institution may set off (i) all amounts due to the Financial Institution in respect of customary fees and expenses for the routine maintenance and operation of the Deposit Account and (ii) the face amount of any checks which have been credited to such Deposit Account but are subsequently returned unpaid because of uncollected or insufficient funds). SECTION 4. CHOICE OF LAW. This Agreement and the Deposit Account shall each be governed by the laws of the State of [New York]. Regardless of any provision in any other agreement, for purposes of the UCC, [New York] shall be deemed to be the Financial Institution's jurisdiction (within the meaning of Section 9-304 of the UCC) and the Deposit Account shall be governed by the laws of the State of [New York]. SECTION 5. CONFLICT WITH OTHER AGREEMENTS. (a) In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered into, the terms of this Agreement shall prevail; (b) No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto; and (c) The Financial Institution hereby confirms and agrees that: (i) There are no other agreements entered into between the Financial Institution and the Debtor with respect to the Deposit Account; and (ii) It has not entered into, and until the termination of this Agreement, will not enter into, any agreement with any other person relating the Deposit Account and/or any funds credited thereto pursuant to which it has agreed to comply with instructions originated by such persons as contemplated by Section 9-104 of the UCC. SECTION 6. ADVERSE CLAIMS. The Financial Institution does not know of any liens, claims or encumbrances relating to the Deposit Account. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Deposit Account, the Financial Institution will promptly notify the Collateral Trustee and the Debtor thereof. SECTION 7. MAINTENANCE OF DEPOSIT ACCOUNT. In addition to, and not in lieu of, the obligation of the Financial Institution to honor instructions as set forth in Section 2 hereof, the Financial Institution agrees to maintain the Deposit Account as follows: (a) Statements and Confirmations. The Financial Institution will promptly send copies of all statements, confirmations and other correspondence concerning the Deposit Account simultaneously to each of the Debtor and the Collateral Trustee at the address for each set forth in Section 11 of this Agreement; and (b) Tax Reporting. All interest, if any, relating to the Deposit Account, shall be reported to the Internal Revenue Service and all state and local taxing authorities under the name and taxpayer identification number of the Debtor. SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE FINANCIAL INSTITUTION. The Financial Institution hereby makes the following representations, warranties and covenants: (a) The Deposit Account has been established as set forth in Section 1 and such Deposit Account will be maintained in the manner set forth herein until termination of this Agreement; and (b) This Agreement is the valid and legally binding obligation of the Financial Institution. SECTION 9. INDEMNIFICATION OF FINANCIAL INSTITUTION. The Debtor and the Collateral Trustee hereby agree that (a) the Financial Institution is released from any and all liabilities to the Debtor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Financial Institution with the terms hereof, except to the extent that such liabilities arise from the Financial Institution's negligence and (b) the Debtor, its successors and assigns shall at all times indemnify and save harmless the Financial Institution from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Financial Institution with the terms hereof, except to the extent that such arises from the Financial Institution's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 10. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Financial Institution and by sending written notice of such assignment to the Debtor. SECTION 11. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Debtor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Financial Institution: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 12. TERMINATION. The obligations of the Financial Institution to the Collateral Trustee pursuant to this Agreement shall continue in effect until the security interest of the Collateral Trustee in the Deposit Account has been terminated pursuant to the terms of the applicable Security Agreements and the Collateral Trustee have notified the Financial Institution of such termination in writing. The Collateral Trustee agrees to provide Notice of Termination of Deposit Account Control Agreement in substantially the form of Exhibit B hereto to the Financial Institution upon the request of the Debtor on or after the termination of the Collateral Trustee' security interest in the Deposit Account pursuant to the terms of the applicable Security Agreement. The termination of this Agreement shall not terminate the Deposit Account or alter the obligations of the Financial Institution to the Debtor pursuant to any other agreement with respect to the Deposit Account. SECTION 13. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. IN WITNESS WHEREOF, the parties hereto have caused this Deposit Account Control Agreement to be executed as of the date first above written by their respective officers thereunto duly authorized. [DEBTOR] By:__________________________ Name: Title: WELLS FARGO BANK, N.A., Collateral Trustee By:__________________________ Name: Title: [NAME OF FINANCIAL INSTITUTION], as Financial Institution By:__________________________ Name: Title: EXHIBIT A TO DEPOSIT ACCOUNT CONTROL AGREEMENT [Letterhead of Collateral Trustee] [Date] [Name and Address of Financial Institution] Attention: Re: Notice of Sole Control Ladies and Gentlemen: As referenced in the Deposit Account Control Agreement dated as of _______, 200__ among [NAME OF THE DEBTOR], you and the undersigned (a copy of which is attached), we hereby give you notice of our sole control over deposit account number ____________ (the "DEPOSIT ACCOUNT") and all financial assets credited thereto. You are hereby instructed not to accept any direction, instructions or entitlement orders with respect to the Deposit Account or the financial assets credited thereto from any person other than the undersigned, unless otherwise ordered by a court of competent jurisdiction. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:________________________ Name: Title: cc: [NAME OF THE DEBTOR] Exhibit D-A-1 EXHIBIT B NOTICE OF TERMINATION OF DEPOSIT ACCOUNT CONTROL AGREEMENT [Letterhead of the Collateral Agent] [Date] [Name and Address of Financial Institution] Attention: Re: Termination of Deposit Account Control Agreement You are hereby notified that the Deposit Account Control Agreement dated as of __________, 2004 among you, [NAME OF THE DEBTOR], and WELLS FARGO BANK, N.A., in its capacity as collateral trustee on behalf of the holders of Priority Lien Obligations and the holders of Parity Lien Obligations (together with any successors or assigns in such capacity, the "COLLATERAL TRUSTEE") (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to account number(s) from [NAME OF THE DEBTOR]. This notice terminates any obligations you may have to the Collateral Trustee with respect to such account(s), however nothing contained in this notice shall alter any obligations which you may otherwise owe to [NAME OF THE DEBTOR] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [NAME OF THE DEBTOR]. Very truly yours, WELLS FARGO BANK, N.A. as Collateral Trustee By:________________________ Name: Title: Cc: [name of debtor] Exhibit D-A-2 EX-10.5 9 l08738aexv10w5.txt EXHIBIT 10.5 EXHIBIT 10.5 PRIORITY LIEN PLEDGE AGREEMENT DATED AS OF JULY 7, 2004 BETWEEN CAPITAL C ENERGY OPERATIONS, LP AND WELLS FARGO BANK, N.A., AS COLLATERAL TRUSTEE TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS; GRANT OF SECURITY.......................................... 1 1.1 GENERAL DEFINITIONS..................................................... 1 1.2 DEFINITIONS; INTERPRETATION............................................. 3 SECTION 2. GRANT OF SECURITY....................................................... 3 2.1 GRANT OF SECURITY....................................................... 3 SECTION 3. SECURITY FOR OBLIGATIONS; PLEDGOR REMAINS LIABLE........................ 3 3.1 SECURITY FOR OBLIGATIONS................................................ 3 3.2 CONTINUING LIABILITY UNDER COLLATERAL................................... 4 SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS............................ 4 4.1 GENERALLY............................................................... 4 4.2 PLEDGED EQUITY INTERESTS................................................ 7 SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES...................... 10 5.1 ACCESS; RIGHT OF INSPECTION............................................. 10 5.2 FURTHER ASSURANCES...................................................... 10 SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT........................... 11 6.1 POWER OF ATTORNEY....................................................... 11 6.2 NO DUTY ON THE PART OF COLLATERAL TRUSTEE OR SECURED PARTIES............ 11 SECTION 7. REMEDIES................................................................ 12 7.1 GENERALLY............................................................... 12 7.2 APPLICATION OF PROCEEDS................................................. 13 7.3 CASH PROCEEDS........................................................... 14 SECTION 8. COLLATERAL TRUSTEE...................................................... 14 SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS......................... 15 SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM....................... 15 SECTION 11. MISCELLANEOUS.......................................................... 16
SCHEDULE 4.1 -- GENERAL INFORMATION SCHEDULE 4.2 -- PLEDGED EQUITY INTERESTS EXHIBIT A -- PLEDGE SUPPLEMENT i EXHIBIT B -- UNCERTIFICATED SECURITIES CONTROL AGREEMENT ii This PRIORITY LIEN PLEDGE AGREEMENT, dated as of July 7, 2004 (this "AGREEMENT"), between CAPITAL C ENERGY OPERATIONS, LP (the "PLEDGOR"), and WELLS FARGO BANK, N.A., as collateral trustee for the Secured Parties (as herein defined) (in such capacity as collateral trustee, the "COLLATERAL TRUSTEE"). RECITALS: WHEREAS, reference is made to that certain Credit and Guaranty Agreement, dated as of the date hereof (as it may be amended, restated, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), by and among BELDEN & BLAKE CORPORATION, an Ohio corporation (together with any successor, the "COMPANY"), CERTAIN SUBSIDIARIES OF COMPANY, as Guarantors (the "GUARANTORS" and together with the Company, the "CREDIT PARTIES"), the lenders party thereto from time to time (the "LENDERS"), GOLDMAN SACHS CREDIT PARTNERS L.P., as Sole Lead Arranger, Sole Book Runner, Sole Syndication Agent and Administrative Agent, and [DOCUMENTATION AGENT], as Documentation Agent; WHEREAS, subject to the terms and conditions of the Credit Agreement, certain Credit Parties may enter into one or more Hedge Agreements (as defined in the Credit Agreement) with one or more Lender Counterparties; WHEREAS, in consideration of the extensions of credit and other accommodations of Lenders and Lender Counterparties as set forth in the Credit Agreement and the Hedge Agreements, respectively, the Pledgor has agreed to secure the Credit Parties' obligations under the Credit Documents and the Hedge Agreements as set forth herein; and NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Pledgor and the Collateral Trustee agree as follows: SECTION 1. DEFINITIONS; GRANT OF SECURITY. 1.1 GENERAL DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "AGREEMENT" shall have the meaning set forth in the preamble. "BANKRUPTCY CODE" shall mean Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "CASH PROCEEDS" shall have the meaning assigned in Section 7.3. "COLLATERAL" shall have the meaning assigned in Section 2.1. "COLLATERAL TRUSTEE" shall have the meaning set forth in the preamble. "COMPANY" shall have the meaning set forth in the recitals. "CREDIT AGREEMENT" shall have the meaning set forth in the recitals. "LENDER" shall have the meaning set forth in the recitals. "LIEN" shall mean (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing and (ii) in the case of Pledged Equity Interests, any purchase option, call or similar right of a third party with respect to such Pledged Equity Interests. "PARITY LIEN PLEDGE AGREEMENT" means the Parity Lien Pledge Agreement, dated as of the date hereof, between Pledgor and Collateral Trustee. "PLEDGE SUPPLEMENT" shall mean any supplement to this agreement in substantially the form of Exhibit A. "PLEDGED EQUITY INTERESTS" shall mean all shares of capital stock, limited liability company interest, general partnership, limited partnership, limited liability partnership or other partnership interest and all other equity interests in the Company, including, without limitation, all interests listed on Schedule 4.2 (as such schedule may be amended or modified from time to time) and the certificates, if any, representing such equity interests and any interest of the Pledgor on the books and records of the Company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 equity interest. "PLEDGOR" shall have the meaning set forth in the preamble. "PROCEEDS" shall mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Pledged Equity Interests and (iii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. "RECORD" shall have the meaning specified in Article 9 of the UCC. "SECURED OBLIGATIONS" shall have the meaning assigned in Section 3.1. "SECURED PARTIES" shall mean the Collateral Trustee, Agents, Lenders and the Lender Counterparties and shall include, without limitation, all former Collateral Trustee, Agents, Lenders and Lender Counterparties to the extent that any Obligations owing to such Persons were incurred while such Persons were Collateral Trustee, Agents, Lenders or Lender Counterparties and such Obligations have not been paid or satisfied in full. "SECURITIES" shall mean any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. 2 "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction. "UNITED STATES" shall mean the United States of America. 1.2 DEFINITIONS; INTERPRETATION. All capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the Credit Agreement or, if not defined therein, in the UCC. References to "Sections," "Exhibits" and "Schedules" shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. If any conflict or inconsistency exists between this Agreement and the Credit Agreement, the Credit Agreement shall govern. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC. SECTION 2. GRANT OF SECURITY. 2.1 GRANT OF SECURITY. The Pledgor hereby grants to the Collateral Trustee for its benefit and benefit of the Secured Parties a security interest in and continuing lien on all of Pledgor's right, title and interest in, to and under all of the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the "COLLATERAL"): (a) Pledged Equity Interests; and (b) to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing. SECTION 3. SECURITY FOR OBLIGATIONS; PLEDGOR REMAINS LIABLE. 3.1 SECURITY FOR OBLIGATIONS. This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) (and any successor provision thereof)), of all Obligations with respect to the Pledgor and the Credit Parties (the "SECURED OBLIGATIONS"). 3 3.2 CONTINUING LIABILITY UNDER COLLATERAL. Notwithstanding anything herein to the contrary, (i) the Pledgor shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Collateral Trustee or any Secured Party, (ii) the Pledgor shall remain liable under each of the agreements included in the Collateral, including, without limitation, any agreements relating to Pledged Equity Interests, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and neither the Collateral Trustee nor any Secured Party shall have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Collateral Trustee nor any Secured Party have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, including, without limitation, any agreements relating to Pledged Equity Interests, and (iii) the exercise by the Collateral Trustee of any of its rights hereunder shall not release the Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral. SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS. 4.1 GENERALLY. (a) Representations and Warranties. The Pledgor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) it owns the Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Collateral, in each case free and clear of any and all Liens (other than Permitted Liens), rights or claims of all other Persons, including, without limitation, liens arising as a result of the Pledgor becoming bound (as a result of merger or otherwise) as debtor under a security agreement entered into by another Person; provided, that the foregoing shall not prohibit the Pledgor from selling or otherwise disposing of any Pledged Equity Interests as long as such sale or other disposition does not result in a Change of Control giving rise to an Event of Default under Section 8.1(k) of the Credit Agreement and the Person acquiring such Pledged Equity Interests pledges them to the Collateral Trustee pursuant to a pledge agreement substantially in the form of this Agreement; (ii) it has indicated on Schedule 4.1(A)(as such schedule may be amended or supplemented from time to time): (w) its type of organization, (x) its jurisdiction of organization, (y) its organizational identification number and (z) the jurisdiction where its chief executive office or its sole place of business is, and for the five-year period preceding the date hereof has been, located. (iii) the full legal name of the Pledgor is as set forth on Schedule 4.1(A) and it has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name) except for those names set forth on Schedule 4.1(B) (as such schedule may be amended or supplemented from time to time); 4 (iv) except as provided on Schedule 4.1(C), it has not changed its name, jurisdiction of organization, chief executive office or sole place of business or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) within the past five (5) years; (v) it has not within the last five (5) years become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not heretofore been terminated other than the agreements identified on Schedule 4.1(D) hereof (as such schedule may be amended or supplemented from time to time); (vi) with respect to each agreement identified on Schedule 4.1(D), it has indicated on Schedule 4.1 (A) and Schedule 4.1(B) the information required pursuant to Section 4.1(a)(ii), (iii) and (iv) with respect to the debtor under each such agreement; (vii) (A) upon the filing of all UCC financing statements naming the Pledgor as "debtor" and the Collateral Trustee as "secured party" and describing the Collateral in the filing office(s) set forth on Schedule 4.1(E) hereof (as such schedule may be amended or supplemented from time to time) and (B) upon delivery of all certificated Pledged Equity Interests, the security interests granted to the Collateral Trustee hereunder constitute valid and perfected first priority Liens on all of the Collateral; (viii) all actions and consents, including all filings, notices, registrations and recordings necessary or desirable for the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect of the Collateral have been made or obtained or otherwise authorized for filing; (ix) other than the financing statements filed in favor of the Collateral Trustee pursuant hereto (and any financing statements filed in favor of the Collateral Trustee in connection with the Senior Secured Indebtedness), no effective UCC financing statement or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for financing statements for which proper termination statements have been delivered to the Collateral Trustee for filing; (x) no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for either (i) the pledge or grant by the Pledgor of the Liens purported to be created in favor of the Collateral Trustee hereunder or (ii) the exercise by Collateral Trustee of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by clause (vii) above and (B) as may be required, in connection with the disposition of any Pledged Equity Interests, by laws generally affecting the offering and sale of Securities; (xi) all information supplied by the Pledgor with respect to any of the Collateral is accurate and complete in all material respects; 5 (xii) except as described on Schedule 4.1(D), it has not become bound as a debtor, either by contract or by operation of law, by a security agreement previously entered into by another Person covering any of the Collateral; and (xiii) it has been duly organized as a limited partnership solely under the laws of the State of Delaware and remains duly existing as such. The Pledgor has not filed any certificates of domestication, transfer or continuance in any other jurisdiction. (b) Covenants and Agreements. The Pledgor hereby covenants and agrees that: (i) except for the security interest created by this Agreement and the Parity Lien Pledge Agreement and except for Permitted Liens, it shall not create or suffer to exist any Lien upon or with respect to any of the Collateral, and it shall defend the Collateral against all Persons at any time claiming any interest therein; (ii) it shall not change its name, identity, corporate structure (e.g., by merger, consolidation, change in corporate form or otherwise), type of organization or jurisdiction of organization unless it shall have (a) notified the Collateral Trustee in writing, by executing and delivering to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure or jurisdiction of organization and providing such other information in connection therewith as the Collateral Trustee may reasonably request and (b) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Trustee's security interest in the Collateral intended to be granted and agreed to hereby; (iii) it shall pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good faith; provided, it shall in any event pay such taxes, assessments, charges, levies or claims not later than five (5) days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against it or any of the Collateral as a result of the failure to make such payment; (iv) upon the Pledgor or any of its officer obtaining knowledge thereof, it shall promptly notify the Collateral Trustee in writing of any event (other than events related to the business or prospects of Company or any of Company's Subsidiaries or events affecting the oil and/or gas business, or the economy generally) that may have a Material Adverse Effect on the value of the Collateral or any portion thereof, the ability of the Pledgor or the Collateral Trustee to dispose of the Collateral or any portion thereof, or the rights and remedies of the Collateral Trustee in relation thereto, including, without limitation, the levy of any legal process against the Collateral or any portion thereof; (v) it shall not take or permit any action which could impair the Collateral Trustee's rights in the Collateral; and (c) it shall not sell, transfer or assign (by operation of law or otherwise) any Collateral except as permitted by the Credit Agreement. 6 4.2 PLEDGED EQUITY INTERESTS 4.2.1 . (a) Representations and Warranties. The Pledgor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.2(A) (as such schedule may be amended or supplemented from time to time) sets forth all of the Pledged Equity Interests owned by the Pledgor and such Pledged Equity Interests constitute the percentage of issued and outstanding shares of stock or percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the Company; (ii) except as set forth on Schedule 4.2(B) and other than as a result of the merger contemplated by the Merger Agreement, it has not acquired any Pledged Equity Interests from another Person within the past five (5) years; (iii) it is the record and beneficial owner of the Pledged Equity Interests free of all Liens (other than Permitted Liens), rights or claims of other Persons and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any Pledged Equity Interests; and (iv) without limiting the generality of Section 4.1(a)(viii), no consent of any Person including any other general or limited partner, any other member of the Company, any other shareholder or any other trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Collateral Trustee in any Pledged Equity Interests or the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof. (b) Covenants and Agreements. The Pledgor hereby covenants and agrees that: (i) in the event it acquires rights in any Pledged Equity Interests after the date hereof, it shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, reflecting such new Pledged Equity Interests and all other Pledged Equity Interests. Notwithstanding the foregoing, it is understood and agreed that the security interest of the Collateral Trustee shall attach to all Pledged Equity Interests immediately upon the Pledgor's acquisition of rights therein and shall not be affected by the failure of the Pledgor to deliver a supplement to Schedule 4.4 as required hereby; (ii) except as provided in the next sentence, in the event the Pledgor receives any securities or other property (other than cash) upon the merger, consolidation, liquidation or dissolution of the Company, then (a) such securities or other property shall be included in the definition of Collateral without further action and (b) the Pledgor shall immediately take all steps, if any, necessary or advisable to ensure the validity, perfection, priority and, if applicable, control of the Collateral Trustee over such Pledged Equity Interests (including, without limitation, delivery thereof to the Collateral Trustee) 7 and pending any such action the Pledgor shall be deemed to hold such securities or other property in trust for the benefit of the Collateral Trustee and shall segregate such securities or other property from all other property of the Pledgor. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to receive and retain any dividends or distributions on the Pledged Equity Interests paid in cash and all such dividends or distributions so received shall be deemed released from the Liens granted by this Agreement; (iii) without the prior written consent of the Collateral Trustee, it shall not vote to enable or take any other action to: (a) amend or terminate any partnership agreement, limited liability company agreement, certificate of incorporation, by-laws or other organizational documents in any way that materially changes the rights of the Pledgor with respect to any Pledged Equity Interests or adversely affects the validity, perfection or priority of the Collateral Trustee's security interest or (b) cause the Pledged Equity Interests which are not securities (for purposes of the UCC) on the date hereof to elect or otherwise take any action to cause such Pledged Equity Interests to be treated as securities for purposes of the UCC; provided, however, notwithstanding the foregoing, if the Company takes any such action in violation of the foregoing in this clause (b), the Pledgor shall promptly notify the Collateral Trustee in writing of any such election or action and, in such event, shall take all steps necessary or advisable to establish the Collateral Trustee's "control" thereof; provided, further, that notwithstanding the foregoing, so long as such actions are in accordance with the Credit Agreement and so long as no Event of Default has occurred and is continuing, the Pledgor may enable or allow the Company, and nothing in this Agreement shall restrict the Company, to offer, issue, sell or otherwise dispose of, any equity securities, or any options, warrants or other rights convertible, exercisable or exchangeable at any time into any equity securities of the Company, or to amend the articles of incorporation of the Company to change the authorized number of shares of capital stock of the Company or to designate the rights and preferences of any series of preferred stock, or amend the bylaws of the Company to provide for any rights to nominate directors with respect to any stockholder, or among the stockholders, of the Company, or any rights of any stockholder to special voting on any matters; (iv) it shall comply with all of its obligations under any partnership agreement or limited liability company agreement relating to Pledged Equity Interests and shall enforce all of its rights with respect to any Pledged Equity Interests, except where such failure to comply or enforce could not reasonably be expected to have a Material Adverse Effect; and (v) without the prior written consent of the Collateral Trustee, it shall not permit the Company to merge or consolidate unless (i) the surviving entity creates a security interest that is perfected by a filed financing statement (that is not effective solely under section 9-508 of the UCC) in collateral in which such new debtor has or acquires rights, and (ii) all the outstanding capital stock or other equity interests of the surviving or resulting corporation, limited liability company, partnership or other entity is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding equity interests of any other constituent Credit Parties. (c) Delivery and Control. 8 (i) The Pledgor agrees that with respect to any Pledged Equity Interests in which it currently has rights it shall comply with the provisions of this Section 4.2(c)(i) on or before the Closing Date and with respect to any Pledged Equity Interests hereafter acquired by the Pledgor it shall comply with the provisions of this Section 4.2(c)(i) immediately upon acquiring rights therein, in each case in form and substance satisfactory to the Collateral Trustee. With respect to any Pledged Equity Interests that is represented by a certificate or that is an "instrument," it shall cause such certificate or instrument to be delivered to the Collateral Trustee, indorsed in blank by an "effective indorsement" (as defined in Section 8-107 of the UCC), regardless of whether such certificate constitutes a "certificated security" for purposes of the UCC. With respect to any Pledged Equity Interests that is an "uncertificated security" for purposes of the UCC, it shall cause the Company to either (i) register the Collateral Trustee as the registered owner thereof on the books and records of the Company or (ii) execute an agreement substantially in the form of Exhibit B hereto, pursuant to which such issuer agrees to comply with the Collateral Trustee's instructions with respect to such uncertificated security without further consent by the Pledgor. (d) Voting and Distributions. (i) So long as no Event of Default shall have occurred and be continuing: (1) except as otherwise provided under the covenants and agreements in this Agreement or elsewhere herein or in the Credit Agreement, the Pledgor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Equity Interests or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; and (2) the Collateral Trustee shall promptly execute and deliver (or cause to be executed and delivered) to the Pledgor all proxies, and other instruments as the Pledgor may from time to time reasonably request for the purpose of enabling the Pledgor to exercise the voting and other consensual rights when and to the extent which it is entitled to exercise pursuant to clause (1) above; (ii) Upon the occurrence and during the continuation of an Event of Default: (1) all rights of the Pledgor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Collateral Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights; and (2) in order to permit the Collateral Trustee to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (1) the Pledgor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Trustee all proxies, dividend payment orders and other instruments as the Collateral Trustee may from time to time 9 reasonably request and (2) the Pledgor acknowledges that the Collateral Trustee may utilize the power of attorney set forth in Section 6.1. SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES. 5.1 ACCESS; RIGHT OF INSPECTION. The Collateral Trustee shall at all times have full and free access upon reasonable notice during normal business hours, to all the books, correspondence and records of the Pledgor relating to the Collateral, and the Collateral Trustee and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and the Pledgor agrees to render to the Collateral Trustee, at such Pledgor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. 5.2 FURTHER ASSURANCES. (a) The Pledgor agrees that from time to time, at its expense, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Trustee may reasonably request, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted hereby or to enable the Collateral Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Pledgor shall: (i) file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be necessary or desirable, or as the Collateral Trustee may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (ii) at any reasonable time, upon request by the Collateral Trustee, assemble the Collateral and allow inspection of the Collateral by the Collateral Trustee, or persons designated by the Collateral Trustee; and (iii) at the Collateral Trustee's request, appear in and defend any action or proceeding that may affect the Pledgor's title to or the Collateral Trustee's security interest in all or any part of the Collateral. The Pledgor hereby authorizes the Collateral Trustee to file a Record or Records, including, without limitation, financing or continuation statements, and amendments thereto, in any jurisdictions and with any filing offices as the Collateral Trustee may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Collateral Trustee herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Collateral Trustee may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Collateral Trustee herein. The Pledgor shall furnish to the Collateral Trustee from time to time statements and schedules further identifying and describing the Collateral and such 10 other reports in connection with the Collateral as the Collateral Trustee may reasonably request, all in reasonable detail. SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT. 6.1 POWER OF ATTORNEY. The Pledgor hereby irrevocably appoints the Collateral Trustee (such appointment being coupled with an interest) as its attorney-in-fact, with full authority in its place and stead and in its name, the Collateral Trustee or otherwise, from time to time in the Collateral Trustee's discretion to take any action and to execute any instrument that the Collateral Trustee may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following: (a) upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (a) above; (c) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that the Collateral Trustee may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Trustee with respect to any of the Collateral; (d) to prepare and file any UCC financing statements against the Pledgor as debtor; (e) to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Collateral Trustee in its sole discretion, any such payments made by the Collateral Trustee to become obligations of the Pledgor to the Collateral Trustee, due and payable immediately without demand; and (f) upon the occurrence and during the continuance of any Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Trustee were the absolute owner thereof for all purposes, and to do, at the Collateral Trustee's option and the Pledgor's expense, at any time or from time to time, all acts and things that the Collateral Trustee deems reasonably necessary to protect, preserve or realize upon the Collateral and the Collateral Trustee's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. 6.2 NO DUTY ON THE PART OF COLLATERAL TRUSTEE OR SECURED PARTIES. The powers conferred on the Collateral Trustee hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral 11 Trustee or any Secured Party to exercise any such powers. The Collateral Trustee and the Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to the Pledgor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. SECTION 7. REMEDIES. 7.1 GENERALLY. (a) If any Event of Default shall have occurred and be continuing, the Collateral Trustee may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it at law or in equity, all the rights and remedies of the Collateral Trustee on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect, enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and also may pursue any of the following separately, successively or simultaneously: (i) require the Pledgor, and the Pledgor hereby agrees that it shall at its expense and promptly upon request of the Collateral Trustee forthwith, assemble all or part of the Collateral as directed by the Collateral Trustee and make it available to the Collateral Trustee at a place to be designated by the Collateral Trustee that is reasonably convenient to both parties; and (ii) without notice except as specified below or under the UCC, sell, assign or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Trustee'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 the Collateral Trustee may deem commercially reasonable. (b) The Collateral Trustee or any Secured Party may be the purchaser of any or all of the Collateral at any public or private (to the extent to the portion of the Collateral being privately sold is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations) sale in accordance with the UCC and the Collateral Trustee, as Collateral Trustee for and representative of the Secured Parties, 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 sale made in accordance with the UCC, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Trustee 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 the Pledgor, and the Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Trustee 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. The Pledgor agrees that it would not be commercially unreasonable for the Collateral Trustee to dispose of the Collateral or any portion thereof by using Internet sites that provide for the auction of assets of the types included in the 12 Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. The Pledgor hereby waives any claims against the Collateral Trustee arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Trustee accepts the first offer received and does not offer such Collateral to more than one offeree. The Pledgor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Trustee, that the Collateral Trustee has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of the Collateral Trustee hereunder. (c) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Collateral Trustee may be compelled, with respect to any sale of all or any part of the Pledged Equity Interests conducted without prior registration or qualification of such Pledged Equity Interests under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Pledged Equity Interests for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, The Pledgor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Equity Interests for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If the Collateral Trustee determines to exercise its right to sell any or all of the Pledged Equity Interests, upon written request, the Pledgor shall and shall cause the Company to furnish to the Collateral Trustee all such information as the Collateral Trustee may request in order to determine the number and nature of interest, shares or other instruments included in the Pledged Equity Interests which may be sold by the Collateral Trustee in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. (d) The Collateral Trustee may sell the Collateral without giving any warranties as to the Collateral. The Collateral Trustee may specifically disclaim or modify any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. (e) The Collateral Trustee shall have no obligation to marshal any of the Collateral. 7.2 APPLICATION OF PROCEEDS. (a) Except as expressly provided elsewhere in this Agreement, all proceeds received by the Collateral Trustee in respect of any sale, any collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by the Collateral Trustee against, the Secured Obligations in the following order of priority: first, to the payment of all 13 reasonable costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Trustee and its agents and counsel, and all other reasonable expenses, liabilities and advances made or incurred by the Collateral Trustee in connection therewith, and all amounts for which the Collateral Trustee is entitled to indemnification hereunder (in its capacity as the Collateral Trustee and not as a Lender), and to the payment of all reasonable costs and expenses paid or incurred by the Collateral Trustee in connection with the exercise of any right or remedy hereunder or under the Credit Agreement, all in accordance with the terms hereof or thereof; second, to the extent of any excess of such proceeds, to the payment of all other Secured Obligations for the ratable benefit of the Lenders and the Lender Counterparties; and third, to the extent of any excess of such proceeds, to the payment to or upon the order of the Pledgor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 7.3 CASH PROCEEDS. After an Event of Default shall have occurred and be continuing, upon receipt of any Collateral consisting of cash, checks and other non-cash items (collectively, "CASH PROCEEDS") by the Pledgor, the Pledgor shall turn over all such Cash Proceeds to the Collateral Trustee. Any Cash Proceeds shall be applied by the Collateral Trustee against the Secured Obligations then due and owing. SECTION 8. COLLATERAL TRUSTEE. The Collateral Trustee has been appointed to act as Collateral Trustee under the Collateral Trust Agreement by Administrative Agent and, by their acceptance of the benefits hereof, the other Secured Parties. The Collateral Trustee shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Credit Agreement; provided, the Collateral Trustee shall, after payment in full of all Obligations under the Credit Agreement and the other Credit Documents, exercise, or refrain from exercising, any remedies provided for herein in accordance with the instructions of the holders of a majority of the aggregate notional amount (or, with respect to any Hedge Agreement that has been terminated in accordance with its terms, the amount then due and payable (exclusive of expenses and similar payments but including any early termination payments then due) under such Hedge Agreement) under all Hedge Agreements. In furtherance of the foregoing provisions of this Section, each Secured Party, by its acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Secured Party that all rights and remedies hereunder may be exercised solely by the Collateral Trustee for the benefit of Secured Parties in accordance with the terms of this Section. Collateral Trustee may resign at any time by giving thirty (30) days' prior written notice thereof to Lenders and the Pledgor, and Collateral Trustee may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the Pledgor and Collateral Trustee signed by the Requisite Lenders. Upon any such notice of resignation or any such removal, Requisite Lenders shall have the right, upon five (5) Business Days' notice to the Administrative Agent, to appoint a successor Collateral Trustee. Upon the acceptance of any appointment as Collateral Trustee hereunder by a successor Collateral Trustee, that successor Collateral Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Trustee under this Agreement, and the retiring or removed Collateral Trustee under this Agreement shall promptly (i) transfer to such successor Collateral Trustee all sums, Securities and other items of Collateral held hereunder, 14 together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Trustee under this Agreement, and (ii) execute and deliver to such successor Collateral Trustee or otherwise authorize the filing of such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Trustee of the security interests created hereunder, whereupon such retiring or removed Collateral Trustee shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Trustee's resignation or removal hereunder as the Collateral Trustee, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Trustee hereunder. SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations (other than any Secured Obligations consisting of indemnity or similar obligations in respect of which no amounts are due and payable), the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, be binding upon The Pledgor, its successors and assigns, and inure, together with the rights and remedies of the Collateral Trustee hereunder, to the benefit of the Collateral Trustee and its successors, transferees and assigns. Without limiting the generality of the foregoing, but subject to the terms of the Credit Agreement, any Lender may assign or otherwise transfer any Loans held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Lenders herein or otherwise. Upon the payment in full of all Secured Obligations (other than any Secured Obligations consisting of indemnity or similar obligations in respect of which no amounts are due and payable), the cancellation or termination of the Commitments and the cancellation or expiration of all outstanding Letters of Credit, the security interest granted hereby shall terminate hereunder and of record, all rights to the Collateral shall revert to the Pledgor and this Agreement (including any provision providing for the appointment of the Collateral Trustee as an attorney-in-fact for the Pledgor) shall terminate. Upon any such termination the Collateral Trustee shall, at Pledgor's expense, execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination. SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM. The powers conferred on the Collateral Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Collateral Trustee shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Trustee accords its own property. Neither the Collateral Trustee nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or otherwise. If the Pledgor fails to perform any agreement contained herein, the Collateral Trustee may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Trustee incurred in connection therewith shall be payable by the Pledgor. 15 SECTION 11. MISCELLANEOUS. 11.1 Any notice required or permitted to be given under this Agreement shall be given in accordance with Section 10.1 of the Credit Agreement. No failure or delay on the part of the Collateral Trustee in the exercise of any power, right or privilege hereunder or under any other Credit Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Credit Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 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. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. This Agreement shall be binding upon and inure to the benefit of the Collateral Trustee and Grantors and their respective successors and assigns. The Pledgor shall not, without the prior written consent of the Collateral Trustee given in accordance with the Credit Agreement, assign any right, duty or obligation hereunder. This Agreement and the other Credit Documents embody the entire agreement and understanding between the Pledgor and the Collateral Trustee and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Credit Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. 11.2 THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 11.3 Limitation of Liability. (a) Each party hereto hereby agrees that all representations, warranties, covenants and other agreements (except for the representations and warranties provided in Section 4.1(a)(i)) made by the Pledgor herein are made without recourse to any assets, monies, properties (tangible, intangible, personal or real) of the Pledgor (other than the Collateral), and the Pledgor shall have no obligation to the Collateral Trustee, the Secured Parties, or any other Person with respect to any breach by the Pledgor of any such representation, warranty, covenant or other agreement (except for the representations and warranties provided in Section 4.1(a)(i)), other than to the extent of any proceeds actually received upon the liquidation of the Collateral. 16 (b) Notwithstanding any other provision of this Agreement or of any of the other Credit Documents, there shall be no recourse against the Pledgor or any of its stockholders, members, partners, officers, directors, employees or agents (collectively, the "NONRECOURSE PERSONS"), for any liability to the Secured Parties arising in connection with any breach or default under this Agreement, and the Secured Parties shall look solely to Company and the Collateral in exercising the Secured Parties' rights and remedies and enforcing the obligations of the other parties under and in connection with the Credit Documents, provided, that the foregoing provisions shall not limit or restrict the right of any Secured Party to name the Pledgor as defendant in any action or suit solely for a judicial foreclosure or for the exercise of any other remedy or with respect to this Agreement so long as no judgment in the nature of a deficiency judgment shall be enforced against any Nonrecourse Person out of any Property. The limitations on recourse set forth in this paragraph shall survive the termination of this Agreement and the full payment and performance of the Secured Obligations. 17 IN WITNESS WHEREOF, the Pledgor and the Collateral Trustee have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. CAPITAL C ENERGY OPERATIONS, LP BY: CAPITAL C ENERGY, LP, ITS GENERAL PARTNER BY: CAPITAL C ENERGY, LLC, ITS GENERAL PARTNER By:/s/ Frost W. Cochran ------------------------------- Name: Frost W. Cochran Title: President WELLS FARGO BANK, N.A., as Collateral Trustee By:/s/ Jane Y. Schweiger ------------------------------- Name: Jane Y. Schweiger Title: Vice President 18 SCHEDULE 4.1 TO PLEDGE AGREEMENT GENERAL INFORMATION (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business and Organizational Identification Number of the Pledgor:
Chief Executive Full Legal Type of Jurisdiction of Office/Sole Place of Name Organization Organization Business Organization I.D.# - ---------- ------------ --------------- -------------------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which the Pledgor has conducted business for the past five (5) years: Trade Name or Fictitious Business Name (C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business and Corporate Structure within past five (5) years: Date of Change Description of Change (D) Agreements pursuant to which Pledgor is found as debtor within past five (5) years: Description of Agreement (E) Financing Statements: Filing Jurisdiction(s) SCHEDULE 4.1-1 SCHEDULE 4.2 TO PLEDGE AGREEMENT PLEDGED EQUITY INTERESTS
LIMITED LIABILITY % OF OUTSTANDING COMPANY/ LLC/PARTNERSHIP PARTNERSHIP/CORPORATION/ CERTIFICATED CERTIFICATE NO. OF PLEDGED INTERESTS/STOCK/TRUST TRUST (Y/N) NO. (IF ANY) UNITS/STOCK INTERESTS - ------------------------ ------------ ------------ -------------- ---------------------
(B)
Name of Pledgor Date of Acquisition Description of Acquisition
EXHIBIT 4.2-1 EXHIBIT A TO PLEDGE AGREEMENT PLEDGE SUPPLEMENT This PLEDGE SUPPLEMENT, dated [mm/dd/yy], is delivered by CAPITAL C ENERGY OPERATIONS, LP., a Delaware limited partnership (the "PLEDGOR") pursuant to the Pledge Agreement, dated as of July __, 2004 (as it may be from time to time amended, restated, modified or supplemented, the "Pledge Agreement"), between PLEDGOR and WELLS FARGO BANK, N.A., as Collateral Trustee. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Pledge Agreement. Pledgor hereby confirms the grant to the Collateral Trustee set forth in the Pledge Agreement of, and does hereby grant to the Collateral Trustee, a security interest in all of Pledgor's right, title and interest in and to all Collateral to secure the Secured Obligations, in each case whether now or hereafter existing or in which Pledgor now has or hereafter acquires an interest and wherever the same may be located. Pledgor represents and warrants that the attached Supplements to Schedules accurately and completely set forth all additional information required pursuant to the Pledge Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the Schedules to the Pledge Agreement. IN WITNESS WHEREOF, Grantor has caused this Pledge Supplement to be duly executed and delivered by its duly authorized officer as of [MM/DD/YY]. CAPITAL C ENERGY OPERATIONS, LP BY: CAPITAL C ENERGY, LP, ITS GENERAL PARTNER BY: CAPITAL C ENERGY, LLC, ITS GENERAL PARTNER By:_____________________________ Name: Title: EXHIBIT A-1 SUPPLEMENT TO SCHEDULE 4.1 TO PLEDGE AGREEMENT Additional Information: (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business and Organizational Identification Number of the Pledgor:
Chief Executive Office/Sole Place of Business (or Jurisdiction of Residence if Grantor Full Legal Name Type of Organization Organization is a Natural Person) Organization I.D.# - --------------- -------------------- --------------- -------------------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which the Pledgor has conducted business for the past five (5) years: Trade Name or Fictitious Business Name (C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years: Date of Change Description of Change (D) Agreements pursuant to which the Pledgor is found as debtor within past five (5) years: Description of Agreement (E) Financing Statements: Filing Jurisdiction(s) EXHIBIT A-2 SUPPLEMENT TO SCHEDULE 4.2 TO PLEDGE AGREEMENT PLEDGED EQUITY INTERESTS Additional Information: (A)
LIMITED LIABILITY % OF OUTSTANDING COMPANY/ LLC/PARTNERSHIP PARTNERSHIP/CORPORATION/ CERTIFICATED CERTIFICATE NO. OF PLEDGED INTERESTS/STOCK/TRUST TRUST (Y/N) NO. (IF ANY) UNITS/STOCK INTERESTS - ------------------------ ------------ ------------ -------------- ---------------------
(B) Date of Acquisition Description of Acquisition EXHIBIT A-3 EXHIBIT B TO PLEDGE AGREEMENT UNCERTIFICATED SECURITIES CONTROL AGREEMENT This Uncertificated Securities Control Agreement dated as of _________, 200__ among CAPITAL C ENERGY OPERATIONS, LP (the "PLEDGOR"), WELLS FARGO BANK, N.A., as Collateral Trustee for the Secured Parties, (the "COLLATERAL TRUSTEE") and ____________, a ________corporation (the "ISSUER"). Capitalized terms used but not defined herein shall have the meaning assigned in the Pledge Agreement dated [as of the date hereof], among the Pledgor, the other Grantors party thereto and the Collateral Trustee (the "PLEDGE AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. SECTION 1. REGISTERED OWNERSHIP OF SHARES. The Issuer hereby confirms and agrees that as of the date hereof the Pledgor is the registered owner of __________ shares of the Issuer's [common] stock (the "PLEDGED SHARES") and the Issuer shall not change the registered owner of the Pledged Shares without the prior written consent of the Collateral Trustee. SECTION 2. INSTRUCTIONS. If at any time the Issuer shall receive instructions originated by the Collateral Trustee relating to the Pledged Shares, the Issuer shall comply with such instructions without further consent by the Pledgor or any other person. SECTION 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer hereby represents and warrants to the Collateral Trustee: (a) It has not entered into, and until the termination of this agreement will not enter into, any agreement with any other person relating the Pledged Shares pursuant to which it has agreed to comply with instructions issued by such other person; and (b) It has not entered into, and until the termination of this agreement will not enter into, any agreement with the Pledgor or the Collateral Trustee purporting to limit or condition the obligation of the Issuer to comply with Instructions as set forth in Section 2 hereof. (c) Except for the claims and interest of the Collateral Trustee and of the Pledgor in the Pledged Shares, the Issuer does not know of any claim to, or interest in, the Pledged Shares. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Shares, the Issuer will promptly notify the Collateral Trustee and the Pledgor thereof. (d) This Uncertificated Securities Control Agreement is the valid and legally binding obligation of the Issuer. SECTION 4. CHOICE OF LAW. This Agreement shall be governed by the laws of the State of [New York]. SECTION 5. CONFLICT WITH OTHER AGREEMENTS. In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered 19 into, the terms of this Agreement shall prevail. No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto. SECTION 6. VOTING RIGHTS. Until such time as the Collateral Trustee shall otherwise instruct the Issuer in writing, the Pledgor shall have the right to vote the Pledged Shares. SECTION 7. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Issuer and by sending written notice of such assignment to the Pledgor. SECTION 8. INDEMNIFICATION OF ISSUER. The Pledgor and the Collateral Trustee hereby agree that (a) the Issuer is released from any and all liabilities to the Pledgor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Issuer with the terms hereof, except to the extent that such liabilities arise from the Issuer's negligence and (b) the Pledgor, its successors and assigns shall at all times indemnify and save harmless the Issuer from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Issuer with the terms hereof, except to the extent that such arises from the Issuer's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 9. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Pledgor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Issuer: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 10. TERMINATION. The obligations of the Issuer to the Collateral Trustee pursuant to this Control Agreement shall continue in effect until the security interests of the Collateral Trustee in the Pledged Shares have been terminated pursuant to the terms of the Exhibit B-2 Security Agreement and the Collateral Trustee has notified the Issuer of such termination in writing. The Collateral Trustee agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Issuer upon the request of the Pledgor on or after the termination of the Collateral Trustee's security interest in the Pledged Shares pursuant to the terms of the Security Agreement. The termination of this Control Agreement shall not terminate the Pledged Shares or alter the obligations of the Issuer to the Pledgor pursuant to any other agreement with respect to the Pledged Shares. SECTION 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. CAPITAL C ENERGY OPERATIONS, LP By:__________________________ Name: Title: WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________ Name: Title: [NAME OF ISSUER] By:__________________________ Name: Title: Exhibit B-3 Exhibit A [Letterhead of Collateral Trustee] [Date] [Name and Address of Issuer] Attention:___________________ Re: Termination of Control Agreement You are hereby notified that the Uncertificated Securities Control Agreement between you, [the Pledgor] and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to Pledged Shares (as defined in the Uncertificated Control Agreement) from [the Pledgor]. This notice terminates any obligations you may have to the undersigned with respect to the Pledged Shares, however nothing contained in this notice shall alter any obligations which you may otherwise owe to [the Pledgor] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [insert name of Pledgor]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:__________________________ Name: Title: Exhibit D-A-1 EX-10.6 10 l08738aexv10w6.txt EXHIBIT 10.6 EXHIBIT 10.6 PARITY LIEN PLEDGE AGREEMENT DATED AS OF JULY 7, 2004 BETWEEN CAPITAL C ENERGY OPERATIONS, LP AND WELLS FARGO BANK, N.A., AS COLLATERAL TRUSTEE TABLE OF CONTENTS
PAGE SECTION 1. DEFINITIONS; GRANT OF SECURITY............................................................... 2 1.1 GENERAL DEFINITIONS.......................................................................... 2 1.2 DEFINITIONS; INTERPRETATION.................................................................. 4 SECTION 2. GRANT OF SECURITY............................................................................ 4 2.1 GRANT OF SECURITY............................................................................ 4 SECTION 3. SECURITY FOR OBLIGATIONS; PLEDGOR REMAINS LIABLE............................................. 5 3.1 SECURITY FOR OBLIGATIONS..................................................................... 5 3.2 CONTINUING LIABILITY UNDER COLLATERAL........................................................ 5 SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS................................................. 5 4.1 GENERALLY.................................................................................... 5 4.2 PLEDGED EQUITY INTERESTS..................................................................... 8 SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES........................................... 11 5.1 ACCESS; RIGHT OF INSPECTION.................................................................. 11 5.2 FURTHER ASSURANCES........................................................................... 11 SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT................................................ 12 6.1 POWER OF ATTORNEY............................................................................ 12 6.2 NO DUTY ON THE PART OF COLLATERAL TRUSTEE OR SECURED PARTIES................................. 13 SECTION 7. REMEDIES..................................................................................... 13 7.1 GENERALLY.................................................................................... 13 7.2 APPLICATION OF PROCEEDS...................................................................... 15 7.3 CASH PROCEEDS................................................................................ 15 SECTION 8. COLLATERAL TRUSTEE........................................................................... 15 SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.............................................. 16 SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM............................................ 16 SECTION 11. MISCELLANEOUS............................................................................... 17
SCHEDULE 4.1 -- GENERAL INFORMATION SCHEDULE 4.2 -- PLEDGED EQUITY INTERESTS EXHIBIT A -- PLEDGE SUPPLEMENT i EXHIBIT B -- UNCERTIFICATED SECURITIES CONTROL AGREEMENT ii This PARITY LIEN PLEDGE AGREEMENT, dated as of July 7, 2004 (this "AGREEMENT"), between CAPITAL C ENERGY OPERATIONS, LP (the "PLEDGOR"), and WELLS FARGO BANK, N.A., as collateral trustee for the Secured Parties (as herein defined) (in such capacity as collateral trustee, the "COLLATERAL Trustee"). RECITALS: WHEREAS, reference is made to that certain Indenture dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "INDENTURE"), among BELDEN & BLAKE CORPORATION, an Ohio corporation (together with any successor, the "Company"), GUARANTORS PARTY THERETO (together with the Company, the "CREDIT PARTIES"), and BNY MIDWEST TRUST COMPANY, as trustee (in such capacity and together with its successors in such capacity, the "INDENTURE TRUSTEE") pursuant to which the Company intends to issue 8.75% Senior Secured Notes due 2012 (including any related exchange notes, the "NOTES") in an aggregate principal amount of $192,500,000; WHEREAS, reference is made to that certain ISDA Master Agreement (together with the schedule thereto and the confirmations thereunder, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "HEDGE AGREEMENT"), dated as of June 30, 2004, by and between Capital C Ohio, Inc. and J. Aron & Company (together with its successors, the "HEDGE COUNTERPARTY"), and assumed by Company as of the date hereof pursuant to the merger between Company and Capital C Ohio Inc., pursuant to which the Company and the Hedge Counterparty have entered into certain gas price swaps; WHEREAS, pursuant to the Indenture and the Hedge Agreement, the Pledgor is required to execute and deliver this Agreement; WHEREAS, the Credit Parties may, from time to time, incur Parity Lien Debt (as defined in the Collateral Trust Agreement referred to below) that will, subject to the terms and conditions of the Indenture and the Hedge Agreement, be secured on a second priority basis by the Collateral (as defined herein) and constitute Secured Obligations (as defined herein) hereunder; WHEREAS, as of the date hereof, the Credit Parties have also entered into that certain Credit and Guaranty Agreement, dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"), by and among the Credit Parties, the lenders party thereto from time to time (collectively, the "Lenders"), Goldman Sachs Credit Parties L.P., as Sole Lead Arranger, Sole Book Runner, Sole Syndication Agent and Administrative Agent (the "ADMINISTRATIVE AGENT"), and [DOCUMENTATION AGENT], as Documentation Agent; WHEREAS, as of the date hereof, the Pledgor has also entered into that Priority Lien Pledge Agreement, dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to time, the "PRIORITY LIEN PLEDGE AGREEMENT"), by and between the Pledgor and Wells Fargo Bank, N.A., as Collateral Trustee for the benefit of the holders of Priority Lien Obligations (as defined in the Collateral Trust Agreement referred to below) (the "PRIORITY LIEN COLLATERAL TRUSTEE"), pursuant to which Pledgor has granted a first priority Lien on the Collateral to secure the Pledgor's obligations under the Credit Documents (as defined in the Credit Agreement); WHEREAS the Credit Parties, the Administrative Agent, the Indenture Trustee, the Hedge Counterparty and the Collateral Trustee have entered into a Collateral Trust Agreement, dated as of the date hereof (as may be amended, supplemented or otherwise modified from time to time, the "COLLATERAL TRUST AGREEMENT"); and WHEREAS, in consideration of the accommodations of the holders of the Notes, the Hedge Counterparty and the other holders of Parity Lien Obligations, the Pledgor has agreed to secure its obligations hereunder and the Credit Parties' obligations under the Senior Secured Note Documents, the Hedge Agreement Documents and the other Parity Lien Documents (as such terms are defined in the Collateral Trust Agreement) as set forth herein. NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Pledgor and the Collateral Trustee agree as follows: SECTION 1. DEFINITIONS; GRANT OF SECURITY. 1.1 GENERAL DEFINITIONS. In this Agreement, the following terms shall have the following meanings: "AGREEMENT" shall have the meaning set forth in the preamble. "BANKRUPTCY CODE" shall mean Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. "CASH PROCEEDS" shall have the meaning assigned in Section 7.3. "COLLATERAL" shall have the meaning assigned in Section 2.1. "COLLATERAL TRUST AGREEMENT" shall have the meaning set forth in the recitals. "COLLATERAL TRUSTEE" shall have the meaning set forth in the preamble. "COMPANY" shall have the meaning set forth in the recitals. "CREDIT AGREEMENT" shall have the meaning set forth in the recitals. "EVENT OF DEFAULT" shall have the meaning set forth in the Indenture and the Hedge Agreement. "HEDGE COUNTERPARTY" shall have the meaning set forth in the recitals. "INDENTURE TRUSTEE" shall have the meaning set forth in the recitals. "LENDER" shall have the meaning set forth in the recitals. "LIEN" shall mean (i) any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, and any lease in the nature thereof) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing 2 and (ii) in the case of Pledged Equity Interests, any purchase option, call or similar right of a third party with respect to such Pledged Equity Interests. "NOTES" shall have the meaning set forth in the recitals. "PLEDGE SUPPLEMENT" shall mean any supplement to this agreement in substantially the form of Exhibit A. "PLEDGED EQUITY INTERESTS" shall mean all shares of capital stock, limited liability company interest, general partnership, limited partnership, limited liability partnership or other partnership interest and all other equity interests in the Company, including, without limitation, all interests listed on Schedule 4.2 (as such schedule may be amended or modified from time to time) and the certificates, if any, representing such equity interests and any interest of the Pledgor on the books and records of the Company or on the books and records of any securities intermediary pertaining to such interest and all dividends, distributions, cash, warrants, rights, options, instruments, securities 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 equity interest. "PLEDGOR" shall have the meaning set forth in the preamble. "PRIORITY LIEN PLEDGE AGREEMENT" shall have the meaning set forth in the recitals. "PROCEEDS" shall mean: (i) all "proceeds" as defined in Article 9 of the UCC, (ii) payments or distributions made with respect to any Pledged Equity Interests and (iii) whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary. "RECORD" shall have the meaning specified in Article 9 of the UCC. "SECURED OBLIGATIONS" shall have the meaning assigned in Section 3.1. "SECURED PARTIES" shall mean the holders of the Notes, the Hedge Counterparty, the Indenture Trustee, the Collateral Trustee and the other holders of Parity Lien Obligations and shall include, without limitation, all former holders of the Notes, the Hedge Counterparty, the Indenture Trustee, the Collateral Trustee and other holders of Parity Lien Obligations to the extent that any Obligations owing to such Persons were incurred while such Persons were holders of the Notes, the Hedge Counterparty, the Indenture Trustee, the Collateral Trustee and other holders of Parity Lien Obligations and such Obligations have not been paid or satisfied in full. "SECURITIES" shall mean any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. 3 "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York or, when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction. "UNITED STATES" shall mean the United States of America. 1.2 DEFINITIONS; INTERPRETATION. All capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the Collateral Trust Agreement or, if not defined therein, in the UCC. References to "Sections," "Exhibits" and "Schedules" shall be to Sections, Exhibits and Schedules, as the case may be, of this Agreement unless otherwise specifically provided. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. The use herein of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. Notwithstanding anything herein to the contrary, the Lien and security interest granted to the Collateral Trustee pursuant to this Agreement and the exercise of any right or remedy by such Collateral Trustee hereunder are subject to the provisions of the Collateral Trust Agreement. In the event of any conflict between the terms of the Collateral Trust Agreement and this Agreement, the terms of the Collateral Trust Agreement will govern. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC. SECTION 2. GRANT OF SECURITY. 2.1 GRANT OF SECURITY. The Pledgor hereby grants to the Collateral Trustee for its benefit and the benefit of the Secured Parties a security interest in and continuing lien on all of Pledgor's right, title and interest in, to and under all of the following, in each case whether now owned or existing or hereafter acquired or arising and wherever located (all of which being hereinafter collectively referred to as the "COLLATERAL"): (a) Pledged Equity Interests; and (b) to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing. 2.2 SUBORDINATION. Notwithstanding anything herein to the contrary, it is the understanding of the parties that the Liens granted pursuant to Section 2.1 shall, prior to the Discharge of Priority Lien Obligations, be subject and subordinate to the Liens granted to the Priority Lien Collateral Trustee for the benefit of the holders of the Priority Lien Obligations to secure the Priority Lien Obligations pursuant to the Priority Lien Pledge Agreement and all other 4 rights and remedies of the Collateral Trustee and the other Secured Parties are further subject to the intercreditor and subordination provisions of the Collateral Trust Agreement. SECTION 3. SECURITY FOR OBLIGATIONS; PLEDGOR REMAINS LIABLE. 3.1 SECURITY FOR OBLIGATIONS. This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) (and any successor provision thereof)), of all Parity Lien Obligations with respect to the Pledgor and the Credit Parties (the "SECURED OBLIGATIONS"). 3.2 CONTINUING LIABILITY UNDER COLLATERAL. Notwithstanding anything herein to the contrary, (i) the Pledgor shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Collateral Trustee or any Secured Party, (ii) the Pledgor shall remain liable under each of the agreements included in the Collateral, including, without limitation, any agreements relating to Pledged Equity Interests, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and neither the Collateral Trustee nor any Secured Party shall have any obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Collateral Trustee nor any Secured Party have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, including, without limitation, any agreements relating to Pledged Equity Interests, and (iii) the exercise by the Collateral Trustee of any of its rights hereunder shall not release the Pledgor from any of its duties or obligations under the contracts and agreements included in the Collateral. SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS. 4.1 GENERALLY. (a) Representations and Warranties. The Pledgor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) it owns the Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, will continue to own or have such rights in each item of the Collateral, in each case free and clear of any and all Liens (other than Permitted Liens (as defined in the Indenture)), rights or claims of all other Persons, including, without limitation, liens arising as a result of the Pledgor becoming bound (as a result of merger or otherwise) as debtor under a security agreement entered into by another Person; provided, that the foregoing shall not prohibit the Pledgor from selling or otherwise disposing of any Pledged Equity Interests as long as such sale or other disposition does not result in a Change of Control and the Person acquiring such Pledged Equity Interests pledges them to the Collateral Trustee pursuant to a pledge agreement substantially in the form of this Agreement; 5 (ii) it has indicated on Schedule 4.1(A)(as such schedule may be amended or supplemented from time to time): (w) its type of organization, (x) its jurisdiction of organization, (y) its organizational identification number and (z) the jurisdiction where its chief executive office or its sole place of business is, and for the five-year period preceding the date hereof has been, located. (iii) the full legal name of the Pledgor is as set forth on Schedule 4.1(A) and it has not done in the last five (5) years, and does not do, business under any other name (including any trade-name or fictitious business name) except for those names set forth on Schedule 4.1(B) (as such schedule may be amended or supplemented from time to time); (iv) except as provided on Schedule 4.1(C), it has not changed its name, jurisdiction of organization, chief executive office or sole place of business or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) within the past five (5) years; (v) it has not within the last five (5) years become bound (whether as a result of merger or otherwise) as debtor under a security agreement entered into by another Person, which has not heretofore been terminated other than the agreements identified on Schedule 4.1(D) hereof (as such schedule may be amended or supplemented from time to time); (vi) with respect to each agreement identified on Schedule 4.1(D), it has indicated on Schedule 4.1 (A) and Schedule 4.1(B) the information required pursuant to Section 4.1(a)(ii), (iii) and (iv) with respect to the debtor under each such agreement; (vii) (A) upon the filing of all UCC financing statements naming the Pledgor as "debtor" and the Collateral Trustee as "secured party" and describing the Collateral in the filing office(s) set forth on Schedule 4.1(E) hereof (as such schedule may be amended or supplemented from time to time) and (B) upon delivery of all certificated Pledged Equity Interests in accordance with the Collateral Trust Agreement, the security interests granted to the Collateral Trustee hereunder constitute valid and perfected first priority Liens on all of the Collateral; (viii) all actions and consents, including all filings, notices, registrations and recordings necessary or desirable for the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect of the Collateral have been made or obtained or otherwise authorized for filing; (ix) other than the financing statements filed in favor of the Collateral Trustee pursuant hereto (and any financing statements filed in favor of the Collateral Trustee in connection with the Priority Lien Debt), no effective UCC financing statement or other instrument similar in effect under any applicable law covering all or any part of the Collateral is on file in any filing or recording office except for financing statements for which proper termination statements have been delivered to the Collateral Trustee for filing; (x) no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for either (i) the 6 pledge or grant by the Pledgor of the Liens purported to be created in favor of the Collateral Trustee hereunder or (ii) the exercise by Collateral Trustee of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by clause (vii) above and (B) as may be required, in connection with the disposition of any Pledged Equity Interests, by laws generally affecting the offering and sale of Securities; (xi) all information supplied by the Pledgor with respect to any of the Collateral is accurate and complete in all material respects; (xii) except as described on Schedule 4.1(D), it has not become bound as a debtor, either by contract or by operation of law, by a security agreement previously entered into by another Person covering any of the Collateral; and (xiii) it has been duly organized as a limited partnership solely under the laws of the State of Delaware and remains duly existing as such. The Pledgor has not filed any certificates of domestication, transfer or continuance in any other jurisdiction. (b) Covenants and Agreements. The Pledgor hereby covenants and agrees that: (i) except for the security interest created by this Agreement and the Priority Lien Pledge Agreement and except for Permitted Liens (as defined in the Indenture), it shall not create or suffer to exist any Lien upon or with respect to any of the Collateral, and it shall defend the Collateral against all Persons at any time claiming any interest therein; (ii) it shall not change its name, identity, corporate structure (e.g., by merger, consolidation, change in corporate form or otherwise), type of organization or jurisdiction of organization unless it shall have (a) notified the Collateral Trustee in writing, by executing and delivering to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, at least thirty (30) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure or jurisdiction of organization and providing such other information in connection therewith as the Collateral Trustee may reasonably request and (b) taken all actions necessary or advisable to maintain the continuous validity, perfection and the same or better priority of the Collateral Trustee's security interest in the Collateral intended to be granted and agreed to hereby; (iii) it shall pay promptly when due all property and other taxes, assessments and governmental charges or levies imposed upon, and all claims (including claims for labor, materials and supplies) against, the Collateral, except to the extent the validity thereof is being contested in good faith; provided, it shall in any event pay such taxes, assessments, charges, levies or claims not later than five (5) days prior to the date of any proposed sale under any judgment, writ or warrant of attachment entered or filed against it or any of the Collateral as a result of the failure to make such payment; (iv) upon the Pledgor or any of its officer obtaining knowledge thereof, it shall promptly notify the Collateral Trustee in writing of any event (other than events related to the business or prospects of Company or any of Company's Subsidiaries 7 or events affecting the oil and/or gas business, or the economy generally) that may have a Material Adverse Effect on the value of the Collateral or any portion thereof, the ability of the Pledgor or the Collateral Trustee to dispose of the Collateral or any portion thereof, or the rights and remedies of the Collateral Trustee in relation thereto, including, without limitation, the levy of any legal process against the Collateral or any portion thereof; (v) it shall not take or permit any action which could impair the Collateral Trustee's rights in the Collateral; and (c) it shall not sell, transfer or assign (by operation of law or otherwise) any Collateral except as permitted by the Parity Lien Documents. 4.2 PLEDGED EQUITY INTERESTS 4.2.1 . (a) Representations and Warranties. The Pledgor hereby represents and warrants, on the Closing Date and on each Credit Date, that: (i) Schedule 4.2(A) (as such schedule may be amended or supplemented from time to time) sets forth all of the Pledged Equity Interests owned by the Pledgor and such Pledged Equity Interests constitute the percentage of issued and outstanding shares of stock or percentage of membership interests, percentage of partnership interests or percentage of beneficial interest of the Company; (ii) except as set forth on Schedule 4.2(B) and other than as a result of the merger contemplated by the Merger Agreement, it has not acquired any Pledged Equity Interests from another Person within the past five (5) years; (iii) it is the record and beneficial owner of the Pledged Equity Interests free of all Liens (other than Permitted Liens (as defined in the Indenture)), rights or claims of other Persons and there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any Pledged Equity Interests; and (iv) without limiting the generality of Section 4.1(a)(viii), no consent of any Person including any other general or limited partner, any other member of the Company, any other shareholder or any other trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of the Collateral Trustee in any Pledged Equity Interests or the exercise by the Collateral Trustee of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof. (b) Covenants and Agreements. The Pledgor hereby covenants and agrees that: (i) in the event it acquires rights in any Pledged Equity Interests after the date hereof, it shall deliver to the Collateral Trustee a completed Pledge Supplement, substantially in the form of Exhibit A attached hereto, together with all Supplements to Schedules thereto, reflecting such new Pledged Equity Interests and all 8 other Pledged Equity Interests. Notwithstanding the foregoing, it is understood and agreed that the security interest of the Collateral Trustee shall attach to all Pledged Equity Interests immediately upon the Pledgor's acquisition of rights therein and shall not be affected by the failure of the Pledgor to deliver a supplement to Schedule 4.4 as required hereby; (ii) except as provided in the next sentence, in the event the Pledgor receives any securities or other property (other than cash) upon the merger, consolidation, liquidation or dissolution of the Company, then (a) such securities or other property shall be included in the definition of Collateral without further action and (b) the Pledgor shall immediately take all steps, if any, necessary or advisable to ensure the validity, perfection, priority and, if applicable, control of the Collateral Trustee in accordance with the Collateral Trust Agreement) over such Pledged Equity Interests (including, without limitation, delivery thereof to the Collateral Trustee in accordance with the Collateral Trust Agreement) and pending any such action the Pledgor shall be deemed to hold such securities or other property in trust for the benefit of the Collateral Trustee and shall segregate such securities or other property from all other property of the Pledgor. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to receive and retain any dividends or distributions on the Pledged Equity Interests paid in cash and all such dividends or distributions so received shall be deemed released from the Liens granted by this Agreement; (iii) without the prior written consent of the Collateral Trustee, it shall not vote to enable or take any other action to: (a) amend or terminate any partnership agreement, limited liability company agreement, certificate of incorporation, by-laws or other organizational documents in any way that materially changes the rights of the Pledgor with respect to any Pledged Equity Interests or adversely affects the validity, perfection or priority of the Collateral Trustee's security interest or (b) cause the Pledged Equity Interests which are not securities (for purposes of the UCC) on the date hereof to elect or otherwise take any action to cause such Pledged Equity Interests to be treated as securities for purposes of the UCC; provided, however, notwithstanding the foregoing, if the Company takes any such action in violation of the foregoing in this clause (b), the Pledgor shall promptly notify the Collateral Trustee in writing of any such election or action and, in such event, shall take all steps necessary or advisable to establish the Collateral Trustee's "control" thereof; provided, further, that notwithstanding the foregoing, so long as such actions are in accordance with the Parity Lien Documents and so long as no Event of Default has occurred and is continuing, the Pledgor may enable or allow the Company, and nothing in this Agreement shall restrict the Company, to offer, issue, sell or otherwise dispose of, any equity securities, or any options, warrants or other rights convertible, exercisable or exchangeable at any time into any equity securities of the Company, or to amend the articles of incorporation of the Company to change the authorized number of shares of capital stock of the Company or to designate the rights and preferences of any series of preferred stock, or amend the bylaws of the Company to provide for any rights to nominate directors with respect to any stockholder, or among the stockholders, of the Company, or any rights of any stockholder to special voting on any matters; (iv) it shall comply with all of its obligations under any partnership agreement or limited liability company agreement relating to Pledged Equity Interests and shall enforce all of its rights with respect to any Pledged Equity Interests, except 9 where such failure to comply or enforce could not reasonably be expected to have a Material Adverse Effect; and (v) without the prior written consent of the Collateral Trustee, it shall not permit the Company to merge or consolidate unless (i) the surviving entity creates a security interest that is perfected by a filed financing statement (that is not effective solely under section 9-508 of the UCC) in collateral in which such new debtor has or acquires rights, and (ii) all the outstanding capital stock or other equity interests of the surviving or resulting corporation, limited liability company, partnership or other entity is, upon such merger or consolidation, pledged hereunder and no cash, securities or other property is distributed in respect of the outstanding equity interests of any other constituent Credit Parties. (c) Delivery and Control. (i) The Pledgor agrees that with respect to any Pledged Equity Interests in which it currently has rights it shall comply with the provisions of this Section 4.2(c)(i) on or before the Closing Date and with respect to any Pledged Equity Interests hereafter acquired by the Pledgor it shall comply with the provisions of this Section 4.2(c)(i) immediately upon acquiring rights therein, in each case in form and substance satisfactory to the Collateral Trustee. With respect to any Pledged Equity Interests that is represented by a certificate or that is an "instrument," it shall cause such certificate or instrument to be delivered to the Collateral Trustee (or the Priority Lien Collateral Trustee in accordance with the Collateral Trust Agreement), indorsed in blank by an "effective indorsement" (as defined in Section 8-107 of the UCC), regardless of whether such certificate constitutes a "certificated security" for purposes of the UCC. With respect to any Pledged Equity Interests that is an "uncertificated security" for purposes of the UCC, it shall cause the Company to either (i) register the Collateral Trustee as the registered owner thereof on the books and records of the Company or (ii) execute an agreement substantially in the form of Exhibit B hereto, pursuant to which such issuer agrees to comply with the Collateral Trustee's instructions with respect to such uncertificated security without further consent by the Pledgor. (d) Voting and Distributions. (i) So long as no Event of Default shall have occurred and be continuing: (1) except as otherwise provided under the covenants and agreements in this Agreement or elsewhere herein or in the Parity Lien Documents, the Pledgor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Equity Interests or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Parity Lien Documents; and (2) the Collateral Trustee shall promptly execute and deliver (or cause to be executed and delivered) to the Pledgor all proxies, and other instruments as the Pledgor may from time to time reasonably request for the purpose of enabling the Pledgor to exercise the voting and other consensual rights when and to the extent which it is entitled to exercise pursuant to clause (1) above; 10 (ii) Upon the occurrence and during the continuation of an Event of Default: (1) all rights of the Pledgor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall cease and all such rights shall thereupon become vested in the Collateral Trustee who shall thereupon have the sole right to exercise such voting and other consensual rights; and (2) in order to permit the Collateral Trustee to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (1) the Pledgor shall promptly execute and deliver (or cause to be executed and delivered) to the Collateral Trustee all proxies, dividend payment orders and other instruments as the Collateral Trustee may from time to time reasonably request and (2) the Pledgor acknowledges that the Collateral Trustee may utilize the power of attorney set forth in Section 6.1. SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES. 5.1 ACCESS; RIGHT OF INSPECTION. The Collateral Trustee shall at all times have full and free access upon reasonable notice during normal business hours, to all the books, correspondence and records of the Pledgor relating to the Collateral, and the Collateral Trustee and its representatives may examine the same, take extracts therefrom and make photocopies thereof, and the Pledgor agrees to render to the Collateral Trustee, at such Pledgor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. 5.2 FURTHER ASSURANCES. (a) The Pledgor agrees that from time to time, at its expense, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Trustee may reasonably request in accordance with the Collateral Trust Agreement, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted hereby or to enable the Collateral Trustee to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, the Pledgor shall: (i) file such financing or continuation statements, or amendments thereto, and execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices, as may be necessary or desirable, or as the Collateral Trustee may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby; (ii) at any reasonable time, upon request by the Collateral Trustee, assemble the Collateral and allow inspection of the Collateral by the Collateral Trustee, or persons designated by the Collateral Trustee; and 11 (iii) at the Collateral Trustee's request, appear in and defend any action or proceeding that may affect the Pledgor's title to or the Collateral Trustee's security interest in all or any part of the Collateral. The Pledgor hereby authorizes the Collateral Trustee to file a Record or Records, including, without limitation, financing or continuation statements, and amendments thereto, in any jurisdictions and with any filing offices as the Collateral Trustee may determine, in its sole discretion, are necessary or advisable to perfect the security interest granted to the Collateral Trustee herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Collateral Trustee may determine, in its sole discretion, is necessary, advisable or prudent to ensure the perfection of the security interest in the Collateral granted to the Collateral Trustee herein. The Pledgor shall furnish to the Collateral Trustee from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Collateral Trustee may reasonably request, all in reasonable detail. SECTION 6. COLLATERAL TRUSTEE APPOINTED ATTORNEY-IN-FACT. 6.1 POWER OF ATTORNEY. The Pledgor hereby irrevocably appoints the Collateral Trustee (such appointment being coupled with an interest) as its attorney-in-fact, with full authority in its place and stead and in its name, the Collateral Trustee or otherwise, from time to time in the Collateral Trustee's discretion to take any action and to execute any instrument that the Collateral Trustee may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, the following: (a) upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (a) above; (c) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that the Collateral Trustee may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Collateral Trustee with respect to any of the Collateral; (d) to prepare and file any UCC financing statements against the Pledgor as debtor; (e) to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Collateral Trustee in its sole discretion, any such payments made by the Collateral Trustee to become obligations of the Pledgor to the Collateral Trustee, due and payable immediately without demand; and 12 (f) upon the occurrence and during the continuance of any Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Trustee were the absolute owner thereof for all purposes, and to do, at the Collateral Trustee's option and the Pledgor's expense, at any time or from time to time, all acts and things that the Collateral Trustee deems reasonably necessary to protect, preserve or realize upon the Collateral and the Collateral Trustee's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as the Pledgor might do. 6.2 NO DUTY ON THE PART OF COLLATERAL TRUSTEE OR SECURED PARTIES. The powers conferred on the Collateral Trustee hereunder are solely to protect the interests of the Secured Parties in the Collateral and shall not impose any duty upon the Collateral Trustee or any Secured Party to exercise any such powers. The Collateral Trustee and the Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to the Pledgor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. SECTION 7. REMEDIES. 7.1 GENERALLY. (a) If any Event of Default shall have occurred and be continuing, the Collateral Trustee may exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it at law or in equity, all the rights and remedies of the Collateral Trustee on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect, enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and also may pursue any of the following separately, successively or simultaneously: (i) require the Pledgor, and the Pledgor hereby agrees that it shall at its expense and promptly upon request of the Collateral Trustee forthwith, assemble all or part of the Collateral as directed by the Collateral Trustee and make it available to the Collateral Trustee at a place to be designated by the Collateral Trustee that is reasonably convenient to both parties; and (ii) without notice except as specified below or under the UCC, sell, assign or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Collateral Trustee'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 the Collateral Trustee may deem commercially reasonable. (b) The Collateral Trustee or any Secured Party may be the purchaser of any or all of the Collateral at any public or private (to the extent to the portion of the Collateral being privately sold is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations) sale in accordance with the UCC and the Collateral Trustee, as Collateral Trustee for and representative of the Secured Parties, 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 sale made in accordance with the UCC, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by 13 the Collateral Trustee 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 the Pledgor, and the Pledgor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Trustee shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Trustee 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. The Pledgor agrees that it would not be commercially unreasonable for the Collateral Trustee to dispose of the Collateral or any portion thereof by using Internet sites that provide for the auction of assets of the types included in the Collateral or that have the reasonable capability of doing so, or that match buyers and sellers of assets. The Pledgor hereby waives any claims against the Collateral Trustee arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Collateral Trustee accepts the first offer received and does not offer such Collateral to more than one offeree. The Pledgor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Collateral Trustee, that the Collateral Trustee has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way alter the rights of the Collateral Trustee hereunder. (c) The Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Collateral Trustee may be compelled, with respect to any sale of all or any part of the Pledged Equity Interests conducted without prior registration or qualification of such Pledged Equity Interests under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Pledged Equity Interests for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, The Pledgor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Collateral Trustee shall have no obligation to engage in public sales and no obligation to delay the sale of any Pledged Equity Interests for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If the Collateral Trustee determines to exercise its right to sell any or all of the Pledged Equity Interests, upon written request, the Pledgor shall and shall cause the Company to furnish to the Collateral Trustee all such information as the Collateral Trustee may request in order to determine the number and nature of interest, shares or other instruments included in the Pledged Equity Interests which may be sold by the Collateral Trustee in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. 14 (d) The Collateral Trustee may sell the Collateral without giving any warranties as to the Collateral. The Collateral Trustee may specifically disclaim or modify any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. (e) The Collateral Trustee shall have no obligation to marshal any of the Collateral. 7.2 APPLICATION OF PROCEEDS (a). Except as expressly provided elsewhere in this Agreement, all proceeds received by the Collateral Trustee in respect of any sale, any collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by the Collateral Trustee against, the Secured Obligations in the following order of priority: first, to the payment of all reasonable costs and expenses of such sale, collection or other realization, including reasonable compensation to the Collateral Trustee and its agents and counsel, and all other reasonable expenses, liabilities and advances made or incurred by the Collateral Trustee in connection therewith, and all amounts for which the Collateral Trustee is entitled to indemnification hereunder (in its capacity as the Collateral Trustee and not as a holder of Note), and to the payment of all reasonable costs and expenses paid or incurred by the Collateral Trustee in connection with the exercise of any right or remedy hereunder or under the Parity Lien Documents, all in accordance with the terms hereof or thereof; second, to the extent of any excess of such proceeds, to the payment of all other Secured Obligations for the ratable benefit of the holders of the Parity Lien Obligations; and third, to the extent of any excess of such proceeds, to the payment to or upon the order of the Pledgor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 7.3 CASH PROCEEDS. After an Event of Default shall have occurred and be continuing, upon receipt of any Collateral consisting of cash, checks and other non-cash items (collectively, "CASH PROCEEDS") by the Pledgor, the Pledgor shall turn over all such Cash Proceeds to the Collateral Trustee. Any Cash Proceeds shall be applied by the Collateral Trustee against the Secured Obligations then due and owing. SECTION 8. COLLATERAL TRUSTEE. The Collateral Trustee has been appointed to act as Collateral Trustee under the Collateral Trust Agreement by Indenture Trustee and Hedge Counterparty and, by their acceptance of the benefits hereof, the other Secured Parties. The Collateral Trustee shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Parity Lien Documents. In furtherance of the foregoing provisions of this Section, each Secured Party, by its acceptance of the benefits hereof, agrees that it shall have no right individually to realize upon any of the Collateral hereunder, it being understood and agreed by such Secured Party that all rights and remedies hereunder may be exercised solely by the Collateral Trustee for the benefit of Secured Parties in accordance with the terms of this Section. Collateral Trustee may resign at any time by giving thirty (30) days' prior written notice thereof to Parity Lien Representative and the Pledgor, and Collateral Trustee may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to the 15 Pledgor and Collateral Trustee signed by the Parity Lien Representative. Upon any such notice of resignation or any such removal, Parity Lien Representative shall have the right to appoint a successor Collateral Trustee. Upon the acceptance of any appointment as Collateral Trustee hereunder by a successor Collateral Trustee, that successor Collateral Trustee shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Collateral Trustee under this Agreement, and the retiring or removed Collateral Trustee under this Agreement shall promptly (i) transfer to such successor Collateral Trustee all sums, Securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Collateral Trustee under this Agreement, and (ii) execute and deliver to such successor Collateral Trustee or otherwise authorize the filing of such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Collateral Trustee of the security interests created hereunder, whereupon such retiring or removed Collateral Trustee shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Collateral Trustee's resignation or removal hereunder as the Collateral Trustee, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Collateral Trustee hereunder. SECTION 9. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations (other than any Secured Obligations consisting of indemnity or similar obligations in respect of which no amounts are due and payable), be binding upon The Pledgor, its successors and assigns, and inure, together with the rights and remedies of the Collateral Trustee hereunder, to the benefit of the Collateral Trustee and its successors, transferees and assigns. Without limiting the generality of the foregoing, but subject to the terms of the Priority Lien Documents, any Secured Party may assign or otherwise transfer any Obligations held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Party herein or otherwise. Upon the payment in full of all Secured Obligations (other than any Secured Obligations consisting of indemnity or similar obligations in respect of which no amounts are due and payable), the security interest granted hereby shall terminate hereunder and of record, all rights to the Collateral shall revert to the Pledgor and this Agreement (including any provision providing for the appointment of the Collateral Trustee as an attorney-in-fact for the Pledgor) shall terminate. Upon any such termination the Collateral Trustee shall, at Pledgor's expense, execute and deliver to the Pledgor such documents as the Pledgor shall reasonably request to evidence such termination. SECTION 10. STANDARD OF CARE; COLLATERAL TRUSTEE MAY PERFORM. The powers conferred on the Collateral Trustee hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Collateral Trustee shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Collateral Trustee shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Collateral Trustee accords its own property. Neither the Collateral Trustee nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of 16 the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Pledgor or otherwise. If the Pledgor fails to perform any agreement contained herein, the Collateral Trustee may itself perform, or cause performance of, such agreement, and the expenses of the Collateral Trustee incurred in connection therewith shall be payable by the Pledgor. SECTION 11. MISCELLANEOUS. 11.1 Any notice required or permitted to be given under this Agreement shall be given in accordance with Section 7.7 of the Collateral Trust Agreement. No failure or delay on the part of the Collateral Trustee in the exercise of any power, right or privilege hereunder or under any other Parity Lien Obligations shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Parity Lien Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 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. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. This Agreement shall be binding upon and inure to the benefit of the Collateral Trustee and Grantors and their respective successors and assigns. The Pledgor shall not, without the prior written consent of the Collateral Trustee given in accordance with the Parity Lien Documents, assign any right, duty or obligation hereunder. This Agreement and the other Parity Lien Documents embody the entire agreement and understanding between the Pledgor and the Collateral Trustee and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Parity Lien Documents may not be contradicted by evidence of prior, contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral agreements between the parties. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. 11.2 THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 11.3 Limitation of Liability. (a) Each party hereto hereby agrees that all representations, warranties, covenants and other agreements (except for the representations and warranties provided in Section 4.1(a)(i)) made by the Pledgor herein are made without recourse to any assets, monies, properties (tangible, intangible, personal or real) of the Pledgor (other than the Collateral), and 17 the Pledgor shall have no obligation to the Collateral Trustee, the Secured Parties, or any other Person with respect to any breach by the Pledgor of any such representation, warranty, covenant or other agreement (except for the representations and warranties provided in Section 4.1(a)(i)), other than to the extent of any proceeds actually received upon the liquidation of the Collateral. (b) Notwithstanding any other provision of this Agreement or of any of the other Parity Lien Documents, there shall be no recourse against the Pledgor or any of its stockholders, members, partners, officers, directors, employees or agents (collectively, the "NONRECOURSE PERSONS"), for any liability to the Secured Parties arising in connection with any breach or default under this Agreement, and the Secured Parties shall look solely to Company and the Collateral in exercising the Secured Parties' rights and remedies and enforcing the obligations of the other parties under and in connection with the Parity Lien Documents, provided, that the foregoing provisions shall not limit or restrict the right of any Secured Party to name the Pledgor as defendant in any action or suit solely for a judicial foreclosure or for the exercise of any other remedy or with respect to this Agreement so long as no judgment in the nature of a deficiency judgment shall be enforced against any Nonrecourse Person out of any Property. The limitations on recourse set forth in this paragraph shall survive the termination of this Agreement and the full payment and performance of the Secured Obligations. 18 IN WITNESS WHEREOF, the Pledgor and the Collateral Trustee have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. CAPITAL C ENERGY OPERATIONS, LP BY: CAPITAL C ENERGY, LP, ITS GENERAL PARTNER BY: CAPITAL C ENERGY, LLC, ITS GENERAL PARTNER By: /s/ Frost W. Cochran ------------------------------- Name: Frost W. Cochran Title: President WELLS FARGO BANK, N.A., as Collateral Trustee By: /s/ Jane Y. Schweiger ------------------------------- Name: Jane Y. Schweiger Title: Vice President 19 SCHEDULE 4.1 TO PLEDGE AGREEMENT GENERAL INFORMATION (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business and Organizational Identification Number of the Pledgor:
Chief Executive Type of Jurisdiction of Office/Sole Place of Full Legal Name Organization Organization Business Organization I.D.# - --------------- ------------ --------------- -------------------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which the Pledgor has conducted business for the past five (5) years: Trade Name or Fictitious Business Name (C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business and Corporate Structure within past five (5) years: Date of Change Description of Change (D) Agreements pursuant to which Pledgor is found as debtor within past five (5) years: Description of Agreement (E) Financing Statements: Filing Jurisdiction(s) SCHEDULE 4.1-1 SCHEDULE 4.2 TO PLEDGE AGREEMENT PLEDGED EQUITY INTERESTS
LIMITED LIABILITY COMPANY/ CERTIFICATED CERTIFICATE NO. OF PLEDGED % OF OUTSTANDING LLC/PARTNERSHIP PARTNERSHIP/CORPORATION/TRUST (Y/N) NO. (IF ANY) UNITS/STOCK INTERESTS/STOCK/TRUST INTERESTS - ----------------------------- ------------ ------------ -------------- --------------------------------
(B) Name of Pledgor Date of Acquisition Description of Acquisition EXHIBIT 4.2-1 EXHIBIT A TO PLEDGE AGREEMENT PLEDGE SUPPLEMENT This PLEDGE SUPPLEMENT, dated [mm/dd/yy], is delivered by CAPITAL C ENERGY OPERATIONS, LP., a Delaware limited partnership (the "PLEDGOR") pursuant to the Pledge Agreement, dated as of July __, 2004 (as it may be from time to time amended, restated, modified or supplemented, the "Pledge Agreement"), between PLEDGOR and WELLS FARGO BANK, N.A., as Collateral Trustee. Capitalized terms used herein not otherwise defined herein shall have the meanings ascribed thereto in the Pledge Agreement. Pledgor hereby confirms the grant to the Collateral Trustee set forth in the Pledge Agreement of, and does hereby grant to the Collateral Trustee, a security interest in all of Pledgor's right, title and interest in and to all Collateral to secure the Secured Obligations, in each case whether now or hereafter existing or in which Pledgor now has or hereafter acquires an interest and wherever the same may be located. Pledgor represents and warrants that the attached Supplements to Schedules accurately and completely set forth all additional information required pursuant to the Pledge Agreement and hereby agrees that such Supplements to Schedules shall constitute part of the Schedules to the Pledge Agreement. IN WITNESS WHEREOF, Grantor has caused this Pledge Supplement to be duly executed and delivered by its duly authorized officer as of [MM/DD/YY]. CAPITAL C ENERGY OPERATIONS, LP BY: CAPITAL C ENERGY, LP, ITS GENERAL PARTNER BY: CAPITAL C ENERGY, LLC, ITS GENERAL PARTNER By:_____________________________ Name: Title: EXHIBIT A-1 SUPPLEMENT TO SCHEDULE 4.1 TO PLEDGE AGREEMENT Additional Information: (A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Sole Place of Business and Organizational Identification Number of the Pledgor:
Chief Executive Office/Sole Place of Business (or Residence Jurisdiction of if Grantor is a Natural Full Legal Name Type of Organization Organization Person) Organization I.D.# - --------------- -------------------- --------------- ----------------------- ------------------
(B) Other Names (including any Trade-Name or Fictitious Business Name) under which the Pledgor has conducted business for the past five (5) years: Trade Name or Fictitious Business Name (C) Changes in Name, Jurisdiction of Organization, Chief Executive Office or Sole Place of Business (or Principal Residence if Grantor is a Natural Person) and Corporate Structure within past five (5) years: Date of Change Description of Change (D) Agreements pursuant to which the Pledgor is found as debtor within past five (5) years: Description of Agreement (E) Financing Statements: Filing Jurisdiction(s) EXHIBIT A-2 SUPPLEMENT TO SCHEDULE 4.2 TO PLEDGE AGREEMENT PLEDGED EQUITY INTERESTS Additional Information: (A)
LIMITED LIABILITY COMPANY/ CERTIFICATED CERTIFICATE NO. OF PLEDGED % OF OUTSTANDING LLC/PARTNERSHIP PARTNERSHIP/CORPORATION/TRUST (Y/N) NO. (IF ANY) UNITS/STOCK INTERESTS/STOCK/TRUST INTERESTS - ----------------------------- ------------ ------------ -------------- ---------------------------------
(B) Date of Acquisition Description of Acquisition EXHIBIT A-3 EXHIBIT B TO PLEDGE AGREEMENT UNCERTIFICATED SECURITIES CONTROL AGREEMENT This Uncertificated Securities Control Agreement dated as of _________, 200__ among CAPITAL C ENERGY OPERATIONS, LP (the "PLEDGOR"), WELLS FARGO BANK, N.A., as Collateral Trustee for the Secured Parties, (the "COLLATERAL TRUSTEE") and ____________, a ________corporation (the "ISSUER"). Capitalized terms used but not defined herein shall have the meaning assigned in the Pledge Agreement dated [as of the date hereof], among the Pledgor, the other Grantors party thereto and the Collateral Trustee (the "PLEDGE AGREEMENT"). All references herein to the "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. SECTION 1. REGISTERED OWNERSHIP OF SHARES. The Issuer hereby confirms and agrees that as of the date hereof the Pledgor is the registered owner of __________ shares of the Issuer's [common] stock (the "PLEDGED SHARES") and the Issuer shall not change the registered owner of the Pledged Shares without the prior written consent of the Collateral Trustee. SECTION 2. INSTRUCTIONS. If at any time the Issuer shall receive instructions originated by the Collateral Trustee relating to the Pledged Shares, the Issuer shall comply with such instructions without further consent by the Pledgor or any other person. SECTION 3. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer hereby represents and warrants to the Collateral Trustee: (a) It has not entered into, and until the termination of this agreement will not enter into, any agreement with any other person relating the Pledged Shares pursuant to which it has agreed to comply with instructions issued by such other person; and (b) It has not entered into, and until the termination of this agreement will not enter into, any agreement with the Pledgor or the Collateral Trustee purporting to limit or condition the obligation of the Issuer to comply with Instructions as set forth in Section 2 hereof. (c) Except for the claims and interest of the Collateral Trustee and of the Pledgor in the Pledged Shares, the Issuer does not know of any claim to, or interest in, the Pledged Shares. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Pledged Shares, the Issuer will promptly notify the Collateral Trustee and the Pledgor thereof. (d) This Uncertificated Securities Control Agreement is the valid and legally binding obligation of the Issuer. SECTION 4. CHOICE OF LAW. This Agreement shall be governed by the laws of the State of [New York]. SECTION 5. CONFLICT WITH OTHER AGREEMENTS. In the event of any conflict between this Agreement (or any portion thereof) and any other agreement now existing or hereafter entered Exhibit B-1 into, the terms of this Agreement shall prevail. No amendment or modification of this Agreement or waiver of any right hereunder shall be binding on any party hereto unless it is in writing and is signed by all of the parties hereto. SECTION 6. VOTING RIGHTS. Until such time as the Collateral Trustee shall otherwise instruct the Issuer in writing, the Pledgor shall have the right to vote the Pledged Shares. SECTION 7. SUCCESSORS; ASSIGNMENT. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective corporate successors or heirs and personal representatives who obtain such rights solely by operation of law. The Collateral Trustee may assign its rights hereunder only with the express written consent of the Issuer and by sending written notice of such assignment to the Pledgor. SECTION 8. INDEMNIFICATION OF ISSUER. The Pledgor and the Collateral Trustee hereby agree that (a) the Issuer is released from any and all liabilities to the Pledgor and the Collateral Trustee arising from the terms of this Agreement and the compliance of the Issuer with the terms hereof, except to the extent that such liabilities arise from the Issuer's negligence and (b) the Pledgor, its successors and assigns shall at all times indemnify and save harmless the Issuer from and against any and all claims, actions and suits of others arising out of the terms of this Agreement or the compliance of the Issuer with the terms hereof, except to the extent that such arises from the Issuer's negligence, and from and against any and all liabilities, losses, damages, costs, charges, counsel fees and other expenses of every nature and character arising by reason of the same, until the termination of this Agreement. SECTION 9. NOTICES. Any notice, request or other communication required or permitted to be given under this Agreement shall be in writing and deemed to have been properly given when delivered in person, or when sent by telecopy or other electronic means and electronic confirmation of error free receipt is received or two (2) days after being sent by certified or registered United States mail, return receipt requested, postage prepaid, addressed to the party at the address set forth below. Pledgor: [INSERT ADDRESS] Attention: Telecopier: Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Telecopier: 612-667-9825 Issuer: [INSERT ADDRESS] Attention: Telecopier: Any party may change its address for notices in the manner set forth above. SECTION 10. TERMINATION. The obligations of the Issuer to the Collateral Trustee pursuant to this Control Agreement shall continue in effect until the security interests of the Collateral Trustee in the Pledged Shares have been terminated pursuant to the terms of the Security Agreement and the Collateral Trustee has notified the Issuer of such termination in Exhibit B-2 writing. The Collateral Trustee agrees to provide Notice of Termination in substantially the form of Exhibit A hereto to the Issuer upon the request of the Pledgor on or after the termination of the Collateral Trustee's security interest in the Pledged Shares pursuant to the terms of the Security Agreement. The termination of this Control Agreement shall not terminate the Pledged Shares or alter the obligations of the Issuer to the Pledgor pursuant to any other agreement with respect to the Pledged Shares. SECTION 11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing and delivering one or more counterparts. CAPITAL C ENERGY OPERATIONS, LP By:_________________________ Name: Title: WELLS FARGO BANK, N.A., as Collateral Trustee By:_________________________ Name: Title: [NAME OF ISSUER] By:_________________________ Name: Title: Exhibit B-3 Exhibit A [Letterhead of Collateral Trustee] [Date] [Name and Address of Issuer] Attention:__________________________ Re: Termination of Control Agreement You are hereby notified that the Uncertificated Securities Control Agreement between you, [the Pledgor] and the undersigned (a copy of which is attached) is terminated and you have no further obligations to the undersigned pursuant to such Agreement. Notwithstanding any previous instructions to you, you are hereby instructed to accept all future directions with respect to Pledged Shares (as defined in the Uncertificated Control Agreement) from [the Pledgor]. This notice terminates any obligations you may have to the undersigned with respect to the Pledged Shares, however nothing contained in this notice shall alter any obligations which you may otherwise owe to [the Pledgor] pursuant to any other agreement. You are instructed to deliver a copy of this notice by facsimile transmission to [insert name of Pledgor]. Very truly yours, WELLS FARGO BANK, N.A., as Collateral Trustee By:________________________ Name: Title: Exhibit D-A-1 EX-10.7 11 l08738aexv10w7.txt EXHIBIT 10.7 EXHIBIT 10.7 ================================================================================ COLLATERAL TRUST AGREEMENT dated as of July 7, 2004 among BELDEN & BLAKE CORPORATION, the other Pledgors from time to time party hereto, GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent under the Credit Agreement, J. ARON & COMPANY, as Hedge Counterparty under the Hedge Agreement, BNY MIDWEST TRUST COMPANY, as Trustee under the Indenture and WELLS FARGO BANK, N.A., as Collateral Trustee ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE 1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION............................................... 2 SECTION 1.1 Defined Terms................................................................. 2 SECTION 1.2 Rules of Interpretation....................................................... 14 ARTICLE 2. THE TRUST ESTATES..................................................................... 15 SECTION 2.1 Declaration of Senior Trust................................................... 15 SECTION 2.2 Declaration of Junior Trust................................................... 16 SECTION 2.3 Priority of Liens............................................................. 17 SECTION 2.4 Restrictions on Enforcement of Junior Priority Liens.......................... 17 SECTION 2.5 Waiver of Right of Marshalling................................................ 19 SECTION 2.6 Discretion in Enforcement of Priority Liens................................... 20 SECTION 2.7 Discretion in Enforcement of Priority Lien Obligations........................ 20 SECTION 2.8 Insolvency or Liquidation Proceedings......................................... 21 SECTION 2.9 Collateral Shared Equally and Ratably within Class............................ 22 ARTICLE 3. OBLIGATIONS AND POWERS OF COLLATERAL TRUSTEE.......................................... 22 SECTION 3.1 Undertaking of the Collateral Trustee......................................... 22 SECTION 3.2 Release or Subordination of Liens............................................. 23 SECTION 3.3 Enforcement of Liens.......................................................... 24 SECTION 3.4 Application of Proceeds....................................................... 24 SECTION 3.5 Appointment and Powers of the Collateral Trustee.............................. 26 SECTION 3.6 Documents and Communications.................................................. 26 SECTION 3.7 For Sole and Exclusive Benefit of Holders of Secured Obligations.............. 26 SECTION 3.8 Additional Secured Debt....................................................... 27 ARTICLE 4. OBLIGATIONS ENFORCEABLE BY THE BORROWER AND THE OTHER PLEDGORS........................ 28 SECTION 4.1 Release of Liens on Collateral................................................ 28 SECTION 4.2 Delivery of Copies to Secured Debt Representatives............................ 30 SECTION 4.3 Collateral Trustee not Required to Serve, File or Record...................... 30 SECTION 4.4 Release of Liens in Respect of Notes.......................................... 31 ARTICLE 5. IMMUNITIES OF THE COLLATERAL TRUSTEE.................................................. 31 SECTION 5.1 No Implied Duty............................................................... 31 SECTION 5.2 Appointment of Agents and Advisors............................................ 31 SECTION 5.3 Other Agreements.............................................................. 31 SECTION 5.4 Solicitation of Instructions.................................................. 32 SECTION 5.5 Limitation of Liability....................................................... 32 SECTION 5.6 Documents in Satisfactory Form................................................ 32 SECTION 5.7 Entitled to Rely.............................................................. 32 SECTION 5.8 Secured Debt Default.......................................................... 33 SECTION 5.9 Actions by Collateral Trustee................................................. 33 SECTION 5.10 Security or Indemnity in favor of the Collateral Trustee...................... 33 SECTION 5.11 Rights of the Collateral Trustee.............................................. 33
i SECTION 5.12 Limitations on Duty of Collateral Trustee in Respect of Collateral............ 34 SECTION 5.13 Assumption of Rights, Not Assumption of Duties................................ 34 SECTION 5.14 No Liability for Clean Up of Hazardous Materials.............................. 35 ARTICLE 6. RESIGNATION AND REMOVAL OF THE COLLATERAL TRUSTEE..................................... 35 SECTION 6.1 Resignation or Removal of Collateral Trustee.................................. 35 SECTION 6.2 Appointment of Successor Collateral Trustee................................... 35 SECTION 6.3 Succession.................................................................... 36 SECTION 6.4 Merger, Conversion or Consolidation of Collateral Trustee..................... 36 ARTICLE 7. MISCELLANEOUS PROVISIONS.............................................................. 37 SECTION 7.1 Amendment..................................................................... 37 SECTION 7.2 Voting........................................................................ 38 SECTION 7.3 Further Assurances; Insurance................................................. 39 SECTION 7.4 Perfection of Junior Trust Estate............................................. 40 SECTION 7.5 Successors and Assigns........................................................ 40 SECTION 7.6 Delay and Waiver.............................................................. 40 SECTION 7.7 Notices....................................................................... 40 SECTION 7.8 Notice Following Discharge of Priority Lien Obligations....................... 42 SECTION 7.9 Entire Agreement.............................................................. 42 SECTION 7.10 Compensation; Expenses........................................................ 42 SECTION 7.11 Indemnity..................................................................... 43 SECTION 7.12 Severability.................................................................. 44 SECTION 7.13 Headings...................................................................... 44 SECTION 7.14 Obligations Secured........................................................... 44 SECTION 7.15 GOVERNING LAW................................................................. 44 SECTION 7.16 CONSENT TO JURISDICTION....................................................... 44 SECTION 7.17 WAIVER OF JURY TRIAL.......................................................... 45 SECTION 7.18 Counterparts.................................................................. 46 SECTION 7.19 Effectiveness................................................................. 46 SECTION 7.20 Additional Pledgors........................................................... 46 SECTION 7.21 Continuing Nature of this Agreement........................................... 46 SECTION 7.22 Insolvency.................................................................... 46 SECTION 7.23 Rights and Immunities of Secured Debt Representatives......................... 47
EXHIBIT A - Form of Collateral Trust Joinder ii This Collateral Trust Agreement (this "AGREEMENT") is dated as of July 7, 2004 and is by and among Belden & Blake Corporation, an Ohio corporation (the "BORROWER"), the Pledgors from time to time party hereto, Goldman Sachs Credit Partners L.P., as Administrative Agent (as defined below), J. Aron & Company, as Hedge Counterparty (as defined below), BNY Midwest Trust Company, as Trustee (as defined below), and Wells Fargo Bank, N.A., as Collateral Trustee (in such capacity and together with its successors in such capacity, the "COLLATERAL TRUSTEE"). RECITALS The Borrower intends to enter into a Credit Agreement dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "CREDIT AGREEMENT") among the Borrower, certain subsidiaries of the Borrower, as guarantors (the "GUARANTOR SUBSIDIARIES"), the lenders party thereto, and Goldman Sachs Credit Partners L.P., as sole lead arranger, sole bookrunner, sole syndication agent and as administrative agent (in such capacity and together with its successors, the "ADMINISTRATIVE AGENT"), which will provide for a $170,000,000 credit facility. Capital C Ohio Inc. has previously entered into an ISDA Master Agreement dated as of June 30, 2004, a Credit Support Annex and a Schedule thereto and Confirmations thereunder relating to one or more Transactions (each such term as defined therein) under such ISDA Master Agreement (collectively, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "HEDGE AGREEMENT") by and between J. Aron & Company (the "HEDGE COUNTERPARTY") and Capital C Ohio, Inc., which will provide for cash-settled hedge transactions and which Hedge Agreement is being assumed by the Borrower upon the merger of Capital C Ohio, Inc. into the Borrower. Pursuant to the terms of the Credit Agreement, certain lenders under the Credit Agreement have agreed to issue letters of credit in support of the Borrower's obligations under the Hedge Agreement. To the extent the Borrower's obligations under the Hedge Agreement exceed letters of credit issued under the Credit Agreement to secure such obligations, such excess amounts shall be secured by a second priority lien on the Collateral in favor of the Hedge Counterparty pursuant to the terms of the Parity Debt Documents. The Borrower intends to issue 8.75% Senior Secured Notes (including any related exchange notes, the "NOTES") in an aggregate principal amount of $192,500,000 pursuant to an Indenture dated as of the date hereof (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "INDENTURE") among the Borrower, the guarantors party thereto and BNY Midwest Trust Company, as trustee (in such capacity and together with its successors in such capacity, the "TRUSTEE"). The Borrower and the other Pledgors intend to (i) secure the Obligations under the Credit Agreement and any future Priority Lien Debt on a first priority basis and (ii) and, subject to such priority, intend to secure the Obligations under the Hedge Agreement and the Indenture and any future Parity Lien Debt, with Liens on all present and future Collateral. This Agreement sets forth the terms on which each Secured Party has appointed the Collateral Trustee to act as the trustee for the present and future holders of the Secured Obligations to receive, hold, maintain, administer and distribute the Collateral at any time delivered to the Collateral Trustee or the subject of the Security Documents, and to enforce the Security Documents and all interests, rights, powers and remedies of the Collateral Trustee with respect thereto or thereunder and the proceeds thereof. Capitalized terms used in this Agreement have the meanings assigned to them above or in Article 1 below. AGREEMENT In consideration of the premises and the mutual agreements herein set forth, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: ARTICLE 1. DEFINITIONS; PRINCIPLES OF CONSTRUCTION SECTION 1.1 Defined Terms. The following terms will have the following meanings: "ACT OF REQUIRED CREDITORS" means, as to any matter at any time: (1) prior to the Discharge of Priority Lien Obligations, a direction in writing delivered to the Collateral Trustee by or with the written consent of the Required Priority Creditors; (2) after the Discharge of Priority Lien Obligations, a direction in writing delivered to the Collateral Trustee by or with the written consent of the Required Parity Creditors. For purposes of this definition, (a) Secured Debt registered in the name of, or beneficially owned by, the Borrower or any Affiliate of the Borrower will be deemed not to be outstanding and (b) votes will be determined in accordance with Section 7.2. "ADDITIONAL SECURED DEBT" has the meaning set forth in Section 3.8. "ADMINISTRATIVE AGENT" has the meaning set forth in the recitals. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control," as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes of this definition, the terms "controlling," "controlled by" and "under common control with" have correlative meanings. 2 "AGREEMENT" has the meaning set forth in the preamble. "BOARD OF DIRECTORS" means (1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board; (2) with respect to a partnership, the Board of Directors of the general partner of the partnership; (3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and (4) with respect to any other Person, the board or committee of such Person serving a similar function. "BORROWER" has the meaning set forth in the preamble. "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on which banking institutions in the City of New York or at a place of payment are authorized by law, regulation or executive order to remain closed. "CAPITAL STOCK" means: (1) in the case of a corporation, corporate stock; (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. "CLASS" means (1) in the case of Parity Lien Debt, every Series of Parity Lien Debt, taken together and (2) in the case of Priority Lien Debt, every Series of Priority Lien Debt, taken together. "COLLATERAL" means, in the case of each Series of Secured Debt, all properties and assets of the Borrower and the other Pledgors now owned or hereafter acquired in which Liens have been granted to the Collateral Trustee to secure the Secured Obligations, and shall exclude any properties and assets in which the Collateral Trustee is required to release its Liens pursuant to Section 3.2; provided, that, if such Liens are required to be released as a result of the sale, transfer or other disposition of any properties or assets of the Borrower or any other Pledgor, 3 such assets or properties will cease to be excluded from the Collateral if the Borrower or any other Pledgor thereafter acquires or reacquires such assets or properties. "COLLATERAL TRUSTEE" has the meaning set forth in the preamble. "COLLATERAL TRUST JOINDER" means an agreement substantially in the form of Exhibit A. "CREDIT AGREEMENT" has the meaning set forth in the recitals. "CREDIT FACILITIES" means, one or more debt facilities or commercial paper facilities, in each case with banks or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced (whether upon or after termination or otherwise) or refinanced (including by means of sales of debt securities to institutional investors) in whole or in part from time to time. "DEFEASANCE ACCOUNT" means any deposit account to be titled "Defeasance Account" or words of similar nature established or maintained for the benefit of the holders of Senior Secured Note Obligations. "DISCHARGE OF PRIORITY LIEN OBLIGATIONS" means the occurrence of all of the following: (1) termination or expiration of all commitments to extend credit that would constitute Priority Lien Debt; (2) payment in full in cash of the principal of and interest and premium (if any) on all Priority Lien Debt (other than any undrawn letters of credit); (3) discharge or cash collateralization (at the lower of (A) 105% of the aggregate undrawn amount and (B) the percentage of the aggregate undrawn amount required for release of liens under the terms of the applicable Priority Lien Document) of all outstanding letters of credit constituting Priority Lien Debt; and (4) payment in full in cash of all other Priority Lien Obligations that are outstanding and unpaid at the time the Priority Lien Debt is paid in full in cash (other than any obligations for taxes, costs, indemnifications, reimbursements, damages and other liabilities in respect of which no claim or demand for payment has been made at such time). "EQUALLY AND RATABLY" means, in reference to sharing of Liens or proceeds thereof as between holders of Secured Obligations within the same Class, that such Liens or proceeds: (1) will be allocated and distributed first to the Secured Debt Representative for each outstanding Series of Secured Debt within that Class, for the account of the holders of such Series of Secured Debt, ratably in proportion to the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been 4 made under such letters of credit) on each outstanding Series of Secured Debt within that Class when the allocation or distribution is made, and thereafter (2) will be allocated and distributed (if any remain after payment in full of all of the principal of, and interest and premium (if any) and reimbursement obligations (contingent or otherwise) with respect to letters of credit, if any, outstanding (whether or not drawings have been made on such letters of credit) on all outstanding Secured Obligations within that Class) to the Secured Debt Representative for each outstanding Series of Secured Obligations within that Class, for the account of the holders of any remaining Secured Obligations within that Class, ratably in proportion to the aggregate unpaid amount of such remaining Secured Obligations within that Class due and demanded (with written notice to the applicable Secured Debt Representative and the Collateral Trustee) prior to the date such distribution is made. "GUARANTEE" means a guarantee other than by endorsement of negotiable instruments for collection in the ordinary course of business, direct or indirect, in any manner including, by way of a pledge of assets or through letters of credit or reimbursement agreements in respect thereof, of all or any part of any Indebtedness (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take or pay or to maintain financial statement conditions or otherwise). "GUARANTOR SUBSIDIARIES" as defined in the recitals hereto. "HEDGE AGREEMENT" as defined in the recitals hereto. "HEDGE AGREEMENT DEBT" means any and all amounts owing (whether or not then due or subject to any contingency) by the Borrower and/or its Subsidiaries under the Hedge Agreement, and any ISDA Master Agreement entered into after the date hereof by the Borrower and/or its Subsidiaries as may be permitted under Section 6.1(k) of the Credit Agreement and/or Section 4.09 of the Indenture, that was permitted to be incurred and secured under each applicable Secured Debt Document (or as to which the counterparties under the Hedge Agreement obtained an Officer's Certificate at the time of incurrence to the effect that such Indebtedness was permitted to be incurred and secured by all applicable Secured Debt Documents); provided, that Hedging Obligations, if any, that constitute Priority Lien Debt shall be excluded from this definition. "HEDGE AGREEMENT DOCUMENTS" means the Hedge Agreement, the credit support annex, and any ISDA Master Agreement entered into after the date hereof by the Borrower and/or its Subsidiaries with respect to Hedge Agreement Debt, and the Security Documents (other than any Security Documents that do not secure Hedge Agreement Obligations). "HEDGE AGREEMENT OBLIGATIONS" means the Hedge Agreement Debt and all other Obligations in respect of Hedge Agreement Debt. "HEDGE AGREEMENT OUTSTANDING AMOUNT" as defined in Section 7.2 hereof. "HEDGE AGREEMENT REPRESENTATIVE" means: 5 (1) in the case of the Hedge Agreement, J. Aron & Company or any successor under the Hedge Agreement; or (2) in the case of any other Series of Hedge Agreement Debt, the trustee, agent or representative of the holders of such Series of Hedge Agreement Debt who (A) is appointed as a Hedge Agreement Representative (for purposes related to the administration of the Security Documents) pursuant to the agreement governing such Series of Hedge Agreement Debt, together with its successors in such capacity, and (B) that has executed a Collateral Trust Joinder. "HEDGE LETTERS OF CREDIT" means, collectively, any Hedge Letter of Credit (as defined in the Credit Agreement) and any Hedge Support Letter of Credit (as defined in the Credit Agreement). "HEDGING OBLIGATIONS" means, with respect to any specified Person, the obligations of such Person under: (1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements; (2) other agreements or arrangements designed to manage interest rates or interest rate risk; and (3) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange rates or commodity prices; provided, that in each case above, such agreements, arrangements or obligations shall not include the Hedge Agreement or the obligations or arrangements thereunder. "INDEBTEDNESS" means and includes all obligations that constitute "Indebtedness" as defined under the Credit Agreement and the Indenture and all obligations of the Borrower under the Hedge Agreement or future hedge agreements to the extent permitted under Section 6.1(k) of the Credit Agreement and/or Section 4.09 of the Indenture. "INDEMNIFIED LIABILITIES" means any and all liabilities (including all environmental liabilities), obligations, losses, damages, penalties, actions, judgments, suits, costs, taxes, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, performance, administration or enforcement of this Agreement or any of the other Security Documents, including any of the foregoing relating to the use of proceeds of any Secured Debt or the violation of, noncompliance with or liability under, any law (including environmental laws) applicable to or enforceable against the Borrower, any of its Subsidiaries or any other Pledgor or any of the Collateral and all reasonable costs and expenses (including reasonable fees and expenses of legal counsel selected by the Indemnitee) incurred by any Indemnitee in connection with any claim, action, investigation or proceeding in any respect relating to any of the foregoing, whether or not suit is brought. "INDEMNITEE" has the meaning set forth in Section 7.11(a). "INDENTURE" has the meaning set forth in the recitals. 6 "INSOLVENCY OR LIQUIDATION PROCEEDING" means: (1) any case commenced by or against the Borrower or any other Pledgor under Title 11, U.S. Code or any similar federal or state law for the relief of debtors, any other proceeding for the reorganization, recapitalization or adjustment or marshalling of the assets or liabilities of the Borrower or any other Pledgor, any receivership or assignment for the benefit of creditors relating to the Borrower or any other Pledgor or any similar case or proceeding relative to the Borrower or any other Pledgor or its creditors, as such, in each case whether or not voluntary; (2) any liquidation, dissolution, marshalling of assets or liabilities or other winding up of or relating to the Borrower or any other Pledgor, in each case whether or not voluntary and whether or not involving bankruptcy or insolvency; or (3) any other proceeding of any type or nature in which substantially all claims of creditors of the Borrower or any other Pledgor are determined and any payment or distribution is or may be made on account of such claims. "JUNIOR TRUST ESTATE" has the meaning set forth in Section 2.2. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the UCC (or equivalent statutes) of any jurisdiction. "LIEN SHARING AND PRIORITY CONFIRMATION" means: (1) as to any Series of Parity Lien Debt, the written agreement of the holders of such Series of Parity Lien Debt, as set forth in the Hedge Agreement, the Indenture or other agreement governing such Series of Parity Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Priority Lien Debt, each existing and future Priority Lien Representative and each existing and future holder of Permitted Prior Liens: (a) that all Parity Lien Obligations will be and are secured equally and ratably by all Parity Liens at any time granted by the Borrower or any other Pledgor to secure any Obligations in respect of such Series of Parity Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Parity Lien Debt, and that all such Parity Liens will be enforceable by the Collateral Trustee for the benefit of all holders of Parity Lien Obligations equally and ratably; (b) that the holders of Obligations in respect of such Series of Parity Lien Debt are bound by the provisions of this Agreement, including the provisions relating to the ranking of Parity Liens and the order of application of proceeds from the enforcement of Parity Liens; and 7 (c) consenting to and directing the Collateral Trustee to perform its obligations under this Agreement and the other Security Documents; and (2) as to any Series of Priority Lien Debt, the written agreement of the holders of such Series of Priority Lien Debt, as set forth in the Credit Agreement or other agreement governing such Series of Priority Lien Debt, for the enforceable benefit of all holders of each existing and future Series of Parity Lien Debt, each existing and future Parity Lien Representative and each existing and future holder of Permitted Prior Liens: (a) that all Priority Lien Obligations will be and are secured equally and ratably by all Priority Liens at any time granted by the Borrower or any other Pledgor to secure any Obligations in respect of such Series of Priority Lien Debt, whether or not upon property otherwise constituting collateral for such Series of Priority Lien Debt, and that all such Priority Liens will be enforceable by the Collateral Trustee for the benefit of all holders of Priority Lien Obligations equally and ratably; (b) that the holders of Obligations in respect of such Series of Priority Lien Debt are bound by the provisions of this Agreement, including the provisions relating to the ranking of Priority Liens and the order of application of proceeds from enforcement of Priority Liens; and (c) consenting to and directing the Collateral Trustee to perform its obligations under this Agreement and the other Security Documents. "NON-SHARED COLLATERAL" means the following exclusions from the definition of "Collateral": (i) with respect to the Collateral for the holders of Priority Lien Obligations and Senior Secured Note Obligations, the Hedge Letters of Credit; and (ii) with respect to the Collateral for the holders of Priority Lien Obligations and the holders of Hedge Agreement Obligations, any Redemption Account or Defeasance Account. "NOTES" has the meaning set forth in the recitals. "OBLIGATIONS" means any principal (including reimbursement obligations with respect to letters of credit whether or not drawn), interest (including all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable post-default rate, specified in the Priority Lien Documents, even if such interest is not enforceable, allowable or allowed as a claim in such proceeding), premium (if any), fees, indemnifications, reimbursements, expenses and other liabilities payable under the documentation governing any Indebtedness. "OFFICER'S CERTIFICATE" means a certificate with respect to compliance with a condition or covenant provided for in this Agreement, signed on behalf of the Borrower by an officer of the Borrower (in his capacity as officer and not in his individual capacity), including: (a) a statement that the Person making such certificate has read such covenant or condition; 8 (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based; (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. "PARITY LIEN" means a Lien granted by a Security Document to the Collateral Trustee, at any time, upon any property of the Borrower or any other Pledgor to secure Parity Lien Obligations. "PARITY LIEN DEBT" means (i) the Hedge Agreement Debt and (ii) the Senior Secured Note Debt. "PARITY LIEN DOCUMENTS" means the Hedge Agreement Documents and the Senior Secured Note Documents. "PARITY LIEN OBLIGATIONS" means Parity Lien Debt and all other Obligations in respect thereof. "PARITY LIEN REPRESENTATIVE" means each Hedge Agreement Representative and the Senior Secured Note Representative. "PERMITTED PRIOR LIENS" means: (1) Liens described in clauses (1), (4), (5), (7), (10), (14), (15) or (16) of the definition of "Permitted Liens" under the Indenture; and (2) Permitted Liens (as defined in the Indenture) that arise by operation of law and are not voluntarily granted, to the extent entitled by law to priority over the Liens created by the Security Documents. "PERSON" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, limited liability company or government or other entity. "PLEDGORS" means the Sponsor, the Borrower, the Guarantor Subsidiaries and any other Person (if any) that at any time provides collateral security for any Secured Obligations. "PRIORITY LIEN" means a Lien granted by a Security Document to the Collateral Trustee, at any time, upon any property of the Borrower or any other Pledgor to secure Priority Lien Obligations. 9 "PRIORITY LIEN DEBT" means: (1) Indebtedness and other Obligations under the Credit Agreement; (2) Indebtedness under any other Credit Facility that is secured equally and ratably with the Credit Agreement by a Priority Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document; provided, in the case of any Indebtedness referred to in this clause (2), that: (a) on or before the date on which such Indebtedness is incurred by the Borrower such Indebtedness is designated by the Borrower, in an Officer's Certificate delivered to each Priority Lien Representative and the Collateral Trustee, as "Priority Lien Debt" for the purposes of the Secured Debt Documents; provided, that no Obligation or Indebtedness may be designated as both Parity Lien Debt and Priority Lien Debt; (b) such Indebtedness is governed by a credit agreement, an indenture or other agreement that includes a Lien Sharing and Priority Confirmation; and (c) all requirements set forth in this Agreement as to the confirmation, grant or perfection of the Collateral Trustee's Lien to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (c) will be conclusively established if the Borrower delivers to the Collateral Trustee an Officer's Certificate stating that such requirements and other provisions have been satisfied and that such Indebtedness is "Priority Lien Debt"); and (3) Hedging Obligations incurred to hedge or manage interest rate risk with respect to Priority Lien Debt; provided, that such Hedging Obligations are secured equally and ratably with the Credit Agreement by a Priority Lien on all of the assets and properties that secure Indebtedness under the Credit Facility in respect of which such Hedging Obligations are incurred. "PRIORITY LIEN DOCUMENTS" means the Credit Agreement and any other Credit Facility pursuant to which any Priority Lien Debt is incurred and the Security Documents (other than any Security Documents that do not secure Priority Lien Obligations). "PRIORITY LIEN OBLIGATIONS" means the Priority Lien Debt and all other Obligations in respect of Priority Lien Debt. "PRIORITY LIEN REPRESENTATIVE" means: (a) in the case of the Credit Agreement, the Administrative Agent or any other person appointed as the Priority Lien Representative by the Administrative Agent; or (b) in the case of any other Series of Priority Lien Debt, the trustee, agent or representative of the holders of such Series of Priority Lien Debt who maintains the transfer register for such Series of Priority Lien Debt and is appointed as a representative of the Priority 10 Lien Debt (for purposes related to the administration of the Security Documents) pursuant to the Credit Agreement or other agreement governing such Series of Priority Lien Debt, and who has executed a Collateral Trust Joinder. "REDEMPTION ACCOUNT" means any deposit account to be titled "Redemption Account" or words of similar nature established or maintained for the benefit of the holders of Senior Secured Note Obligations. "REQUIRED PARITY CREDITORS" means, at any time, the holders of more than 50% of the sum of: (i) the Hedge Agreement Outstanding Amount, plus (ii) the sum of (a) the aggregate outstanding principal amount of Senior Secured Note Debt and (b) other than in connection with the exercise of remedies, the aggregate unfunded commitments, if any, to extend credit which, when funded, would constitute Senior Secured Note Debt. For purposes of this definition, (a) Senior Secured Note Debt registered in the name of, or beneficially owned by, the Borrower or any Affiliate of the Borrower will be deemed not to be outstanding, and (b) votes will be determined in accordance with the provisions of Section 7.2. "REQUIRED PRIORITY CREDITORS" means, at any time, the holders of more than 50% of the sum of: (1) the aggregate outstanding principal amount of Priority Lien Debt (including outstanding letters of credit whether or not then available or drawn); and (2) other than in connection with the exercise of remedies, the aggregate unfunded commitments to extend credit which, when funded, would constitute Priority Lien Debt. For purposes of this definition, (a) Priority Lien Debt registered in the name of, or beneficially owned by, the Borrower or any Affiliate of the Borrower will be deemed not to be outstanding, and (b) votes will be determined in accordance with the provisions of Section 7.2. "SECURED DEBT" means Parity Lien Debt and Priority Lien Debt. "SECURED DEBT DEFAULT" means any event or condition which, under the terms of any credit agreement, indenture or other agreement governing any Series of Secured Debt causes, or permits holders of Secured Debt outstanding thereunder (with or without the giving of notice or lapse of time, or both, and whether or not notice has been given or time has lapsed) to cause, the Secured Debt outstanding thereunder to become immediately due and payable. "SECURED DEBT DOCUMENTS" means the Parity Lien Documents and the Priority Lien Documents. "SECURED DEBT REPRESENTATIVE" means each Parity Lien Representative and each Priority Lien Representative. "SECURED OBLIGATIONS" means Parity Lien Obligations and Priority Lien Obligations. 11 "SECURED PARTIES" means the holders of Secured Obligations and the Secured Debt Representatives. "SECURITY DOCUMENTS" means this Agreement, each Lien Sharing and Priority Confirmation, and all security agreements, pledge agreements, collateral assignments, mortgages, collateral agency agreements, control agreements, deeds of trust or other grants or transfers for security executed and delivered by the Borrower or any other Pledgor creating (or purporting to create) a Lien upon Collateral in favor of the Collateral Trustee, for the benefit of the Secured Parties, in each case, as amended, modified, renewed, restated or replaced, in whole or in part, from time to time, in accordance with its terms and Section 7.2. "SENIOR SECURED NOTE DEBT" means (1) the Notes issued on the date hereof (including any related exchange notes); and (2) any other Indebtedness (including additional Notes) that is secured equally and ratably with the Notes by a Parity Lien that was permitted to be incurred and so secured under each applicable Secured Debt Document; provided, that in the case of any Indebtedness referred to in clause (2) of this definition, that: (a) on or before the date on which such Indebtedness is incurred by the Borrower or by a Restricted Subsidiary (as defined under the Indenture) of the Borrower, such Indebtedness is designated by the Borrower, in an Officer's Certificate delivered to each Parity Lien Representative and the Collateral Trustee, as "Parity Lien Debt" for the purposes of the Secured Debt Documents; provided, that no Obligation or Indebtedness may be designated as both Parity Lien Debt and Priority Lien Debt; (b) such Indebtedness is governed by an indenture, credit agreement or other agreement that includes a Lien Sharing and Priority Confirmation; and (c) all requirements set forth in this Agreement as to the confirmation, grant or perfection of the Collateral Trustee's Lien to secure such Indebtedness or Obligations in respect thereof are satisfied (and the satisfaction of such requirements and the other provisions of this clause (c) will be conclusively established if the Borrower delivers to the Collateral Trustee an Officer's Certificate stating that such requirements and other provisions have been satisfied and that such Indebtedness is "Parity Lien Debt"). "SENIOR SECURED NOTE DOCUMENTS" means, collectively, the Indenture, the Notes and each indenture, credit agreement or other agreement governing each other Series of Senior Secured Note Debt and the Security Documents (other than any Security Documents that do not secure Senior Secured Note Obligations). "SENIOR SECURED NOTE OBLIGATIONS" means Senior Secured Note Debt and all other Obligations in respect thereof. "SENIOR SECURED NOTE REPRESENTATIVE" means: (1) in the case of the Notes, the Trustee; or 12 (2) in the case of any other Series of Senior Secured Note Debt, the trustee, agent or representative of the holders of such Series of Senior Secured Note Debt who maintains the transfer register for such Series of Senior Secured Note Debt and (A) is appointed as a Senior Secured Note Representative (for purposes related to the administration of the Security Documents) pursuant to the indenture, credit agreement or other agreement governing such Series of Senior Secured Note Debt, together with its successors in such capacity, and (B) that has executed a Collateral Trust Joinder. "SENIOR TRUST ESTATE" has the meaning set forth in Section 2.1. "SERIES OF HEDGE AGREEMENT DEBT" means obligations under the Hedge Agreement Debt and the obligations to each other counterparty, if any, under any other Hedging Obligations; provided, that Hedging Obligations, if any, that constitute Priority Lien Debt shall be excluded from this definition. "SERIES OF PARITY LIEN DEBT" means (i) with respect to Senior Secured Note Debt, each Series of Senior Secured Note Debt and (ii) with respect to Hedge Agreement Debt, each Series of Hedge Agreement Debt. "SERIES OF PRIORITY LIEN DEBT" means indebtedness under the Credit Agreement and each other issue or series of Priority Lien Debt for which a single transfer register is maintained. "SERIES OF SECURED DEBT" means, severally, each Series of Priority Lien Debt and each Series of Parity Lien Debt. "SERIES OF SENIOR SECURED NOTE DEBT" means the Notes and each other issue or series of Parity Lien Debt for which a single transfer register is maintained. "SPONSOR" means Capital C Energy Operations, LP. "SUBSIDIARY" means, with respect to any specified Person: (1) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders' agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of the corporation, association or other business entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and (2) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are that Person or one or more Subsidiaries of that Person (or any combination thereof). "TRUSTEE" has the meaning set forth in the recitals. "TRUST ESTATES" has the meaning set forth in Section 2.2. 13 "UCC" means the Uniform Commercial Code as in effect in the State of New York or any other applicable jurisdiction. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. SECTION 1.2 Rules of Interpretation. (a) All terms used in this Agreement that are defined in Article 9 of the UCC and not otherwise defined herein have the meanings assigned to them in Article 9 of the UCC. (b) Unless otherwise indicated, any reference to any agreement or instrument will be deemed to include a reference to that agreement or instrument as assigned, amended, supplemented, amended and restated, or otherwise modified and in effect from time to time or replaced in accordance with the terms of this Agreement. (c) The use in this Agreement or any of the other Security Documents of the word "include" or "including," when following any general statement, term or matter, will not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but will be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The word "will" shall be construed to have the same meaning and effect as the word "shall." (d) References to "Sections," "clauses," "recitals" and the "preamble" will be to Sections, clauses, recitals and the preamble, respectively, of this Agreement unless otherwise specifically provided. References to "Articles" will be to Articles of this Agreement unless otherwise specifically provided. References to "Exhibits" and "Schedules" will be to Exhibits and Schedules, respectively, to this Agreement unless otherwise specifically provided. (e) Notwithstanding anything to the contrary in this Agreement, any references contained herein to any section, clause, paragraph, definition or other provision of the Indenture (including any definition contained therein) shall be deemed to be a reference to such section, clause, paragraph, definition or other provision as in effect on the date of this Agreement; provided, that any reference to any such section, clause, paragraph or other provision shall refer to such section, clause, paragraph or other provision of the Indenture (including any definition contained therein) as amended or modified from time to time if such amendment or modification has been (1) made in accordance with the Indenture and (2) prior to the Discharge of Priority Lien Obligations, approved in a writing delivered to the Trustee and the Collateral Trustee by, or on behalf of, the requisite holders of Priority Lien Obligations as are needed (if any) under the terms of the applicable Priority Lien Documents to approve such amendment or modification. (f) This Agreement and the other Security Documents will be construed without regard to the identity of the party who drafted it and as though the parties participated 14 equally in drafting it. Consequently, each of the parties acknowledges and agrees that any rule of construction that a document is to be construed against the drafting party will not be applicable either to this Agreement or the other Security Documents. ARTICLE 2. THE TRUST ESTATES SECTION 2.1 Declaration of Senior Trust. To secure the payment of the Priority Lien Obligations and in consideration of the mutual agreements set forth in this Agreement, each of the Pledgors hereby grants to the Collateral Trustee, and the Collateral Trustee hereby accepts and agrees to hold, in trust under this Agreement for the benefit of all present and future holders of Priority Lien Obligations, all of such Pledgor's right, title and interest in, to and under all Collateral granted to the Collateral Trustee under any Security Document for the benefit of the holders of Priority Lien Obligations, together with all of the Collateral Trustee's right, title and interest in, to and under the Security Documents, and all interests, rights, powers and remedies of the Collateral Trustee thereunder or in respect thereof and all cash and non-cash proceeds thereof (collectively, the "SENIOR TRUST ESTATE"). The Collateral Trustee and its successors and assigns under this Agreement will hold the Senior Trust Estate in trust for the benefit solely and exclusively of all present and future holders of Priority Lien Obligations as security for the payment of all present and future Priority Lien Obligations. Notwithstanding the foregoing, if at any time: (1) all Liens securing the Priority Lien Obligations have been released as provided in Section 4.1; (2) the Collateral Trustee holds no other property in trust as part of the Senior Trust Estate; (3) no monetary obligation (other than indemnification and other contingent obligations not then due and payable and letters of credit that have been cash collateralized as provided in clause (3) of the definition of "Discharge of Priority Lien Obligations") is outstanding and payable under this Agreement to the Collateral Trustee or any of its co-trustees or agents (whether in an individual or representative capacity); and (4) the Borrower delivers to the Collateral Trustee an Officer's Certificate stating that all Priority Liens of the Collateral Trustee have been released in compliance with all applicable provisions of the Priority Lien Documents and that the Pledgors are not required by any Priority Lien Document to grant any Priority Lien upon any property, then the senior trust arising hereunder will terminate, except that all provisions set forth in Sections 7.10 and 7.11 that are enforceable by the Collateral Trustee or any of its co-trustees or 15 agents (whether in an individual or representative capacity) will remain enforceable in accordance with their terms. The parties further declare and covenant that the Senior Trust Estate will be held and distributed by the Collateral Trustee subject to the further agreements herein. SECTION 2.2 Declaration of Junior Trust. To secure the payment of the Parity Lien Obligations and in consideration of the premises and the mutual agreements set forth herein, each of the Pledgors hereby grants to the Collateral Trustee, and the Collateral Trustee hereby accepts and agrees to hold, in trust under this Agreement for the benefit of all present and future holders of Parity Lien Obligations, all of such Pledgor's right, title and interest in, to and under all Collateral granted to the Collateral Trustee under any Security Document for the benefit of the holders of Parity Lien Obligations, together with all of the Collateral Trustee's right, title and interest in, to and under the Security Documents, and all interests, rights, powers and remedies of the Collateral Trustee thereunder or in respect thereof and all cash and non-cash proceeds thereof (collectively, the "JUNIOR TRUST ESTATE," and together with the Senior Trust Estate, the "TRUST ESTATES"). The Collateral Trustee and its successors and assigns under this Agreement will hold the Junior Trust Estate in trust for the benefit solely and exclusively of all present and future holders of Parity Lien Obligations as security for the payment of all present and future Priority Lien Obligations. Notwithstanding the foregoing, if at any time: (1) all Liens securing the Parity Lien Obligations have been released as provided in Section 4.1; (2) the Collateral Trustee holds no other property in trust as part of the Junior Trust Estate; (3) no monetary obligation (other than indemnification and other contingent obligations not then due and payable and letters of credit that have been cash collateralized as provided in clause (3) of the definition of "Discharge of Priority Lien Obligations") is outstanding and payable under this Agreement to the Collateral Trustee or any of its co-trustees or agents (whether in an individual or representative capacity); and (4) the Borrower delivers to the Collateral Trustee an Officer's Certificate stating that all Parity Liens of the Collateral Trustee have been released in compliance with all applicable provisions of the Parity Lien Documents and that the Pledgors are not required by any Parity Lien Document to grant any Parity Lien upon any property, then the junior trust arising hereunder will terminate, except that all provisions set forth in Sections 7.10 and 7.11 that are enforceable by the Collateral Trustee or any of its co-trustees or 16 agents (whether in an individual or representative capacity) will remain enforceable in accordance with their terms. The parties further declare and covenant that the Junior Trust Estate will be held and distributed by the Collateral Trustee subject to the further agreements herein. SECTION 2.3 Priority of Liens. Notwithstanding anything else contained herein or in any other Security Document, it is the intent of the parties that: (1) this Agreement and the other Security Documents create two separate and distinct Trust Estates and Liens: (a) the Senior Trust Estate and Priority Lien securing the payment and performance of the Priority Lien Obligations and (b) the Junior Trust Estate and Parity Lien securing the payment and performance of the Parity Lien Obligations; and (2) the Liens securing the Parity Lien Obligations are subject and subordinate to the Liens securing the Priority Lien Obligations. SECTION 2.4 Restrictions on Enforcement of Junior Priority Liens. (a) Until the Discharge of Priority Lien Obligations, the holders of the Priority Lien Obligations will have, subject to the exceptions set forth below in clauses (1) through (4) and subject to the rights of the holders of Permitted Prior Liens, the exclusive right to authorize and direct the Collateral Trustee with respect to the Security Documents and the Collateral including, without limitation, the exclusive right to authorize or direct the Collateral Trustee to enforce, collect or realize on any Collateral or exercise any other right or remedy with respect to the Collateral and no Parity Lien Representative nor the holders of Parity Lien Obligations may authorize or direct the Collateral Trustee with respect to such matters. Notwithstanding the foregoing, the Parity Lien Representatives (together with any other holder of Parity Lien Obligations) may, subject to the rights of the holders of other Permitted Prior Liens, direct the Collateral Trustee: (1) without any condition or restriction whatsoever, at any time after the Discharge of Priority Lien Obligations; (2) as necessary to redeem any Collateral in a creditor's redemption permitted by law or to deliver any notice or demand necessary to enforce (subject to the prior Discharge of Priority Lien Obligations) any right to claim, take or receive proceeds of Collateral remaining after the Discharge of Priority Lien Obligations in the event of foreclosure or other enforcement of any Permitted Prior Lien; (3) as necessary to perfect or establish the priority (subject to Priority Liens and other Permitted Prior Liens) of the Parity Liens upon any Collateral, provided that, unless otherwise agreed to by the Collateral Trustee in the Security Documents, the 17 Parity Lien Representatives and the holders of Parity Lien Obligations may not require the Collateral Trustee to take any action to perfect any Collateral through possession or control other than the Collateral Trustee taking any action for possession or control required by the holders of Priority Lien Obligations and the Collateral Trustee agreeing pursuant to Section 7.4 that the Collateral Trustee as agent for the benefit of the holders of Priority Lien Obligations agrees to act as agent for the Administrative Agent for the benefit of the holders of Parity Lien Obligations; or (4) as necessary to create, prove, preserve or protect (but not enforce) the Parity Liens upon any Collateral. (b) Until the Discharge of Priority Lien Obligations, none of the holders of Parity Lien Obligations, the Collateral Trustee or any Parity Lien Representative will: (1) request judicial relief, in an Insolvency or Liquidation Proceeding or in any other court, that would hinder, delay, limit or prohibit the lawful exercise or enforcement of any right or remedy otherwise available to the holders of any Priority Lien Obligations in respect of any Priority Liens or that would limit, invalidate, avoid or set aside any Priority Liens or subordinate any Priority Liens to the Parity Liens or grant the Parity Liens equal ranking to any Priority Liens; (2) oppose or otherwise contest any motion for relief from the automatic stay or for any injunction against foreclosure or enforcement of Priority Liens made by any holder of Priority Lien Obligations or any Priority Lien Representative in any Insolvency or Liquidation Proceeding; (3) oppose or otherwise contest any lawful exercise by any holder of Priority Lien Obligations or any Priority Lien Representative of the right to credit bid Priority Lien Debt at any sale in foreclosure of Priority Liens; (4) oppose or otherwise contest any other request for judicial relief made in any court by any holder of Priority Lien Obligations or any Priority Lien Representative relating to the lawful enforcement of any Priority Lien; or (5) challenge the validity, enforceability, perfection or priority of the Priority Liens. Notwithstanding the foregoing, (i) both before and during an Insolvency or Liquidation Proceeding, the holders of Parity Lien Obligations and the Parity Lien Representatives may take any actions and exercise any and all rights that would be available to a holder of unsecured claims, including, without limitation, the commencement of an Insolvency or Liquidation Proceeding against the Borrower or any other Pledgor in accordance with applicable law; provided, that the holders of Parity Lien Obligations and the Parity Lien Representatives may not take any of the actions prohibited by clauses (1) through (5) of this Section 2.4(b) or oppose or contest any order that it has agreed not to oppose or contest under Section 2.8; and (ii) the Hedge Agreement Representative or the holders of Hedge Agreement Obligations may establish an "Early Termination Date" under the Hedge Agreement as provided therein and terminate, liquidate, net and set-off in respect of "Transactions" under the Hedge Agreement and draw on 18 or otherwise exercise any rights or remedies under any Hedge Letter of Credit or any other letter of credit delivered to the Hedge Agreement Representative and may retain the proceeds thereof without regard to any other provisions of this Agreement. (c) Except for payments that are received by the Collateral Trustee, any Parity Lien Representative or any holder of Parity Lien Obligations at any time prior to the Discharge of Priority Lien Obligations and after (1) the commencement of any Insolvency or Liquidation Proceeding in respect of the Borrower or any other Pledgor or (2) the Collateral Trustee and each Parity Lien Representative have received written notice from any Priority Lien Representative at the direction of an Act of Required Creditors stating that (A) any Series of Priority Lien Debt has become due and payable in full (whether at maturity, upon acceleration or otherwise) or (B) the holders of Priority Liens securing one or more Series of Priority Lien Debt have become entitled under any Priority Lien Documents to and desire to enforce any or all of the Priority Liens by reason of a default under such Priority Lien Documents: (1) no payment of money (or the equivalent of money) made by the Borrower or any other Pledgor to any Parity Lien Representative or the Collateral Trustee or any other holder of Parity Lien Obligations (including, without limitation, payments and prepayments made for application to Parity Lien Obligations and all other payments and deposits made pursuant to any provision of any Parity Lien Document) will in any event be subject to the provisions of Sections 2.4(a) and (b); and (2) all payments permitted to be received under this Section 2.4(c) will be received by the Parity Lien Representatives, the Collateral Trustee and the other holders of Parity Lien Obligations free from the Priority Liens and all other Liens except the Parity Liens. (d) Except for payments received free from the Priority Liens as provided in Section 2.4(c), all proceeds of Collateral received by the Collateral Trustee, any Parity Lien Representative or any holder of Parity Lien Obligations at any time prior to the Discharge of Priority Lien Obligations will be held by the Collateral Trustee, the applicable Parity Lien Representative or the applicable holder of Parity Lien Obligations for the account of the holders of Priority Liens and remitted to any Priority Lien Representative upon demand by such Priority Lien Representative. The Parity Liens will remain attached to and enforceable against all proceeds so held or remitted. SECTION 2.5 Waiver of Right of Marshalling. (a) Prior to the Discharge of Priority Lien Obligations, the holders of Parity Lien Obligations, each Parity Lien Representative and the Collateral Trustee may not assert or enforce any right of marshalling accorded to a junior lienholder, as against the holders of any Priority Liens (in their capacity as priority lienholders). (b) Following the Discharge of Priority Lien Obligations, the holders of Parity Lien Obligations and any Parity Lien Representative may assert their right under the UCC or otherwise to any proceeds remaining following a sale or other disposition of Collateral by, or on behalf of, the holders of Priority Lien Obligations. 19 SECTION 2.6 Discretion in Enforcement of Priority Liens. In exercising rights and remedies with respect to the Collateral, the Priority Lien Representatives may enforce (or refrain from enforcing) the provisions of the Priority Lien Documents and exercise (or refrain from exercising) remedies thereunder or any such rights and remedies, all in such order and in such manner as they may determine in the exercise of their sole and exclusive discretion, including: (1) the exercise or forbearance from exercise of all rights and remedies in respect of the Collateral and/or the Priority Lien Obligations; (2) the enforcement or forbearance from enforcement of any Priority Lien in respect of the Collateral; (3) the exercise or forbearance from exercise of rights and powers of a holder of shares of stock included in the Senior Trust Estate to the extent provided in the Security Documents; (4) the acceptance of the Collateral in full or partial satisfaction of the Priority Lien Obligations; and (5) the exercise or forbearance from exercise of all rights and remedies of a secured lender under the UCC or any similar law of any applicable jurisdiction or in equity. SECTION 2.7 Discretion in Enforcement of Priority Lien Obligations. (a) Without in any way limiting the generality of Section 2.6, the holders of Priority Lien Obligations and the Priority Lien Representatives may, at any time and from time to time, without the consent of or notice to holders of Parity Lien Obligations or the Parity Lien Representatives, without incurring responsibility to holders of Parity Lien Obligations and the Parity Lien Representatives and without impairing or releasing the subordination provided in this Agreement or the obligations hereunder of holders of Parity Lien Obligations and the Parity Lien Representatives, do any one or more of the following: (1) subject to the other provisions hereof, change the manner, place or terms of payment or extend the time of payment of, or renew or alter, the Priority Lien Obligations, or otherwise amend or supplement in any manner the Priority Lien Obligations, or any instrument evidencing the Priority Lien Obligations or any agreement under which the Priority Lien Obligations are outstanding or any Security Document related thereto; (2) subject to the other provisions hereof, release any Person or entity liable in any manner for the collection of the Priority Lien Obligations; (3) subject to the other provisions hereof, release the Priority Lien on any Collateral; and 20 (4) exercise or refrain from exercising any rights against any Pledgor. SECTION 2.8 Insolvency or Liquidation Proceedings. (a) If in any Insolvency or Liquidation Proceeding and prior to the Discharge of Priority Lien Obligations, the holders of any Priority Lien Obligations by an Act of Required Creditors consent to any order: (1) for use of cash collateral; (2) approving a debtor-in-possession financing secured by a Lien that is senior to or on a parity with all Priority Liens upon any property of the estate in such Insolvency or Liquidation Proceeding; (3) granting any relief on account of Priority Lien Obligations as adequate protection (or its equivalent) for the benefit of the holders of Priority Lien Obligations in the Collateral subject to Priority Liens; or (4) relating to a sale of assets of the Borrower or any other Pledgor that provides, to the extent the Collateral sold is to be free and clear of Liens, that all Priority Liens and Parity Liens will attach to the proceeds of the sale; provided, that in the case of the above subsections (1) - (4), such collateral shall not include the Non-Shared Collateral; then, the holders Parity Lien Obligations and the Parity Lien Representatives, in their capacity as holders or representatives of secured claims, will not oppose or otherwise contest the entry of such order, so long as none of the holders of Priority Lien Obligations or any Priority Lien Representative in any respect opposes or otherwise contests any request made by the holders of Parity Lien Obligations or a Parity Lien Representative for the grant to the Collateral Trustee, for the benefit of the holders of Parity Lien Obligations and the Parity Lien Representatives, of a junior Lien upon any property on which a Lien is (or is to be) granted under such order to secure the Priority Lien Obligations, co-extensive in all respects with, but subordinated (as set forth in Section 2.3) to, such Lien and all Priority Liens on such property. Notwithstanding the foregoing, both before and during an Insolvency or Liquidation Proceeding, the holders of Parity Lien Obligations and the Parity Lien Representatives may take any actions and exercise any and all rights that would otherwise be available to a holder of unsecured claims, including, without limitation, the commencement of Insolvency or Liquidation Proceedings against any Pledgors in accordance with applicable law; provided, however, that, both before and during an Insolvency or Liquidation Proceeding, the holders of Parity Lien Obligations and the Parity Lien Representatives may not take any of the actions prohibited under Section 2.4(b) or oppose or contest any order that it has agreed not to oppose or contest under clauses (1) through (4) of the preceding paragraph. (b) The holders of Parity Lien Obligations or any Parity Lien Representative will not file or prosecute in any Insolvency or Liquidation Proceeding any motion for adequate 21 protection (or any comparable request for relief) based upon their interest in the Collateral under the Parity Liens, except that: (1) they may freely seek and obtain relief: (A) granting a junior Lien co-extensive in all respects with, but subordinated (as set forth in Section 2.4) to, all Liens granted in such Insolvency or Liquidation Proceeding to, or for the benefit of, the holders of any Priority Lien Obligations; or (B) in connection with the confirmation of any plan of reorganization or similar dispositive restructuring plan; and (2) they may freely seek and obtain any relief upon a motion for adequate protection (or any comparable relief), without any condition or restriction whatsoever, at any time after the Discharge of Priority Lien Obligations, in each case other than with respect to the Non-Shared Collateral. SECTION 2.9 Collateral Shared Equally and Ratably within Class. The parties to this Agreement agree that the payment and satisfaction of all of the Secured Obligations within each Class will be secured equally and ratably by the Liens established in favor of the Collateral Trustee for the benefit of the Secured Parties belonging to such Class (except with respect to Non-Shared Collateral). It is understood and agreed that nothing in this Section 2.9 is intended to alter the priorities among Secured Parties belonging to different Classes as provided in Section 2.3. ARTICLE 3. OBLIGATIONS AND POWERS OF COLLATERAL TRUSTEE SECTION 3.1 Undertaking of the Collateral Trustee. (a) Subject to, and in accordance with, this Agreement, the Collateral Trustee will, as trustee and as representative (for the purposes of Section 9-502(a)(2) of the UCC), for the benefit solely and exclusively of the present and future Secured Parties: (1) accept, enter into, hold, maintain, administer and enforce all Security Documents, including all Collateral subject thereto, and all Liens created thereunder, perform its obligations under the Security Documents and protect, exercise and enforce the interests, rights, powers and remedies granted or available to it under, pursuant to or in connection with the Security Documents; (2) take all lawful and commercially reasonable actions permitted under the Security Documents that it may deem necessary or advisable to protect or preserve its interest in the Collateral subject thereto and such interests, rights, powers and remedies; (3) deliver and receive notices pursuant to the Security Documents; (4) sell, assign, collect, assemble, foreclose on, institute legal proceedings with respect to, or otherwise exercise or enforce the rights and remedies of a 22 secured party (including a mortgagee, trust deed beneficiary and insurance beneficiary or loss payee) with respect to the Collateral under the Security Documents and its other interests, rights, powers and remedies; (5) remit as provided in Section 3.4 all cash proceeds received by the Collateral Trustee from the collection, foreclosure or enforcement of its interest in the Collateral under the Security Documents or any of its other interests, rights, powers or remedies; (6) execute and deliver amendments to the Security Documents as from time to time authorized pursuant to Section 7.1 accompanied by an Officer's Certificate and an opinion of counsel to the Borrower complying with the requirements of Section 7.1; and (7) release any Lien granted to it by any Security Document upon any Collateral if and as required by Section 4.1(b). (b) Each party to this Agreement acknowledges and consents to the undertaking of the Collateral Trustee set forth in Section 3.1(a) and agrees to each of the other provisions of this Agreement applicable to the Collateral Trustee. (c) Notwithstanding anything to the contrary contained in this Agreement, the Collateral Trustee will not commence any exercise of remedies or any foreclosure actions or otherwise take any action or proceeding against any of the Collateral (other than actions as necessary to prove, protect or preserve the Liens securing the Secured Obligations) unless and until it shall have been directed by written notice of an Act of Required Creditors and then only in accordance with the provisions of this Agreement. (d) Notwithstanding anything to the contrary contained in this Agreement, no Parity Lien Representative or Priority Lien Representative may serve as Collateral Trustee. SECTION 3.2 Release or Subordination of Liens. The Collateral Trustee will not release or subordinate any Lien of the Collateral Trustee or consent to the release or subordination of any Lien of the Collateral Trustee, except: (a) as directed by an Act of Required Creditors accompanied by an Officer's Certificate to the effect that the release or subordination was permitted by each applicable Secured Debt Document; (b) as required by Article 4; (c) as ordered pursuant to applicable law under a final and nonappealable order or judgment of a court of competent jurisdiction; or (d) for the subordination of (i) the Junior Trust Estate and the Parity Liens to the Senior Trust Estate and the Priority Liens. 23 SECTION 3.3 Enforcement of Liens. If the Collateral Trustee at any time receives written notice that any event has occurred that constitutes a default under any Secured Debt Document entitling the Collateral Trustee to foreclose upon, collect or otherwise enforce its Liens hereunder, the Collateral Trustee will promptly deliver written notice thereof to each Secured Debt Representative. Thereafter, the Collateral Trustee may await direction by an Act of Required Creditors and will act, or decline to act, as directed by an Act of Required Creditors, in the exercise and enforcement of the Collateral Trustee's interests, rights, powers and remedies in respect of the Collateral or under the Security Documents or applicable law and, following the initiation of such exercise of remedies, the Collateral Trustee will act, or decline to act, with respect to the manner of such exercise of remedies as directed by an Act of Required Creditors. Once notice has been delivered to each Secured Debt Representative pursuant to the provisions of this paragraph, the Collateral Trustee may (but will not be obligated to), unless it has been directed to the contrary by an Act of Required Creditors, take or refrain from taking such action with respect to any default under any Secured Debt Document as it may deem advisable and in the best interest of the holders of Secured Obligations. SECTION 3.4 Application of Proceeds. (a) Subject to the payment of Permitted Prior Liens to the extent required by applicable law, the Collateral Trustee will apply the proceeds of any collection, sale, foreclosure or other realization upon any Collateral and the proceeds of any title insurance policy required under any Priority Lien Document or Parity Lien Document in the following order of application: FIRST, to the payment of all amounts payable under this Agreement on account of the Collateral Trustee's fees and any reasonable legal fees, costs and expenses or other liabilities of any kind incurred by the Collateral Trustee or any co-trustee or agent of the Collateral Trustee in connection with any Security Document; SECOND, to the respective Priority Lien Representatives for application to the payment of all outstanding Priority Lien Debt and any other Priority Lien Obligations that are then due and payable in such order as may be provided in the Priority Lien Documents in an amount sufficient to pay in full in cash all outstanding Priority Lien Debt and all other Priority Lien Obligations that are then due and payable (including all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable post-default rate, specified in the Priority Lien Documents, even if such interest is not enforceable, allowable or allowed as a claim in such proceeding, and including the discharge or cash collateralization (at the lower of (1) 105% of the aggregate undrawn amount and (2) the percentage of the aggregate undrawn amount required for release of Liens under the terms of the applicable Priority Lien Document) of all outstanding letters of credit constituting Priority Lien Debt); 24 THIRD, to the respective Parity Lien Representatives, on a pro rata basis according to the percentage of Parity Lien Obligations represented by the Hedge Agreement Obligations (after taking into account any letters of credit that are available to be drawn upon by the holders of the Hedge Agreement Obligations to provide credit support for such Hedge Agreement Obligations), on the one hand, and the Senior Secured Note Obligations, on the other hand, for application to the payment of all outstanding Parity Lien Debt and any other Parity Lien Obligations that are then due and payable in such order as may be provided in the Parity Lien Documents in an amount sufficient to pay in full (after taking into account any letters of credit that are available to be drawn upon by the holders of the Hedge Agreement Obligations to provide credit support for such Hedge Agreement Obligations) in cash all outstanding Parity Lien Debt and all other Parity Lien Obligations that are then due and payable and, in the case of Parity Lien Obligations constituting Hedge Agreement Obligations, the Hedge Outstanding Amount (including all interest accrued thereon after the commencement of any Insolvency or Liquidation Proceeding at the rate, including any applicable post-default rate, specified in the Parity Lien Documents, even if such interest is not enforceable, allowable or allowed as a claim in such proceeding, and including the discharge or cash collateralization (at the lower of (1) 105% of the aggregate undrawn amount and (2) the percentage of the aggregate undrawn amount required for release of Liens under the terms of the applicable Parity Lien Document) of all outstanding letters of credit, if any, constituting Parity Lien Debt); and FOURTH, any surplus remaining after the payment in full in cash of amounts described in the preceding clauses will be paid to the Borrower or the applicable Pledgor, as the case may be, its successors or assigns, or as a court of competent jurisdiction may direct. (b) If any Parity Lien Representative or any holder of a Parity Lien Obligation collects or receives any proceeds of such foreclosure, collection or other enforcement that should have been applied to the payment of any Priority Lien Obligations in accordance with Section 3.4(a) above, whether after the commencement of an Insolvency or Liquidation Proceeding or otherwise, such Parity Lien Representative or such holder of a Parity Lien Obligation, as the case may be, will forthwith deliver the same to the Collateral Trustee, for the account of the holders of such Priority Lien Obligations and other Obligations secured by a Permitted Prior Lien, to be applied in accordance with Section 3.4(a). Until so delivered, such proceeds will be held by that Parity Lien Representative or that holder of a Parity Lien Obligation, as the case may be, for the benefit of the holders such Priority Lien Obligations and other Obligations secured by a Permitted Prior Lien. (c) This Section 3.4 is intended for the benefit of, and will be enforceable as a third party beneficiary by, each present and future holder of Secured Obligations, each present and future Secured Debt Representative and the Collateral Trustee as holder of Priority Liens and Parity Liens. The Secured Debt Representative of each future Series of Secured Debt will be required to deliver a Lien Sharing and Priority Confirmation to the Collateral Trustee and each other Secured Debt Representative at the time of incurrence of such Series of Secured Debt. 25 (d) In connection with the application of proceeds pursuant to Section 3.4(a), except as otherwise directed by an Act of Required Creditors, the Collateral Trustee may sell any non-cash proceeds for cash prior to the application of the proceeds thereof. SECTION 3.5 Appointment and Powers of the Collateral Trustee. (a) The Administrative Agent on behalf of the holders of Priority Lien Obligations hereby appoints the Collateral Trustee and the Collateral Trustee hereby accepts to act as collateral trustee hereunder and the other Security Documents for the benefit of the holders of Priority Lien Obligations. Each of the Hedge Counterparty and the Trustee on behalf of the holders of Notes hereby appoints the Collateral Trustee and the Collateral Trustee hereby accepts to act as collateral trustee hereunder and the other Security Documents for the benefit of the holders of Parity Lien Obligations. (b) The Collateral Trustee is irrevocably authorized and empowered to enter into and perform its obligations and protect, perfect, exercise and enforce its interest, rights, powers and remedies under the Security Documents and applicable law and in equity and to act as set forth in this Article 3 or as requested in any lawful directions given to it from time to time in respect of any matter by an Act of Required Creditors. (c) No Secured Debt Representative or holder of Secured Obligations will have any liability whatsoever for any act or omission of the Collateral Trustee. SECTION 3.6 Documents and Communications. The Collateral Trustee will permit each Secured Debt Representative and each holder of Secured Obligations upon reasonable written notice from time to time to inspect and copy, at the cost and expense of the party requesting such copies, any and all Security Documents and other documents, notices, certificates, instructions or communications received by the Collateral Trustee in its capacity as such. SECTION 3.7 For Sole and Exclusive Benefit of Holders of Secured Obligations. The Collateral Trustee will accept, hold, administer and enforce all Liens on the Collateral at any time transferred or delivered to it and all other interests, rights, powers and remedies at any time granted to or enforceable by the Collateral Trustee and all other property of the Trust Estates solely and exclusively for the benefit of the present and future holders of present and future Secured Obligations, and will distribute all proceeds received by it in realization thereon or from enforcement thereof solely and exclusively pursuant to the provisions of Section 3.4. 26 SECTION 3.8 Additional Secured Debt. (a) The Collateral Trustee will, as trustee hereunder, perform its undertakings set forth in Section 3.1(a) with respect to each holder of Secured Obligations of a Series of Secured Debt that is issued or incurred after the date hereof that: (1) holds Secured Obligations that are identified as Parity Lien Debt or Priority Lien Debt in accordance with the procedures set forth in Section 3.8(b); (2) signs, through its designated Secured Debt Representative identified pursuant to Section 3.8(b), a Collateral Trust Joinder; and (3) delivers a Lien Sharing and Priority Confirmation. (b) The Borrower or other applicable Pledgor will be permitted to designate as an additional holder of Secured Obligations hereunder each Person who is, or who becomes, the registered holder of Parity Lien Debt or the registered holder of Priority Lien Debt incurred by the Borrower or such other Pledgor after the date of this Agreement in accordance with the terms of all applicable Secured Debt Documents. The Borrower or other applicable Pledgor may effect such designation by delivering to the Collateral Trustee, with copies to each previously identified Secured Debt Representative, each of the following: (1) an Officer's Certificate stating that: (A) the Borrower or such other Pledgor intends to incur additional Secured Debt ("ADDITIONAL SECURED DEBT") which will either be (i) Priority Lien Debt permitted by each applicable Secured Debt Document to be secured by a Priority Lien equally and ratably with all previously existing and future Priority Lien Debt or (ii) Parity Lien Debt permitted by each applicable Secured Debt Document to be secured with a Parity Lien equally and ratably with all previously existing and future Parity Lien Debt; (2) evidence that the Borrower or such other Pledgor has duly authorized, executed (if applicable) and recorded (or caused to be recorded) in each appropriate governmental office all relevant filings and recordations to ensure that the Additional Secured Debt is secured by the Collateral in accordance with the Security Documents; and (3) a written notice specifying the name and address of the Secured Debt Representative for such series of Additional Secured Debt for purposes of Section 7.7. Notwithstanding the foregoing, nothing in this Agreement will be construed to allow the Borrower or any other Pledgor to incur additional Indebtedness unless otherwise permitted by the terms of all applicable Secured Debt Documents. 27 ARTICLE 4. OBLIGATIONS ENFORCEABLE BY THE BORROWER AND THE OTHER PLEDGORS SECTION 4.1 Release of Liens on Collateral. (a) The Collateral Trustee's Liens upon the Collateral will be released as provided in any of the following clauses: (1) in whole, upon (A) payment in full and discharge of all outstanding Secured Debt and all other Secured Obligations that are outstanding, due and payable at the time all of the Secured Debt is paid in full and discharged and (B) termination or expiration of all commitments to extend credit under all Secured Debt Documents and the cancellation or termination or cash collateralization (at the lower of (1) 105% of the aggregate undrawn amount and (2) the percentage of the aggregate undrawn amount required for release of Liens under the terms of the applicable Secured Debt Documents) of all outstanding letters of credit issued pursuant to any Secured Debt Documents; (2) until the Discharge of Priority Lien Obligations has occurred and upon notice from the Priority Lien Representative, as to any Collateral that is sold, transferred or otherwise disposed of by the Borrower or any other Pledgor to a Person that is not (either before or after such sale, transfer or disposition) the Borrower or a Subsidiary (as defined under the Credit Agreement) of the Borrower in a transaction or other circumstance that complies with Section 6.9 of the Credit Agreement, if any, and is otherwise permitted by the terms of the Credit Agreement, the Hedge Agreement and all of the other Secured Debt Documents, at the time of such sale, transfer or other disposition or to the extent of the interest sold, transferred or otherwise disposed of; (3) after the Discharge of Priority Lien Obligations has occurred and upon notice from the Parity Lien Representative, as to any Collateral that is sold, transferred or otherwise disposed of by the Borrower or any other Pledgor to a Person that is not (either before or after such sale, transfer or disposition) the Borrower or a Restricted Subsidiary (as defined under the Indenture) of the Borrower in a transaction or other circumstance that complies with Section 4.10 of the Indenture, if any, and Section 5(a)(ix) of the Hedge Agreement (as added thereto by the Schedule thereto, dated as of June 30, 2004) to the extent such Section 5(a)(ix) incorporates Section 6.9 of the Credit Agreement and is permitted by all of the other Secured Debt Documents, at the time of such sale, transfer or other disposition or to the extent of the interest sold, transferred or otherwise disposed of; provided, that the Collateral Trustee's Liens upon the Collateral will not be released if the sale or disposition is subject to the "Merger, Consolidation or Sale of Assets" provisions of the Indenture or and Section 5(a)(ix) of the Hedge Agreement (as added thereto by the Schedule thereto, dated as of June 30, 2004) to the extent such Section 5(a)(ix) incorporates the provisions of Section 6.9 of the Credit Agreement restricting mergers or the sale of all of its assets; 28 (4) as to a release of less than all or substantially all of the Collateral, if consent to the release of all Priority Liens on such Collateral has been given by an Act of Required Creditors; (5) as to a release of all or substantially all of the Collateral, if (A) consent to release of that Collateral has been given by the requisite percentage or number of holders of each Series of Secured Debt at the time outstanding as provided for in the applicable Secured Debt Documents and (B) the Borrower has delivered an Officer's Certificate to the Collateral Trustee certifying that any such necessary consents have been obtained; or (6) as to sales or other dispositions of assets referred to in subsections (b),(d),(f) of Section 6.9 of the Credit Agreement, the Collateral Trustee's Liens upon such Collateral shall be released automatically; provided, that upon request by any holder of Priority Lien Obligations, the Collateral Trustee will execute (with such acknowledgements and/or notarizations as are required) and deliver such release to the Borrower or other applicable Pledgor as so reasonably requested. (b) The Collateral Trustee agrees for the benefit of the Borrower and the other Pledgors that if the Collateral Trustee at any time receives: (1) an Officer's Certificate stating that (A) the signing officer has read Article 4 of this Agreement and understands the provisions and the definitions relating hereto, (B) such officer has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not the conditions precedent in this Agreement and all other Secured Debt Documents, if any, relating to the release of the Collateral have been complied with and (C) in the opinion of such officer, such conditions precedent, if any, have been complied with; (2) the proposed instrument or instruments releasing such Lien as to such property in recordable form, if applicable; and (3) prior to the Discharge of Priority Lien Obligations, the written confirmation of each Priority Lien Representative (or at any time after the Discharge of Priority Lien Obligations, each Parity Lien Representative) (such confirmation to be given following receipt of, and based solely on, the Officer's Certificate described in clause (1) above) that, in its view, such release is permitted by Section 4.1(a) and the respective Secured Debt Documents governing the Secured Obligations the holders of which such Secured Debt Representative represents; then the Collateral Trustee will execute (with such acknowledgements and/or notarizations as are required) and deliver such release to the Borrower or other applicable Pledgor on or before the later of (x) the date specified in such request for such release and (y) the fifth Business Day after the date of receipt of the items required by this Section 4.1(b) by the Collateral Trustee. 29 (c) The Collateral Trustee hereby agrees that: (1) in the case of any release pursuant to clause (2) of Section 4.1(a), if the terms of any such sale, transfer or other disposition require the payment of the purchase price to be contemporaneous with the delivery of the applicable release, then, at the written request of and at the expense of the Borrower or other applicable Pledgor, the Collateral Trustee will either (A) be present at and deliver the release at the closing of such transaction or (B) deliver the release under customary escrow arrangements that permit such contemporaneous payment and delivery of the release; and (2) at any time when a Secured Debt Default under a Series of Secured Debt that constitutes Parity Lien Debt has occurred and is continuing, within one Business Day of the receipt by it of any Act of Required Creditors pursuant to Section 4.1(a)(4), the Collateral Trustee will deliver a copy of such Act of Required Creditors to each Secured Debt Representative. (d) Each Secured Debt Representative hereby agrees that: (1) as soon as reasonably practicable after receipt of an Officer's Certificate from the Borrower pursuant to Section 4.1(b)(1) it will, to the extent required by such Section, either provide (A) the written confirmation required by Section 4.1(b)(3), (B) a written statement that such release is not permitted by Section 4.1(a) or (C) a request for further information from the Borrower reasonably necessary to determine whether the proposed release is permitted by Section 4.1(a) and after receipt of such information such Secured Debt Representative will as soon as reasonably practicable either provide the written confirmation or statement required pursuant to clause (A) or (B), as applicable; and (2) within one Business Day of the receipt by it of any notice from the Collateral Trustee pursuant to Section 4.1(c)(2), such Secured Debt Representative will deliver a copy of such notice to each registered holder of the Series of Priority Lien Debt or Series of Parity Lien Debt for which it acts as Secured Debt Representative. SECTION 4.2 Delivery of Copies to Secured Debt Representatives. The Borrower will deliver to each Secured Debt Representative a copy of each Officer's Certificate delivered to the Collateral Trustee pursuant to Section 4.1(b), together with copies of all documents delivered to the Collateral Trustee with such Officer's Certificate. The Secured Debt Representatives will not be obligated to take notice thereof or to act thereon, subject to Section 4.1(d). SECTION 4.3 Collateral Trustee not Required to Serve, File or Record. The Collateral Trustee is not required to serve, file, register or record any instrument releasing or subordinating its Liens on any Collateral; provided, however, that if the Borrower or any other Pledgor shall make a written demand for a termination statement under Section 9-513(c) of the UCC (or an amendment to a UCC-1 showing a release of specified items of Collateral), the Collateral Trustee shall comply with the written request of the Borrower or such 30 Pledgor to comply with the requirements of such UCC provision; provided, further, that the Collateral Trustee must first confirm with the Secured Debt Representatives that the requirements of such UCC provisions have been satisfied. SECTION 4.4 Release of Liens in Respect of Notes. The Collateral Trustee's Parity Lien will no longer secure the Notes outstanding under the Indenture or any other Obligations under the Indenture, and the right of the holders of the Notes and such Obligations to the benefits and proceeds of the Collateral Trustee's Parity Lien on the Collateral will terminate and be discharged: (1) upon satisfaction and discharge of the Indenture as set forth under Article 12 of the Indenture; (2) upon a Legal Defeasance or Covenant Defeasance (each as defined under the Indenture) of the Notes as set forth under Article 8 of the Indenture; (3) upon payment in full and discharge of all Notes outstanding under the Indenture and all Obligations that are outstanding, due and payable under the Indenture at the time the Notes are paid in full and discharged; (4) in whole or in part, with the consent of the holders of the requisite percentage of Notes in accordance with Article 9 of the Indenture; or (5) upon release of the Liens securing the Priority Lien Debt and the Hedge Agreement Debt; provided, however, that if at any time following such release, any Liens upon the Collateral are granted to secure any Priority Lien Debt or any Hedge Agreement Debt, then such Liens shall also be granted to secure the Notes. ARTICLE 5. IMMUNITIES OF THE COLLATERAL TRUSTEE SECTION 5.1 No Implied Duty. The Collateral Trustee will not have any fiduciary duties nor will it have responsibilities or obligations other than those expressly assumed by it in this Agreement and the other Security Documents. The Collateral Trustee will not be required to take any action that is contrary to applicable law or any provision of this Agreement or the other Security Documents. SECTION 5.2 Appointment of Agents and Advisors. The Collateral Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, accountants, appraisers or other experts or advisors selected by it in good faith as it may reasonably require and will not be responsible for any misconduct or negligence on the part of any of them. SECTION 5.3 Other Agreements. 31 The Collateral Trustee has accepted and is bound by the Security Documents executed by the Collateral Trustee as of the date of this Agreement and, as directed by an Act of Required Creditors, the Collateral Trustee shall execute additional Security Documents delivered to it after the date of this Agreement; provided, however, that such additional Security Documents do not adversely affect the rights, privileges, benefits and immunities of the Collateral Trustee. The Collateral Trustee will not otherwise be bound by, or be held obligated by, the provisions of any credit agreement, indenture or other agreement governing Secured Debt (other than this Agreement and the other Security Documents). SECTION 5.4 Solicitation of Instructions. (a) The Collateral Trustee may at any time solicit written confirmatory instructions, in the form of an Act of Required Creditors, an Officer's Certificate or an order of a court of competent jurisdiction, as to any action that it may be requested or required to take, or that it may propose to take, in the performance of any of its obligations under this Agreement or the other Security Documents, and shall be fully justified in failing or refusing to act whether under this Agreement or any other Security Document until it shall have received such requested instructions. (b) No written direction given to the Collateral Trustee by an Act of Required Creditors that in the sole judgment of the Collateral Trustee imposes, purports to impose or might reasonably be expected to impose upon the Collateral Trustee any obligation or liability not set forth in or arising under this Agreement and the other Security Documents will be binding upon the Collateral Trustee unless the Collateral Trustee elects, at its sole option, to accept such direction. SECTION 5.5 Limitation of Liability. The Collateral Trustee will not be responsible or liable for any action taken or omitted to be taken by it hereunder or under any other Security Document, except for its own gross negligence, bad faith or willful misconduct as determined by a court of competent jurisdiction by a final and non-appealable decision. SECTION 5.6 Documents in Satisfactory Form. The Collateral Trustee will be entitled to require that all agreements, certificates, opinions, instruments and other documents at any time submitted to it, including those expressly provided for in this Agreement, be delivered to it in a form and with substantive provisions reasonably satisfactory to it. SECTION 5.7 Entitled to Rely. The Collateral Trustee shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message statement or other document or conversation believed by it to be genuine and correct 32 and to have been signed, sent or made by the proper Person or Persons. The Collateral Trustee may seek and rely upon, and shall be fully protected in relying upon, any judicial order or judgment, upon any advice, opinion or statement of legal counsel, independent consultants and other experts selected by it in good faith and upon any certification, instruction, notice or other writing delivered to it by the Borrower or any other Pledgor in compliance with the provisions of this Agreement or delivered to it by any Secured Debt Representative as to the holders of Secured Obligations for whom it acts, without being required to determine the authenticity thereof or the correctness of any fact stated therein or the propriety or validity of service thereof. The Collateral Trustee may act in reliance upon any instrument comporting with the provisions of this Agreement or any signature reasonably believed by it to be genuine and may assume that any Person purporting to give notice or receipt or advice or make any statement or execute any document in connection with the provisions hereof or the other Security Documents has been duly authorized to do so. To the extent an Officer's Certificate or opinion of counsel is required or permitted under this Agreement to be delivered to the Collateral Trustee in respect of any matter, the Collateral Trustee may rely conclusively on Officer's Certificate or opinion of counsel as to such matter and such Officer's Certificate or opinion of counsel shall be full warranty and protection to the Collateral Trustee for any action taken, suffered or omitted by it under the provisions of this Agreement and the other Security Documents. SECTION 5.8 Secured Debt Default. The Collateral Trustee will not be required to inquire as to the occurrence or absence of any Secured Debt Default and will not be affected by or required to act upon any notice or knowledge as to the occurrence of any Secured Debt Default unless and until it is directed by an Act of Required Creditors. SECTION 5.9 Actions by Collateral Trustee. As to any matter not expressly provided for by this Agreement or the other Security Documents, the Collateral Trustee will act or refrain from acting as directed by an Act of Required Creditors and will be fully protected if it does so, and any action taken, suffered or omitted pursuant to hereto or thereto shall be binding on the holders of Secured Obligations. SECTION 5.10 Security or Indemnity in favor of the Collateral Trustee. The Collateral Trustee will not be required to advance or expend any funds or otherwise incur any financial liability in the performance of its duties or the exercise of its powers or rights hereunder unless it has been provided with security or indemnity reasonably satisfactory to it against any and all liability or expense which may be incurred by it by reason of taking or continuing to take such action. SECTION 5.11 Rights of the Collateral Trustee. In the event of any conflict between any terms and provisions set forth in this Agreement and those set forth in any other Security Document, the terms and provisions of this Agreement shall supersede and control the terms and provisions of such other Security Document. In the event there is any bona fide, good faith disagreement between the other parties to this Agreement or any of the other Security Documents resulting in adverse claims being 33 made in connection with Collateral held by the Collateral Trustee and the terms of this Agreement or any of the other Security Documents do not unambiguously mandate the action the Collateral Trustee is to take or not to take in connection therewith under the circumstances then existing, or the Collateral Trustee is in doubt as to what action it is required to take or not to take hereunder or under the other Security Documents, it will be entitled to refrain from taking any action (and will incur no liability for doing so) until directed otherwise in writing by a request signed jointly by the parties hereto entitled to give such direction or by order of a court of competent jurisdiction. SECTION 5.12 Limitations on Duty of Collateral Trustee in Respect of Collateral. (a) Beyond the exercise of reasonable care in the custody of Collateral in its possession, the Collateral Trustee will have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto and the Collateral Trustee will not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any Liens on the Collateral. The Collateral Trustee will be deemed to have exercised reasonable care in the custody of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and the Collateral Trustee will not be liable or responsible for any loss or diminution in the value of any of the Collateral by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Collateral Trustee in good faith. (b) The Collateral Trustee will not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Liens in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder, except to the extent such action or omission constitutes gross negligence, bad faith or willful misconduct on the part of the Collateral Trustee, for the validity or sufficiency of the Collateral or any agreement or assignment contained therein, for the validity of the title of any Pledgor to the Collateral, for insuring the Collateral or for the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Collateral Trustee hereby disclaims any representation or warranty to the present and future holders of the Secured Obligations concerning the perfection of the Liens granted hereunder or in the value of any of the Collateral. SECTION 5.13 Assumption of Rights, Not Assumption of Duties. Notwithstanding anything to the contrary contained herein: (1) each of the parties thereto will remain liable under each of the Security Documents (other than this Agreement) to the extent set forth therein to perform all of their respective duties and obligations thereunder to the same extent as if this Agreement had not be executed; 34 (2) the exercise by the Collateral Trustee of any of its rights, remedies or powers hereunder will not release such parties from any of their respective duties or obligations under the other Security Documents; and (3) the Collateral Trustee will not be obligated to perform any of the obligations or duties of any of the parties thereunder other than the Collateral Trustee. SECTION 5.14 No Liability for Clean Up of Hazardous Materials. In the event that the Collateral Trustee is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any fiduciary or trust obligation for the benefit of another, which in the Collateral Trustee's sole discretion may cause the Collateral Trustee to be considered an "owner or operator" under any environmental laws or otherwise cause the Collateral Trustee to incur, or be exposed to, any environmental liability or any liability under any other federal, state or local law, the Collateral Trustee reserves the right, instead of taking such action, either to resign as Collateral Trustee or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Collateral Trustee will not be liable to any Person for any environmental liability or any environmental claims or contribution actions under any federal, state or local law, rule or regulation by reason of the Collateral Trustee's actions and conduct as authorized, empowered and directed hereunder or relating to any kind of discharge or release or threatened discharge or release of any hazardous materials into the environment. ARTICLE 6. RESIGNATION AND REMOVAL OF THE COLLATERAL TRUSTEE SECTION 6.1 Resignation or Removal of Collateral Trustee. Subject to the appointment of a successor Collateral Trustee as provided in Section 6.2 and the acceptance of such appointment by the successor Collateral Trustee: (a) the Collateral Trustee may resign at any time by giving not less than 30 days' notice of resignation to each Secured Debt Representative and the Borrower; and (b) the Collateral Trustee may be removed at any time, with or without cause, by an Act of Required Creditors. SECTION 6.2 Appointment of Successor Collateral Trustee. Upon any such resignation or removal, a successor Collateral Trustee may be appointed by an Act of Required Creditors. If no successor Collateral Trustee has been so appointed and accepted such appointment within 30 days after the predecessor Collateral Trustee gave notice of resignation or was removed, the retiring Collateral Trustee may (at the expense of the Borrower), at its option, appoint a successor Collateral Trustee, or petition a court of competent jurisdiction for appointment of a successor Collateral Trustee, which must be a bank or trust company: (1) authorized to exercise corporate trust powers; (2) having a combined capital and surplus of at least $500,000,000; 35 (3) maintaining an office in New York, New York; and (4) that is not a Secured Debt Representative. The Collateral Trustee will fulfill its obligations hereunder until a successor Collateral Trustee meeting the requirements of this Section 6.2 has accepted its appointment as Collateral Trustee and the provisions of Section 6.3 have been satisfied. SECTION 6.3 Succession. When the Person so appointed as successor Collateral Trustee accepts such appointment: (1) such Person will succeed to and become vested with all the rights, powers, privileges and duties of the predecessor Collateral Trustee, and the predecessor Collateral Trustee will be discharged from its duties and obligations hereunder; and (2) the predecessor Collateral Trustee will (at the expense of the Borrower) promptly transfer all Liens and collateral security and other property of the Trust Estates within its possession or control to the possession or control of the successor Collateral Trustee and will execute instruments and assignments as may be necessary or desirable or reasonably requested by the successor Collateral Trustee to transfer to the successor Collateral Trustee all Liens, interests, rights, powers and remedies of the predecessor Collateral Trustee in respect of the Security Documents or the Trust Estates. Thereafter the predecessor Collateral Trustee will remain entitled to enforce the immunities granted to it in Article 5 and the provisions of Sections 7.10 and 7.11. SECTION 6.4 Merger, Conversion or Consolidation of Collateral Trustee. Any Person into which the Collateral Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Collateral Trustee shall be a party, or any Person succeeding to the business of the Collateral Trustee shall be the successor of the Collateral Trustee pursuant to Section 6.3, provided that (i) without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto, except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding, such Person satisfies the eligibility requirements specified in clauses (1) through (4) of Section 6.2 and (ii) prior to any such merger, conversion or consolidation, the Collateral Trustee shall have notified the Borrower, each Priority Lien Representative and each Parity Lien Representative thereof in writing. 36 ARTICLE 7. MISCELLANEOUS PROVISIONS SECTION 7.1 Amendment. (a) No amendment or supplement to the provisions of any Security Document will be effective without the approval of the Collateral Trustee acting as directed by an Act of Required Creditors, except that: (1) any amendment or supplement that has the effect solely of adding or maintaining Collateral, securing additional Secured Debt that was otherwise permitted by the terms of the Secured Debt Documents to be secured by the Collateral or preserving, perfecting or establishing the Liens thereon or the rights of the Collateral Trustee therein will become effective when executed and delivered by the Borrower or any other applicable Pledgor party thereto and the Collateral Trustee; (2) no amendment or supplement that reduces, impairs or adversely affects the right of any holder of Secured Obligations: (A) to vote its outstanding Secured Debt as to any matter described as subject to an Act of Required Creditors (or amends the provisions of this clause (2) or the definition of "Act of Required Creditors", "Required Priority Creditors" or "Required Parity Creditors"), (B) to share in the order of application described in Section 3.4 in the proceeds of enforcement of or realization on any Collateral that has not been released in accordance with the provisions described in Section 4.1 or (C) to require that Liens securing Secured Obligations be released only as set forth in the provisions described in Section 4.1, will become effective without the consent of the requisite percentage or number of holders of each Series of Secured Debt so affected under the applicable Secured Debt Documents; and (3) no amendment or supplement that imposes any obligation upon the Collateral Trustee or any Secured Debt Representative or adversely affects the rights of the Collateral Trustee or any Secured Debt Representative, respectively, in its individual capacity as such will become effective without the consent of the Collateral Trustee or such Secured Debt Representative, respectively. (b) Notwithstanding Section 7.1(a) but subject to Sections 7.1(a)(2) and 7.1(a)(3): (1) any mortgage or other Security Document that secures Parity Lien Obligations (but not Priority Lien Obligations) may be amended or supplemented with the approval of the Collateral Trustee acting as directed in writing by the Required Parity Creditors, unless such amendment or supplement would not be permitted under the terms of this Agreement or the other Priority Lien Documents; and 37 (2) any amendment or waiver of, or any consent under, any provision of this Agreement or any other Security Document that secures any Priority Lien Obligations will apply automatically to any comparable provision of any comparable Parity Lien Document, without the consent of or notice to any other holder of Parity Lien Obligations and without any action by the Borrower or any other Pledgor or any holder of Notes or other Parity Lien Obligations. (c) The Collateral Trustee will not enter into any amendment or supplement unless it has received an Officer's Certificate to the effect that such amendment or supplement will not result in a breach of any provision or covenant contained in any of the Secured Debt Documents. Prior to executing any amendment or supplement pursuant to this Section 7.1, the Collateral Trustee will be entitled to receive an opinion of counsel of the Borrower to the effect that the execution of such document is authorized or permitted hereunder, and with respect to amendments adding Collateral, an opinion of counsel of the Borrower addressing customary perfection, and if such additional Collateral consists of equity interests of any Person, priority matters with respect to such additional Collateral. (d) The holders of Parity Lien Obligations and the Parity Lien Representatives agree that each Security Document that secures Parity Lien Obligations (but not also securing Priority Lien Obligations) will include the following language: "Notwithstanding anything herein to the contrary, the lien and security interest granted to the Collateral Trustee pursuant to this Agreement and the exercise of any right or remedy by such Collateral Trustee hereunder are subject to the provisions of the Collateral Trust Agreement, dated as of July 7, 2004, among Belden & Blake Corporation, the Pledgors from time to time party thereto, Goldman Sachs Credit Partners L.P., as Administrative Agent under the Credit Agreement (as defined therein), J. Aron & Company, as Hedge Counterparty under the Hedge Agreement (as defined therein), BNY Midwest Trust Company, as Trustee under the Indenture (as defined therein) and Wells Fargo Bank, N.A., as Collateral Trustee (as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, the "Collateral Trust Agreement"). In the event of any conflict between the terms of the Collateral Trust Agreement and this Agreement, the terms of the Collateral Trust Agreement will govern." ; provided, however, that if the jurisdiction in which any such Parity Lien Document will be filed prohibits the inclusion of the language above or would prevent a document containing such language from being recorded, the Parity Lien Representatives and the Priority Lien Representatives agree, prior to such Parity Lien Document being entered into, to negotiate in good faith replacement language stating that the lien and security interest granted under such Parity Lien Document is subject to the provisions of this Agreement. SECTION 7.2 Voting. In connection with any matter under this Agreement requiring a vote of holders of Secured Debt, each Series of Secured Debt will cast its votes in accordance with the Secured Debt Documents governing such Series of Secured Debt. The amount of Secured Debt to be voted by a Series of Secured Debt will equal (1) the aggregate principal amount of Secured Debt held by such Series of Secured Debt (including outstanding letters of credit whether or not then 38 available or drawn), plus (2) other than in connection with an exercise of remedies, the aggregate unfunded commitments to extend credit which, when funded, would constitute Indebtedness of such Series of Secured Debt plus, in the case of Hedge Agreement Obligations, the amount that would be payable in the reasonable good faith judgment of the Hedge Agreement Representative under, and in accordance with the terms of, the applicable Hedge Agreement Documents if such Hedge Agreement Documents were terminated on the business day prior to the date of any such vote based on an Event of Default under the applicable Hedge Agreement Documents with respect to the Borrower or, if the applicable Hedge Agreement Documents were previously terminated, the termination amount determined in accordance with Section 6(e) of the Hedge Agreement (and related provisions thereunder) which remains unpaid as of the business day preceding such date (the "HEDGE AGREEMENT OUTSTANDING AMOUNT"). Following and in accordance with the outcome of the applicable vote under its Secured Debt Documents, the Secured Debt Representative of each Series of Secured Debt will cast all of its votes as a block in respect of any vote under this Agreement. SECTION 7.3 Further Assurances; Insurance. (a) The Borrower and each of the other Pledgors will do or cause to be done all acts and things that may be required, or that the Collateral Trustee from time to time may reasonably request, to assure and confirm that the Collateral Trustee holds, for the benefit of the holders of Secured Obligations, duly created and enforceable and perfected Liens upon the Collateral (including any property or assets that are acquired or otherwise become Collateral after the date hereof), in each case as contemplated by, and with the Lien priority required under, the Secured Debt Documents. (b) Upon the reasonable request of the Collateral Trustee or any Secured Debt Representative at any time and from time to time, the Borrower and each of the other Pledgors will promptly execute, acknowledge and deliver such security documents, instruments, certificates, notices and other documents, and take such other actions as may be reasonably required, or that the Collateral Trustee may reasonably request, to create, perfect, protect, assure or enforce the Liens and benefits intended to be conferred, in each case as contemplated by the Secured Debt Documents for the benefit of holders of Secured Obligations. (c) The Borrower and the other Pledgors will maintain such insurance as may be required by the Priority Lien Documents, the Parity Lien Documents and the Security Documents. (f) Upon the request of the Collateral Trustee, the Borrower and the other Pledgors will permit the Collateral Trustee or any of its agents or representatives, at reasonable times and intervals upon reasonable prior notice, to visit their offices and sites and inspect any of the Collateral and to discuss matters relating to the Collateral with their respective officers and independent public accountants. The Borrower and the other Pledgors shall, at any reasonable time and from time to time upon reasonable prior notice, permit the Collateral Trustee or any of its agents or representatives to examine and make copies of and abstracts from the records and 39 books of account of the Borrower and the other Pledgors and their Subsidiaries, all at the Borrower's expense. SECTION 7.4 Perfection of Junior Trust Estate. Solely for purposes of perfecting the Liens of the Collateral Trustee in its capacity as agent of the holders of Parity Lien Obligations and the Parity Lien Representatives in any portion of the Junior Trust Estate in the possession or control of the Collateral Trustee (or its agents or bailees) as part of the Senior Trust Estate including, without limitation, any instruments, goods, negotiable documents, tangible chattel paper, electronic chattel paper, certificated securities, money, deposit accounts and securities accounts, the Collateral Trustee, the holders of Priority Lien Obligations and the Priority Lien Representatives hereby acknowledge that the Collateral Trustee also holds such property as agent for the benefit of the Collateral Trustee for the benefit of the holders of Parity Lien Obligations and the Parity Lien Representatives. SECTION 7.5 Successors and Assigns. (a) Except as provided in Section 5.2, the Collateral Trustee may not, in its capacity as such, delegate any of its duties or assign any of its rights hereunder, and any attempted delegation or assignment of any such duties or rights will be null and void. All obligations of the Collateral Trustee hereunder will inure to the sole and exclusive benefit of, and be enforceable by, each Secured Debt Representative and each present and future holder of Secured Obligations, each of whom will be entitled to enforce this Agreement as a third-party beneficiary hereof, and all of their respective successors and assigns. (b) Neither the Borrower nor any other Pledgor may delegate any of its duties or assign any of its rights hereunder, and any attempted delegation or assignment of any such duties or rights will be null and void. All obligations of the Borrower and the other Pledgors hereunder will inure to the sole and exclusive benefit of, and be enforceable by, the Collateral Trustee, each Secured Debt Representative and each present and future holder of Secured Obligations, each of whom will be entitled to enforce this Agreement as a third-party beneficiary hereof, and all of their respective successors and assigns. SECTION 7.6 Delay and Waiver. No failure to exercise, no course of dealing with respect to the exercise of, and no delay in exercising, any right, power or remedy arising under this Agreement or any of the other Security Documents will impair any such right, power or remedy or operate as a waiver thereof. No single or partial exercise of any such right, power or remedy will preclude any other or future exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. SECTION 7.7 Notices. 40 Any communications, including notices and instructions, between the parties hereto or notices provided herein to be given may be given to the following addresses: If to the Collateral Trustee: Wells Fargo Bank, N.A. Sixth & Marquette; N9303-120 Minneapolis, MN 55479 Attention: Jane Schweiger Fax: 612-667-9825 If to the Borrower or any other Pledgor: Belden & Blake Corporation 5200 Stoneham Road, Suite 2500 North Canton, OH 44720-0500 Attention: Robert Peshek, CFO Fax: 330-497-5463 If to the Administrative Agent: Goldman Sachs Credit Partners L.P. Attention: 85 Broad Street New York, New York 10004 Telephone: Rob Schatzman Fax: 212-902-3000 If to the Hedge Counterparty: J. Aron & Company 85 Broad Street New York, New York 10004 Attention: Sherry Lankford Fax: 212-672-0148 If to the Trustee: BNY Midwest Trust Company 2 N. LaSalle Street, Suite 1020 Chicago, IL 60602 Attention: Linda Garcia Telephone: 312-827-8548 and if to any other Secured Debt Representative, to such address as it may specify by written notice to the parties named above. All notices and communications will be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery, to the relevant address set forth above or, as to holders of Secured Debt, its address shown on the register kept by the office or agency where the relevant Secured Debt may be presented for registration of transfer or for exchange. To the extent applicable, any notice or communication will also be so mailed to any Person described in Section 313(c) of the Trust Indenture Act of 1939, as amended, to the extent required thereunder. Failure to mail a notice or communication to a holder of Secured Debt or any defect in it will not affect its sufficiency with respect to other holders of Secured Debt. 41 If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. SECTION 7.8 Notice Following Discharge of Priority Lien Obligations. Promptly following the Discharge of Priority Lien Obligations with respect to one or more Series of Priority Lien Debt, each Priority Lien Representative with respect to each applicable Series of Priority Lien Debt that is so discharged will provide written notice of such discharge to the Collateral Trustee and to each other Secured Debt Representative. SECTION 7.9 Entire Agreement. This Agreement states the complete agreement of the parties relating to the undertaking of the Collateral Trustee set forth herein and supersedes all oral negotiations and prior writings in respect of such undertaking. SECTION 7.10 Compensation; Expenses. The Pledgors jointly and severally agree to pay, promptly upon demand: (1) such compensation to the Collateral Trustee and its agents as the Borrower and the Collateral Trustee may agree in writing from time to time; (2) all reasonable costs and expenses incurred by the Collateral Trustee and its agents in the preparation, execution, delivery, filing, recordation, administration or enforcement of this Agreement or any other Security Document or any consent, amendment, waiver or other modification relating hereto or thereto; (3) all reasonable fees, expenses and disbursements of legal counsel and any auditors, accountants, consultants or appraisers or other professional advisors and agents engaged by the Collateral Trustee or any Secured Debt Representative incurred in connection with the negotiation, preparation, closing, administration, performance or enforcement of this Agreement and the other Security Documents or any consent, amendment, waiver or other modification relating hereto or thereto and any other document or matter requested by the Borrower or any other Pledgor; (4) all reasonable costs and expenses incurred by the Collateral Trustee and its agents in creating, perfecting, preserving, releasing or enforcing the Collateral Trustee's Liens on the Collateral, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, and title insurance premiums; (5) all other reasonable costs and expenses incurred by the Collateral Trustee and its agents in connection with the negotiation, preparation and execution of the Security Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby or the exercise of rights or performance of obligations by the Collateral Trustee thereunder; and 42 (6) after the occurrence of any Secured Debt Default, all reasonable costs and expenses incurred by the Collateral Trustee, its agents and any Secured Debt Representative in connection with the preservation, collection, foreclosure or enforcement of the Collateral subject to the Security Documents or any interest, right, power or remedy of the Collateral Trustee or in connection with the collection or enforcement of any of the Secured Obligations or the proof, protection, administration or resolution of any claim based upon the Secured Obligations in any Insolvency or Liquidation Proceeding, including all reasonable fees and disbursements of attorneys, accountants, auditors, consultants, appraisers and other professionals engaged by the Collateral Trustee, its agents or the Secured Debt Representatives. The agreements in this Section 7.10 will survive repayment of all other Secured Obligations and the removal or resignation of the Collateral Trustee. SECTION 7.11 Indemnity. (a) The Pledgors jointly and severally agree to defend (subject to Indemnitees' selection of counsel; it being understood that the holders of Priority Lien Obligations and the holders of Parity Lien Obligations shall be entitled to select a single transaction counsel and local counsel), indemnify, pay and hold harmless the Collateral Trustee, each Secured Debt Representative, each holder of Secured Obligations and each of their respective Affiliates and each and all of the directors, officers, partners, trustees, employees, attorneys and agents, and (in each case) their respective heirs, representatives, successors and assigns (each of the foregoing, an "INDEMNITEE") from and against any and all Indemnified Liabilities; provided, no Indemnitee will be entitled to indemnification hereunder with respect to any Indemnified Liability to the extent such Indemnified Liability is found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. (b) All amounts due under this Section 7.11 will be payable upon demand. (c) To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in Section 7.11(a) may be unenforceable in whole or in part because they violate any law or public policy, each of the Pledgors will contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. (d) No Pledgor will ever assert any claim against any Indemnitee, on any theory of liability, for any lost profits or special, indirect or consequential damages or (to the fullest extent a claim for punitive damages may lawfully be waived) any punitive damages arising out of, in connection with, or as a result of, this Agreement or any other Secured Debt Document or any agreement or instrument or transaction contemplated hereby or relating in any respect to any Indemnified Liability, and each of the Pledgors hereby forever waives, releases and agrees not to sue upon any claim for any such lost profits or special, indirect, consequential 43 or (to the fullest extent lawful) punitive damages, whether or not accrued and whether or not known or suspected to exist in its favor. (e) The agreements in this Section 7.11 will survive repayment of all other Secured Obligations and the removal or resignation of the Collateral Trustee. SECTION 7.12 Severability. If any provision of this Agreement is invalid, illegal or unenforceable in any respect or in any jurisdiction, the validity, legality and enforceability of such provision in all other respects and of all remaining provisions, and of such provision in all other jurisdictions, will not in any way be affected or impaired thereby. SECTION 7.13 Headings. Section headings herein have been inserted for convenience of reference only, are not to be considered a part of this Agreement and will in no way modify or restrict any of the terms or provisions hereof. SECTION 7.14 Obligations Secured. All obligations of the Pledgors set forth in or arising under this Agreement will be Secured Obligations and are secured by all Liens granted by the Security Documents. SECTION 7.15 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). SECTION 7.16 CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY: (1) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; 44 (2) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (3) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 7.7; (4) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (3) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (5) AGREES EACH PARTY HERETO RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY PARTY IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 7.17 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT OR THE INTENTS AND PURPOSES OF THE OTHER SECURITY DOCUMENTS. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE OTHER SECURITY DOCUMENTS, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PARTY HERETO HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH PARTY HERETO WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 7.17 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER WILL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS OF OR TO THIS AGREEMENT OR ANY OF THE OTHER SECURITY DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS 45 RELATING THERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. SECTION 7.18 Counterparts. This Agreement may be executed in any number of counterparts (including by facsimile), each of which when so executed and delivered will be deemed an original, but all such counterparts together will constitute but one and the same instrument. SECTION 7.19 Effectiveness. This Agreement will become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by each party of written notification of such execution and written or telephonic authorization of delivery thereof. SECTION 7.20 Additional Pledgors. The Borrower will cause each Person that becomes a Pledgor or is required by any Secured Debt Document to become a party to this Agreement to become a party to this Agreement, for all purposes of this Agreement, by causing such Person to execute and deliver to the parties hereto a Collateral Trust Joinder, whereupon such Person will be bound by the terms hereof to the same extent as if it had executed and delivered this Agreement as of the date hereof. The Borrower shall promptly provide each Secured Debt Representative with a copy of each Collateral Trust Joinder executed and delivered pursuant to this Section 7.20. SECTION 7.21 Continuing Nature of this Agreement. This Agreement, including the subordination provisions hereof, will be reinstated if at any time any payment or distribution in respect of any of the Priority Lien Obligations is rescinded or must otherwise be returned in an Insolvency or Liquidation Proceeding or otherwise by any holder of Priority Lien Obligations or Priority Lien Representative or any representative of any such party (whether by demand, settlement, litigation or otherwise). In the event that all or any part of a payment or distribution made with respect to the Priority Lien Obligations is recovered from any holder of Priority Lien Obligations or any Priority Lien Representative in an Insolvency or Liquidation Proceeding or otherwise, such payment or distribution received by any holder of Parity Lien Obligations or Parity Lien Representative with respect to the Parity Lien Obligations from the proceeds of any Collateral or any title insurance policy required by any real property mortgage at any time after the date of the payment or distribution that is so recovered, whether pursuant to a right of subrogation or otherwise, that Parity Lien Representative or that holder of a Parity Lien Obligation, as the case may be, will forthwith deliver the same to the Collateral Trustee, for the account of the holders of the Priority Lien Obligations and other Obligations secured by a Permitted Prior Lien, to be applied in accordance with Section 3.4. Until so delivered, such proceeds will be held by that Parity Lien Representative or that holder of a Parity Lien Obligation, as the case may be, for the benefit of the holders of the Priority Lien Obligations and other Obligations secured by a Permitted Prior Lien. SECTION 7.22 Insolvency. 46 This Agreement will be applicable both before and after the commencement of any Insolvency or Liquidation Proceeding by or against any Pledgor. The relative rights, as provided for in this Agreement, will continue after the commencement of any such Insolvency or Liquidation Proceeding on the same basis as prior to the date of the commencement of any such case, as provided in this Agreement. SECTION 7.23 Rights and Immunities of Secured Debt Representatives. The Administrative Agent will be entitled to all of the rights, protections, immunities and indemnities set forth in the Credit Agreement, the Hedge Counterparty will be entitled to all of the rights, protections, immunities and indemnities set forth in the Hedge Agreement, the Trustee will be entitled to all of the rights, protections, immunities and indemnities set forth in the Indenture and any future Secured Debt Representative will be entitled to all of the rights, protections, immunities and indemnities set forth in the credit agreement, indenture or other agreement governing the applicable Secured Debt with respect to which such Person will act as representative, in each case as if specifically set forth herein. In no event will any Secured Debt Representative be liable for any act or omission on the part of the Pledgors or the Collateral Trustee hereunder. [The remainder of this page is intentionally left blank.] 47 IN WITNESS WHEREOF, the parties hereto have caused this Collateral Trust Agreement to be executed by their respective officers or representatives as of the day and year first above written. BELDEN & BLAKE CORPORATION By: /s/ Frost W. Cochran ------------------------------------- Name: Frost W. Cochran Title: President THE CANTON OIL & GAS COMPANY By: /s/ Frost W. Cochran ------------------------------------- Name: Frost W. Cochran Title: President WARD LAKE DRILLING, INC. By: /s/ Frost W. Cochran ------------------------------------- Name: Frost W. Cochran Title: Chief Executive Officer S-1 CAPITAL C ENERGY OPERATIONS, LP BY: CAPITAL C ENERGY, LP, ITS GENERAL PARTNER BY: CAPITAL C ENERGY, LLC, ITS GENERAL PARTNER By: /s/ Frost W. Cochran ------------------------------------- Name: Frost W. Cochran Title: President S-2 GOLDMAN SACHS CREDIT PARTNERS L.P., as Administrative Agent By: /s/ William W. Archer ------------------------------------- Name: William W. Archer Title: Managing Director S-3 J. ARON & COMPANY, as Hedge Counterparty By: /s/ L. Peter O'Hagan ------------------------------------- Name: L. Peter O'Hagan Title: S-4 BNY MIDWEST TRUST COMPANY, as Trustee under the Indenture By: /s/ L. Garcia ------------------------------------- Name: L. Garcia Title: Assistant Vice President S-5 WELLS FARGO BANK, N.A., as Collateral Trustee By: /s/ Jane Y. Schweiger ------------------------------------- Name: Jane Y. Schweiger Title: Vice President S-6 EXHIBIT A to Collateral Trust Agreement [FORM OF] COLLATERAL TRUST JOINDER The undersigned, _____________________, a _______________, hereby agrees to become party as [a Pledgor] [a Parity Lien Representative] [a Priority Lien Representative] under the Collateral Trust Agreement dated as of July ___, 2004 (the "COLLATERAL TRUST AGREEMENT") among Belden & Blake Corporation, the Pledgors from time to time party thereto, Goldman Sachs Credit Partners L.P., as Administrative Agent under the Credit Agreement (as defined therein), J. Aron & Company, as Hedge Counterparty (as defined therein), BNY Midwest Trust Company, as Trustee under the Indenture (as defined therein) and Wells Fargo Bank, N.A., as Collateral Trustee, as amended, supplemented, amended and restated or otherwise modified and in effect from time to time, for all purposes thereof on the terms set forth therein, and to be bound by the terms of the Collateral Trust Agreement as fully as if the undersigned had executed and delivered the Collateral Trust Agreement as of the date thereof. The provisions of Article 7 of the Collateral Trust Agreement will apply with like effect to this Joinder. IN WITNESS WHEREOF, the parties hereto have caused this Collateral Trust Joinder to be executed by their respective officers or representatives as of ___________________, 20____. [________________________________] By:_______________________________________ Name: _________________________________ Title: ________________________________ EXHIBIT A EX-10.8 12 l08738aexv10w8.txt EXHIBIT 10.8 EXHIBIT 10.8 GUARANTY AGREEMENT This GUARANTY AGREEMENT, dated as of July 7, 2004 (this "GUARANTY"), is entered into by J. ARON & COMPANY, a general partnership organized under the laws of the State of New York ("HEDGE COUNTERPARTY"), THE CANTON OIL & GAS COMPANY, an Ohio corporation ("CANTON"), and WARD LAKE DRILLING, INC., a Michigan corporation ("WARD LAKE" and, together with Canton, "GUARANTORS"). RECITALS: WHEREAS, capitalized terms used herein but otherwise not defined herein shall have the meanings ascribed to them in the Hedge Agreement (as defined below); WHEREAS, reference is made to that certain ISDA Master Agreement (including the Schedules thereto, the Credit Support Annex thereto, and the confirmations thereunder, the "HEDGE AGREEMENT"), dated as of June 30, 2004, between Hedge Counterparty and Capital C Ohio, Inc. ("CAPITAL C OHIO"), an Ohio corporation and wholly-owned subsidiary of Capital C Energy Operations, LP (the "SPONSOR"), which agreement shall be assumed by Belden & Blake Corporation ("COMPANY") in the Acquisition, pursuant to which the parties thereto have entered into certain gas and oil price swaps; and WHEREAS, the Guarantors expect to receive substantial benefit from Company becoming a party to the Hedge Agreement and Guarantors have agreed to guarantee the obligations of Company under the Hedge Agreement and to secure their respective obligations by granting to Hedge Counterparty, a second priority Lien on their respective assets, including a pledge of all of the Capital Stock of each of their respective Domestic Subsidiaries and 65% of all the Capital Stock of each of their respective Foreign Subsidiaries. DEFINITIONS: "ACQUISITION" means the merger of Capital C Ohio with and into Company, with Company as the surviving corporation, pursuant to the Agreement and Plan of Merger, dated as of June 15, 2004, by and between Sponsor, Capital C Ohio and Company. "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute. "CAPITAL STOCK" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation), including, without limitation, partnership interests and membership interests, and any and all warrants, rights or options to purchase or other arrangements or rights to acquire any of the foregoing. "COLLATERAL TRUST AGREEMENT" means the Collateral Trust Agreement, dated as of July 7, 2004, among Wells Fargo Bank, N.A., as Collateral Trustee, Company, Guarantors, Sponsor, Hedge Counterparty and BNY Midwest Trust Company, as Indenture Trustee. "DOMESTIC SUBSIDIARIES" means any Subsidiary organized under the laws of the United States of America, any State thereof or the District of Columbia. "FOREIGN SUBSIDIARIES" means any Subsidiary that is not a Domestic Subsidiary. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; provided, that in determining the percentage of ownership interests of any Person controlled by another Person, no ownership interest in the nature of a "qualifying share" of the former Person shall be deemed to be outstanding. "TERMINATION EVENT" means the designation by Hedge Counterparty of an Early Termination Date pursuant to the terms of the Hedge Agreement. SECTION I 1.1. GUARANTY OF THE OBLIGATIONS. Subject to the provisions of Section 1.2, Guarantors jointly and severally hereby irrevocably and unconditionally guaranty to Hedge Counterparty the due and punctual payment in full of all obligations of Company to the Hedge Counterparty under the Hedge Agreement when the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)) (collectively, the "GUARANTEED OBLIGATIONS"). 1.2. CONTRIBUTION BY GUARANTORS. All Guarantors desire to allocate among themselves (collectively, the "CONTRIBUTING GUARANTORS"), in a fair and equitable manner, their obligations arising under this Guaranty. Accordingly, in the event any payment or distribution is made on any date by a Guarantor (a "FUNDING GUARANTOR") under this Guaranty such that its Aggregate Payments (as defined below) exceeds its Fair Share (as defined below) as of such date, such Funding Guarantor shall be entitled to a contribution from each of the other Contributing Guarantors in an amount sufficient to cause each Contributing Guarantor's Aggregate Payments to equal its Fair Share as of such date. "FAIR SHARE" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (a) the ratio of (i) the Fair Share Contribution Amount (as defined below) with respect to such Contributing Guarantor to (ii) the aggregate of the Fair Share Contribution Amounts with respect to all Contributing Guarantors, multiplied by (b) the aggregate amount paid or distributed on or before such date by all Funding Guarantors under this Guaranty in respect of the obligations Guaranteed. "FAIR SHARE CONTRIBUTION AMOUNT" means, with respect to a Contributing Guarantor as of any date of determination, the maximum aggregate amount of the obligations of such Contributing Guarantor under this Guaranty that would not render its obligations hereunder or thereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11 of the United States Code or any comparable applicable provisions of state law; provided, that solely for purposes of calculating the "FAIR SHARE CONTRIBUTION AMOUNT" with respect to any Contributing Guarantor for purposes of this Section 1.2, any assets or liabilities of such Contributing Guarantor arising by virtue of any rights to subrogation, reimbursement or indemnification or any rights to or obligations of contribution hereunder shall not be considered as assets or liabilities of such Contributing Guarantor. "AGGREGATE PAYMENTS" means, with respect to a Contributing Guarantor as of any date of determination, an amount equal to (1) the aggregate amount of all payments and distributions made on or before such date by such Contributing Guarantor in respect of this Guaranty (including, without limitation, in respect of this Section 1.2), minus (2) the aggregate amount of all payments received on or before such date by such Contributing Guarantor from the other Contributing Guarantors as contributions under this Section 1.2. The amounts payable as contributions hereunder shall be determined as of the date on which the related payment or distribution is made by the applicable Funding Guarantor. The allocation among Contributing Guarantors of their obligations as set forth in this Section 1.2 shall not be construed in any way to limit the liability of any Contributing Guarantor hereunder. Each Guarantor is a third party beneficiary to the contribution agreement set forth in this Section 1.2. 1.3. PAYMENT BY GUARANTORS. Subject to Section 1.2, Guarantors hereby jointly and severally agree, in furtherance of the foregoing and not in limitation of any other right which Hedge Counterparty may have at law or in equity against any Guarantor by virtue hereof, that upon the failure of Company to pay any of the Guaranteed Obligations when and as the same shall become due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), Guarantors will upon demand pay, or cause to be paid, in Cash, to Hedge Counterparty, an amount equal to the sum of the unpaid principal amount of all Guaranteed Obligations then due as aforesaid, accrued and unpaid interest on such Guaranteed Obligations (including interest which, but for Company's becoming the subject of a case under the Bankruptcy Code, would have accrued on such Guaranteed Obligations, whether or not a claim is allowed against Company for such interest in the related bankruptcy case) and all other Guaranteed Obligations then owed to Hedge Counterparty as aforesaid. 1.4. LIABILITY OF GUARANTORS ABSOLUTE. Each Guarantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Guaranteed Obligations. In furtherance of the foregoing and without limiting the generality thereof, each Guarantor agrees as follows: (a) this Guaranty is a guaranty of payment when due and not of collectability. This Guaranty is a primary obligation of each Guarantor and not merely a contract of surety; (b) Hedge Counterparty may enforce this Guaranty upon the occurrence of a Termination Event notwithstanding the existence of any dispute between Company and Hedge Counterparty with respect to the existence of such Termination Event; (c) the obligations of each Guarantor hereunder are independent of the obligations of Company and the obligations of any other guarantor (including any other Guarantor) of the obligations of Company, and a separate action or actions may be brought and prosecuted against such Guarantor whether or not any action is brought against Company or any of such other guarantors and whether or not Company is joined in any such action or actions; (d) payment by any Guarantor of a portion, but not all, of the Guaranteed Obligations shall in no way limit, affect, modify or abridge any Guarantor's liability for any portion of the Guaranteed Obligations which has not been paid. Without limiting the generality of the foregoing, if Hedge Counterparty is awarded a judgment in any suit brought to enforce any Guarantor's covenant to pay a portion of the Guaranteed Obligations, such judgment shall not be deemed to release such Guarantor from its covenant to pay the portion of the Guaranteed Obligations that is not the subject of such suit, and such judgment shall not, except to the extent satisfied by such Guarantor, limit, affect, modify or abridge any other Guarantor's liability hereunder in respect of the Guaranteed Obligations; (e) Hedge Counterparty, upon such terms as it deems appropriate, without notice or demand and without affecting the validity or enforceability hereof or giving rise to any reduction, limitation, impairment, discharge or termination of any Guarantor's liability hereunder, from time to time may (i) renew, extend, accelerate, increase the rate of interest on, or otherwise change the time, place, manner or terms of payment of the Guaranteed Obligations; (ii) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Guaranteed Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations; (iii) request and accept other guaranties of the Guaranteed Obligations and take and hold security for the payment hereof or the Guaranteed Obligations; (iv) release, surrender, exchange, substitute, compromise, settle, rescind, waive, alter, subordinate or modify, with or without consideration, any security for payment of the Guaranteed Obligations, any other guaranties of the Guaranteed Obligations, or any other obligation of any Person (including any other Guarantor) with respect to the Guaranteed Obligations; (v) enforce and apply any security now or hereafter held by or for the benefit of Hedge Counterparty in respect hereof or the Guaranteed Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that Hedge Counterparty may have against any such security, in each case as Hedge Counterparty in its discretion may determine consistent herewith and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and even though such action operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Guarantor against Company or any security for the Guaranteed Obligations; and (vi) exercise any other rights available to it under the Hedge Agreement; and (f) this Guaranty and the obligations of Guarantors hereunder shall be valid and enforceable and shall not be subject to any reduction, limitation, impairment, discharge or termination for any reason (other than payment in full of the Guaranteed Obligations), including the occurrence of any of the following, whether or not any Guarantor shall have had notice or knowledge of any of them: (i) any failure or omission to assert or enforce or agreement or election not to assert or enforce, or the stay or enjoining, by order of court, by operation of law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy (whether arising under the Hedge Agreement, at law, in equity or otherwise) with respect to the Guaranteed Obligations or any agreement relating thereto, or with respect to any other guaranty of or security for the payment of the Guaranteed Obligations; (ii) any rescission, waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions (including provisions relating to events of default) hereof, the Hedge Agreement or any agreement or instrument executed pursuant thereto, or of any other guaranty or security for the Guaranteed Obligations, in each case whether or not in accordance with the terms hereof or the Hedge Agreement or any agreement relating to such other guaranty or security; (iii) the Guaranteed Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect; (iv) the application of payments received from any source (other than payments received pursuant to the Hedge Agreement or from the proceeds of any security for the Guaranteed Obligations, except to the extent such security also serves as collateral for indebtedness other than the Guaranteed Obligations) to the payment of indebtedness other than the Guaranteed Obligations, even though Hedge Counterparty might have elected to apply such payment to any part or all of the Guaranteed Obligations; (v) Hedge Counterparty consent to the change, reorganization or termination of the corporate structure or existence of Company or any of its Subsidiaries and to any corresponding restructuring of the Guaranteed Obligations; (vi) any failure to perfect or continue perfection of a security interest in any collateral which secures any of the Guaranteed Obligations; (vii) any defenses, set-offs or counterclaims which Company may allege or assert against Hedge Counterparty in respect of the Guaranteed Obligations, including failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury; and (viii) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of any Guarantor as an obligor in respect of the Guaranteed Obligations. 1.5. WAIVERS BY GUARANTORS. Each Guarantor hereby waives, for the benefit of Hedge Counterparty: (a) any right to require Hedge Counterparty, as a condition of payment or performance by such Guarantor, to (i) proceed against Company, any other guarantor (including any other Guarantor) of the Guaranteed Obligations or any other Person, (ii) proceed against or exhaust any security held from Company, any such other guarantor or any other Person, (iii) proceed against or have resort to any balance of any Deposit Account or credit on the books of Hedge Counterparty in favor of Company or any other Person, or (iv) pursue any other remedy in the power of Hedge Counterparty whatsoever; (b) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of Company or any other Guarantor including any defense based on or arising out of the lack of validity or the unenforceability of the Guaranteed Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of Company or any other Guarantor from any cause other than payment in full of the Guaranteed Obligations; (c) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (d) any defense based upon Hedge Counterparty's errors or omissions in the administration of the Guaranteed Obligations, except behavior which amounts to bad faith; (e) (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof and any legal or equitable discharge of such Guarantor's obligations hereunder, (ii) to the extent permitted by law, the benefit of any statute of limitations affecting such Guarantor's liability hereunder or the enforcement hereof, (iii) any rights to set-offs, recoupments and counterclaims, and (iv) promptness, diligence and any requirement that Hedge Counterparty protect, secure, perfect or insure any security interest or lien or any property subject thereto; (f) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, including acceptance hereof, notices of default hereunder, the Hedge Agreement or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Guaranteed Obligations or any agreement related thereto, notices of any extension of credit to Company and notices of any of the matters referred to in Section 1.4 and any right to consent to any thereof; and (g) any defenses or benefits that may be derived from or afforded by law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms hereof. Notwithstanding anything herein to the contrary, nothing in Sections 1.4, 1.5 or 1.6 shall affect the obligations of Hedge Counterparty and Company with respect to the netting of transactions provided for in Section 2(c) of the Hedge Agreement. 1.6. GUARANTORS' RIGHTS OF SUBROGATION, CONTRIBUTION, ETC. Until the Guaranteed Obligations shall have been indefeasibly paid in full, each Guarantor hereby waives any claim, right or remedy, direct or indirect, that such Guarantor now has or may hereafter have against Company or any other Guarantor or any of its assets in connection with this Guaranty or the performance by such Guarantor of its obligations hereunder, in each case whether such claim, right or remedy arises in equity, under contract, by statute, under common law or otherwise and including without limitation (a) any right of subrogation, reimbursement or indemnification that such Guarantor now has or may hereafter have against Company with respect to the Guaranteed Obligations, (b) any right to enforce, or to participate in, any claim, right or remedy that Hedge Counterparty now has or may hereafter have against Company, and (c) any benefit of, and any right to participate in, any collateral or security now or hereafter held by Hedge Counterparty. In addition, until the Guaranteed Obligations shall have been indefeasibly paid in full, each Guarantor shall withhold exercise of any right of contribution such Guarantor may have against any other guarantor (including any other Guarantor) of the Guaranteed Obligations, including, without limitation, any such right of contribution as contemplated by Section 1.2. Each Guarantor further agrees that, to the extent the waiver or agreement to withhold the exercise of its rights of subrogation, reimbursement, indemnification and contribution as set forth herein is found by a court of competent jurisdiction to be void or voidable for any reason, any rights of subrogation, reimbursement or indemnification such Guarantor may have against Company or against any collateral or security, and any rights of contribution such Guarantor may have against any such other guarantor, shall be junior and subordinate to any rights Hedge Counterparty may have against Company, to all right, title and interest Hedge Counterparty may have in any such collateral or security, and to any right Hedge Counterparty may have against such other guarantor. If any amount shall be paid to any Guarantor on account of any such subrogation, reimbursement, indemnification or contribution rights at any time when all Guaranteed Obligations shall not have been finally and indefeasibly paid in full, such amount shall be held in trust for Hedge Counterparty and shall forthwith be paid over to Hedge Counterparty to be credited and applied against the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms hereof. 1.7. SUBORDINATION OF OTHER OBLIGATIONS. Any Indebtedness of Company or any Guarantor now or hereafter held by any Guarantor (the "OBLIGEE GUARANTOR") is hereby subordinated in right of payment to the Guaranteed Obligations, and any such indebtedness collected or received by the Obligee Guarantor after a Termination Event has occurred and is continuing shall be held in trust for Hedge Counterparty and shall forthwith be paid over to Hedge Counterparty to be credited and applied against the Guaranteed Obligations but without affecting, impairing or limiting in any manner the liability of the Obligee Guarantor under any other provision hereof. 1.8. CONTINUING GUARANTY. This Guaranty is a continuing guaranty and shall remain in effect until all of the Guaranteed Obligations shall have been paid in full. Each Guarantor hereby irrevocably waives any right to revoke this Guaranty as to future transactions giving rise to any Guaranteed Obligations. 1.9. AUTHORITY OF GUARANTORS OR COMPANY. It is not necessary for Hedge Counterparty to inquire into the capacity or powers of any Guarantor or Company or the officers, directors or any agents acting or purporting to act on behalf of any of them. 1.10. FINANCIAL CONDITION OF COMPANY. Additional Confirmations or Transactions may be entered into from time to time under the Hedge Agreement, in each case without notice to or authorization from any Guarantor regardless of the financial or other condition of Company at the time of any such grant or continuation or at the time such Confirmations or Transactions under the Hedge Agreement is entered into, as the case may be. Hedge Counterparty shall not have any obligation to disclose or discuss with any Guarantor its assessment, or any Guarantor's assessment, of the financial condition of Company. Each Guarantor has adequate means to obtain information from Company on a continuing basis concerning the financial condition of Company and its ability to perform its obligations under the Hedge Agreement, and each Guarantor assumes the responsibility for being and keeping informed of the financial condition of Company and of all circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations. Each Guarantor hereby waives and relinquishes any duty on the part of Hedge Counterparty to disclose any matter, fact or thing relating to the business, operations or conditions of Company now known or hereafter known by Hedge Counterparty. 1.11. BANKRUPTCY, ETC. (a) So long as any Guaranteed Obligations remain outstanding, no Guarantor shall, without the prior written consent of Hedge Counterparty, commence or join with any other Person in commencing any bankruptcy, reorganization or insolvency case or proceeding of or against Company or any other Guarantor. The obligations of Guarantors hereunder shall not be reduced, limited, impaired, discharged, deferred, suspended or terminated by any case or proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of Company or any other Guarantor or by any defense which Company or any other Guarantor may have by reason of the order, decree or decision of any court or administrative body resulting from any such proceeding. (b) Each Guarantor acknowledges and agrees that any interest on any portion of the Guaranteed Obligations which accrues after the commencement of any case or proceeding referred to in clause (a) above (or, if interest on any portion of the Guaranteed Obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, such interest as would have accrued on such portion of the Guaranteed Obligations if such case or proceeding had not been commenced) shall be included in the Guaranteed Obligations because it is the intention of Guarantors and Hedge Counterparty that the Guaranteed Obligations which are guaranteed by Guarantors pursuant hereto should be determined without regard to any rule of law or order which may relieve Company of any portion of such Guaranteed Obligations. Guarantors will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Hedge Counterparty, or allow the claim of Hedge Counterparty in respect of, any such interest accruing after the date on which such case or proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Obligations are paid by Company, the obligations of Guarantors hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Hedge Counterparty as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Obligations for all purposes hereunder. 1.12. DISCHARGE OF GUARANTY UPON SALE OF GUARANTOR. If all of the Capital Stock of any Guarantor or any of its successors in interest hereunder shall be sold or otherwise disposed of (including by merger or consolidation) in accordance with the terms and conditions OF SECTION 4.1(a)(2) OR SECTION 4.1(a)(3) of the Collateral Trust Agreement, the Guaranty of such Guarantor or such successor in interest, as the case may be, hereunder shall automatically be discharged and released without any further action by Hedge Counterparty or any other Person effective as of the time of such sale or disposition. Notwithstanding anything herein to the contrary, each Guarantor confirms that it is its intention that the guaranty by such Guarantor pursuant to this Guaranty not constitute a fraudulent transfer or conveyance for purposes of any federal, state or foreign law. To effectuate the foregoing intention, each Guarantor hereby irrevocably agrees that the obligations of each Guarantor under this Guaranty shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor and after giving effect to any collections from payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guaranty, result in the obligations of such Guarantor under this Guaranty not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law. SECTION II. MISCELLANEOUS 2.1 NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given to Hedge Counterparty, Company or a Guarantor, shall be sent to such Person's address as set forth in the Hedge Agreement and in the manner permitted therein. 2.2. GOVERNING LAW. This Agreement, each Transaction entered into hereunder, and all matters arising in connection with this Agreement will be governed by, and construed and enforced in accordance with, the law of the State of New York. 2.3. SEVERABILITY. If any term, provision, covenant, or condition of this Guaranty, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or in part) for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full force and effect as if this Guaranty had been executed with the invalid or unenforceable portion eliminated, so long as this Guaranty as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Guaranty and the deletion of such portion of this Guaranty will not substantially impair the respective benefits or expectations of the parties to this Guaranty. 2.4. WAIVER OF TRIAL BY JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING. 2.5. CONSENT TO JURISDICTION. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PARTY HERETO ARISING OUT OF OR RELATING HERETO, OR ANY OF THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PARTY HERETO, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (a) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (b) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (c) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO THE APPLICABLE PARTY HERETO AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SECTION 2.1; (d) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (c) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE PARTY HERETO IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (e) AGREES AGENTS AND LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY PARTY HERETO IN THE COURTS OF ANY OTHER JURISDICTION. IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. J. ARON & COMPANY, as Hedge Counterparty By: /s/ L. Peter O'Hagan ----------------------------------- Name: L. Peter O'Hagan Title: THE CANTON OIL & GAS COMPANY By: /s/ Frost W. Cochran ----------------------------------- Name: Frost W. Cochran Title: President WARD LAKE DRILLING, INC. By: /s/ Frost W. Cochran ----------------------------------- Name: Frost W. Cochran Title: Chief Executive Officer EX-10.9 13 l08738aexv10w9.txt EXHIBIT 10.9 EXHIBIT 10.9 MANAGEMENT SERVICES AGREEMENT This Management Services Agreement (this "Agreement") is entered into by and between Capital C Energy Operations, LP, a Delaware limited partnership ("Capital C"), and Belden & Blake Corporation, an Ohio corporation ("Belden & Blake"), as of July 7, 2004. RECITALS Whereas, as of the date hereof, Belden & Blake is a wholly owned subsidiary of Capital C; and Whereas, Capital C Energy, LLC, a Delaware limited liability company (the "General Partner GP") is the general partner of Capital C Energy, LP, a Delaware limited partnership, and Capital C Energy, LP is the general partner of Capital C; and WHEREAS, Belden & Blake desires that certain officers of the General Partner GP provide management services to Belden & Blake from time to time; Now, Therefore, in consideration of these recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Capital C and Belden & Blake agree as follows, intending to be legally bound: 1. MANAGEMENT SERVICES. 1.1 Services To Be Provided. During the term of this Agreement, in consideration for the payments to be made by Belden & Blake as described herein, certain individual officers, employees, affiliates, agents or representatives of Capital C or the General Partner GP (the "Officers"), initially Frost W. Cochran, Billy Dee Davis, Jr. and W. Mac Jensen, shall dedicate substantial time and resources to providing the management services described in this Section 1.1 (collectively, the "Services") without additional direct consideration from Belden & Blake unless otherwise determined appropriate by the board of directors of Belden & Blake: (a) General management supervision and oversight, in the capacity as officers of Belden & Blake, as may be approved, designated and limited by the Board of Directors of Belden & Blake from time to time; (b) Financial advisory services, including, but not limited to, negotiating on behalf of Belden & Blake with respect to any debt financing; (c) Evaluation of potential acquisitions and other business opportunities; and (d) Strategic consulting services including, but not limited to, strategic business planning and participation in strategy implementation. 1.2 Authority; Reimbursement. The Officers are authorized to make expenditures and incur obligations to the extent necessary to provide the Services to Belden & Blake in a lawful, safe and professional manner. The Officers shall be entitled to reimbursement of all out-of-pocket expenses reasonably incurred in connection with this Agreement. 2. COMPENSATION. In consideration for the provision of the Services pursuant to this Agreement, Capital C shall be entitled to a management fee (the "Management Fee"), in an amount equal to two hundred fifty thousand dollars ($250,000) per quarter. The Management Fee shall be payable in advance on the first day of each calendar quarter. The Management Fee shall be appropriately prorated if this Agreement shall commence on other than the first day of a calendar quarter. Belden & Blake shall not be entitled to recoupment of any Management Fee paid in advance of the termination of this Agreement. Notwithstanding anything to the contrary in this Agreement, the Management Fee shall not be due and payable at any time Belden & Blake is in default, or any event of default exists, under the Credit and Guaranty Agreement, dated as of July 7, 2004, among Belden & Blake, as borrower, certain subsidiaries of Belden & Blake, as guarantors, and Goldman Sachs Credit Partners, L.P., as sole lead arranger, sole bookrunner, sole syndication agent and administrative agent. 3. TERM AND TERMINATION. 3.1 Initial Term. This Agreement shall have an initial term commencing on the date hereof and ending on July 7, 2014, unless otherwise terminated pursuant to the terms hereof. This Agreement shall terminate immediately upon a sale of all or substantially all of the assets, or dissolution and winding up, of Belden & Blake. 3.2 Renewal; Termination. This Agreement shall be renewed automatically for additional consecutive twelve-month terms, unless either party provides notice to the other of its intent not to renew not more than sixty days and not less than twenty days prior to the end of the term. This Agreement may be terminated only by a failure to renew. 3.3 Officers. Notwithstanding anything in this Agreement to the contrary, the continued employment of Frost W. Cochran, Billy Dee Davis, Jr. and W. Mac Jensen by Capital C or the General Partner GP shall not be a condition to the continuing effectiveness of this Agreement, and the Services may be provided by any officers, employees, affiliates, agents or representatives of Capital C or the General Partner GP. 4. DISPUTE RESOLUTION. All disputes arising out of this Agreement, any of the provisions hereof or the performance of either party hereunder that the parties are unable to resolve directly between themselves shall be settled by arbitration in Houston, Texas (unless Belden & Blake and Capital C agree upon another location) before three arbitrators in accordance with the rules then in effect of the American Arbitration Association. 2 5. INDEMNIFICATION AND TAXES. 5.1 Indemnification. Belden & Blake hereby agrees to release, indemnify, defend, protect and hold harmless Capital C, the General Partner GP, the Officers and their affiliates, agents and representatives from and against all claims, losses, liabilities and expenses, including, but not limited to, legal fees and expenses, arising from any action taken or not taken by Capital C, the General Partner GP, the Officers or their affiliates, agents or representatives in connection with their performance under this Agreement, except to the extent such claim, loss, liability or expense is directly attributable to gross negligence or willful misconduct. The indemnification provisions of this Agreement shall survive termination of this Agreement. 5.2 Taxes. Belden & Blake is responsible for the payment of all tariffs, duties and taxes (excluding U.S. federal and state taxation of the overall net income of Capital C) imposed by any domestic or foreign government or governmental agency in connection with this Agreement, however designated, levied or assessed, including without limitation, state and local income, lease, personal, sales and use taxes. 6. MISCELLANEOUS. 6.1 Notices. All consents, approvals, notices, requests, demands, instructions and other communications required or permitted to be given hereunder shall be in writing and shall be (i) delivered personally; (ii) mailed by registered mail, or U.S. certified mail, return receipt requested, postage prepaid; (iii) delivered by Federal Express or other reputable U.S. overnight courier service; or (iv) delivered by facsimile transmission (receipt of such transmission to be acknowledged by the recipient by facsimile transmission); (a) if to Capital C, to: Capital C Energy Operations, LP % Capital C Energy, LLC 333 Clay St., Suite 4960 Houston, Texas 77002 Attn: Frost W. Cochran Fax: 713-571-9533 3 (b) if to Belden & Blake, to: Belden & Blake Corporation 5200 Stoneham Rd. North Canton, Ohio 44720 Attn: Chief Executive Officer Fax: (330) 497-5463 or to such other place as any party may designate by written notice to the other party. All notices shall be deemed given on the date of receipt at the appropriate address, except in the case of facsimile transmissions received after the normal close of business, which shall be deemed given on the next business day. 6.2 Force Majeure. Neither Capital C nor Belden & Blake will be liable for nonperformance or defective or late performance of any of its obligations hereunder to the extent and for such periods of time as such nonperformance, defective performance or late performance is due to reasons outside such party's control, including, without limitation, acts of God, war (declared or undeclared), acts (including failure to act) of any governmental authority, riots, revolutions, fire, floods, explosions, sabotage, nuclear incidents, lightning, weather, earthquakes, storms, sinkholes, epidemics, strikes, or delays of suppliers or subcontractors for the same causes. 6.3 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument. 6.4 Amendment. This Agreement may be amended or modified only by a written instrument signed by each party. 6.5 GOVERNING LAW. THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS THAT MIGHT REQUIRE OR PERMIT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION. 6.6 Assignment; Binding Effect. This Agreement and the rights and obligations hereunder may not be assigned by any party, in whole or in part, without the prior written consent of the other party, and any such assignment that is made without such consent shall be void and of no force and effect. No permitted assignment shall release any party from any of its obligations under this Agreement. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assignees. 6.7 Severability. In the event any one or more of the provisions (or portion(s) thereof) contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in 4 any respect, such invalidity, illegality, or unenforceability shall not affect any other provision (or portion(s) thereof), and this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or portion(s) thereof) had never been contained herein. 6.8 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof, superseding any and all prior negotiations, discussions, agreements and understandings, whether oral or written, relating to such subject matter. 6.9 Waiver. No waiver of any term, provision or condition of this Agreement shall be effective unless in writing signed by the party against whom such waiver is sought to be enforced. Any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given, and no such waiver shall be deemed to be or construed as a further or continuing waiver of any such term, provision or condition or as a waiver of any other term, provision or condition of this Agreement, unless specifically so stated in such written waiver. 6.10 No Third Party Beneficiaries. This Agreement is intended for the exclusive benefit of the parties to this Agreement and their respective personal representatives, successors and permitted assigns, and nothing contained in this Agreement shall be construed as creating any rights or benefits in or to any third party. 6.11 Further Assurances. In connection with this Agreement and the transactions contemplated hereby, each party shall execute and deliver any additional documents and instruments and perform any additional acts that may be reasonably necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions. 6.12 Captions. The captions of the sections and paragraphs of this Agreement are for convenience and reference only and in no way define, limit or describe the scope of intent of this Agreement. Remainder of page intentionally left blank. 5 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first set forth above. CAPITAL C ENERGY OPERATIONS, LP By: Capital C Energy, LP, its general partner By: Capital C Energy, LLC, its general partner By: /s/ Frost W. Cochran ------------------------------ Frost W. Cochran President and Chief Executive Officer BELDEN & BLAKE CORPORATION By: /s/ W. Mac Jensen ------------------------------ W. Mac Jensen Senior Vice President EX-10.10 14 l08738aexv10w10.txt EXHIBIT 10.10 EXHIBIT 10.10 TERMINATION AND RELEASE AGREEMENT TERMINATION AND RELEASE AGREEMENT, dated as of July 7, 2004 (this "Agreement"), by and among Belden & Blake Corporation, an Ohio corporation (the "Borrower"), each subsidiary of the Borrower listed as a "Guarantor" on the signature pages hereto (each a "Guarantor" and collectively, the "Guarantors" and, together with the Borrower, each a "Loan Party" and collectively, the "Loan Parties"), Ableco Finance LLC, a Delaware limited liability company ("Ableco"), as collateral agent and administrative agent on behalf of the Lenders referred to in the Credit Agreement defined below (in such capacity, the "Collateral Agent" or the "Administrative Agent"), and Wells Fargo Foothill, Inc., a California corporation, formerly known as Foothill Capital Corporation ("Foothill"), as funding agent on behalf of the Lenders (in such capacity, the "Funding Agent", and together with the Administrative Agent and the Collateral Agent, each an "Agent" and collectively the "Agents"). W I T N E S S E T H: WHEREAS, the Borrower, the Guarantors, the Agents and the Lenders are parties to the Amended and Restated Credit Agreement, dated as of August 23, 2000 (as amended, restated, supplemented, modified or otherwise changed, the "Credit Agreement"; capitalized terms not otherwise defined shall have the meanings assigned to them in the Credit Agreement); WHEREAS, the obligations of the Loan Parties to the Agents and the Lenders in respect of the Credit Agreement and the other Loan Documents (the "Obligations") are secured pursuant to the terms of the Credit Agreement and the other Loan Documents; WHEREAS, the Borrower has advised the Agents that it intends to (a) prepay all the principal of all Loans outstanding under the Credit Agreement and to pay all interest and fees payable under the Credit Agreement that will have accrued and be unpaid on the date hereof (and any interest and fees shall accrue at a per diem rate of $7,072.78, if payment is not received on the date hereof as provided in Section 5 below), (b) pay all other monetary obligations of the Borrower under the Credit Agreement and the other Loan Documents that have accrued or otherwise arisen on or before the date hereof, including amounts payable pursuant to any indemnity or expense reimbursement provisions, and provide an expense deposit for monetary obligations arising in accordance with Section 5 below, (c) cause each Letter of Credit (other than the Surviving Letter of Credit (as defined below)) to be returned to Funding Agent for cancellation and (d) cash collateralize the Surviving Letter of Credit as set forth below. NOW, THEREFORE, in consideration of the premises and agreements herein and the payment of the Obligations, the parties hereby agree as follows: 1. Subject to (a) the satisfaction of the conditions precedent set forth in Section 6 below (including the payment of all amounts referred to in Section 5 below), (b) the agreement, acknowledgement and understanding that the provisions of the Credit Agreement and the other Loan Documents that are explicitly stated to survive the repayment of the Obligations shall remain in full force and effect and (c) the agreement, acknowledgment and understanding that the Borrower's reimbursement obligations with respect to the Surviving Letter of Credit and the Borrower's obligations under the Cash Collateral Agreement (as defined below) shall remain in full force and effect, the Agents (on behalf of Lenders) acknowledge and agree that all liability of the Borrower and the Guarantors in respect of the Obligations under the Loan Documents shall be deemed to be and shall be paid and discharged in full, provided that the foregoing shall not be construed to relieve the Borrower or Guarantors from their obligations under any indemnity or expense reimbursement provisions of any Loan Document in respect of any amounts that may become payable thereunder after the date hereof (including, without limitation, Section 11.15 of the Credit Agreement). 2. Without recourse and without any representation or warranty of any kind, subject to satisfaction of the conditions precedent set forth in Section 6 hereof, the Agents (on behalf of the Lenders) hereby terminate and release any and all liens, security interests or other charges or encumbrances in favor of the Agents or Lenders now existing or hereafter arising under the Credit Agreement or the other Loan Documents (other than the liens on the Cash Collateral (as defined below) under the Cash Collateral Agreement). The Borrower acknowledges and agrees that any commitments of the Agents or the Lenders to provide loans, letters of credit or other financial accommodations under the Loan Documents are hereby terminated. 3. Subject to satisfaction of the conditions precedent set forth in Section 6 hereof, the Agents (on behalf of the Lenders): (a) hereby authorize the Loan Parties, their counsel or their designee to file UCC termination statements in respect of the UCC financing statements filed previously by the Agents against the Loan Parties in connection with the Loan Documents and releases of mortgages in respect of Mortgages filed by the Agents against the Loan Parties in connection with the Loan Documents, in each case without representation, warranty, or recourse to the Agents or the Lenders and at the sole cost and expense of the Loan Parties; (b) hereby agree on the Payoff Date (as defined below) to send to the Borrower (or its designee or their respective counsel) any certificates, instruments or other possessory collateral (other than the Cash Collateral and other than with respect to other cash which shall be governed in accordance with the terms of Section 7 hereof) pledged to or held by the Agents as collateral under the Loan Documents, without representation, warranty, or recourse to the Agents or the Lenders and at the sole cost and expense of the Loan Parties; (c) hereby agree promptly to provide termination notices or agreements sufficient to terminate, in accordance with their terms, any depository account, blocked account, lockbox account or similar agreements, entered into pursuant to the Loan Documents (if such agreements are not terminated automatically in accordance with their terms by reason of the receipt of the Payoff Amount (as defined below)), without representation, warranty, or recourse to the Agents or the Lenders and at the sole cost and expense of the Loan Parties; and (d) will, at the reasonable request of the Borrower, execute such additional instruments and other writings, and take such other actions, to effect or evidence the release of any liens, security interests or other charges or encumbrances in favor of the Agents -2- now or hereafter arising under the Credit Agreement or the other Loan Documents (including, without limitation, (i) releases of Mortgages and (ii) releases of filings made with respect to patents, trademarks, copyrights, or other intellectual property rights of the Loan Parties (to the extent any such filings were made), but, in each case, without representation, warranty, or recourse to the Agents or the Lenders and at the sole cost and expense of the Loan Parties. 4. This Agreement shall be binding on and shall inure to the benefit of the Agents and the Loan Parties and their respective successors and assigns. 5. (a) As of the date hereof, the outstanding principal amount of the Loans and accrued and unpaid interest and all fees related thereto (other than the amounts specified in Sections 5(b) and (c) below) is $28,664,841.88. If payment of the Obligations is not made on July 7, 2004, on or before 12:00 noon (New York City time), or such later time as may be agreed to by the Agents, interest and fees shall accrue at the per diem rate of $7,072.78, provided that, (i) the interest rate and the outstanding principal amount of the Loans do not change after the date hereof and (ii) notwithstanding anything in the Credit Agreement to the contrary, such interest and fee payment shall be made in full in cash. If the assumptions set forth with respect to the calculation of the principal, interest and fee components are not correct, the Administrative Agent will notify the Borrower in writing before the Payoff Date (as defined below) of the appropriate changes in the amounts of principal, interest and fees and such adjusted amounts shall be required to be paid hereunder. (b) The aggregate amount of the accrued and unpaid fees and expenses of counsel and other experts and specialists to the Agents and the Lenders, and the expense deposit related to unpaid fees and expenses (the "Expense Deposit"), in each case in connection with the administration of this matter, including, without limitation, the termination and the release of the Collateral, is $150,000.00, which shall be paid in accordance with Section 7 below. (c) There is currently outstanding for the account of the Borrower a Letter of Credit (No. 5750965) (the "Surviving Letter of Credit") issued by Wells Fargo Bank, National Association pursuant to the Credit Agreement, in the face amount of $1,200,000, with respect to which the Funding Agent will accept cash collateral in the amount of $1,320,000 pursuant to a cash collateral agreement (the "Cash Collateral Agreement") in favor of the Funding Agent, in form and substance satisfactory to the Funding Agent (the "Cash Collateral"), that may be drawn upon in the event of any payment by the Funding Agent, or Wells Fargo, on account of the Surviving Letter of Credit and on account of fees and expenses payable to the Funding Agent with respect to the Surviving Letter of Credit. The sum of the amounts in clauses (a), (b) and (c) above is referred to as the "Payoff Amount." 6. The effectiveness of this Agreement is subject to the condition precedent that (i) the Agents and the Agents' counsel, as the case may be, shall have received (a) full payment of the Payoff Amount set forth in Section 5 hereof by wire transfer of immediately available funds in the amounts and in accordance with the wire transfer instructions set forth on Annex A hereto and (b) counterparts of this Agreement and the Cash Collateral Agreement duly executed by each Loan Party and received by the Administrative Agent (the date on which the -3- foregoing conditions shall first be satisfied herein called the "Payoff Date") and (ii) Wells Fargo Bank, National Association or its designee shall have received for cancellation all outstanding original Letters of Credit (other than the Surviving Letter of Credit) at the address set forth on Annex C hereto and shall have received a letter, in form and substance satisfactory to Wells Fargo Bank, National Association, requesting cancellation of such Letters of Credit. Such letter shall be on letterhead of the beneficiary of the Letter of Credit, shall refer to the Letter of Credit number and the account for whom such Letter of Credit was issued and shall include a request that such Letter of Credit be cancelled. If the Payoff Date does not occur on or prior to 5:00 pm (New York City time) on July 7, 2004, then this Agreement shall automatically terminate. 7. On and after the Payoff Date, the Funding Agent agrees to forward, but not more than once on any Business Day, any cleared and immediately available funds (other than Cash Collateral) (the "Remaining Funds") of the Loan Parties received by it in the Funding Agent's account from any of the Borrower's bank accounts (the "Bank Accounts") as a result of the cash management systems established under the Credit Agreement and the other Loan Documents. Such Remaining Funds will be forwarded to the Borrower in accordance with the wire instructions set forth on Annex B hereto. In consideration of the foregoing and the other terms of this Agreement, the Loan Parties hereby: (a) agree that the Funding Agent's customary wire transfer fees shall be setoff from any Remaining Funds that the Funding Agent forwards to the Borrower pursuant to this Section 7, and (b) confirm that they are obligated pursuant to, and on the terms of, Section 11.15 of the Credit Agreement to indemnify, hold harmless and reimburse the Funding Agent for any losses, liabilities, damages, claims (including, but not limited to, claims by any bank at which a Bank Account is maintained or any other third party), demands, obligations, actions, suits, judgments, penalties, costs or expenses, including, but not limited to, attorneys' fees, suffered or incurred by the Funding Agent in any way relating to the Bank Accounts or any related agreement, instrument or document in connection with the Bank Accounts or any transaction arising in connection therewith, and to reimburse the Funding Agent for amounts it incurs as a result of checks and other remittances that are returned unpaid for any reason, the proceeds of which the Funding Agent credited to the Obligations or remitted to the Borrower. 8. (a) The Loan Parties acknowledge and agree that (a) the amounts referred to in Section 5 above are enforceable obligations of the Loan Parties and, other than with respect to the Expense Deposit, are payable to the Agents and the Lenders, as applicable, pursuant to the provisions of the Credit Agreement and the other Loan Documents, without any deduction, offset, defenses or counterclaim, (b) prior to the Payoff Date, nothing contained herein shall constitute a waiver of any Default or Event of Default or any Agent's or any Lender's rights and remedies under the Credit Agreement or any other Loan Document and (c) as of the Payoff Date, the Credit Agreement and the other Loan Documents are terminated, and the Agents, the Lenders, and their respective participants, if any, have no further obligation, duty or responsibility under the Credit Agreement and any other Loan Document or any other document or agreement executed and/or delivered in connection therewith. -4- (b) The Loan Parties hereby irrevocably, unconditionally and generally release and discharge the Agents, the Lenders, their respective participants, if any, and successors and assigns, and their respective officers, directors, shareholders, affiliates, agents, attorneys and employees (the "Released Parties"), from or in connection with any and all actions, accounts, suits, debts, controversies, agreements, promises, damages, judgments, executions, any liability, claims or demands and any acts or omissions of any such Released Parties, known or unknown and of any nature whatsoever which the Loan Parties or their successors and assigns ever had, now have or hereafter can, shall or may have, against any or all of the Loan Parties to the date of this Agreement arising directly or indirectly under, pursuant to, or out of, the Loan Documents. (c) As to each and every claim released hereunder, each Loan Party hereby represents that it has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, each of them specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." (d) As to each and every claim released hereunder, each Loan Party also waives the benefit of each other similar provision of applicable federal or state law (including without limitation the laws of the state of New York), if any, pertaining to general releases after having been advised by their legal counsel with respect thereto. 9. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Agreement by telefacsimile or electronic mail shall be equally effective as delivery of an original executed counterpart of this Agreement. 10. This Agreement shall be governed by and construed in accordance with the law of the State of New York. EACH LOAN PARTY AND EACH AGENT, FOR ITSELF AND ON BEHALF OF THE LENDERS HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT, OR UNDER ANY INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] -5- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ADMINISTRATIVE AGENT AND COLLATERAL AGENT: ABLECO FINANCE LLC By: /s/ Daniel Wolf ------------------------------------ Name: Daniel Wolf Title: Vice President FUNDING AGENT: WELLS FARGO FOOTHILL, INC. By: /s/ Drew Stawin ------------------------------------ Name: Drew Stawin Title: Senior Vice President BORROWER: BELDEN & BLAKE CORPORATION By: /s/ James L. Goist ------------------------------------ Name: James L. Goist Title: Treasurer GUARANTORS: THE CANTON OIL & GAS COMPANY By: /s/ James L. Goist ------------------------------------ Name: James L. Goist Title: Treasurer WARD LAKE DRILLING, INC. By: /s/ James L. Goist ------------------------------------ Name: James L. Goist Title: Treasurer Annex A WIRE TRANSFER INSTRUCTIONS FOR FUNDING Name of Bank: JPMorgan Chase Bank 4 New York Plaza New York, New York 10004 ABA No: 021000021 Account Name: Wells Fargo Foothill, Inc. Account No: 323-266193 Ref: Belden & Blake Amount: $30,134,841.88 Annex B Borrower's Wire Transfer Instructions Name of Bank: KeyBank 2025 Ontario Street Cleveland, OH 44115 ABA No: 041001039 Account Name: Belden & Blake Corporation Account No: 042-818-4440 Ref: Termination and Release of Ableco Loan Annex C Address: Wells Fargo Bank, N.A. Trade Services Division, Northern California One Front Street, 21st Floor San Francisco, CA 94111 Attn: Jai Chaudhary EX-10.11 15 l08738aexv10w11.txt EXHIBIT 10.11 EXHIBIT 10.11 BELDEN & BLAKE CORPORATION $192,500,000 8.75% SENIOR SECURED NOTES DUE 2012 PURCHASE AGREEMENT July 1, 2004 Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: Belden & Blake Corporation, an Ohio corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to Goldman, Sachs & Co. (the "Purchaser") an aggregate of $192,500,000 principal amount of Senior Secured Notes specified above (the "Securities"). The Company's obligations under the Securities will be jointly and severally guaranteed on a second priority senior secured basis (the "Guarantees") by the Company's domestic subsidiaries set forth on Annex I hereto (collectively, the "Guarantors"). Capitalized terms used but not defined herein will have the meanings assigned to them in the "Description of the Notes" section of the Offering Circular (as defined below). The Company and the Guarantors have agreed to secure the Securities and the Guarantees on a second-priority basis "equally and ratably" with all obligations of the Company and the Guarantors under the Hedge Agreement (as defined below) and any future Parity Lien Debt, by Liens on certain of the assets of the Company and the Guarantors other than Excluded Assets, subject to the liens securing the Company's obligations under the Credit Agreement (as defined below) and any other Priority Lien Debt and other Permitted Prior Liens, granted to Wells Fargo Bank, N.A. as the collateral trustee (the "Collateral Trustee") for the benefit of the holders of the Secured Obligations, in all of the Collateral. The Securities are being issued and sold in connection with the acquisition of the Company (the "Merger") by Capital C Energy Operations, LP, a Delaware limited partnership ("Capital C"), pursuant to an Agreement and Plan of Merger, dated June 15, 2004 (the "Merger Agreement"), among the Company, Capital C and Capital C Ohio Inc., an Ohio corporation ("Capital Ohio"). Pursuant to the Merger Agreement, Capital Ohio will merge with and into the Company, with the Company as the surviving corporation. In connection with the Merger, the Company will, among other things, (i) commence a tender offer (the "Tender Offer") to purchase its $225,000,000 9-7/8% Senior Subordinated Notes due 2007 (the "2007 Notes") pursuant to an Offer to Purchase and Consent Solicitation (the "Offer to Purchase"); (ii) enter into a senior credit agreement consisting of term, revolving and letter of credit facilities (the "Credit Agreement"); (iii) enter into the ISDA Master Agreement, dated as of June 30, 2004 with J. Aron & Company and Capital Ohio (to be assumed by the Company) (the "Hedge Agreement"); and (iv) issue the Securities. As used herein, the term "Transactions" means collectively, (a) the closing of the Merger; (b) entering into the Credit Agreement; (c) the assuming of the Hedge Agreement by the Company; (d) the offering of the Securities; and (e) the use of proceeds from the offering of the Securities and the Credit Agreement as described under the caption "Use of Proceeds" in the Offering Circular. 1. The Company and each of the Guarantors represents and warrants to, and agrees with, the Purchaser that: (a) A preliminary offering circular, dated June 23, 2004 (the "Preliminary Offering Circular") and an offering circular, dated July 1, 2004 (the "Offering Circular"), have been prepared in connection with the offering of the Securities. Any reference to the Preliminary Offering Circular or the Offering Circular, as the case may be, as amended or supplemented, as of any specified date, shall be deemed to include any Additional Issuer Information (as defined in Section 5(f)) furnished by the Company prior to the completion of the distribution of the Securities. The Preliminary Offering Circular or the Offering Circular and any amendments or supplements thereto did not and will not, as of their respective dates, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by the Purchaser expressly for use therein; (b) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Offering Circular any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Circular; and, since the respective dates as of which information is given in the Offering Circular, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Offering Circular; (c) Except as disclosed in the Offering Circular, the Company and its subsidiaries have good and marketable title to all real properties and have good and marketable title to all other properties and assets owned by them, including, without limitation, all oil and gas producing properties of the Company and its subsidiaries and all assets and facilities owned by the Company and its subsidiaries in the production and marketing of oil and gas, in each case, free and clear from liens, encumbrances and defects that would materially interfere with the use made or currently proposed to be made thereof by them or otherwise could reasonably be expected to have a material adverse effect upon the business, properties, financial condition, earnings or prospects of the Company and its subsidiaries, taken as a whole (a "Material Adverse Effect"); and except as disclosed in the Offering Circular, the Company and its subsidiaries hold all leased real or personal property, including, without limitation, all oil and gas producing properties of the Company and its subsidiaries and all assets and facilities used by the Company and its subsidiaries in the production and marketing of oil and gas, under valid and enforceable leases with no exceptions that would, individually or in the aggregate, have a Material Adverse Effect; 2 (d) Each of the Company and the Guarantors has been duly incorporated and is validly existing as a corporation, in good standing under the laws of its state of incorporation, with power and authority (corporate or other) to own its properties and conduct its business as described in the Offering Circular, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; and each subsidiary of the Company that is not a Guarantor has been duly incorporated or formed, as the case may be, and is validly existing as a corporation, limited liability company or limited partnership, as the case may be, in good standing under the laws of its state of incorporation or formation, as the case may be; (e) The Company has, on the date hereof, or will have, at the Time of Delivery (as defined below), the authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors' qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims; (f) This Agreement has been duly authorized, executed and delivered by the Company and the Guarantors; (g) At the Time of Delivery, the Securities will be duly authorized by the Company and, when issued and delivered pursuant to this Agreement, will have been duly executed, authenticated, issued and delivered and will constitute valid and binding obligations of the Company entitled to the benefits provided by the indenture to be dated as of July 7, 2004 (the "Indenture") among the Company, the Guarantors and BNY Midwest Trust Company, as trustee (the "Trustee"), under which they are to be issued, which will be substantially in the form previously delivered to you; at the Time of Delivery, the Indenture will be duly authorized by the Company and the Guarantors and, when executed and delivered by the Company, the Guarantors and the Trustee, will constitute a valid and binding instrument, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Securities and the Indenture will conform to the descriptions thereof in the Offering Circular and will be in substantially the form previously delivered to you; (h) At the Time of Delivery, the Guarantees will be duly authorized by the Guarantors, and when executed, authenticated, issued and delivered pursuant to this Agreement and the Indenture, will constitute valid and binding obligations of the Guarantors entitled to the benefits provided by the Indenture, enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Guarantees will conform to the descriptions thereof in the Offering Circular and will be in substantially the form previously delivered to you; (i) At the Time of Delivery, the Exchange Securities (as defined below) will be duly authorized by the Company, and when executed, authenticated, issued and delivered in 3 accordance with the terms of the Registration Rights Agreement (as defined below) and the Indenture, will be entitled to the benefits of the Indenture and will constitute valid and binding obligations of the Company entitled to the benefits provided by the Indenture, enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Exchange Securities will conform to the descriptions thereof in the Offering Circular; (j) At the Time of Delivery, the guarantees of the Company's obligations under the Exchange Securities to be offered in exchange for the Guarantees in the Exchange Offer (the "Exchange Guarantees") will be duly authorized by the Guarantors, and when executed, authenticated, issued and delivered in accordance with the terms of the Registration Rights Agreement and the Indenture, will constitute valid and binding obligations of the Guarantors entitled to the benefits provided by the Indenture, enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Exchange Guarantees will conform to the descriptions thereof in the Offering Circular; (k) At the Time of Delivery, the exchange and registration rights agreement (the "Registration Rights Agreement") will be duly authorized by the Company and the Guarantors, and when executed, authenticated, issued and delivered by the Company, the Guarantors and the Purchaser, will constitute the valid and binding obligations of the Company and the Guarantors, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing and that rights to indemnity and contributions may be limited by considerations of public policy; (l) At the Time of Delivery, the Credit Agreement will be duly authorized by the Company and the guarantors party thereto, and, when executed and delivered by the Company, the guarantors party thereto and the lenders party thereto, will constitute valid and binding obligations of the Company and the guarantors party thereto, enforceable in accordance with its terms subject to, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Credit Agreement will conform to the descriptions thereof in the Offering Circular; (m) At the Time of Delivery, the Hedge Agreement will be duly authorized by the Company and, when executed and delivered by the Company and the other parties thereto, will constitute valid and binding obligations of the Company, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Hedge Agreement will conform to the descriptions thereof in the Offering Circular; 4 (n) The Merger Agreement has been duly authorized by the Company, and when executed and delivered by the Company, Capital C and Capital Ohio, will constitute valid and binding obligations of the Company, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; and the Merger Agreement will conform to the descriptions thereof in the Offering Circular; (o) At the Time of Delivery, each of the documents listed on Annex II hereof (collectively, the "Security Documents") will be duly authorized by the Company and the Guarantors party thereto and, when executed and delivered by the Company, the Guarantors party thereto and the other parties thereto, will constitute valid and binding obligations of the Company and the Guarantors party thereto, enforceable against the Company and the Guarantors in accordance with their respective terms, subject, as to enforcement and the Liens created thereby, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (p) At the Time of Delivery, each of the mortgages or deeds of trust as listed on Annex III hereof (the "Mortgages") will be duly authorized by the Company and the Guarantors party thereto and, when executed and delivered by the Company and such Guarantors, will constitute valid and binding obligations of the Company and such Guarantors, enforceable against the Company and such Guarantors in accordance with their respective terms, subject, as to enforcement and the Liens created thereby, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights or providing for the relief of debtors and to general equity principles; (q) None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Securities) will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations G, T, U, and X of the Board of Governors of the Federal Reserve System; (r) Prior to the date hereof, neither the Company nor any of its affiliates has taken any action which is designed to or which has constituted or which might have been expected to cause or result in stabilization or manipulation of the price of any security of the Company in connection with the offering of the Securities; (s) The issue and sale of the Securities, the issuance of the Guarantees and the compliance by the Company and the Guarantors with all of the provisions of the Securities, the Guarantees, the Indenture, the Registration Rights Agreement, the Security Documents and this Agreement and the consummation of the transactions herein and therein contemplated will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any of its subsidiaries or (iii) result in the violation of any statute or any order, rule or regulation of any court or governmental agency 5 or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; except with respect to clause (i) and clause (iii) of this paragraph, for such conflicts, breaches, defaults or violations as would not have a Material Adverse Effect. (t) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Securities, the issuance of the Guarantees, the grant, perfection or enforcement of security interests in the Collateral pursuant to the provisions of the Security Documents or the consummation by the Company and the Guarantors of the transactions contemplated by this Agreement, the Indenture, the Registration Rights Agreement or the Security Documents, except for (i) the filing of a registration statement by the Company with the Commission pursuant to the Act relating to the Exchange Securities and the Exchange Guarantees, (ii) the filings required to perfect the Collateral Trustee's security interests granted pursuant to the Security Documents and (iii) such consents, approvals, authorizations, registrations or qualifications as may be required under foreign or state securities or Blue Sky laws in connection with the purchase and distribution of the Securities and the Guarantees by the Purchaser; (u) Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or Formation, as the case may be, or By-laws or other organization document or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; (v) The statements set forth in the Offering Circular under the caption "Description of the Notes," insofar as they purport to summarize certain provisions of the Securities, the Indenture, the Registration Rights Agreement and the Security Documents, fairly summarize in all material respects the matters described therein. The statements set forth in the Offering Circular under the captions "Certain United States Federal Income Tax Considerations" and "Certain Relationships and Related Party Transactions," insofar as they purport to summarize certain provisions of the laws and matters referred to therein, are accurate and fairly summarize in all material respects the matters described therein; (w) Other than as set forth in the Offering Circular, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect; and, to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (x) The Company and each its subsidiaries owns or possesses such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") of the appropriate federal, state or local regulatory and quasi-regulatory agencies or bodies necessary to conduct any business now conducted by them and as contemplated to be conducted by them upon consummation of the transactions contemplated under this Agreement, except where the failure to possess such Governmental Licenses would not, individually or in the aggregate, have a Material Adverse Effect. The Company and each of its subsidiaries is in compliance with the terms and conditions of all such Governmental Licenses except where the failure to comply would not, individually or in the aggregate, have a Material Adverse Effect; all of the material Governmental Licenses are, and upon consummation of the transactions contemplated under this Agreement will be, valid and in full force and effect. 6 None of the Company or any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, individually or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect; (y) Except as would not, individually or in the aggregate, have a Material Adverse Effect, the Company and its subsidiaries are entitled to receive (and are currently receiving with respect to producing oil, gas and/or mineral leases), without present suspense or presently required indemnity against asserted or known defects or disputes regarding the Company's and any of its subsidiaries' ownership, from each purchaser of its production, or from the person receiving payments from any such purchasers, the proceeds attributable to the net revenue interest in production from each of the Company's and its subsidiaries surface and mineral leases; (z) Except as would not, individually or in the aggregate, have a Material Adverse Effect, all production from the wells operated by the Company and its subsidiaries has been properly accounted for and all proceeds attributable thereto have been properly paid in the ordinary course of business consistent with past practices; (aa) Wright & Company, Inc. ("Wright") is an independent petroleum engineering consultant and nothing has come to the Company's attention or any Guarantor's attention to cause them to believe that Wright is not qualified to pass on questions relating to reserve evaluations and related calculations set forth in the Offering Circular. No facts have arisen that lead the Company and its subsidiaries to conclude that the information supplied to Wright that formed the basis of the reserve report prepared by Wright, dated February 24, 2004 (the "Reserve Report") was incorrect in any material respect at the time it was used or supplied or that there has been any material adverse change in the reserves as shown in the Reserve Report, other than from normal production or disposition thereof. Since February 24, 2004, excluding normal production, no facts have arisen that lead the Company and its subsidiaries to conclude that there has been a material adverse change in the present value of future net cash flows of the proved reserves as shown in the Reserve Report, other than changes that may result from decreases in commodity prices; (bb) Except as disclosed in the Offering Circular, and except for such matters as would not, individually or in the aggregate, have a Material Adverse Effect, the Company and its subsidiaries (or, to the knowledge of the Company, any other entity for whose acts or omissions the Company is or may be liable) (i) are conducting and have conducted their businesses, operations and facilities in compliance with any and all applicable Environmental Laws (as defined below); (ii) have received and are in compliance with all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses as described in the Offering Circular; (iii) have not, pursuant to any contract, assumed responsibility to cure any currently identified material liability under Environmental Law or to remediate any currently identified Hazardous Substances (as defined below) spill or release; (iv) have not received notice of any actual or potential liability under Environmental Law, including, without limitation, liability as a "potentially responsible party" and/or for the investigation or remediation of any disposal or release of Hazardous Substances; and (v) are not subject to any pending or, to the knowledge of the Company, threatened claim or other legal proceeding under any Environmental Laws against the Company or its subsidiaries. "Environmental Laws" means any applicable federal, state and local law, statute, ordinance, regulation, order, requirement and common law relating to 7 pollution or the protection of human health or the environment, including, without limitation, those relating to, regulating, or imposing liability or standards of conduct concerning (i) noise or odor, (ii) emissions, discharges, or releases of Hazardous Substances, (iii) the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances, (iv) the protection of wildlife or endangered or threatened species, or (v) the investigation, remediation or cleanup of, or exposure to, any Hazardous Substances. As used in this paragraph, "Hazardous Substances" means pollutants, contaminants or hazardous, dangerous or toxic wastes or hazardous substances, including, but not limited to, any naturally occurring radioactive materials, brine, drilling mud, crude oil, natural gas liquids and other petroleum materials, petroleum, petroleum products and their breakdown constituents. (cc) There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of Hazardous Substances, by, due to or caused by the Company or any of its subsidiaries (or any other entity (including any predecessor) for whose acts or omissions the Company or any of its subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any Environmental Laws or in a manner or to a location that could reasonably be expected to give rise to any liability under any Environmental Laws (except for such as would not, individually or in the aggregate, have a Material Adverse Effect); (dd) When the Securities and the Guarantees are issued and delivered pursuant to this Agreement, neither the Securities nor the Guarantees will not be of the same class (within the meaning of Rule 144A under the Act) as securities or guarantees which are listed on a national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system; (ee) The Company is subject to Section 13 or 15(d) of the Exchange Act; (ff) Neither the Company, nor any of its subsidiaries is, and after giving effect to the offering and sale of the Securities and the application of the proceeds therefrom as described in the Offering Circular under the caption "Use of Proceeds," will be an "investment company," as such term is defined in the United States Investment Company Act of 1940, as amended (the "Investment Company Act"); (gg) None of the Company, any of its subsidiaries or any person acting on its or their behalf has offered or sold the Securities by means of any general solicitation or general advertising within the meaning of Rule 502(c) under the Act or, with respect to Securities sold outside the United States to non-U.S. persons (as defined in Rule 902 under the Act), by means of any directed selling efforts within the meaning of Rule 902 under the Act and the Company, any affiliate of the Company and any person acting on its or their behalf has complied with and will implement the "offering restriction" within the meaning of such Rule 902, provided that the Company makes no representation or warranty with respect to any actions undertaken by or on behalf of the Purchaser; (hh) Within the preceding six months, none of the Company, the Guarantors or any other person acting on behalf of the Company or any Guarantor has offered or sold to any person any Securities or Guarantees, or any securities of the same or a similar class as the Securities or the Guarantees, other than Securities or Guarantees offered or sold to the Purchaser hereunder. The Company and the Guarantors will take reasonable precautions 8 designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Act) of any Securities or Guarantees or any substantially similar security issued by the Company or the Guarantors, within six months subsequent to the date on which the distribution of the Securities or Guarantees has been completed (as notified to the Company by Goldman, Sachs & Co.), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Securities or the Guarantees in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Securities Act; (ii) The Company maintains and will maintain disclosure controls and procedures (as defined as Rule 13a-14 of the Exchange Act) designed to ensure that information required to be disclosed by the reports that they file or submit under the Exchange Act are recorded, processed, summarized and reported in accordance with the Exchange Act and the rules and regulations thereunder; and the Company has carried out and will carry out evaluations, under the supervision and with the participation of the management of the Company, of the effectiveness of the design and operation of the Company's disclosure controls and procedures in accordance with Rule 13a-15 of the Exchange Act; (jj) When executed and delivered to the Collateral Trustee at the Time of Delivery, the Security Documents will grant and create, in favor of the Collateral Trustee, for the benefit of the holders of the Parity Lien Debt, as security for all of the Parity Lien Obligations, a valid second priority security interest in the Collateral defined in each of such instruments. When (i) the Financing Statements (as defined below) are filed, with respect to Collateral in which a security interest may be perfected by the filing of a financing statement (as defined in Article 9 of the Uniform Commercial Code as in effect in any relevant jurisdiction), (ii) when a control agreement is executed and delivered by the Company or applicable Guarantor, the Collateral Trustee, and the relevant "securities intermediary" (as defined in Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction) with respect to any "securities account" (as defined in Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction) owned by the Company or such Guarantor, (iii) when a control agreement is executed and delivered by the Company or applicable Guarantor, the Collateral Trustee, and the relevant "bank" (as defined in Article 9 of the Uniform Commercial Code as in effect in any relevant jurisdiction) with respect to any "deposit account" (as defined in Article 9 of the Uniform Commercial Code as in effect in any relevant jurisdiction) owned by the Company or such Guarantor, (iv) when any "certificated security" (as defined in Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction) or "instrument" (as defined in Article 9 of the Uniform Commercial Code as in effect in any relevant jurisdiction) is delivered to the Collateral Trustee, and (v) when the consent of the issuer of any letter of credit is obtained, and (vi) when any security interest in patents, trademarks and copyrights is recorded in the applicable intellectual property registries, including but not limited to the United States Patent and Trademark Office and the United States Copyright Office, such second priority security interests will be perfected security interests (subject in priority only to Permitted Prior Liens and the provisions with respect to priority set forth in the Collateral Trust Agreement). When delivered at the Time of Delivery, each Mortgage will be delivered, duly acknowledged and, if required for recordation, attested and otherwise will be in recordable form. At the Time of Delivery, (y) all pledged Collateral constituting Capital Stock will be represented by certificated securities and (z) all such certificated securities required to be delivered to the Collateral Trustee under the Security Documents and all promissory notes and other instruments then evidencing or representing any Collateral will be delivered to the Collateral Trustee in pledge 9 for the benefit of the holders of the Parity Lien Debt, as security for all of the Parity Lien Obligations, on a second priority basis, duly endorsed by an effective endorsement; and (kk) Ernst & Young LLP, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder. 2. Subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Purchaser, and the Purchaser agrees to purchase from the Company, at a purchase price of 97.5% of the principal amount thereof, plus accrued interest, if any, from July 7, 2004 to the Time of Delivery hereunder, the entire principal amount of Securities (and the Guarantees thereof) offered hereby. 3. Upon the authorization by you of the release of the Securities and the Guarantees, the Purchaser proposes to offer the Securities and the Guarantees for sale upon the terms and conditions set forth in this Agreement and the Offering Circular and the Purchaser hereby represents and warrants to, and agrees with the Company and the Guarantors that: (a) It will offer and sell the Securities and the Guarantees only to: (i) persons who it reasonably believes are "qualified institutional buyers" ("QIBs") within the meaning of Rule 144A under the Act in transactions meeting the requirements of Rule 144A or (ii) upon the terms and conditions set forth in Annex IV to this Agreement; (b) It is an Institutional Accredited Investor; and (c) It will not offer or sell the Securities and the Guarantees by any form of general solicitation or general advertising, including but not limited to the methods described in Rule 502(c) under the Act. 4. (a) The Securities and the Guarantees to be purchased by the Purchaser hereunder will be represented by one or more definitive global Securities in book-entry form which will be deposited by or on behalf of the Company with The Depository Trust Company ("DTC") or its designated custodian. The Company and the Guarantees will deliver the Securities and the Guarantees to Goldman, Sachs & Co. against payment by or on behalf of the Purchaser of the purchase price therefor by certified or official bank check or checks, payable to the order of the Company in Federal (same day) funds, by causing DTC to credit the Securities to the account of Goldman, Sachs & Co. at DTC. The Company will cause the certificates representing the Securities and the Guarantees to be made available to Goldman, Sachs & Co. for checking at least twenty-four hours prior to the Time of Delivery at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on July 7, 2004 or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and date are herein called the "Time of Delivery." (b) The documents to be delivered at the Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross-receipt for the Securities, the Guarantees and any additional documents requested by the Purchaser pursuant to Section 7(i) hereof, will be delivered at the Time of Delivery at the offices of Latham & Watkins LLP, 885 Third Avenue, Suite 1000, New York, New York 10022 (the "Closing Location"), and the Securities and the Guarantees will be delivered at the Designated Office, all at the Time of Delivery. A meeting will be held at the Closing Location at 5:00 p.m., New York City time, on the New York Business Day next preceding the Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 10 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. Each of the Company and the Guarantors agrees with the Purchaser: (a) To prepare the Offering Circular in a form approved by you; to make no amendment or any supplement to the Offering Circular which shall be disapproved by you promptly after reasonable notice thereof; and to furnish you with copies thereof; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Securities and the Guarantees for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Securities and the Guarantees, provided that in connection therewith the Company and the Guarantors shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) If, at any time prior to the expiration of nine months after the date of the Offering Circular, any event shall have occurred as a result of which the Offering Circular as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Offering Circular is delivered, not misleading, or, if for any other reason it shall be necessary or desirable during such same period to amend or supplement the Offering Circular, to notify you and upon your request to prepare and furnish without charge to the Purchaser and to any dealer in securities as many written and electronic copies as you may from time to time reasonably request of an amended Offering Circular or a supplement to the Offering Circular which will correct such statement or omission or effect such compliance; (d) During the period beginning from the date hereof and continuing until the date 90 days after the Time of Delivery, not to offer, sell contract to sell or otherwise dispose of, except as provided hereunder any securities of the Company or any of its subsidiaries that are substantially similar to the Securities, without your prior written consent; (e) Not to be or become, at any time prior to the expiration of three years after the Time of Delivery, an open-end investment company, unit investment trust, closed-end investment company or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act; (f) At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, for the benefit of holders from time to time of Securities, to furnish at its expense, upon request, to holders of Securities and prospective purchasers of securities information (the "Additional Issuer Information") satisfying the requirements of subsection (d)(4)(i) of Rule 144A under the Act; (g) If requested by you, to use its commercially reasonable efforts to cause the Securities to be eligible for the PORTAL trading system of the National Association of Securities Dealers, Inc.; (h) If not otherwise available on the Commission's Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"), to furnish to the holders of the Securities as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the date of the Offering 11 Circular), to make available to its stockholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; (i) If not otherwise available on EDGAR, during a period of five years from the date of the Offering Circular, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders of the Company, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any securities exchange on which the Securities or any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (j) During the period of two years after the Time of Delivery, the Company will not, and will not permit any of its "affiliates" (as defined in Rule 144 under the Securities Act) to, resell any of the Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them; (k) To use the net proceeds received by it from the sale of the Securities pursuant to this Agreement in the manner specified in the Offering Circular under the caption "Use of Proceeds." 6. The Company and each of the Guarantors covenant and agree with the Purchaser that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the issue of the Securities and the Guarantees and all other expenses in connection with the preparation, printing and filing of the Preliminary Offering Circular and the Offering Circular and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Purchaser and dealers; (ii) the cost of printing or producing this Agreement, the Indenture, the Security Documents the Blue Sky and Legal Investment Memoranda, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Securities and the Guarantees; (iii) all expenses in connection with the qualification of the Securities, the Guarantees, the Exchange Securities and the Exchange Guarantees for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Purchaser in connection with such qualification and in connection with the Blue Sky and legal investment surveys; (iv) all expenses associated with the assignment, creation and the perfection of security interests and associated documents, including, without limitation, the Security Documents and all Financing Statements (as defined below), including search and filing fees and the reasonable fees and disbursements of Latham & Watkins LLP incurred in connection therewith; (v) any fees charged by securities rating services for rating the Securities; (vi) the cost of preparing the Securities, the Guarantees, the Exchange Securities and the Exchange Guarantees; (vii) the fees and expenses of the Trustee and any agent of the Trustee and the fees and disbursements of counsel for the Trustee in connection with the Indenture and the Securities; (viii) the fees and expenses of the Collateral Trustee and any agent of the Collateral Trustee in connection with the Security Documents, the Financing Statements and the Collateral; (ix) any cost incurred in connection with the designation of the Securities for trading in PORTAL; and (x) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Purchaser will pay all of their own costs and expenses, including the fees of their counsel, transfer taxes on resale of any of the Securities by them, and any advertising expenses connected with any offers they may make. 12 7. The obligations of the Purchaser hereunder shall be subject, in its discretion, to the condition that all representations and warranties and other statements of the Company and the Guarantors herein are, at and as of the Time of Delivery, true and correct, the condition that the Company and the Guarantors shall have performed all of their respective obligations hereunder theretofore to be performed, and the following additional conditions: (a) Latham & Watkins LLP, counsel for the Purchaser, shall have furnished to you such opinion or opinions, dated the Time of Delivery, with respect to certain matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (b) Vinson & Elkins L.L.P. shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) Assuming that the Securities have been duly authorized, executed and delivered under the laws of the State of Ohio, and assuming due authentication thereof by the Trustee, upon payment and delivery therefor in accordance with this Agreement, the Securities constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, entitled to the benefits provided by the Indenture, and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (ii) Assuming that the Guarantees have been duly authorized, executed and delivered by the Guarantors under the laws of their respective States of incorporation, the Guarantees constitute valid and binding obligations of the Guarantors enforceable against the Guarantors in accordance with their terms, entitled to the benefits provided by the Indenture and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (iii) Assuming the Indenture has been duly authorized, executed and delivered by the Company and the Guarantors under the laws of their respective States of incorporation, and assuming the due authorization, execution and delivery of the Indenture by the Trustee, the Indenture constitutes a valid and binding obligation of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (iv) Assuming the Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Guarantors under the laws of their respective States of incorporation, the Registration Rights Agreement constitutes a valid and binding obligation of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair 13 dealing, and that rights to indemnity and contributions may be limited by considerations of public policy. In addition, such counsel need express no opinion as to the specific performance provision contained in the Registration Rights Agreement, nor as to the validity or enforceability of any provision of the Registration Rights Agreement relating to provisions of the Indenture or the Securities that requires the payment of any interest at a rate or in an amount that a court would determine under the circumstances under applicable law to be commercially unreasonable or a penalty or a forfeiture; (v) Assuming the Security Documents have been duly authorized, executed and delivered by the Company and the Guarantors party thereto in their respective States of incorporation, the Security Documents constitute valid and binding obligations of the Company and the Guarantors party thereto, enforceable against the Company and the Guarantors party thereto in accordance with their terms, and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (vi) Assuming the Mortgages have been duly authorized, executed and delivered by the Company and the Guarantors party thereto under the laws of their respective States of incorporation, the provisions of each Mortgage that are governed by the laws of the State of New York constitute valid and binding obligations of the Company and the Guarantors party thereto, enforceable against the Company and the Guarantors party thereto in accordance with their terms, and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (vii) Assuming the Credit Agreement has been duly authorized, executed and delivered by the Company and the Guarantors under the laws of their respective States of incorporation, the Credit Agreement constitutes a valid and binding obligation of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (viii) Assuming the Hedge Agreement has been duly authorized, executed and delivered by the Company under the laws of the State of Ohio, the Hedge Agreement constitutes a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, and subject, as to enforcement, to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws of general applicability relating to or affecting creditors' rights and to general equity principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (ix) The issue and sale of the Securities, the issuance of the Guarantees and the compliance by the Company and the Guarantors with all of the provisions of the Securities, the Guarantees, the Indenture, the Registration Rights Agreement, the Security Documents and this Agreement and the consummation of the transactions herein and therein contemplated will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or 14 constitute a default under, the Credit Agreement or the Hedge Agreement, or (ii) result in any violation of any federal or New York statute or any order, rule or regulation of any federal or New York court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties (it being understood that for the purpose of the opinion in clause (ii), such counsel is not passing upon compliance with respect to antifraud or similar provisions of any law, rule or regulation); (x) No consent, approval, authorization, order, registration or qualification of or with any federal or New York court or federal or New York governmental agency or body is required under federal or New York law for the issue and sale of the Securities, the issuance of the Guarantees, the grant, perfection or enforcement of security interests in the Collateral pursuant to the provisions of the Security Documents or the consummation by the Company and the Guarantors of the transactions contemplated by this Agreement, the Indenture, the Registration Rights Agreement or the Security Documents, except for (i) the filing of a registration statement by the Company with the Commission pursuant to the Act relating to the Exchange Securities and the Exchange Guarantees, (ii) the filings required to perfect the Collateral Trustee's security interests granted pursuant to the Security Documents and (iii) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities and the Guarantees by the Purchaser; (xi) The statements set forth in the Offering Circular under the caption "Description of the Notes," insofar as they purport to summarize certain provisions of the Securities, the Indenture, the Registration Rights Agreement and the Security Documents, fairly summarize in all material respects the provisions described therein. The statements set forth in the Offering Circular under the captions "Certain United States Federal Income Tax Considerations" and "Description of Other Indebtedness--Post-Merger Debt," insofar as they purport to summarize certain provisions of the laws and documents referred to therein, fairly summarize in all material respects the provisions described therein; (xii) No registration of the Securities or the Guarantees under the Act, and no qualification of an indenture under the United States Trust Indenture Act of 1939 with respect thereto, is required for the offer, sale and initial resale of the Securities or the Guarantees by the Purchaser, solely in the manner contemplated by this Agreement, the Indenture and the Offering Circular; (xiii) Neither the Company, nor any of its subsidiaries is an "investment company," as such term is defined in the Investment Company Act; (xiv) The Parity Lien Pledge and Security Agreement to be dated July 7, 2004, among the Company, the Guarantors and the Collateral Trustee (the "Pledge and Security Agreement"), creates a valid security interest in favor of the Collateral Trustee for the benefit of the holders of the Parity Lien Debt in that portion of the Collateral in which the Company and each Guarantor has rights and in which a security interest may be created under Article 9 (the "Article 9 Collateral") of the Uniform Commercial Code as in effect in the State of New York (the "New York UCC"), which security interest secures the Secured Obligations (as defined in the Pledge and Security Agreement); (xv) Upon delivery of that portion of the UCC Collateral consisting of the certificates in registered form that constitute "certificated securities" within the meaning of Section 8.102(a)(4) of the New York UCC and that are listed on Schedule 4.4 to the Pledge and 15 Security Agreement (the "Pledged Securities") to the Collateral Trustee in, and while located in the State of New York, pursuant to the Pledge and Security Agreement, indorsed to the Collateral Trustee or in blank, in each case, by an effective endorsement, or accompanied by undated stock powers with respect thereto duly indorsed in blank by an effective endorsement, the security interest in favor of the Collateral Trustee for the benefit of the holders of the Parity Lien Debt in the Pledged Securities will be perfected. Assuming neither the Collateral Trustee nor any holders of the Parity Lien Debt has notice of any adverse claim (within the meaning of Section 8-105 of the New York UCC) to the Pledged Securities, the Collateral Trustee will acquire the security interest in the Pledged Securities free of any adverse claim in accordance with Section 8-303 of the New York UCC; (xvi) Upon delivery of that portion of the Article 9 Collateral listed on Schedule 4.4 to the Pledge and Security Agreement that constitutes "instruments" within the meaning of Section 9-102(a)(47) of the New York UCC (the "Pledged Notes") to the Collateral Trustee for the benefit of the holders of the Parity Lien Debt in, and while located in, the State of New York, pursuant to the Pledge and Security Agreement, the security interest in favor of the Collateral Trustee for the benefit of the holders of the Parity Lien Debt will be perfected; (xvii) With respect to that portion of the Article 9 Collateral consisting of Deposit Accounts (as defined in the applicable Deposit Account Control Agreement), the provisions of the Deposit Account Control Agreements to be dated July 7, 2004, among the Company or any Guarantor, as applicable, the relevant banks (as defined in Article 9 of the New York UCC) , and the Collateral Trustee (the "Deposit Account Control Agreement") are effective to perfect the security interest of the Collateral Trustee for the benefit of the holders of the Parity Lien Debt by "control" (within the meaning of Section 9-104 of the New York UCC); and (xviii) With respect to that portion of the Article 9 Collateral consisting of the Securities Accounts (as defined in the applicable Securities Account Control Agreement), the provisions of the Securities Account Control Agreement to be dated July 7, 2004, among the Company or any Guarantor, as applicable, the relevant "securities intermediary" (as defined in Article 8 of the New York UCC), and the Collateral Trustee (the "Securities Account Control Agreement"), are effective to perfect the security interest in favor of the Collateral Trustee for the benefit of the holders of the Parity Lien Debt therein by "control" (within the meaning of Section 8-106 of the New York UCC). (c) Andrews Kurth LLP shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) None of (A) the issue and sale of the Securities by the Company in the manner described in the Offering Circular, (B) the issuance of the Guarantees by the Guarantors in the manner described in the Offering Circular and (C) the execution and delivery on behalf of, or the incurrence or performance by the Company and the Guarantors with all of their respective obligations under the Securities, the Guarantees, the Indenture, the Registration Rights Agreement, the Security Documents and this Agreement, each in accordance with its terms, constitutes, constituted or will constitute a conflict with, breach or violation of or default under the documents set forth on Annex V hereto; (ii) The statements set forth in the Offering Circular under the caption "The Merger Agreement," insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate in all material respects; 16 (iii) The Merger Agreement has been duly authorized, executed and delivered by Capital C; (iv) The Parity Lien Pledge Agreement, to be dated as of July 7, 2004 (the "Pledge Agreement"), between Capital C and the Collateral Trustee constitutes a valid and binding obligation of Capital C, enforceable against Capital C in accordance with its terms under the applicable laws of the State of New York; (v) The execution and delivery by Capital C of the Pledge Agreement and the performance by Capital C of its obligations thereunder do not and will not violate any applicable laws of the State of New York or any applicable laws of the United States of America; (vi) The Pledge Agreement is effective to create in favor of the Collateral Trustee for the benefit of the holders of the Parity Lien Debt a valid security interest under the Uniform Commercial Code as in effect in the State of New York (the "New York UCC") in all of the right, title and interest of Capital C in, to and under the Collateral (as defined in the Pledge Agreement) to which Article 9 of the New York UCC is applicable as collateral security for the payment when due of the Secured Obligations (as defined in the Pledge Agreement); and (vii) The security interest referred to in Section 7(c)(vi) of this Agreement in the types of Collateral described in the following clauses (a) and (b) will be perfected as described in the following clauses (a) and (b): (a) such security interest in that portion of the Collateral consisting of "investment property" (as defined in the New York UCC) will, upon creation of such security interest, be perfected by the filing of a financing statement naming Capital C as debtor and the Collateral Trustee as secured party in the office of the Secretary of State of the State of Delaware, and (b) such security interest in that portion of the Collateral consisting of a "certificated security" (as defined in the New York UCC) in bearer form or in registered form will, upon the creation of such security interest, be perfected by the Collateral Trustee taking possession in the State of New York of such security certificate. (viii) Such counsel has participated in conferences with officers and other representatives of the Company and the independent public accountants for the Company at which the contents of the Offering Circular (and any further amendments or supplements thereto made by the Company priority to the Time of Delivery) and related matters were discussed and, although such counsel has not independently verified and is not passing upon, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Offering Circular (and any further amendments or supplements thereto made by the Company priority to the Time of Delivery) (except to the extent set forth in Section 6(c)(ii) of this Agreement), on the basis of the foregoing (relying with respect to factual matters to the extent such counsel deems appropriate upon statements by officers and other representatives of the Company), no facts have come to such counsel's attention that have led such counsel to believe that the Offering Circular and any further amendments or supplements thereto made by the Company prior to the Time of Delivery, as of its date and as of the Time of Delivery contained or contains an untrue statement of material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, it being understood that such counsel will express no statement or belief with respect to (a) the financial statements and related schedules included therein, including the notes and the auditor's report thereon, (b) estimates of oil and gas reserves and (c) other information of a 17 financial or reserve nature included in the Offering Circular, including, without limitation, oil and gas production information. (d) Bricker & Eckler LLP shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) Each of the Company and The Canton Oil & Gas Company, an Ohio corporation (the "Ohio Guarantor") has been duly incorporated, and is validly existing as a corporation in good standing under the laws of the State of Ohio with corporate power and authority to own its properties and conduct its business as described in the Offering Circular; (ii) The Company has an authorized capitalization as set forth in the Offering Circular, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable; (iii) All of the issued shares of capital stock of the Ohio Guarantor have been duly and validly authorized and issued, are fully paid and non-assessable, and (except for directors' qualifying shares) are owned of record by the Company; (iv) Based solely on certificates from the Secretary of State of those States listed on a schedule provided to such counsel by the Company, the Company and the Ohio Guarantor have been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of such jurisdictions. (v) The Securities have been duly authorized by the Company and have been executed, issued and delivered; (vi) The Guarantees have been duly authorized by the Ohio Guarantor and have been executed, issued and delivered by the Ohio Guarantor; (vii) The Exchange Securities have been duly authorized by the Company; (viii) The Exchange Guarantees have been duly authorized by the Ohio Guarantor; (ix) The Indenture has been duly authorized, executed and delivered by the Company and the Ohio Guarantor; (x) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Ohio Guarantor; (xi) The Credit Agreement has been duly authorized, executed and delivered by the Company and the Ohio Guarantor; (xii) The Hedge Agreement has been duly authorized, executed and delivered by the Company; (xiii) The issue and sale of the Securities, the issuance of the Guarantees by the Ohio Guarantor and the compliance by the Company and the Ohio Guarantor with all of the provisions of the Securities, the Guarantees, the Indenture, the Registration Rights Agreement, the Security Documents and this Agreement and the consummation of the transactions herein and therein contemplated will not (A) result in any violation of the provisions of the Articles of Incorporation or Code of Regulations of the Company or the Ohio Guarantor or (B) result in any violation of any Ohio statute or written regulation thereunder, or any order, rule or regulation of any Ohio court or governmental agency or body known to such counsel having jurisdiction over the Company or the Ohio Guarantor or any of their properties; 18 (xiv) No consent, approval, authorization, order, registration or qualification of or with any Ohio court or Ohio governmental agency or body is required to be obtained by the Company or the Ohio Guarantor for the issue and sale of the Securities, the issuance of the Guarantees by the Ohio Guarantor, the grant, perfection or enforcement of security interests in the Collateral pursuant to the provisions of the Security Documents or the consummation by the Company and the Ohio Guarantor of the transactions contemplated by this Agreement, the Indenture, the Registration Rights Agreement or the Security Documents, except for (A) the filings required to perfect the Collateral Trustee's security interests granted pursuant to the Security Documents and (B) such consents, approvals, authorizations, registrations or qualifications as may be required under federal or state securities laws; (xv) Each Financing Statement naming the Company or the Ohio Guarantor as the debtor is in appropriate form for filing in the Office of the Secretary of State of the State of Ohio. Upon the proper filing of such Financing Statements in the Office of the Secretary of State of the State of Ohio, the security interest in favor of the Collateral Trustee for the benefit of the holders of the Parity Lien Debt in the UCC Collateral described in such Financing Statements will be perfected to the extent a security interest in such UCC Collateral can be perfected under the Ohio UCC by the filing of a financing statement in the Office of the Secretary of State of the State of Ohio; and (xvi) Certain mortgage opinions with respect to enforceability of Mortgages in the State of Ohio. (e) Dickinson Wright PLLC shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) Ward Lake Drilling, Inc., a Michigan corporation (the "Michigan Guarantor") has been duly incorporated and is validly existing as a corporation, in good standing under the laws of the State of Michigan, with power and authority (corporate or other) to own its properties and conduct its business as described in the Offering Circular; (ii) All of the issued shares of capital stock of the Michigan Guarantor have been duly and validly authorized and issued, are fully paid and non-assessable, and (except for directors' qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except for Permitted Prior Liens (such counsel being entitled to rely in respect of matters of fact upon certificates of officers of the Company or its subsidiaries, provided that such counsel shall state that it is justified in relying upon such certificates); (iii) Based solely on certificates from the Secretary of State of those States listed on a schedule provided to such counsel by the Company, the Michigan Guarantor has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of such jurisdictions. (iv) Any real property and buildings held under lease by the Michigan Guarantor at 685 East M32, Gaylord, Michigan 49735 are held by it under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; (v) Each of the Company and the Ohio Guarantor has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of the State of Michigan, or is subject to no material liability or disability by reason of the failure to 19 be so qualified in any such jurisdiction (such counsel being entitled to rely in respect of matters of fact upon certificates of officers of the Company and the Ohio Guarantor, provided that such counsel shall state that they believe that they are justified in relying upon such opinions and certificates); (vi) This Agreement has been duly authorized, executed and delivered by the Michigan Guarantor; (vii) The Guarantees have been duly authorized by the Michigan Guarantor and have been executed, authenticated, issued and delivered by the Michigan Guarantor; (viii) The Exchange Guarantees have been duly authorized by the Michigan Guarantor; (ix) The Indenture has been duly authorized, executed and delivered by the Michigan Guarantor; (x) The Registration Rights Agreement has been duly authorized, executed and delivered by the Michigan Guarantor; (xi) The Credit Agreement has been duly authorized, executed and delivered by the Michigan Guarantor; (xii) The issuance of the Guarantees by the Michigan Guarantor and the compliance by the Michigan Guarantor with all of the provisions of the Guarantees of the Michigan Guarantor, the Indenture, the Registration Rights Agreement, the Security Documents and this Agreement and the consummation of the transactions herein and therein contemplated will not (i) result in any violation of the provisions of the Certificate of Incorporation or By-laws or other organizational document of the Michigan Guarantor or (ii) result in any violation of any Michigan statute or any order, rule or regulation of any Michigan court or governmental agency or body having jurisdiction over the Michigan Guarantor or any of its properties; (xiii) No consent, approval, authorization, order, registration or qualification of or with any Michigan court or Michigan governmental agency or body is required for the issuance of the Guarantees by the Michigan Guarantor, the grant or perfection of security interests in the Collateral pursuant to the provisions of the Security Documents or the consummation by the Michigan Guarantor of the transactions contemplated by this Agreement, the Indenture, the Registration Rights Agreement or the Security Documents, except for (i) the filings required to perfect the Collateral Trustee's security interests granted pursuant to the Security Documents and (ii) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Securities and the Guarantees by the Purchaser; (xiv) The Michigan Guarantor is not in violation of its Certificate of Incorporation or By-laws or other organizational document or in default in the performance or observance of any material obligation, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; (xv) Each Financing Statement naming the Michigan Guarantor as the debtor is in appropriate form for filing in the Office of the Secretary of State of the State of Michigan. Upon the proper filing of such Financing Statements in the Office of the Secretary of State of the State of Michigan, the security interest in favor of the Collateral Trustee for the benefit of the 20 holders of the Parity Lien Debt in the UCC Collateral described in such Financing Statements will be perfected to the extent a security interest in such UCC Collateral can be perfected under the Michigan UCC by the filing of a financing statement in the Office of the Secretary of State of the State of Michigan; and (xvi) Certain mortgage opinions with respect to enforceability of Mortgages in the State of Michigan. (f) Vorys, Sater, Seymour and Pease LLP shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance satisfactory to you, to the effect that: (i) This Agreement has been duly authorized, executed and delivered by the Company and the Ohio Guarantor; (ii) The Merger Agreement has been duly authorized, executed and delivered by the Company; and (iii) To the best of such counsel's knowledge and other than as set forth in the Offering Circular, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. (g) Culbertson, Weiss, Schetroma and Schug, P.C. shall have furnished to you their written opinion, dated the Time of Delivery, in form and substance satisfactory to you, with respect to enforceability of Mortgages in the State of Pennsylvania. (h) On the date of the Offering Circular prior to the execution of this Agreement and also at the Time of Delivery, Ernst & Young LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex VI hereto; (i) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Offering Circular any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Offering Circular, and (ii) since the respective dates as of which information is given in the Offering Circular there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Offering Circular, the effect of which, in any such case described in clause (i) or (ii), is in the judgment of the Purchaser so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in this Agreement and in the Offering Circular; (j) On or after the date hereof (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company's debt securities; 21 (k) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange; (ii) a general moratorium on commercial banking activities declared by either Federal or New York State authorities or a material disruption in commercial banking or securities settlement or clearance services in the United States; (iii) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war or (iv) the occurrence of any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (iii) or (iv) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Securities on the terms and in the manner contemplated in the Offering Circular; (l) The Securities have been designated for trading on PORTAL; (m) The Company and the Guarantors shall have furnished or caused to be furnished to you at the Time of Delivery a certificate of an officer of the Company and the Guarantors satisfactory to you as to the accuracy of the representations and warranties of the Company and the Guarantors herein at and as of such Time of Delivery, as to the performance by the Company and the Guarantors of all of their respective obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (i) and (j) of this Section and as to such other matters as you may reasonably request. (n) The Company and the Guarantors shall have entered into the Registration Rights Agreement and the Purchaser shall have received executed counterparts thereof. (o) The Company, the Guarantors and the Trustee shall have executed and delivered the Indenture, and the Purchaser shall an original copy thereof, duly executed by the Company, the Guarantors and the Trustee. (p) The Company (as applicable), the Guarantors (as applicable) and the Collateral Trustee shall have executed and delivered the Security Documents and the Mortgages, and the Purchaser shall have received copies thereof, duly executed by the Company, the Guarantors (as applicable) and the Collateral Trustee. (q) The Collateral Trustee shall have received (with a copy for the Purchaser) those documents listed on Annex VII hereof. (r) All Uniform Commercial Code Financing Statements or other similar Financing Statements and Uniform Commercial Code Form UCC-3 termination statements required pursuant to clauses (1) and (2) of Annex VII hereof (collectively, the "Financing Statements") shall have been delivered to CT Corporation System or another similar filing service company acceptable to the Collateral Trustee (the "Filing Agent"). The Filing Agent shall have acknowledged in a writing reasonably satisfactory to the Collateral Trustee and its counsel (i) the Filing Agent's receipt of all Financing Statements, (ii) that the Financing Statements have either been submitted for filing in the appropriate filing offices or will be submitted for filing in the appropriate offices within ten days following the Time of Delivery and (iii) that the Filing Agent will notify the Collateral Trustee and its counsel of the results of such submissions within 30 days following the Time of Delivery. (s) The Consent Condition (as defined in the Offer to Purchase) shall have satisfied and the Company and the trustee under the indenture governing the 2007 Notes shall have executed a Supplemental Indenture (as defined in the Offer to Purchase). (t) The Company's existing credit facility shall be terminated and the Transactions shall be consummated simultaneously with the closing of the offering of the Securities. 22 8. (a) The Company and each of the Guarantors will, jointly and severally, indemnify and hold harmless the Purchaser against any losses, claims, damages or liabilities, joint or several, to which the Purchaser may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Circular or the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and will reimburse the Purchaser for any legal or other expenses reasonably incurred by the Purchaser in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company and each of the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Offering Circular or the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use therein. (b) The Purchaser will indemnify and hold harmless the Company and each of the Guarantors against any losses, claims, damages or liabilities to which the Company or any of the Guarantors may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Offering Circular or the Offering Circular, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Offering Circular or the Offering Circular or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by the Purchaser expressly for use therein; and will reimburse the Company or any of the Guarantors for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be 23 sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Purchaser on the other from the offering of the Securities. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Guarantors on the one hand and the Purchaser on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Purchaser on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Guarantors bear to the total underwriting discounts and commissions received by the Purchaser, in each case as set forth in the Offering Circular. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or the Purchaser on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Guarantors and the Purchaser agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), the Purchaser shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to investors were offered to investors exceeds the amount of any damages which the Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (e) The obligations of the Company and the Guarantors under this Section 8 shall be in addition to any liability which the Company and the Guarantors may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Purchaser within the meaning of the Act; and the obligations of the Purchaser under this Section 8 shall be in addition to any liability which the Purchaser may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act. 24 9. The respective indemnities, agreements, representations, warranties and other statements of the Company, the Guarantors and the Purchaser, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Purchaser or any controlling person of any Purchaser, or the Company or any of the Guarantors or any officer or director or controlling person of the Company or any of the Guarantors, and shall survive delivery of and payment for the Securities. 10. If this Agreement is terminated and the Securities and the Guarantees are not delivered by or on behalf of the Company and the Guarantors as provided herein, the Company will reimburse the Purchaser for all its out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred by the Purchaser in making preparations for the purchase, sale and delivery of the Securities, but the Company and the Guarantors shall then be under no further liability to the Purchaser except as provided in Sections 6 and 8 hereof. 11. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Purchaser shall be delivered or sent by mail, telex or facsimile transmission at 85 Broad Street, New York, New York 10004, Attention: Registration Department; and if to the Company shall be delivered or sent by mail, telex or facsimile transmission to the address of the Company set forth in the Offering Circular, Attention: Secretary; provided, however, that any notice to the Purchaser pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to the Purchaser at its address set forth in its Purchaser's Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 12. This Agreement shall be binding upon, and inure solely to the benefit of, the Purchaser, the Company and the Guarantors and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company or the Purchaser, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Securities from the Purchaser shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. 15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 17. The Company is authorized, subject to applicable law, to disclose any and all aspects of this potential transaction that are necessary to support any U.S. federal income tax benefits expected to be claimed with respect to such transaction, and all materials of any kind (including tax opinions and other tax analyses) related to those benefits, without the Purchaser imposing any limitation of any kind. 25 If the foregoing is in accordance with your understanding, please sign and return to us six counterparts hereof, and upon the acceptance hereof by you, this letter and such acceptance hereof shall constitute a binding agreement between Purchaser, the Company and the Guarantors. Very truly yours, Belden & Blake Corporation By: /s/ Robert W. Peshek ---------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer The Canton Oil & Gas Company By: /s/ Robert W. Peshek ---------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer Ward Lake Drilling, Inc. By: /s/ Robert W. Peshek ---------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer Accepted as of the date hereof: Goldman, Sachs & Co. By: /s/ Goldman, Sachs & Co. ---------------------------- (Goldman, Sachs & Co.) ANNEX I GUARANTORS The Canton Oil & Gas Company, an Ohio corporation Ward Lake Drilling, Inc., a Michigan corporation A-I-1 ANNEX II SECURITY DOCUMENTS Collateral Trust Agreement, among the Collateral Trustee, the Administrative Agent named therein, J. Aron & Company and the Trustee. Priority Lien Pledge and Security Agreement, among Company, the Guarantors and the Collateral Trustee, relating to the Priority Lien Debt Priority Lien Sponsor Pledge Agreement, among Capital C and the Collateral Trustee, relating to the Priority Lien Debt Parity Lien Pledge and Security Agreement, among Company, the Guarantors and the Collateral Trustee, relating to the Parity Lien Debt Parity Lien Sponsor Pledge Agreement, among Capital C and the Collateral Trustee, relating to the Parity Lien Debt Deposit Account Control Agreements Securities Account Control Agreements A-II-1 ANNEX III MORTGAGES The following list of mortgages describes each mortgage to be filed in each county where real property or other assets to be mortgaged are located. 1. Mortgage by Ward Lake Drilling, Inc., d/b/a Ward Lake Energy, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Manistee County, Michigan 2. Mortgage by Ward Lake Drilling, Inc., d/b/a Ward Lake Energy, for the benefit of Wells Fargo Bank, N.A, dated as of July 7, 2004, filed in Montmorency County, Michigan 3. Mortgage by Ward Lake Drilling, Inc., d/b/a Ward Lake Energy, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Ostego County, Michigan 4. Mortgage by Ward Lake Drilling, Inc., d/b/a Ward Lake Energy, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Antrim County, Michigan 5. Mortgage by Ward Lake Drilling, Inc., d/b/a Ward Lake Energy, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Alpena County, Michigan 6. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Stark County, Ohio 7. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Portage County, Ohio 8. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Mahoning County, Ohio 9. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and A-III-1 Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Carroll County, Ohio 10. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Tuscarawas County, Ohio 11. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Wayne County, Ohio 12. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Columbiana County, Ohio 13. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Fairfield County, Ohio 14. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Guernsey County, Ohio 15. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Noble County, Ohio 16. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Summit County, Ohio 17. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Trumble County, Ohio 18. Open End Mortgage, Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Summit County, Ohio (Headquarters) 19. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Warren County, Pennsylvania 20. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Indiana County, Pennsylvania 21. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Venango County, Pennsylvania 22. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in McKean County, Pennsylvania 23. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Bradford County, Pennsylvania 24. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Crawford County, Pennsylvania 25. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Sommerset County, Pennsylvania 26. Open End Mortgage, Assignment of Production, Security Agreement, Fixture Filing and Financing Statement by Belden & Blake Corporation, for the benefit of Wells Fargo Bank, N.A., dated as of July 7, 2004, filed in Westmoreland County, Pennsylvania ANNEX IV (1) The Securities have not been and will not be registered under the Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S under the Act or pursuant to an exemption from the registration requirements of the Act. The Purchaser represents that it has offered and sold the Securities, and will offer and sell the Securities (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Time of Delivery, only in accordance with Rule 903 of Regulation S or Rule 144A under the Act. Accordingly, the Purchaser agrees that neither it, its affiliates nor any persons acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and it and they have complied and will comply with the offering restrictions requirement of Regulation S. The Purchaser agrees that, at or prior to confirmation of sale of Securities (other than a sale pursuant to Rule 144A), it will have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered and sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the closing date, except in either case in accordance with Regulation S (or Rule 144A if available) under the Securities Act. Terms used above have the meaning given to them by Regulation S." Terms used in this paragraph have the meanings given to them by Regulation S. The Purchaser further agrees that it has not entered and will not enter into any contractual arrangement with respect to the distribution or delivery of the Securities, except with its affiliates or with the prior written consent of the Company. (2) Notwithstanding the foregoing, Securities in registered form may be offered, sold and delivered by the Purchaser in the United States and to U.S. persons pursuant to Section 3 of this Agreement without delivery of the written statement required by paragraph (1) above. (3) The Purchaser has represented, warranted and agreed that: (i) it has not offered or sold and, prior to the expiry of a period of six months from the Time of Delivery, will not offer or sell any notes to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 ("FSMA")) received by it in connection with the issue or sale of any notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and (iii) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom. (4) The Purchaser agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with A-IV-1 the applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. The Purchaser understands that no action has been taken to permit a public offering in any jurisdiction outside the United States where action would be required for such purpose. The Purchaser agrees not to cause any advertisement of the Securities to be published in any newspaper or periodical or posted in any public place and not to issue any circular relating to the Securities, except in any such case with Goldman, Sachs & Co.'s express written consent and then only at its own risk and expense. A-IV-2 ANNEX V MATERIAL AGREEMENTS 1. Indenture, dated as of June 27, 1997, between the Company, the Subsidiary Guarantors and LaSalle National Bank, as trustee 2. Registration Rights Agreement, dated as of June 27, 1997, between the Company, the Guarantors and Chase Securities, Inc. 3. Peake Energy, Inc. Stock Purchase Agreement between the Company and North Coast Energy, Inc. 4. Credit Agreement, dated as of August 23, 2000, by and among the Company, Ableco Finance LLC and Foothill Capital Corporation 5. Amendment to the Credit Agreement, dated as of June 29, 2001, by and among the Company, Ableco Finance LLC and Foothill Capital Corporation 6. Amendment to the Credit Agreement, dated as of July 25, 2002, by and among the Company, Ableco Finance LLC and Foothill Capital Corporation 7. Amendment to the Credit Agreement and Waiver, dated as of December 5, 2002, by and among the Company Finance LLC and Foothill Capital Corporation 8. Amendment to the Credit Agreement and Waiver dated as of March 31, 2003 by and among the Company Finance LLC and Foothill Capital Corporation 9. Amendment to the Credit Agreement and Waiver, dated as of May 30, 2003, by and among the Company Finance LLC and Foothill Capital Corporation 10. Transaction Advisory Agreement, dated as of June 27, 1997, by and between the Company and TPG Partners II, L.P. 11. Retirement and Noncompetition Agreement, dated May 26, 1999, by and between the Company and Ronald L. Clements 12. Belden & Blake Corporation 1997 Non-Qualified Stock Option Plan 13. Change in Control Severance Pay Plan for Key Employees of the Company, dated August 12, 1999 14. Amendment No. 1 of the Belden & Blake Corporation 1999 Change in Control Protection Plan for Key Employees, dated as of February 26, 2002 A-VI-1 15. Amendment No. 2 of the Belden & Blake Corporation 1999 Change in Control Protection Plan for Key Employees, dated as of October 23, 2002 16. Severance Pay Plan for Employees of Belden & Blake Corporation, dated August 12, 1999 17. Amendment 1 to the Belden & Blake Corporation 1999 Severance Pay Plan, dated as of May 29, 2000 18. Amendment 2 to the Belden & Blake Corporation 1999 Severance Pay Plan, dated as of September 12, 2002 19. Employment Agreement, dated June 1, 1999 and amended November 1, 1999, by and between the Company and John L. Schwager 20. Amended and Restated Employment Agreement, dated July 1, 2001, by and between the Company and John L. Schwager 21. Letter of Agreement, dated December 21, 2001, by and between the Company and Leo A. Schrider A-VI-2 ANNEX VI Pursuant to Section 7(h) of this Agreement, the accountants shall furnish letters to the Purchaser to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries; (ii) In our opinion, the consolidated financial statements and financial statement schedules audited by us and included in the Offering Circular comply as to form in all material respects with the applicable requirements of the Exchange Act and the related published rules and regulations; (iii) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Offering Circular agrees with the corresponding amounts (after restatements where applicable) in the audited consolidated financial statements for such five fiscal years; (iv) On the basis of limited procedures not constituting an audit in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements included in the Offering Circular, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) the unaudited consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Offering Circular are not in conformity with generally accepted accounting principles applied on the basis substantially consistent with the basis for the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Offering Circular; (B) any other unaudited income statement data and balance sheet items included in the Offering Circular do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included in the Offering Circular; (C) the unaudited financial statements which were not included in the Offering Circular but from which were derived any unaudited condensed financial statements referred to in clause (A) and any unaudited income statement data and balance sheet items included in the Offering Circular and referred to in clause (B) were not determined on a basis substantially consistent with the basis for the audited consolidated financial statements included in the Offering Circular; (D) any unaudited pro forma consolidated condensed financial statements included in the Offering Circular do not comply as to form in all material respects with the applicable accounting requirements or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; A-VI-1 (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest financial statements included in the Offering Circular or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or stockholders' equity or other items specified by the Purchaser, or any increases in any items specified by the Purchaser, in each case as compared with amounts shown in the latest balance sheet included in the Offering Circular except in each case for changes, increases or decreases which the Offering Circular discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included in the Offering Circular to the specified date referred to in clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of consolidated net income or other items specified by the Purchaser, or any increases in any items specified by the Purchaser, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Purchaser, except in each case for decreases or increases which the Offering Circular discloses have occurred or may occur or which are described in such letter; and (v) In addition to the examination referred to in their report(s) included in the Offering Circular and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (iv) above, they have carried out certain specified procedures, not constituting an audit in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Purchaser, which are derived from the general accounting records of the Company and its subsidiaries, which appear in the Offering Circular, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. A-VI-2 ANNEX VII The Collateral Trustee shall have received (with a copy for the Purchaser): 1. Appropriately completed copies, which have been duly authorized for filing by the appropriate Person, of Uniform Commercial Code Financing Statements naming the Company and each Guarantor (as applicable) as a debtor and the Collateral Trustee as the secured party, or other similar instruments or documents to be filed under the UCC of all jurisdictions as may be necessary or, in the reasonable opinion of the Collateral Trustee and its counsel, desirable to perfect the security interests of the Collateral Trustee pursuant to the Security Documents. 2. Appropriately completed copies, which have been duly authorized for filing by the appropriate Person, of Uniform Commercial Code Form UCC-3 termination statements, if any, necessary to release all Liens (other than Permitted Prior Liens) of any Person in any collateral described in the Security Documents previously granted by any Person. 3. Certified copies of Uniform Commercial Code Requests for Information or Copies (Form UCC-11), or a similar search report certified by a party acceptable to the Collateral Trustee, dated a date reasonably near to the Closing Date, listing all effective Financing Statements which name the Company and the Guarantors (under their respective present name and any previous names) as the debtor, together with copies of such Financing Statements (none of which shall cover any collateral described in the Security Documents, other than such Financing Statements that evidence Permitted Prior Liens). 4. Such releases, reconveyances, satisfactions or other instruments as it may request to confirm the release, satisfaction and discharge in full of all mortgages and deeds of trust at any time delivered by the Company or any Guarantor to secure any Obligations in respect of any existing credit facilities or other secured indebtedness, duly executed, delivered and acknowledged in recordable form by the grantee named therein or its of record successors or assigns. 5. A copy of the Collateral Trust Agreement executed by the Administrative Agent under the Credit Agreement, the Company and each Guarantor. 6. A certificate of insurance satisfactory to the Purchaser confirming that all insurance requirements of the Collateral Trust Agreement are satisfied. 7. Such other approvals, opinions or documents as the Purchaser, the Trustee or the Collateral Trustee may reasonably request in form and substance satisfactory to each of them. A-VII-1 EX-10.12 16 l08738aexv10w12.txt EXHIBIT 10.12 EXHIBIT 10.12 BELDEN & BLAKE CORPORATION 8.75% SENIOR SECURED NOTES DUE 2012 UNCONDITIONALLY GUARANTEED AS TO THE PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY THE GUARANTORS NAMED ON SCHEDULE I HERETO EXCHANGE AND REGISTRATION RIGHTS AGREEMENT July 7, 2004 Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Ladies and Gentlemen: Belden & Blake Corporation, an Ohio corporation (the "Company"), proposes to issue and sell to Goldman, Sachs & Co. (the "Purchaser") upon the terms set forth in the Purchase Agreement (as defined herein) its 8.75% Senior Secured Notes due 2012, which are unconditionally guaranteed by the Guarantors named on Schedule I hereto. As an inducement to the Purchaser to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Purchaser thereunder, the Company and the Guarantors agree with the Purchaser for the benefit of holders (as defined herein) from time to time of the Registrable Securities (as defined herein) as follows: 1. Certain Definitions. For purposes of this Exchange and Registration Rights Agreement (this "Exchange and Registration Rights Agreement"), the following terms shall have the following respective meanings: "Base Interest" shall mean the interest that would otherwise accrue on the Securities under the terms thereof and the Indenture, without giving effect to the provisions of this Exchange and Registration Rights Agreement. The term "broker-dealer" shall mean any broker or dealer registered with the Commission under the Exchange Act. "Closing Date" shall mean the date on which the Securities are initially issued. "Commission" shall mean the United States Securities and Exchange Commission, or any other federal agency at the time administering the Exchange Act or the Securities Act, whichever is the relevant statute for the particular purpose. "DTC" shall mean The Depository Trust Company. "Effective Time," in the case of (i) an Exchange Registration, shall mean the time and date as of which the Commission declares the Exchange Registration Statement effective or as of which the Exchange Registration Statement otherwise becomes effective and (ii) a Shelf Registration, shall mean the time and date as of which the Commission declares the Shelf Registration Statement effective or as of which the Shelf Registration Statement otherwise becomes effective. "Electing Holder" shall mean any holder of Registrable Securities that has returned a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(i) or 3(d)(ii) hereof. "Exchange Act" shall mean the Securities Exchange Act of 1934, or any successor thereto, as the same shall be amended from time to time. "Exchange Offer" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Registration" shall have the meaning assigned thereto in Section 3(c) hereof. "Exchange Registration Statement" shall have the meaning assigned thereto in Section 2(a) hereof. "Exchange Securities" shall have the meaning assigned thereto in Section 2(a) hereof. "Guarantors" shall have the meaning assigned thereto in the Indenture. The term "holder" shall mean the Purchaser and other persons who acquire Registrable Securities from time to time (including any successors or assigns), in each case for so long as such person owns any Registrable Securities. "Indenture" shall mean the Indenture, dated as of July 7, 2004, among the Company, the Guarantors and BNY Midwest Trust Company, as Trustee, as the same shall be amended from time to time. "Majority Electing Holders" means the Electing Holders of a majority of the aggregate principal amount of outstanding Registrable Securities. "Notice and Questionnaire" means a Notice of Registration Statement and Selling Securityholder Questionnaire substantially in the form of Exhibit A hereto. The term "person" shall mean a corporation, association, partnership, organization, business, individual, government or political subdivision thereof or governmental agency. "Purchase Agreement" shall mean the Purchase Agreement, dated as of July 1, 2004, among the Purchaser, the Guarantors and the Company, relating to the Securities. "Registrable Securities" shall mean the Securities; provided, however, that a Security shall cease to be a Registrable Security when (i) in the circumstances contemplated by Section 2(a) hereof, the Security has been exchanged for an Exchange Security in an Exchange Offer as contemplated in Section 2(a) hereof (provided that any Exchange Security that, pursuant to the last two sentences of Section 2(a), is included in a prospectus for use in connection with resales by broker-dealers shall be deemed to be a Registrable Security with respect to Sections 5, 6 and 9 until resale of such Registrable Security has been effected within the 180-day period referred to in Section 2(a); (ii) in the circumstances contemplated by Section 2(b) hereof, a Shelf Registration Statement registering such 2 Security under the Securities Act has been declared or becomes effective and such Security has been sold or otherwise transferred by the holder thereof pursuant to and in a manner contemplated by such effective Shelf Registration Statement; (iii) such Security is sold pursuant to Rule 144 under circumstances in which any legend borne by such Security relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant to paragraph (k) of Rule 144; or (v) such Security shall cease to be outstanding. "Registration Default" shall have the meaning assigned thereto in Section 2(c) hereof. "Registration Expenses" shall have the meaning assigned thereto in Section 4 hereof. "Resale Period" shall have the meaning assigned thereto in Section 2(a) hereof. "Restricted Holder" shall mean (i) a holder that is an affiliate of the Company within the meaning of Rule 405, (ii) a holder who acquires Exchange Securities outside the ordinary course of such holder's business, (iii) a holder who has arrangements or understandings with any person to participate in the Exchange Offer for the purpose of distributing Exchange Securities and (iv) a holder that is a broker-dealer, but only with respect to Exchange Securities received by such broker-dealer pursuant to an Exchange Offer in exchange for Registrable Securities acquired by the broker-dealer directly from the Company. "Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time. "Securities" shall mean, collectively, the 8.75% Senior Secured Notes due 2012 of the Company to be issued and sold to the Purchaser, and securities issued in exchange therefor or in lieu thereof pursuant to the Indenture. Each Security is entitled to the benefit of the guarantee provided for in the Indenture (the "Guarantee") and, unless the context otherwise requires, any reference herein to a "Security," an "Exchange Security" or a "Registrable Security" shall include a reference to the related Guarantee. "Securities Act" shall mean the Securities Act of 1933, or any successor thereto, as the same shall be amended from time to time. "Shelf Registration" shall have the meaning assigned thereto in Section 2(b) hereof. "Shelf Registration Statement" shall have the meaning assigned thereto in Section 2(b) hereof. "Special Interest" shall have the meaning assigned thereto in Section 2(c) hereof. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or any successor thereto, and the rules, regulations and forms promulgated thereunder, all as the same shall be amended from time to time. Unless the context otherwise requires, any reference herein to a "Section" or "clause" refers to a Section or clause, as the case may be, of this Exchange and Registration Rights Agreement, and the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Exchange and Registration Rights Agreement as a whole and not to any particular Section or other subdivision. 3 2. Registration Under the Securities Act. (a) Except as set forth in Section 2(b) below, the Company agrees to file under the Securities Act, as soon as practicable, but no later than 90 days after the Closing Date, a registration statement relating to an offer to exchange (such registration statement, the "Exchange Registration Statement", and such offer, the "Exchange Offer") any and all of the Securities for a like aggregate principal amount of debt securities issued by the Company and guaranteed by the Guarantors, which debt securities and guarantee are substantially identical to the Securities and the related Guarantee, respectively (and are entitled to the benefits of a trust indenture which is substantially identical to the Indenture or is the Indenture and which has been qualified under the Trust Indenture Act), except that they have been registered pursuant to an effective registration statement under the Securities Act and do not contain provisions for the additional interest contemplated in Section 2(c) below (such new debt securities hereinafter called "Exchange Securities"). The Company agrees to use its commercially reasonable efforts to cause the Exchange Registration Statement to become effective under the Securities Act as soon as practicable, but no later than 180 days after the Closing Date. The Exchange Offer will be registered under the Securities Act on the appropriate form and will comply with all applicable tender offer rules and regulations under the Exchange Act. The Company further agrees to use its commercially reasonable efforts to commence and complete the Exchange Offer promptly, but no later than 30 business days after such registration statement has become effective, hold the Exchange Offer open for at least 20 business days and exchange Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn on or prior to the expiration of the Exchange Offer. The Exchange Offer will be deemed to have been "completed" only if the debt securities and related guarantee received by holders other than Restricted Holders in the Exchange Offer for Registrable Securities are, upon receipt, transferable by each such holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the blue sky or securities laws of a substantial majority of the States of the United States of America. The Exchange Offer shall be deemed to have been completed upon the earlier to occur of (i) the Company having exchanged the Exchange Securities for all outstanding Registrable Securities pursuant to the Exchange Offer and (ii) the Company having exchanged, pursuant to the Exchange Offer, Exchange Securities for all Registrable Securities that have been properly tendered and not withdrawn before the expiration of the Exchange Offer, which shall be on a date that is at least 20 business days following the commencement of the Exchange Offer. The Company agrees (x) to include in the Exchange Registration Statement a prospectus for use in any resales by any holder of Exchange Securities that is a broker-dealer and (y) to keep such Exchange Registration Statement effective for a period (the "Resale Period") beginning when Exchange Securities are first issued in the Exchange Offer and ending upon the earlier of the expiration of the 180th day after the Exchange Offer has been completed or such time as such broker-dealers no longer own any Registrable Securities. With respect to such Exchange Registration Statement, such holders shall have the benefit of the rights of indemnification and contribution set forth in Sections 6(a), (c), (d) and (e) hereof. (b) If on or prior to the time the Exchange Offer is completed, the Company and the Guarantors are not (i) required to file the Exchange Registration Statement; or (ii) permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy; or (iii) any holder of Registrable Securities notifies the Company prior to the 20th business day following consummation of the Exchange Offer that: (A) it is prohibited by law or Commission policy from participating in the Exchange Offer; (B) 4 it may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Registration Statement is not appropriate or available for such resales; or (C) it is a broker-dealer and owns Securities acquired directly from the Company or an affiliate of the Company, the Company shall, in lieu of (or, in the case of clause (iii), in addition to) conducting the Exchange Offer contemplated by Section 2(a), file under the Securities Act as soon as practicable, but no later than the later of 30 days after the time such obligation to file arises, a "shelf" registration statement providing for the registration of, and the sale on a continuous or delayed basis by the holders of, all of the Registrable Securities, pursuant to Rule 415 or any similar rule that may be adopted by the Commission (such filing, the "Shelf Registration" and such registration statement, the "Shelf Registration Statement"). The Company agrees to use its commercially reasonable efforts (x) to cause the Shelf Registration Statement to become or be declared effective no later than 120 days after such Shelf Registration Statement is filed and to keep such Shelf Registration Statement continuously effective for a period ending on the earlier of the second anniversary of the Effective Time or such time as there are no longer any Registrable Securities outstanding, provided, however, that no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement or to use the prospectus forming a part thereof for resales of Registrable Securities unless such holder is an Electing Holder, and (y) after the Effective Time of the Shelf Registration Statement, promptly upon the request of any holder of Registrable Securities that is not then an Electing Holder, to take any action reasonably necessary to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities, including, without limitation, any action necessary to identify such holder as a selling securityholder in the Shelf Registration Statement, provided, however, that nothing in this Clause (y) shall relieve any such holder of the obligation to return a completed and signed Notice and Questionnaire to the Company in accordance with Section 3(d)(ii) hereof. The Company further agrees to supplement or make amendments to the Shelf Registration Statement, as and when required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or rules and regulations thereunder for shelf registration, and the Company agrees to furnish to each Electing Holder copies of any such supplement or amendment prior to its being used or promptly following its filing with the Commission. (c) In the event that (i) the Company has not filed the Exchange Registration Statement or Shelf Registration Statement on or before the date on which such registration statement is required to be filed pursuant to Section 2(a) or 2(b), respectively, or (ii) such Exchange Registration Statement or Shelf Registration Statement has not become effective or been declared effective by the Commission on or before the date on which such registration statement is required to become or be declared effective pursuant to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed within 30 business days after the initial effective date of the Exchange Registration Statement relating to the Exchange Offer (if the Exchange Offer is then required to be made) or (iv) any Exchange Registration Statement or Shelf Registration Statement required by Section 2(a) or 2(b) hereof is filed and declared effective but shall thereafter either be withdrawn by the Company or shall become subject to an effective stop order issued pursuant to Section 8(d) of the Securities Act suspending the effectiveness of such registration statement (except as specifically permitted herein) without being succeeded immediately by an additional registration statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default" and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), then, as liquidated damages for such Registration Default, subject to the provisions of Section 9(b), special interest ("Special Interest"), in addition to the Base Interest, shall accrue at a per annum rate 5 of 0.25% for the first 90 days of the Registration Default Period and will increase by an additional per annum rate of 0.25% with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum per annum rate of 1.00%. In no event will the Company be required to pay Special Interest for more than one Registration Default at any given time. (d) The Company shall use commercially reasonable efforts, and shall cause the Guarantors to use commercially reasonable efforts, to ensure that the transactions contemplated herein are effected as so contemplated, including actions to register the Guarantee under the registration statement contemplated in Section 2(a) or 2(b) hereof, as applicable. (e) Any reference herein to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time and any reference herein to any post-effective amendment to a registration statement as of any time shall be deemed to include any document incorporated, or deemed to be incorporated, therein by reference as of such time. 3. Registration Procedures. If the Company files a registration statement pursuant to Section 2(a) or Section 2(b), the following provisions shall apply: (a) At or before the Effective Time of the Exchange Offer or the Shelf Registration, as the case may be, the Company shall qualify the Indenture under the Trust Indenture Act of 1939. (b) In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (c) In connection with the Company's obligations with respect to the registration of Exchange Securities as contemplated by Section 2(a) (the "Exchange Registration"), if applicable, the Company shall, as soon as practicable (or as otherwise specified): (i) as soon as practicable prepare and file with the Commission such amendments and supplements to such Exchange Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Exchange Registration Statement for the periods and purposes contemplated in Section 2(a) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Exchange Registration Statement, and promptly provide each broker-dealer holding Exchange Securities with such number of copies of the prospectus included therein (as then amended or supplemented), in conformity in all material respects with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, as such broker-dealer reasonably may request prior to the expiration of the Resale Period, for use in connection with resales of Exchange Securities; (ii) promptly notify each broker-dealer that has requested or received copies of the prospectus included in such registration statement, (A) when such Exchange Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with 6 respect to such Exchange Registration Statement or any post-effective amendment, when the same has become effective, (B) with respect to counsel for Goldman, Sachs & Co., of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Exchange Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Exchange Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Exchange Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) at any time during the Resale Period when a prospectus is required to be delivered under the Securities Act, that such Exchange Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (iii) in the event that the Company would be required, pursuant to Section 3(c)(ii)(F) above, to notify any broker-dealers holding Exchange Securities, promptly prepare and furnish to each such holder a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of such Exchange Securities during the Resale Period, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (iv) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such Exchange Registration Statement or any post-effective amendment thereto at the earliest practicable date; (v) use commercially reasonable efforts to (A) register or qualify the Exchange Securities under the securities laws or blue sky laws of such jurisdictions as are contemplated by Section 2(a) no later than the commencement of the Exchange Offer, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions until the expiration of the Resale Period and (C) enable each broker-dealer holding Exchange Securities to consummate the disposition thereof in such jurisdictions; provided, however, that neither the Company nor the Guarantors shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(c)(v), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; 7 (vi) use commercially reasonable efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Exchange Registration, the Exchange Offer and the offering and sale of Exchange Securities by broker-dealers during the Resale Period; (vii) provide a CUSIP number for all Exchange Securities, not later than the applicable Effective Time; (viii) comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but no later than eighteen months after the effective date of such Exchange Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). As a condition to its participation in the Exchange Offer, each holder of Registrable Securities (including, without limitation, any holder who is a broker-dealer) shall furnish, upon the request of the Company, prior to the consummation of the Exchange Offer, a written representation to the Company (which may be contained in the letter of transmittal or agent's message contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Company, (B) unless such holder is a broker-dealer, it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Exchange Securities to be issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in its ordinary course of business. As a condition to its participation in the Exchange Offer each holder using the Exchange Offer to participate in a distribution of the Exchange Securities shall acknowledge and agree that, if the resales are of Exchange Securities obtained by such holder in exchange for Exchange Securities acquired directly from the Company or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Exchange and Registration Rights Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. (d) In connection with the Company's obligations with respect to the Shelf Registration, if applicable, the Company shall, as soon as practicable (or as otherwise specified): (i) not less than 30 calendar days prior to the Effective Time of the Shelf Registration Statement, mail the Notice and Questionnaire to the holders of Registrable Securities; no holder shall be entitled to be named as a selling securityholder in the Shelf Registration Statement as of the Effective Time, and no holder shall be entitled to use the prospectus forming a part thereof for resales of Registrable Securities at any time, unless such holder has returned a completed and signed Notice and Questionnaire to the Company by the deadline for response set forth therein; provided, however, holders of Registrable Securities shall have at least 20 calendar days from the date on which the Notice and Questionnaire is first mailed to such holders to return a completed and signed Notice and Questionnaire to the Company; 8 (ii) after the Effective Time of the Shelf Registration Statement, upon the request of any holder of Registrable Securities that is not then an Electing Holder, promptly send a Notice and Questionnaire to such holder; provided that the Company shall not be required to take any action to name such holder as a selling securityholder in the Shelf Registration Statement or to enable such holder to use the prospectus forming a part thereof for resales of Registrable Securities until such holder has returned a completed and signed Notice and Questionnaire to the Company; (iii)as soon as practicable prepare and file with the Commission such amendments and supplements to such Shelf Registration Statement and the prospectus included therein as may be necessary to effect and maintain the effectiveness of such Shelf Registration Statement for the period specified in Section 2(b) hereof and as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Shelf Registration Statement, and furnish to the Electing Holders copies of any such supplement or amendment simultaneously with or prior to its being used or filed with the Commission; (iv) comply with the provisions of the Securities Act with respect to the disposition of all of the Registrable Securities covered by such Shelf Registration Statement in accordance with the intended methods of disposition by the Electing Holders provided for in such Shelf Registration Statement; (v) provide (A) a representative of the Majority Electing Holders, (B) the underwriters (which term, for purposes of this Exchange and Registration Rights Agreement, shall include a person deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act), if any, thereof, (C) any sales or placement agent therefor, (D) counsel for any such underwriter of the Majority Electing Holders or agent and (E) not more than one counsel for all the Electing Holders the opportunity to participate in the preparation of such Shelf Registration Statement, each prospectus included therein or filed with the Commission and each amendment or supplement thereto; (vi) for a reasonable period prior to the filing of such Shelf Registration Statement, and throughout the period specified in Section 2(b), make available at reasonable times at the Company's principal place of business or such other reasonable place for inspection by the persons referred to in Section 3(d)(v) who shall certify to the Company that they have a current intention to sell the Registrable Securities pursuant to the Shelf Registration such financial and other information and books and records of the Company, and cause the officers, employees, counsel and independent certified public accountants of the Company to respond to such inquiries, as shall be reasonably necessary, in the judgment of the respective counsel referred to in such Section, to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that each such party shall be required to maintain in confidence and not to disclose to any other person any information or records reasonably designated by the Company as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in such registration statement or otherwise), or (B) such person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after 9 such person shall have given the Company prompt prior written notice of such requirement), or (C) such information is required to be set forth in such Shelf Registration Statement or the prospectus included therein or in an amendment to such Shelf Registration Statement or an amendment or supplement to such prospectus in order that such Shelf Registration Statement, prospectus, amendment or supplement, as the case may be, complies with applicable requirements of the federal securities laws and the rules and regulations of the Commission and does not contain an untrue statement of a material fact or omit to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (vii) promptly notify a representative of the Majority Electing Holders, DTC, any sales or placement agent therefor and any underwriter thereof (which notification may be made through any managing underwriter that is a representative of such underwriter for such purpose) (A) when such Shelf Registration Statement or the prospectus included therein or any prospectus amendment or supplement or post-effective amendment has been filed, and, with respect to such Shelf Registration Statement or any post-effective amendment, when the same has become effective, (B) in the case of any managing underwriter, its counsel and counsel for the Electing Holders, of any comments by the Commission and by the blue sky or securities commissioner or regulator of any state with respect thereto or any request by the Commission for amendments or supplements to such Shelf Registration Statement or prospectus or for additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of such Shelf Registration Statement or the initiation or threatening of any proceedings for that purpose, (D) if at any time the representations and warranties of the Company contemplated by Section 3(d)(xvi) or Section 5 cease to be true and correct in all material respects, (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, or (F) if at any time when a prospectus is required to be delivered under the Securities Act, that such Shelf Registration Statement, prospectus, prospectus amendment or supplement or post-effective amendment does not conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder or contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; (viii) use commercially reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of such registration statement or any post-effective amendment thereto at the earliest practicable date; (ix) if reasonably requested by any managing underwriter or underwriters, any placement or sales agent or any Electing Holder with respect to information relating to such Electing Holder, promptly incorporate in a prospectus supplement or post-effective amendment such information as is required by the applicable rules and regulations of the Commission and as such managing underwriter or underwriters, such agent or such Electing Holder specifies should be included therein relating to the terms of the sale of such Registrable Securities, including information with respect to the principal amount of Registrable Securities being sold by such Electing Holder or agent or to any underwriters, the name and description of such Electing 10 Holder, agent or underwriter, the offering price of such Registrable Securities and any discount, commission or other compensation payable in respect thereof, the purchase price being paid therefor by such underwriters and with respect to any other terms of the offering of the Registrable Securities to be sold by such Electing Holder or agent or to such underwriters; and make all required filings of such prospectus supplement or post-effective amendment promptly after notification of the matters to be incorporated in such prospectus supplement or post-effective amendment; (x) furnish to the representative of the Majority Electing Holders, DTC, each placement or sales agent, if any, therefor, each underwriter, if any, thereof and the respective counsel referred to in Section 3(d)(v) an executed copy (or, in the case of an Electing Holder, a conformed copy) of such Shelf Registration Statement, each such amendment and supplement thereto (and, if requested in writing by an Electing Holder, placement or sales agent or underwriter, all exhibits thereto and documents incorporated by reference therein) and of the prospectus included in such Shelf Registration Statement (including each preliminary prospectus and any summary prospectus), in conformity in all material respects with the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, and such other documents, as such Electing Holder, agent, if any, and underwriter, if any, may reasonably request in order to facilitate the offering and disposition of the Registrable Securities owned by such Electing Holder, offered or sold by such agent or underwritten by such underwriter and to permit such Electing Holder, agent and underwriter to satisfy the prospectus delivery requirements of the Securities Act; and the Company hereby consents to the use of such prospectus (including such preliminary and summary prospectus) and any amendment or supplement thereto by each such Electing Holder and by any such agent and underwriter, in each case in the form most recently provided to such person by the Company, in connection with the offering and sale of the Registrable Securities covered by the prospectus (including such preliminary and summary prospectus) or any supplement or amendment thereto; (xi) use commercially reasonable efforts to (A) register or qualify the Registrable Securities to be included in such Shelf Registration Statement under such securities laws or blue sky laws of such jurisdictions as any Electing Holder and each placement or sales agent, if any, therefor and underwriter, if any, thereof shall reasonably request, (B) keep such registrations or qualifications in effect and comply with such laws so as to permit the continuance of offers, sales and dealings therein in such jurisdictions during the period the Shelf Registration is required to remain effective under Section 2(b) above and for so long as may be necessary to enable any such Electing Holder, agent or underwriter to complete its distribution of Securities pursuant to such Shelf Registration Statement and (C) enable each such Electing Holder, agent, if any, and underwriter, if any, to consummate the disposition in such jurisdictions of such Registrable Securities; provided, however, that neither the Company nor the Guarantors shall be required for any such purpose to (1) qualify as a foreign corporation in any jurisdiction wherein it would not otherwise be required to qualify but for the requirements of this Section 3(d)(xi), (2) consent to general service of process in any such jurisdiction or (3) make any changes to its certificate of incorporation or by-laws or any agreement between it and its stockholders; 11 (xii)use commercially reasonable efforts to obtain the consent or approval of each governmental agency or authority, whether federal, state or local, which may be required to effect the Shelf Registration or the offering or sale in connection therewith or to enable the selling holder or holders to offer, or to consummate the disposition of, their Registrable Securities; (xiii) Unless any Registrable Securities shall be in book-entry only form, cooperate with the representative of the Majority Electing Holders and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, which certificates shall not bear any restrictive legends; and, in the case of an underwritten offering, enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of the Registrable Securities; (xiv)provide a CUSIP number for all Registrable Securities, not later than the applicable Effective Time; (xv) enter into one or more underwriting agreements, engagement letters, agency agreements, "best efforts" underwriting agreements or similar agreements, as appropriate, including customary provisions relating to indemnification and contribution, and take such other actions in connection therewith as the Majority Electing Holders shall request in order to expedite or facilitate the disposition of such Registrable Securities; (xvi) whether or not an agreement of the type referred to in Section 3(d)(xv) hereof is entered into and whether or not any portion of the offering contemplated by the Shelf Registration is an underwritten offering or is made through a placement or sales agent or any other entity, (A) make such representations and warranties to the Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof in form, substance and scope as are customarily made in connection with an offering of debt securities pursuant to any appropriate agreement or to a registration statement filed on the form applicable to the Shelf Registration; (B) obtain an opinion or opinions of counsel to the Company in customary form and covering such matters, of the type customarily covered by such an opinion, as the managing underwriters, if any, or as the Majority Electing Holders may reasonably request, addressed to such Electing Holder or Electing Holders and the placement or sales agent, if any, therefor and the underwriters, if any, thereof and dated the effective date of such Shelf Registration Statement (and if such Shelf Registration Statement contemplates an underwritten offering of a part or all of the Registrable Securities, dated the date of the closing under the underwriting agreement relating thereto) (it being agreed that the matters to be covered by such opinion shall include, subject to customary exceptions to be agreed, the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(d)(xv) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the Securities; the absence of material legal or governmental proceedings involving the Company; the absence of a breach by the Company or any of its subsidiaries of, or a default under, material agreements binding upon the Company or any subsidiary of the Company; the absence of governmental approvals required to be obtained in connection with the Shelf 12 Registration, the offering and sale of the Registrable Securities, this Exchange and Registration Rights Agreement or any agreement of the type referred to in Section 3(d)(xv) hereof, except such approvals as may be required under state securities or blue sky laws; the material compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder, respectively; and, as of the date of the opinion and of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from the documents incorporated by reference therein (in each case other than the financial statements and other financial and accounting and reserve information contained therein) of an untrue statement of a material fact or the omission to state therein a material fact necessary to make the statements therein not misleading (in the case of such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act)); (C) obtain a "cold comfort" letter or letters from the independent certified public accountants of the Company addressed to the selling Electing Holders, the placement or sales agent, if any, therefor or the underwriters, if any, thereof, dated (i) the effective date of such Shelf Registration Statement and (ii) the effective date of any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus (and, if such Shelf Registration Statement contemplates an underwritten offering pursuant to any prospectus supplement to the prospectus included in such Shelf Registration Statement or post-effective amendment to such Shelf Registration Statement which includes unaudited or audited financial statements as of a date or for a period subsequent to that of the latest such statements included in such prospectus, dated the date of the closing under the underwriting agreement relating thereto), such letter or letters to be in customary form and covering such matters of the type customarily covered by letters of such type; (D) deliver such documents and certificates, including officers' certificates, as may be reasonably requested by the Majority Electing Holders and the managing underwriters, if any, thereof to evidence the accuracy of the representations and warranties made pursuant to clause (A) above or those contained in Section 5(a) hereof and the compliance with or satisfaction of any agreements or conditions contained in the underwriting agreement or other agreement entered into by the Company or the Guarantors; and (E) undertake such obligations relating to expense reimbursement, indemnification and contribution as are provided in Section 6 hereof; (xvii) notify in writing each holder of Registrable Securities of any proposal by the Company to amend or waive any provision of this Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof and of any amendment or waiver effected pursuant thereto, each of which notices shall contain the text of the amendment or waiver proposed or effected, as the case may be; (xviii) in the event that any broker-dealer registered under the Exchange Act shall underwrite any Registrable Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Conduct Rules) of the National Association of Securities Dealers, Inc. ("NASD") or any successor thereto, as amended from time to time) 13 thereof, whether as a holder of such Registrable Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, assist such broker-dealer in complying with the requirements of such Conduct Rules, including by (A) if such Conduct Rules shall so require, engaging a "qualified independent underwriter" (as defined in such Conduct Rules) to participate in the preparation of the Shelf Registration Statement relating to such Registrable Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Shelf Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Registrable Securities, (B) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 6 hereof (or to such other customary extent as may be requested by such underwriter), and (C) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Conduct Rules; and (xix)comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders as soon as practicable but in any event not later than eighteen months after the effective date of such Shelf Registration Statement, an earning statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act (including, at the option of the Company, Rule 158 thereunder). (e) In the event that the Company would be required, pursuant to Section 3(d)(vii)(F) above, to notify the Electing Holders, the placement or sales agent, if any, therefor and the managing underwriters, if any, thereof, the Company shall without delay prepare and furnish to each of the Electing Holders, to each placement or sales agent, if any, and to each such underwriter, if any, a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to purchasers of Registrable Securities, such prospectus shall conform in all material respects to the applicable requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. Each Electing Holder agrees that upon receipt of any notice from the Company pursuant to Section 3(d)(vii)(F) hereof, such Electing Holder shall forthwith discontinue the disposition of Registrable Securities pursuant to the Shelf Registration Statement applicable to such Registrable Securities until such Electing Holder shall have received copies of such amended or supplemented prospectus, and if so directed by the Company, such Electing Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies, then in such Electing Holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. (f) In the event of a Shelf Registration, in addition to the information required to be provided by each Electing Holder in its Notice Questionnaire, the Company may require such Electing Holder to furnish to the Company such additional information regarding such Electing Holder and such Electing Holder's intended method of distribution of Registrable Securities as may be required in order to comply with the Securities Act. Each such Electing Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Electing Holder to the Company or of the occurrence of any event in either case as a result of which any prospectus relating to such Shelf Registration contains or would contain an untrue statement of a material fact regarding 14 such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities or omits to state any material fact regarding such Electing Holder or such Electing Holder's intended method of disposition of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Electing Holder or the disposition of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. (g) Until the expiration of two years after the Closing Date, the Company will not, and will not permit any of its "affiliates" (as defined in Rule 144) to, resell any of the Securities that have been reacquired by any of them except pursuant to an effective registration statement under the Securities Act. 4. Registration Expenses. The Company agrees to bear and to pay or cause to be paid promptly all expenses incident to the Company's performance of or compliance with this Exchange and Registration Rights Agreement, including (a) all Commission and any NASD registration, filing and review fees and expenses including fees and disbursements of counsel for the placement or sales agent or underwriters in connection with such registration, filing and review, (b) all fees and expenses in connection with the qualification of the Securities for offering and sale under the State securities and blue sky laws referred to in Section 3(d)(xi) hereof and determination of their eligibility for investment under the laws of such jurisdictions as any managing underwriters or the Electing Holders may designate, including any fees and disbursements of counsel for the Electing Holders or underwriters in connection with such qualification and determination, (c) all expenses relating to the preparation, printing, production, distribution and reproduction of each registration statement required to be filed hereunder, each prospectus included therein or prepared for distribution pursuant hereto, each amendment or supplement to the foregoing, the expenses of preparing the Securities for delivery and the expenses of printing or producing any underwriting agreements, agreements among underwriters, selling agreements and blue sky or legal investment memoranda and all other documents in connection with the offering, sale or delivery of Securities to be disposed of (including certificates representing the Securities), (d) messenger, telephone and delivery expenses relating to the offering, sale or delivery of Securities and the preparation of documents referred in clause (c) above, (e) fees and expenses of the Trustee under the Indenture, any agent of the Trustee and any counsel for the Trustee and of any collateral agent or custodian, (f) internal expenses (including all salaries and expenses of the Company's officers and employees performing legal or accounting duties), (g) fees, disbursements and expenses of counsel and independent certified public accountants of the Company (including the expenses of any opinions or "cold comfort" letters required by or incident to such performance and compliance), (h) fees, disbursements and expenses of any "qualified independent underwriter" engaged pursuant to Section 3(d)(xviii) hereof, (i) fees, disbursements and expenses of one counsel for the Majority Electing Holders and one local counsel retained in connection with a Shelf Registration, as selected by the Electing Holders of at least a majority in aggregate principal amount of the Registrable Securities held by Electing Holders (which counsel shall be reasonably satisfactory to the Company), (j) any fees charged by securities rating services for rating the Securities, and (k) fees, expenses and disbursements of any other persons, including special experts, retained by the Company in connection with such registration (collectively, the "Registration Expenses"). To the extent that any Registration Expenses are incurred, assumed or paid by any holder of Registrable Securities or any 15 placement or sales agent therefor or underwriter thereof, the Company shall reimburse such person for the full amount of the Registration Expenses so incurred, assumed or paid promptly after receipt of a request therefor. Notwithstanding the foregoing, the holders of the Registrable Securities being registered shall pay all agency fees and commissions and underwriting discounts and commissions attributable to the sale of such Registrable Securities and the fees and disbursements of any counsel or other advisors or experts retained by such holders (severally or jointly), other than the counsel and experts specifically referred to above. 5. Representations and Warranties. Each of the Company and the Guarantors represents and warrants to, and agrees with, the Purchaser and each of the holders from time to time of Registrable Securities that: (a) Each registration statement covering Registrable Securities and each prospectus (including any preliminary or summary prospectus) contained therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and any further amendments or supplements to any such registration statement or prospectus, when it becomes effective or is filed with the Commission, as the case may be, and, in the case of an underwritten offering of Registrable Securities, at the time of the closing under the underwriting agreement relating thereto, will conform in all material respects to the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and at all times subsequent to the Effective Time when a prospectus would be required to be delivered under the Securities Act, other than from (i) such time as a notice has been given to holders of Registrable Securities pursuant to Section 3(d)(vii)(F) or Section 3(c)(ii)(F) hereof until (ii) such time as the Company furnishes an amended or supplemented prospectus pursuant to Section 3(e) or Section 3(c)(iii) hereof, each such registration statement, and each prospectus (including any summary prospectus) contained therein or furnished pursuant to Section 3(d) or Section 3(c) hereof, as then amended or supplemented, will conform in all material respects to the requirements of the Securities Act and the Trust Indenture Act and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a holder of Registrable Securities expressly for use therein. (b) Any documents incorporated by reference in any prospectus referred to in Section 5(a) hereof, when they become or became effective or are or were filed with the Commission, as the case may be, will conform or conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such documents will contain or contained an untrue statement of a material fact or will omit or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by a holder of Registrable Securities expressly for use therein. (c) The compliance by the Company with all of the provisions of this Exchange and Registration Rights Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach of any of the terms or provisions of, 16 or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any subsidiary of the Company is a party or by which the Company or any subsidiary of the Company is bound or to which any of the property or assets of the Company or any subsidiary of the Company is subject, nor will such action result in any violation of the provisions of the certificate of incorporation, as amended, or the by-laws of the Company or any Guarantor or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any subsidiary of the Company or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the consummation by the Company and the Guarantors of the transactions contemplated by this Exchange and Registration Rights Agreement, except the registration under the Securities Act of the Securities, qualification of the Indenture under the Trust Indenture Act and such consents, approvals, authorizations, registrations or qualifications as may be required under State securities or blue sky laws in connection with the offering and distribution of the Securities. (d) This Exchange and Registration Rights Agreement has been duly authorized, executed and delivered by the Company and the Guarantors. 6. Indemnification. (a) Indemnification by the Company and the Guarantors. The Company and the Guarantors, jointly and severally, will indemnify and hold harmless each of the holders of Registrable Securities included in an Exchange Registration Statement, each of the Electing Holders of Registrable Securities included in a Shelf Registration Statement and each person who participates as a placement or sales agent or as an underwriter in any offering or sale of such Registrable Securities against any losses, claims, damages or liabilities, joint or several, to which such holder, agent or underwriter may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Exchange Registration Statement or Shelf Registration Statement, as the case may be, under which such Registrable Securities were registered under the Securities Act, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such holder, Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse such holder, such Electing Holder, such agent and such underwriter for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that neither the Company nor the Guarantors shall be liable to any such person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, or preliminary, final or summary prospectus, or amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by such person expressly for use therein. (b) Indemnification by the Holders and any Agents and Underwriters. The Company may require, as a condition to including any Registrable Securities in any registration statement filed pursuant to Section 2(b) hereof and to entering into any underwriting agreement with respect thereto, that the Company shall have received an undertaking reasonably satisfactory to it from the Electing Holder of such Registrable Securities and from 17 each underwriter named in any such underwriting agreement, severally and not jointly, to (i) indemnify and hold harmless the Company, the Guarantors, and all other holders of Registrable Securities, against any losses, claims, damages or liabilities to which the Company, the Guarantors or such other holders of Registrable Securities may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such registration statement, or any preliminary, final or summary prospectus contained therein or furnished by the Company to any such Electing Holder, agent or underwriter, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Electing Holder or underwriter expressly for use therein, and (ii) reimburse the Company and the Guarantors for any legal or other expenses reasonably incurred by the Company and the Guarantors in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that no such Electing Holder shall be required to undertake liability to any person under this Section 6(b) for any amounts in excess of the dollar amount of the proceeds to be received by such Electing Holder from the sale of such Electing Holder's Registrable Securities pursuant to such registration. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party under subsection (a) or (b) above of written notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party pursuant to the indemnification provisions of or contemplated by this Section 6, notify such indemnifying party in writing of the commencement of such action; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under the indemnification provisions of or contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be brought against any indemnified party and it shall notify an indemnifying party of the commencement thereof, such indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, such indemnifying party shall not be liable to such indemnified party for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) Contribution. If for any reason the indemnification provisions contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the 18 amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were determined by pro rata allocation (even if the holders or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 6(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), no holder shall be required to contribute any amount in excess of the amount by which the dollar amount of the proceeds received by such holder from the sale of any Registrable Securities (after deducting any fees, discounts and commissions applicable thereto) exceeds the amount of any damages which such holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The holders' and any underwriters' obligations in this Section 6(d) to contribute shall be several in proportion to the principal amount of Registrable Securities registered or underwritten, as the case may be, by them and not joint. (e) The obligations of the Company and the Guarantors under this Section 6 shall be in addition to any liability which the Company or the Guarantors may otherwise have and shall extend, upon the same terms and conditions, to each officer, director and partner of each holder, agent and underwriter and each person, if any, who controls any holder, agent or underwriter within the meaning of the Securities Act; and the obligations of the holders and any agents or underwriters contemplated by this Section 6 shall be in addition to any liability which the respective holder, agent or underwriter may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company or the Guarantors (including any person who, with his consent, is named in any registration statement as about to become a director of the Company or the Guarantors) and to each person, if any, who controls the Company within the meaning of the Securities Act. 7. Underwritten Offerings. (a) Selection of Underwriters. If any of the Registrable Securities covered by the Shelf Registration are to be sold pursuant to an underwritten offering, the managing underwriter or underwriters thereof shall be designated by Electing Holders holding at least a majority in 19 aggregate principal amount of the Registrable Securities to be included in such offering, provided that such designated managing underwriter or underwriters is or are reasonably acceptable to the Company. (b) Participation by Holders. Each holder of Registrable Securities hereby agrees with each other such holder that no such holder may participate in any underwritten offering hereunder unless such holder (i) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 8. Rule 144. Until such time as Registrable Securities cease to be outstanding, the Company covenants to the holders of Registrable Securities that to the extent it shall be required to do so under the Exchange Act, the Company shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Section 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted by the Commission under the Securities Act) and the rules and regulations adopted by the Commission thereunder, and shall take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar or successor rule or regulation hereafter adopted by the Commission. Upon the request of any holder of Registrable Securities in connection with that holder's sale pursuant to Rule 144, the Company shall deliver to such holder a written statement as to whether it has complied with such requirements. 9. Miscellaneous. (a) No Inconsistent Agreements. The Company represents, warrants, covenants and agrees that it has not granted, and shall not grant, registration rights with respect to Registrable Securities or any other securities which would be inconsistent with the terms contained in this Exchange and Registration Rights Agreement. (b) Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if the Company fails to perform any of its obligations hereunder and that the Purchaser and the holders from time to time of the Registrable Securities may be irreparably harmed by any such failure, and accordingly agree that the Purchaser and such holders, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of the Company under this Exchange and Registration Rights Agreement in accordance with the terms and conditions of this Exchange and Registration Rights Agreement, in any court of the United States or any State thereof having jurisdiction. (c) Notices. All notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand, if delivered personally or by courier, or three days after being deposited in the mail (registered or certified mail, postage prepaid, return receipt requested) as follows: If to the Company, to it at 5200 Stoneham Road, North Canton, Ohio 44720, and if to a holder, to the address of such holder set forth in the security register or other records of the Company, or to such other address as the Company or any such holder may have furnished to the other 20 in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (d) Parties in Interest. All the terms and provisions of this Exchange and Registration Rights Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and the holders from time to time of the Registrable Securities and the respective successors and assigns of the parties hereto and such holders. In the event that any transferee of any holder of Registrable Securities shall acquire Registrable Securities, in any manner, whether by gift, bequest, purchase, operation of law or otherwise, such transferee shall, without any further writing or action of any kind, be deemed a beneficiary hereof for all purposes and such Registrable Securities shall be held subject to all of the terms of this Exchange and Registration Rights Agreement, and by taking and holding such Registrable Securities such transferee shall be entitled to receive the benefits of, and be conclusively deemed to have agreed to be bound by all of the applicable terms and provisions of this Exchange and Registration Rights Agreement. If the Company shall so request, any such successor, assign or transferee shall agree in writing to acquire and hold the Registrable Securities subject to all of the applicable terms hereof. (e) Survival. The respective indemnities, agreements, representations, warranties and each other provision set forth in this Exchange and Registration Rights Agreement or made pursuant hereto shall remain in full force and effect regardless of any investigation (or statement as to the results thereof) made by or on behalf of any holder of Registrable Securities, any director, officer or partner of such holder, any agent or underwriter or any director, officer or partner thereof, or any controlling person of any of the foregoing, and shall survive delivery of and payment for the Registrable Securities pursuant to the Purchase Agreement and the transfer and registration of Registrable Securities by such holder and the consummation of an Exchange Offer. (f) GOVERNING LAW. THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. (g) Headings. The descriptive headings of the several Sections and paragraphs of this Exchange and Registration Rights Agreement are inserted for convenience only, do not constitute a part of this Exchange and Registration Rights Agreement and shall not affect in any way the meaning or interpretation of this Exchange and Registration Rights Agreement. (h) Entire Agreement; Amendments. This Exchange and Registration Rights Agreement and the other writings referred to herein (including the Indenture and the form of Securities) or delivered pursuant hereto which form a part hereof contain the entire understanding of the parties with respect to its subject matter. This Exchange and Registration Rights Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Exchange and Registration Rights Agreement may be amended and the observance of any term of this Exchange and Registration Rights Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument duly executed by the Company and the holders of at least a majority in aggregate principal amount of the Registrable Securities at the time outstanding. Each holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any amendment or waiver effected pursuant to this Section 9(h), whether or not any notice, writing or marking indicating such amendment or waiver appears on such Registrable Securities or is delivered to such holder. (i) Inspection. For so long as this Exchange and Registration Rights Agreement shall be in effect, this Exchange and Registration Rights Agreement and a complete list of the 21 names and addresses of all the holders of Registrable Securities shall be made available for inspection and copying on any business day by any holder of Registrable Securities for proper purposes only (which shall include any purpose related to the rights of the holders of Registrable Securities under the Securities, the Indenture and this Exchange and Registration Rights Agreement) at the offices of the Company at the address thereof set forth in Section 9(c) above and at the office of the Trustee under the Indenture. (j) Counterparts. This Exchange and Registration Rights Agreement may be executed by the parties in counterparts, each of which shall be deemed to be an original, but all such respective counterparts shall together constitute one and the same instrument. 22 If the foregoing is in accordance with your understanding, please sign and return to us six counterparts hereof, and upon the acceptance hereof by you, this letter and such acceptance hereof shall constitute a binding agreement among the Purchaser, the Guarantors and the Company. Very truly yours, Belden & Blake Corporation By: /s/ Robert W. Peshek ----------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer The Canton Oil & Gas Company By: /s/ Robert W. Peshek ----------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer Ward Lake Drilling, Inc. By: /s/ Robert W. Peshek ----------------------------- Name: Robert W. Peshek Title: Senior Vice President and Chief Financial Officer Accepted as of the date hereof: Goldman, Sachs & Co. By: /s/ Goldman, Sachs & Co. --------------------------- (Goldman, Sachs & Co.) Schedule I Guarantors The Canton Oil & Gas Company, an Ohio corporation Ward Lake Drilling, Inc., a Michigan corporation EXHIBIT A BELDEN & BLAKE CORPORATION INSTRUCTION TO DTC PARTICIPANTS (Date of Mailing) URGENT - IMMEDIATE ATTENTION REQUESTED DEADLINE FOR RESPONSE: [DATE] * The Depository Trust Company ("DTC") has identified you as a DTC Participant through which beneficial interests in Belden & Blake Corporation (the "Company") 8.75% Senior Secured Notes due 2012 (the "Securities") are held. The Company is in the process of registering the Securities under the Securities Act of 1933 for resale by the beneficial owners thereof. In order to have their Securities included in the registration statement, beneficial owners must complete and return the enclosed Notice of Registration Statement and Selling Securityholder Questionnaire. It is important that beneficial owners of the Securities receive a copy of the enclosed materials as soon as possible as their rights to have the Securities included in the registration statement depend upon their returning the Notice and Questionnaire by [DEADLINE FOR RESPONSE]. Please forward a copy of the enclosed documents to each beneficial owner that holds interests in the Securities through you. If you require more copies of the enclosed materials or have any questions pertaining to this matter, please contact Belden & Blake Corporation, 5200 Stoneham Road, North Canton, Ohio 44720, (330) 499-1660. - --------------- *Not less than 20 calendar days from date of mailing. A-1 BELDEN & BLAKE CORPORATION Notice of Registration Statement and Selling Securityholder Questionnaire (Date) Reference is hereby made to the Exchange and Registration Rights Agreement (the "Exchange and Registration Rights Agreement") among Belden & Blake Corporation (the "Company"), the Guarantors named therein and the Purchaser named therein. Pursuant to the Exchange and Registration Rights Agreement, the Company has filed with the United States Securities and Exchange Commission (the "Commission") a registration statement on Form [__] (the "Shelf Registration Statement") for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"), of the Company's 8.75% Senior Secured Notes due 2012 (the "Securities"). A copy of the Exchange and Registration Rights Agreement is attached hereto. All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Exchange and Registration Rights Agreement. Each beneficial owner of Registrable Securities (as defined below) is entitled to have the Registrable Securities beneficially owned by it included in the Shelf Registration Statement. In order to have Registrable Securities included in the Shelf Registration Statement, this Notice of Registration Statement and Selling Securityholder Questionnaire ("Notice and Questionnaire") must be completed, executed and delivered to the Company's counsel at the address set forth herein for receipt ON OR BEFORE [DEADLINE FOR RESPONSE]. Beneficial owners of Registrable Securities who do not complete, execute and return this Notice and Questionnaire by such date (i) will not be named as selling securityholders in the Shelf Registration Statement and (ii) may not use the Prospectus forming a part thereof for resales of Registrable Securities. Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and related Prospectus. The term "Registrable Securities" is defined in the Exchange and Registration Rights Agreement. A-2 ELECTION The undersigned holder (the "Selling Securityholder") of Registrable Securities hereby elects to include in the Shelf Registration Statement the Registrable Securities beneficially owned by it and listed below in Item (3). The undersigned, by signing and returning this Notice and Questionnaire, agrees to be bound with respect to such Registrable Securities by the terms and conditions of this Notice and Questionnaire and the Exchange and Registration Rights Agreement, including, without limitation, Section 6 of the Exchange and Registration Rights Agreement, as if the undersigned Selling Securityholder were an original party thereto. Upon any sale of Registrable Securities pursuant to the Shelf Registration Statement, the Selling Securityholder will be required to deliver to the Company and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and as Exhibit B to the Exchange and Registration Rights Agreement. The Selling Securityholder hereby provides the following information to the Company and represents and warrants that such information is accurate and complete: A-3 QUESTIONNAIRE (1) (a) Full Legal Name of Selling Securityholder: (b) Full Legal Name of Registered Holder (if not the same as in (a) above) of Registrable Securities Listed in Item (3) below: (c) Full Legal Name of DTC Participant (if applicable and if not the same as (b) above) Through Which Registrable Securities Listed in Item (3) below are Held: (2) Address for Notices to Selling Securityholder: ________________ ________________ ________________ Telephone: ____________________ Fax: ____________________ Contact Person: ____________________ (3) Beneficial Ownership of Securities: Except as set forth below in this Item (3), the undersigned does not beneficially own any Securities. (a) Principal amount of Registrable Securities beneficially owned: ____________________________________________________________________ CUSIP No(s). of such Registrable Securities:________________________ (b) Principal amount of Securities other than Registrable Securities beneficially owned:_________________________________________________ CUSIP No(s). of such other Securities:______________________________ (c) Principal amount of Registrable Securities which the undersigned wishes to be included in the Shelf Registration Statement: ___________________________________________________________________ CUSIP No(s). of such Registrable Securities to be included in the Shelf Registration Statement:______________________________________ (4) Beneficial Ownership of Other Securities of the Company: Except as set forth below in this Item (4), the undersigned Selling Securityholder is not the beneficial or registered owner of any other securities of the Company, other than the Securities listed above in Item (3). State any exceptions here: (5) Relationships with the Company: A-4 Except as set forth below, neither the Selling Securityholder nor any of its affiliates, officers, directors or principal equity holders (5% or more) has held any position or office or has had any other material relationship with the Company (or its predecessors or affiliates) during the past three years. State any exceptions here: (6) Plan of Distribution: Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item (3) only as follows (if at all): Such Registrable Securities may be sold from time to time directly by the undersigned Selling Securityholder or, alternatively, through underwriters, broker-dealers or agents. Such Registrable Securities may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale, or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Registered Securities may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market, or (iv) through the writing of options. In connection with sales of the Registrable Securities or otherwise, the Selling Securityholder may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the Registrable Securities in the course of hedging the positions they assume. The Selling Securityholder may also sell Registrable Securities short and deliver Registrable Securities to close out such short positions, or loan or pledge Registrable Securities to broker-dealers that in turn may sell such securities. State any exceptions here: By signing below, the Selling Securityholder acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M. In the event that the Selling Securityholder transfers all or any portion of the Registrable Securities listed in Item (3) above after the date on which such information is provided to the Company, the Selling Securityholder agrees to notify the transferee(s) at the time of the transfer of its rights and obligations under this Notice and Questionnaire and the Exchange and Registration Rights Agreement. By signing below, the Selling Securityholder consents to the disclosure of the information contained herein in its answers to Items (1) through (6) above and the inclusion of such information in the Shelf Registration Statement and related Prospectus. The Selling Securityholder understands that such information will be relied upon by the Company in connection with the preparation of the Shelf Registration Statement and related Prospectus. In accordance with the Selling Securityholder's obligation under Section 3(d) of the Exchange and Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the Selling Securityholder agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein which A-5 may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains in effect. All notices hereunder and pursuant to the Exchange and Registration Rights Agreement shall be made in writing, by hand-delivery, first-class mail, or air courier guaranteeing overnight delivery as follows: (i) To the Company: Belden & Blake Corporation 5200 Stoneham Road North Canton, Ohio 44720 Attn: [ ] (ii) With a copy to: ____________________________ ____________________________ ____________________________ ____________________________ ____________________________ Once this Notice and Questionnaire is executed by the Selling Securityholder and received by the Company's counsel, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives, and assigns of the Company and the Selling Securityholder (with respect to the Registrable Securities beneficially owned by such Selling Securityholder and listed in Item (3) above. This Exchange and Registration Rights Agreement shall be governed in all respects by the laws of the State of New York. A-6 IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent. Dated:_________________ ____________________________________________________________________ Selling Securityholder (Print/type full legal name of beneficial owner of Registrable Securities) By:_________________________________________________________________ Name: Title: PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY'S COUNSEL AT: Belden & Blake Corporation 5200 Stoneham Road North Canton, Ohio 44720 Attn: [ ] With a copy to: [ ] [ ] [ ] A-7 EXHIBIT B NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT BNY Midwest Trust Company 2 North LaSalle Street, Suite 1020 Chicago, Illinois 60602 Attention: Trust Officer Re: Belden & Blake Corporation (the "Company") 8.75% Senior Secured Notes due 2012 Dear Sirs: Please be advised that ____________ has transferred $_________________ aggregate principal amount of the above-referenced Notes pursuant to an effective Registration Statement on Form [____] (File No. 333-___) filed by the Company. We hereby certify that the prospectus delivery requirements, if any, of the Securities Act of 1933, as amended, have been satisfied and that the above-named beneficial owner of the Notes is named as a "Selling Holder" in the Prospectus dated [DATE] or in supplements thereto, and that the aggregate principal amount of the Notes transferred are the Notes listed in such Prospectus opposite such owner's name. Dated: Very truly yours, __________________________ (Name) By: ________________________ (Authorized Signature) B-1 -----END PRIVACY-ENHANCED MESSAGE-----