U.S. CREDIT AGREEMENT]

[U.S. CREDIT AGREEMENT]

CREDIT AGREEMENT

dated as of July 28, 2006

among

STORM CAT ENERGY (USA) CORPORATION,

STORM CAT ENERGY CORPORATION,

THE LENDERS PARTY HERETO,

and

JPMORGAN CHASE BANK, N.A.,

as Global Administrative Agent

X.X. XXXXXX SECURITIES INC.,

as Sole Book Manager and Lead Arranger

ARTICLE I DEFINITIONS
Section 1.1	Defined Terms	1
Section 1.2	Classification of Loans and Borrowings	24
Section 1.3	Terms Generally	24
Section 1.4	Accounting Terms; GAAP	24
Section 1.5	Designation and Conversion of Restricted and Unrestricted Subsidiaries.	25

ARTICLE II THE CREDITS
Section 2.1	Commitments	26
Section 2.2	Loans and Borrowings	26
Section 2.3	Requests for Borrowings	27
Section 2.4	Letters of Credit	27
Section 2.5	Funding of Borrowings	31
Section 2.6	Interest Elections	32
Section 2.7	Global Borrowing Base	33
Section 2.8	Termination and Reduction of Commitments	38
Section 2.9	Repayment of Loans; Evidence of Debt	38
Section 2.10	Prepayment of Loans	38
Section 2.11	Fees	39
Section 2.12	Interest	41
Section 2.13	Alternate Rate of Interest	42
Section 2.14	Illegality	43
Section 2.15	Increased Costs	44
Section 2.16	Break Funding Payments	45
Section 2.17	Taxes	46
Section 2.18	Payments Generally; Pro Rata Treatment; Sharing of Set-offs	48
Section 2.19	Mitigation Obligations; Replacement of Lenders	49

ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.1	Organization; Powers	50
Section 3.2	Authorization; Enforceability	50
Section 3.3	Approvals; No Conflicts	51
Section 3.4	Financial Condition; No Material Adverse Change	51
Section 3.5	Properties	51
Section 3.6	Litigation	52
Section 3.7	Compliance with Laws and Agreements	52
Section 3.8	Investment Company Status	52
Section 3.9	Taxes	52
Section 3.10	ERISA	52
Section 3.11	Disclosure	53
Section 3.12	Subsidiaries	53
Section 3.13	Insurance	53
Section 3.14	Labor Matters	53
Section 3.15	Priority; Security Matters	53

Section 3.16	Environmental Matters	54
Section 3.17	Solvency	55
Section 3.18	Use of Credit	55
Section 3.19	Claims and Liabilities	55

ARTICLE IV CONDITIONS
Section 4.1	Effectiveness	55
Section 4.2	Initial Loan	56
Section 4.3	Each Credit Event	59

ARTICLE V AFFIRMATIVE COVENANTS
Section 5.1	Financial Reporting; Notices and Other Information	60
Section 5.2	Notice of Material Events	62
Section 5.3	Information Regarding Collateral	63
Section 5.4	Existence; Conduct of Business	63
Section 5.5	Payment of Obligations	63
Section 5.6	Maintenance of Properties	63
Section 5.7	Insurance	64
Section 5.8	Casualty and Condemnation	64
Section 5.9	Books and Records; Inspection Rights	64
Section 5.10	Compliance with Laws	64
Section 5.11	Use of Proceeds and Letters of Credit	63
Section 5.12	Additional Subsidiaries	65
Section 5.13	Unrestricted Subsidiaries	65
Section 5.14	Environmental Matters	65
Section 5.15	Further Assurances; Title Data.	65

ARTICLE VI FINANCIAL COVENANTS
Section 6.1	Ratio of Total Funded Debt to EBITDA	68
Section 6.2	Ratio of Current Assets to Current Liabilities	68

ARTICLE VII NEGATIVE COVENANTS
Section 7.1	Indebtedness; Certain Equity Securities	68
Section 7.2	Liens	69
Section 7.3	Fundamental Changes	70
Section 7.4	Investments, Loans, Advances, Guarantees and Acquisitions	71
Section 7.5	Asset Sales	72
Section 7.6	Sale and Leaseback Transactions	72
Section 7.7	Hedging Agreements	72
Section 7.8	Restricted Payments; Certain Payments of Indebtedness	73
Section 7.9	Transactions with Affiliates	73
Section 7.10	Restrictive Agreements	73
Section 7.11	No Action to Affect Security Documents	74

ARTICLE VIII EVENTS OF DEFAULT
Section 8.1	Listing of Events of Default	74
Section 8.2	Action if Bankruptcy	76
Section 8.3	Action if Other Event of Default	76

ARTICLE IX AGENTS

ARTICLE X MISCELLANEOUS
Section 10.1	Notices	79
Section 10.2	Waivers; Amendments	81
Section 10.3	Expenses; Indemnity; Damage Waiver	82
Section 10.4	Successors and Assigns	84
Section 10.5	Survival	86
Section 10.6	Counterparts; Effectiveness	87
Section 10.7	Severability	87
Section 10.8	Right of Setoff	87
Section 10.9	GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS	87
Section 10.10	WAIVER OF JURY TRIAL	88
Section 10.11	Headings	89
Section 10.12	Confidentiality	89
Section 10.13	Interest Rate Limitation	89
Section 10.14	Collateral Matters; Hedging Agreements	91
Section 10.15	Arranger; Other Agents	91
Section 10.16	Intercreditor Agreement; Loan Documents	91
Section 10.17	USA PATRIOT Act Notice	91
Section 10.18	NO ORAL AGREEMENTS	92

iii

DEFINED TERMS

		Page Xx.
XXX		0
Xxx		00
Xxxxxxxx XXXX Rate		1
Administrative Questionnaire		1
Affiliate		1
Agents		1
Agreement		1
Allocated Canadian Borrowing Base		35
Allocated U.S. Borrowing Base		35
Alternate Base Rate		2
Annualized EBITDA		2
Applicable Lending Office		2
Applicable Percentage		2
Applicable Rate		2
Approved Counterparty		3
Approved Country		3
Approved Engineer		3
Arranger		3
Assignment and Assumption		3
Authorized Officer		3
Availability Period		3
Board		3
Borrower		1
Borrowing		4
Borrowing Base Properties		4
Borrowing Request		4
Business Day		4
C$		4
Canadian Administrative Agent		4
Canadian Borrower		4
Canadian Credit Agreement		4
Canadian Dollars		4
Canadian Lenders		4
Canadian Loan Documents		4
Canadian Obligations		5
Canadian Security Documents		5
Capital Lease Obligations		5
Casualty Event		5
CERCLA		5
CERCLIS		5
Change in Control		5
Change in Law		5
Code		5

Collateral		6
Combined Applicable Percentage		6
Combined Commitments		6
Combined Credit Agreements		6
Combined Credit Exposure		6
Combined LC Exposure		6
Combined Lenders		6
Combined Loan Documents		7
Combined Loans		7
Combined Obligations		7
Commission		7
Commitment		7
Commitment Fee		7
Control		7
Controlled		7
Controlling		7
Credit Exposure		7
Current Assets		7
Current Liabilities		7
Default		8
Deficiency Notification Date		37
Disclosed Matters		52
dollars		8
EBITDA		8
Election Notice		39
Environmental Laws		8
Environmental Liability		8
Equity Interests		8
Equivalent Amount		8
ERISA		9
ERISA Affiliate		9
ERISA Event		9
Eurodollar		9
Eurodollar Borrowing		24
Eurodollar Loan		24
Event of Default		74
Exchange Act		9
Excluded Taxes		9
Facility Guaranty		10
Federal Funds Effective Rate		10
Fee Letter		10
Financing Transactions		10
Foreign Lender		10
Foreign Subsidiary		10
GAAP		10
Global Administrative Agent		10

Global Borrowing Base		11
Global Borrowing Base Allocation Notice		35
Global Borrowing Base Deficiency		11
Global Borrowing Base Designation Notice		34
Global Borrowing Base Utilization Percentage		11
Global Effective Date		11
Global Effectiveness Notice		11
Governmental Approval		11
Governmental Authority		11
Governmental Rule		11
Guarantee		11
Guarantor		12
Hazardous Material		12
Hedging Agreement		12
Hedging Obligations		12
Highest Lawful Rate		90
Hydrocarbon Interests		12
Hydrocarbons		12
Indebtedness		12
Indemnified Taxes		13
Indemnitee		83
Independent Reserve Report		61
Information		89
Initial Reserve Report		13
Intercreditor Agreement		13
Interest Election Request		13
Interest Payment Date		13
Interest Period		14
Internal Reserve Report		61
Investment		14
Issuing Bank		14
LC Disbursement		14
LC Exposure		14
Lender Affiliate		15
Lenders		15
Letter of Credit		15
LIBO Rate		15
Lien		15
Loan Document		15
Loan Parties		16
Loan Value		16
Loans		16
Margin Stock		16
Material Adverse Effect		16
Maturity Date		16
Xxxxx’x		16

Mortgage		16
Mortgaged Property		16
Multiemployer Plan		17
Net Proceeds		17
New York City		17
Non-Recourse Debt		17
Note		17
Obligations		17
Oil and Gas Properties		17
Organic Documents		18
Other Taxes		18
Parent		1, 18
Participant		86
PBGC		18
Pension Plan		18
Permitted Encumbrances		19
Permitted Investments		19
Person		20
Plan		20
Pledge Agreement		20
Preferred Equity Interest		20
Present Value		20
Prime Rate		20
Proceeds		21
Production Payment		21
Property		21
Proven Reserves		21
Register		85
Regulation U		21
Related Parties		21
Release		21
Remedial Action		21
Required Lenders		22
Reserve Report		22
Resource Conservation and Recovery Act		22
Restricted Payment		22
Restricted Subsidiary		22
S&P		22
Security Documents		22
Solvent		22
Statutory Reserve Rate		23
subsidiary		23
Subsidiary		23
Taxes		23
Total Funded Debt		23
Type		23

vii

U.S.		24
U.S. Borrowing Base		24
U.S. Borrowing Base Deficiency		24
U.S. Dollars		8
U.S. Required Lenders		00
X.X.x		0
XXX Xxxxxxxx		00
Xxxxxx Xxxxxx		24
Unrestricted Subsidiary		24
Unutilized Commitment		24
Withdrawal Liability		24

viii

EXHIBITS AND SCHEDULES

EXHIBITS:
Exhibit A		Form of Compliance Certificate
Exhibit B		Form of Assignment and Assumption
Exhibit C-1		Form of Borrowing Request
Exhibit C-2		Form of Interest Election Request
Exhibit D		Form of Facility Guaranty
Exhibit E		Form of Pledge Agreement

SCHEDULES:
Schedule 2.1		Commitments
Schedule 3.4		Contingent Liabilities; Long Term Commitments; Unrealized Losses
Schedule 3.6		Disclosed Matters
Schedule 3.9		Taxes
Schedule 3.12		Subsidiaries; Restricted Subsidiaries
Schedule 3.13		Insurance
Schedule 3.16		Environmental Matters
Schedule 7.1(a)(iii)		Existing Guarantees of Intercompany Indebtedness
Schedule 7.2		Existing Liens
Schedule 7.4		Existing Investments
Schedule 7.10		Existing Restrictions

CREDIT AGREEMENT

THIS CREDIT AGREEMENT, dated as of July 28, 2006, is among STORM CAT ENERGY (USA) CORPORATION, a Colorado corporation (the “Borrower”), STORM CAT ENERGY CORPORATION, a corporation amalgamated under the laws of British Columbia (“Parent”), the LENDERS party hereto, and JPMORGAN CHASE BANK, N.A., as Global Administrative Agent.

WITNESSETH:

WHEREAS, Borrower and Parent have requested that the Lenders provide certain loans to and extensions of credit on behalf of the Borrower; and

WHEREAS, the Lenders have agreed to make such loans and extensions of credit subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Global Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agents” means each of the Global Administrative Agent and any other agent appointed hereunder from time to time.

“Agreement” means this Credit Agreement, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time.

“Allocated Canadian Borrowing Base” means from time to time the “Allocated Canadian Borrowing Base” as determined in accordance with Section 2.7(d)(ii).

“Allocated U.S. Borrowing Base” means from time to time the “Allocated U.S. Borrowing Base” as determined in accordance with Section 2.7(d)(i).

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus½ of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. If for any reason the Global Administrative Agent shall have determined (which determination shall be conclusive and binding, absent manifest error) that it is unable to ascertain the Federal Funds Effective Rate for any reason, including, without limitation, the inability or failure of the Global Administrative Agent to obtain sufficient bids or publications in accordance with the terms hereof, the Alternate Base Rate shall be the Prime Rate until the circumstances giving rise to such inability no longer exist.

“Annualized EBITDA” means, for purposes of calculating the financial ratio set forth in Section 6.1 for any fiscal quarter, Parent’s actual EBITDA for such fiscal quarter ending on the calculation date multiplied by 4.

“Applicable Lending Office” means, for each Lender and for each Type of Loan, such office of such Lender (or of an Affiliate of such Lender) as such Lender may from time to time specify in writing to the Global Administrative Agent and Borrower as the office by which its Loans of such Type are to be made and/or issued and maintained.

“Applicable Percentage” means, with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Commitments most recently set forth in the Register, giving effect to any assignments made in accordance with Section 10.4 or any decreases in Commitments made in accordance with this Agreement.

“Applicable Rate” means, for any day and with respect to any Eurodollar Loans, any ABR Loans or any Commitment Fees payable hereunder, as the case may be, the applicable rate per annum set forth below in the Global Borrowing Base Utilization Grid with respect to “Eurodollar Loans,” “ABR Loans” or “Commitment Fees,” as the case may be, based on the Global Borrowing Base Utilization Percentage then in effect on such date:

Global Borrowing Base Utilization Grid

Global Borrowing Base Utilization Percentage:	<50	%	≥50% <75	%	≥75% <90	%	≥90	%
Eurodollar Loans:	1.250	%	1.500	%	1.750	%	2.000	%
ABR Loans:	0	%	0	%	0.250	%	0.500	%
Commitment Fees:	0.300	%	0.375	%	0.375	%	0.500	%

Each change in the Applicable Rate shall apply during the period commencing on the effective date of such change and ending on the date immediately preceding the effective date of the next such change.

“Approved Counterparty” means (a) any Lender or any Affiliate of any Lender, or (b) any other Person whose long term senior unsecured debt rating at the time of entry into the applicable Hedging Agreement is A-/A3 by S&P or Xxxxx’x (or their equivalent) or higher.

“Approved Country” means the United States or Canada.

“Approved Engineer” means Netherland, Xxxxxx & Associates, Inc., or such other firm of independent petroleum engineers expert in the matters required to be performed in connection with the preparation and delivery of an Independent Reserve Report and reasonably satisfactory to the Global Administrative Agent.

“Arranger” means X.X. Xxxxxx Securities Inc.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 10.4), and accepted by the Global Administrative Agent, in substantially the form of Exhibit B or any other form approved by the Global Administrative Agent.

“Authorized Officer” means the Chief Executive Officer, the President or the Chief Financial Officer of Parent or Borrower or any other officer of Parent or Borrower specified as such to the Global Administrative Agent in writing by any of the aforementioned officers of Parent or Borrower.

“Availability Period” means the period from and including the Global Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Borrower” is defined in the preamble.

“Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

“Borrowing Base Properties” means the Mortgaged Properties and those other Oil and Gas Properties owned by Borrower, Parent or its Restricted Subsidiaries that are given value in the determination of the then current Global Borrowing Base.

“Borrowing Request” means a request by Borrower for a Borrowing in accordance with Section 2.3, in substantially the form of Exhibit C-1 or any other form approved by the Global Administrative Agent.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in Dallas, Texas and New York City are authorized or required by law to remain closed.

“Canadian Administrative Agent” means JPMorgan Chase Bank, N.A., Toronto Branch, in its capacity as Canadian administrative agent for the lenders party to the Canadian Credit Agreement, and any successor thereto.

“Canadian Borrower” means Parent, as the “Borrower” under the Canadian Credit Agreement.

“Canadian Credit Agreement” means that certain Credit Agreement of even date herewith among the Canadian Borrower, the Canadian Lenders, the Global Administrative Agent and the Canadian Administrative Agent, as it may be amended, supplemented, restated or otherwise modified and in effect from time to time.

“Canadian Dollars” or “C$” refers to lawful money of Canada.

“Canadian Lenders” means the financial institutions from time to time party to the Canadian Credit Agreement and their respective successors and permitted assigns.

“Canadian Loan Documents” means the Canadian Credit Agreement, each Canadian Security Document, each Hedging Agreement between the Canadian Borrower or any of its Restricted Subsidiaries and any Canadian Lender or any Affiliate of a Canadian Lender, any Borrowing Request under the Canadian Credit Agreement, any Interest Election Request under the Canadian Credit Agreement, any election notice and any agreement with respect to fees, together with all exhibits, schedules and attachments thereto, and all other agreements, documents, certificates, financing statements and instruments from time to time executed and delivered by a Loan Party (as defined in the Canadian Credit Agreement) pursuant to or in connection with any of the foregoing.

“Canadian Obligations” means, at any time, the Equivalent Amount in U.S. Dollars of the sum of (a) the aggregate “Credit Exposure” of the Canadian Lenders under the Canadian Loan Documents plus (b) all accrued and unpaid interest and fees owing to the Canadian Lenders under the Canadian Loan Documents plus (c) all other obligations (monetary or otherwise) of Canadian Borrower or any of its Restricted Subsidiaries to any Canadian Lender or any of the “Agents” under the Canadian Credit Agreement, whether or not contingent, arising under or in connection with any of the Canadian Loan Documents.

“Canadian Security Documents” means the “Security Documents,” as defined in the Canadian Credit Agreement.

“Capital Lease Obligations” means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

“Casualty Event” means any loss, casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any Collateral having a fair market value in excess of U.S. $500,000 (or its equivalent in other currencies).

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et. seq., as amended from time to time.

“CERCLIS” means the Comprehensive Environmental Response and Liability Information System as provided for by 40 C.F.R. § 300.5, as amended from time to time.

“Change in Control” means (a) the failure of Parent to own, directly or indirectly, 100% of the Equity Interests of Borrower or any other Loan Party, or (b) a “Change in Control” under the Canadian Credit Agreement.

“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or any Issuing Bank (or, for purposes of Section 2.15(b), by any Applicable Lending Office of such Lender or any Issuing Bank or by such Lender’s or any Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means any and all “Mortgaged Property” and “Collateral,” as defined in all Security Documents.

“Combined Applicable Percentage” means, with respect to any Combined Lender, the percentage of the total Combined Commitments represented by such Combined Lender’s Commitment (or, in the case of Canadian Lenders, the “Commitment” of such Canadian Lender as defined in the Canadian Credit Agreement) with amounts outstanding in Canadian Dollars being converted into an Equivalent Amount (calculated by the Global Administrative Agent) of U.S. Dollars solely for this purpose. If the Combined Commitments have terminated or expired, the Combined Applicable Percentages shall be determined based upon the Combined Commitments most recently in effect, after giving effect to any assignments made in accordance with the Combined Credit Agreements.

“Combined Commitments” means, with respect to each Combined Lender, the commitment of such Combined Lender to make Loans (or in the case of Canadian Lenders, “Loans” (as defined in the Canadian Credit Agreement)), expressed as an amount representing the maximum aggregate amount of such Combined Lender’s Credit Exposure (or in the case of Canadian Lenders, “Credit Exposure” (as defined in the Canadian Credit Agreement)) under the Combined Credit Agreements (with amounts outstanding in Canadian Dollars being converted into an Equivalent Amount (calculated by the Global Administrative Agent) of U.S. Dollars solely for this purpose), as such commitment may be reduced or terminated from time to time pursuant to the Combined Loan Documents. The amount of each Combined Lender’s Commitment is set forth on Schedule 2.1 to the applicable Combined Credit Agreement, or in an Assignment and Assumption (as defined in this Agreement and the Canadian Credit Agreement) pursuant to which such Combined Lender shall have assumed its Combined Commitment, as applicable, subject to reduction and termination from time to time pursuant to this Agreement and the Canadian Credit Agreement. The initial aggregate amount of the Combined Lenders’ Combined Commitments is U.S.$250,000,000.

“Combined Credit Agreements” means this Agreement and the Canadian Credit Agreement.

“Combined Credit Exposure” means at any time the sum of (a) the aggregate Credit Exposure of all Lenders hereunder and (b) the Equivalent Amount in U.S. Dollars of the aggregate “Credit Exposure” (as defined in the Canadian Credit Agreement) of all Canadian Lenders.

“Combined LC Exposure” means, at any time, the sum of the LC Exposure under this Agreement and the Equivalent Amount in U.S. Dollars of the “LC Exposure” (as defined in the Canadian Credit Agreement) under the Canadian Credit Agreement. The Combined LC Exposure of any Combined Lender at any time shall be its Combined Applicable Percentage of the total Combined LC Exposure at such time.

“Combined Lenders” means the Lenders hereunder and the Canadian Lenders.

“Combined Loan Documents” means the Loan Documents and the Canadian Loan Documents.

“Combined Loans” means the loans made by the Combined Lenders to Borrower and Canadian Borrower pursuant to the Combined Loan Documents.

“Combined Obligations” means the aggregate of the Obligations and the Canadian Obligations.

“Commission” means the U.S. Securities and Exchange Commission, or any Governmental Authority in the United States succeeding to any or all of the functions thereof.

“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.8, (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.4, and (c) terminated pursuant to Section 8.2 or Section 8.3. The initial amount of each Lender’s Commitment is set forth on Schedule 2.1, or in the Register following any Assignment and Assumption to which such Lender is a party. The initial aggregate amount of the Commitments of the Lenders is U.S.$250,000,000.

“Commitment Fee” is defined in Section 2.11(a).

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans and its LC Exposure at such time.

“Current Assets” means, with respect to Parent and its Subsidiaries on a consolidated basis, as of any date of determination, the sum of (a) the current assets of Parent and its Subsidiaries on a consolidated basis at such time determined in accordance with GAAP, plus (b) the current Unutilized Commitment at such time, minus (c) current FASB 133 and FASB 143 assets,

“Current Liabilities” means, with respect to Parent and its Subsidiaries on a consolidated basis, as of any date of determination, the sum of the current obligations of Parent and its Subsidiaries, excluding amounts “due to or due from” Parent and/or Subsidiaries, on a consolidated basis at such time determined in accordance with GAAP, excluding therefrom (a) any current liabilities to pay principal due on the Loans, and (b) current FASB 133 and FASB 143 liabilities.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Deficiency Notification Date” is defined in Section 2.7(f).

“Disclosed Matters” is defined in Section 3.6(a).

“dollars” or “U.S. Dollars” or “U.S.$” refers to lawful money of the United States of America.

“EBITDA” means, for any period, the consolidated net income of Parent and its Subsidiaries for such period (excluding any extraordinary gains and losses from consolidated net income) before deduction for interest expense, depreciation, depletion expense, amortization expense, federal, provincial, territorial and state income taxes and other non-cash charges (including, but not limited to, stock option grants, warrants, and similar non-cash charges) and expenses incurred by Parent and its Subsidiaries; provided, however, that any calculation of EBITDA hereunder shall be (a) in all respects acceptable to, and approved by, the Global Administrative Agent, and (b) made using an EBITDA calculated on a pro forma basis (inclusive of any acquisitions and/or divestitures, if any, made during the relevant calculation period and, if any such acquisition or divestiture has a value in excess of U.S.$500,000, as if such acquisition or divestiture had occurred on the first day of such period).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters (including without limitation the Environmental Protection Enhancement Act (Alberta) and the Canadian Environmental Protection Act).

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of Parent or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment, or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of the capital stock, partnership interests, membership interest in a limited liability company, beneficial interests in a trust or other equity interests in any Person or any warrants, options or other rights to acquire such interests.

“Equivalent Amount” means as at any date the amount of Canadian Dollars into which an amount of U.S. Dollars may be converted, or the amount of U.S. Dollars into which an amount of Canadian Dollars may be converted, in either case at The Bank of Canada mid-point noon spot rate of exchange for such date in Toronto at approximately 12:00 noon, Toronto time on such date.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the rules, regulations and interpretations thereunder, in each case as in effect from time to time.

“ERISA Affiliate” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with Parent, are treated as a single employer under Section 414 (b) or 414 (c) of the Internal Revenue Code or Section 4001 of ERISA.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Parent or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Parent or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Parent or any ERISA Affiliate of any Withdrawal Liability; or (g) the receipt by Parent or any ERISA Affiliate of any notice concerning the determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Section 8.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Taxes” means, with respect to any Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which Borrower is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by Borrower under Section 2.19(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new Applicable Lending Office) or is attributable to such Foreign Lender’s failure to comply with Section 2.17(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Applicable Lending Office (or assignment), to receive additional amounts from Borrower with respect to such withholding tax pursuant to Section 2.19(a).

“Facility Guaranty” means a guaranty dated as of the Global Effective Date or otherwise delivered pursuant to the Loan Documents, made by each Loan Party (other than Parent, Borrower and any Foreign Subsidiary) in favor of the Global Administrative Agent, substantially in the form of Exhibit D, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms of this Agreement and the other Loan Documents. The term “Facility Guaranties” shall include each and every Facility Guaranty executed and delivered by a Loan Party (other than Parent, Borrower and any Foreign Subsidiary) hereunder.

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Global Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“Fee Letter” means that certain Fee Letter dated as of the date hereof, by and between Parent and JPMorgan Chase Bank, N.A., as such letter may be amended, supplemented, restated or otherwise modified from time to time in accordance with the Loan Documents.

“Financing Transactions” means the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America or any State thereof, or the District of Columbia.

“Foreign Subsidiary” means any Subsidiary that is organized under the laws of a jurisdiction other than the United States of America or any State thereof or the District of Columbia.

“GAAP” means generally accepted accounting principles in the United States of America.

“Global Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as global administrative agent for the Combined Lenders, and its successors.

“Global Borrowing Base” means the “Global Borrowing Base” as determined from time to time pursuant to Section 2.7.

“Global Borrowing Base Allocation Notice” is defined in Section 2.7(d)(iii).

“Global Borrowing Base Deficiency” means, at the time of determination, the amount by which (a) the Combined Credit Exposure of all Combined Lenders exceeds (b) the then current Global Borrowing Base.

“Global Borrowing Base Designation Notice” is defined in Section 2.7(b).

“Global Borrowing Base Utilization Percentage” means, at any time of determination, an amount (expressed as a percentage) equal to the quotient of (a) the Combined Credit Exposure divided by (b) the Global Borrowing Base.

“Global Effective Date” means the date on which the conditions specified in Section 4.2 of each Combined Credit Agreement are satisfied (or waived in accordance with Section 10.2 of each Combined Credit Agreement).

“Global Effectiveness Notice” means a notice and certificate of Borrower and Parent properly executed by an Authorized Officer of Borrower and Parent addressed to the Combined Lenders and delivered to the Global Administrative Agent whereby Borrower and Parent certify satisfaction and/or waiver of all the conditions precedent to the effectiveness under Section 4.2 of each Combined Credit Agreement.

“Governmental Approval” means (a) any authorization, consent, approval, license, ruling, permit, tariff, rate, certification, waiver, exemption, filing, variance, claim, order, judgment or decree of, or with, (b) any required notice to, (c) any declaration of or with, or (d) any registration by or with, any Governmental Authority.

“Governmental Authority” means the government of the United States of America, Canada, any other nation or any political subdivision thereof, whether state, provincial, territorial or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Governmental Rule” means any statute, law, regulation, ordinance, rule, judgment, order, decree, permit, concession, grant, franchise, license, agreement, directive, requirement of, or other governmental restriction or any similar binding form of decision of or determination by, or any binding interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereafter in effect.

“Guarantee” means a guarantee, an endorsement, a contingent agreement to purchase or to furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, the Indebtedness, net worth, working capital or earnings of any Person or any production or revenues generated by (or any capital or other expenditures incurred in connection with the acquisition and exploitation of, exploration for, development of or production from) any Hydrocarbons, or a guarantee of the payment of dividends or other distributions upon the Equity Interests of any Person, including, without limitation, causing a bank, surety company or other financial institution or similar entity to issue a letter of credit, surety bond or other similar instrument for the benefit of another Person, but excluding any such endorsements, contingent agreement or contingent liability for collection or deposit in the ordinary course of business. The terms “Guarantee” and “Guaranteed” used as a verb shall have a correlative meaning.

“Guarantor” means, collectively, (a) each Loan Party (other than Parent, Borrower and any Foreign Subsidiary) that executes and delivers a Facility Guaranty, including each Loan Party that is required to execute a Facility Guaranty pursuant to Section 5.12.

“Hazardous Material” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law, and any petroleum, petroleum products or petroleum distillates and associated oil or natural gas exploration, production and development wastes that are not exempted or excluded from being defined as “hazardous substances”, “hazardous materials”, “hazardous wastes” and “toxic substances” under such Environmental Laws.

“Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement among Borrower, Parent or its Restricted Subsidiaries and any Person.

“Hedging Obligations” means, with respect to any Person, all liabilities (including but not limited to obligations and liabilities of such Person arising in connection with or as a result of early or premature termination of a Hedging Agreement, whether or not occurring as a result of a default thereunder) of such Person under a Hedging Agreement.

“Highest Lawful Rate” is defined in Section 10.13(b).

“Hydrocarbon Interests” means all rights, titles and interests in and to oil and gas leases, oil, gas and mineral leases, other Hydrocarbon leases, mineral interests; mineral servitudes, overriding royalty interests, royalty interests, net profits interests, production payment interests, and other similar interests.

“Hydrocarbons” means, collectively, oil, gas, casinghead gas, drip gasoline, natural gasoline, condensate, distillate and all other liquid or gaseous hydrocarbons and related minerals and all products therefrom, in each case whether in a natural or a processed state.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to Property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of Property or services (excluding earn-outs and current accounts payable incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (i) all obligations of such Person with respect to any arrangement, directly or indirectly, whereby such Person or its Subsidiaries shall sell or transfer any material asset, and whereby such Person or any of its Subsidiaries shall then or immediately thereafter rent or lease as lessee such asset or any part thereof, (j) all recourse and support obligations of such Person or any of its Subsidiaries with respect to the sale or discount of any of its accounts receivable, and (k) all obligations of such Person with respect to Production Payments sold by such Person or any prepayments for oil and gas production or other similar agreements. The Indebtedness of any Person shall include, without duplication, the Indebtedness of any other Person (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitee” is defined in Section 10.3(b).

“Independent Reserve Report” is defined in Section 5.1(e).

“Information” is defined in Section 10.12.

“Initial Reserve Report” means the Independent Reserve Report delivered to the Global Administrative Agent dated effective as of June 30, 2006, with respect to the Oil and Gas Properties of Borrower, a true and correct copy of which has been delivered to the Global Administrative Agent and the Lenders.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of even date herewith, by and among the Global Administrative Agent, the Canadian Administrative Agent and the Combined Lenders, as amended, supplemented, restated or otherwise modified from time to time in accordance with the Loan Documents.

“Interest Election Request” means a request by Borrower to convert or continue a Borrowing in accordance with Section 2.6, in substantially the form of Exhibit C-2 or any other form approved by the Global Administrative Agent.

“Interest Payment Date” means (a) with respect to any ABR Loan, the last day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three (3) months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three (3) months’ duration after the first day of such Interest Period.

“Interest Period” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day, in the calendar month that is one, two or three months (or, with the consent of each Lender, six months) thereafter, as Borrower may elect; provided, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, and (c) no Interest Period may end later than the last day of the Availability Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“Internal Reserve Report” is defined in Section 5.1(e).

“Investment” means, for any Person: (a) the acquisition (whether for cash, Property, services or securities or otherwise) of Equity Interests of any other Person (including, without limitation, any “short sale” or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale), (b) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of Property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such Property to such Person, but excluding any such advance, loan or extension of credit having a term not exceeding 180 days representing the purchase price of inventory or supplies sold by such Person in the ordinary course of business) or (c) the entering into of any Guarantee of Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person.

“Issuing Bank” means JPMorgan Chase Bank, N.A. and each Lender that agrees to act as an issuer of Letters of Credit hereunder at the request of the Global Administrative Agent, in each case, in its capacity as the issuer of Letters of Credit hereunder. Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“LC Disbursement” means a payment made by any Issuing Bank pursuant to a Letter of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.

“Lender Affiliate” means, with respect to any Lender, (a) an Affiliate of such Lender or (b) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by such Lender or an Affiliate of such Lender, and with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“Lenders” means the Persons listed on Schedule 2.1 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing the British Bankers Association Interest Settlement Rate for such Service, as determined by the Global Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity equal to such Interest Period. In the event that such rate is not available at such time for any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate at which dollar deposits of U.S.$5,000,000 and for a maturity equal to such Interest Period are offered by the principal London office of the Global Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge, collateral assignment or security interest in, on or of such asset, including, without limitation, encumbrances created by the posting of a Letter of Credit, and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset to secure Indebtedness.

“Loan Document” means (a) this Agreement, the Notes, the Security Documents, the Fee Letter, the Intercreditor Agreement, the Facility Guaranties, the Hedging Agreements between Borrower, Parent or any of its Restricted Subsidiaries and any Lender or any Affiliate of a Lender, any Borrowing Request, any Interest Election Request, any election notice, any agreement with respect to fees described in Section 2.11, and (b) each other agreement, document or instrument delivered by Parent, Borrower or any other Loan Party in connection with this Agreement, as amended, supplemented, restated or otherwise modified from time to time. For avoidance of doubt, the term “Loan Document” shall not include the Canadian Loan Documents.

“Loan Parties” means Parent, Borrower and any other Affiliate or Restricted Subsidiary of Parent that executes a Loan Document, for so long as such Loan Document is in effect.

“Loan Value” means, with respect to the Borrowing Base Properties, the value which the Global Administrative Agent, in its sole discretion, attributes to the Borrowing Base Properties (or a particular Borrowing Base Property) in its calculation of the Global Borrowing Base and the U.S. Borrowing Base.

“Loans” means the loans made by the Lenders to Borrower pursuant to this Agreement.

“Margin Stock” means “margin stock” within the meaning of Regulation U.

“Material Adverse Effect” means a material adverse effect on (a) the business, Property, operations or condition, financial or otherwise, of the Loan Parties taken as a whole, (b) the ability of the Loan Parties (as defined herein and in the Canadian Credit Agreement) to perform any of their respective obligations under the Combined Loan Documents or (c) the rights of or benefits available to the Combined Lenders under any of the Combined Loan Documents, as the case may be.

“Maturity Date” means July 28, 2010.

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

“Mortgage” means any Mortgage, Line of Credit Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement and Fixture Filing (a) dated as of the Global Effective Date or (b) otherwise delivered pursuant to the Loan Documents, in form and substance satisfactory to the Global Administrative Agent, executed and delivered by Borrower or any other Loan Party (other than Foreign Subsidiaries), as the case may be, as amended, supplemented, restated or otherwise modified from time to time in accordance with the terms of this Agreement and the other Loan Documents. The term “Mortgage” shall include each mortgage supplement after execution and delivery of such mortgage supplement. The term “Mortgages” shall include each and every Mortgage executed and delivered by each of Borrower, Parent and its Restricted Subsidiaries hereunder.

“Mortgaged Property” means, initially, each Oil and Gas Property on which a Lien has been granted pursuant to Section 4.2(b)(vi), and includes each other Oil and Gas Property with respect to which a Mortgage is granted pursuant to Section 5.12 or Section 5.15. The term “Mortgaged Property” shall not include an Oil and Gas Property with respect to which a Lien has been released and not re-granted pursuant to the provisions of Section 5.15(a).

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Net Proceeds” means, with respect to any event, (a) the cash proceeds received by Borrower, Parent and its Restricted Subsidiaries in respect of such event including (i) any cash received in respect of any non-cash proceeds, but only as and when received, (ii) in the case of a casualty, insurance proceeds and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, net of (b) the sum of (i) all reasonable fees and out of pocket expenses paid by Borrower, Parent and its Restricted Subsidiaries to third parties (other than Affiliates) in connection with such event, (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a sale and leaseback transaction or a casualty or a condemnation or similar proceeding), the amount of all payments required to be made by Borrower, Parent and its Restricted Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such asset or otherwise subject to mandatory prepayment as a result of such event, (iii) the amount of all taxes paid (or reasonably estimated to be payable) by Borrower, Parent and its Restricted Subsidiaries, and (iv) the amount of any reserves established by Borrower, Parent and its Restricted Subsidiaries to fund contingent liabilities reasonably estimated to be payable, in each case during the year that such event occurred or the next succeeding year and that are directly attributable to such event (as determined reasonably and in good faith by the chief financial officer of Parent).

“New York City” means New York, New York.

“Non-Recourse Debt” means any Indebtedness of any Unrestricted Subsidiary, in each case in respect of which the holder or holders thereof (a) shall have recourse only to, and shall have the right to require the obligations of such Unrestricted Subsidiary to be performed, satisfied, and paid only out of, the assets and Property of such Unrestricted Subsidiary and/or one or more of its Subsidiaries and/or any other Person (other than Borrower, Parent and/or any Restricted Subsidiary), and (b) shall have no direct or indirect recourse (including by way of guaranty or indemnity) to Borrower, Parent or any Restricted Subsidiary or to any of the assets or Property of Borrower, Parent or any Restricted Subsidiary, whether for principal, interest, fees, expenses or otherwise.

“Note” means any promissory note delivered pursuant to Section 2.9(e).

“Obligations” means, at any time, the sum of (a) the aggregate Credit Exposure of the Lenders under the Loan Documents plus (b) all accrued and unpaid interest and fees owing to the Lenders under the Loan Documents plus (c) all Hedging Obligations in connection with all Hedging Agreements between Borrower, Parent or any of its Restricted Subsidiaries and any Lender or any Affiliate of a Lender plus (d) all other obligations (monetary or otherwise) of Borrower, Parent or any Restricted Subsidiary to any Lender or any Agent, whether or not contingent, arising under or in connection with any of the Loan Documents.

“Oil and Gas Properties” means the Hydrocarbon Interests; any Property 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 operating agreements, joint venture agreements, contracts and other agreements which relate to any of the Hydrocarbon Interests or the production, sale, purchase, exchange or processing of Hydrocarbons from or attributable to such Hydrocarbon Interests; all Hydrocarbons in and under and which may be produced and saved or attributable to the Hydrocarbon Interests, the lands covered thereby and all oil in tanks and all rents, issues, profits, proceeds, products, revenues and other incomes from or attributable to the Hydrocarbon Interests; all tenements, profits á prendre, hereditaments, appurtenances and any Property in anywise appertaining, belonging, affixed or incidental to the Hydrocarbon Interests, Property, rights, titles, interests and estates described or referred to above, including any and all Property, real or personal, now owned or hereinafter acquired and situated upon, used, held for use or useful in connection with the operating, working or development of any of such Hydrocarbon Interests or Property (excluding drilling rigs, automotive equipment or other personal Property which may be on such premises for the purpose of drilling a well or for other similar temporary uses) and including any and all oil xxxxx, gas xxxxx, water xxxxx, injection xxxxx or other xxxxx, buildings, structures, fuel separators, liquid extraction plants, plant compressors, pumps, pumping units, field gathering systems, tanks and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, meters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements and servitudes together with all additions, substitutions, replacements, accessions and attachments to any and all of the foregoing.

“Organic Documents” means, relative to any Person, its articles of organization, formation or incorporation (or comparable document), its by-laws or operating agreement and all partnership agreements, limited liability company or operating agreements and similar arrangements applicable to ownership.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Parent” is defined in the preamble.

“Participant” is defined in Section 10.4(e).

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Pension Plan” means a “pension plan,” as such term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which Parent or any ERISA Affiliate may have liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.

“Permitted Encumbrances” means:

(a) Liens imposed by any Governmental Rule for Taxes that are not yet due or are being contested in compliance with Section 5.5;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law or arising in the ordinary course of business and in each case, securing obligations that are not overdue by more than 45 days or are being contested in compliance with Section 5.5;

(c) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(d) pledges or deposits under worker’s compensation, unemployment insurance and other social security or similar legislation made in the ordinary course of business;

(e) judgment Liens in respect of judgments that do not constitute an Event of Default under Section 8.1(h);

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by any Governmental Rule or arising in the ordinary course of business that do not secure any Indebtedness and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of Borrower, Parent or any of its Restricted Subsidiaries;

(g) Liens permitted by the Canadian Credit Agreement or any of the other Combined Loan Documents; and

(h) any (i) interest or title of a lessor under any lease of real property entered into by Parent, Borrower or any Restricted Subsidiary in the ordinary course of its business and covering only the assets so leased or liens in favor of a lessor created by statute or by the terms of a lease, and (ii) interests or rights of a creditor of a landlord pursuant to a subordination or other similar agreement entered into in the ordinary course of business covering only the property subject to the terms of such lease;

provided that the term “Permitted Encumbrances” shall not include any Lien securing any Indebtedness for borrowed money.

“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America or Canada or any province thereof (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one (1) year from the date of acquisition thereof;

(b) Investments in commercial paper (i) rated X-0, X-0, X-0 low or A-1 or better by S&P, Xxxxx’x, Dominion Bond Rating Service Limited or Canada Bond Rating Service, respectively, maturing not more than 90 days from the date of acquisition thereof or (ii) rated A-2 or better (but less than A-1) or P-2 or better (but less than P-1) by S&P or Xxxxx’x, respectively, maturing not more than 30 days from the date of acquisition thereof; and

(c) Investments in certificates of deposit, bankers’ acceptances and time deposits maturing within one (1) year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or Canada or any State or Province thereof which has a combined capital and surplus and undivided profits of not less than U.S.$500,000,000.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Parent or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreement” means a Pledge Agreement, dated as of the Global Effective Date or otherwise delivered pursuant to the Loan Documents, in form and substance satisfactory to the Global Administrative Agent, as amended, supplemented, restated or otherwise modified from time to time in accordance with the Loan Documents. The term “Pledge Agreements” shall include each and every Pledge Agreement executed and delivered pursuant to the Loan Documents.

“Preferred Equity Interest” means any Equity Interest that, by its terms (or the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event or circumstance either (a) matures, (b) is redeemable (whether mandatorily or otherwise) at the option of the holder thereof for any consideration other than shares of common stock or (c) is convertible or exchangeable for Indebtedness or other Preferred Equity Interests, in each case, in whole or in part, prior to the date which is 91 days after the earlier of (i) the Maturity Date or (ii) the date on which the Combined Obligations have been paid in full and the Combined Commitments have terminated and all Letters of Credit have expired or terminated.

“Present Value” means, at any time, the calculation of the present value of future cash flows based upon the then-effective Reserve Report for Proven Reserves from Oil and Gas Properties located within an Approved Country, utilizing the customary discount rates and price deck of the Global Administrative Agent.

“Prime Rate” means the rate of interest per annum publicly announced from time to time by the Global Administrative Agent as its prime rate in effect at its principal office in New York City. Without notice to Borrower, Parent or any other Person, the Prime Rate shall change automatically from time to time as and in the amount by which such prime rate shall fluctuate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Global Administrative Agent may make commercial loans and other loans at rates of interest at, above or below the Prime Rate. For purposes of this Agreement, any change in the Alternate Base Rate due to a change in the Prime Rate shall be effective on the date such change in the Prime Rate is announced.

“Proceeds” means, with respect to any event, the cash proceeds received in respect of such event including any cash received in respect of any non-cash proceeds, but only as and when received.

“Production Payment” means a production payment obligation (whether volumetric or dollar denominated) of Borrower, Parent or any of its Restricted Subsidiaries which is payable from a specified share of proceeds received from production from specified Oil and Gas Properties, together with all undertakings and obligations in connection therewith.

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

“Proven Reserves” means collectively, “proved oil and gas reserves,” “proved developed producing oil and gas reserves,” “proved developed non-producing oil and gas reserves” (consisting of proved developed shut-in oil and gas reserves and proved developed behind pipe oil and gas reserves), and “proved undeveloped oil and gas reserves,” as such terms are defined by the Commission in its standards and guidelines.

“Register” has the meaning set forth in Section 10.4(c).

“Regulation U” means any of Regulations T, U or X of the Board from time to time in effect and shall include any successor or other regulations or official interpretations of the Board or any successor Person relating to the extension of credit for the purpose of purchasing or carrying Margin Stock and which is applicable to member banks of the Federal Reserve System or any successor Person.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Release” means a “release,” as such term is defined in CERCLA.

“Remedial Action” means any action under Environmental Laws required to (a) clean up, remove, treat, dispose of, xxxxx, or in any other way address Hazardous Materials in the environment, (b) prevent the Release or threat of a Release or minimize the further Release of Hazardous Materials, or (c) investigate and determine if a remedial response is needed and to design such a response and any post-remedial investigation, monitoring, operation, and maintenance and care.

“Required Lenders” means, at any time, the Combined Lenders having in the aggregate at least 66-2/3% of the aggregate total Combined Commitments under the Combined Loan Documents, or, if the Combined Commitments have been terminated, Combined Lenders holding at least 66-2/3% of the aggregate unpaid principal amount of the outstanding Combined Credit Exposure.

“Reserve Report” means the Initial Reserve Report and any other Independent Reserve Report or Internal Reserve Report delivered pursuant to Section 2.7 or Section 5.1(e), in form and substance reasonably satisfactory to the Global Administrative Agent, prepared at the sole cost and expense of Borrower (a) by an Approved Engineer or (b) by Borrower’s internal petroleum engineers, as the case may be, which shall evaluate the Proven Reserves attributable to the Oil and Gas Properties owned directly by Borrower, Parent and/or its Restricted Subsidiaries, as of the immediately preceding December 31 or June 30. Each Reserve Report shall set forth volumes, projections of the future rate of production, Hydrocarbons prices, escalation rates, discount rate assumptions, and net proceeds of production, present value of the net proceeds of production, operating expenses and capital expenditures, in each case based upon updated economic assumptions reasonably acceptable to the Global Administrative Agent.

“Resource Conservation and Recovery Act” means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as amended from time to time.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other Property, real, personal or mixed) with respect to any Equity Interests in Borrower, Parent or Restricted Subsidiary, or any payment (whether in cash, securities or other Property, real, personal or mixed), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in Borrower, Parent or any Restricted Subsidiary or any option, warrant or other right to acquire any such Equity Interests in Borrower, Parent or any Restricted Subsidiary.

“Restricted Subsidiary” means any Subsidiary of Parent that is not an Unrestricted Subsidiary.

“S&P” means Standard & Poor’s and any successor thereto that is a nationally-recognized rating agency.

“Security Documents” means each Facility Guaranty, each Mortgage, each Pledge Agreement, each Canadian Security Document and each other instrument or document executed and delivered pursuant to Section 5.12 or Section 5.15 or pursuant to the Loan Documents to secure any of the Obligations.

“Solvent” means, with respect to any Person at any time, a condition under which (a) the fair saleable value of such Person’s assets is, on the date of determination, greater than the total amount of such Person’s liabilities (including contingent and unliquidated liabilities) at such time; and (b) such Person is able to pay all of its liabilities as such liabilities mature. For purposes of this definition (i) the amount of a Person’s contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability, (ii) the “fair saleable value” of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such asset at its regular market value, and (iii) the “regular market value” of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an interested buyer who is willing to purchase such asset under ordinary selling conditions.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the applicable maximum reserve percentages (including any basic, marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Global Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency fundings and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“subsidiary” means, with respect to any Person (the “parent”) at any date any corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of Parent.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

“Total Funded Debt” means all Indebtedness of Parent and its Subsidiaries, without duplication, on a consolidated basis described under (i) clauses (a), (b), (g), (h) and (i) of the definition thereof, and (ii) clauses (e) and (f) of the definition thereof but only with respect to Indebtedness referred to in clauses (a), (b), (g), (h) and (i) of the definition thereof.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“UCC Searches” means central and local current financing statement searches from each state in which any Collateral or a Borrowing Base Property is located, and such other jurisdictions as the Global Administrative Agent may request, covering each Loan Party together with copies of all financing statements listed in such searches.

“United States” or “U.S.” means the United States of America, its fifty states and the District of Columbia.

“Unrestricted Subsidiary” means any Subsidiary of Parent that is not a Restricted Subsidiary or which Parent has designated in writing to the Global Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 1.5 and all subsidiaries of such Person. As of the date of this Agreement, the Unrestricted Subsidiaries are designated on Schedule 3.12 as such.

“Unutilized Commitment” means, at the time of determination, the amount by which (a) the lowest of (i) the aggregate amount of the Commitments of all Lenders at such time, (ii) the amount of the U.S. Borrowing Base as then in effect at such time, and (iii) the amount of the Allocated U.S. Borrowing Base as then in effect at such time, exceeds (b) the amount of the aggregate Credit Exposure of the Lenders at such time.

“U.S. Borrowing Base” means the “U.S. Borrowing Base” as determined from time to time pursuant to Section 2.7.

“U.S. Borrowing Base Deficiency” means the amount by which (a) the aggregate Credit Exposure of the Lenders exceeds (b) the lesser of (i) the then current U.S. Borrowing Base and (ii) the then current Allocated U.S. Borrowing Base.

“U.S. Required Lenders” means, at any time, the Lenders having in the aggregate at least 66-2/3% of the aggregate total Commitments under the Loan Documents, or, if the Commitments have been terminated, the Lenders holding at least 66-2/3% of the aggregate unpaid principal amount of the outstanding Credit Exposure.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

Section 1.2 Classification of Loans and Borrowings. For purposes of this Agreement, Loans and Borrowings may be classified and referred to by Type (e.g., a “Eurodollar Loan” or “Eurodollar Borrowing”).

Section 1.3 Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, provided such successors and assigns are permitted by the Loan Documents, c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.

Section 1.4 Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if Parent notifies the Global Administrative Agent that Parent requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date of this Agreement in GAAP or in the application thereof on the operation of such provision (or if the Global Administrative Agent notifies Borrower or Parent that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

Section 1.5 Designation and Conversion of Restricted and Unrestricted Subsidiaries.

(a) Unless designated as an Unrestricted Subsidiary on Schedule 3.12 as of the date of this Agreement or thereafter in writing to the Global Administrative Agent, any Person that becomes a Subsidiary of Parent or any of its Restricted Subsidiaries (including Borrower) shall be classified as a Restricted Subsidiary.

(b) Parent may designate any Subsidiary of Parent (other than Borrower) (including a newly formed or newly acquired Subsidiary) as an Unrestricted Subsidiary if i) after giving effect to such designation, no Default would exist as a result of a breach of Section 5.13 and ii) such designation is deemed to be an Investment in an Unrestricted Subsidiary in an amount equal to the fair market value of Parent’s direct and indirect ownership interest in such Subsidiary and such Investment would be permitted to be made at the time of such designation under Section 7.4(h). Except as provided in this Section 1.5(b), no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary.

(c) Parent may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if after giving effect to such designation, iii) the representations and warranties of Borrower, Parent and its Restricted Subsidiaries contained in each of the Loan Documents are true and correct on and as of such date as if made on and as of the date of such redesignation (or, if stated to have been made expressly as of an earlier date, were true and correct as of such date), iv) no Default would exist, and v) Borrower and Parent comply with the requirements of Section 5.12 and Section 5.15. Any such designation shall be treated as a cash dividend in an amount equal to the fair market value of Parent’s direct and indirect ownership interest in such Subsidiary for purposes of the limitation on Investments under Section 7.4(h).

(d) If, during any period, a Subsidiary is redesignated as either “Restricted” or “Unrestricted,” then for purposes of the calculation of EBITDA for such period, such Subsidiary shall be deemed to have been redesignated as of the first day of the relevant period.

ARTICLE II

THE CREDITS

Section 2.1 Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans in U.S. Dollars to Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in e) the Credit Exposure of any Lender exceeding the lowest of (1) the Commitment of such Lender, (2) such Lender’s Applicable Percentage of the U.S. Borrowing Base then in effect, or (3) such Lender’s Applicable Percentage of the Allocated U.S. Borrowing Base then in effect, or f) the aggregate amount of the Credit Exposure of all Lenders exceeding the lowest of (1) the aggregate Commitments of all of the Lenders, (2) the U.S. Borrowing Base then in effect, or (3) the Allocated U.S. Borrowing Base then in effect. Within the foregoing limits and subject to the terms and conditions set forth herein, Borrower may borrow, prepay and reborrow Loans.

Section 2.2 Loans and Borrowings.

(a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Applicable Percentages. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b) Subject to Section 2.13 and Section 2.14, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of U.S.$500,000 and not less than U.S.$1,000,000 (including any continuation or conversion of existing Loans made in connection therewith). At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of U.S.$500,000 and not less than U.S. $1,000,000 (including any continuation or conversion of existing Loans made in connection therewith); provided that an ABR Borrowing may be in an aggregate amount that is equal to the entire Unutilized Commitment, if less. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of five (5) Eurodollar Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, Borrower shall not be entitled to request, or to elect to convert or continue, any Eurodollar Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

Section 2.3 Requests for Borrowings. To request a Borrowing, Borrower shall notify the Global Administrative Agent of such request by telephone g) in the case of a Eurodollar Borrowing, not later than 12:00 noon, Dallas, Texas time, three Business Days before the date of the proposed Borrowing or h) in the case of an ABR Borrowing, not later than 10:00 a.m., Dallas, Texas time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy (or other electronic transmission approved by the Global Administrative Agent) to the Global Administrative Agent of a written Borrowing Request executed by an Authorized Officer of Borrower, substantially in the form of Exhibit C-1 or otherwise in a form approved by the Global Administrative Agent. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.2:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”.

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Global Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

Section 2.4 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, Borrower may request the issuance of Letters of Credit for its own account or the account of any Restricted Subsidiary, in a form reasonably acceptable to the Global Administrative Agent and the Issuing Bank, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by Borrower to, or entered into by Borrower with, the Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), Borrower shall hand-deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to an Issuing Bank and the Global Administrative Agent (reasonably in advance of the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section), the amount of such Letter of Credit, the Loan Party for whose account such Letter of Credit shall be issued, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the Issuing Bank, Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (1) the LC Exposure shall not exceed the least of (a) the aggregate Commitments hereunder; (b) the Allocated U.S. Borrowing Base as then in effect at such time and (c) U.S.$10,000,000; and (2) the aggregate Credit Exposure of the Lenders shall not exceed the lesser of (x) the aggregate Commitments of the Lenders or (y) the Allocated U.S. Borrowing Base then in effect. The Global Administrative Agent shall use reasonable efforts to provide notice to the Lenders on a quarterly basis with respect to the issuance, amendment, renewal or extension of Letters of Credit hereunder for such quarter.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close of business on the earlier of (3) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any renewal or extension thereof, one year after such renewal or extension) and (4) five (5) Business Days prior to the Maturity Date.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Global Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by Borrower on the date due as provided in paragraph (e) of this Section, or of any reimbursement payment required to be refunded to Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, Borrower shall reimburse such LC Disbursement by paying to the Global Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, Dallas, Texas time, on the date that such LC Disbursement is made, if Borrower shall have received notice of such LC Disbursement prior to 10:00 a.m., Dallas, Texas time, on such date; or, if such notice has not been received by Borrower prior to such time on such date, then not later than 12:00 noon, Dallas, Texas time, on the Business Day immediately following the day that Borrower receives such notice; provided that, unless such LC Disbursement is less than U.S.$500,000, Borrower may, subject to the conditions to Borrowing set forth herein, request in accordance with Section 2.3 that such payment be financed with a Borrowing in an equivalent amount and, to the extent so financed, Borrower’s obligation to make such payment shall be discharged and replaced by the resulting Borrowing. If Borrower fails to make such payment when due (or fails to request an ABR Loan Borrowing as provided herein), the Global Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Global Administrative Agent its Applicable Percentage of the payment then due from Borrower, in the same manner as provided in Section 2.5 with respect to Loans made by such Lender (and Section 2.5 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Global Administrative Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Global Administrative Agent of any payment from Borrower pursuant to this paragraph (or promptly following the Global Administrative Agent’s receipt from the Lenders of proceeds from a requested Borrowing), the Global Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as contemplated above) shall not constitute a Loan and shall not relieve Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (e) of this Section shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (5) any lack of validity or enforceability of any Letter of Credit or this Agreement or any other Loan Document, or any term or provision herein or therein, (6) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein proving to be untrue or inaccurate in any respect, (7) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (8) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, Borrower’s obligations hereunder. Neither the Agents, the Lenders or any Issuing Bank nor any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of such Issuing Bank; provided that the foregoing shall not be construed to excuse such Issuing Bank from liability to Borrower to the extent of any direct or actual damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by Borrower to the extent permitted by applicable law) suffered by Borrower that are caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. An Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify the Global Administrative Agent and Borrower by telephone (confirmed by telecopy) of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.

(h) Interim Interest. If an Issuing Bank shall make any LC Disbursement, then, unless Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that Borrower reimburses such LC Disbursement, at the rate per annum set forth in Section 2.12(c). Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to paragraph (e) of this Section to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that Borrower receives notice from the Global Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing 66-2/3% or more of the total LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, Borrower shall deposit in an account with the Global Administrative Agent, in the name of the Global Administrative Agent and for the benefit of the Lenders, an amount in cash equal to the LC Exposure as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to Borrower described in Section 8.1(g). Borrower also shall deposit cash collateral pursuant to this paragraph as and to the extent required by Section 2.10, and any such cash collateral so deposited and held by the Global Administrative Agent hereunder shall constitute part of the Global Borrowing Base for purposes of determining compliance with Section 2.10. Each such deposit shall be held by the Global Administrative Agent as collateral for the payment and performance of the obligations of Borrower under this Agreement. The Global Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Global Administrative Agent and at Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Global Administrative Agent to reimburse the Issuing Bank for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing 66-2/3% or more of the total LC Exposure), be applied to satisfy other obligations of Borrower under this Agreement. If Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to Borrower within three (3) Business Days after all Events of Default have been cured or waived. If Borrower is required to provide an amount of cash collateral hereunder pursuant to Section 2.10, such amount (to the extent not applied as aforesaid) shall be returned to Borrower as and to the extent that, after giving effect to such return, Borrower would remain in compliance with Section 2.10 and no Default shall have occurred and be continuing.

Section 2.5 Funding of Borrowings.

(a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 1:00 p.m., Dallas, Texas time, to the account of the Global Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Global Administrative Agent will make such Loans available to Borrower by promptly crediting the amounts so received, in like funds, to an account of Borrower maintained with the Global Administrative Agent in Dallas, Texas; provided that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.4(e) shall be remitted by the Global Administrative Agent to the applicable Issuing Bank.

(b) Unless the Global Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Global Administrative Agent such Lender’s share of such Borrowing, the Global Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Global Administrative Agent, then the applicable Lender and Borrower severally agree to pay to the Global Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to Borrower to but excluding the date of payment to the Global Administrative Agent, at (9) in the case of such Lender, the greater of (a) the Federal Funds Effective Rate or (b) a rate determined by the Global Administrative Agent in accordance with banking industry rules on interbank compensation or (10) in the case of Borrower, the interest rate applicable to Loans made in such Borrowing. If such Lender pays such amount to the Global Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

Section 2.6 Interest Elections.

(a) Borrower may elect to convert a Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. Borrower may, subject to the requirements of Section 2.2(c), elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

(b) To make an election pursuant to this Section, Borrower shall notify the Global Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.3 if Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Global Administrative Agent of a written Interest Election Request executed by an Authorized Officer of Borrower, substantially in the form of Exhibit C-2 or otherwise in a form approved by the Global Administrative Agent.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.2:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Global Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Global Administrative Agent, at the request of the Required Lenders, so notifies Borrower, then, so long as such Event of Default is continuing, (11) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (12) unless the Indebtedness has been accelerated pursuant to Section 8.3, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

Section 2.7 Global Borrowing Base.

(a) Initial Global Borrowing Base and U.S. Borrowing Base. During the period from the date hereof to the date of the first redetermination of the Global Borrowing Base and U.S. Borrowing Base pursuant to the provisions of this Section, ii) the initial amount of the Global Borrowing Base has been determined by the Global Administrative Agent and acknowledged by Borrower and the Canadian Borrower and agreed to by the Combined Lenders to be U.S.$10,000,000, and iii) the initial amount of the U.S. Borrowing Base has been determined by the Global Administrative Agent and acknowledged by Borrower and agreed to by the Combined Lenders to be U.S. $11,000,000.

(b) Annual Scheduled Determinations of the Global Borrowing Base and U.S. Borrowing Base. Promptly after January 1 of each calendar year (commencing January 1, 2007), and in any event prior to March 1st of each calendar year (commencing March 1, 2007), Borrower shall furnish to the Global Administrative Agent and the Combined Lenders a Reserve Report in form and substance reasonably satisfactory to the Global Administrative Agent, prepared by an Approved Engineer, which Reserve Report shall evaluate as of December 31st of the immediately preceding calendar year iv) the Proven Reserves attributable to the Oil and Gas Properties which Borrower wishes to include in the Global Borrowing Base, and a projection of the rate of production and net operating income with respect thereto, as of such date, and v) the Proven Reserves attributable to the Oil and Gas Properties of Borrower and the U.S. Loan Parties which Borrower wishes to include in the U.S. Borrowing Base, and a projection of the rate of production and net operating income with respect thereto, as of such date, in each case, together with additional data concerning pricing, hedging, operating costs and quantities of production, and other information and engineering and geological data as the Global Administrative Agent or any Combined Lender may reasonably request. Within 15 days after receipt of such report and information, the Global Administrative Agent shall make an initial determination of the Global Borrowing Base and the U.S. Borrowing Base, and upon such initial determination shall promptly notify the Combined Lenders in writing of the Global Administrative Agent’s initial determination of the Global Borrowing Base and the U.S. Borrowing Base. The Global Administrative Agent shall make such determination in accordance with its customary practices and standards for oil and gas loans and in the exercise of its sole and reasonable discretion. Within 15 days following their receipt of the proposed amount for the redetermined Global Borrowing Base and U.S. Borrowing Base, (a) all Combined Lenders (in the case of a proposed increase of the Global Borrowing Base) and/or all Lenders (in the case of a proposed increase of the U.S. Borrowing Base), or (b) Required Lenders (in the case of a decrease or reaffirmation of the Global Borrowing Base) and/or U.S. Required Lenders (in the case of a decrease or reaffirmation of the U.S. Borrowing Base) shall approve or reject the Global Administrative Agent’s initial determination of the Global Borrowing Base and the U.S. Borrowing Base by written notice to the Global Administrative Agent; provided, however that failure by any Combined Lender to reject in writing the Global Administrative Agent’s determination of the Global Borrowing Base and the U.S. Borrowing Base within such 15-day period shall be deemed an acceptance of such determination by such Combined Lender. If all of the Combined Lenders (in the case of the Global Borrowing Base) or all of the Lenders (in the case of the U.S. Borrowing Base), or the Required Lenders or U.S. Required Lenders, as applicable, fail to approve any such determination of the Global Borrowing Base or the U.S. Borrowing Base made by the Global Administrative Agent hereunder, then the Global Administrative Agent shall poll the Combined Lenders, Required Lenders or U.S. Required Lenders, as appropriate, and the Global Borrowing Base and the U.S. Borrowing Base, as applicable, shall be set at the highest amount on which all Combined Lenders (in the case of the Global Borrowing Base) or all Lenders (in the case of the U.S. Borrowing Base) if such number would result in an increase in the Global Borrowing Base or the U.S. Borrowing Base, or otherwise, the Required Lenders or the U.S. Required Lenders, as applicable, can agree, it being understood that a Combined Lender is deemed to have agreed to any and all amounts that are lower than the amount actually determined by such Combined Lender to be the appropriate value of the Global Borrowing Base and the U.S. Borrowing Base. Upon approval or deemed approval by the Combined Lenders, Lenders, Required Lenders or U.S. Required Lenders, as applicable, of the Global Borrowing Base and the U.S. Borrowing Base, the Global Administrative Agent upon notice thereof shall, by written notice to Borrower, Canadian Borrower and the Combined Lenders, designate the new Global Borrowing Base available to Borrower and the Canadian Borrower, and the new U.S. Borrowing Base available to Borrower, in each case as of April 1st of the applicable calendar year (each such notice in this Section 2.7(b) or Section 2.7(c) below, herein a “Global Borrowing Base Designation Notice”). Upon receipt of such Global Borrowing Base Designation Notice, Borrower shall designate the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base to the Global Administrative Agent in accordance with Section 2.7(d).

(c) Semi-Annual Scheduled Determination of the Global Borrowing Base and U.S. Borrowing Base. In addition, promptly after June 30 of each calendar year (commencing June 30, 2006), and in any event prior to September 1st of each calendar year (commending September 1, 2006), Borrower will make available for review by the Global Administrative Agent a Reserve Report in form and substance reasonably satisfactory to the Global Administrative Agent, prepared by Borrower’s internal petroleum engineers, which Reserve Report shall evaluate as of June 30 of such calendar year vi) the Proven Reserves attributable to the Oil and Gas Properties which Borrower wishes to include in the Global Borrowing Base, and a projection of the rate of production and net operating income with respect thereto, as of such date, and vii) the Proven Reserves attributable to the Oil and Gas Properties of Borrower and the U.S. Loan Parties which Borrower wishes to include in the U.S. Borrowing Base, and a projection of the rate of production and net operating income with respect thereto, as of such date, in each case, together with additional data concerning pricing, hedging, operating costs, and quantities of production, and other information and engineering and geological data as the Global Administrative Agent or any Combined Lender may reasonably request. The Global Administrative Agent and the Required Lenders (or all Combined Lenders in the case of a proposed increase of the Global Borrowing Base), or the Global Administrative Agent and the U.S. Required Lenders (or all Lenders in the case of a proposed increase of the U.S. Borrowing Base), as applicable, shall approve and designate the new Global Borrowing Base and the U.S. Borrowing Base, as applicable, in each case as of October 1st of the applicable calendar year in accordance with the procedures and standards described in Section 2.7(b) and Borrower shall provide a Global Borrowing Base Allocation Notice to the Global Administrative Agent in accordance with Section 2.7(d).

(d) Allocation of the Global Borrowing Base. The Global Borrowing Base shall be comprised of the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base, and allocations between the Allocated U.S. Borrowing Base and Allocated Canadian Borrowing Base shall be made in accordance with this Section 2.7(d).

(i) The “Allocated U.S. Borrowing Base” means, as of any date, the amount in U.S. Dollars designated or determined as such from time to time (a) by Borrower pursuant to a Global Borrowing Base Allocation Notice delivered in accordance with Section 2.7(d)(iii) or (iv) of this Agreement or (b) in accordance with the other provisions of this Agreement. On the date of this Agreement, the initial Allocated U.S. Borrowing Base shall be U.S.$11,000,000.

(ii) The “Allocated Canadian Borrowing Base” means, as of any date, the Equivalent Amount in U.S. Dollars designated as such from time to time (c) by Borrower pursuant to a Global Borrowing Base Allocation Notice delivered in accordance with Section 2.7(d)(iii) or (iv) of this Agreement or (d) in accordance with the other provisions of this Agreement. On the date of this Agreement, the initial Allocated Canadian Borrowing Base shall be U.S.$0.

(iii) Upon receipt of the Global Borrowing Base Designation Notice, Borrower shall specify within ten (10) days of its receipt thereof the allocation of the Global Borrowing Base between the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base by providing a written notice to the Global Administrative Agent of such allocation (each such notice herein a “Global Borrowing Base Allocation Notice”); provided that (2) the sum of the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base shall at all times be equal to the Global Borrowing Base, and (3) the Allocated U.S. Borrowing Base shall never exceed the U.S. Borrowing Base then in effect. In the event that Borrower fails to provide the Global Administrative Agent with a Global Borrowing Base Allocation Notice within the period required by this Section 2.7(d)(iii), the Global Borrowing Base will be allocated in same proportion as existed prior to such redetermination. Promptly upon the allocation of the Global Borrowing Base between the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base in accordance with the procedures set forth above, the Global Administrative Agent shall provide a written notice to the Combined Lenders and Borrower, which written notice shall set forth the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base to be in effect. Any designation of the Allocated U.S. Borrowing Base or the Allocated Canadian Borrowing Base effected pursuant to this Section 2.7(d)(iii) in connection with a determination or redetermination of the Global Borrowing Base or U.S. Borrowing Base shall be effective as of the date of the Global Borrowing Base Designation Notice.

(iv) Borrower shall have the right to request the Combined Lenders to increase the Allocated U.S. Borrowing Base (but in no event to an amount in excess of the U.S. Borrowing Base then in effect) and decrease the Allocated Canadian Borrowing Base, or to increase the Allocated Canadian Borrowing Base and decrease the Allocated U.S. Borrowing Base, by providing a written notice to the Global Administrative Agent and the Combined Lenders; provided that Borrower may change the Allocated U.S. Borrowing Base and/or the Allocated Canadian Borrowing Base only one (1) time during any fiscal quarter unless necessary to cure any deficiency as contemplated by Section 2.10(b). In connection with such increase or decrease, each Combined Lender shall have its share of the Allocated U.S. Borrowing Base or the Allocated Canadian Borrowing Base, as applicable, increased or decreased, as the case may be, by an amount in proportion to its Applicable Percentage (as defined herein, in the case of a Lender, and as defined in the Canadian Credit Agreement, in the case of a Canadian Lender). The revised Allocated U.S. Borrowing Base and Allocated Canadian Borrowing Base shall become effective upon the delivery by the Global Administrative Agent to Borrower and the Combined Lenders of written notice thereof.

(e) Discretionary Determination of the Global Borrowing Base and U.S. Borrowing Base. Each of Borrower and, at the request of the Required Lenders, the Global Administrative Agent shall have the right to redetermine the Global Borrowing Base and the U.S. Borrowing Base at any time and from time to time but not more often than one (1) time between any scheduled redetermination (annual or semi-annual) of the Global Borrowing Base and the U.S. Borrowing Base. If either Borrower or, at the request of the Required Lenders, the Global Administrative Agent, shall elect to make a discretionary redetermination of the Global Borrowing Base and U.S. Borrowing Base pursuant to the provisions of this Section 2.7(e), Borrower shall, within 30 days of receipt of a request therefor from the Global Administrative Agent, deliver to the Global Administrative Agent an Internal Reserve Report or such other updated engineering, production, operating and other data as the Global Administrative Agent or any Combined Lender may reasonably request. The Global Administrative Agent, the Required Lenders, the Combined Lenders, the U.S. Required Lenders or all Lenders, as applicable, shall approve and designate the new Global Borrowing Base and U.S. Borrowing Base in accordance with the procedures and standards described in Section 2.7(b) and Borrower shall provide a Global Borrowing Base Allocation Notice to the Global Administrative Agent in accordance with Section 2.7(d)(iii); provided that in the event that Borrower fails to provide such Global Borrowing Base Allocation Notice, the Global Borrowing Base shall be allocated between the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base in accordance with Section 2.7(d)(iii).

(f) General Provisions With Respect to the Global Borrowing Base and U.S. Borrowing Base. The determination of the Global Borrowing Base and the U.S. Borrowing Base shall be made by the Global Administrative Agent and the Combined Lenders or the Required Lenders, or the Lenders or the U.S. Required Lenders, as applicable, taking into consideration the estimated value of the Oil and Gas Properties owned by Borrower and the other Loan Parties as reflected in the most recent Reserve Report delivered hereunder and any other relevant information obtained by or delivered to the Global Administrative Agent or any Combined Lender, all in accordance with the other provisions of this Section 2.7 in accordance with their customary practices for oil and gas loans as in effect from time to time. It is understood by the parties hereto that the Combined Lenders shall have no commitment or obligation whatsoever to increase the Global Borrowing Base or U.S. Borrowing Base to any amount in excess of U.S.$250,000,000, and nothing herein contained shall be construed to be a commitment by the Combined Lenders to so increase the Global Borrowing Base or U.S. Borrowing Base. The Global Borrowing Base and U.S. Borrowing Base may each be redetermined pursuant to Section 2.7(b) (annual), Section 2.7(c) (semi-annual) and Section 2.7(e) (discretionary) and may be adjusted from time to time to give effect to occurrence of asset dispositions under Section 2.7(g). In connection with any redetermination or adjustment pursuant to any of the foregoing, if the Global Administrative Agent determines that either a Global Borrowing Base Deficiency or a U.S. Borrowing Base Deficiency exists, the Global Administrative Agent shall give written notice thereof to Borrower and the date such notice is received shall be the “Deficiency Notification Date”.

(g) Adjustment of Global Borrowing Base In Connection With Asset Dispositions. In the event that Borrower sells, transfers or otherwise disposes in one or more transactions any Property pursuant to Section 7.5(f), if the aggregate Loan Value of all such Property so sold, transferred or otherwise disposed of during the period since the most recent redetermination of the Global Borrowing Base shall exceed 5% of the amount of the then current Global Borrowing Base, then the Global Borrowing Base shall be reduced by an amount equal to the Loan Value assigned to such Property in the most recently prepared Reserve Report. The Global Administrative Agent shall provide notice to Borrower and the Combined Lenders of the reduction in the Global Borrowing Base resulting from such disposition, which reduction shall be effective as of the date of such notice. Any such reduction in the Global Borrowing Base shall result in a corresponding reduction in the U.S. Borrowing Base and the Allocated U.S. Borrowing Base (to the extent that the Property so sold, transferred or otherwise disposed of is located in the United States) or in the Allocated Canadian Borrowing Base (to the extent that the Property so sold, transferred or otherwise disposed of is located in Canada).

(h) Maximum Credit. The Global Borrowing Base shall represent the maximum amount of credit in the form of loans, letters of credit and bankers’ acceptances (subject to the aggregate Combined Commitments and subject to the other provisions hereof or of the Canadian Credit Agreement) that the Combined Lenders will extend to Borrower or Canadian Borrower pursuant to the Combined Loan Documents at any one time prior to the Maturity Date. The U.S. Borrowing Base shall represent the maximum amount of credit in the form of Loans and Letters of Credit (subject to the aggregate Commitments and subject to the other provisions thereof) that the Lenders will extend to Borrower pursuant to the Loan Documents at any one time prior to the Maturity Date.

Section 2.8 Termination and Reduction of Commitments.

(a) Unless previously terminated in accordance with this Agreement, the Commitments shall terminate on the Maturity Date.

(b) Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (4) each reduction of the Commitments shall be in an amount that is an integral multiple of U.S.$500,000 and not less than U.S.$1,000,000 and (5) Borrower shall not terminate or reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.10, the aggregate Credit Exposure of the Lenders would exceed the aggregate Commitments of the Lenders.

(c) Borrower shall notify the Global Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least two (2) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Global Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Commitments delivered by Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by Borrower (by notice to the Global Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among each of the Lenders in accordance with each such Lender’s Applicable Percentage.

Section 2.9 Repayment of Loans; Evidence of Debt.

(a) Borrower hereby unconditionally promises to pay to the Global Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan and Borrowing of such Lender on the Maturity Date.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Global Administrative Agent shall maintain accounts in which it shall record (6) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (7) the amount of any principal or interest due and payable or to become due and payable from Borrower to each Lender hereunder and (8) the amount of any sum received by the Global Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof. In the event of any inconsistency between the account maintained by any Lender and the account maintained by the Global Administrative Agent, the account maintained by the Global Administrative Agent shall control, absent manifest error.

(d) The entries made in the accounts maintained pursuant to paragraphs (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Global Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of Borrower to repay the Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans made by it be evidenced by one or more promissory notes. In such event, Borrower shall prepare, execute and deliver to such Lender promissory notes payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns and in a form approved by the Global Administrative Agent). Thereafter, the Loans evidenced by such promissory notes and interest thereon shall at all times (including after assignment pursuant to Section 10.4) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if any such promissory note is a registered note, to such payee and its registered assigns).

Section 2.10 Prepayment of Loans.

(a) Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the requirements of this Section.

(b) If either a Global Borrowing Base Deficiency or a U.S. Borrowing Base Deficiency occurs, then Borrower shall take the following actions:

(i) in the case of a Global Borrowing Base Deficiency resulting from a redetermination or reduction of the Global Borrowing Base, Borrower shall, within ten (10) days following the Deficiency Notification Date, provide written notice (the “Election Notice”) to the Global Administrative Agent stating the action which Borrower proposes to take to remedy such deficiency, and Borrower shall thereafter, at its option, either (a) within thirty (30) days following the delivery of the Election Notice, prepay Combined Loans in an aggregate principal amount equal to such deficiency, together with interest on the principal amount paid accrued to the date of such prepayment, (b) eliminate such deficiency by making three (3) consecutive monthly mandatory prepayments of the Combined Loans, together with interest on the principal amount paid accrued to the date of such prepayment, each such payment to be in the amount of 1/3rd of the amount of such deficiency, commencing on the last day of the month in which the Election Notice is delivered, and continuing on the last day of each month thereafter, (c) within ninety (90) days following the delivery of the Election Notice, submit (and pledge as Collateral) additional Oil and Gas Properties owned by Borrower or any other Loan Party for consideration in connection with the determination of the Global Borrowing Base which the Global Administrative Agent and the Combined Lenders deem sufficient in their sole discretion to eliminate such deficiency, or (d) within ninety (90) days following the delivery of the Election Notice, eliminate such deficiency through a combination of prepayments and submission of additional Oil and Gas Properties as set forth in subclauses (A) and (C) above, and, if after prepaying the Combined Loans pursuant to subclauses (A), (B) or (D) above, a Global Borrowing Base Deficiency remains as a result of any LC Exposure, Borrower shall pay to the Global Administrative Agent an amount equal to such remaining Global Borrowing Base Deficiency to be held as cash collateral as provided in Section 2.4(i);

(ii) in the case of a U.S. Borrowing Base Deficiency resulting from a redetermination or reduction of the Global Borrowing Base, take the action described under clause (i) above (except that prepayments shall be made in respect of Loans made pursuant to this Agreement);

(iii) in the case of either a Global Borrowing Base Deficiency or a U.S. Borrowing Base Deficiency resulting from an asset disposition pursuant to Section 2.7(g), utilize the Net Proceeds of such asset disposition to take the action described under clause (i) above (except that prepayments shall first be made in respect of Loans made pursuant to this Agreement); provided that if a prepayment or deposit is required under this clause (iii), then Borrower shall be obligated to make such prepayment and/or deposit of cash collateral on the Business Day immediately following the receipt by Borrower or any other Loan Party of any Net Proceeds from such asset disposition;

(iv) in the case of a U.S. Borrowing Base Deficiency resulting from a reallocation of the Global Borrowing Base pursuant to Section 2.7(d), prepay Loans in an aggregate principal amount equal to such deficiency, together with interest on the principal amount paid accrued to the date of such prepayment, and if a U.S. Borrowing Base Deficiency remains after prepaying all of the Loans as a result of any LC Exposure, pay to the Global Administrative Agent an amount equal to such remaining U.S. Borrowing Base Deficiency to be held as cash collateral as provided in Section 2.4(i); it being understood that Borrower shall be obligated to make such prepayment and/or deposit of cash collateral on the effective date of such reallocation;

(v) notwithstanding anything in this Section 2.10 to the contrary, in the event that a U.S. Borrowing Base Deficiency exists at a time when no Global Borrowing Base Deficiency exists, then, to the extent that such action would cure (in whole or in part) such U.S. Borrowing Base Deficiency, Borrower may reallocate the Global Borrowing Base between the Allocated U.S. Borrowing Base and the Allocated Canadian Borrowing Base by providing the Global Administrative Agent with its election to do so (which election will designate the relevant reallocations) on the Business Day on which such U.S. Borrowing Base Deficiency occurs; provided, however, that no reallocation shall be permitted to the extent such reallocation would cause the aggregate “Credit Exposure” of the Canadian Lenders under the Canadian Credit Agreement to be greater than the lesser of the aggregate “Commitments” thereunder and the Allocated Canadian Borrowing Base; and

(vi) in the case of a Global Borrowing Base Deficiency or any U.S. Borrowing Base Deficiency not resulting from a reason described in clauses (i), (ii), (iii) or (iv) above, Borrower will prepay within thirty (30) days the Loans and “Loans” under the Canadian Credit Agreement in an aggregate principal amount equal to such Global Borrowing Base Deficiency or U.S. Borrowing Base Deficiency together, in each case, with unpaid interest thereon accrued to the date of such prepayment and, if after prepaying all such Loans and “Loans” under the Canadian Credit Agreement, a Global Borrowing Base Deficiency remains as a result of any LC Exposure, pay to the Global Administrative Agent an amount equal to such remaining Global Borrowing Base Deficiency to be held as cash collateral as provided in Section 2.4(i).

(c) Notwithstanding any other provision of this Section 2.10, if at any time the Credit Exposure of any Lender exceeds its Commitment, Borrower will forthwith prepay the Loans of such Lender in an aggregate principal amount equal to such excess, together with interest on the principal amount paid accrued to the date of such prepayment, and if any excess remains after prepaying all of such Loans as a result of any LC Exposure of such Lender, pay to the Global Administrative Agent an amount equal to such remaining excess to be held as cash collateral for such Lender as provided in Section 2.4(i). Borrower shall make prepayments pursuant to this clause (c) prior to making prepayments pursuant to clause (b) above.

(d) Borrower shall notify the Global Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (9) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, Dallas, Texas time, two Business Days before the date of prepayment or (10) in the case of prepayment of an ABR Borrowing, not later than 10:00 a.m., Dallas, Texas time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid (which amount shall be in a minimum principal amount of U.S.$1,000,000 (or the aggregate amount of the Obligations hereunder at such time, if a lesser amount) and in U.S.$500,000 increments in excess thereof (or such other lesser amount in excess thereof in the event that prepayment is with respect to all Obligations hereunder); provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.8, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.8. Promptly following receipt of any such notice relating to a Borrowing, the Global Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.2. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.12 and by any other amounts then due under this Agreement (including all amounts due under Section 2.16).

Section 2.11 Fees.

(a) Borrower agrees to pay to the Global Administrative Agent for the account of each Lender a commitment fee (the “Commitment Fee”), which shall accrue at the Applicable Rate for Commitment Fees on the daily amount equal to the Applicable Percentage of such Lender of the Unutilized Commitment during the period from and including the Global Effective Date to but excluding the date on which the Commitments terminate. Accrued Commitment Fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date of this Agreement; provided that any Commitment Fees accruing after the date on which the Commitments terminate shall be payable on demand. All Commitment Fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b) Borrower agrees to pay (11) to the Global Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which shall accrue at the Applicable Rate for Eurodollar Loans on the average daily amount of such Lender’s LC Exposure during the period from and including the date of this Agreement to but excluding the later of the date on which the Commitments terminate and the date on which the Lenders cease to have any LC Exposure, (12) from and after the date one or more Persons (in addition to JPMorgan Chase Bank, N.A.) becomes a Lender hereunder, to the Issuing Bank a fronting fee equal to the greater of (a) U.S.$500 and (b) the rate of 0.125% per annum on the face amount of each Letter of Credit issued by the Issuing Bank, and (13) to the Issuing Bank, such Issuing Bank’s standard fees with respect to the administration, issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued participation fees shall be payable in arrears on the last day of each March, June, September and December of each year, commencing on the first such date to occur after the date of this Agreement; provided that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Fronting fees with respect to any Letter of Credit shall be payable at the time of issuance of such Letter of Credit. Any other fees payable to the Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) Borrower agrees to pay to the Global Administrative Agent and/or the Arranger, for its own account and for the account of each Lender, as applicable, fees, in the amounts and at the times separately agreed upon among Parent, Borrower, the Global Administrative Agent and the Arranger, including, without limitation, the amounts agreed upon in the Fee Letter.

(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Global Administrative Agent (or the Issuing Bank, in the case of fees payable to it) for distribution, in the case of Commitment Fees and participation fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances.

Section 2.12 Interest.

(a) Subject to Section 10.13, the Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate for ABR Loans.

(b) Subject to Section 10.13, the Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate for Eurodollar Loans.

(c) Notwithstanding the foregoing, but subject to Section 10.13, if any principal of or interest on any Loan or any fee or other amount payable by Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (14) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (15) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

(d) Subject to Section 10.13, accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided that (16) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand of the Global Administrative Agent or the Required Lenders (through the Global Administrative Agent), (17) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (18) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) Subject to Section 10.13, all interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate, shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Global Administrative Agent, and such determination shall be conclusive absent manifest error.

Section 2.13 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(a) the Global Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period;

(b) the Global Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; or

(c) the Global Administrative Agent determines in good faith (which determination shall be conclusive) that by reason of circumstances affecting the interbank dollar market generally, deposits in U.S. Dollars in the London interbank dollar market are not being offered for the applicable Interest Period and in an amount equal to the amount of the Eurodollar Loan requested by Borrower,

then the Global Administrative Agent shall give prompt notice thereof to Borrower and the Lenders by telephone or telecopy and, if given by telephone, as promptly as practicable thereafter in writing and, until the Global Administrative Agent notifies Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (19) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing for the affected Interest Period shall be ineffective, and (20) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as a Eurodollar Loan having the shortest Interest Period which is not unavailable under clauses (a) through (c) of this Section, and if no Interest Period is available, as an ABR Borrowing.

Section 2.14 Illegality.

(a) Notwithstanding any other provision of this Agreement to the contrary, if (21) by reason of the adoption of any applicable Governmental Rule or any change in any applicable Governmental Rule or in the interpretation or administration thereof by any Governmental Authority or compliance by any Lender with any request or directive (whether or not having the force of law) of any central bank or other Governmental Authority or (22) circumstances affecting the London interbank dollar market or the position of a Lender therein shall at any time make it unlawful or impracticable in the sole discretion of a Lender exercised in good faith for such Lender or its Applicable Lending Office to (a) honor its obligation to make Eurodollar Loans either generally or for a particular Interest Period provided for hereunder, or (b) maintain Eurodollar Loans either generally or for a particular Interest Period provided for hereunder, then such Lender shall promptly notify Borrower thereof through Global Administrative Agent and such Lender’s obligation to make or maintain Eurodollar Loans having an affected Interest Period hereunder shall be suspended until such time as such Lender may again make and maintain Eurodollar Loans having an affected Interest Period (in which case the provisions of Section 2.14(b) hereof shall be applicable). Before giving such notice pursuant to this Section 2.14, such Lender will designate a different available Applicable Lending Office for the affected Eurodollar Loans of such Lender or take such other action as Borrower may request if such designation or action will avoid the need to suspend such Lender’s obligation to make Eurodollar Loans hereunder and will not, in the sole opinion of such Lender exercised in good faith, be disadvantageous to such Lender (provided, that such Lender shall have no obligation so to designate an Applicable Lending Office for Eurodollar Loans located in the United States of America).

(b) If the obligation of any Lender to make or maintain any Eurodollar Loans shall be suspended pursuant to Section 2.14(a) hereof, all Loans having an affected Interest Period which would otherwise be made by such Lender as Eurodollar Loans shall be made instead as ABR Loans (and, if such Lender so requests by notice to Borrower with a copy to the Global Administrative Agent, each Eurodollar Loan having an affected Interest Period of such Lender then outstanding shall be automatically converted into an ABR Loan on the last day of the Interest Period for such Eurodollar Loans unless earlier conversion is required by applicable law) and, to the extent that Eurodollar Loans are so made as (or converted into) ABR Loans, all payments of principal which would otherwise be applied to such Eurodollar Loans shall be applied instead to such ABR Loans.

Section 2.15 Increased Costs.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank; or

(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), then Borrower will pay to such Lender or such Issuing Bank such additional amount or amounts as will compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy), then Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to Borrower and shall be conclusive absent manifest error. Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or such Issuing Bank, as the case may be, notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

Section 2.16 Break Funding Payments. In the event of i) the payment (including prepayment) of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), j) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, k) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.10(b) and is revoked in accordance therewith), or l) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by Borrower pursuant to Section 2.19 then, in any such event, Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (1) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (2) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the London interbank market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to Borrower and the Global Administrative Agent and shall be conclusive absent manifest error. Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

Section 2.17 Taxes.

(a) Any and all payments by or on account of any obligation of Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (3) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), the Global Administrative Agent, each Lender or the Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (4) Borrower shall make such deductions and (5) Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law; provided that if a Lender is in default of its obligations under Section 2.17(e), then Borrower shall only be obligated to comply with clauses (ii) and (iii) of this Section 2.17(a) with respect to payments to be made to such Lender.

(b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Borrower shall indemnify the Global Administrative Agent, each Lender and each Issuing Bank, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Global Administrative Agent, such Lender or such Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided that if a Lender is in default of its obligations under Section 2.17(e), then Borrower shall have no obligations under this Section 2.17(c) with respect to any payments or liabilities described herein made or owed by such Lender. A certificate as to the amount of such payment or liability delivered to Borrower by a Lender or an Issuing Bank, or by the Global Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, if available, Borrower shall deliver to the Global Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Global Administrative Agent.

(e) Each Lender that is not organized under the laws of the United States of America or a state thereof agrees that such Lender will deliver to Borrower and the Global Administrative Agent two (2) duly completed copies of United States Internal Revenue Service Form W-8 BEN or W-8 ECI (or successor form) certifying in either case that such Lender is entitled to receive payments from the Loan Parties under the Loan Documents without deduction or withholding of any United States federal income taxes. Each Lender which so delivers a Form W-8 BEN or W-8 ECI further undertakes to deliver to Borrower and the Global Administrative Agent two (2) additional copies of such form (or a successor form) on or before such form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form so delivered by it and such amendments thereto or extensions or renewals thereof as may be reasonably requested by Borrower or the Global Administrative Agent, in each case, certifying that such Lender is entitled to receive payments from Borrower under the Loan Documents without deduction or withholding of any United States federal income taxes, unless (6) an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and (7) such Lender advises Borrower and the Global Administrative Agent that it is not capable of receiving such payments without any deduction or withholding of United States federal income tax.

(f) If Borrower at any time pays an amount under Section 2.17(a), Section 2.10(b) or Section 2.17(c) to any Lender, the Global Administrative Agent or any Issuing Bank, and such payee receives a refund of or credit for any part of any Indemnified Taxes or Other Taxes which such payee determines in its sole judgment is made with respect to such amount paid by Borrower, such Lender, the Global Administrative Agent or any Issuing Bank, as the case may be, shall pay to such Borrower the amount of such refund or credit promptly, and in any event within 30 days, following the receipt of such refund or credit by such payee.

Section 2.18 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15, Section 2.16 or Section 2.17, or otherwise) prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 11:00 a.m., Dallas, Texas time), on the date when due, in immediately available funds, without set off or counterclaim. Any amounts received after such time on any date may, in the discretion of the Global Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Global Administrative Agent c/o JPMorgan Chase Bank, N.A., 00 Xxxxx Xxxxxxxx, Xxxxx 00, Xxxxxxx, Xxxxxxxx 00000-0000, Attention: Xxxxx Xxxxx, Telephone: 000-000-0000, Fax: 000-000-0000, with a copy to JPMorgan Chase Bank, N.A., 1717 Xxxx Xxxxxx, 0^xx Xxxxx, Mail Code TX1-2448, Xxxxxx, Xxxxx 00000, Attention: Xxxxx Xxxxxx, Telephone: 000-000-0000, Fax: 000-000-0000, except payments to be made directly to an Issuing Bank as expressly provided herein and payments pursuant Section 2.15, Section 2.16, Section 2.17(a), Section 2.17(c) and Section 10.3 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Global Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. Except as set forth in clause (a) of the definition of “Interest Period”, if any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in U.S. Dollars.

(b) If at any time insufficient funds are received by and available to the Global Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (8) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (9) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c) If any Lender shall, by exercising any right of set off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements; provided that (10) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (11) the provisions of this paragraph shall not be construed to apply to any payment made by Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of Borrower in the amount of such participation.

(d) Unless the Global Administrative Agent shall have received notice from Borrower prior to the date on which any payment is due to the Global Administrative Agent for the account of the Lenders or an Issuing Bank hereunder that Borrower will not make such payment, the Global Administrative Agent may assume that Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or an Issuing Bank, as the case may be, the amount due. In such event, if Borrower has not in fact made such payment, then each of the Lenders or each of the Issuing Banks, as the case may be, severally agrees to repay to the Global Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Global Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Global Administrative Agent in accordance with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.4(d)(e), Section 2.5(b), Section 2.18(d) or Section 10.3(c) then the Global Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Global Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

Section 2.19 Mitigation Obligations; Replacement of Lenders.

(a) If any Lender requests compensation under Section 2.15, or if Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different Applicable Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment (12) would eliminate or reduce amounts payable pursuant to Section 2.15 or Section 2.17, as the case may be, in the future and (13) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If (14) any Lender asserts that events have occurred suspending its obligation to make or maintain Eurodollar Loans under Section 2.14 when substantially all other Lenders have not also done so, (15) any Lender requests compensation under Section 2.15, (16) Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, or (iv) any Lender defaults in its obligation to fund Loans hereunder, then Borrower may, at its sole expense and effort, upon notice to such Lender and the Global Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the terms of Section 10.4), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) Borrower shall have received the prior written consent of the Global Administrative Agent, which consent shall not unreasonably be withheld or delayed, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder as of such time, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or Borrower (in the case of all other amounts), (iii) the assignee and assignor shall have entered into an Assignment and Assumption, and (iv) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

In order to induce the Global Administrative Agent, any Issuing Bank and the Lenders to enter into this Agreement and to make Loans and issue or participate in any Letters of Credit hereunder, Borrower and Parent jointly and severally represent and warrant to the Global Administrative Agent, any Issuing Bank and the Lenders as set forth in this Article.

Section 3.1 Organization; Powers. Each of Parent, Borrower and the other Loan Parties is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

Section 3.2 Authorization; Enforceability. The execution, delivery and performance by Borrower and Parent of this Agreement and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each other Loan Party of each Loan Document executed or to be executed by it, are within Borrower’s, Parent’s and each such other Loan Party’s corporate, limited liability company and/or partnership powers, and have been duly authorized by all necessary corporate, limited liability company and/or partnership action, and if required, stockholder, member and/or partner action. This Agreement and each other Loan Document executed or to be executed by it has been duly executed and delivered by Borrower and Parent and constitutes, and each other Loan Document executed or to be executed by any other Loan Party, when executed and delivered by such other Loan Party, will constitute, a legal, valid and binding obligation of Borrower, Parent or such other Loan Party (as the case may be), enforceable in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

Section 3.3 Approvals; No Conflicts. The execution, delivery and performance by Borrower and Parent of this Agreement and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each other Loan Party of each Loan Document executed or to be executed by such other Loan Party, m) do not require any Governmental Approval or third party approvals, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect Liens created under the Loan Documents, n) will not violate any applicable Governmental Rule or the Organic Documents of Borrower, Parent or any such other Loan Party or any order of any Governmental Authority, o) will not violate or result in a default under any indenture, agreement or other instrument binding upon Borrower, Parent or any such other Loan Party or its assets, or give rise to a right thereunder to require any payment to be made by Borrower, Parent or any such other Loan Party, and p) will not result in the creation or imposition of any Lien on any asset of Borrower, Parent or any such other Loan Party, except Liens created under the Loan Documents.

Section 3.4 Financial Condition; No Material Adverse Change.

(a) Parent has heretofore furnished to the Lenders and the Global Administrative Agent copies of Parent’s consolidated balance sheet and statements of income, stockholders equity and cash flows i) as of and for the fiscal year ended December 31, 2005, audited by Xxxx & Associates LLP, independent public accountants, and ii) as of and for the fiscal quarters and the portions of the fiscal year ended March 31, 2006, certified by the chief financial officer of Parent. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of Parent and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP consistently applied, subject to year end audit adjustments in the case of the statements referred to in clause (ii) above.

(b) Except as set forth in Schedule 3.4 or reflected in the financial statements referred to in Section 3.4(a), neither Borrower, Parent, nor any other Loan Party has any contingent liabilities, unusual long-term commitments or unrealized losses.

(c) Since December 31, 2005, there has been no material adverse change in the consolidated financial condition, operations or business taken as a whole of Parent and its consolidated Subsidiaries.

Section 3.5 Properties.

(a) Each of Borrower, Parent and the other Loan Parties owns its Properties free and clear of all Liens (other than Liens permitted by Section 7.2).

(b) After giving full effect to all Liens permitted under Section 7.2, Borrower, Parent and the other Loan Parties own the net interests in Hydrocarbons produced from the Oil and Gas Properties as reflected in the most recent Reserve Report, and neither Borrower, Parent nor any other Loan Party is obligated to bear costs or expenses in respect of the Oil and Gas Properties in excess of its working interest percentage as reflected in the most recent Reserve Report.

Section 3.6 Litigation.

(a) Except for such actions, suits or proceedings set forth in Schedule 3.6 hereto and any other actions, suits or proceedings from time to time disclosed in writing by Borrower, Parent or the other Loan Parties to the Global Administrative Agent after the date of this Agreement (collectively, the “Disclosed Matters”), there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Borrower or Parent, threatened against or affecting Borrower, Parent or any other Loan Party or any of their respective Properties, businesses, assets or revenues, (1) that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (2) that question the validity or enforceability of any of the Loan Documents or seek to enjoin or prevent the Financing Transactions.

(b) Since the date of this Agreement, there has been no change in the status of the Disclosed Matters that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

Section 3.7 Compliance with Laws and Agreements. Each of Borrower, Parent and the other Loan Parties is in compliance with all Governmental Rules applicable to such Person or its Property and all indentures, agreements and other instruments binding upon it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

Section 3.8 Investment Company Status. Neither Borrower, Parent nor any of their Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

Section 3.9 Taxes. Except as set forth in Schedule 3.9, each of Borrower, Parent, the other Loan Parties and each of their Subsidiaries which is a member of Parent’s consolidated U.S. federal income tax group has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except q) Taxes that are being contested in good faith by appropriate proceedings and for which Borrower, Parent or such Subsidiary, as applicable, has set aside on its books adequate reserves or r) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

Section 3.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (in each case determined based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) as of the date of the most recent financial statements reflecting such amounts, does not exceed the fair market value of the assets of such Plan (as of the date of determination of such benefit obligation amount) by an amount which, if it constituted a direct liability of Parent or Borrower, could reasonably be expected to have a Material Adverse Effect.

Section 3.11 Disclosure. Borrower and Parent have disclosed to the Lenders and the Global Administrative Agent all agreements, court orders, judgments, instruments and corporate or other restrictions to which Borrower, Parent or any of their Subsidiaries is subject, and all other matters known to any of them relating to any of the foregoing, which agreements, court orders, judgments, instruments, restrictions and other matters individually or in aggregate could reasonably be expected to result in a Material Adverse Effect. None of the documents, reports, financial statements, certificates or other information furnished by or on behalf of Borrower, Parent or any of their Subsidiaries to the Global Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, Borrower and Parent represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

Section 3.12 Subsidiaries. Schedule 3.12 sets forth the name, the identity or corporate structure, the ownership interest, the chief executive office, principal places of business, and, if applicable, the Federal Taxpayer Identification Number, of each direct or indirect Subsidiary of Parent as of the Global Effective Date. Schedule 3.12 also sets forth the name of each Restricted Subsidiary and Unrestricted Subsidiary of Parent as of the Global Effective Date. As of the Global Effective Date, Parent does not have any Subsidiaries other than the Subsidiaries identified in Schedule 3.12.

Section 3.13 Insurance. Schedule 3.13 sets forth a description of all insurance maintained by or on behalf of Borrower, Parent and the other Loan Parties as of the date of this Agreement. As of the date of this Agreement, all premiums in respect of such insurance then due have been paid.

Section 3.14 Labor Matters. As of the Global Effective Date, there are no strikes, lockouts or slowdowns against Borrower, Parent or any other Loan Party pending or, to the knowledge of Borrower or Parent, threatened. The hours worked by and payments made to employees of Borrower, Parent and the other Loan Parties have not been in material violation of the Fair Labor Standards Act or any other applicable Federal, state, provincial, local, territorial or foreign law dealing with such matters. All payments due from Borrower, Parent or any other Loan Party, or for which any claim may be made against Borrower, Parent or any other Loan Party, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Borrower, Parent or any other Loan Party.

Section 3.15 Priority; Security Matters. The Combined Obligations are and shall be at all times secured by Liens in all Collateral located in the United States or Canada to the extent perfection has or will occur by the filing of a UCC financing statement in the state of incorporation or formation of each applicable Loan Party, filing a mortgage in real property records of the county in which such real property or fixtures is located (or adjacent in the case of properties located on the Outer Continental Shelf), filing of an instrument to create a floating charge under the laws of the Province of British Columbia, or by possession, and, except for Liens permitted by Section 7.2, all such Liens shall be first priority Liens.

Section 3.16 Environmental Matters. Except as set forth in Schedule 3.16 or, after the date of this Agreement, otherwise disclosed in writing by Parent or Borrower to the Global Administrative Agent:

(a) All facilities and Property owned or leased by Borrower, Parent or any of the other Loan Parties have been, and continue to be, owned or leased by Borrower, Parent or the other Loan Parties in compliance with all applicable Environmental Laws except where the failure to comply could not reasonably be expected to have a Material Adverse Effect;

(b) There are no pending or, to the knowledge of Borrower or Parent, threatened (1) claims, complaints, notices or requests for information received by Borrower, Parent or any other Loan Party with respect to any alleged violation of any applicable Environmental Law, or (2) complaints or notices to Borrower, Parent or any of the other Loan Parties regarding instances which could give rise to an Environmental Liability for Borrower, Parent or any of the other Loan Parties, which in either case could reasonably be expected to have a Material Adverse Effect;

(c) To the best of Borrower, Parent and the other Loan Parties’ knowledge after reasonable inquiry, there have been no Releases of Hazardous Materials at, on or under any Property now or previously owned or leased by Borrower, Parent or any other Loan Party which could give rise to an Environmental Liability which could reasonably be expected to have a Material Adverse Effect;

(d) Borrower, Parent and the other Loan Parties have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations required by applicable Environmental Laws except where the failure to comply could not reasonably be expected to have a Material Adverse Effect;

(e) No Property now or previously owned or leased by Borrower, Parent or any of other Loan Parties is listed or proposed for listing (with respect to owned Property only) on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any analogous state or any Canadian federal or provincial list of sites requiring investigation or clean-up which listing could result in the imposition of an Environmental Liability on any of Borrower, Parent or any of the other Loan Parties which could reasonably be expected to have a Material Adverse Effect;

(f) There are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any Property now or previously owned or leased by Borrower, Parent or any other Loan Party which have been operated in non-compliance with applicable Environmental Laws which could give rise to an Environmental Liability which could reasonably be expected to have a Material Adverse Effect;

(g) None of Borrower, Parent or any other Loan Party has directly transported or directly arranged for the transportation of any Hazardous Material to any site which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any analogous state, provincial or territorial list or which is the subject of federal, state, provincial, territorial or local enforcement actions or other investigations which could give rise to an Environmental Liability which could reasonably be expected to have a Material Adverse Effect;

(h) There are no polychlorinated biphenyls or friable asbestos present at any Property now or previously owned or leased by Borrower, Parent or any other Loan Party which ownership or use of could result in the imposition of an Environmental Liability which could reasonably be expected to have a Material Adverse Effect; and

(i) Borrower and Parent have adopted and implemented procedures and guidelines as they have determined are reasonably appropriate to continuously ensure compliance with applicable Environmental Laws and to identify and evaluate events or conditions that would result in any material Environmental Liability.

Section 3.17 Solvency. Immediately after the consummation of the Financing Transactions to occur on the Global Effective Date, s) no Loan Party will have unreasonably small capital with which to conduct the business in which such Loan Party is engaged as such business is now conducted and is proposed to be conducted following the Global Effective Date; and t) Borrower, Parent and each other Loan Party, on a consolidated basis, will be Solvent.

Section 3.18 Use of Credit. None of Borrower, Parent or any of the other Loan Parties is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any extension of credit hereunder will be used to buy or carry any Margin Stock.

Section 3.19 Claims and Liabilities. None of Borrower, Parent or any of the other Loan Parties has accrued any liabilities under gas purchase contracts for gas not taken, but for which it is liable to pay if not made up and which, if not paid, could reasonably be expected to have a Material Adverse Effect. No claims exist against Borrower, Parent or any other Loan Party for gas imbalances which claims if adversely determined could reasonably be expected to have a Material Adverse Effect. No purchaser of product supplied by Borrower, Parent or any other Loan Party has any claim against Borrower, Parent or any other Loan Party for product paid for, but for which delivery was not taken as and when paid for, which claim if adversely determined could reasonably be expected to have a Material Adverse Effect.

ARTICLE IV

CONDITIONS

Section 4.1 Effectiveness. This Agreement shall become effective on the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2):

(a) Certain Loan Documents. The Global Administrative Agent (or its counsel) shall have received from each party thereto either a counterpart of each of the following documents duly executed on behalf of such party or written evidence satisfactory to the Global Administrative Agent (which may include telecopy transmission of a signed signature page of such document) that each such party has duly executed for delivery to the Global Administrative Agent a counterpart of each of the following documents which documents must be acceptable to the Global Administrative Agent in its sole and absolute discretion: this Agreement, the Canadian Credit Agreement and the Intercreditor Agreement.

(b) Fees and Expenses. The Global Administrative Agent, the Canadian Administrative Agent, the Arranger and the Lenders shall have received all fees, including the fees agreed upon in the Fee Letter, and other amounts due and payable pursuant to this Agreement or any other Loan Document on or prior to the date hereof, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel) required to be reimbursed or paid by any Loan Party hereunder or under any other Combined Loan Document.

Section 4.2 Initial Loan. The obligations of u) the Lenders to make Loans or v) any Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 10.2):

(i) Certain Loan Documents. The Global Administrative Agent (or its counsel) shall have received from each party thereto either a counterpart of each of the following documents duly executed on behalf of such party or written evidence satisfactory to the Global Administrative Agent (which may include telecopy transmission of a signed signature page of such document) that each such party has duly executed for delivery to the Global Administrative Agent a counterpart of each of the following documents: a Facility Guaranty from each of the Loan Parties (other than Parent, Borrower or any Foreign Subsidiary), the Fee Letter, the Pledge Agreement required by Section 4.2(b)(v), the Mortgages executed by Borrower, as required by Section 4.2(b)(vi), and all related financing statements and other filings.

(ii) Canadian Loan Documents. The Global Administrative Agent shall have received copies of the executed Canadian Loan Documents (other than the Canadian Credit Agreement).

(iii) Opinions of Counsel. The Global Administrative Agent shall have received opinions dated the Global Effective Date, addressed to the Global Administrative Agent and all Lenders, from (a) Xxxxx & Xxxxxxx L.L.P., counsel to Parent and Borrower, and (b) local counsel in the State of Wyoming, in each case in form and substance acceptable to the Global Administrative Agent and its counsel.

(iv) Organizational Documents. The Global Administrative Agent shall have received a certificate of an Authorized Officer of each Loan Party dated as of the Global Effective Date, certifying:

(A) that attached to each such certificate is (i) a true and complete copy of the Organic Documents of such Loan Party, as the case may be, as in effect on the Global Effective Date, (ii) a true and complete copy of a certificate from the Governmental Authority of the state of such entity’s organization certifying that such entity is duly organized and validly existing in such state, and (iii) a true and complete copy of a certificate from the appropriate Governmental Authority of each state (without duplication) certifying that such entity is duly qualified and in good standing (including with respect to the payment of franchise taxes, if any) to transact business in such state as a foreign corporation or other entity, if the failure to be so qualified or in good standing could reasonably be expected to have a Material Adverse Effect;

(B) that attached to such certificate is a true and complete copy of resolutions duly adopted by the board of directors or management committee of such Loan Party, as applicable, authorizing the execution, delivery and performance of such of the Loan Documents to which such Loan Party is or is intended to be a party; and

(C) as to the incumbency and specimen signature of each officer of such Loan Party executing such of the Loan Documents to which such Loan Party is or is intended to be a party.

(v) Pledge Agreement. The Global Administrative Agent shall have received counterparts of a Pledge Agreement, dated as of the Global Effective Date, duly executed and delivered by Parent and Borrower, together with the following:

(A) stock certificates representing all the outstanding Equity Interests of Borrower and each other Loan Party owned by or on behalf of Parent and/or Borrower as of the Global Effective Date after giving effect to the Financing Transactions (except that Equity Interests of a Loan Party that is a Foreign Subsidiary shall be limited to 65% of the total combined voting power of all classes of voting Equity Interests of such Foreign Subsidiary), and stock powers and instruments of transfer, endorsed in blank, with respect to such stock certificates, or, if any securities pledged pursuant to the Pledge Agreement are uncertificated securities, confirmation and evidence satisfactory to the Global Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Global Administrative Agent in accordance with the Uniform Commercial Code, as in effect in the State of New York; and

(B) all documents and instruments, including Uniform Commercial Code Financing Statements (Form UCC-1), required by law or reasonably requested by the Global Administrative Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Pledge Agreement.

(vi) Mortgages. The Global Administrative Agent shall have received (c) counterparts of duly-executed Mortgages from Borrower encumbering various Oil and Gas Properties which constitute at least 80% of the Present Value of the Oil and Gas Properties of Borrower evaluated for purposes of establishing the initial amount of the Global Borrowing Base, and (d) executed (as applicable) copies of proper Uniform Commercial Code Form UCC-3 termination statements necessary to release all Liens and other rights of any Person previously granted by any Person in any Collateral described in the Mortgages (except Liens permitted pursuant to Section 7.2), together with such other Uniform Commercial Code Form UCC-3 termination statements as the Global Administrative Agent may reasonably request.

(vii) UCC Searches. The Global Administrative Agent shall have received (e) the UCC Searches, all dated reasonably close to the Global Effective Date, in the discretion of the Global Administrative Agent and in form and substance satisfactory to the Global Administrative Agent, and (f) evidence reasonably satisfactory to the Global Administrative Agent that the Liens indicated by the financing statements (or similar documents) in such UCC Searches are permitted by Section 7.2 or have been released.

(viii) Priority; Security Interest. The Collateral and Borrowing Base Properties shall be free and clear of all Liens, except Liens permitted by Section 7.2. All filings, notices, recordings and other action necessary to perfect the Liens in the Collateral shall have been made, given or accomplished or arrangements for the completion thereof satisfactory to the Global Administrative Agent and its counsel shall have been made and all filing fees and other expenses related to such actions either have been paid in full or arrangements have been made for their payment in full which are satisfactory to the Global Administrative Agent.

(ix) Due Diligence Review. The Global Administrative Agent or its counsel shall have completed (2) a satisfactory review of title to not less than 80% of the Present Value of the Oil and Gas Properties evaluated for purposes of establishing the initial amount of the Global Borrowing Base, and such review shall not have revealed any condition or circumstance which would reflect that the representations and warranties contained in Section 3.5 hereof are inaccurate in any respect, and (3) an environmental review of the Borrowing Base Properties and such review shall not have revealed any condition or circumstance which would reflect that the representations and warranties contained in Section 3.16 hereof are inaccurate in any respect.

(x) Approvals and Consents. The Global Administrative Agent shall have received copies of all Governmental Approvals and third party consents and approvals necessary or advisable in connection with the Financing Transactions.

(xi) Insurance. The Global Administrative Agent and the Lenders shall have received certificates, dated within ten (10) days of the Global Effective Date, from Borrower’s and Parent’s insurers certifying (a) compliance with all of the insurance required by Section 5.7 and by the Security Documents and (b) that such insurance is in full force and effect.

(xii) Initial Reserve Report. The Global Administrative Agent and the Lenders shall have received and shall be satisfied with the contents, results and scope of the Initial Reserve Report.

(xiii) Hedging Agreements. The Global Administrative Agent shall have received a list of any Hedging Agreements currently in existence with respect to Borrower, Parent or any of the other Loan Parties.

(xiv) Financial Statements. The Global Administrative Agent shall have received the financial statements described in Section 3.4 hereof.

(xv) Global Effectiveness Notice. The Global Administrative Agent shall have received the Global Effectiveness Notice.

(xvi) Other Documents. The Global Administrative Agent shall have received such other legal opinions, information, approvals, instruments and documents as the Global Administrative Agent or its counsel may have reasonably requested.

(xvii) Satisfactory Legal Form. All documents executed or submitted pursuant hereto by and on behalf of Borrower, Parent or any other Loan Party shall be in form and substance reasonably satisfactory to the Global Administrative Agent and its counsel.

The Global Administrative Agent shall notify Borrower, Parent and the Lenders of the Global Effective Date, and such notice shall be conclusive and binding. Notwithstanding the foregoing, the obligations of (c) the Lenders to make Loans and (d) any Issuing Bank to issue Letters of Credit hereunder shall not become effective unless each of the foregoing conditions is satisfied (or waived pursuant to Section 10.2) at or prior to 2:00 p.m., Dallas, Texas time, on July 28, 2006 (and, in the event such conditions are not so satisfied or waived, the Commitments shall terminate at such time).

Section 4.3 Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of the Issuing Banks to issue, amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions:

(a) Representations and Warranties. At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, the representations and warranties of each Loan Party set forth in the Loan Documents to which it is a party shall be true and correct on and as of such date after giving effect to such funding and to the intended use thereof as if made on and as of such date (or, if stated to have been made expressly as of an earlier date, were true and correct as of such date).

(b) No Defaults. At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, as applicable, no Default shall have occurred and be continuing and Parent shall be in compliance with the financial covenants set forth in Article VI.

(c) No Material Adverse Effect. At the time of and immediately after giving effect to such Borrowing or the issuance, amendment, renewal or extension of such Letter of Credit, no event or events shall have occurred which individually or in the aggregate could reasonably be expected to have a Material Adverse Effect.

(d) Borrowing Request. The Global Administrative Agent shall have received a Borrowing Request for any Borrowing. Each Borrowing and each issuance, amendment, renewal or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by Borrower and Parent on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section.

ARTICLE V

AFFIRMATIVE COVENANTS

Borrower and Parent jointly and severally agree with the Global Administrative Agent, any Issuing Bank and each Lender that, until the Commitments have expired or been terminated and Obligations shall have been paid and performed in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, Borrower and Parent will perform (or cause the performance of) the obligations set forth in this Article.

Section 5.1 Financial Reporting; Notices and Other Information. Borrower and Parent will furnish, or will cause to be furnished, to each Lender, each Canadian Lender, the Global Administrative Agent and the Canadian Administrative Agent the following financial statements, reports, notices and information:

(a) As soon as available, but in any event within 90 days after the end of each fiscal year of Parent (or not later than one (1) Business Day after such earlier filing date as may be required by the Commission), commencing with the fiscal year ending December 31, 2006, a copy of Parent’s audited annual report for the applicable fiscal year, including therein a consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by an independent public accountant of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Parent and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied;

(b) As soon as available, but in any event within 45 days after the end of each fiscal quarter of Parent (or not later than one (1) Business Day after such earlier filing date as may be required by the Commission) commencing with the fiscal quarter ending June 30, 2006, Parent’s consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for the applicable fiscal quarter and the then-elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by an Authorized Officer of Parent as presenting fairly in all material respects the financial condition and results of operations of Parent and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments;

(c) Concurrently with any delivery of financial statements under clause (a) or (b) above, a compliance certificate, in substantially the form of Exhibit A or any other form approved by the Global Administrative Agent, executed by an Authorized Officer of Parent (4) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (5) setting forth reasonably detailed calculations demonstrating compliance with Article VI, and (6) stating whether any change in GAAP or in the application thereof has occurred since the date of the audited financial statements referred to in Section 3.4 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) Promptly after the sending or filing thereof, copies of all material public filings, reports and communications from Parent or any of its Subsidiaries, and all reports, proxy statements and registration statements which Parent or any of its Subsidiaries files with the Commission or any national securities exchange;

(e) By March 1st of each year, a Reserve Report prepared by an Approved Engineer (the “Independent Reserve Report”), and by September 1st of each year, a Reserve Report prepared by Borrower, utilizing the customary discount rates and price deck of the Global Administrative Agent and in form and substance acceptable to the Global Administrative Agent (the “Internal Reserve Report”);

(f) Within 45 days after the end of each calendar quarter, a certificate specifying any material sales, transfer, assignments or other dispositions of Property of Borrower, Parent or any other Loan Party governed by subsections (d), (e) or (f) of Section 7.5 occurring during such calendar quarter, executed on behalf of Parent by an Authorized Officer; and

(g) Promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Borrower, Parent or any other Loan Party, including, without limitation, any requested Internal Reserve Report, or compliance with the terms of this Agreement, as the Global Administrative Agent or any Lender may reasonably request.

Section 5.2 Notice of Material Events.

(a) Promptly, and in any event within three (3) Business Days of Parent, Borrower or any other Loan Party becoming aware of the following events, Parent or Borrower will furnish to the Global Administrative Agent and each Lender written notice of the following:

(i) the occurrence of any Default; and

(ii) any sales, transfer, assignments or other dispositions of Property of Borrower, Parent or any other Loan Party governed by subsections (d), (e) or (f) of Section 7.5;

(b) Promptly, and in any event within five (5) days of Borrower, Parent or any other Loan Party becoming aware of the following events, Borrower or Parent will furnish to the Global Administrative Agent and each Lender written notice of the following:

(i) (a) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting Borrower, Parent or any other Loan Party or (b) the occurrence of any adverse development with respect to any action, suit or proceeding previously disclosed to the Global Administrative Agent or the Lenders pursuant to this Agreement, in each case if such action, suit, proceeding or development could reasonably be expected to result in a Material Adverse Effect;

(ii) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of Borrower, Parent and the other Loan Parties in an aggregate amount which could reasonably be expected to have a Material Adverse Effect;

(iii) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened or other environmental claims against Borrower, Parent, any other Loan Party, or any of their Properties pursuant to any applicable Environmental Laws which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

(iv) any default under one or more Hedging Agreements which results in an obligation of Borrower, Parent or any other Loan Party to make one or more payments in an aggregate amount in excess of U.S.$250,000; and

(v) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect; and

(c) Each notice delivered under this Section shall be accompanied by a statement of an Authorized Officer of Parent or Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

Section 5.3 Information Regarding Collateral. Parent or Borrower will furnish to the Global Administrative Agent promptly, and in any event within ten (10) days upon becoming aware of the following changes, written notice of any change w) in Borrower’s, Parent’s or any other Loan Party’s corporate or organizational name or in any trade name used to identify Borrower, Parent or such other Loan Party in the conduct of its business or in the ownership of any of its Properties, x) in the location of Borrower’s, Parent’s or any other Loan Party’s chief executive office or its principal place of business, y) in Borrower’s, Parent’s or any other Loan Party’s state of incorporation or formation, z) in Borrower’s, Parent’s or any other Loan Party’s identity or corporate or organizational structure, aa) in Borrower’s, Parent’s or any other Loan Party’s organizational identification number or any other such similar number identifying Borrower, Parent or such Loan Party, and bb) in the location of any Collateral located in Canada to any jurisdiction in which any registration of, or in respect of, the Debenture (as defined in the Canadian Credit Agreement) may not be effective to protect the Lien created thereunder, including, without limitation, information regarding the time of such relocation, the items being relocated and the intended new locality of such items.

Section 5.4 Existence; Conduct of Business. Borrower and Parent will, and will cause each other Loan Party to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect cc) its legal existence and dd) the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business, except where the failure to so preserve, renew or keep in full force and effect such rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks or trade names could not reasonably be expected to result in a Material Adverse Effect.

Section 5.5 Payment of Obligations. Borrower and Parent will, and will cause each other Loan Party to, pay its obligations, including liabilities for Taxes, before the same shall become delinquent or in default, except where ee) the validity or amount thereof is being contested in good faith by appropriate proceedings, ff) Borrower, Parent or such other Loan Party has set aside on its books adequate reserves with respect thereto in accordance with GAAP, gg) such contest effectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation, and hh) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

Section 5.6 Maintenance of Properties. Borrower and Parent will, and will cause each of the other Loan Parties to, keep, preserve, protect and maintain all Properties material to the conduct of its business in good repair, working order and condition, and make necessary and proper repairs, renewals and replacements so that their business, and the respective businesses of the other Loan Parties, carried on in connection therewith may be properly conducted at all times in accordance with standard industry practices unless (1) Borrower, Parent or the respective other Loan Party determines in good faith that the continued maintenance of any of its Properties is no longer economically desirable or (2) the failure to so keep, preserve, protect and maintain such Properties or the failure to make such repairs, renewals or replacements could not reasonably be expected to result in a Material Adverse Effect. In particular, Borrower and Parent will, and will cause each of the other Loan Parties to, operate or cause to be operated its Oil and Gas Properties as a reasonable and prudent operator.

Section 5.7 Insurance. Borrower and Parent will, and will cause each of the other Loan Parties to, maintain, with financially sound and reputable insurance companies insurance in such amounts and against such risks as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations. The Global Administrative Agent, on behalf of the Lenders, will be named as sole loss payee and additional insured, as appropriate, with respect to such insurance. Borrower and Parent will furnish to the Lenders, upon request of the Global Administrative Agent, information in reasonable detail as to the insurance so maintained.

Section 5.8 Casualty and Condemnation. Borrower and Parent ii) will furnish to the Global Administrative Agent and the Lenders written notice promptly, and in any event within three (3) Business Days of the occurrence, of any Casualty Event to any Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or any part thereof or interest therein under power of eminent domain or by condemnation or similar proceeding and jj) will ensure that the Net Proceeds of any such event (whether in the form of insurance proceeds, condemnation awards or otherwise) are collected and applied in accordance with the applicable provisions of the Combined Loan Documents.

Section 5.9 Books and Records; Inspection Rights. Borrower and Parent will, and will cause each of their Subsidiaries to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. Borrower and Parent will, and will cause each of the other Loan Parties to, permit any representatives or agents designated by the Global Administrative Agent or any Lender (including any consultants, accountants, lawyers and appraisers), upon reasonable prior notice and at the reasonable cost and expense of Borrower and Parent, to visit and inspect its Properties, including, without limitation, the Oil and Gas Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at reasonable times and without disruption to the conduct of Borrower’s business; provided, however, so long as no Default shall have occurred and be continuing, the Global Administrative Agent and Lenders agree to limit such visits to one (1) during each fiscal year of Borrower and Parent for which Borrower or Parent shall pay the reasonable cost and expense of the Global Administrative Agent or Lender.

Section 5.10 Compliance with Laws. Borrower and Parent will, and will cause each of their Subsidiaries to, comply with all Governmental Rules applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

Section 5.11 Use of Proceeds and Letters of Credit. Borrower and Parent will, and will cause each of their Subsidiaries to, use the proceeds of the Loans kk) to reimburse each Issuing Bank for LC Disbursements in accordance with Section 2.4(e), or ll) for Borrower’s and the other Loan Parties’ general corporate purposes, including any acquisitions. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the regulations of the Board, including Regulation U. Letters of Credit will be issued only to support normal and customary oil and gas operations including, but not limited to, credit support for insurance or similar items required in support of Borrower’s operations, undertaken by Borrower or any of the other Loan Parties in the ordinary course of its business.

Section 5.12 Additional Subsidiaries. If any additional Subsidiary of Parent is formed or acquired after the Global Effective Date, Borrower and Parent will notify the Global Administrative Agent and the Lenders thereof and whether such Subsidiary is an Unrestricted Subsidiary or a Restricted Subsidiary, and if a Restricted Subsidiary, then Borrower and Parent will cause such Restricted Subsidiary (unless such Restricted Subsidiary is a Foreign Subsidiary) to mm) execute a Facility Guaranty within fifteen (15) Business Days after such Subsidiary is formed or acquired, i) execute a Mortgage (to the extent necessary to comply with Section 5.15) and promptly take such actions to create and perfect Liens on such Restricted Subsidiary’s assets to secure the Obligations as the Global Administrative Agent shall reasonably request, ii) pledge or cause to be pledged all Equity Interests in such Restricted Subsidiary pursuant to a Pledge Agreement within fifteen (15) Business Days after such Restricted Subsidiary is formed or acquired (except that, if such Restricted Subsidiary is a Foreign Subsidiary, Equity Interests of such Restricted Subsidiary to be pledged pursuant to such Pledge Agreement may be limited to 65% of the total combined voting power of all classes of voting Equity Interests of such Restricted Subsidiary) and iii) cause any and all such Persons (except Parent and Borrower) pledging such Equity Interests pursuant to a Pledge Agreement to execute a Facility Guaranty but only if such Person has not heretofore executed a Facility Guaranty.

Section 5.13 Unrestricted Subsidiaries. Borrower and Parent:

(a) will cause the management, business and affairs of each of Borrower, Parent and the other Loan Parties to be conducted in such a manner (including, without limitation, by keeping separate books of account, furnishing separate financial statements of Unrestricted Subsidiaries to creditors and potential creditors thereof and by not permitting any Property of Borrower, Parent and their respective Subsidiaries to be commingled) so that each Unrestricted Subsidiary that is a corporation will be treated as a corporate entity separate and distinct from Borrower, Parent and the other Loan Parties;

(b) will not, and will not permit any of the other Loan Parties to, incur, assume, Guarantee or be or become liable for any Indebtedness of any of the Unrestricted Subsidiaries; and

Section 5.14 Environmental Matters.

(a) Borrower and Parent will, and will cause each of the other Loan Parties to, comply in all material respects with all Environmental Laws now or hereafter applicable to Borrower, Parent or the other Loan Parties, and shall obtain, at or prior to the time required by applicable Environmental Laws, all environmental, health and safety permits, licenses and other authorizations necessary for its operations and maintain such authorizations in full force and effect, except to the extent failure to have any such permit, license or authorization could not reasonably be expected to have a Material Adverse Effect.

(b) Borrower and Parent will, and will cause each of the other Loan Parties to, promptly furnish to the Global Administrative Agent all requests for information, notices of claim, demand letters, and other notifications, received by Borrower, Parent or any other Loan Parties, to the effect that, in connection with its ownership or use of their Properties or the conduct of their business, it may be potentially responsible with respect to any investigation or clean-up of Hazardous Material at any location, except to the extent any such investigation or clean-up could not reasonably be expected to have a Material Adverse Effect.

Section 5.15 Further Assurances; Title Data.

(a) Borrower and Parent will, and will cause each other Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which the Global Administrative Agent or the Required Lenders may reasonably request, to effect the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Loan Parties. Borrower and Parent also agree to provide to the Global Administrative Agent, from time to time upon reasonable request of the Global Administrative Agent, information which is in the possession of Borrower, Parent or the other Loan Parties or otherwise reasonably obtainable by any of them, reasonably satisfactory to the Global Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. The Security Documents shall remain in effect at all times unless otherwise released pursuant to the terms of this Agreement.

(b) Borrower and Parent hereby authorize the Global Administrative Agent and the Lenders to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of Borrower, Parent or any other Loan Party where permitted by law. A carbon, photographic or other reproduction of the Security Documents or any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law. The Global Administrative Agent will promptly send Borrower any financing or continuation statements it files without the signature of Borrower, Parent or any other Loan Party and the Global Administrative Agent will promptly send Borrower the filing or recordation information with respect thereto.

(c) If at any time the aggregate Present Value of the Oil and Gas Properties for which the Global Administrative Agent shall have received currently effective, duly executed Mortgages encumbering such Oil and Gas Properties constitutes (1) less than 80% of the aggregate Present Value of all Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries evaluated for purposes of the then effective Global Borrowing Base, (2) less than 80% of the aggregate Present Value of all Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries located in the United States and evaluated for purposes of the U.S. Borrowing Base then in effect, or (3) less than 80% of the aggregate Present Value of all Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries located in Canada and evaluated for purposes of the Allocated Canadian Borrowing Base then in effect, then Borrower and Parent will, and/or will cause the Restricted Subsidiaries to, execute and deliver to the Global Administrative Agent, Mortgages covering additional Oil and Gas Properties of Borrower, Parent and/or its Restricted Subsidiaries not then encumbered by Mortgages for the benefit of the Global Administrative Agent, such that the Global Administrative Agent shall have received currently effective duly-executed Mortgages (x) encumbering Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries constituting 80% or more of the aggregate Present Value of all Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries evaluated for purposes of the then effective Global Borrowing Base, (y) encumbering Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries located in the United States with a Present Value constituting not less than 80% of the aggregate Present Value of all Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries located in the United States and evaluated for purposes of the U.S. Borrowing Base, and (z) at any time Allocated Canadian Borrowing Base is in effect, encumbering Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries located in Canada with a Present Value constituting not less than 80% of the aggregate Present Value of all Oil and Gas Properties of Borrower, Parent and its Restricted Subsidiaries located in Canada and evaluated for purposes of the Allocated Canadian Borrowing Base.

(d) On or before the delivery to the Global Administrative Agent and Combined Lenders of each Reserve Report required by Section 2.7 or Section 5.1(e) hereof, and at such other times as the Required Lenders may request, Borrower will deliver title information in form and substance reasonably acceptable to the Global Administrative Agent and its counsel covering enough of the proved Oil and Gas Properties evaluated by such Reserve Report that were not included in the immediately preceding Reserve Report, so that the Global Administrative Agent and its counsel shall have received, together with title information previously received, satisfactory title information on at least 80% of the total value of the proved Oil and Gas Properties evaluated by such Reserve Report. Borrower and Parent will, and will cause each other Loan Party to, in all material respects maintain good and defensible title (except for Permitted Encumbrances) to (4) the Mortgaged Properties, and (5) its and their other material Oil and Gas Properties, and to do all things reasonably necessary to cure any material title defects which are not Permitted Encumbrances of which an Authorized Officer of Borrower, Parent or any other Loan Party has knowledge or has been provided written notice.

(e) At any time Borrower or any of the other Loan Parties is required to execute and deliver Mortgages to the Global Administrative Agent pursuant to this Section 5.15, Borrower shall also deliver to the Global Administrative Agent such customary opinions of counsel (including, if so requested, title opinions, and in each case addressed to the Global Administrative Agent) and other evidence of title as the Global Administrative Agent shall deem reasonably necessary or appropriate to verify (6) Borrower’s or such other Loan Party’s title to not less than 80% of the total value of the proved Oil and Gas Properties which are subject to such Mortgages, and (7) the validity, perfection of the Liens and priority (subject only to Permitted Encumbrances) of the Liens created by such Mortgages and such other matters regarding such Mortgages and the Loan Documents as the Global Administrative Agent shall reasonably request.

ARTICLE VI

FINANCIAL COVENANTS

Borrower and Parent jointly and severally agree with the Global Administrative Agent, any Issuing Bank, and each Lender that, until the Commitments have expired or been terminated and Obligations shall have been paid and performed in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, Parent will perform the obligations set forth in this Article.

Section 6.1 Ratio of Total Funded Debt to EBITDA. As of the end of any fiscal quarter, commencing with the fiscal quarter ending December 31, 2006, Parent will not permit its ratio of Total Funded Debt outstanding to Annualized EBITDA to be greater than iv) for the fiscal quarters ending December 31, 2006 and March 31, 2007, 3.50 to 1.00, and v) for the fiscal quarter ending June 30, 2007 and for each fiscal quarter thereafter, 3.00 to 1.00.

Section 6.2 Ratio of Current Assets to Current Liabilities. As of the end of any fiscal quarter, commencing with the fiscal quarter ending December 31, 2006, Parent will not permit its ratio of Current Assets to Current Liabilities to be less than 1.00 to 1.00.

ARTICLE VII

NEGATIVE COVENANTS

Borrower and Parent jointly and severally agree with the Global Administrative Agent, any Issuing Bank, and each Lender that, until the Commitments have expired or been terminated and the Obligations shall have been paid and performed in full and all Letters of Credit shall have expired or terminated and all LC Disbursements shall have been reimbursed, Borrower and Parent will perform the obligations set forth in this Article.

Section 7.1 Indebtedness; Certain Equity Securities.

(a) Borrower and Parent will not, and will not permit any other Loan Party to, create, incur, assume or permit to exist any Indebtedness, except:

(i) Indebtedness created under the Combined Loan Documents;

(ii) Indebtedness of (i) Borrower to any Restricted Subsidiary, (ii) any Restricted Subsidiary to Borrower and (iii) any Restricted Subsidiary to another Restricted Subsidiary that is subordinated to the Combined Obligations in form and substance reasonably satisfactory to the Global Administrative Agent;

(iii) Guarantees by Borrower and Parent of Indebtedness of any other Loan Party and by any other Loan Party of Indebtedness of Borrower and Parent, in each case existing as of the date hereof and set forth in Schedule 7.1(a)(iii);

(iv) Indebtedness of any Person that becomes a Restricted Subsidiary after the Global Effective Date; provided that (a) such Indebtedness exists at the time such Person becomes a Restricted Subsidiary and is not created in contemplation of or in connection with such Person becoming a Restricted Subsidiary and (b) the aggregate principal amount of Indebtedness permitted by this clause (iv) and clause (vii) shall not exceed U.S.$1,000,000 at any time outstanding;

(v) Indebtedness of Borrower and the Restricted Subsidiaries secured by Liens permitted by Section 7.2(e) up to but not exceeding U.S.$500,000 at any one time outstanding;

(vi) Capital Lease Obligations of Borrower and the Restricted Subsidiaries secured by Liens permitted by Section 7.2(h) hereof up to but not exceeding U.S.$500,000 at any one time outstanding;

(vii) contingent obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with dispositions permitted under Section 7.5;

(viii) Indebtedness in respect of netting services, overdraft protection and otherwise in connection with deposit accounts;

(ix) Indebtedness incurred in the ordinary course of business in connection with performance, surety, appeal or other similar obligations (exclusive of obligations for the payment of borrowed money);

(x) other Indebtedness of Borrower and the Restricted Subsidiaries in an aggregate principal amount not exceeding U.S.$500,000 at any time outstanding; and

(xi) any extension, renewal or refinancing (but not increase) of any of the foregoing on terms and conditions (taken as a whole) that are no less favorable to Borrower, Parent and the Restricted Subsidiaries than the Indebtedness being extended, renewed or refinanced.

(b) Borrower and Parent will not, and will not permit any other Loan Party to, issue any Preferred Equity Interest.

(c) Borrower and Parent will not permit any of the Unrestricted Subsidiaries to create, incur or suffer to exist any Indebtedness except Non-Recourse Debt in an aggregate principal amount not to exceed U.S.500,000 at any time outstanding.

(d) Notwithstanding anything contained in this Agreement to the contrary, Borrower and Parent may, or may permit any other Loan Party to create, incur, assume or permit to exist debt, which debt and any Liens created by such debt is at all times subordinate to the Indebtedness and Liens created by the Combined Credit Agreements, in such amounts and on such terms approved by the Global Administrative Agent and the Required Lenders in their sole and absolute discretion.

Section 7.2 Liens. Borrower and Parent will not, and will not permit any other Loan Party to, create, incur, assume or permit to exist any Lien on any Property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Liens created under the Combined Loan Documents;

(b) Permitted Encumbrances;

(c) any Lien on any Property or asset of Borrower or any Restricted Subsidiary existing on the Global Effective Date and set forth in Schedule 7.2; provided that (2) such Lien shall not apply to any other Property or asset of Borrower or any other Loan Party and (3) such Lien shall secure only those obligations which it secures on the Global Effective Date;

(d) any Lien existing on any Property or asset prior to the acquisition thereof by Borrower or any Restricted Subsidiary or existing on any Property or asset of any Person that becomes a Restricted Subsidiary after the Global Effective Date prior to the time such Person becomes a Restricted Subsidiary; provided that (4) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Restricted Subsidiary, as the case may be, (5) such Lien shall not apply to any other Property or assets of Borrower or any other Loan Party, and (6) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Restricted Subsidiary, as the case may be;

(e) any Liens on assets acquired, constructed or improved by Borrower or any Restricted Subsidiary; provided that (7) such Liens secure Indebtedness permitted by clause (v) of Section 7.1(a), (8) such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (9) the Indebtedness secured thereby does not exceed 80% of the cost of acquiring, constructing or improving such fixed or capital assets, and (10) such Liens shall not apply to any other Property of Borrower or any of the other Loan Parties;

(f) any Liens for farm-in, farm-out, joint operating, area of mutual interest agreements or similar agreements entered into by Borrower and the other Loan Parties in the ordinary course of business and which Borrower or such Loan Party determines in good faith to be necessary for or advantageous to the economic development of their Properties;

(g) additional Liens upon real and/or personal Property created after the date hereof, provided that the aggregate Indebtedness secured thereby and incurred on and after the date hereof shall not exceed U.S.$500,000 in the aggregate at any one time outstanding;

(h) Liens to secure Capital Lease Obligations permitted under Section 7.1(a)(v); provided that such Liens attach only to Property subject of such Capital Lease Obligation; and

(i) any extension, renewal or replacement of the foregoing, provided that the Liens permitted hereunder shall not be spread to cover any additional Indebtedness or Property (other than a substitution of like Property).

Section 7.3 Fundamental Changes.

(a) Borrower and Parent will not, and will not permit any other Loan Party to, merge into or consolidate or amalgamate with any other Person, or permit any other Person to merge into or consolidate or amalgamate with it, or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (11) any Restricted Subsidiary may merge into Borrower in a transaction in which Borrower is the surviving entity, (12) any Restricted Subsidiary may merge into any Restricted Subsidiary in a transaction in which the surviving entity is a Restricted Subsidiary and (if any party to such merger is a Loan Party) is a Loan Party, and (13) Borrower or any Restricted Subsidiary may merge or consolidate with any other Person if in the case of a merger or consolidation of (a) Borrower, Borrower is the surviving entity, and (b) in any other case, the surviving entity is a wholly-owned Restricted Subsidiary and such Restricted Subsidiary (x) has complied with the requirements of Section 5.12 and (y) shall have assumed and ratified all obligations of any Restricted Subsidiary involved in such merger pursuant to documentation in form and substance satisfactory to the Global Administrative Agent.

(b) Borrower and Parent will not, and will not permit any of their Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by Borrower, Parent and their Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto.

Section 7.4 Investments, Loans, Advances, Guarantees and Acquisitions. Borrower and Parent will not, and will not permit any other Loan Party to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a Restricted Subsidiary prior to such merger) any Equity Interests in or evidences of Indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any Indebtedness of, or make or permit to exist any Investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a) Permitted Investments;

(b) Investments existing on the date of this Agreement and set forth on Schedule 7.4;

(c) Investments by Borrower and the Restricted Subsidiaries in Equity Interests in Restricted Subsidiaries and Indebtedness of Borrower or a Restricted Subsidiary permitted by Section 7.1(a)(ii);

(d) one or more substantially contemporaneous Investments in Equity Interests of any Person owning Oil and Gas Properties which, after giving effect to such Investments, will be a Restricted Subsidiary or will be merged into or with a Restricted Subsidiary; provided that (14) as a result of such Investments, such Person becomes a wholly-owned Restricted Subsidiary and has complied with the requirements of Section 5.12, and (15) no Default would result from such Person becoming a Restricted Subsidiary;

(e) Guarantees constituting Indebtedness permitted by Section 7.1; provided that a Restricted Subsidiary shall not Guarantee any other Indebtedness unless such Restricted Subsidiary also has Guaranteed the Obligations pursuant to a Facility Guaranty delivered pursuant to Article IV on the Global Effective Date or pursuant to Section 5.12;

(f) Investments in Oil and Gas Properties and related assets and technology;

(g) Investments in Unrestricted Subsidiaries existing as of the date hereof and set forth on Schedule 7.4; and

(h) additional Investments in an aggregate principal amount not to exceed U.S.$500,000 at any one time outstanding.

Section 7.5 Asset Sales. Borrower and Parent will not, and will not permit any Restricted Subsidiary to, sell, transfer, lease or otherwise dispose of any Property or asset, including any Equity Interest owned by it, nor will Borrower and Parent permit any of the Restricted Subsidiaries to issue any additional Equity Interest in such Restricted Subsidiary, except:

(a) sales or other dispositions of inventory, used or surplus equipment and Permitted Investments in the ordinary course of business;

(b) sales, transfers and dispositions of Property to Borrower or a Restricted Subsidiary (including the transfer of Oil and Gas Properties into newly created limited partnerships or limited liability companies, all of the Equity Interests of which are directly or indirectly owned by Borrower and/or the Restricted Subsidiaries) or the issuance of any Equity Interest in Borrower or any Restricted Subsidiary to Borrower or any Restricted Subsidiary;

(d) the sale, transfer or other disposition of Equity Interests in Unrestricted Subsidiaries;

(e) the sale, transfer or other disposition in one or more transactions of Property (other than Equity Interests in Parent or Restricted Subsidiaries) not constituting Borrowing Base Properties; and

(f) provided no Event of Default, Global Borrowing Base Deficiency or U.S. Borrowing Base Deficiency then exists, the sale, issuance, transfer or other disposition in one or more transactions of Property constituting either Equity Interests in Parent or Restricted Subsidiaries or any Oil and Gas Properties that are given value in the calculation of Present Value or the Global Borrowing Base, as applicable; provided that, with respect to the Oil and Gas Properties only, the aggregate Loan Value of such Oil and Gas Property so sold, transferred or disposed of during the period since the most recent redetermination of the Global Borrowing Base shall not exceed 5% of the amount of the then current Global Borrowing Base.

Section 7.6 Sale and Leaseback Transactions. Except to the extent permitted by Section 7.1 and Section 7.2, Borrower and Parent will not, and will not permit any other Loan Party to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any Property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such Property or other Property that it intends to use for substantially the same purpose or purposes as the Property sold or transferred.

Section 7.7 Hedging Agreements. Borrower and Parent will not, and will not permit any other Loan Party to, enter into any Hedging Agreements with any Person other than vi) Hedging Agreements in respect of commodities (1) with an Approved Counterparty and (2) the notional volumes for which (when aggregated with other commodity Hedging Agreements of Borrower, Parent and the other Loan Parties then in effect other than basis differential swaps on volumes already hedged pursuant to other Hedging Agreements) do not exceed, as of the date such Hedging Agreement is executed, 80% of the reasonably anticipated projected production from proved, developed, producing Oil and Gas Properties (as set forth in the most recently delivered Reserve Report and approved by the Global Administrative Agent) for each month during the period during which such Hedging Agreement is in effect for each of crude oil and natural gas, calculated separately, and which Hedging Agreements shall not, in any case, have a tenor of greater than three (3) years, and vii) Hedging Agreements in respect of interest rates with an Approved Counterparty, the notional amounts of which (when aggregated with all other Hedging Agreements of Borrower, Parent and the other Loan Parties then in effect in respect of interest rates) do not exceed 100% of the then outstanding principal amount of Borrower’s Indebtedness for borrowed money, and which Hedging Agreements shall not, in any case, have a tenor of greater than three (3) years. In no event shall any Hedging Agreement to which Borrower, Parent or any other Loan Party is a party contain any requirement, agreement or covenant for Borrower, Parent or any other Loan Party to post cash or other collateral or margin to secure their obligations under such Hedging Agreement or to cover market exposures.

Section 7.8 Restricted Payments; Certain Payments of Indebtedness. Borrower and Parent will not, and will not permit any other Loan Party to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except that:

(a) any Restricted Subsidiary may pay dividends to Borrower or any other Restricted Subsidiary; and

(b) Borrower and Parent may make Restricted Payments provided that such Restricted Payments are in shares of common stock or other Equity Interests of Borrower or Parent.

Section 7.9 Transactions with Affiliates. Borrower and Parent will not, and will not permit any other Loan Party to, sell, lease or otherwise transfer any Property or assets to, or purchase, lease or otherwise acquire any Property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except nn) transactions in the ordinary course of business and that are at prices and on terms and conditions not less favorable to Borrower, Parent or such other Loan Party than could be obtained on an arm’s-length basis from unrelated third parties, oo) transactions between or among Borrower, Parent and the other Loan Parties not involving any other Affiliate, pp) any Restricted Payment permitted by Section 7.8, and qq) any Investment permitted by Section 7.4.

Section 7.10 Restrictive Agreements. Borrower and Parent will not, and will not permit any other Loan Party to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits or restricts rr) the ability of Borrower, Parent or any other Loan Party to create, incur or permit to exist any Lien in favor of the Global Administrative Agent and/or the Canadian Administrative Agent for the benefit of the Combined Lenders upon any of its Property, or ss) the ability of any Restricted Subsidiary to make Restricted Payments to Borrower or any other Restricted Subsidiary or to Guarantee Indebtedness of Borrower or any other Restricted Subsidiary; provided that (1) the foregoing shall not apply to restrictions and conditions imposed by law or by any Combined Loan Document, (2) the foregoing shall not apply to restrictions and conditions existing on the date of this Agreement identified on Schedule 7.10 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition), (3) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary pending such sale, provided such restrictions and conditions apply only to the Restricted Subsidiary that is to be sold and such sale is permitted hereunder, (4) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Indebtedness or other obligations permitted by this Agreement if such restrictions or conditions apply only to the Property or assets securing such Indebtedness or other obligation, and (5) clause (a) of the foregoing shall not apply to customary provisions in leases or other agreements restricting the assignment thereof.

Section 7.11 No Action to Affect Security Documents. Except for transactions expressly permitted hereby, Borrower and Parent shall not, and shall not permit any of their Subsidiaries to, do anything to adversely affect the priority of the Liens created by the Security Documents given or to be given in respect of the Obligations.

ARTICLE VIII

EVENTS OF DEFAULT

Section 8.1 Listing of Events of Default. Each of the following events or occurrences described in this Section 8.1 shall constitute an “Event of Default”:

(a) Non-Payment of Obligations. Any Loan Party shall default in the payment or prepayment when due of any principal of any Loan or of any reimbursement obligation with respect to any Letter of Credit; or Borrower shall default in the payment when due of any interest, fee or of any other obligation hereunder or under any other Loan Document and such default continues for a period of three (3) days.

(b) Breach of Warranty. Any representation or warranty of any Loan Party made or deemed to be made hereunder or in any other Loan Document or any other writing or certificate furnished by or on behalf of any Loan Party to the Global Administrative Agent, or any Lender for purposes of or in connection with this Agreement or any such other Loan Document is or shall be false or misleading when made.

(c) Non-Performance of Covenants and Obligations. Any Loan Party shall default in the due performance and observance of any of its obligations under Section 5.1, Section 5.2, Section 5.3, Section 5.7, Section 5.11, Section 5.12 or Section 5.15, or under Article VI or Article VII.

(d) Non-Performance of Other Covenants and Obligations. Any Loan Party shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to Borrower by the Global Administrative Agent or the Required Lenders.

(e) Default on Other Indebtedness. Any Loan Party shall default in the payment when due of any principal of or interest on any of its other Indebtedness aggregating U.S.$500,000 or more, or in the payment when due of U.S.$500,000 or more in the aggregate under one or more Hedging Agreements; or any event specified in any note, agreement, indenture or other document evidencing or relating to any such Indebtedness shall occur if the effect of such event is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due, or to be prepaid in full (whether by redemption, purchase, offer to purchase or otherwise), prior to its stated maturity.

(f) Pension Plans. Any of the following events shall occur with respect to any Pension Plan: (6) the institution of any steps by Parent, any ERISA Affiliate or any other Person to terminate a Pension Plan if, as a result of such termination, Parent or any ERISA Affiliate could reasonably expect to incur a liability or obligation to such Pension Plan, which could reasonably be expected to have a Material Adverse Effect; or (7) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA to the extent such action could reasonably be expected to have a Material Adverse Effect.

(g) Bankruptcy and Insolvency. Any Loan Party shall (8) generally fail to pay, or admit in writing its inability or unwillingness to generally pay, debts as they become due; (9) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, receiver and manager, sequestrator or other custodian for any Loan Party, or any substantial part of the property of any thereof, or make a general assignment for the benefit of creditors; (10) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, receiver and manager, sequestrator or other custodian for any Loan Party, or for a substantial part of the property of any thereof, and such trustee, receiver, receiver and manager, sequestrator or other custodian shall not be discharged within 60 days, provided that each Loan Party hereby expressly authorizes the Global Administrative Agent to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend the rights of the Combined Lenders under the Loan Documents; (11) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law (including the Bankruptcy and Insolvency Act (Canada)), or any dissolution, winding up or liquidation proceeding, in respect of any Loan Party, and, if any such case or proceeding is not commenced by such Loan Party, such case or proceeding shall be consented to or acquiesced in by such Loan Party or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that each Loan Party hereby expressly authorizes the Global Administrative Agent to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend the rights of the Combined Lenders under the Loan Documents; or (12) take any corporate or partnership action authorizing, or in furtherance of, any of the foregoing.

(h) Judgments. One or more judgments or orders for the payment of money in excess of U.S.$500,000 in the aggregate (exclusive of amounts fully covered by valid and collectible insurance in respect thereof subject to customary deductibles or fully covered by an indemnity with respect thereto reasonably acceptable to the Required Lenders) shall be rendered against any Loan Party and either (13) enforcement proceedings shall have been commenced by any creditor upon such judgment or order, or (14) such judgment shall have become final and non-appealable and shall have remained outstanding for a period of 60 consecutive days.

(i) Change in Control. A Change in Control shall occur.

(j) Failure of Liens. The Liens created by the Security Documents shall at any time not constitute a valid and perfected Lien on the collateral intended to be covered thereby (to the extent perfection by filing, registration, recordation or possession is required herein or therein) in favor of the Global Administrative Agent or, except for expiration in accordance with its terms, any of the Security Documents shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability thereof shall be contested by any Loan Party.

(k) Event of Default under Canadian Loan Documents. Any “Event of Default” as defined in the Canadian Loan Documents shall occur; provided that the occurrence of a “Default” as defined in the Canadian Loan Documents shall constitute a Default under this Agreement; provided further that if such “Default” or “Event of Default” is cured or waived under the Canadian Loan Documents, as applicable, then such “Default” or “Event of Default” shall no longer constitute a Default or an Event of Default, respectively, under this Agreement.

Section 8.2 Action if Bankruptcy. If any Event of Default described in Section 8.1(g) shall occur, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations hereunder shall automatically be and become immediately due and payable, without demand, protest or presentment or notice of any kind, all of which are hereby expressly waived by Borrower, Parent and their Subsidiaries. Without limiting the foregoing, the Lenders shall be entitled to exercise any and all other remedies available to them under the Loan Documents and applicable law.

Section 8.3 Action if Other Event of Default. If any Event of Default (other than any Event of Default described in Section 8.1(g)) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Required Lenders, may, by notice to Borrower declare tt) the Commitments (if not theretofore terminated) to be terminated and/or uu) all of the outstanding principal amount of the Loans and all other Obligations hereunder to be due and payable, whereupon the Commitments shall terminate and the full unpaid amount of such Loans and other Obligations shall be and become immediately due and payable, without demand, protest or presentment or notice of any kind, all of which are hereby waived by Borrower, Parent and their Subsidiaries. Without limiting the foregoing, the Lenders shall be entitled to exercise any and all other remedies available to them under the Loan Documents and applicable law.

ARTICLE IX

AGENTS

Each of the Lenders, the Issuing Banks and the other Agents hereby irrevocably appoints JPMorgan Chase Bank, N.A. as the Global Administrative Agent, and authorizes the Global Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Global Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto.

Any bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with Parent or any other Subsidiary or other Affiliate thereof as if it were not an Agent hereunder.

The Agents shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Agents shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) each Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise following its receipt of written instructions from the Required Lenders (or such other number or percentage of the Combined Lenders as shall be necessary under the circumstances as provided in Section 10.2), and (c) except as expressly set forth in the Loan Documents, the Agents shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Parent or any of its Subsidiaries that is communicated to or obtained by the bank serving as such Agent or any of its Related Parties in any capacity. Each Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Combined Lenders as shall be necessary under the circumstances as provided in Section 10.2) or in the absence of its own gross negligence or willful misconduct; PROVIDED, HOWEVER, THAT IT IS THE INTENTION OF THE PARTIES HERETO THAT EACH OF THE AGENTS BE INDEMNIFIED IN THE CASE OF ITS OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL. Each Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to such Agent by Borrower, Parent or a Lender, and such Agent shall not be responsible for or have any duty to ascertain or inquire into (1) any statement, warranty or representation made in or in connection with any Loan Document, (2) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (3) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (4) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (5) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to such Agent.

The Global Administrative Agent and the other Agents shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Global Administrative Agent and the other Agents also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Global Administrative Agent and the other Agents may consult with legal counsel (who may be counsel for Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

Any Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Any Agent and any such sub agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of such Agent and any such sub-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 an Agent.

Subject to the appointment and acceptance of a successor Global Administrative Agent as provided in this paragraph, the Global Administrative Agent may resign at any time by notifying the Combined Lenders, Borrower and Parent. Upon any such resignation, the Required Lenders shall have the right, in consultation with Borrower and Parent, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Global Administrative Agent gives notice of its resignation, then the retiring Global Administrative Agent may, on behalf of the Combined Lenders and the Issuing Banks, appoint a successor Global Administrative Agent which shall be a bank with an office in New York City or an Affiliate of any such bank. Upon the acceptance of its appointment as Global Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Global Administrative Agent, and the retiring Global Administrative Agent shall be discharged from its duties and obligations hereunder (other than its obligations under Section 10.12). The fees payable by Borrower to a successor Global Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between Borrower and such successor. After the Global Administrative Agent’s resignation hereunder, the provisions of this Article and Section 10.3 shall continue in effect for the benefit of such retiring Global Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Global Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and the Intercreditor Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

Each of the Lenders, for itself and on behalf of any of its Affiliates, and the Issuing Banks hereby irrevocably appoints the Global Administrative Agent to act as its agent under the Intercreditor Agreement and authorizes the Global Administrative Agent to execute the Intercreditor Agreement on its behalf and to take such actions on its behalf and to exercise such powers as are delegated to the Global Administrative Agent by the terms hereof and thereof, together with such actions and powers as are reasonably incidental thereto.

ARTICLE X

MISCELLANEOUS

Section 10.1 Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(a) if to Borrower, to:

	Storm Cat Energy (USA) Corporation c/o Storm Cat Energy Corporation 0000 00^xx Xxxxxx, Xxxxx 0000 Xxxxxx, Xxxxxxxx 00000 Attention: Xxxx Xxxxxxx Telephone: 000.000.0000 Facsimile: 303.991.5075

	with copy to:

	Xxxxx & Xxxxxxx L.L.P. One Xxxxx Center, Suite 1500 0000 Xxxxxxxxxxx Xxxxxx Xxxxxx, Xxxxxxxx 00000 Attention: Xxxxxxx Xxxxxxx Telephone: 000.000.0000 Facsimile: 303.899.7333

	with an additional copy to:

	Bull, Housser & Xxxxxx LLP 3000 Royal Center 0000 Xxxx Xxxxxxx Xxxxxx Xxxxxxxxx Xxxxxxx Xxxxxxxx Xxxxxx X0X 0X0 Attention: Xxxxx X. Xxxxxx Telephone: 000.000.0000 Facsimile: 604.646.2634

(b) if to Parent, to:

	Storm Cat Energy Corporation 0000 00^xx Xxxxxx, Xxxxx 0000 Xxxxxx, Xxxxxxxx 00000 Attention: Xxxx Xxxxxxx Telephone: 000.000.0000 Facsimile: 303.991.5075

	with copy to:

	Xxxxx & Xxxxxxx L.L.P. One Xxxxx Center, Suite 1500 0000 Xxxxxxxxxxx Xxxxxx Xxxxxx, Xxxxxxxx 00000 Attention: Xxxxxxx Xxxxxxx Telephone: 000.000.0000 Facsimile: 303.899.7333

	with an additional copy to:

	Bull, Housser & Xxxxxx LLP 3000 Royal Center 0000 Xxxx Xxxxxxx Xxxxxx Xxxxxxxxx Xxxxxxx Xxxxxxxx Xxxxxx X0X 0X0 Attention: Xxxxx X. Xxxxxx Telephone: 000.000.0000 Facsimile: 604.646.2634

JPMorgan Chase Bank, N.A.

00 Xxxxx Xxxxxxxx

Xxxxx 00

Xxxxxxx, Xxxxxxxx 00000-0000

Attention: Xxxxx Xxxxx

Telephone: 000.000.0000

Facsimile: 312.385.7096

	with a copy to:

	JPMorgan Chase Bank, N.A. 0000 Xxxx Xxxxxx, 0^xx Xxxxx Mail Code TX1-2448 Xxxxxx, Xxxxx 00000 Attention: Xxxxx Xxxxxx Telephone: 000.000.0000 Facsimile: 214.290.2332

(d) if to any other Lender, to it at its address (or telecopy number) provided to the Global Administrative Agent and Borrower or as set forth in its Administrative Questionnaire; and

(e) if to any Canadian Lender, to it at its address (or telecopy number) provided to the Canadian Administrative Agent and Canadian Borrower or as set forth in its “Administrative Questionnaire” as defined in the Canadian Credit Agreement.

Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

Section 10.2 Waivers; Amendments.

(a) No failure or delay by the Global Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Global Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Global Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any of the Combined Loan Documents nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Borrower, Parent and the Required Lenders or by Borrower, Parent and the Global Administrative Agent with the consent of the Required Lenders, or, in the case of any other Combined Loan Document, pursuant to an agreement or agreements in writing entered into by the relevant Loan Parties thereto and the Required Lenders or by the relevant Loan Parties thereto and the Global Administrative Agent with the consent of the Required Lenders; provided that the same waiver, amendment or modification is requested by Borrower or Parent in connection with each of the Combined Credit Agreements; and provided further that no such agreement shall (6) increase the Commitment of any Lender without the written consent of such Lender, (7) reduce, or otherwise release Borrower from its obligation to pay, the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (8) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (9) change Section 2.18(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (10) change any of the provisions of this Section 10.2, Section 2.7 (unless a lesser vote is otherwise required pursuant to this Section 10.2), Section 2.10 (unless a lesser vote is otherwise required pursuant to this Section 10.2), or the definition of “Required Lenders,” “U.S. Required Lenders” or any other provision of any Combined Loan Document specifying the number or percentage of Lenders, Canadian Lenders or Combined Lenders required to determine or redetermine the Global Borrowing Base, the U.S. Borrowing Base, the Allocated U.S. Borrowing Base or the Allocated Canadian Borrowing Base or required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Combined Lender, (11) release any Loan Party from its Facility Guaranty (except as expressly provided herein or in such Facility Guaranty), or limit its liability in respect of such Facility Guaranty, without the written consent of each Combined Lender, or (12) except as expressly provided herein, in the Intercreditor Agreement or in the Security Documents, release all or any part of the Collateral from the Liens of the Security Documents, without the written consent of each Combined Lender; provided, further, that no such agreement shall (i) change any provision regarding when determinations of the Global Borrowing Base and the U.S. Borrowing Base are required pursuant to Section 2.7, (ii) postpone or defer scheduled Global Borrowing Base or U.S. Borrowing Base redeterminations pursuant to Section 2.7, or (iii) change any provision regarding remedies for a Global Borrowing Base Deficiency or a U.S. Borrowing Base Deficiency pursuant to Section 2.10, without the written consent of the Required Lenders; provided further that no such agreement shall amend, waive, modify or otherwise affect the rights or duties of any Agent (as defined herein and in the Canadian Credit Agreement) or any Issuing Bank (as defined herein and in the Canadian Credit Agreement) without the prior written consent of such Agent (as defined herein and in the Canadian Credit Agreement) or any Issuing Bank (as defined herein and in the Canadian Credit Agreement), as the case may be; provided further that the Global Administrative Agent shall have the right to execute and deliver any release of Lien (or other similar instrument) without the consent of any Lender to the extent such release is required to permit a Loan Party to consummate a transaction permitted by this Agreement or the other Combined Loan Documents.

Section 10.3 Expenses; Indemnity; Damage Waiver.

(a) Borrower shall pay (13) all reasonable legal, printing, recording, syndication, travel, advertising and other reasonable out of pocket expenses incurred by the Global Administrative Agent, the Arranger and their Affiliates, including the reasonable fees, charges and disbursements of counsel for the Global Administrative Agent and the Arranger, in connection with the syndication of the credit facilities provided for herein, the preparation, execution, delivery and administration of this Agreement, the Loan Documents and each other document or instrument relevant to this Agreement or the Loan Documents and any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (14) all reasonable out of-pocket expenses incurred by an Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (15) the filing, recording, refiling or rerecording of the Mortgages, the Pledge Agreement and the other Security Documents and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements and modifications to, and all releases and terminations of, any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of the Mortgages, the Pledge Agreement and the other Security Documents, and (16) all out-of-pocket expenses incurred by the Agents, any Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Agents, any Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) Borrower and Parent shall jointly and severally indemnify the Agents, each Issuing Bank, the Arranger and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable out-of-pocket fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of ((17) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Financing Transactions or any other transactions contemplated hereby, (18) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by an Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (19) any actual or alleged presence or release of Hazardous Materials on or from any Mortgaged Property or any other property currently or formerly owned or operated by any Loan Party, or any Environmental Liability related in any way to any Loan Party, or (20) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity and release shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee (IT BEING UNDERSTOOD THAT IT IS THE INTENTION OF THE PARTIES HERETO THAT EACH OF THE INDEMNITEES BE INDEMNIFIED IN THE CASE OF ITS OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL).

(c) To the extent that Borrower and Parent fail to pay any amount required to be paid by Borrower and Parent to the Global Administrative Agent or an Issuing Bank under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Global Administrative Agent or such Issuing Bank, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Global Administrative Agent or such Issuing Bank in its capacity as such.

(d) To the extent permitted by applicable law, neither Borrower nor Parent shall assert, and each hereby waive, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Financing Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable not later than fifteen (15) days after written demand therefor.

Section 10.4 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of an Issuing Bank that issues any Letter of Credit), except that neither Borrower nor Parent may assign or otherwise transfer any of their rights or obligations hereunder without the prior written consent of the Global Administrative Agent, each Issuing Bank and each Combined Lender (and any attempted assignment or transfer by Borrower or Parent without such consent shall be null and void). 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 (including any Affiliate of an Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Global Administrative Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (21) except in the case of an assignment to a Lender or a Lender Affiliate, each of Borrower (unless an Event of Default has occurred and is continuing) and the Global Administrative Agent (and, in the case of an assignment of all or a portion of a Commitment or any Lender’s obligations in respect of its LC Exposure, the Issuing Banks) must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (22) except in the case of an assignment to a Lender or a Lender Affiliate or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Global Administrative Agent) shall be in increments of U.S.$1,000,000 and not less than U.S.$5,000,000 unless each of Borrower (unless an Event of Default has occurred and is continuing) and the Global Administrative Agent otherwise consent, (23) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement, except that this clause (iii) shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of its Commitments or Loans in conformity with the Intercreditor Agreement, (24) the parties to each assignment shall execute and deliver to the Global Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of U.S.$3,500, (25) the assignee, if it shall not be a Lender, shall deliver to the Global Administrative Agent an Administrative Questionnaire, and (26) after giving effect to any assignment hereunder, the assigning Lender shall have a Commitment of at least U.S.$5,000,000 unless each of Borrower and the Global Administrative Agent otherwise consents; and provided further that any consent of Borrower otherwise required under this paragraph shall not be required if an Event of Default under Section 8.1 has occurred and is continuing. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and to the other Loan Documents and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement and the other Loan Documents (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Section 2.15, Section 2.16, Section 2.17, Section 2.18, Section 10.3 and be subject to the terms of Section 10.12). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.

(c) The Global Administrative Agent, acting for this purpose as an agent of Borrower, shall maintain at one of its offices in Dallas, Texas, a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and Borrower, Parent, the Global Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement and the other Loan Documents, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrower, Parent, any Issuing Bank and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Global Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register and will provide prompt written notice to Borrower of the effectiveness of such assignment. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(e) Any Lender may, without the consent of Borrower, Parent, the Global Administrative Agent or any Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (27) such Lender’s obligations under this Agreement shall remain unchanged, (28) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and (29) Borrower, Parent, the Global Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the second proviso to Section 10.2(b) that affects such Participant. Subject to paragraph (f) of this Section, Borrower and Parent agree that each Participant shall be entitled to the benefits of Section 2.15, Section 2.16 and Section 2.17 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.8 and Section 10.12 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender.

(f) A Participant shall not be entitled to receive any greater payment under Section 2.15, Section 2.16 or Section 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 unless Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of Borrower, to comply with Section 2.17(e) as though it were a Lender.

(g) Any Lender may at any time pledge or assign a Lien in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or, in the case of a Lender organized in a jurisdiction outside of the United States, a comparable Person, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

Section 10.5 Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Agent, any Issuing Bank, the Arranger or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Section 2.15, Section 2.16, Section 2.17, Section 2.18, Section 10.3 and Section 10.12and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.

Section 10.6 Counterparts; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Except as provided in Section 4.1, this Agreement shall become effective when it shall have been executed by the Global Administrative Agent and when the Global Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 10.7 Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

Section 10.8 Right of Setoff. If an Event of Default shall have occurred and be continuing, each of the Agents, the Issuing Banks, the Lenders and their Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of any Loan Party against any and all the obligations of Borrower or Parent now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured; provided, however, that any such set off and application shall be subject to the provisions of Section 2.18.

Section 10.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(b) BORROWER AND PARENT HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMIT, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE AGENTS OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AGAINST BORROWER OR PARENT OR THEIR PROPERTIES IN THE COURTS OF ANY JURISDICTION.

(c) BORROWER AND PARENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT THEY MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

(d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

Section 10.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO vv) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND ww) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 10.11 Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

Section 10.12 Confidentiality. Each of the Agents, the Issuing Banks, and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed xx) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), yy) to the extent requested by any regulatory or self-regulatory authority, zz) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, aaa) to any other party to this Agreement, bbb) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, ccc) subject to an agreement containing provisions substantially the same as those of this Section, to (1) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (2) any actual or prospective counterparty (or its advisors) to any Hedging Agreement, ddd) with the consent of Borrower or eee) to the extent such Information (1) becomes publicly available other than as a result of a breach of this Section by any Person or (2) becomes available to any Agent, any Issuing Bank or any Lender on a non-confidential basis from a source other than Borrower, Parent or any of their Affiliates. For purposes of this Section, “Information” means all information received from Borrower, Parent or their Affiliates relating to the Loan Parties or their business, other than any such information that is available to any Agent, any Issuing Bank or any Lender on a non-confidential basis prior to disclosure by Borrower, Parent or any of their Affiliates; provided that, in the case of information received from Borrower or Parent after the date of this Agreement, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

Section 10.13 Interest Rate Limitation. It is the intention of the parties hereto to conform strictly to applicable interest, usury and criminal laws and, anything herein to the contrary notwithstanding, the obligations of Borrower and the Guarantors to a Lender, any Issuing Bank or any Agent under this Agreement or any Loan Document shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to such Lender, such Issuing Bank or Agent limiting rates of interest which may be charged or collected by such Lender, such Issuing Bank or Agent. Accordingly, if the transactions contemplated hereby or thereby would be illegal, unenforceable, usurious or criminal under laws applicable to a Lender, any Issuing Bank or any Agent (including the laws of any jurisdiction whose laws may be mandatorily applicable to such Lender or Agent notwithstanding anything to the contrary in this Agreement or any other Loan Document then, in that event, notwithstanding anything to the contrary in this Agreement or any other Loan Document, it is agreed as follows:

(a) the provisions of this Section shall govern and control;

(b) the aggregate of all consideration which constitutes interest under applicable law that is contracted for, taken, reserved, charged or received under this Agreement or any Loan Document or otherwise in connection with this Agreement or any Loan Document by such Lender, such Issuing Bank or such Agent shall under no circumstances exceed the maximum amount of interest allowed by applicable law (such maximum lawful interest rate, if any, with respect to each Lender, each Issuing Bank and the Agents herein called the “Highest Lawful Rate”), and any excess shall be cancelled automatically and if theretofore paid shall be credited to Borrower by such Lender, such Issuing Bank or such Agent (or, if such consideration shall have been paid in full, such excess refunded to Borrower);

(c) all sums paid, or agreed to be paid, to such Lender, such Issuing Bank or such Agent for the use, forbearance and detention of the indebtedness of Borrower to such Lender, such Issuing Bank or such Agent hereunder or under any Loan Document shall, to the extent permitted by laws applicable to such Lender, such Issuing Bank or such Agent, as the case may be, be amortized, prorated, allocated and spread throughout the full term of such indebtedness until payment in full so that the actual rate of interest is uniform throughout the full term thereof;

(d) if at any time the interest provided pursuant to this Section or any other clause of this Agreement or any other Loan Document, together with any other fees or compensation payable pursuant to this Agreement or any other Loan Document and deemed interest under laws applicable to such Lender, such Issuing Bank or such Agent, exceeds that amount which would have accrued at the Highest Lawful Rate, the amount of interest and any such fees or compensation to accrue to such Lender, such Issuing Bank or such Agent pursuant to this Agreement or such other Loan Document shall be limited, notwithstanding anything to the contrary in this Agreement or any other Loan Document, to that amount which would have accrued at the Highest Lawful Rate, but any subsequent reductions, as applicable, shall not reduce the interest to accrue to such Lender, such Issuing Bank or such Agent pursuant to this Agreement or such other Loan Document below the Highest Lawful Rate until the total amount of interest accrued pursuant to this Agreement or such other Loan Document, as the case may be, and such fees or compensation deemed to be interest equals the amount of interest which would have accrued to such Lender or Agent if a varying rate per annum equal to the interest provided pursuant to any other relevant Section hereof (other than this Section) or thereof, as applicable, had at all times been in effect, plus the amount of fees which would have been received but for the effect of this Section; and

(e) with the intent that the rate of interest herein shall at all times be lawful, and if the receipt of any funds owing hereunder or under any other agreement related hereto (including any of the other Loan Documents) by such Lender, such Issuing Bank or such Agent would cause such Lender to charge Borrower a criminal rate of interest, the Lenders, the Issuing Banks and the Agents agree that they will not require the payment or receipt thereof or a portion thereof which would cause a criminal rate of interest to be charged by such Lender, such Issuing Bank or such Agent, as applicable, and if received such affected Lender, such Issuing Bank or Agent will return such funds to Borrower so that the rate of interest paid by Borrower shall not exceed a criminal rate of interest from the date this Agreement was entered into.

Section 10.14 Collateral Matters; Hedging Agreements. The benefit of the Security Documents and of the provisions of this Agreement relating to the Collateral shall also extend to and be available to those Lenders or their Affiliates which are counterparties to the Hedging Agreements on a pro rata basis in respect of any Hedging Obligations of any Loan Party that are in effect at such time as such Person (or its Affiliate) is a Lender, but only while such Person or its Affiliate is a Lender; provided that it is the intention of the Lenders that receipt of payment in respect of Hedging Obligations of any Loan Party under any Hedging Agreement with a Combined Lender, or any Affiliate of a Combined Lender from realization of any Collateral, shall be subject to the terms of the Intercreditor Agreement and the Security Documents.

Section 10.15 Arranger; Other Agents. None of the Persons identified on the facing page or the signature pages of this Agreement as the “Sole Book Manager and Lead Arranger” or any future documentation agent or syndication agent shall have any right, power, obligation, liability, responsibility or duty under this Agreement or any other Loan Document other than, except in the case of the Arranger, those applicable to all Lenders as such. Without limiting the foregoing, none of the Arranger, any documentation agent or any syndication agent shall have or be deemed to have any fiduciary relationship with any Lender or any Loan Party. Borrower, Parent and each Lender acknowledge that they have not relied, and will not rely, on any of the Arranger, any documentation agent or syndication agent in deciding to enter into this Agreement or in taking or not taking any action hereunder or under the Loan Documents.

Section 10.16 Intercreditor Agreement; Loan Documents. Each Lender on behalf of itself and any Affiliate which is a counterparty to a Hedging Agreement acknowledges and agrees that the Global Administrative Agent has entered into the Intercreditor Agreement and the Security Documents on behalf of itself, the other Agents, Lenders and Affiliates thereof that are parties to a Hedging Agreement, and each of them (by their signature hereto or acceptance of the benefits of the Security Documents) hereby agrees to be bound by the terms of the Intercreditor Agreement and such Security Documents, acknowledge receipt of copies of the Intercreditor Agreement and such Security Documents and consents to the rights, powers, remedies, indemnities and exculpations given to the Global Administrative Agent thereunder. For so long as the Intercreditor Agreement shall be in effect, the terms and conditions of this Agreement and the other Loan Documents are subject to the terms of the Intercreditor Agreement. In the event of any inconsistency between this Agreement or any other Loan Document and the terms of the Intercreditor Agreement, the Intercreditor Agreement shall control. In the event of any inconsistency between this Agreement and the terms of any other Loan Document (other than the Intercreditor Agreement), this Agreement shall control.

Section 10.17 USA PATRIOT Act Notice. Each Lender hereby notifies Borrower and Parent that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies Borrower and Parent, which information includes the name and address of Borrower and Parent and other information that will allow such Lender to identify Borrower and Parent in accordance with the Act.

Section 10.18 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

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


	STORM CAT ENERGY CORPORATION, a corporation amalgamated under the laws of British Columbia

	By:	/s/ Xxxx Xxxxxxx
		Xxxx Xxxxxxx, Chief Financial Officer


	STORM CAT ENERGY (USA) CORPORATION, a Colorado corporation

	By:	/s/ Xxxx Xxxxxxx
		Xxxx Xxxxxxx, Secretary and Treasurer

[SIGNATURE PAGE TO U.S. CREDIT AGREEMENT]


	JPMORGAN CHASE BANK, N.A., as Global Administrative Agent and as a Lender

	By:	/s/ J. Xxxxx Xxxxxx
		J. Xxxxx Xxxxxx, Senior Vice President

[SIGNATURE PAGE TO U.S. CREDIT AGREEMENT]

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