-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NlAOKy8pIkN5lrlx8wbsZTV97AcS8FpouY2ePR/Ftu6JA2ukQQ5zJkjdB2H832Fd mQSDMraju9sbbSDh+vLGxw== 0000899243-98-001517.txt : 19980813 0000899243-98-001517.hdr.sgml : 19980813 ACCESSION NUMBER: 0000899243-98-001517 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980730 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980811 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAINS RESOURCES INC CENTRAL INDEX KEY: 0000350426 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 132898764 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 033-50572 FILM NUMBER: 98682704 BUSINESS ADDRESS: STREET 1: 500 DALLAS STREET 2: SUITE 700 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136541414 MAIL ADDRESS: STREET 1: 1600 SMITH STREET STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77002 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (Date of earliest event reported): JULY 30, 1998 PLAINS RESOURCES INC. (Exact name of registrant as specified in charter) DELAWARE 0-9808 13-2898764 (State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.) 500 DALLAS STREET, SUITE 700 HOUSTON, TEXAS 77002 77002 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (713) 654-1414 ITEM 2. ACQUISITION OF ASSETS Description of Transaction On July 30, 1998, Plains All American Inc. ("PAAI") a wholly-owned subsidiary of Plains Resources Inc. (the "Company"), acquired all of the outstanding capital stock of All American Pipeline Company ("AAPL"), Celeron Gathering Corporation ("CGC") and Celeron Trading & Transportation Company ("PT&T") (AAPL, CGC and CT&T collectively referred to as the "Celeron Companies") from Wingfoot Ventures Seven Inc., a wholly-owned subsidiary of The Goodyear Tire & Rubber Company. The purchase price for the acquisition was approximately $400 million. Financing for the acquisition was provided through (i) PAAI's $325 million, limited recourse bank facility with ING (U.S.) Capital Corporation, BankBoston, N.A., and other lenders under that certain Credit Agreement dated as of July 30, 1998 and (ii) an approximate $110 million capital contribution to PAAI by the Company. Approximately $25 million of the capital contribution was made in the first quarter of 1998 and the remaining $85 million was provided by a privately placed issuance under that certain Stock Purchase Agreement dated as of July 30, 1998, of the Company's Series E Cumulative Convertible Preferred Stock. Kayne Anderson Investment Management, Plains' largest shareholder, and EnCap Investments L.C. were the lead investors in the private placement of such preferred stock. Description of Assets Involved The principal assets of the entities to be acquired include the All American Pipeline System, a 1,233-mile crude oil pipeline extending from California to Texas, and a 45-mile crude oil gathering system in the San Joaquin Valley of California, as well as other assets related to such operations. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) - Financial Statements of Business Acquired. Financial Statements for the Celeron Companies will be filed under an amendment to this report as soon as practicable but not later than sixty days after the filing of this report. (b) - Pro Forma Financial Information. Pro forma financial information relative to the acquisition will be filed under an amendment to this report as soon as practicable but not later than sixty days after the filing of this report. 1 (c) Exhibits. 2.1 Stock Purchase Agreement dated as of March 15, 1998, among Plains Resources Inc., Plains All American Inc., Wingfoot Ventures Seven Inc. (incorporated by reference to Exhibit 2(b) to the Company's Annual report on Form 10-K for the year ended December 31, 1997). 2.2 Credit Agreement dated as of July 30, 1998, among Plains All American Inc. and ING (U.S.) Capital Corporation, et al. 2.3 Stock Purchase Agreement dated as of July 30, 1998 by and among Plains Resources Inc. and the Purchasers Named Therein for the issuance of Series E Cumulative Convertible Preferred Stock. 3.1 Certificate of Designation, Preference and Rights of Series E Cumulative Convertible Preferred Stock. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: August 11, 1998 PLAINS RESOURCES INC. By: /s/ Phillip D. Kramer ------------------------------ Name: Phillip D. Kramer Title: Executive Vice President and Chief Financial Officer 2 INDEX TO EXHIBITS Number Exhibit - ------ ------- 2.1 Stock Purchase Agreement dated as of March 15, 1998, among Plains Resources Inc., Plains All American Inc., Wingfoot Ventures Seven Inc. (incorporated by reference to Exhibit 2(b) to the Company's Annual report on Form 10-K for the year ended December 31, 1997). 2.2 Credit Agreement dated as of July 30, 1998, among Plains All American Inc. and ING (U.S.) Capital Corporation, et al. 2.3 Stock Purchase Agreement dated as of July 30, 1998 by and among Plains Resources Inc. and the Purchasers Named Therein for the issuance of Series E Cumulative Convertible Preferred Stock. 3.1 Certificate of Designation, Preference and Rights of Series E Cumulative Convertible Preferred Stock. EX-2.2 2 CREDIT AGREEMENT EXHIBIT 2.2 Execution Copy ================================================================================ CREDIT AGREEMENT _______________________________________________________ PLAINS ALL AMERICAN INC., as Borrower, and ING (U.S.) CAPITAL CORPORATION, as Administrative Agent, ING BARING (U.S.) CAPITAL CORPORATION, as Syndication Agent, BANKBOSTON, N.A., as Documentation Agent, and CERTAIN FINANCIAL INSTITUTIONS, as Lenders _______________________________________________________ $100,000,000 Reducing Revolving Credit Facility $225,000,000 Term Loan July 30, 1998 ================================================================================ TABLE OF CONTENTS Page ---- CREDIT AGREEMENT.............................................................. 1 ARTICLE I - Definitions and References........................................ 1 Section 1.1. Defined Terms.............................................. 1 Section 1.2. Exhibits and Schedules; Additional Definitions.............18 Section 1.3. Amendment of Defined Instruments...........................18 Section 1.4. References and Titles......................................19 Section 1.5. Calculations and Determinations............................19 ARTICLE II - The Loans........................................................19 Section 2.1. Commitments to Lend; Notes.................................19 Section 2.2. Requests for Revolver Loans................................20 Section 2.3. Continuations and Conversions of Existing Loans............21 Section 2.4. Use of Proceeds............................................22 Section 2.5. Interest Rates and Fees....................................23 Section 2.6. Optional Prepayments.......................................24 Section 2.7. Mandatory Prepayments......................................24 Section 2.8. Letters of Credit..........................................25 Section 2.9. Requesting Letters of Credit...............................26 Section 2.10. Reimbursement and Participations...........................26 Section 2.11. Letter of Credit Fees......................................28 Section 2.12. No Duty to Inquire.........................................28 Section 2.13. LC Collateral..............................................29 ARTICLE III - Payments to Lenders.............................................30 Section 3.1. General Procedures.........................................30 Section 3.2. Capital Reimbursement......................................31 Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit....31 Section 3.4. Notice; Change of Applicable Lending Office................32 Section 3.5. Availability...............................................32 Section 3.6. Funding Losses.............................................33 Section 3.7. Reimbursable Taxes.........................................33 ARTICLE IV - Conditions Precedent to Lending..................................36 Section 4.1. Documents to be Delivered..................................36 Section 4.2. Additional Conditions to Initial Credit....................38 Section 4.3. Additional Conditions Precedent............................38 ARTICLE V - Representations and Warranties....................................39 Section 5.1. No Default.................................................39 Section 5.2. Organization and Good Standing.............................39 Section 5.3. Authorization..............................................40 i Section 5.4. No Conflicts or Consents...................................40 Section 5.5. Enforceable Obligations....................................40 Section 5.6. Initial Financial Statements...............................40 Section 5.7. Other Obligations and Restrictions.........................40 Section 5.8. Full Disclosure............................................41 Section 5.9. Litigation.................................................41 Section 5.10. Labor Disputes and Acts of God.............................41 Section 5.11. ERISA Plans and Liabilities................................41 Section 5.12. Compliance with Laws.......................................41 Section 5.13. Environmental Laws.........................................42 Section 5.15. Borrower's Subsidiaries....................................44 Section 5.16. Title to Properties; Licenses..............................44 Section 5.17. Government Regulation......................................44 Section 5.18. Insider....................................................44 Section 5.19. Solvency...................................................44 Section 5.20. Credit Arrangements........................................44 ARTICLE VI - Affirmative Covenants of Borrower................................45 Section 6.1. Payment and Performance....................................45 Section 6.2. Books, Financial Statements and Reports....................45 Section 6.3. Other Information and Inspections..........................47 Section 6.4. Notice of Material Events and Change of Address............48 Section 6.5. Maintenance of Properties..................................48 Section 6.6. Maintenance of Existence and Qualifications................49 Section 6.7. Payment of Trade Liabilities, Taxes, etc...................49 Section 6.8. Insurance..................................................49 Section 6.9. Performance on Borrower's Behalf...........................49 Section 6.10. Interest...................................................49 Section 6.11. Compliance with Agreements and Law.........................50 Section 6.12. Environmental Matters; Environmental Reviews...............50 Section 6.13. Evidence of Compliance.....................................50 Section 6.14. Agreement to Deliver Security Documents....................50 Section 6.15. Perfection and Protection of Security Interests and Liens..................................................51 Section 6.16. Bank Accounts; Offset......................................51 Section 6.17. Guaranties of Borrower's Subsidiaries......................51 Section 6.18. Interest Rate Hedging Agreements...........................51 ARTICLE VII - Negative Covenants of Borrower..................................52 Section 7.1. Indebtedness...............................................52 Section 7.2. Limitation on Liens........................................53 Section 7.3. Hedging Contracts..........................................54 Section 7.4. Limitation on Mergers, Issuances of Securities.............55 Section 7.5. Limitation on Sales of Property............................55 Section 7.6. Limitation on Dividends and Redemptions....................56 Section 7.7. Limitation on Investments and New Businesses...............56 ii Section 7.8. Limitation on Credit Extensions...........................56 Section 7.9. Transactions with Affiliates..............................56 Section 7.10. Prohibited Contracts......................................57 Section 7.11. Limitations on Capital Expenditures.......................57 Section 7.12. Current Ratio.............................................57 Section 7.13. Net Worth.................................................57 Section 7.14. Interest Coverage Ratio...................................57 Section 7.15. Fixed Charge Coverage Ratio...............................58 Section 7.16. Debt to Capital Ratio.....................................58 Section 7.17. Consolidated General and Administrative Expenses..........58 ARTICLE VIII - Events of Default and Remedies.................................58 Section 8.1. Events of Default.........................................58 Section 8.2. Remedies..................................................61 ARTICLE IX - Administrative Agent.............................................61 Section 9.1. Appointment and Authority.................................61 Section 9.2. Exculpation, Administrative Agent's Reliance, Etc.........62 Section 9.3. Credit Decisions..........................................62 Section 9.4. Indemnification...........................................62 Section 9.5. Rights as Lender..........................................63 Section 9.6. Sharing of Set-Offs and Other Payments....................63 Section 9.7. Investments...............................................64 Section 9.8. Benefit of Article IX.....................................64 Section 9.9. Resignation...............................................64 Section 9.10. Other Agents..............................................65 ARTICLE X - Miscellaneous.....................................................65 Section 10.1. Waivers and Amendments; Acknowledgments...................65 Section 10.2. Survival of Agreements; Cumulative Nature.................67 Section 10.3. Notices...................................................67 Section 10.4. Payment of Expenses; Indemnity............................68 Section 10.5. Joint and Several Liability; Parties in Interest; Assignments...............................................69 Section 10.6. Confidentiality...........................................72 Section 10.7. GOVERNING LAW; SUBMISSION TO PROCESS......................72 Section 10.8. Limitation on Interest....................................73 Section 10.9. Termination; Limited Survival.............................74 Section 10.10. Severability..............................................74 Section 10.11. Counterparts..............................................74 Section 10.12. Waiver of Jury Trial, Punitive Damages, etc...............74 iii Schedules and Exhibits: Schedule 1 - Lender Schedule Schedule 2 - Disclosure Schedule Schedule 3 - Security Schedule Schedule 4 - Insurance Schedule Schedule 5 - Capital Expenditures Exhibit A-1 - Revolver Note Exhibit A-2 - Term Note Exhibit B - Borrowing Notice Exhibit C - Continuation/Conversion Notice Exhibit D - Certificate Accompanying Financial Statements Exhibit E-1 - Opinion of In-House Counsel for Restricted Persons Exhibit E-2 - Opinion of Counsel for Restricted Persons Exhibit F - Environmental Compliance Certificate Exhibit G - Letter of Credit Application and Agreement Exhibit H - Assignment and Acceptance Agreement Exhibit I - Officer's Certificate Exhibit J - Service and Exchange Agreement Exhibit K - Agreement for the Allocation of Taxes Exhibit L - Netting Agreement Exhibit M - Support Service Agreement iv CREDIT AGREEMENT THIS CREDIT AGREEMENT is made as of July 30, 1998, by and among PLAINS ALL AMERICAN INC., a Delaware corporation ("Borrower"), ING (U.S.) CAPITAL CORPORATION, as administrative agent (in such capacity, "Administrative Agent"), ING BARING (U.S.) CAPITAL CORPORATION, as syndication agent (in such capacity, "Syndication Agent") and BANKBOSTON, N.A., as documentation agent (in such capacity, "Documentation Agent") and the Lenders referred to below. In consideration of the mutual covenants and agreements contained herein the parties hereto agree as follows: ARTICLE I - Definitions and References Section 1.1. Defined Terms. As used in this Agreement, each of the following terms has the meaning given to such term in this Section 1.1 or in the sections and subsections referred to below: "Acquisition Documents" means the Stock Purchase Agreement dated as of March 15, 1998 among Resources, Borrower and Wingfoot Ventures Seven Inc., and all other agreements or instruments delivered in connection therewith to consummate the acquisition contemplated thereby. "Adjusted Eurodollar Rate" means, with respect to each particular Eurodollar Loan and the related Interest Period, the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by Administrative Agent to be equal to the quotient obtained by dividing (i) the rate reported, on the date two Business Days prior to the first day of such Interest Period, on Telerate Access Service Page 3750 (British Bankers Association Settlement Rate) as the London Interbank Offered Rate for dollar deposits having a term comparable to such Interest Period and in an amount of $1,000,000 or more (or, if such Page shall cease to be publicly available or if the information contained on such Page, in Administrative Agent's sole judgment, shall cease to accurately reflect such London Interbank Offered Rate, as reported by any publicly available source of similar market data selected by Administrative Agent that, in Administrative Agent's sole judgment, accurately reflects such London Interbank Offered Rate) by (ii) 1 minus the Reserve Requirement for Eurodollar Loan for such Interest Period. The Adjusted Eurodollar Rate shall change whenever the Reserve Requirement changes. "Affiliate" means, as to any Person, each other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with, such Person. A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 5% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or 1 (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Affiliate Agreements" has the meaning given to such term in Section 4.2. "Administrative Agent" means ING (U.S.) Capital Corporation, as Administrative Agent hereunder, and its successors in such capacity. "Agreement" means this Credit Agreement. "Applicable Lending Office" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of Base Rate Loans and such Lender's Eurodollar Lending Office in the case of Eurodollar Loans. "Applicable Leverage Level" means the level set forth below that corresponds to the ratio of (i) Consolidated Indebtedness of Borrower and its Subsidiaries to (ii) the Consolidated EBITDA for the applicable period of four Fiscal Quarters (the "Leverage Ratio"): Applicable Leverage Level Leverage Ratio --------------------------------------------------- Level I greater than or equal to 5.0 to 1.0 --------------------------------------------------- Level II less than 5.0 to 1.0 but greater than or equal to 3.5 to 1.0 --------------------------------------------------- Level III less than 3.5 to 1.0 The Leverage Ratio will be determined quarterly by Administrative Agent within two (2) Business Days after Administrative Agent's receipt of Borrower's Consolidated financial statements for the immediate preceding Fiscal Quarter based upon: (i) Consolidated Indebtedness as of the end of such Fiscal Quarter, and (ii) the Consolidated EBITDA for the four Fiscal Quarters ending with such Fiscal Quarter. The Applicable Leverage Level shall become effective upon such determination of the Leverage Ratio by Administrative Agent and shall remain effective until the next such determination by Administrative Agent of the Leverage Ratio. For the Fiscal Quarters ending on September 30 and December 31, 1998 and March 31 and June 30, 1999, such determination of Consolidated EBITDA, Leverage Ratio, or Applicable Leverage Ratio shall be made by annualizing Consolidated EBITDA for the period from the date of the Acquisition to the end of such Fiscal Quarter. "Applicable Rating Level" means, for any day, the level set forth below that corresponds to the higher of the ratings publicly announced by Moody's or S&P, as applicable on that day, to the Term Loans; provided that if ratings announced by Moody's and S&P 2 differ by more than two (2) levels on such day, then the Applicable Rating Level shall be based upon the level which is one level lower than the higher. Applicable Rating Level Moody's S&P -------------------------------------------------------------------------- Level A greater than or equal to Ba3 greater than or equal to BB- -------------------------------------------------------------------------- Level B less than or equal to B1 less than or equal to B+ "greater than or equal to" means greater than or equal to and "less than or equal to" means less than or equal to. If neither Moody's or S&P shall have in effect a rating for the Term Loans, then the Applicable Rating Level shall be deemed to be Level B; provided, however, if the rating system of either rating agency shall change, or if a rating agency shall cease to be in the business of rating corporate debt obligations, Borrower and the Term Lenders shall negotiate in good faith to amend this definition to reflect such changed rating system or the unavailability of ratings from such rating agency, but until such an agreement shall be reached, the Applicable Rating Level shall be based only upon the rating by the remaining rating agency. "Base Rate" means, for any day, the higher of (a) the Reference Rate and (b) the Federal Funds Rate plus one-half percent (0.5%) per annum. For purposes of this definition, "Reference Rate" means the arithmetic average of the rates of interest publicly announced by The Chase Manhattan Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York (or their respective successors) as their respective prime commercial lending rates (or, as to any such bank that does not announce such a rate, such bank's 'base' or other rate determined by Administrative Agent to be the equivalent rate announced by such bank), except that, if any such bank shall, for any period, cease to announce publicly its prime commercial lending (or equivalent) rate, Administrative Agent shall, during such period, determine the "Base Rate" based upon the prime commercial lending (or equivalent) rates announced publicly by the other such banks. "Base Rate Loan" means a Loan which does not bear interest based upon the Adjusted Eurodollar Rate. "Borrower" means Plains All American Inc., a Delaware corporation. "Borrowing" means a borrowing of new Revolver Loans of a single Type pursuant to Section 2.2 or a Continuation or Conversion of all or a portion of an existing Loan (whether alone or as a combination with a new Loan) into a single Type (and, in the case of Eurodollar Loans, with the same Interest Period) pursuant to Section 2.3. "Borrowing Notice" means a written or telephonic request, or a written confirmation, made by Borrower which meets the requirements of Section 2.2. 3 "Business Day" means a day, other than a Saturday or Sunday, on which commercial banks are open for business with the public in New York, New York. Any Business Day in any way relating to Eurodollar Loans (such as the day on which an Interest Period begins or ends) must also be a day on which, in the judgment of Administrative Agent, significant transactions in dollars are carried out in the London interbank eurocurrency market. "Capital Lease" means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "Capital Lease Obligation" means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. "Cash Equivalents" means Investments in: (a) marketable obligations, maturing within 12 months after acquisition thereof, issued or unconditionally guaranteed by the United States of America or an instrumentality or agency thereof and entitled to the full faith and credit of the United States of America; (b) demand deposits and time deposits (including certificates of deposit) maturing within 12 months from the date of deposit thereof, (i) with any office of any Lender or (ii) with a domestic office of any national or state bank or trust company which is organized under the Laws of the United States of America or any state therein, which has capital, surplus and undivided profits of at least $500,000,000, and whose long term certificates of deposit are rated at least Aa3 by Moody's or AA by S&P; (c) repurchase obligations with a term of not more than seven days for underlying securities of the types described in subsection (a) above entered into with (i) any Lender or (ii) any other commercial bank meeting the specifications of subsection (b) above; (d) open market commercial paper, maturing within 270 days after acquisition thereof, which are rated at least P-1 by Moody's or A-1 by S&P; and (e) money market or other mutual funds substantially all of whose assets comprise securities of the types described in subsections (a) through (d) above. "Change of Control" means the occurrence of any of the following events: (i) an event or series of events by which any Person or other entity or group of Persons or other entities acting in concert as a partnership or other group (a "Group of Persons") shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases, merger, consolidation or otherwise, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of 40% or more of the combined voting power of the then outstanding voting stock of Resources, (ii) during any period of two consecutive years (A) the members of the board of directors of Resources (the "Board") as of January 1, 1998, (B) 4 any director elected thereafter in any annual meeting of the stockholders of Resources upon the recommendation of the Board, and (C) any other member of the Board who will be recommended or elected to succeed those Persons described in subclauses (A) and (B) of this clause (ii) by a majority of such Persons who are then members of the Board, cease for any reason to constitute collectively a majority of the Board then in office, (iii) the direct or indirect sale, lease, exchange or other transfer of all or substantially all of the assets of Resources to any Person or Group of Persons, or (iv) any Person other than Resources or a wholly owned Subsidiary of Resources shall own or acquire legal or beneficial ownership of any equity securities of Borrower or any securities which are convertible into equity securities of Borrower. "Code" means the Internal Revenue Code of 1986, as amended from time to time, together with all rules and regulations promulgated with respect thereto. "Collateral" means all property of any kind which is subject to a Lien in favor of Lenders (or in favor of Administrative Agent for the benefit of Lenders) or which, under the terms of any Security Document, is purported to be subject to such a Lien, in each case granted or created to secure all or part of the Obligations. "Consolidated" refers to the consolidation of any Person, in accordance with GAAP, with its properly consolidated subsidiaries. References herein to a Person's Consolidated financial statements, financial position, financial condition, liabilities, etc. refer to the consolidated financial statements, financial position, financial condition, liabilities, etc. of such Person and its properly consolidated subsidiaries. "Consolidated EBITDA" means, for any four-Fiscal Quarter period, the sum of (1) the Consolidated Net Income of Borrower and its Subsidiaries during such period, plus (2) all interest expense which was deducted in determining such Consolidated Net Income for such period, plus (3) all income taxes (including any franchise taxes to the extent based upon net income) which were deducted in determining such Consolidated Net Income, plus (4) all depreciation, amortization (including amortization of good will and debt issue costs) and other non-cash charges (including any provision for the reduction in the carrying value of assets recorded in accordance with GAAP) which were deducted in determining such Consolidated Net Income, minus (5) all non-cash items of income which were included in determining such Consolidated Net Income. "Consolidated Indebtedness" means all Indebtedness of Borrower and, without duplication, all Indebtedness any of its Subsidiaries after eliminating (i) all intercompany items between Borrower and its Subsidiaries required to be eliminated in the course of the preparation of Consolidated financial statements in accordance with GAAP and (ii) any Liability related to any unrealized gains or losses from a mark to market of any Hedging Contracts. "Consolidated Net Income" means, for any period, Borrower's and its Subsidiaries' gross revenues for such period, including any cash dividends or distributions actually received from any other Person during such period, minus Borrower's and its Subsidiaries' expenses 5 and other proper charges against income (including taxes on income, to the extent imposed), determined on a Consolidated basis after eliminating earnings or losses attributable to outstanding minority interests and excluding the net earnings of any Person other than a Subsidiary in which Borrower or any of its Subsidiaries has an ownership interest. "Consolidated Net Worth" means the remainder of all Consolidated assets, as determined in accordance with GAAP, of Borrower and its Subsidiaries minus the sum of Borrower's Consolidated liabilities, as determined in accordance with GAAP, and all outstanding Minority Interests. The effect of any increase or decrease in net worth in any period as a result of (i) any unrealized gains or losses from a mark to market of any Hedging Contracts not reflected in the determination of net income but reflected in the determination of comprehensive income and (ii) any Excluded Income Tax Accrual shall be excluded in determining Consolidated Net Worth. "Minority Interests" means the book value of any shares of stock of any of Borrower's Subsidiaries which shares are owned by Persons other than Borrower or one of its wholly owned Subsidiaries. "Excluded Income Tax Accrual" means accrued liabilities in respect of federal or state income taxes (including state franchise taxes to the extent based on net income) so long as such tax liabilities are deferred and not then paid or payable as a result of combined income tax filings with Resources or otherwise. "Continuation/Conversion Notice" means a written or telephonic request, or a written confirmation, made by Borrower which meets the requirements of Section 2.3. "Continue", "Continuation", and "Continued" shall refer to the continuation pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the next Interest Period. "Convert", "Conversion", and "Converted" shall refer to a conversion pursuant to Section 2.3 or Article III of one Type of Loan into another Type of Loan. "Default" means any Event of Default and any default, event or condition which would, with the giving of any requisite notices and the passage of any requisite periods of time, constitute an Event of Default. "Default Rate" means, at the time in question, (i) three and three-fourths percent (3.75%) per annum plus the Adjusted Eurodollar Rate then in effect for any Eurodollar Loan (up to the end of the applicable Interest Period) or (ii) two percent (2%) per annum plus the Base Rate for each Base Rate Loan; provided, however, the Default Rate shall never exceed the Highest Lawful Rate "Default Rate Period" means (i) any period during which an Event of Default, other than pursuant to Section 8.1 (a) or (b), is continuing, provided that such period shall not begin until notice of the commencement of the Default Rate has been given to Borrower by Administrative Agent upon the instruction by Majority Lenders and (ii) any period during which any Event of Default pursuant to Section 8.1 (a) or (b) is continuing unless Borrower has been notified otherwise by Administrative Agent upon the instruction by Majority Lenders. 6 "Disclosure Schedule" means Schedule 2 hereto. "Distribution" means (a) any dividend or other distribution made by a Restricted Person on or in respect of any stock, partnership interest, or other equity interest in such Restricted Person (including any option or warrant to buy such an equity interest), or (b) any payment made by a Restricted Person to purchase, redeem, acquire or retire any stock, partnership interest, or other equity interest in such Restricted Person (including any such option or warrant). "Domestic Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" in the Lender Schedule hereto, or such other office as such Lender may from time to time specify to Borrower and Administrative Agent; with respect to LC Issuer, the office, branch, or agency through which it issues Letters of Credit; and, with respect to Administrative Agent, the office, branch, or agency through which it administers this Agreement. "Eligible Transferee" means a Person which either (a) is a Lender, or (b) is consented to as an Eligible Transferee by Administrative Agent and, so long as no Default or Event of Default is continuing, by Borrower, which consents in each case will not be unreasonably withheld (provided that no Person organized outside the United States may be an Eligible Transferee if Borrower would be required to pay withholding taxes on interest or principal owed to such Person). "Environmental Laws" means any and all Laws relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, together with all rules and regulations promulgated with respect thereto. "ERISA Affiliate" means Borrower and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control that, together with Borrower, are treated as a single employer under Section 414 of the Code. "ERISA Plan" means any employee pension benefit plan subject to Title IV of ERISA maintained by any ERISA Affiliate with respect to which any Restricted Person has a fixed or contingent liability. "Eurodollar Lending Office" means, with respect to any Lender, the office of such Lender specified as its "Eurodollar Lending Office" on the Lender Schedule hereto (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender may from time to time specify to Borrower and Administrative Agent. 7 "Eurodollar Loan" means a Loan that bears interest based upon the Adjusted Eurodollar Rate. "Event of Default" has the meaning given to such term in Section 8.1. "Facility Usage" means, at the time in question, the aggregate amount of outstanding Revolver Loans and LC Obligations at such time. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of one percent) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day, provided that (i) if the day for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (ii) if such rate is not so published for any day, the Federal Funds Rate for such day shall be the average rate quoted to Administrative Agent on such day on such transactions as determined by Administrative Agent. "Fiscal Quarter" means a three-month period ending on March 31, June 30, September 30 or December 31 of any year. "Fiscal Year" means a twelve-month period ending on December 31 of any year. "GAAP" means those generally accepted accounting principles and practices which are recognized as such by the Financial Accounting Standards Board (or any generally recognized successor) and which, in the case of Borrower and its Consolidated Subsidiaries, are applied for all periods after the date hereof in a manner consistent with the manner in which such principles and practices were applied to the Initial Financial Statements. If any change in any accounting principle or practice is required by the Financial Accounting Standards Board (or any such successor) in order for such principle or practice to continue as a generally accepted accounting principle or practice, all reports and financial statements required hereunder with respect to Borrower or with respect to Borrower and its Consolidated Subsidiaries may be prepared in accordance with such change, but all calculations and determinations to be made hereunder may be made in accordance with such change only after notice of such change is given to each Lender and Majority Lenders agree to such change insofar as it affects the accounting of Borrower or of Borrower and its Consolidated Subsidiaries. "Guarantors" means All American Pipeline Company, a Texas corporation, Celeron Gathering Corporation, a Delaware corporation, Celeron Trading & Transportation Company, a Delaware corporation, and any other Person who has guaranteed some or all of the Obligations pursuant to a guaranty listed on the Security Schedule or any other Person who has guaranteed some or all of the Obligations and who has been accepted by Administrative Agent as a Guarantor or any Subsidiary of Borrower which now or hereafter executes and delivers a guaranty to Administrative Agent pursuant to Section 6.17. 8 "Hazardous Materials" means any substances regulated under any Environmental Law, whether as pollutants, contaminants, or chemicals, or as industrial, toxic or hazardous substances or wastes, or otherwise. "Hedging Contract" means (a) any agreement providing for options, swaps, floors, caps, collars, forward sales or forward purchases involving interest rates, commodities or commodity prices, equities, currencies, bonds, or indexes based on any of the foregoing, (b) any option, futures or forward contract traded on an exchange, and (c) any other derivative agreement or other similar agreement or arrangement. "Highest Lawful Rate" means, with respect to each Lender Party to whom Obligations are owed, the maximum nonusurious rate of interest that such Lender Party is permitted under applicable Law to contract for, take, charge, or receive with respect to such Obligations. All determinations herein of the Highest Lawful Rate, or of any interest rate determined by reference to the Highest Lawful Rate, shall be made separately for each Lender Party as appropriate to assure that the Loan Documents are not construed to obligate any Person to pay interest to any Lender Party at a rate in excess of the Highest Lawful Rate applicable to such Lender Party. "Indebtedness" of any Person means its Liabilities (without duplication) in any of the following categories: (a) Liabilities for borrowed money, (b) Liabilities constituting an obligation to pay the deferred purchase price of property or services, (c) Liabilities evidenced by a bond, debenture, note or similar instrument, (d) Liabilities (other than reserves for taxes and reserves for contingent obligations) which (i) would under GAAP be shown on such Person's balance sheet as a liability and (ii are payable more than one year from the date of creation or incurrence thereof, (e) Liabilities arising under Hedging Contracts (on a net basis to the extent netting is provided for in the applicable Hedging Contact), (f) Liabilities constituting principal under Capital Leases, (g) Liabilities arising under conditional sales or other title retention agreements, (h) Liabilities owing under direct or indirect guaranties of Liabilities of any other Person or otherwise constituting obligations to purchase or acquire or to otherwise protect or insure a creditor against loss in respect of Liabilities of any other Person (such as obligations under working capital maintenance agreements, agreements to keep-well, or agreements to 9 purchase Liabilities, assets, goods, securities or services), but excluding endorsements in the ordinary course of business of negotiable instruments in the course of collection, (i) Liabilities consisting of an obligation to purchase or redeem securities or other property, if such Liabilities arises out of or in connection with the sale or issuance of the same or similar securities or property (for example, repurchase agreements, mandatorily redeemable preferred stock and sale/leaseback agreements), (j) Liabilities with respect to letters of credit or applications or reimbursement agreements therefor, (k) Liabilities with respect to banker's acceptances, or (l) Liabilities with respect to obligations to deliver goods or services in consideration of advance payments therefor; provided, however, that the "Indebtedness" of any Person shall not include Liabilities that were incurred in the ordinary course of business by such Person on ordinary trade terms to vendors, suppliers, or other Persons providing goods and services for use by such Person in the ordinary course of its business, unless and until such Liabilities are outstanding more than 120 days after the date the respective goods are delivered or the respective services are rendered, other than Liabilities contested in good faith by appropriate proceedings, if required, and for which adequate reserves are maintained on the books of such Person in accordance with GAAP. "Initial Financial Statements" means (i) the audited Consolidated financial statements of the Celeron Companies dated as of December 31, 1997, (ii) the unaudited quarterly Consolidated financial statements of the Celeron Companies dated as of June 30, 1998 and (iii) pro forma balance sheet of Borrower as of June 30, 1998. "Insurance Schedule" means Schedule 4 attached hereto. "Interest Expense" means, with respect to any period, the sum (without duplication) of the following (in each case, eliminating all offsetting debits and credits between Borrower and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of Borrower and its Subsidiaries in accordance with GAAP): (a) all interest and commitment fees in respect of Indebtedness of Borrower or any of its Subsidiaries (including imputed interest on Capital Lease Obligations) which are accrued during such period and whether expensed in such period or capitalized; plus (b) all fees, expenses and charges in respect of letters of credit issued for the account of Borrower or any of its Subsidiaries, which are accrued during such period and whether expensed in such period or capitalized. "Interest Payment Date" means (a) with respect to each Base Rate Loan, each Quarterly Payment Date, and (b) with respect to each Eurodollar Loan, the last day of the Interest Period that is applicable thereto and, if such Interest Period is six, or twelve months in length, the 10 dates specified by Administrative Agent which are approximately three, six, and nine months (as appropriate) after such Interest Period begins; provided that the last Business Day of each calendar month shall also be an Interest Payment Date for each such Loan so long as any Event of Default exists under Section 8.1 (a) or (b). "Interest Period" means, with respect to each particular Eurodollar Loan in a Borrowing, the period specified in the Borrowing Notice or Continuation/Conversion Notice applicable thereto, beginning on and including the date specified in such Borrowing Notice or Continuation/Conversion Notice (which must be a Business Day), and ending one, two, three, six or twelve months thereafter, as Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; (b) any Interest Period which begins on the last Business Day in a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day in a calendar month; and (c) notwithstanding the foregoing, any Interest Period for a Revolver Loan that would otherwise end after the Revolver Maturity Date shall end on the Revolver Maturity Date. "Investment" means any investment made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, advance, capital contribution or otherwise, and whether made in cash, by the transfer of property or by any other means. "Law" means any statute, law, regulation, ordinance, rule, treaty, judgment, order, decree, permit, concession, franchise, license, agreement or other governmental restriction of the United States or any state or political subdivision thereof or of any foreign country or any department, province or other political subdivision thereof. "LC Application" means any application for a Letter of Credit hereafter made by Borrower to LC Issuer. "LC Collateral" has the meaning given to such term in Section 2.13(a). "LC Issuer" means BankBoston, N.A., in its capacity as the issuer of Letters of Credit hereunder, and its successors in such capacity. Administrative Agent may, with the consent of Borrower and the Lender in question, appoint any Lender hereunder as an LC Issuer in place of or in addition to BankBoston, N.A. "LC Obligations" means, at the time in question, the sum of all Matured LC Obligations plus the maximum amounts which LC Issuer might then or thereafter be called upon to advance under all Letters of Credit then outstanding. "Lease Rentals" means, with respect to any period, the sum of the rental and other obligations required to be paid during such period by Borrower or any Subsidiary of Borrower 11 as lessee under all leases of real or personal property (other than Capital Leases), excluding any amount required to be paid by the lessee (whether or not therein designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates and similar charges, provisions that, if at the date of determination, any such rental or other obligations are contingent or not otherwise definitely determinable by terms of the related lease, the amount of such obligations (i) shall be assumed to be equal to the amount of such obligations for the period of 12 consecutive calendar months immediately preceding the date of determination or (ii) if the related lease was not in effect during such preceding 12-month period, shall be the amount estimated by a senior financial officer of the Borrower on a reasonable basis and in good faith. "Lender Parties" means Administrative Agent, Syndication Agent, Documentation Agent, LC Issuer, and all Lenders. "Lender Schedule" means Schedule 1 hereto. "Lenders" means each signatory hereto (other than Borrower and any Restricted Person that is a party hereto), including ING (U.S.) Capital Corporation in its capacity as a Lender hereunder rather than as Administrative Agent, and the successors of each such party as holder of a Note. "Letter of Credit" means any letter of credit issued by LC Issuer hereunder at the application of Borrower. "Letter of Credit Fee Rate" means, on any day, the rate per annum set forth below based on the Applicable Leverage Level on such date. Applicable Leverage Level Letter of Credit Fee Rate -------------------------------------------------------- Level I 1.625% -------------------------------------------------------- Level II 1.375% -------------------------------------------------------- Level III 1.125% "Liabilities" means, as to any Person, all indebtedness, liabilities and obligations of such Person, whether matured or unmatured, liquidated or unliquidated, primary or secondary, direct or indirect, absolute, fixed or contingent, and whether or not required to be considered pursuant to GAAP. "Lien" means, with respect to any property or assets, any right or interest therein of a creditor to secure Liabilities owed to it or any other arrangement with such creditor which provides for the payment of such Liabilities out of such property or assets or which allows such creditor to have such Liabilities satisfied out of such property or assets prior to the general creditors of any owner thereof, including any lien, mortgage, security interest, pledge, deposit, production payment, rights of a vendor under any title retention or conditional sale agreement or 12 lease substantially equivalent thereto, tax lien, mechanic's or materialman's lien, or any other charge or encumbrance for security purposes, whether arising by Law or agreement or otherwise, but excluding any right of offset which arises without agreement in the ordinary course of business. "Lien" also means any filed financing statement, any registration of a pledge (such as with an issuer of uncertificated securities), or any other arrangement or action which would serve to perfect a Lien described in the preceding sentence, regardless of whether such financing statement is filed, such registration is made, or such arrangement or action is undertaken before or after such Lien exists. "Loans" means all Revolver Loans and Term Loans. "Loan Documents" means this Agreement, the Notes, the Security Documents, the Letters of Credit, the LC Applications, the Hedging Contracts described in Section 2.14, and all other agreements, certificates, documents, instruments and writings at any time delivered in connection herewith or therewith (exclusive of term sheets and commitment letters). "Majority Lenders" means Lenders whose aggregate Percentage Shares equal or exceed sixty-six and two-thirds percent (66 2/3%). "Material Adverse Change" means a material and adverse change, from the state of affairs presented in the Initial Financial Statements or as represented or warranted in any Loan Document, to (a) Borrower's Consolidated financial condition, (b) Borrower's Consolidated operations, properties or prospects, considered as a whole, (c) Borrower's ability to timely pay the Obligations, or (d) the enforceability of the material terms of any Loan Document. "Matured LC Obligations" means all amounts paid by LC Issuer on drafts or demands for payment drawn or made under or purported to be under any Letter of Credit and all other amounts due and owing to LC Issuer under any LC Application for any Letter of Credit, to the extent the same have not been repaid to LC Issuer (with the proceeds of Loans or otherwise). "Maximum Drawing Amount" means at the time in question the sum of the maximum amounts which LC Issuer might then or thereafter be called upon to advance under all Letters of Credit then outstanding. "Moody's" means Moody's Investor Service, Inc., or its successor. "Notes" means all Revolver Notes and all Term Notes. "Obligations" means all Liabilities from time to time owing by any Restricted Person to any Lender Party under or pursuant to any of the Loan Documents, including all LC Obligations. "Obligation" means any part of the Obligations. "Percentage Share" means, with respect to any Lender, the percentage obtained by dividing (i) the sum of the unpaid principal balance of such Lender's Term Loans at the time in question plus such Lender's Revolver Commitment, by (ii) the sum of the aggregate unpaid principal balance of all Term Loans at such time plus the total Revolver Commitment. 13 "Permitted Investments" means (a) Cash Equivalents, (b) Investments described in the Disclosure Schedule, and (c) Investments by Borrower or any of its Subsidiaries in any wholly owned Subsidiary of Borrower which is a Guarantor and by any Subsidiary of Borrower in Borrower. "Permitted Lien" has the meaning given to such term in Section 7.2. "Person" means an individual, corporation, partnership, limited liability company, association, joint stock company, trust or trustee thereof, estate or executor thereof, unincorporated organization or joint venture, Tribunal, or any other legally recognizable entity. "Quarterly Payment Date" means the first day of each April, July, October and January. "Rating Agency" means either S&P or Moody's. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect. "Reserve Requirement" means, at any time, the maximum rate at which reserves (including any marginal, special, supplemental, or emergency reserves) are required to be maintained under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) by member banks of the Federal Reserve System against "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks with respect to (a) any category of liabilities which includes deposits by reference to which the Adjusted Eurodollar Rate is to be determined, or (b) any category of extensions of credit or other assets which include Eurodollar Loans. "Resources" means Plains Resources Inc., a Delaware corporation. "Resources Credit Agreement" means that certain Fourth Amended and Restated Credit Agreement dated as of May 22, 1998 by and among Resources, ING (U.S.) Capital Corporation, as agent, and the lenders party thereto, as such credit agreement may be amended, modified or restated from time to time, and each other credit agreement to which Resources is a party replacing such credit agreement in whole or in part. "Restricted Person" means any of Borrower and each Subsidiary of Borrower. "Revolver Commitment" means, (i) from the date hereof to and including September 30, 1998, $100,000,000, and (ii) thereafter, from and including the first day of each Fiscal Quarter to and including the last day of such Fiscal Quarter, an amount equal to the Revolver Commitment on the last day of the immediately preceding Fiscal Quarter minus the Revolver Reduction Amount; in each case of the preceding clauses (i) and (ii), subject to reductions pursuant to Section 2.7. Subject to change as provided in Section 2.7, the Revolver Commitment shall be the following amounts for the following periods: 14 Period Amount ------ ------ On or Prior to September 30, 1998 $100,000,000.00 October 1, 1998 through December 31, 1998 $ 95,833,379.41 January 1, 1999 through March 31, 1999 $ 91,666,710.74 April 1, 1999 through June 30, 1999 $ 87,500,042.07 July 1, 1999 through September 30, 1999 $ 83,333,333.40 October 1, 1999 through December 31, 1999 $ 79,166,666.73 January 1, 2000 through March 31, 2000 $ 75,000,000.06 April 1, 2000 through June 30, 2000 $ 70,833,333.39 July 1, 2000 through September 30, 2000 $ 66,666,666.72 October 1, 2000 through December 31, 2000 $ 62,500,000.05 January 1, 2001 through March 31, 2001 $ 58,333,333.38 April 1, 2001 through June 30, 2001 $ 54,166,666.71 July 1, 2001 through September 30, 2001 $ 50,000,000.04 October 1, 2001 through December 31, 2001 $ 45,833,333.37 January 1, 2002 through March 31, 2002 $ 41,666,666.67 April 1, 2002 through June 30, 2002 $ 37,500,000.03 July 1, 2002 through September 30, 2002 $ 33,333,333.36 October 1, 2002 through December 31, 2002 $ 29,166,666.69 January 1, 2003 through March 31, 2003 $ 25,000,000.02 April 1, 2003 through June 30, 2003 $ 20,833,333.35 July 1, 2003 through September 30, 2003 $ 16,666,666.68 October 1, 2003 through December 31, 2003 $ 12,500,000.01 January 1, 2004 through March 31, 2004 $ 8,333,333.34 April 1, 2004 through Revolver Maturity Date $ 4,166,666.67 Each Lender's Revolver Commitment shall initially be the amount set forth on the Lender Schedule and thereafter such Lender's Revolver Commitment shall be reduced concurrently with any reduction in the Revolver Commitment as provided in this Agreement by an amount equal to the product of (i) such Lender's Percentage Share and (ii) the amount of such reduction in the Revolver Commitment. "Revolver Commitment Period" means the period from and including the date hereof until the Revolver Maturity Date (or, if earlier, the day on which the obligation of Lenders to make Loans hereunder and the obligation of LC Issuer to issue Letters of Credit hereunder has terminated or the day on which the Revolver Notes first become due and payable in full). "Revolver Eurodollar Rate Margin" means (i) on each day from the date hereof until the date the Applicable Leverage Level is determined following the Fiscal Quarter ending September 30, 1998, one and three-quarters percent (1.75%), and (ii) on each day after such date the percent per annum set forth below based on the Applicable Leverage Level in effect on such date. 15 Applicable Leverage Level Revolver Eurodollar Rate Margin ------------------------------------------------------------- Level I 1.75% ------------------------------------------------------------- Level II 1.50% ------------------------------------------------------------- Level III 1.25% ------------------------------------------------------------- Changes in the applicable Revolver Eurodollar Rate Margin will occur automatically without prior notice as changes in the Applicable Leverage Level occur. Administrative Agent will give notice promptly to Borrower and the Revolver Lenders of changes in the Revolver Eurodollar Rate Margin. "Revolver Lender" means each holder of a Revolver Note. "Revolver Loan" has the meaning given such term in Section 2.1(a). "Revolver Maturity Date" means June 30, 2004. "Revolver Note" has the meaning given such term in Section 2.1(a). "Revolver Percentage Share" means, with respect to any Revolver Lender, the Revolver Percentage Share set forth opposite such Revolver Lender's name on the Lender Schedule. "Revolver Reduction Amount" means $4,166,666.67 or such other amount as provided in Section 2.7(a). "S&P" means Standard & Poor's Ratings Group (a division of McGraw Hill, Inc.) or its successor. "Security Documents" means the instruments listed in the Security Schedule and all other security agreements, deeds of trust, mortgages, chattel mortgages, pledges, guaranties, financing statements, continuation statements, extension agreements and other agreements or instruments now, heretofore, or hereafter delivered by any Restricted Person to Administrative Agent in connection with this Agreement or any transaction contemplated hereby to secure or guarantee the payment of any part of the Obligations or the performance of any Restricted Person's other duties and obligations under the Loan Documents. "Security Schedule" means Schedule 3 hereto. "Subsidiary" means, with respect to any Person, any corporation, association, partnership, limited liability company, joint venture, or other business or corporate entity, enterprise or organization which is directly or indirectly (through one or more intermediaries) controlled or owned by more than fifty percent by such Person. 16 "Term Lender" means each holder of a Term Note. "Term Loan" has the meaning given such term in Section 2.1(b). "Term Loan Base Rate Margin" means (i) on each day from the date hereof until the date the Applicable Leverage Level is determined following the Fiscal Quarter ending on September 30, 1998, one and one fourth percent (1.25%) per annum and (ii) on any date on or after such date, the percent per annum set forth below based on the Applicable Leverage Level in effect on such date and Applicable Rating Level in effect on such date: Applicable Applicable Rating Level Leverage Level Level A Level B ------------------------------------------- Level I 1.00% 1.25% ------------------------------------------- Level II .75% 1.00% ------------------------------------------- Level III .50% .75% Changes in the applicable Term Loan Base Rate Margin will occur automatically without prior notice as changes in the Applicable Leverage Level or Applicable Rating Level occur. Administrative Agent will give notice promptly to Borrower and the Term Lenders of changes in the Term Loan Base Rate Margin. "Term Loan Eurodollar Rate Margin" means, (i) on each day from the date hereof until the date the Applicable Leverage Level is determined following the Fiscal Quarter ending on September 30, 1998, three percent (3%) per annum, and (ii) on any date on or after such date, the percent per annum set forth below based on the Applicable Leverage Level in effect on such date and Applicable Rating Level in effect on such date: Applicable Applicable Rating Level Leverage Level Level A Level B ------------------------------------------- Level I 2.75% 3.00% ------------------------------------------- Level II 2.50% 2.75% ------------------------------------------- Level III 2.25% 2.50% Changes in the applicable Term Loan Eurodollar Rate Margin will occur automatically without prior notice as changes in the Applicable Leverage Level or Applicable Rating Level occur. Administrative Agent will give notice promptly to Borrower and the Term Lenders of changes in the Term Loan Eurodollar Rate Margin. "Term Note" has the meaning given such term in Section 2.1(b). 17 "Termination Event" means (a) the occurrence with respect to any ERISA Plan of (i) a reportable event described in Sections 4043(c)(5) or (6) of ERISA or (ii) any other reportable event described in Section 4043(c) of ERISA other than a reportable event not subject to the provision for 30-day notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation under Section 4043(a) of ERISA, or (b) the withdrawal of any ERISA Affiliate from an ERISA Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the filing of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate any ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISA Plan. "Tribunal" means any government, any arbitration panel, any court or any governmental department, commission, board, bureau, agency or instrumentality of the United States of America or any state, province, commonwealth, nation, territory, possession, county, parish, town, township, village or municipality, whether now or hereafter constituted or existing. "Type" means, with respect to any Loans, the characterization of such Loans as either Base Rate Loans or Eurodollar Loans. Section 1.2. Exhibits and Schedules; Additional Definitions. All Exhibits and Schedules attached to this Agreement are a part hereof for all purposes. Reference is hereby made to the Security Schedule for the meaning of certain terms defined therein and used but not defined herein, which definitions are incorporated herein by reference. Section 1.3. Amendment of Defined Instruments. Unless the context otherwise requires or unless otherwise provided herein the terms defined in this Agreement which refer to a particular agreement, instrument or document also refer to and include all renewals, extensions, modifications, amendments and restatements of such agreement, instrument or document, provided that nothing contained in this section shall be construed to authorize any such renewal, extension, modification, amendment or restatement. Section 1.4. References and Titles. All references in this Agreement to Exhibits, Schedules, articles, sections, subsections and other subdivisions refer to the Exhibits, Schedules, articles, sections, subsections and other subdivisions of this Agreement unless expressly provided otherwise. Titles appearing at the beginning of any subdivisions are for convenience only and do not constitute any part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions. The words "this Agreement," "this instrument," "herein," "hereof," "hereby," "hereunder" and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. The phrases "this section" and "this subsection" and similar phrases refer only to the sections or subsections hereof in which such phrases occur. The word "or" is not exclusive, and the word "including" (in its various forms) means "including without limitation." Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires. 18 Section 1.5. Calculations and Determinations. All calculations under the Loan Documents of interest chargeable with respect to Eurodollar Loans and of fees shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 360 days. All other calculations of interest made under the Loan Documents shall be made on the basis of actual days elapsed (including the first day but excluding the last) and a year of 365 or 366 days, as appropriate. Each determination by a Lender Party of amounts to be paid under Article III or any other matters which are to be determined hereunder by a Lender Party (such as any Eurodollar Rate, Adjusted Eurodollar Rate, Business Day, Interest Period, or Reserve Requirement) shall, in the absence of manifest error, be conclusive and binding. Unless otherwise expressly provided herein or unless Majority Lenders otherwise consent all financial statements and reports furnished to any Lender Party hereunder shall be prepared and all financial computations and determinations pursuant hereto shall be made in accordance with GAAP. ARTICLE II - The Loans and Letters of Credit Section 2.1. Commitments to Lend; Notes. (a) Revolver Loans. Subject to the terms and conditions hereof, each Revolver Lender agrees to make loans to Borrower (herein called such Lender's "Revolver Loans") upon Borrower's request from time to time during the Revolver Commitment Period, provided that (a) subject to Sections 3.3, 3.4 and 3.6, all Revolver Lenders are requested to make Revolver Loans of the same Type in accordance with their respective Revolver Percentage Shares and as part of the same Borrowing, (b) after giving effect to such Revolver Loans, the Facility Usage does not exceed the Revolver Commitment determined as of the date on which the requested Revolver Loans are to be made and (c) after giving effect to such Revolver Loans the Revolver Loans by each Revolver Lender plus the existing LC Obligations of such Revolver Lender does not exceed such Lender's Revolver Commitment. The aggregate amount of all Revolver Loans in any Borrowing must be greater than or equal to $2,000,000 or any higher integral multiple of $250,000 or must equal the remaining availability under the Revolver Commitment. The obligation of Borrower to repay to each Revolver Lender the aggregate amount of all Revolver Loans made by such Revolver Lender, together with interest accruing in connection therewith, shall be evidenced by a single promissory note (herein called such Lender's "Revolver Note") made by Borrower payable to the order of such Revolver Lender in the form of Exhibit A-1 with appropriate insertions. The amount of principal owing on any Revolver Lender's Revolver Note at any given time shall be the aggregate amount of all Revolver Loans theretofore made by such Revolver Lender minus all payments of principal theretofore received by such Revolver Lender on such Revolver Note. Interest on each Revolver Note shall accrue and be due and payable as provided herein and therein. Each Revolver Note shall be due and payable as provided herein and therein, and shall be due and payable in full on the Revolver Maturity Date. Subject to the terms and conditions of this Agreement, Borrower may borrow, repay, and reborrow under this Section 2.1(a). Borrower may have no more than seven Borrowings of Eurodollar Loans outstanding at any time. (b) Term Loans. Subject to the terms and conditions hereof, each Term Lender agrees to make a single advance to Borrower (herein called such Lender's "Term Loan") upon 19 Borrower's request on or before September 30, 1998, provided that (a) such Term Loan does not exceed such Term Lender's Term Loan amount set forth on the Lender Schedule and (b) the aggregate amount of all Term Loans does not exceed $225,000,000. Portions of each Lender's Term Loan may from time to time be designated as a Base Rate Loan or Eurodollar Loan as provided herein. The obligation of Borrower to repay to each Term Lender the amount of the Term Loan made by such Term Lender, together with interest accruing in connection therewith, shall be evidenced by a single promissory note (herein called such Term Lender's "Term Note") made by Borrower payable to the order of such Term Lender in the form of Exhibit A-2 with appropriate insertions. The amount of principal owing on any Term Lender's Term Note at any given time shall be the amount of such Term Lender's Term Loan minus all payments of principal theretofore received by such Term Lender on such Term Note. Interest on each Term Note shall accrue and be due and payable as provided herein and therein. Each Term Note shall be due and payable as provided herein and therein, and shall be due and payable in full on June 30, 2005. No portion of any Term Loan which has been repaid may be reborrowed. Section 2.2. Requests for Revolver Loans. Borrower must give to Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of any requested Borrowing of Revolver Loans to be funded by Revolver Lenders. Each such notice constitutes a "Borrowing Notice" hereunder and must: (a) specify (i) the aggregate amount of any such Borrowing of new Base Rate Loans and the date on which such Base Rate Loans are to be advanced, or (ii) the aggregate amount of any such Borrowing of new Eurodollar Loans, the date on which such Eurodollar Loans are to be advanced (which shall be the first day of the Interest Period which is to apply thereto), and the length of the applicable Interest Period; and (b) be received by Administrative Agent not later than 11:00 a.m., New York, New York time, on (i) the day on which any such Base Rate Loans are to be made, or (ii) the third Business Day preceding the day on which any such Eurodollar Loans are to be made. Each such written request or confirmation must be made in the form and substance of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Borrower as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Borrowing Notice, Administrative Agent shall give each Revolver Lender prompt notice of the terms thereof. If all conditions precedent to such new Revolver Loans have been met, each Revolver Lender will on the date requested promptly remit to Administrative Agent at Administrative Agent's office in New York, New York the amount of such Revolver Lender's new Revolver Loan in immediately available funds, and upon receipt of such funds, unless to its actual knowledge any conditions precedent to such Revolver Loans have been neither met nor waived as provided herein, Administrative Agent shall promptly make such Revolver Loans available to Borrower. Unless Administrative Agent shall have received prompt notice from a Revolver Lender that such Revolver Lender will not make available to Administrative Agent such Revolver Lender's new Revolver Loan, Administrative Agent may in its discretion assume that such Revolver Lender has made such Revolver Loan available to Administrative Agent in 20 accordance with this section, and Administrative Agent may if it chooses, in reliance upon such assumption, make such Revolver Loan available to Borrower. If and to the extent such Revolver Lender shall not so make its new Revolver Loan available to Administrative Agent, such Lender and Borrower severally agree to pay or repay to Administrative Agent within three days after demand the amount of such Revolver Loan together with interest thereon, for each day from the date such amount was made available to Borrower until the date such amount is paid or repaid to Administrative Agent, with interest at (i) the Federal Funds Rate, if such Lender is making such payment and (ii) the interest rate applicable at the time to the other new Revolver Loans made on such date, if Borrower is making such repayment. If neither such Revolver Lender nor Borrower pays or repays to Administrative Agent such amount within such three-day period, Administrative Agent shall, be entitled to recover from Borrower, on demand in lieu of the interest provided for in the preceding sentence, interest thereon at the Default Rate, calculated from the date such amount was made available to Borrower. The failure of any Revolver Lender to make any new Revolver Loan to be made by it hereunder shall not relieve any other Revolver Lender of its obligation hereunder, if any, to make its new Revolver Loan, but no Revolver Lender shall be responsible for the failure of any other Revolver Lender to make any new Revolver Loan to be made by such other Revolver Lender. Section 2.3. Continuations and Conversions of Existing Loans. Borrower may make the following elections with respect to Revolver Loans or Term Loans already outstanding: to Convert, in whole or in part, Base Rate Loans to Eurodollar Loans, to Convert, in whole or in part, Eurodollar Loans to Base Rate Loans on the last day of the Interest Period applicable thereto, and to Continue, in whole or in part, Eurodollar Loans beyond the expiration of such Interest Period by designating a new Interest Period to take effect at the time of such expiration. In making such elections, Borrower may combine existing Loans made pursuant to separate Borrowings into one new Borrowing or divide existing Loans made pursuant to one Borrowing into separate new Borrowings, provided that (i) Borrower may have no more than seven Borrowings of Eurodollar Loans outstanding at any time and (ii) no combinations may be made between Borrowings constituting Revolver Loans on the one hand and Borrowings constituting Term Loans on the other hand. To make any such election, Borrower must give to Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of any such Conversion or Continuation of existing Loans, with a separate notice given for each new Borrowing. Each such notice constitutes a "Continuation/Conversion Notice" hereunder and must: (a) specify the existing Loans which are to be Continued or Converted; (b) specify (i) the aggregate amount of any Borrowing of Base Rate Loans into which such existing Loans are to be Continued or Converted and the date on which such Continuation or Conversion is to occur, or (ii) the aggregate amount of any Borrowing of Eurodollar Loans into which such existing Loans are to be Continued or Converted, the date on which such Continuation or Conversion is to occur (which shall be the first day of the Interest Period which is to apply to such Eurodollar Loans), and the length of the applicable Interest Period; and 21 (c) be received by Administrative Agent not later than 11:00 a.m., New York, New York time, on (i) the day on which any such Continuation or Conversion to Base Rate Loans is to occur, or (ii) the third Business Day preceding the day on which any such Continuation or Conversion to Eurodollar Loans is to occur. Each such written request or confirmation must be made in the form and substance of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly completed. Each such telephonic request shall be deemed a representation, warranty, acknowledgment and agreement by Borrower as to the matters which are required to be set out in such written confirmation. Upon receipt of any such Continuation/Conversion Notice, Administrative Agent shall give each Lender prompt notice of the terms thereof. Each Continuation/Conversion Notice shall be irrevocable and binding on Borrower. During the continuance of any Default, Borrower may not make any election to Convert existing Loans into Eurodollar Loans or Continue existing Loans as Eurodollar Loans beyond the expiration of their respective and corresponding Interest Period then in effect. If (due to the existence of a Default or for any other reason) Borrower fails to timely and properly give any Continuation/Conversion Notice with respect to a Borrowing of existing Eurodollar Loans at least three days prior to the end of the Interest Period applicable thereto, such Eurodollar Loans, to the extent not prepaid at the end of such Interest Period, shall automatically be Converted into Base Rate Loans at the end of such Interest Period. No new funds shall be repaid by Borrower or advanced by any Lender in connection with any Continuation or Conversion of existing Loans pursuant to this section, and no such Continuation or Conversion shall be deemed to be a new advance of funds for any purpose; such Continuations and Conversions merely constitute a change in the interest rate applicable to already outstanding Loans. Section 2.4. Use of Proceeds. Borrower shall use (i) all Term Loans to fund the transactions under the Acquisition Documents and (ii) all Revolver Loans fund the transactions under the Acquisition Documents, to finance capital expenditures, to pay reimbursement obligations of Letters of Credit, to provide working capital for operations and for other general business purposes. Borrower shall use all Letters of Credit for its and its Subsidiaries' general corporate purposes. In no event shall the funds from any Loan or any Letter of Credit be used directly or indirectly by any Person for personal, family, household or agricultural purposes or for the purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or carrying any "margin stock" (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) or to extend credit to others directly or indirectly for the purpose of purchasing or carrying any such margin stock. Borrower represents and warrants that Borrower is not engaged principally, or as one of Borrower's important activities, in the business of extending credit to others for the purpose of purchasing or carrying such margin stock. Section 2.5. Interest Rates and Fees. (a) Revolver Interest Rates. Each Revolver Loan shall bear interest as follows: (i) unless the Default Rate shall apply, (A) each Base Rate Loan shall bear interest on each day outstanding at the Base Rate in effect on such day, and (B) each Eurodollar Loan shall bear interest on each day during the related Interest Period at the related Adjusted Eurodollar Rate plus the Revolver Eurodollar Rate Margin in effect on such day, and (ii) during a Default Rate 22 Period, all Revolver Loans shall bear interest on each day outstanding at the Default Rate. If an Event of Default based upon Section 8.1(a), Section 8.1(b) or, with respect to Borrower, based upon Section 8.1(i)(i), (i)(ii) or (i)(iii) exists and the Revolver Loans are not bearing interest at the Default Rate, the past due principal and past due interest shall bear interest on each day outstanding at the Default Rate. The interest rate shall change whenever the applicable Base Rate, the Adjusted Eurodollar Rate or the Revolver Eurodollar Rate Margin changes. In no event shall the interest rate on any Revolver Loan exceed the Highest Lawful Rate. (b) Term Loan Interest Rates. Each Term Loan shall bear interest as follows: (i) unless the Default Rate shall apply, (A) each Base Rate Loan shall bear interest on each day outstanding at the Base Rate plus the Term Loan Base Rate Margin in effect on such day, and (B) each Eurodollar Loan shall bear interest on each day during the related Interest Period at the related Adjusted Eurodollar Rate plus the Term Loan Eurodollar Rate Margin in effect on such day and (ii) during a Default Rate Period, all Term Loans shall bear interest on each day outstanding at the Default Rate. If an Event of Default based upon Section 8.1(a) or Section 8.1(b) or, with respect to Borrower, based upon Section 8.1(i)(i), (i)(ii) or (i)(iii) exists and the Term Loans are not bearing interest at the Default Rate, the past due principal and past due interest shall bear interest on each day outstanding at the Default Rate. The interest rate shall change whenever the applicable Base Rate, Term Loan Base Rate Margin, Adjusted Eurodollar Rate, or Term Loan Eurodollar Rate Margin changes. In no event shall the interest rate on any Term Loan exceed the Highest Lawful Rate. (c) Revolver Commitment Fees. In consideration of each Revolver Lender's commitment to make Revolver Loans, Borrower will pay to Administrative Agent for the account of each Revolver Lender a commitment fee determined on a daily basis by applying a rate of one-half of one percent (.50%) per annum to such Revolver Lender's Revolver Percentage Share of the unused portion of the Revolver Commitment on each day during the Revolver Commitment Period, determined for each such day by deducting from the amount of the Revolver Commitment at the end of such day the Facility Usage. This commitment fee shall be due and payable in arrears on each Quarterly Payment Date and at the end of the Revolver Commitment Period. Borrower shall have the right from time to time to permanently reduce the Revolver Commitment, provided that (i) notice of such reduction is given not less than 2 Business Days prior to such reduction, (ii) the resulting Revolver Commitment is not less than the Facility Usage and (iii) each partial reduction shall be in an amount at least equal to $500,000 and in multiples of $100,000 in excess thereof. (d) Administrative Agent's Fees. In addition to all other amounts due to Administrative Agent under the Loan Documents, Borrower will pay fees to Administrative Agent as described in a letter agreement dated June 2, 1998, between Administrative Agent and Borrower. Section 2.6. Optional Prepayments. (a) Revolver Loans. Borrower may, upon five Business Days' notice to Administrative Agent (and Administrative Agent will promptly give notice to the other Lenders) from time to time and without premium or penalty prepay the Revolver Loans, in whole or in part, so long as the aggregate amounts of all partial prepayments of principal on the Revolver Loans equals $2,000,000 or any higher integral multiple of $250,000, and so long as Borrower does not 23 make any prepayments which would reduce the unpaid principal balance of the Revolver Loans to less than $100,000 without first either (i) terminating this Agreement or (ii) providing assurance satisfactory to Administrative Agent in its discretion that Revolver Lenders' legal rights under the Loan Documents are in no way affected by such reduction. Upon receipt of any such notice, Administrative Agent shall give each Revolver Lender prompt notice of the terms thereof. (b) Term Loans. Borrower may, upon five Business Days' notice to each Term Lender and, if applicable, with the payment of the prepayment premium set forth below, prepay the Term Loans, in whole or in part, so long as the aggregate of amounts of all partial prepayments of principal on the Term Loans equals $5,000,000 or any higher integral multiple of $1,000,000. Borrower shall pay to Administrative Agent, for the account of each Term Lender, a prepayment premium equal to (x) if such prepayment is made prior to December 31, 1998, one percent (1%) of the amount of principal so prepaid by Borrower; or (y) if such prepayment is made on or after December 31, 1998 and prior to June 30, 1999, one-half of one percent (.50%) of the amount of principal prepaid by Borrower. Any prepayment on the Term Loans made by Borrower in accordance with this Section 2.6(b) on or after June 30, 1999 shall not be subject to any prepayment premium. (c) Interest on Prepayment. Each prepayment of principal under Section 2.6(a) or 2.6(b) shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid pursuant to Section 2.6(a) or 2.6(b) shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment. Section 2.7. Mandatory Prepayments. (a) Without limiting the requirements of Section 7.5 hereof regarding the consent of Majority Lenders to sales of property by Restricted Persons which are not permitted by Section 7.5, the proceeds of any sale of property (net of all reasonable costs and expenses, but excluding proceeds consisting of tangible property to be used in the business of Restricted Persons) by any Restricted Person (other than a sale of property permitted under Section 7.5 hereof) shall be placed in a collateral account under the control of Administrative Agent in a manner satisfactory to Administrative Agent immediately upon such Restricted Person's receipt of such proceeds and maintained therein for a period of ninety (90) days following the date of receipt thereof in cash (in this Section 2.7(a) referred to as the "Collateral Period"). If any consideration consists of an instrument or security, the Collateral Period shall, with respect to each amount of cash received in respect thereof, continue until ninety (90) days following such Restricted Person's receipt of such cash unless, pursuant to the following sentence, an approved investment included such cash; any cash in a collateral account may be invested in Cash Equivalents designated by Borrower. During each Collateral Period, Borrower may propose to invest such proceeds in other property subject to the approval of Majority Lenders, and shall thereafter invest such proceeds in such property so approved by Majority Lenders. At the end of each Collateral Period or, if an investment is so proposed and approved during such Collateral Period, within one hundred-eighty (180) days after such proposed investment has been so approved by Majority Lenders, any such proceeds which have not been so invested by Borrower shall be applied pro rata to the reduction of the outstanding principal balance of 24 the Term Loans and the Revolver Loans at such time, and the Revolver Commitment shall be reduced by an amount equal to the prepayment applied to the Revolver Loans. Thereafter, the Revolver Reduction Amount shall equal the quotient of (i) the Revolver Commitment at the time of such application minus the amount of such application allocated to the Revolver Loan divided by (ii) the number of Fiscal Quarters remaining until the Revolver Maturity Date. (b) If at any time the Facility Usage exceeds the Revolver Commitment (whether due to a reduction in the Revolver Commitment in accordance with this Agreement, or otherwise), Borrower shall immediately upon demand prepay the principal of the Revolver Loans in an amount at least equal to such excess. Each prepayment of principal under this section shall be accompanied by all interest then accrued and unpaid on the principal so prepaid. Any principal or interest prepaid pursuant to this section shall be in addition to, and not in lieu of, all payments otherwise required to be paid under the Loan Documents at the time of such prepayment. Section 2.8. Letters of Credit. Subject to the terms and conditions hereof, Borrower may during the Revolver Commitment Period request LC Issuer to issue, amend, or extend the expiration date of, one or more Letters of Credit, provided that, after taking such Letter of Credit into account: (a) the Facility Usage does not exceed the Revolver Commitment at such time; (b) the aggregate amount of LC Obligations at such time does not exceed $30,000,000; (c) the expiration date of such Letter of Credit is prior to the earlier of (i) one (1) year after the date of issuance of such Letter of Credit or (ii) the end of the Revolver Commitment Period; (d) such Letter of Credit is to be used for general corporate purposes of Borrower or any of its Subsidiaries and is not directly or indirectly used to assure payment of or otherwise support any Indebtedness of any Person, except Indebtedness of a Restricted Person; (e) the issuance of such Letter of Credit will be in compliance with all applicable governmental restrictions, policies, and guidelines and will not subject LC Issuer to any cost which is not reimbursable under Article III; (f) the form and terms of such Letter of Credit are acceptable to LC Issuer in its sole and absolute discretion; and (g) all other conditions in this Agreement to the issuance of such Letter of Credit have been satisfied. LC Issuer will honor any such request if the foregoing conditions (a) through (g) (in the following Section 2.9 called the "LC Conditions") have been met as of the date of issuance, amendment, or extension of the expiration, of such Letter of Credit. 25 Section 2.9. Requesting Letters of Credit. Borrower must make written application for any Letter of Credit at least two Business Days before the date on which Borrower desires for LC Issuer to issue such Letter of Credit. By making any such written application, unless otherwise expressly stated therein, Borrower shall be deemed to have represented and warranted that the LC Conditions described in Section 2.8 will be met as of the date of issuance of such Letter of Credit. Each such written application for a Letter of Credit must be made in writing in the form and substance of Exhibit G, the terms and provisions of which are hereby incorporated herein by reference (or in such other form as may mutually be agreed upon by LC Issuer and Borrower). If all LC Conditions are met as described in Section 2.8 on any Business Day before 11:00 a.m, New York, New York time, LC Issuer will issue such Letter of Credit on the same Business Day at LC Issuer's office in Boston, Massachusetts. If the LC Conditions are met as described in Section 2.8 on any Business Day on or after 11:00 a.m., New York, New York time, LC Issuer will issue such Letter of Credit on the next succeeding Business Day at LC Issuer's office in Boston, Massachusetts. If any provisions of any LC Application conflict with any provisions of this Agreement, the provisions of this Agreement shall govern and control. Section 2.10. Reimbursement and Participations. (a) Reimbursement by Borrower. Each Matured LC Obligation shall constitute a loan by LC Issuer to Borrower. Borrower promises to pay to LC Issuer, or to LC Issuer's order, on demand, the full amount of each Matured LC Obligation, together with interest thereon (i) at the Base Rate to and including the second Business Day after the Matured LC Obligation is incurred and (ii) at the Default Rate on each day thereafter. (b) Letter of Credit Advances. If the beneficiary of any Letter of Credit makes a draft or other demand for payment thereunder then Borrower may, during the interval between the making thereof and the honoring thereof by LC Issuer, request Revolver Lenders to make Revolver Loans to Borrower in the amount of such draft or demand, which Revolver Loans shall be made concurrently with LC Issuer's payment of such draft or demand and shall be immediately used by LC Issuer to repay the amount of the resulting Matured LC Obligation. Such a request by Borrower shall be made in compliance with all of the provisions hereof, provided that for the purposes of the first sentence of Section 2.1(a), the amount of such Revolver Loans shall be considered, but the amount of the Matured LC Obligation to be concurrently paid by such Revolver Loans shall not be considered. (c) Participation by Revolver Lenders. LC Issuer irrevocably agrees to grant and hereby grants to each Revolver Lender, and -- to induce LC Issuer to issue Letters of Credit hereunder -- each Revolver Lender irrevocably agrees to accept and purchase and hereby accepts and purchases from LC Issuer, on the terms and conditions hereinafter stated and for such Revolver Lender's own account and risk an undivided interest equal to such Revolver Lender's Revolver Percentage Share of LC Issuer's obligations and rights under each Letter of Credit issued hereunder and the amount of each Matured LC Obligation paid by LC Issuer thereunder. Each Revolver Lender unconditionally and irrevocably agrees with LC Issuer that, if a Matured LC Obligation is paid under any Letter of Credit for which LC Issuer is not reimbursed in full by Borrower in accordance with the terms of this Agreement and the related LC Application (including any reimbursement by means of concurrent Loans or by the application of LC 26 Collateral), such Revolver Lender shall (in all circumstances and without set- off or counterclaim) pay to LC Issuer on demand, in immediately available funds at LC Issuer's address for notices hereunder, such Lender's Revolver Percentage Share of such Matured LC Obligation (or any portion thereof which has not been reimbursed by Borrower). Each Revolver Lender's obligation to pay LC Issuer pursuant to the terms of this subsection is irrevocable and unconditional. If any amount required to be paid by any Revolver Lender to LC Issuer pursuant to this subsection is paid by such Revolver Lender to LC Issuer within three Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Revolver Lender, on demand, interest thereon calculated from such due date at the Federal Funds Rate. If any amount required to be paid by any Revolver Lender to LC Issuer pursuant to this subsection is not paid by such Revolver Lender to LC Issuer within three Business Days after the date such payment is due, LC Issuer shall in addition to such amount be entitled to recover from such Revolver Lender, on demand, interest thereon calculated from such due date at the Base Rate. (d) Distributions to Participants. Whenever LC Issuer has in accordance with this section received from any Revolver Lender payment of such Lender's Revolver Percentage Share of any Matured LC Obligation, if LC Issuer thereafter receives any payment of such Matured LC Obligation or any payment of interest thereon (whether directly from Borrower or by application of LC Collateral or otherwise, and excluding only interest for any period prior to LC Issuer's demand that such Revolver Lender make such payment of its Revolver Percentage Share), LC Issuer will distribute to such Lender its Revolver Percentage Share of the amounts so received by LC Issuer; provided, however, that if any such payment received by LC Issuer must thereafter be returned by LC Issuer, such Revolver Lender shall return to LC Issuer the portion thereof which LC Issuer has previously distributed to it. (e) Calculations. A written advice setting forth in reasonable detail the amounts owing under this section, submitted by LC Issuer to Borrower or any Revolver Lender from time to time, shall be conclusive, absent manifest error, as to the amounts thereof. Section 2.11. Letter of Credit Fees. In consideration of LC Issuer's issuance of any Letter of Credit, Borrower agrees to pay (i) to Administrative Agent for the account of each Revolver Lender in proportion to its Revolver Percentage Share, a letter of credit fee equal to the Letter of Credit Fee Rate applicable each day times the face amount of such Letter of Credit and (ii) to such LC Issuer for its own account, a letter of credit fronting fee at a rate equal to one-eighth percent (.125%) per annum times the face amount of such Letter of Credit. Each such fee will be calculated on the face amount of each Letter of Credit outstanding on each day at the above applicable rates and will be payable quarterly in arrears. In addition, Borrower will pay to LC Issuer a minimum administrative issuance fee of $100 for each Letter of Credit and such other fees and charges customarily charged by the LC Issuer in respect of any amendment or negotiation of any Letter of Credit in accordance with the LC Issuer's published schedule of such charges effective as of the date of such amendment or negotiation. Section 2.12. No Duty to Inquire. 27 (a) Drafts and Demands. LC Issuer is authorized and instructed to accept and pay drafts and demands for payment under any Letter of Credit without requiring, and without responsibility for, any determination as to the existence of any event giving rise to said draft, either at the time of acceptance or payment or thereafter. LC Issuer is under no duty to determine the proper identity of anyone presenting such a draft or making such a demand (whether by tested telex or otherwise) as the officer, representative or agent of any beneficiary under any Letter of Credit, and payment by LC Issuer to any such beneficiary when requested by any such purported officer, representative or agent is hereby authorized and approved. Borrower releases each Lender Party from, and agrees to hold each Lender Party harmless and indemnified against, any liability or claim in connection with or arising out of the subject matter of this section, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no Lender Party shall be entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. (b) Extension of Maturity. If the maturity of any Letter of Credit is extended by its terms or by Law or governmental action, if any extension of the maturity or time for presentation of drafts or any other modification of the terms of any Letter of Credit is made at the request of Borrower, or if the amount of any Letter of Credit is increased at the request of Borrower, this Agreement shall be binding upon all Restricted Persons with respect to such Letter of Credit as so extended, increased or otherwise modified, with respect to drafts and property covered thereby, and with respect to any action taken by LC Issuer, LC Issuer's correspondents, or any Lender Party in accordance with such extension, increase or other modification. (c) Transferees of Letters of Credit. If any Letter of Credit provides that it is transferable, LC Issuer shall have no duty to determine the proper identity of anyone appearing as transferee of such Letter of Credit, nor shall LC Issuer be charged with responsibility of any nature or character for the validity or correctness of any transfer or successive transfers, and payment by LC Issuer to any purported transferee or transferees as determined by LC Issuer is hereby authorized and approved, and Borrower releases each Lender Party from, and agrees to hold each Lender Party harmless and indemnified against, any liability or claim in connection with or arising out of the foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, provided only that no Lender Party shall be entitled to indemnification for that portion, if any, of any liability or claim which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. Section 2.13. LC Collateral. (a) LC Obligations in Excess of Revolver Commitment. If, after the making of all mandatory prepayments required under Section 2.7, the outstanding LC Obligations will exceed 28 the Revolver Commitment, then in addition to prepayment of the entire principal balance of the Revolver Loans Borrower will immediately pay to LC Issuer an amount equal to such excess. LC Issuer will hold such amount as collateral security for the remaining LC Obligations (all such amounts held as collateral security for LC Obligations being herein collectively called "LC Collateral") and the Revolver Loans, and such collateral may be applied from time to time to pay Matured LC Obligations. Neither this subsection nor the following subsection shall, however, limit or impair any rights which LC Issuer may have under any other document or agreement relating to any Letter of Credit, LC Collateral or LC Obligation, including any LC Application, or any rights which any Lender Party may have to otherwise apply any payments by Borrower and any LC Collateral under Section 3.1. (b) Acceleration of LC Obligations. If the Obligations or any part thereof become immediately due and payable pursuant to Section 8.1 then, unless all Revolver Lenders otherwise specifically elect to the contrary (which election may thereafter be retracted by any Revolver Lender at any time), all LC Obligations shall become immediately due and payable without regard to whether or not actual drawings or payments on the Letters of Credit have occurred, and Borrower shall be obligated to pay to LC Issuer immediately an amount equal to the aggregate LC Obligations which are then outstanding to be held as LC Collateral. (c) Investment of LC Collateral. Pending application thereof, all LC Collateral shall be invested by LC Issuer in such Investments as LC Issuer may choose in its sole discretion. All interest on (and other proceeds of) such Investments shall be reinvested or applied to Matured LC Obligations or the Revolver Loans which are due and payable. When all Obligations have been satisfied in full, including all LC Obligations, all Letters of Credit have expired or been terminated, and all of Borrower's reimbursement obligations in connection therewith have been satisfied in full, LC Issuer shall release any remaining LC Collateral. Borrower hereby assigns and grants to LC Issuer for the benefit of Revolver Lenders a continuing security interest in all LC Collateral paid by it to LC Issuer, all Investments purchased with such LC Collateral, and all proceeds thereof to secure its Matured LC Obligations and its Obligations under this Agreement, each Note, and the other Loan Documents, and Borrower agrees that such LC Collateral, Investments and proceeds shall be subject to all of the terms and conditions of the Security Documents. Borrower further agrees that LC Issuer shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as adopted in the State of New York with respect to such security interest and that an Event of Default under this Agreement shall constitute a default for purposes of such security interest. (d) Payment of LC Collateral. When Borrower is required to provide LC Collateral for any reason and fails to do so on the day when required, LC Issuer may without notice to Borrower or any other Restricted Person provide such LC Collateral (whether by application of proceeds of other Collateral, by transfers from other accounts maintained with LC Issuer, or otherwise) using any available funds of Borrower or any other Person also liable to make such payments. Any such amounts which are required to be provided as LC Collateral and which are not provided on the date required shall, for purposes of each Security Document, be considered past due Obligations owing hereunder, and LC Issuer is hereby authorized to exercise its respective rights under each Security Document to obtain such amounts. 29 Section 2.14. Hedging Contracts. All Hedging Contracts permitted hereunder entered into with any one or more Lenders or their Affiliates shall be deemed to be Obligations and be secured by all Collateral; subject, however, to the provisions of Section 3.9 hereof. ARTICLE III - Payments to Lenders Section 3.1. General Procedures. Borrower will make each payment which it owes under the Loan Documents to Administrative Agent for the account of the Lender Party to whom such payment is owed in lawful money of the United States of America, without set-off, deduction or counterclaim, and in immediately available funds. Each such payment must be received by Administrative Agent not later than noon, New York, New York time, on the date such payment becomes due and payable. Any payment received by Administrative Agent after such time will be deemed to have been made on the next following Business Day. Should any such payment become due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day, and, in the case of a payment of principal or past due interest, interest shall accrue and be payable thereon for the period of such extension as provided in the Loan Document under which such payment is due. Each payment under a Loan Document shall be due and payable at the place provided therein and, if no specific place of payment is provided, shall be due and payable at the place of payment of Administrative Agent's Note. When Administrative Agent collects or receives money on account of the Obligations, other than as provided in Section 3.9, Administrative Agent shall distribute all money so collected or received, and each Lender Party shall apply all such money so distributed, as follows: (a) first, for the payment of all Obligations which are then due (and if such money is insufficient to pay all such Obligations, first to any reimbursements due Administrative Agent under Section 6.9 or 10.4 and then to the partial payment of all other Obligations then due in proportion to the amounts thereof, or as Lender Parties shall otherwise agree); (b) then for the prepayment of amounts owing under the Loan Documents (other than principal on the Notes) if so specified by Borrower; (c) then for the prepayment of principal on the Notes, together with accrued and unpaid interest on the principal so prepaid; and (d) last, for the payment or prepayment of any other Obligations. All payments applied to principal or interest on any Note shall be applied first to any interest then due and payable, then to principal then due and payable, and last to any prepayment of principal and interest in compliance with Sections 2.6 and 2.7. All distributions of amounts described in any of subsections (b), (c) or (d) above shall be made by Administrative Agent pro rata to each Lender Party then owed Obligations described in such subsection in proportion to all amounts owed to all Lender Parties which are described in such subsection; provided that if any Lender then owes payments to LC Issuer for the purchase of a participation under Section 2.13(c) or to Administrative Agent under Section 9.4, any amounts otherwise distributable under this section to such Lender shall be deemed to belong to LC Issuer, or Administrative Agent, respectively, to the 30 extent of such unpaid payments, and Administrative Agent shall apply such amounts to make such unpaid payments rather than distribute such amounts to such Lender. Section 3.2. Capital Reimbursement. If either (a) the introduction or implementation of or the compliance with or any change in or in the interpretation of any Law, or (b) the introduction or implementation of or the compliance with any request, directive or guideline from any central bank or other governmental authority (whether or not having the force of Law) affects or would affect the amount of capital required or expected to be maintained by any Lender Party or any corporation controlling any Lender Party, then, within five Business Days after demand by such Lender Party, Borrower will pay to Administrative Agent for the benefit of such Lender Party, from time to time as specified by such Lender Party, such additional amount or amounts which such Lender Party shall determine to be appropriate to compensate such Lender Party or any corporation controlling such Lender Party in light of such circumstances, to the extent that such Lender Party reasonably determines that the amount of any such capital would be increased or the rate of return on any such capital would be reduced by or in whole or in part based on the existence of the face amount of such Lender Party's Loans, Letters of Credit, participations in Letters of Credit or commitments under this Agreement. Section 3.3. Increased Cost of Eurodollar Loans or Letters of Credit. If any applicable Law (whether now in effect or hereinafter enacted or promulgated, including Regulation D) or any interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof (whether or not having the force of Law): (a) shall change the basis of taxation of payments to any Lender Party of any principal, interest, or other amounts attributable to any Eurodollar Loan or Letter of Credit or otherwise due under this Agreement in respect of any Eurodollar Loan or Letter of Credit (other than taxes imposed on, or measured by, the overall net income of such Lender Party or any Applicable Lending Office of such Lender Party by any jurisdiction in which such Lender Party or any such Applicable Lending Office is located); or (b) shall change, impose, modify, apply or deem applicable any reserve, special deposit or similar requirements in respect of any Eurodollar Loan or any Letter of Credit (excluding those for which such Lender Party is fully compensated pursuant to adjustments made in the definition of Eurodollar Rate) or against assets of, deposits with or for the account of, or credit extended by, such Lender Party; or (c) shall impose on any Lender Party or the interbank eurocurrency deposit market any other condition affecting any Eurodollar Loan or Letter of Credit, the result of which is to increase the cost to any Lender Party of funding or maintaining any Eurodollar Loan or of issuing any Letter of Credit or to reduce the amount of any sum receivable by any Lender Party in respect of any Eurodollar Loan or Letter of Credit by an amount deemed by such Lender Party to be material, then such Lender Party shall promptly notify Administrative Agent and Borrower in writing of the happening of such event and of the amount required to compensate such Lender Party for such event (on an after-tax basis, taking into account any taxes on such compensation), whereupon (i) 31 Borrower shall, within five Business Days after demand therefor by such Lender Party, pay such amount to Administrative Agent for the account of such Lender Party and (ii Borrower may elect, by giving to Administrative Agent and such Lender Party not less than three Business Days' notice, to Convert all (but not less than all) of any such Eurodollar Loans into Base Rate Loans. Section 3.4. Notice; Change of Applicable Lending Office. A Lender Party shall notify Borrower of any event occurring after the date of this Agreement that will entitle such Lender Party to compensation under Section 3.2, 3.3, or 3.5 hereof as promptly as practicable, but in any event within 90 days, after such Lender Party obtains actual knowledge thereof; provided, that (i) if such Lender Party fails to give such notice within 90 days after it obtains actual knowledge of such an event, such Lender Party shall, with respect to compensation payable pursuant to Section 3.2, 3.3, or 3.5 in respect of any costs resulting from such event, only be entitled to payment under Section 3.2, 3.3, or 3.5 hereof for costs incurred from and after the date 90 days prior to the date that such Lender Party does give such notice and (ii) such Lender Party will designate a different Applicable Lending Office for the Loans affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Lender Party, be disadvantageous to such Lender Party, except that such Lender Party shall have no obligation to designate an Applicable Lending Office located in the United States of America. Each Lender Party will furnish to Borrower a certificate setting forth the basis and amount of each request by such Lender Party for compensation under Section 3.2, 3.3, or 3.5 hereof. Section 3.5. Availability. If (a) any change in applicable Laws, or in the interpretation or administration thereof of or in any jurisdiction whatsoever, domestic or foreign, shall make it unlawful or impracticable for any Lender Party to fund or maintain Eurodollar Loans or to issue or participate in Letters of Credit, or shall materially restrict the authority of any Lender Party to purchase or take offshore deposits of dollars (i.e., "eurodollars"), or (b) any Lender Party determines that matching deposits appropriate to fund or maintain any Eurodollar Loan are not available to it, or (c) any Lender Party determines that the formula for calculating the Eurodollar Rate does not fairly reflect the cost to such Lender Party of making or maintaining loans based on such rate, then, upon notice by such Lender Party to Borrower and Administrative Agent, Borrower's right to elect Eurodollar Loans from such Lender Party (or, if applicable, to obtain Letters of Credit) shall be suspended to the extent and for the duration of such illegality, impracticability or restriction and all Eurodollar Loans of such Lender Party which are then outstanding or are then the subject of any Borrowing Notice and which cannot lawfully or practicably be maintained or funded shall immediately become or remain, or shall be funded as, Base Rate Loans of such Lender Party. Borrower agrees to indemnify each Lender Party and hold it harmless against all costs, expenses, claims, penalties, liabilities and damages which may result from any such change in Law, interpretation or administration. Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity. Section 3.6. Funding Losses. In addition to its other obligations hereunder, Borrower will indemnify each Lender Party against, and reimburse each Lender Party on demand for, any loss or expense incurred or sustained by such Lender Party (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by a Lender Party to fund or maintain Eurodollar Loans), as a result of (a) any payment or prepayment 32 (whether or not authorized or required hereunder) of all or a portion of a Eurodollar Loan on a day other than the day on which the applicable Interest Period ends, (b) any payment or prepayment, whether or not required hereunder, of a Loan made after the delivery, but before the effective date, of a Continuation/Conversion Notice, if such payment or prepayment prevents such Continuation/Conversion Notice from becoming fully effective, (c) the failure of any Loan to be made or of any Continuation/Conversion Notice to become effective due to any condition precedent not being satisfied or due to any other action or inaction of any Restricted Person, or (d) any Conversion (whether or not authorized or required hereunder) of all or any portion of any Eurodollar Loan into a Base Rate Loan or into a different Eurodollar Loan on a day other than the day on which the applicable Interest Period ends. Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity. Section 3.7. Reimbursable Taxes. Borrower covenants and agrees that: (a) Borrower will indemnify each Lender Party against and reimburse each Lender Party for all present and future income, stamp and other taxes, levies, costs and charges whatsoever imposed, assessed, levied or collected on or in respect of this Agreement or any Eurodollar Loans or Letters of Credit (whether or not legally or correctly imposed, assessed, levied or collected), excluding, however, any taxes imposed on or measured by the overall net income of Administrative Agent or such Lender Party or any Applicable Lending Office of such Lender Party by any jurisdiction in which such Lender Party or any such Applicable Lending Office is located (all such non-excluded taxes, levies, costs and charges being collectively called "Reimbursable Taxes" in this section). Such indemnification shall be on an after-tax basis, taking into account any taxes imposed on the amounts paid as indemnity. (b) All payments on account of the principal of, and interest on, each Lender Party's Loans and Note, and all other amounts payable by Borrower to any Lender Party hereunder, shall be made in full without set- off or counterclaim and shall be made free and clear of and without deductions or withholdings of any nature by reason of any Reimbursable Taxes, all of which will be for the account of Borrower. In the event of Borrower being compelled by Law to make any such deduction or withholding from any payment to any Lender Party, Borrower shall pay on the due date of such payment, by way of additional interest, such additional amounts as are needed to cause the amount receivable by such Lender Party after such deduction or withholding to equal the amount which would have been receivable in the absence of such deduction or withholding. If Borrower should make any deduction or withholding as aforesaid, Borrower shall within 60 days thereafter forward to such Lender Party an official receipt or other official document evidencing payment of such deduction or withholding. (c) If Borrower is ever required to pay any Reimbursable Tax with respect to any Eurodollar Loan, Borrower may elect, by giving to Administrative Agent and such Lender Party not less than three Business Days' notice, to Convert all (but not less than all) of any such Eurodollar Loan into a Base Rate Loan, but such election shall not diminish Borrower's obligation to pay all Reimbursable Taxes. 33 (d) Notwithstanding the foregoing provisions of this section, Borrower shall be entitled, to the extent it is required to do so by Law, to deduct or withhold (and not to make any indemnification or reimbursement for) income or other similar taxes imposed by the United States of America (other than any portion thereof attributable to a change in federal income tax Laws effected after the date hereof) from interest, fees or other amounts payable hereunder for the account of any Lender Party, other than a Lender Party (i) who is a U.S. person for Federal income tax purposes or (ii) who has the Prescribed Forms on file with Administrative Agent (with copies provided to Borrower) for the applicable year to the extent deduction or withholding of such taxes is not required as a result of the filing of such Prescribed Forms, provided that if Borrower shall so deduct or withhold any such taxes, it shall provide a statement to Administrative Agent and such Lender Party, setting forth the amount of such taxes so deducted or withheld, the applicable rate and any other information or documentation which such Lender Party may reasonably request for assisting such Lender Party to obtain any allowable credits or deductions for the taxes so deducted or withheld in the jurisdiction or jurisdictions in which such Lender Party is subject to tax. As used in this section, "Prescribed Forms" means such duly executed forms or statements, and in such number of copies, which may, from time to time, be prescribed by Law and which, pursuant to applicable provisions of (x) an income tax treaty between the United States and the country of residence of the Lender Party providing the forms or statements, (y) the Code, or (z) any applicable rules or regulations thereunder, permit Borrower to make payments hereunder for the account of such Lender Party free of such deduction or withholding of income or similar taxes. Section 3.8 Replacement of Lenders. If any Lender Party seeks reimbursement for increased costs under Sections 3.2 through 3.7, then within ninety days thereafter -- provided no Event of Default then exists -- Borrower shall have the right (unless such Lender Party withdraws its request for additional compensation) to replace such Lender Party by requiring such Lender Party to assign its Loans and Notes and its commitments hereunder to an Eligible Transferee reasonably acceptable to Administrative Agent and to Borrower, provided that: (i) all Obligations of Borrower owing to such Lender Party being replaced (including such increased costs, but excluding principal and accrued interest on the Notes being assigned) shall be paid in full to such Lender Party concurrently with such assignment, and (ii) the replacement Eligible Transferee shall purchase the Note being assigned by paying to such Lender Party a price equal to the principal amount thereof plus accrued and unpaid interest and accrued and unpaid commitment fees thereon. In connection with any such assignment Borrower, Administrative Agent, such Lender Party and the replacement Eligible Transferee shall otherwise comply with Section 10.5. Notwithstanding the foregoing rights of Borrower under this section, however, Borrower may not replace any Lender Party which seeks reimbursement for increased costs under Section 3.2 through 3.7 unless Borrower is at the same time replacing all Lender Parties which are then seeking such compensation. Section 3.9. Application of Proceeds After Acceleration. If any Event of Default shall have occurred and be continuing, and if the Obligations have become due and payable, all cash collateral held by Administrative Agent under this Agreement and the proceeds of any sale, disposition, or other realization by Administrative Agent upon the Collateral (or any portion thereof) pursuant to the Security Documents, shall be distributed in whole or in part by 34 Administrative Agent in the following order of priority, unless otherwise directed by all of the Lenders: First, to the Administrative Agent, in an amount equal to all reimbursements to Administrative Agent due and payable as of the date of such distribution; Second, to the Lenders, ratably, in an amount equal to all accrued and unpaid interest and fees owing to the Lenders under this Agreement due and payable as of the date of such distribution; provided, however, that in case such proceeds shall be insufficient to pay in full all such Obligations, then to the payment thereof to the Lenders, ratably, in proportion to its percentage of the sum of the aggregate amounts of all such Obligations; Third, to the Lenders, ratably, in an amount equal to all Loans plus LC Obligations; provided, however, that in the case such proceeds shall be insufficient to pay in full all such Obligations, then to the payment thereof to the Lenders, ratably, in proportion to its percentage of the sum of the aggregate amounts of all such Obligations; Fourth, to the Lenders, ratably, in an amount equal to all amounts owing to the Lenders under all Obligations with respect to Hedging Contracts between any Restricted Person and any Lender or an Affiliate; provided, however, that in case such proceeds shall be insufficient to pay in full all such Obligations, then to the payment thereof to the Lenders, ratably, in proportion to its percentage of the sum of the aggregate amounts of all such Obligations; Fifth, to the Lenders in an amount equal to all other Obligations; provided, however, that in the case such proceeds shall be insufficient to pay in full such Obligations, then to the payment thereof to the Lenders, ratably, in proportion to its percentage of the sum of the aggregate amounts of all such Obligations; and Sixth, to the extent of any surplus, to the Restricted Persons as their respective interests may appear, except as may be provided otherwise by law; it being understood that the Restricted Persons shall remain liable to the extent of any deficiency between the amount of proceeds of the Collateral and the aggregate sums referred to in clauses First through Fifth above. ARTICLE IV - Conditions Precedent to Lending Section 4.1. Documents to be Delivered. No Lender has any obligation to make its first Loan, and LC Issuer has no obligation to issue the first Letter of Credit unless Administrative Agent shall have received all of the following, at Administrative Agent's office in New York, New York, duly executed and delivered and in form, substance and date satisfactory to Administrative Agent: (a) This Agreement and any other documents that Lenders are to execute in connection herewith. 35 (b) Each Note. (c) Each Security Document listed in the Security Schedule. (d) Certain certificates of Borrower including: (i) An "Omnibus Certificate" of the secretary and of the president of each Restricted Person, which shall contain the names and signatures of the officers of such Restricted Person authorized to execute Loan Documents and which shall certify to the truth, correctness and completeness of the following exhibits attached thereto: (1) a copy of resolutions duly adopted by the Board of Directors of such Restricted Person and in full force and effect at the time this Agreement is entered into, authorizing the execution of this Agreement and the other Loan Documents delivered or to be delivered in connection herewith and the consummation of the transactions contemplated herein and therein, (2) a copy of the charter documents of such Restricted Person and all amendments thereto, certified by the appropriate official of such Restricted Person's state of organization, and (3) a copy of any bylaws of such Restricted Person; and (ii) A certificate of the president and of the chief financial officer of Borrower, regarding satisfaction of subsections (a) and (b) of Section 4.2 and subsections (a), (b), (c), and (d) of Section 4.3, in the form of Exhibit I hereto. (e) A certificate (or certificates) of the due formation, valid existence and good standing of each Restricted Person in its respective state of organization, issued by the appropriate authorities of such jurisdiction, and certificates of each Restricted Person's good standing and due qualification to do business, issued by appropriate officials in any states in which such Restricted Person owns property subject to Security Documents. (f) Documents similar to those specified in subsections (d)(i) and (e) of this section with respect to each Guarantor and the execution by it of its guaranty of Borrower's Obligations. (g) A favorable opinion of Michael Patterson, Esq., General Counsel for Restricted Persons, substantially in the form set forth in Exhibit E-1, and Fulbright & Jaworski L.L.P., special Texas and New York counsel to Restricted Persons, substantially in the form set forth in Exhibit E-2. (h) The Initial Financial Statements. (i) Certificates or binders evidencing Restricted Persons' insurance in effect on the date hereof. (j) A favorable report of Administrative Agent's professional insurance consultants regarding their assessment of the insurance maintained by Restricted Persons, in scope and results acceptable to Administrative Agent. 36 (k) A favorable report of Pilko & Associates, Inc. regarding their environmental assessment of the material properties of Restricted Persons and any other properties constituting Collateral, in scope and results acceptable to Administrative Agent. (l) Copies of such permits and approvals regarding the property and business of Restricted Persons as Agent may request. (m) A certificate signed by the chief executive officer of Borrower in form and detail acceptable to Administrative Agent confirming the insurance that is in effect as of the date hereof and certifying that such insurance is customary for the businesses conducted by Restricted Persons and is in compliance with the requirements of this Agreement. (n) Payment of all commitment, facility, agency and other fees required to be paid to any Lender pursuant to any Loan Documents or any commitment agreement heretofore entered into. (o) A copy of each Acquisition Document, duly executed and delivered by each party thereto. (p) Evidence that all notice requirements and the expiration of applicable time periods or the receipt of all applicable approvals required pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, have been satisfied. (q) Evidence acceptable to Administrative Agent in its sole and absolute discretion that Resources has made a net cash equity contribution to Borrower of at least $110,000,000 in exchange for common stock of Borrower or as additional paid in capital contributions in respect of common stock. Section 4.2. Additional Conditions to Initial Credit. No Lender has any obligation to make its first Loan, and LC Issuer has no obligation to issue the first Letter of Credit unless, prior to or contemporaneously with the initial Loan or initial Letter of Credit issuance hereunder, the following conditions precedent have been satisfied: (a) Borrower shall have consummated all of the transactions contemplated under the Acquisition Documents, in compliance with the terms and conditions thereof, in form and substance satisfactory to each Lender, and all representations and warranties made by any party to the Acquisition Documents are true and correct. (b) After giving effect to each of the transactions under the Acquisition Documents, all representations and warranties made by any Restricted Person in any Loan Document shall be true on and as of the date of such Loan or the date of issuance of such Letter of Credit as if such representations and warranties had been made as of the date of such Loan or the date of issuance of such Letter of Credit. 37 (c) Restricted Persons shall have entered into (i) the Service and Exchange Agreement with PMTI in the form of Exhibit J, (ii) the Agreement for the Allocation of Taxes and Agreement for Deferral among the Plains Resources Inc. Affiliate Group in the form of Exhibit K, and (iii) the Netting Agreement between Restricted Persons and certain Affiliates in the form of Exhibit L and Support Services Agreement between Resources and each of the Restricted Persons in the form of Exhibit M (collectively the "Affiliate Agreements"). Section 4.3. Additional Conditions Precedent. No Lender has any obligation to make any Loan (including its first), and LC Issuer has no obligation to issue any Letter of Credit (including its first), unless the following conditions precedent have been satisfied: (a) All representations and warranties made by any Restricted Person in any Loan Document shall be true on and as of the date of such Loan or the date of issuance of such Letter of Credit as if such representations and warranties had been made as of the date of such Loan or the date of issuance of such Letter of Credit except to the extent that such representation or warranty was made as of a specific date or updated, modified or supplemented as of a subsequent date with the consent of Majority Lenders. (b) No Default shall exist at the date of such Loan or the date of issuance of such Letter of Credit. (c) No Material Adverse Change shall have occurred to, and no event or circumstance shall have occurred that could cause a Material Adverse Change to, Borrower's Consolidated financial condition or businesses since the date of the Initial Financial Statements. (d) Each Restricted Person shall have performed and complied with all agreements and conditions required in the Loan Documents to be performed or complied with by it on or prior to the date of such Loan or the date of issuance of such Letter of Credit. (e) The making of such Loan or the issuance of such Letter of Credit shall not be prohibited by any Law and shall not subject any Lender or any LC Issuer to any penalty or other onerous condition under or pursuant to any such Law. (f) Administrative Agent shall have received all documents and instruments which Administrative Agent has then requested, in addition to those described in Section 4.1 (including opinions of legal counsel for Restricted Persons and Administrative Agent; corporate documents and records; documents evidencing governmental authorizations, consents, approvals, licenses and exemptions; and certificates of public officials and of officers and representatives of Borrower and other Persons), as to (i) the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in this Agreement and the other Loan Documents, (ii the satisfaction of all conditions contained herein or therein, and (ii all other matters pertaining hereto and thereto. All such additional documents and instruments shall be satisfactory to Administrative Agent in form, substance and date. 38 ARTICLE V - Representations and Warranties To confirm each Lender's understanding concerning Restricted Persons and Restricted Persons' businesses, properties and obligations and to induce each Lender to enter into this Agreement and to extend credit hereunder, Borrower represents and warrants to each Lender that: Section 5.1. No Default. No Restricted Person is in default in the performance of any of the covenants and agreements contained in any Loan Document. No event has occurred and is continuing which constitutes a Default. Section 5.2. Organization and Good Standing. Each Restricted Person is duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, having all powers required to carry on its business and enter into and carry out the transactions contemplated hereby. Each Restricted Person is duly qualified, in good standing, and authorized to do business in all other jurisdictions within the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such qualification necessary except where the failure to so qualify would not cause a Material Adverse Change. Each Restricted Person has taken all actions and procedures customarily taken in order to enter, for the purpose of conducting business or owning property, each jurisdiction outside the United States wherein the character of the properties owned or held by it or the nature of the business transacted by it makes such actions and procedures necessary except where the failure to so qualify would not cause a Material Adverse Change. Section 5.3. Authorization. Each Restricted Person has duly taken all action necessary to authorize the execution and delivery by it of the Loan Documents to which it is a party and to authorize the consummation of the transactions contemplated thereby and the performance of its obligations thereunder. Borrower is duly authorized to borrow funds hereunder. Section 5.4. No Conflicts or Consents. The execution and delivery by the various Restricted Persons of the Loan Documents and the Acquisition Documents to which each is a party, the performance by each of its obligations under such Loan Documents and such Acquisition Documents, and the consummation of the transactions contemplated by the various Loan Documents and the various Acquisition Documents, do not and will not (i) conflict with any provision of (1) any Law, (2) the organizational documents of any Restricted Person or any of its Affiliates, or (3) any agreement, judgment, license, order or permit applicable to or binding upon any Restricted Person or any of its Affiliates, (ii result in the acceleration of any Indebtedness owed by any Restricted Person or any of its Affiliates, or (ii result in or require the creation of any Lien upon any assets or properties of any Restricted Person or any of its Affiliates except as expressly contemplated in the Loan Documents. Except as expressly contemplated in the Loan Documents or the Acquisition Documents no consent, approval, authorization or order of, and no notice to or filing with, any Tribunal or third party is required in connection with the execution, delivery or performance by any Restricted Person of any Loan Document or any Acquisition Document or to consummate any transactions contemplated by the Loan Documents or the Acquisition Documents. 39 Section 5.5. Enforceable Obligations. This Agreement is, and the other Loan Documents when duly executed and delivered will be, legal, valid and binding obligations of each Restricted Person which is a party hereto or thereto, enforceable in accordance with their terms except as such enforcement may be limited by bankruptcy, insolvency or similar Laws of general application relating to the enforcement of creditors' rights. Section 5.6. Initial Financial Statements. Borrower has heretofore delivered to each Lender true, correct and complete copies of the Initial Financial Statements. The Initial Financial Statements fairly present Borrower's Consolidated financial position at the respective dates thereof and the Consolidated results of Borrower's operations and Borrower's Consolidated cash flows for the respective periods thereof. Since the date of the annual Initial Financial Statements no Material Adverse Change has occurred, except as reflected in the quarterly Initial Financial Statements or in the Disclosure Schedule. All Initial Financial Statements were prepared in accordance with GAAP. Section 5.7. Other Obligations and Restrictions. No Restricted Person has any outstanding Liabilities of any kind (including contingent obligations, tax assessments, and unusual forward or long-term commitments) which are, in the aggregate, material to Borrower or material with respect to Borrower's Consolidated financial condition and not shown in the Initial Financial Statements or disclosed in the Disclosure Schedule. Except as shown in the Initial Financial Statements or disclosed in the Disclosure Schedule, no Restricted Person is subject to or restricted by any franchise, contract, deed, charter restriction, or other instrument or restriction which could cause a Material Adverse Change. Section 5.8. Full Disclosure. No certificate, statement or other information delivered herewith or heretofore by any Restricted Person to any Lender in connection with the negotiation of this Agreement or in connection with any transaction contemplated hereby contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading as of the date made or deemed made. All written information furnished after the date hereof by or on behalf of any Restricted Person to Administrative Agent or any Lender Party in connection with this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect or based on reasonable estimates on the date as of which such information is stated or certified. There is no fact known to any Restricted Person that has not been disclosed to each Lender in writing which could cause a Material Adverse Change. Section 5.9. Litigation. Except as disclosed in the Initial Financial Statements or in the Disclosure Schedule: (i) there are no actions, suits or legal, equitable, arbitrative or administrative proceedings pending, or to the knowledge of any Restricted Person threatened, against any Restricted Person before any Tribunal which could cause a Material Adverse Change, and (ii) there are no outstanding judgments, injunctions, writs, rulings or orders by any such Tribunal against any Restricted Person or any Restricted Person's stockholders, partners, directors or officers which could cause a Material Adverse Change. 40 Section 5.10. Labor Disputes and Acts of God. Except as disclosed in the Disclosure Schedule, neither the business nor the properties of any Restricted Person has been affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), which could cause a Material Adverse Change. Section 5.11. ERISA Plans and Liabilities. All currently existing ERISA Plans are listed in the Disclosure Schedule. Except as disclosed in the Initial Financial Statements or in the Disclosure Schedule, no Termination Event has occurred with respect to any ERISA Plan and all ERISA Affiliates are in compliance with ERISA in all material respects. No ERISA Affiliate is required to contribute to, or has any other absolute or contingent liability in respect of, any "multiemployer plan" as defined in Section 4001 of ERISA. Except as set forth in the Disclosure Schedule: (i) no "accumulated funding deficiency" (as defined in Section 412(a) of the Code) exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, and (ii) the current value of each ERISA Plan's benefits does not exceed the current value of such ERISA Plan's assets available for the payment of such benefits by more than $500,000. Section 5.12. Compliance with Laws. Except as set forth in the Disclosure Schedule, each Restricted Person is conducting its businesses in compliance with all applicable Laws, including Environmental Laws, and has all permits, licenses and authorizations required in connection with the conduct of its businesses, except to the extent failure to have any such permit, license or authorization could not cause a Material Adverse Change. Each Restricted Person is in compliance with the terms and conditions of all such permits, licenses and authorizations, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any Law, including applicable Environmental Law, or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply could not cause a Material Adverse Change. Without limiting the foregoing, each Restricted Person (i) has filed and maintained all tariffs applicable to its business with each applicable commission, (ii) and all such tariffs are in compliance with all Laws administered or promulgated by each applicable commission, and (iii) has imposed charges on its customers in compliance with such tariffs, all contracts applicable to its business and all applicable Laws. As used herein, "commission" includes the Federal Energy Regulatory Commission, the Public Utility Commission of the State of California and each other federal, state or local governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over any Restricted Person or its properties. Section 5.13. Environmental Laws. As used in this section: "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, "CERCLIS" means the Comprehensive Environmental Response, Compensation and Liability Information System List of the Environmental Protection Agency, and "Release" has the meaning given such term in 42 U.S.C. (S)9601(22). Without limiting the provisions of Section 5.12, and except as set forth in the Disclosure Schedule: 41 (a) No notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed, and no investigation or review is pending or threatened by any Tribunal or any other Person with respect to any of the following which in the aggregate could cause a Material Adverse Change: (i) any alleged generation, treatment, storage, recycling, transportation, disposal, or Release of any Hazardous Materials, either by any Restricted Person or on any property owned by any Restricted Person, (ii) any remedial action which might be needed to respond to any such alleged generation, treatment, storage, recycling, transportation, disposal, or Release, or (iii) any alleged failure by any Restricted Person to have any permit, license or authorization required in connection with the conduct of its business or with respect to any such generation, treatment, storage, recycling, transportation, disposal, or Release. (b) No Restricted Person otherwise has any known material contingent liability in connection with any alleged generation, treatment, storage, recycling, transportation, disposal, or Release of any Hazardous Materials. (c) No Restricted Person has handled any Hazardous Materials, other than as a generator, on any properties now or previously owned or leased by any Restricted Person to an extent that such handling has caused, or could cause, a Material Adverse Change. (d) Except to the extent that the following in the aggregate has not caused and could not cause a Material Adverse Change: (i) no PCBs are or have been present at any properties now or previously owned or leased by any Restricted Person; (ii) no asbestos is or has been present at any properties now or previously owned or leased by any Restricted Person; (iii) there are no underground storage tanks for Hazardous Materials, active or abandoned, at any properties now or previously owned or leased by any Restricted Person; and (iv) no Hazardous Materials have been Released at, on or under any properties now or previously owned or leased by any Restricted Person. (e) No Restricted Person has transported or arranged for the transportation of any Hazardous Material to any location which is listed on the National Priorities List under CERCLA, any location listed for possible inclusion on the National Priorities List by the Environmental Protection Agency in CERCLIS, nor, except to the extent that has not caused and could not cause a Material Adverse Change, any location listed on any similar state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to claims against any Restricted Person for clean- up costs, remedial work, damages to natural resources or for personal injury claims, including, but not limited to, claims under CERCLA. 42 (f) No property now or previously owned or leased by any Restricted Person is listed or proposed for listing on the National Priority list promulgated pursuant to CERCLA, in CERCLIS, nor, except to the extent that has not caused and could not cause a Material Adverse Change, on any similar state list of sites requiring investigation or clean-up. (g) There are no Liens arising under or pursuant to any Environmental Laws on any of the real properties or properties owned or leased by any Restricted Person, and no government actions of which Borrower is aware have been taken or are in process which could subject any of such properties to such Liens; nor would any Restricted Person be required to place any notice or restriction relating to the presence of Hazardous Materials at any properties owned by it in any deed to such properties. (h) There have been no environmental investigations, studies, audits, tests, reviews or other analyses for ground water or soil contamination relating to the Release of Hazardous Materials conducted by or which are in the possession of any Restricted Person in relation to any properties or facility now or previously owned or leased by any Restricted Person which have not been made available to Administrative Agent. Section 5.14. Names and Places of Business. No Restricted Person has, during the preceding five years, had, been known by, or used any other trade or fictitious name, except as disclosed in the Disclosure Schedule. Except as otherwise indicated in the Disclosure Schedule, the chief executive office and principal place of business of each Restricted Person are (and for the preceding five years have been) located at the address of Borrower set out in Section 10.3. Except as indicated in the Disclosure Schedule, no Restricted Person has any other office or place of business. Section 5.15. Borrower's Subsidiaries. Borrower does not presently have any Subsidiary or own any stock in any other corporation or association except those listed in the Disclosure Schedule. Neither Borrower nor any Restricted Person is a member of any general or limited partnership, joint venture or association of any type whatsoever except those listed in the Disclosure Schedule. Borrower owns, directly or indirectly, the equity interest in each of its Subsidiaries which is indicated in the Disclosure Schedule. Section 5.16. Title to Properties; Licenses. Each Restricted Person has good and defensible title to all of its material properties and assets, free and clear of all Liens other than Permitted Liens and of all impediments to the use of such properties and assets in such Restricted Person's business. Each Restricted Person possesses all licenses, permits, franchises, patents, copyrights, trademarks and trade names, and other intellectual property (or otherwise possesses the right to use such intellectual property without violation of the rights of any other Person) which are necessary to carry out its business as presently conducted and as presently proposed to be conducted hereafter, and no Restricted Person is in violation in any material respect of the terms under which it possesses such intellectual property or the right to use such intellectual property. Section 5.17. Government Regulation. Neither Borrower nor any other Restricted Person owing Obligations is subject to regulation under the Public Utility Holding Company Act 43 of 1935, the Investment Company Act of 1940 (as any of the preceding acts have been amended) or any other Law which regulates the incurring by such Person of Indebtedness, including Laws relating to common contract carriers or the sale of electricity, gas, steam, water or other public utility services. Neither Borrower nor any other Restricted Person is subject to regulation under the Federal Power Act which would violate, result in a default of, or prohibit the effectiveness or the performance of any of the provisions of the Loan Documents. Section 5.18. Insider. No Restricted Person, nor any Person having "control" (as that term is defined in 12 U.S.C. (S) 375b(9) or in regulations promulgated pursuant thereto) of any Restricted Person, is a "director" or an "executive officer" or "principal shareholder" (as those terms are defined in 12 U.S.C. (S) 375b(8) or (9) or in regulations promulgated pursuant thereto) of any Lender, of a bank holding company of which any Lender is a Subsidiary or of any Subsidiary of a bank holding company of which any Lender is a Subsidiary. Section 5.19. Solvency. Upon giving effect to the issuance of the Notes, the execution of the Loan Documents by Borrower and each Guarantor and the consummation of the transactions contemplated hereby, Borrower and each Guarantor will be solvent (as such term is used in applicable bankruptcy, liquidation, receivership, insolvency or similar Laws). Section 5.20. Credit Arrangements. The Disclosure Schedule contains a complete and correct list, as of the date of this Agreement, of each credit agreement, loan agreement, indenture, purchase agreement, guaranty or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guaranty by, any Restricted Person, or to which any Restricted Person is subject, other than the Loan Documents, and the aggregate principal or face amount outstanding or which may become outstanding under each such arrangement is correctly described in the Disclosure Schedule. No Restricted Person is subject to any restriction under any credit agreement, loan agreement, indenture, purchase agreement, guaranty or other arrangement providing for or otherwise relating to any Indebtedness or any extension of credit (or commitment for any extension of credit) to, or guaranty by, any Affiliate. ARTICLE VI - Affirmative Covenants of Borrower To conform with the terms and conditions under which each Lender is willing to have credit outstanding to Borrower, and to induce each Lender to enter into this Agreement and extend credit hereunder, Borrower covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Majority Lenders, or all Lenders as required under Section 10.1, have previously agreed otherwise: Section 6.1. Payment and Performance. Each Restricted Person will pay all amounts due under the Loan Documents, to which it is a party, in accordance with the terms thereof and will observe, perform and comply with every covenant, term and condition expressed in the Loan Documents to which it is a party. 44 Section 6.2. Books, Financial Statements and Reports. Each Restricted Person will at all times maintain full and accurate books of account and records. Borrower will maintain and will cause its Subsidiaries to maintain a standard system of accounting, will maintain its Fiscal Year, and will furnish the following statements and reports to Administrative Agent, in such number of counterparts as Administrative Agent may request, at Borrower's expense: (a) As soon as available, and in any event within one hundred five (105) days after the end of each Fiscal Year (i) complete Consolidated financial statements of Borrower together with all notes thereto, prepared in reasonable detail in accordance with GAAP, together with an unqualified opinion, based on an audit using generally accepted auditing standards, by PriceWaterhouse Coopers, or other independent certified public accountants selected by Borrower and acceptable to Majority Lenders, stating that such Consolidated financial statements have been so prepared and (ii) supporting unaudited consolidating balance sheets and statements of income of Borrower. These financial statements shall contain a Consolidated and consolidating balance sheet as of the end of such Fiscal Year and Consolidated and consolidating statements of earnings for such Fiscal Year, each setting forth in comparative form the corresponding figures for the preceding Fiscal Year. In addition, within one hundred five (105) days after the end of each Fiscal Year Borrower will furnish a certificate signed by such accountants (i) stating that they have read this Agreement, (ii) containing calculations showing compliance (or non-compliance) at the end of such Fiscal Year with the requirements of Sections 7.11 through 7.17, inclusive, and (iii) further stating that in making their examination and reporting on the Consolidated financial statements described above they obtained no knowledge of any Default existing at the end of such Fiscal Year, or, if they did so conclude that a Default existed, specifying its nature and period of existence. (b) As soon as available, and in any event within forty-five (45) days after the end of each of the first three Fiscal Quarters of each Fiscal Year, (i) Borrower's Consolidated balance sheet as of the end of such Fiscal Quarter and Consolidated statements of Borrower's earnings and cash flows for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, and (ii) supporting consolidating balance sheets and statements of income of Borrower, all in reasonable detail and prepared in accordance with GAAP, subject to changes resulting from normal year-end adjustments; and as soon as available, and in any event within forty-five (45) days after the end of the last Fiscal Quarter of each Fiscal Year, Borrower's unaudited Consolidated balance sheet as of the end of such Fiscal Quarter and income statement for such Fiscal Quarter and for the period from the beginning of the current Fiscal Year to the end of such Fiscal Quarter. In addition Borrower will, together with each such set of financial statements and each set of financial statements furnished under subsection (a) of this section, furnish a certificate in the form of Exhibit D signed by the chief financial officer of Borrower stating that such financial statements are accurate and complete in all material respects (subject to normal year-end adjustments), stating that he has reviewed the Loan Documents, containing calculations showing compliance (or non-compliance) at the end of such Fiscal Quarter with the requirements of Sections 7.11-7.17, inclusive and stating that no Default exists at the end of such Fiscal Quarter or at the 45 time of such certificate or specifying the nature and period of existence of any such Default. (c) Promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent by Resources to its stockholders and all registration statements, periodic reports and other statements and schedules filed by Resources with any securities exchange, the Securities and Exchange Commission or any similar governmental authority. (d) As soon as available, and in any event within ninety (90) days after the end of each Fiscal Year, a five-year business and financial plan for Borrower (in form reasonably satisfactory to Administrative Agent), prepared by a senior financial officer thereof, setting forth for the first year thereof, quarterly financial projections and budgets for Borrower, and thereafter yearly financial projections and budgets for the next four Fiscal Years. (e) As soon as available, and in any event within forty-five (45) days after the end of each month, throughput volume reports setting forth in detail pipeline volumes of crude oil delivered by Restricted Persons for such month in connection with, and transportation fees charged and margins realized by the Restricted Persons for such month delivered through all pipeline facilities of Borrower and its Restricted Subsidiaries. (f) As soon as available, and in any event within forty-five (45) days after the end of each Fiscal Quarter, a report setting forth volumes and margins for all marketing activities of Borrower and its Subsidiaries. (g) As soon as available, and in any event within thirty (30) days after the end of each Fiscal Year, Borrower shall at its own cost and expense deliver to Administrative Agent an environmental compliance certificate signed by the president or chief executive officer of Borrower in the form attached hereto as Exhibit F. Further, if requested by Administrative Agent, Borrower shall permit and cooperate with an environmental and safety review made in connection with the operations of Borrower's properties one time during each Fiscal Year beginning with the Fiscal Year 1999, by Pilko & Associates, Inc. or other consultants selected by Administrative Agent which review shall, if requested by Administrative Agent, be arranged and supervised by environmental legal counsel for Administrative Agent, all at Borrower's cost and expense. The consultant shall render a verbal or written report, as specified by Administrative Agent, based upon such review at Borrower's cost and expense and a copy thereof will be provided to Borrower. (h) Concurrently with the annual renewal of Borrower's insurance policies, Borrower shall at its own cost and expense, if requested by Administrative Agent in writing, cause a certificate or report to be issued by Administrative Agent's professional insurance consultants or other insurance consultants satisfactory to Administrative Agent certifying that Borrower's insurance for the next succeeding year after such renewal (or for such longer period for which such insurance is in effect) complies with the provisions of this Agreement and the Security Documents. 46 Section 6.3. Other Information and Inspections. In each case subject to the last sentence of this Section 6.3, each Restricted Person will furnish to each Lender any information which Administrative Agent or any Lender may from time to time request concerning any covenant, provision or condition of the Loan Documents or any matter in connection with Restricted Persons' businesses and operations. In each case subject to the last sentence of this Section 6.3, each Restricted Person will permit representatives appointed by Administrative Agent (including independent accountants, auditors, agents, attorneys, appraisers and any other Persons) to visit and inspect during normal business hours any of such Restricted Person's property, including its books of account, other books and records, and any facilities or other business assets, and to make extra copies therefrom and photocopies and photographs thereof, and to write down and record any information such representatives obtain, and each Restricted Person shall permit Administrative Agent or its representatives to investigate and verify the accuracy of the information furnished to Administrative Agent or any Lender in connection with the Loan Documents and to discuss all such matters with its officers, employees and, upon prior notice to Borrower, its representatives. Each of the foregoing inspections shall be made subject to compliance with applicable safety standards and the same conditions applicable to any Restricted Person in respect of property of that Restricted Person on the premises of Persons other than a Restricted Person or an Affiliate of a Restricted Person, and all information, books and records furnished or requested to be furnished, or of which copies, photocopies or photographs are made or requested to be made, all information to be investigated or verified and all discussions conducted with any officer, employee or representative of any Restricted Person shall be subject to any applicable attorney-client privilege exceptions which the Restricted Person determines is reasonably necessary and compliance with conditions to disclosures under non-disclosure agreements between any Restricted Person and Persons other than a Restricted Person or an Affiliate of a Restricted Person and the express undertaking of each Person acting at the direction of or on behalf of any Lender Party to be bound by the confidentiality provisions of Section 10.6 of this Agreement. Section 6.4. Notice of Material Events and Change of Address. Borrower will notify each Lender Party, not later than five (5) Business Days after any executive officer of Borrower has knowledge thereof, stating that such notice is being given pursuant to this Agreement, of: (a) the occurrence of any Material Adverse Change, (b) the occurrence of any Default, (c) the acceleration of the maturity of any Indebtedness owed by any Restricted Person or of any default by any Restricted Person under any indenture, mortgage, agreement, contract or other instrument to which any of them is a party or by which any of them or any of their properties is bound, if such acceleration or default could cause a Material Adverse Change, (d) the occurrence of any Termination Event, (e) any claim of $1,000,000 or more, any notice of potential liability under any Environmental Laws which might be reasonably likely to exceed such amount, or any 47 other material adverse claim asserted against any Restricted Person or with respect to any Restricted Person's properties taken as a whole, and (f) the filing of any suit or proceeding against any Restricted Person in which an adverse decision could cause a Material Adverse Change. Upon the occurrence of any of the foregoing Restricted Persons will take all necessary or appropriate steps to remedy promptly any such Material Adverse Change, Default, acceleration, default or Termination Event, to protect against any such adverse claim, to defend any such suit or proceeding, and to resolve all controversies on account of any of the foregoing. Borrower will also notify Administrative Agent and Administrative Agent's counsel in writing at least twenty Business Days prior to the date that any Restricted Person changes its name or the location of its chief executive office or principal place of business or the place where it keeps its books and records concerning the Collateral, furnishing with such notice any necessary financing statement amendments or requesting Administrative Agent and its counsel to prepare the same. Section 6.5. Maintenance of Properties. Each Restricted Person will maintain, preserve, protect, and keep all Collateral and all other property used or useful in the conduct of its business in good condition (ordinary wear and tear excepted) and in compliance with all applicable Laws, and will from time to time make all repairs, renewals and replacements needed to enable the business and operations carried on in connection therewith to be promptly and advantageously conducted at all times. Section 6.6. Maintenance of Existence and Qualifications. Each Restricted Person will maintain and preserve its existence and its rights and franchises in full force and effect and will qualify to do business in all states or jurisdictions where required by applicable Law, except where the failure so to qualify will not cause a Material Adverse Change. Section 6.7. Payment of Trade Liabilities, Taxes, etc. Each Restricted Person will (a) timely file all required tax returns (including any extensions); (b) timely pay all taxes, assessments, and other governmental charges or levies imposed upon it or upon its income, profits or property; (c) within one hundred twenty (120) days after the date such goods are delivered or such services are rendered, pay all Liabilities owed by it on ordinary trade terms to vendors, suppliers and other Persons providing goods and services used by it in the ordinary course of its business; (d) pay and discharge when due all other Liabilities now or hereafter owed by it; and (e) maintain appropriate accruals and reserves for all of the foregoing in accordance with GAAP. Each Restricted Person may, however, delay paying or discharging any of the foregoing so long as it is in good faith contesting the validity thereof by appropriate proceedings, if necessary, and has set aside on its books adequate reserves therefor which are required by GAAP. Section 6.8. Insurance. Each Restricted Person shall at all times maintain insurance for its property in accordance with the Insurance Schedule, which insurance shall be by financially sound and reputable insurers. Borrower will maintain any additional insurance coverage as described in the respective Security Documents. Upon demand by Administrative Agent any insurance policies covering Collateral shall be endorsed (a) to provide for payment of losses to Administrative Agent as its interests may appear, (b) to provide that such policies may not be 48 canceled or reduced or affected in any material manner for any reason without fifteen days prior notice to Administrative Agent, and (c) to provide for any other matters specified in any applicable Security Document or which Administrative Agent may reasonably require. Each Restricted Person shall at all times maintain insurance against its liability for injury to persons or property in accordance with the Insurance Schedule, which insurance shall be by financially sound and reputable insurers. Without limiting the foregoing, each Restricted Person shall at all time maintain liability insurance in accordance with the Insurance Schedule. Section 6.9. Performance on Borrower's Behalf. If any Restricted Person fails to pay any taxes, insurance premiums, expenses, attorneys' fees or other amounts it is required to pay under any Loan Document, Administrative Agent may pay the same after notice of such payment by Administrative Agent is given to Borrower. Borrower shall immediately reimburse Administrative Agent for any such payments and each amount paid by Administrative Agent shall constitute an Obligation owed hereunder which is due and payable on the date such amount is paid by Administrative Agent. Section 6.10. Interest. Borrower hereby promises to each Lender to pay interest at the Default Rate on all Obligations (including Obligations to pay fees or to reimburse or indemnify any Lender) which Borrower has in this Agreement promised to pay to such Lender and which are not paid when due. Such interest shall accrue from the date such Obligations become due until they are paid. Section 6.11. Compliance with Agreements and Law. Each Restricted Person will perform all material obligations it is required to perform under the terms of each indenture, mortgage, deed of trust, security agreement, lease, and franchise, and each material agreement, contract or other instrument or obligation to which it is a party or by which it or any of its properties is bound. Each Restricted Person will conduct its business and affairs in compliance with all Laws applicable thereto. Section 6.12. Environmental Matters; Environmental Reviews. (a) Each Restricted Person will comply in all material respects with all Environmental Laws now or hereafter applicable to such Restricted Person as well as all contractual obligations and agreements with respect to environmental remediation or other environmental matters, 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 will maintain such authorizations in full force and effect. (b) Borrower will promptly furnish to Administrative Agent all written notices of violation, orders, claims, citations, complaints, penalty assessments, suits or other proceedings received by Borrower, or of which it has notice, pending or threatened against Borrower, the potential liability of which exceeds $1,000,000 or would cause a Material Adverse Change if resolved adversely against Borrower, by any governmental authority with respect to any alleged violation of or non-compliance with any Environmental Laws or any permits, licenses or authorizations in connection with its ownership or use of its properties or the operation of its business. 49 (c) Borrower will promptly furnish to Administrative Agent all requests for information, notices of claim, demand letters, and other notifications, received by Borrower in connection with its ownership or use of its properties or the conduct of its business, relating to potential responsibility with respect to any investigation or clean-up of Hazardous Material at any location, the potential liability of which exceeds $1,000,000 or would cause a Material Adverse Change if resolved adversely against Borrower. Section 6.13. Evidence of Compliance. Subject to the last sentence of Section 6.3, each Restricted Person will furnish to each Lender at such Restricted Person's or Borrower's expense all evidence which Administrative Agent from time to time reasonably requests in writing as to the accuracy and validity of or compliance with all representations, warranties and covenants made by any Restricted Person in the Loan Documents, the satisfaction of all conditions contained therein, and all other matters pertaining thereto. Section 6.14. Agreement to Deliver Security Documents. Borrower agrees to deliver and to cause each other Restricted Person to deliver, to further secure the Obligations whenever requested by Administrative Agent in its sole and absolute discretion, deeds of trust, mortgages, chattel mortgages, security agreements, financing statements and other Security Documents in form and substance satisfactory to Administrative Agent for the purpose of granting, confirming, and perfecting first and prior liens or security interests in any real or personal property now owned or hereafter acquired by any Restricted Person. Section 6.15. Perfection and Protection of Security Interests and Liens. Borrower will from time to time deliver, and will cause each other Restricted Person from time to time to deliver, to Administrative Agent any financing statements, continuation statements, extension agreements and other documents, properly completed and executed (and acknowledged when required) by Restricted Persons in form and substance satisfactory to Administrative Agent, which Administrative Agent requests for the purpose of perfecting, confirming, or protecting any Liens or other rights in Collateral securing any Obligations. Section 6.16. Bank Accounts; Offset. To secure the repayment of the Obligations Borrower hereby grants to each Lender a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of any Lender at common Law, under the Loan Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other property (and the proceeds therefrom) of Borrower now or hereafter held or received by or in transit to any Lender from or for the account of Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, (b) any and all deposits (general or special, time or demand, provisional or final) of Borrower with any Lender, and (c) any other credits and claims of Borrower at any time existing against any Lender, including claims under certificates of deposit. At any time and from time to time during the continuance of any Event of Default, each Lender is hereby authorized to foreclose upon, or to offset against the Obligations then due and payable (in either case without notice to Borrower), any and all items hereinabove referred to. The remedies of foreclosure and offset are separate and cumulative, and either may be exercised independently of the other without regard to procedures or restrictions applicable to the other. 50 Section 6.17. Guaranties of Borrower's Subsidiaries. Each Subsidiary of Borrower now existing or created, acquired or coming into existence after the date hereof shall, promptly upon request by Administrative Agent, execute and deliver to Administrative Agent an absolute and unconditional guaranty of the timely repayment of the Obligations and the due and punctual performance of the obligations of Borrower hereunder, which guaranty shall be satisfactory to Administrative Agent in form and substance. Each Subsidiary of Borrower existing on the date hereof shall duly execute and deliver such a guaranty prior to the making of any Loan hereunder. Borrower will cause each of its Subsidiaries to deliver to Administrative Agent, simultaneously with its delivery of such a guaranty, written evidence satisfactory to Administrative Agent and its counsel that such Subsidiary has taken all corporate or partnership action necessary to duly approve and authorize its execution, delivery and performance of such guaranty and any other documents which it is required to execute. Section 6.18. Interest Rate Hedging Agreements. Borrower shall at all times maintain interest rate Hedging Contracts which are: (a) for combined durations as of any day of not less than 24 months following such time, (b) in combined notional amounts not less than fifty percent (50%) of the sum of (i) the Revolver Loans projected by Borrower in good faith to be outstanding and (ii) the outstanding principal balance of the Term Loans, (c) in compliance with Section 7.3, and (d) otherwise on terms acceptable to Administrative Agent in its sole discretion. Section 6.19. Compliance with Agreements. Each Restricted Person shall observe, perform or comply with any agreement with any Person or any term or condition of any instrument, if such agreement or instrument is materially significant to Borrower or to Borrower and its Subsidiaries on a Consolidated basis or materially significant to any Guarantor, and such failure is not remedied within the applicable period of grace (if any) provided in such agreement or instrument. Section 6.20. Year 2000. (a) Borrower (i) no later than December 31, 1998 shall have completed the analysis of its operations and the operations of Restricted Persons and their Affiliates that could be adversely affected by failure to become Year 2000 compliant (that is, that computer applications, imbedded microchips and other systems will be able to perform date-sensitive functions prior to and after December 31, 1999) and developed a plan for Restricted Persons and their Affiliates for becoming Year 2000 compliant in a timely manner, and (ii) shall at all times after development of such plan implement such plan in all material respects, in a timely manner, and in accordance with the schedule of such plan. Contemporaneously with the delivery of each compliance certificate under Section 6.2 (a) or (b) on and after December 31, 1998, Borrower shall certify that it reasonably believes that Restricted Persons and their Affiliates will become Year 2000 compliant for their operations on a timely basis except to the extent that a failure to do so could not reasonably be expected to cause a Material Adverse Change. (b) Contemporaneously with the delivery of each compliance certificate under Section 6.2 (a) or (b) on and after December 31, 1998, Borrower shall certify that it reasonably believes any suppliers and vendors that are material to the operations of Borrower or its Subsidiaries and 51 Affiliates will be Year 2000 compliant for their own computer applications except to the extent that a failure to do so could not reasonably be expected to cause a Material Adverse Change. Section 6.21. Rents. By the terms of the various Security Documents, certain Restricted Persons are and will be assigning to Administrative Agent, for the benefit of Lender Parties, all of the "Rents" (as defined therein) accruing to the property covered thereby. Notwithstanding any such assignments, so long as no Default has occurred and is continuing, (i) such Restricted Persons may continue to receive and collect from the payors of such Rents all such Rents, subject, however, to the Liens created under the Security Documents, which Liens are hereby affirmed and ratified, and free and clear of such Liens, use the proceeds of the Rents, and (ii) the Administrative Agent will not notify the obligors of such Rents or take any other action to cause proceeds thereof to be remitted to the Administrative Agent. Upon the occurrence of a Default, Administrative Agent may exercise all rights and remedies granted under the Security Documents, including the right to obtain possession of all Rents then held by such Restricted Persons or to receive directly from the payors of such Rents all other Rents until such time as such Default is no longer continuing. If the Administrative Agent shall receive any Rent proceeds from any payor at any time other than during the continuance of a Default, then it shall notify Borrower thereof and (i) upon request and pursuant to the instructions of Borrower, it shall, if no Default is then continuing, remit such proceeds to the Borrower and (ii) at the request and expense of Borrower, execute and deliver a letter to such payors confirming Restricted Persons' right to receive and collect Rents until otherwise notified by Administrative Agent. In no case shall any failure, whether purposed or inadvertent, by Administrative Agent to collect directly any such Rents constitute in any way a waiver, remission or release of any of its rights under the Security Documents, nor shall any release of any Rents by Administrative Agent to such Restricted Persons constitute a waiver, remission, or release of any other Rents or of any rights of Administrative Agent to collect other Rents thereafter. ARTICLE VII - Negative Covenants of Borrower To conform with the terms and conditions under which each Lender is willing to have credit outstanding to Borrower, and to induce each Lender to enter into this Agreement and make the Loans, Borrower covenants and agrees that until the full and final payment of the Obligations and the termination of this Agreement, unless Majority Lenders, or all Lenders as required under Section 10.1, have previously agreed otherwise: Section 7.1. Indebtedness. No Restricted Person will in any manner owe or be liable for Indebtedness except: (a) the Obligations; (b) Indebtedness arising under Hedging Contracts permitted under Section 7.3; (c) Indebtedness of any Restricted Person owing to Borrower or any wholly-owned Subsidiary of Borrower; and 52 (d) other Indebtedness not to exceed the aggregate principal amount of $25,000,000 at any one time outstanding. Section 7.2. Limitation on Liens. No Restricted Person will create, assume or permit to exist any Lien upon any of the properties or assets which it now owns or hereafter acquires, except the following ("Permitted Liens"): (a) Liens created pursuant to this Agreement or the Security Documents and Liens existing on the date of this Agreement and listed in the Disclosure Schedule; (b) Liens imposed by any governmental authority for taxes, assessments or charges not yet due or the validity of which is being contested in good faith and by appropriate proceedings, if necessary, for which adequate reserves are maintained on the books of any Restricted Person in accordance with GAAP; (c) pledges or deposits under worker's compensation, unemployment insurance or other social security legislation; (d) carriers', warehousemen's, mechanics', materialmen's, repairmen's, landlord's, or other like Liens arising in the ordinary course of business for amounts which are not more than 60 days past due or the validity of which is being contested in good faith and by appropriate proceedings, if necessary, and for which adequate reserves are maintained on the books of any Restricted Person in accordance with GAAP; (e) deposits of cash or securities to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business and encumbrances consisting of zoning restrictions, easements, licenses, restrictions on the use of real property or minor imperfections in title thereto which, in the aggregate, are not material in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the business of any Restricted Person; (g) Liens constituting a Capital Lease as permitted under Section 7.1(d) hereof; (h) Liens upon any property or assets acquired after the date hereof by a Restricted Person, each of which either (i) existed on such property or asset before the time of its acquisition and was not created in anticipation thereof, or (ii) was created solely for the purpose of securing Indebtedness representing, or incurred to finance, refinance or refund, the cost (including the cost of construction) of such property or asset; provided that no such Lien shall extend to or cover any property or asset of a Restricted Person other than the property or asset so acquired (or constructed) and the Indebtedness secured thereby is permitted under Section 7.1(d) hereof; and any extension, renewal, refinancing, refunding or replacement (or successive extensions, renewals, 53 refinancings, refundings or replacements), in whole or part, of the foregoing, provided, however, that such Liens shall not cover or secure any additional Indebtedness, obligations, property or asset; (i) rights reserved to or vested in any governmental authority by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to revoke or terminate any such right, power, franchise, grant, license or permit or to condemn or acquire by eminent domain or similar process; (j) rights reserved to or vested by Law in any governmental authority to in any manner, control or regulate in any manner any of the properties of any Restricted Person or the use thereof or the rights and interests of any Restricted Person therein, in any manner under any and all Laws; (k) rights reserved to the grantors of any properties of any Restricted Person, and the restrictions, conditions, restrictive covenants and limitations, in respect thereto, pursuant to the terms, conditions and provisions of any rights-of-way agreements, contracts or other agreements therewith; and (l) Inchoate Liens in respect of pending litigation or with respect to a judgment which has not resulted in an Event of Default under Section 8.1. Section 7.3. Hedging Contracts. No Restricted Person will be a party to or in any manner be liable on any Hedging Contract, except: (a) Hedging Contracts entered into by a Restricted Person with the purpose and effect of fixing interest rates on a principal amount of indebtedness of such Restricted Person that is accruing interest at a variable rate, provided that (i) the aggregate notional amount of such contracts never exceeds seventy- five percent (75%) of the anticipated outstanding principal balance of the indebtedness to be hedged by such contracts or an average of such principal balances calculated using a generally accepted method of matching interest swap contracts to declining principal balances, (ii) the floating rate index of each such contract generally matches the index used to determine the floating rates of interest on the corresponding indebtedness to be hedged by such contract and (iii) each such contract is with a counterparty or has a guarantor of the obligation of the counterparty who (unless such counterparty is a Lender or one of its Affiliates) at the time the contract is made has long-term unsecured and unenhanced debt obligations rated AA or Aa2 or better, respectively, by either Rating Agency or is an investment grade-rated industry participant or otherwise acceptable to Majority Lenders. (b) Hedging Contracts entered into with the purpose and effect of fixing prices on crude oil then owned by a Restricted Person or which a Restricted Person is then obligated to purchase, provided that at all times: (i) no such contract fixes a price for a term of more than twelve (12) months; (ii) the aggregate amount of oil so hedged at any one time does not exceed (A) for the period of six (6) months beginning with the acquisition under the Acquisition Documents, the number of barrels hedged by Borrower's Subsidiaries immediately prior to Borrower's acquisition of such Subsidiaries and (B) at any time thereafter, 500,000 barrels, (iii) such contract is entered 54 into for the purpose of hedging the price risk on oil anticipated to be disposed of and for which no other fixed sale price or other price fixing arrangement exists, and (iv) each such contract is either (A) with a counterparty or has a guarantor of the obligation of the counterparty who (unless such counterparty is a Lender Party or one of its Affiliates) at the time the contract is made has long-term unsecured and unenhanced debt obligations rated AA or Aa2 or better, respectively, by either Rating Agency or (B) entered into on the New York Mercantile Exchange through a broker listed on the Disclosure Schedule or otherwise approved by Majority Lenders. Section 7.4. Limitation on Mergers, Issuances of Securities. Except as expressly provided in this section or otherwise disclosed on the Disclosure Schedule, no Restricted Person will (a) enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), (b) acquire any business or property from, or capital stock of, or be a party to any acquisition of, any Person except for purchases of inventory and other property to be sold or used in the ordinary course of business and Investments permitted under Section 7.7 hereof or (c) sell, transfer, lease, exchange, alienate or otherwise dispose of, in one transaction or a series of transactions, any part of its business or property, whether now owned or hereafter acquired, except for sales or transfers not prohibited by under Section 7.5 hereof. Any Subsidiary of Borrower may, however, be merged into or consolidated with (i) another Subsidiary of Borrower, so long as a Guarantor is the surviving business entity, or (ii Borrower, so long as Borrower is the surviving business entity. Borrower will not issue any securities other than shares of its common or preferred stock and any options or warrants giving the holders thereof only the right to acquire such shares. No Subsidiary of Borrower will issue any additional shares of its capital stock or other securities or any options, warrants or other rights to acquire such additional shares or other securities except to Borrower or to a wholly-owned Subsidiary of Borrower. No Subsidiary of Borrower which is a partnership will allow any diminution of Borrower's interest (direct or indirect) therein. Section 7.5. Limitation on Sales of Property. No Restricted Person will sell, transfer, lease, exchange, alienate or dispose of any Collateral or any of its material assets or properties or any material interest therein except: (a) equipment which is worthless or obsolete or which is replaced by equipment of equal suitability and value; (b) inventory (including pipeline linefill) which is sold in the ordinary course of business on ordinary trade terms; (c) in other property which is sold for fair consideration not in the aggregate in excess of $5,000,000 in any Fiscal Year, the sale of which will not materially impair or diminish the value of the Collateral or Borrower's Consolidated financial condition, business or operations; and (d) sales or transfers, subject to the Security Documents, by a Subsidiary of Borrower to Borrower or a wholly-owned Subsidiary of Borrower that is a Guarantor. No Restricted Person will sell, transfer or otherwise dispose of capital stock of or interest in any Subsidiary of Borrower except to Borrower or to another wholly-owned Subsidiary of Borrower. 55 No Restricted Person will discount, sell, pledge or assign any notes payable to it, accounts receivable or future income. So long as no Default then exists, Administrative Agent will, at Borrower's request and expense, execute a release, satisfactory to Borrower and Administrative Agent, of any Collateral so sold, transferred, leased, exchanged, alienated or disposed of pursuant to the clause (a) or (c) of this Section. Section 7.6. Limitation on Dividends and Redemptions. No Restricted Person will declare or pay any dividends on, or make any other distribution in respect of, any class of its capital stock or any partnership or other interest in it, nor will any Restricted Person directly or indirectly make any capital contribution to or purchase, redeem, acquire or retire any shares of the capital stock of or partnership interests in any Restricted Person (whether such interests are now or hereafter issued, outstanding or created), or cause or permit any reduction or retirement of the capital stock of any Restricted Person, while the Revolver Loan is outstanding. Notwithstanding the foregoing, Subsidiaries of Borrower shall not be restricted from declaring and paying dividends or making any other distribution to Borrower. Upon the repayment in full of all Revolver Loans with an issuance of equity and the termination of the Revolver Commitments, dividends shall be permitted on terms acceptable to Majority Lenders in their sole and absolute discretion. Section 7.7. Limitation on Investments and New Businesses. No Restricted Person will (a) make any expenditure or commitment or incur any obligation or enter into or engage in any transaction except in the ordinary course of business, (b) engage directly or indirectly in any business or conduct any operations except in connection with or incidental to its present businesses and operations, (c) make any acquisitions of or capital contributions to or other Investments in any Person, other than Permitted Investments, or (d) make any significant acquisitions or Investments in any properties, in each case, other than oil and gas gathering and transportation, storage, and terminalling facilities. Section 7.8. Limitation on Credit Extensions. Except for Permitted Investments, no Restricted Person will extend credit, make advances or make loans other than normal and prudent extensions of credit to customers buying goods and services in the ordinary course of business, which extensions shall not be for longer periods than those extended by similar businesses operated in a normal and prudent manner. Section 7.9. Transactions with Affiliates. No Restricted Person will engage in any material transaction with any of its Affiliates except: (a) transactions among Borrower and its wholly owned Subsidiaries, (b) transactions governed by the Affiliate Agreements, and (c) other transactions entered into in the ordinary course of business of such Restricted Person on terms which are no less favorable to it than those which would have been obtainable at the time in arm's-length transactions with Persons other than such Affiliates. Section 7.10. Prohibited Contracts. Except as expressly provided for in the Loan Documents, no Restricted Person will, directly or indirectly, enter into, create, or otherwise allow to exist any contract or other consensual restriction on the ability of any Subsidiary of Borrower to: (a) pay dividends or make other distributions to Borrower, (b) redeem equity interests held in it by Borrower, (c) repay loans and other indebtedness owing by it to Borrower, or (d) transfer 56 any of its assets to Borrower. No Restricted Person will amend or permit any amendment to (i) any of the Affiliate Agreements or (ii) any contract or lease which releases, qualifies, limits, makes contingent or otherwise detrimentally affects the rights and benefits of Administrative Agent or any Lender under or acquired pursuant to any Security Documents. No ERISA Affiliate will incur any obligation to contribute to any "multiemployer plan" as defined in Section 4001 of ERISA that is subject to Title IV of ERISA. Section 7.11. Limitations on Capital Expenditures. Restricted Persons shall not make any single capital expenditure in excess of $3,000,000 nor any capital expenditures in excess of $7,500,000 in the aggregate for all Restricted Persons in any Fiscal Year without the approval of Majority Lenders. For purposes of this Section 7.11, capital expenditures for the repair or replacement of property shall be included in the foregoing calculation after deducting proceeds received by Restricted Persons from (a) insurance related to the property so repaired or replaced, (b) the sale, disposal, exchange, or salvaging of the property so repaired or replaced, and (c) payments relating to condemnation of the property so replaced. The foregoing shall not limit (i) any capital expenditures listed on Schedule 5 or (ii) any acquisition, up to an aggregate amount with respect to all Restricted Persons in any Fiscal Year of $15,000,000, of property which will not transport or gather crude oil directly to or from any of the Restricted Persons' properties owned at the time of such acquisition and is not otherwise directly connected to or directly associated with any of the Restricted Persons' properties owned at the time of such acquisition. Section 7.12. Current Ratio. The ratio of Borrower's Consolidated current assets to Borrower's Consolidated current liabilities will never be less than 1.0 to 1.0. For purposes of this section, Borrower's Consolidated current liabilities will be calculated without including (a) any payments of principal on the Notes which are required to be repaid within one year from the time of calculation and (b) all Liabilities arising under permitted Hedging Contracts. Section 7.13. Net Worth. Borrower's Consolidated Net Worth will never be less than the sum of (a) $110,000,000 plus (b) fifty percent (50%) of the Consolidated Net Income (if positive) for each Fiscal Quarter from and after June 30, 1998 to and including the Fiscal Quarter ending on, or most recently ended prior to the date of determination thereof plus (c) fifty percent (50%) of the net proceeds of any equity issued by Borrower on or after the date hereof. Section 7.14. Interest Coverage Ratio. At the end of any Fiscal Quarter, the ratio of (a) Consolidated EBITDA to (b) Interest Expense for the four-Fiscal Quarter period (or other period specified in the following sentence) ending with such Fiscal Quarter will not be less than (i) 1.75 to 1 for any such period ending on or before December 31, 1999; (ii) 2.25 to 1 for any such period ending after December 31, 1999 and on or before December 31, 2000; and (iii) 2.50 to 1 for any period ending after December 31, 2000. For the Fiscal Quarters ending on September 30 and December 31, 1998 and March 31 and June 30, 1999, such determination shall be made using the period from the date of the Acquisition to the end of such Fiscal Quarter. Section 7.15. Fixed Charge Coverage Ratio. At the end of any Fiscal Quarter, beginning with the Fiscal Quarter ending on March 31, 2000, the ratio of (a) the sum of Consolidated EBITDA plus Consolidated Lease Rentals to (b) the sum of Interest Expense plus Consolidated Lease Rentals plus scheduled principal payments required to be made on the Obligations and the 57 amount of scheduled reductions in the Revolver Commitment whether or not a repayment of the Revolver Loans is made in the same day, in each case for the four-Fiscal Quarter period ending with such Fiscal Quarter will not be less than (i) 1.20 to 1 for any such period ending on or before December 31, 2000; (ii) 1.30 to 1 for any such period ending after December 31, 2000 and on or before December 31, 2001; and (iii) 1.40 to 1 for any period ending after December 31, 2001. Section 7.16. Debt to Capital Ratio. The ratio of (a) all Consolidated Indebtedness to (b) the sum of Consolidated Indebtedness plus Consolidated Net Worth will never be greater than (i) .75 to 1.0 at any time on or before December 31, 1999, (ii) .70 to 1.0 at any time after December 31, 1999 and on or before December 31, 2000, and (iii) .60 to 1.0 at any time after December 31, 2000. Section 7.17. Consolidated General and Administrative Expenses. Borrower's Consolidated general and administrative expenses for any period of twelve consecutive calendar months shall not exceed the Applicable G&A Limit. As used herein, the Applicable G&A Limit will be $2,750,000 for each such period ending on or prior to July 31, 1999 and shall increase by $11,460 at the end of each calendar month thereafter. Borrower's Consolidated general and administrative expenses will be determined in accordance with GAAP except that (a) all capital expenditures made during any period and properly characterized as capitalized charges will be treated as expenses in such period without regard to the amount which may be capitalized under GAAP, and (b) general and administrative expenses shall not include expenses relating to the Acquisition up to the amount of $1,000,000 to the extent incurred on or prior to December 31, 1998. ARTICLE VIII - Events of Default and Remedies Section 8.1. Events of Default. Each of the following events constitutes an Event of Default under this Agreement: (a) Any Restricted Person fails to pay the principal component of any Loan or any reimbursement obligation with respect to any Letter of Credit when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise; (b) Any Restricted Person fails to pay any Obligation (other than the Obligations in subsection (a) above) when due and payable, whether at a date for the payment of a fixed installment or as a contingent or other payment becomes due and payable or as a result of acceleration or otherwise, within three Business Days after the same becomes due; (c) Any event defined as a "default" or "event of default" in any Loan Document occurs, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document; (d) Any Restricted Person fails to duly observe, perform or comply with any covenant, agreement or provision of Section 6.4 or Article VII; 58 (e) Any Restricted Person fails (other than as referred to in subsections (a), (b), (c) or (d) above) to duly observe, perform or comply with any covenant, agreement, condition or provision of any Loan Document, and such failure remains unremedied for a period of thirty (30) days after notice of such failure is given by Administrative Agent to Borrower; (f) Any representation or warranty previously, presently or hereafter made in writing by or on behalf of any Restricted Person in connection with any Loan Document shall prove to have been false or incorrect in any material respect on any date on or as of which made, or any Loan Document at any time ceases to be valid, binding and enforceable as warranted in Section 5.5 for any reason other than its release or subordination by Administrative Agent; (g) Any Restricted Person shall default in the payment when due of any principal of or interest on any of its other Indebtedness in excess of $2,500,000 in the aggregate (other than Indebtedness the validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves with respect thereto are maintained on the books of such Restricted Person in accordance with GAAP), 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; (h) Either (i) any "accumulated funding deficiency" (as defined in Section 412(a) of the Code) in excess of $500,000 exists with respect to any ERISA Plan, whether or not waived by the Secretary of the Treasury or his delegate, or (ii any Termination Event occurs with respect to any ERISA Plan and the then current value of such ERISA Plan's benefit liabilities exceeds the then current value of such ERISA Plan's assets available for the payment of such benefit liabilities by more than $500,000 (or in the case of a Termination Event involving the withdrawal of a substantial employer, the withdrawing employer's proportionate share of such excess exceeds such amount); (i) Resources or any Restricted Person: (i) has entered against it of a judgment, decree or order for relief by a Tribunal of competent jurisdiction in an involuntary proceeding commenced under any applicable bankruptcy, insolvency or other similar Law of any jurisdiction now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended, or has any such proceeding commenced against it, in each case, which remains undismissed for a period of sixty days; or (ii) commences a voluntary case under any applicable bankruptcy, insolvency or similar Law now or hereafter in effect, including the federal Bankruptcy Code, as from time to time amended; or applies for or consents to the entry of an order for relief in an involuntary case under any such Law; or makes a general assignment for the benefit of creditors; or is generally unable to pay (or admits in writing its inability to so pay) its debts 59 as such debts become due; or takes corporate or other action to authorize any of the foregoing; or (iii) has entered against it the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of all or a substantial part of its assets in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within sixty days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or (iv) has entered against it the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of any part of the Collateral of a value in excess of $2,500,000 in a proceeding brought against or initiated by it, and such appointment or taking possession is neither made ineffective nor discharged within sixty days after the making thereof, or such appointment or taking possession is at any time consented to, requested by, or acquiesced to by it; or (v) has entered against it a final judgment for the payment of money in excess of $1,000,000 (in each case not covered by insurance satisfactory to Administrative Agent in its discretion), unless the same is stayed or discharged within thirty days after the date of entry thereof or an appeal or appropriate proceeding for review thereof is taken within such period and a stay of execution pending such appeal is obtained; or (vi) suffers a writ or warrant of attachment or any similar process to be issued by any Tribunal against all or any substantial part of its assets or any part of the Collateral of a value in excess of $2,500,000, and such writ or warrant of attachment or any similar process is not stayed or released within thirty days after the entry or levy thereof or after any stay is vacated or set aside; (j) Any Change in Control occurs; or (k) Any "Event of Default" as defined in the Resources Credit Agreement occurs. Upon the occurrence of an Event of Default described in subsection (i)(i), (i)(ii) or (i)(iii) of this section with respect to Borrower, all of the Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Borrower and each Restricted Person who at any time ratifies or approves this Agreement. Upon any such acceleration, any obligation of any Lender to make any further Loans and any obligation of LC Issuer to issue Letters of Credit hereunder shall be permanently terminated. During the continuance of any other Event of Default, Administrative Agent at any time and from time to time may (and upon written instructions from Majority Lenders, Administrative Agent shall), without notice to Borrower or any other Restricted Person, do either or both of the following: (1) terminate any obligation of Lenders to make Loans hereunder and any obligation of LC Issuer to issue Letters of Credit hereunder, and (2) declare any or all of the Obligations immediately due 60 and payable, and all such Obligations shall thereupon be immediately due and payable, without demand, presentment, notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of intention to accelerate, declaration or notice of acceleration, or any other notice or declaration of any kind, all of which are hereby expressly waived by Borrower and each Restricted Person who at any time ratifies or approves this Agreement. Section 8.2. Remedies. If any Default shall occur and be continuing, each Lender Party may protect and enforce its rights under the Loan Documents by any appropriate proceedings, including proceedings for specific performance of any covenant or agreement contained in any Loan Document, and each Lender Party may enforce the payment of any Obligations due it or enforce any other legal or equitable right which it may have. All rights, remedies and powers conferred upon Lender Parties under the Loan Documents shall be deemed cumulative and not exclusive of any other rights, remedies or powers available under the Loan Documents or at Law or in equity. ARTICLE IX - Administrative Agent Section 9.1. Appointment and Authority. Each Lender Party hereby irrevocably authorizes Administrative Agent, and Administrative Agent hereby undertakes, to receive payments of principal, interest and other amounts due hereunder as specified herein and to take all other actions and to exercise such powers under the Loan Documents as are specifically delegated to Administrative Agent by the terms hereof or thereof, together with all other powers reasonably incidental thereto. The relationship of Administrative Agent to the other Lender Parties is only that of one commercial lender acting as administrative agent for others, and nothing in the Loan Documents shall be construed to constitute Administrative Agent a trustee or other fiduciary for any Lender Party or any holder of any participation in a Note nor to impose on Administrative Agent duties and obligations other than those expressly provided for in the Loan Documents. With respect to any matters not expressly provided for in the Loan Documents and any matters which the Loan Documents place within the discretion of Administrative Agent, Administrative Agent shall not be required to exercise any discretion or take any action, and it may request instructions from Lenders with respect to any such matter, in which case it shall be required to act or to refrain from acting (and shall be fully protected and free from liability to all Lender Parties in so acting or refraining from acting) upon the instructions of Majority Lenders (including itself), provided, however, that Administrative Agent shall not be required to take any action which exposes it to a risk of personal liability that it considers unreasonable or which is contrary to the Loan Documents or to applicable Law. Upon receipt by Administrative Agent from Borrower of any communication calling for action on the part of Lenders or upon notice from Borrower or any Lender to Administrative Agent of any Default or Event of Default, Administrative Agent shall promptly notify each other Lender thereof. Section 9.2. Exculpation, Administrative Agent's Reliance, Etc. Neither Administrative Agent nor any of its directors, officers, agents, attorneys, or employees shall be liable for any action taken or omitted to be taken by any of them under or in connection with the Loan Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that each shall be liable for its own gross negligence or willful misconduct. Without limiting the generality of the foregoing, Administrative Agent (a) may treat the payee of any Note as the holder thereof until 61 Administrative Agent receives written notice of the assignment or transfer thereof in accordance with this Agreement, signed by such payee and in form satisfactory to Administrative Agent; (b) may consult with legal counsel (including counsel for Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any other Lender Party and shall not be responsible to any other Lender Party for any statements, warranties or representations made in or in connection with the Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of the Loan Documents on the part of any Restricted Person or to inspect the property (including the books and records) of any Restricted Person; (e) shall not be responsible to any other Lender Party for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any instrument or document furnished in connection therewith; (f) may rely upon the representations and warranties of each Restricted Person or Lender Party in exercising its powers hereunder; and (g) shall incur no liability under or in respect of the Loan Documents by acting upon any notice, consent, certificate or other instrument or writing (including any facsimile, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper Person or Persons. Section 9.3. Credit Decisions. Each Lender Party acknowledges that it has, independently and without reliance upon any other Lender Party, made its own analysis of Borrower and the transactions contemplated hereby and its own independent decision to enter into this Agreement and the other Loan Documents. Each Lender Party also acknowledges that it will, independently and without reliance upon any other Lender Party and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents. SECTION 9.4. INDEMNIFICATION. EACH LENDER AGREES TO INDEMNIFY ADMINISTRATIVE AGENT (TO THE EXTENT NOT REIMBURSED BY BORROWER WITHIN TEN (10) DAYS AFTER DEMAND) FROM AND AGAINST SUCH LENDER'S PERCENTAGE SHARE OF ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES, DAMAGES, PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS, SETTLEMENTS, COSTS, EXPENSES OR DISBURSEMENTS (INCLUDING REASONABLE FEES OF ATTORNEYS, ACCOUNTANTS, EXPERTS AND ADVISORS) OF ANY KIND OR NATURE WHATSOEVER (IN THIS SECTION COLLECTIVELY CALLED "LIABILITIES AND COSTS") WHICH TO ANY EXTENT (IN WHOLE OR IN PART) MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ADMINISTRATIVE AGENT GROWING OUT OF, RESULTING FROM OR IN ANY OTHER WAY ASSOCIATED WITH ANY OF THE COLLATERAL, THE LOAN DOCUMENTS AND THE TRANSACTIONS AND EVENTS (INCLUDING THE ENFORCEMENT THEREOF) AT ANY TIME ASSOCIATED THEREWITH OR CONTEMPLATED THEREIN (WHETHER ARISING IN CONTRACT OR IN TORT 62 OR OTHERWISE AND INCLUDING ANY VIOLATION OR NONCOMPLIANCE WITH ANY ENVIRONMENTAL LAWS BY ANY PERSON OR ANY LIABILITIES OR DUTIES OF ANY PERSON WITH RESPECT TO HAZARDOUS MATERIALS FOUND IN OR RELEASED INTO THE ENVIRONMENT). THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT, provided only that no Lender shall be obligated under this section to indemnify Administrative Agent for that portion, if any, of any liabilities and costs which is proximately caused by Administrative Agent's own individual gross negligence or willful misconduct, as determined in a final judgment. Cumulative of the foregoing, each Lender agrees to reimburse Administrative Agent promptly upon demand for such Lender's Percentage Share of any costs and expenses to be paid to Administrative Agent by Borrower under Section 10.4(a) to the extent that Administrative Agent is not timely reimbursed for such expenses by Borrower as provided in such section. As used in this section the term "Administrative Agent" shall refer not only to the Person designated as such in Section 1.1 but also to each director, officer, agent, attorney, employee, representative and Affiliate of such Person. Section 9.5. Rights as Lender. In its capacity as a Lender, Administrative Agent shall have the same rights and obligations as any Lender and may exercise such rights as though it were not Administrative Agent. Administrative Agent may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with any Restricted Person or their Affiliates, all as if it were not Administrative Agent hereunder and without any duty to account therefor to any other Lender. Section 9.6. Sharing of Set-Offs and Other Payments. Each Lender Party agrees that if it shall, whether through the exercise of rights under Security Documents or rights of banker's lien, set off, or counterclaim against Borrower or otherwise, obtain payment of a portion of the aggregate Obligations owed to it which, taking into account all distributions made by Administrative Agent under Section 3.1, causes such Lender Party to have received more than it would have received had such payment been received by Administrative Agent and distributed pursuant to Section 3.1, then (a) it shall be deemed to have simultaneously purchased and shall be obligated to purchase interests in the Obligations as necessary to cause all Lender Parties to share all payments as provided for in Section 3.1, and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that Administrative Agent and all Lender Parties share all payments of Obligations as provided in Section 3.1; provided, however, that nothing herein contained shall in any way affect the right of any Lender Party to obtain payment (whether by exercise of rights of banker's lien, set-off or counterclaim or otherwise) of indebtedness other than the Obligations. Borrower expressly consents to the foregoing arrangements and agrees that any holder of any such interest or other participation in the Obligations, whether or not acquired 63 pursuant to the foregoing arrangements, may to the fullest extent permitted by Law and, subject to the provisions of Section 6.16, exercise any and all rights of banker's lien, set-off, or counterclaim as fully as if such holder were a holder of the Obligations in the amount of such interest or other participation. If all or any part of any funds transferred pursuant to this section is thereafter recovered from the seller under this section which received the same, the purchase provided for in this section shall be deemed to have been rescinded to the extent of such recovery, together with interest, if any, if interest is required pursuant to the order of a Tribunal to be paid on account of the possession of such funds prior to such recovery. Section 9.7. Investments. Whenever Administrative Agent in good faith determines that it is uncertain about how to distribute to Lender Parties any funds which it has received, or whenever Administrative Agent in good faith determines that there is any dispute among Lender Parties about how such funds should be distributed, Administrative Agent may choose to defer distribution of the funds which are the subject of such uncertainty or dispute. If Administrative Agent in good faith believes that the uncertainty or dispute will not be promptly resolved, or if Administrative Agent is otherwise required to invest funds pending distribution to Lender Parties, Administrative Agent shall invest such funds pending distribution; all interest on any such Investment shall be distributed upon the distribution of such Investment and in the same proportion and to the same Persons as such Investment. All moneys received by Administrative Agent for distribution to Lender Parties (other than to the Person who is Administrative Agent in its separate capacity as a Lender Party) shall be held by Administrative Agent pending such distribution solely as Administrative Agent for such Lender Parties, and Administrative Agent shall have no equitable title to any portion thereof. Section 9.8. Benefit of Article IX. The provisions of this Article are intended solely for the benefit of Lender Parties, and no Restricted Person shall be entitled to rely on any such provision or assert any such provision in a claim or defense against any Lender (other than in relation to the reference to Section 6.16 contained in Section 9.6 or the right to reasonably approve a successor Administrative Agent under Section 9.9). Lender Parties may waive or amend such provisions as they desire without any notice to or consent of Borrower or any other Restricted Person. Section 9.9. Resignation. Administrative Agent may resign at any time by giving written notice thereof to Lenders and Borrower. Each such notice shall set forth the date of such resignation. Upon any such resignation Majority Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval of Borrower, which approval will not be unreasonably withheld. A successor must be appointed for any retiring Administrative Agent, and such Administrative Agent's resignation shall become effective when such successor accepts such appointment. If, within thirty days after the date of the retiring Administrative Agent's resignation, no successor Administrative Agent has been appointed and has accepted such appointment, then the retiring Administrative Agent may appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed to conduct a banking or trust business under the Laws of the United States of America or of any state thereof. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. After any retiring Administrative Agent's 64 resignation hereunder the provisions of this Article IX shall continue to inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under the Loan Documents. Section 9.10. Other Agents. Neither the Syndication Agent nor the Documentation Agent, in such capacities, shall have any duties or responsibilities or incur any liabilities under this Agreement or the other Loan Documents. ARTICLE X - Miscellaneous Section 10.1. Waivers and Amendments; Acknowledgments. (a) Waivers and Amendments. No failure or delay (whether by course of conduct or otherwise) by any Lender in exercising any right, power or remedy which such Lender Party may have under any of the Loan Documents shall operate as a waiver thereof or of any other right, power or remedy, nor shall any single or partial exercise by any Lender Party of any such right, power or remedy preclude any other or further exercise thereof or of any other right, power or remedy. No waiver of any provision of any Loan Document and no consent to any departure therefrom shall ever be effective unless it is in writing and signed as provided below in this section, and then such waiver or consent shall be effective only in the specific instances and for the purposes for which given and to the extent specified in such writing. No notice to or demand on any Restricted Person shall in any case of itself entitle any Restricted Person to any other or further notice or demand in similar or other circumstances. This Agreement and the other Loan Documents set forth the entire understanding between the parties hereto with respect to the transactions contemplated herein and therein and supersede all prior discussions and understandings with respect to the subject matter hereof and thereof, and no waiver, consent, release, modification or amendment of or supplement to this Agreement or the other Loan Documents shall be valid or effective against any party hereto unless the same is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if such party is Administrative Agent or LC Issuer, by such party, and (ii) if such party is a Lender, by such Lender or by Administrative Agent on behalf of Lenders with the written consent of Majority Lenders (which consent has already been given as to the termination of the Loan Documents as provided in Section 10.9). Notwithstanding the foregoing or anything to the contrary herein, Administrative Agent shall not, without the prior consent of each individual Lender, execute and deliver on behalf of such Lender any waiver or amendment which would: (1) waive any of the conditions specified in Article IV (provided that Administrative Agent may in its discretion withdraw any request it has made under Section 4.3), (2) increase the maximum amount which such Lender is committed hereunder to lend (including in the case of Revolver Lenders, the automatic reductions in the Revolver Commitment), (3) reduce any fees payable to such Lender hereunder, or the principal of, or interest on, such Lender's Note, (4) change any date fixed for any payment of any such fees, principal or interest, (5) amend the definition herein of "Majority Lenders" or otherwise change the aggregate amount of Percentage Shares which is required for Administrative Agent, Lenders or any of them to take any particular action under the Loan Documents, (6) release Borrower from its obligation to pay such Lender's Note or any Guarantor from its guaranty of such 65 payment, or (7) release any Collateral, except such releases relating to sales of property as permitted under Section 7.5. (b) Acknowledgments and Admissions. Borrower hereby represents, warrants, acknowledges and admits that (i) it has been advised by counsel in the negotiation, execution and delivery of the Loan Documents to which it is a party, (ii) it has made an independent decision to enter into this Agreement and the other Loan Documents to which it is a party, without reliance on any representation, warranty, covenant or undertaking by Administrative Agent or any other Lender Party, whether written, oral or implicit, other than as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, (iii) there are no representations, warranties, covenants, undertakings or agreements by any Lender Party as to the Loan Documents except as expressly set out in this Agreement or in another Loan Document delivered on or after the date hereof, (iv) no Lender Party has any fiduciary obligation toward Borrower with respect to any Loan Document or the transactions contemplated thereby, (v) the relationship pursuant to the Loan Documents between Borrower and the other Restricted Persons, on one hand, and each Lender Party, on the other hand, is and shall be solely that of debtor and creditor, respectively, (vi) no partnership or joint venture exists with respect to the Loan Documents between any Restricted Person and any Lender Party, (vii) Administrative Agent is not Borrower's Administrative Agent, but Administrative Agent for Lenders, (viii) should an Event of Default or Default occur or exist, each Lender Party will determine in its sole discretion and for its own reasons what remedies and actions it will or will not exercise or take at that time, (ix) without limiting any of the foregoing, Borrower is not relying upon any representation or covenant by any Lender Party, or any representative thereof, and no such representation or covenant has been made, that any Lender Party will, at the time of an Event of Default or Default, or at any other time, waive, negotiate, discuss, or take or refrain from taking any action permitted under the Loan Documents with respect to any such Event of Default or Default or any other provision of the Loan Documents, and (x) all Lender Parties have relied upon the truthfulness of the acknowledgments in this section in deciding to execute and deliver this Agreement and to become obligated hereunder. (c) Representation by Lenders. Each Lender hereby represents that it will acquire its Note for its own account in the ordinary course of its commercial lending or investing business; however, the disposition of such Lender's property shall at all times be and remain within its control and, in particular and without limitation, such Lender may sell or otherwise transfer its Note, any participation interest or other interest in its Note, or any of its other rights and obligations under the Loan Documents subject to compliance with Sections 10.5(b) through (f), inclusive, and applicable Law. (d) JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. 66 THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Section 10.2. Survival of Agreements; Cumulative Nature. All of Restricted Persons' various representations, warranties, covenants and agreements in the Loan Documents shall survive the execution and delivery of this Agreement and the other Loan Documents and the performance hereof and thereof, including the making or granting of the Loans and the delivery of the Notes and the other Loan Documents, and shall further survive until all of the Obligations are paid in full to each Lender Party and all of Lender Parties' obligations to Borrower are terminated. All statements and agreements contained in any certificate or other instrument delivered by any Restricted Person to any Lender Party under any Loan Document shall be deemed representations and warranties by Borrower or agreements and covenants of Borrower under this Agreement. The representations, warranties, indemnities, and covenants made by Restricted Persons in the Loan Documents, and the rights, powers, and privileges granted to Lender Parties in the Loan Documents, are cumulative, and, except for expressly specified waivers and consents, no Loan Document shall be construed in the context of another to diminish, nullify, or otherwise reduce the benefit to any Lender Party of any such representation, warranty, indemnity, covenant, right, power or privilege. In particular and without limitation, no exception set out in this Agreement to any representation, warranty, indemnity, or covenant herein contained shall apply to any similar representation, warranty, indemnity, or covenant contained in any other Loan Document, and each such similar representation, warranty, indemnity, or covenant shall be subject only to those exceptions which are expressly made applicable to it by the terms of the various Loan Documents. Section 10.3. Notices. All notices, requests, consents, demands and other communications required or permitted under any Loan Document shall be in writing, unless otherwise specifically provided in such Loan Document (provided that Administrative Agent may give telephonic notices to the other Lender Parties), and shall be deemed sufficiently given or furnished if delivered by personal delivery, by facsimile or other electronic transmission, by delivery service with proof of delivery, or by registered or certified United States mail, postage prepaid, to Borrower and Restricted Persons at the address of Borrower specified on the signature pages hereto and to each Lender Party at its address specified on the signature pages hereto (unless changed by similar notice in writing given by the particular Person whose address is to be changed). Any such notice or communication shall be deemed to have been given (a) in the case of personal delivery or delivery service, as of the date of first attempted delivery during normal business hours at the address provided herein, (b) in the case of facsimile or other electronic transmission, upon receipt, or (c) in the case of registered or certified United States mail, three days after deposit in the mail; provided, however, that no Borrowing Notice or Continuation/Conversion Notice shall become effective until actually received by Administrative Agent. Section 10.4. Payment of Expenses; Indemnity. (a) Payment of Expenses. Whether or not the transactions contemplated by this Agreement are consummated, Borrower will promptly (and in any event, within 30 days after any 67 invoice or other statement or notice) pay: (i) all transfer, stamp, mortgage, documentary or other similar taxes, assessments or charges levied by any governmental or revenue authority in respect of this Agreement or any of the other Loan Documents or any other document referred to herein or therein, (ii) all reasonable costs and expenses incurred by or on behalf of Administrative Agent (including attorneys' fees, consultants' fees and engineering fees, travel costs and miscellaneous expenses) in connection with (1) the negotiation, preparation, execution and delivery of the Loan Documents, and any and all consents, waivers or other documents or instruments relating thereto, (2) the filing, recording, refiling and re-recording of any Loan Documents and any other documents or instruments or further assurances required to be filed or recorded or refiled or re-recorded by the terms of any Loan Document, (3) the borrowings hereunder and other action reasonably required in the course of administration hereof, (4) monitoring or confirming (or preparation or negotiation of any document related to) Borrower's compliance with any covenants or conditions contained in this Agreement or in any Loan Document, and (iii) all reasonable costs and expenses incurred by or on behalf of any Lender Party (including attorneys' fees, consultants' fees and accounting fees) in connection with the defense or enforcement of any of the Loan Documents (including this section) or the defense of any Lender Party's exercise of its rights thereunder. In addition to the foregoing, until all Obligations have been paid in full, Borrower will also pay or reimburse Administrative Agent for all reasonable out-of-pocket costs and expenses of Administrative Agent or its agents or employees in connection with the continuing administration of the Loans and the related due diligence of Administrative Agent, including travel and miscellaneous expenses and fees and expenses of Administrative Agent's outside counsel, reserve engineers and consultants engaged in connection with the Loan Documents. (b) Indemnity. Borrower agrees to indemnify each Lender Party, upon demand, from and against any and all liabilities, obligations, claims, losses, damages, penalties, fines, actions, judgments, suits, settlements, costs, expenses or disbursements (including reasonable fees of attorneys, accountants, experts and advisors) of any kind or nature whatsoever (in this section collectively called "liabilities and costs") which to any extent (in whole or in part) may be imposed on, incurred by, or asserted against such Lender Party growing out of, resulting from or in any other way associated with any of the Collateral, the Loan Documents and the transactions and events (including the enforcement or defense thereof) at any time associated therewith or contemplated therein (whether arising in contract or in tort or otherwise and including any violation or noncompliance with any Environmental Laws by any Lender Party or any other Person or any liabilities or duties of any or any Lender Party or any other Person with respect to Hazardous Materials found in or released into the environment). THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY OR CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY LENDER PARTY, 68 provided only that no Lender Party shall be entitled under this section to receive indemnification for that portion, if any, of any liabilities and costs which is proximately caused by its own individual gross negligence or willful misconduct, as determined in a final judgment. If any Person (including Borrower or any of its Affiliates) ever alleges such gross negligence or willful misconduct by any Lender Party, the indemnification provided for in this section shall nonetheless be paid upon demand, subject to later adjustment or reimbursement, until such time as a court of competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross negligence or willful misconduct. As used in this section the term "Lender Party" shall refer not only to each Person designated as such in Section 1.1 but also to each director, officer, trustee, agent, attorney, employee, representative and Affiliate of such Persons. Section 10.5. Joint and Several Liability; Parties in Interest; Assignments. (a) All Obligations which are incurred by two or more Restricted Persons shall be their joint and several obligations and liabilities. All grants, covenants and agreements contained in the Loan Documents shall bind and inure to the benefit of the parties thereto and their respective successors and permitted assigns; provided, however, that no Restricted Person may assign or transfer any of its rights or delegate any of its duties or obligations under any Loan Document without the prior consent of all Lenders. Neither Borrower nor any Affiliates of Borrower shall directly or indirectly purchase or otherwise retire any Obligations owed to any Lender nor will any Lender accept any offer to do so, unless each Lender shall have received substantially the same offer with respect to the same Percentage Share of the Obligations owed to it. If Borrower or any Affiliate of Borrower at any time purchases some but less than all of the Obligations owed to all Lender Parties, such purchaser shall not be entitled to any rights of any Lender under the Loan Documents unless and until Borrower or its Affiliates have purchased all of the Obligations. (b) No Lender shall sell any participation interest in its commitment hereunder or any of its rights under its Loans or under the Loan Documents to any Person unless the agreement between such Lender and such participant at all times provides: (i) that such participation exists only as a result of the agreement between such participant and such Lender and that such transfer does not give such participant any right to vote as a Lender or any other direct claims or rights against any Person other than such Lender, (ii) that such participant is not entitled to payment from any Restricted Person under Sections 3.2 through 3.6 of amounts in excess of those payable to such Lender under such sections (determined without regard to the sale of such participation), and (iii) unless such participant is an Affiliate of such Lender, that such participant shall not be entitled to require such Lender to take any action under any Loan Document or to obtain the consent of such participant prior to taking any action under any Loan Document, except for actions which would require the consent of all Lenders under subsection (a) of Section 10.1. No Lender selling such a participation shall, as between the other parties hereto and such Lender, be relieved of any of its obligations hereunder as a result of the sale of such participation. Each Lender which sells any such participation to any Person (other than an Affiliate of such Lender) shall give prompt notice thereof to Administrative Agent and Borrower; provided, however, that no liability shall arise if any such Lender fails to give such notice to Borrower. (c) Except for sales of participations under the immediately preceding subsection, no Lender shall make any assignment or transfer of any kind of its commitments or any of its rights 69 under its Loans or under the Loan Documents, except for assignments to an Eligible Transferee or, subject to the provisions of Subsection (g) below, to an Affiliate, and then only if such assignment is made in accordance with the following requirements: (i) In the case of an assignment by a Revolver Lender of less than all of its Revolver Loans, LC Obligations, and Revolver Commitments, each such assignment shall apply to a consistent percentage of all Revolver Loans and LC Obligations owing to the assignor Revolver Lender hereunder and to the same percentage of the unused portion of the assignor Lender's Revolver Commitments, so that after such assignment is made both the assignee Revolver Lender and the assignor Revolver Lender shall have a fixed (and not a varying) Revolver Percentage Share in its Revolver Loans and LC Obligations and be committed to make that Revolver Percentage Share of all future Revolver Loans and make that Revolver Percentage Share of all future participations in LC Obligations, and the Revolver Percentage Share of the Revolver Commitment of both the assignor and assignee shall equal or exceed $5,000,000. (ii) In the case of an assignment by a Term Lender, after such assignment is made the outstanding Term Loans of both the assignor and assignee shall equal or exceed $5,000,000, except with respect to an assignment of all such Lender's Term Loans or such lesser amount as may be agreed to by the Administrative Agent and Borrower (except that no such minimum shall be applicable with respect to an assignment to a Lender). (iii) The parties to each such assignment shall execute and deliver to Administrative Agent, for its acceptance and recording in the "Register" (as defined below in this section), an Assignment and Acceptance in the form of Exhibit H, appropriately completed, together with the Note subject to such assignment and a processing fee payable by such assignor Lender (and not at Borrower's expense) to Administrative Agent of $3,500. Upon such execution, delivery, and payment and upon the satisfaction of the conditions set out in such Assignment and Acceptance, then (i) Borrower shall issue new Notes to such assignor and assignee upon return of the old Notes to Borrower, and (ii) as of the "Settlement Date" specified in such Assignment and Acceptance the assignee thereunder shall be a party hereto and a Lender hereunder and Administrative Agent shall thereupon deliver to Borrower and each Lender a schedule showing the revised Revolver Percentage Shares and total Percentage Shares of such assignor Lender and such assignee Lender and the revised Revolver Percentage Shares and total Percentage Shares of all other Lenders. (iv) Each assignee Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, shall (to the extent it has not already done so) provide Administrative Agent and Borrower with the "Prescribed Forms" referred to in Section 3.7(d). (d) Nothing contained in this section shall prevent or prohibit any Lender from assigning or pledging all or any portion of its Loans and Note to any Federal Reserve Bank as collateral 70 security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank; provided that (i) no such assignment or pledge shall relieve such Lender from its obligations hereunder and (ii) all related costs, fees and expenses incurred by such Lender in connection with such assignment and the reassignment back to it, free of any interests of such Federal Reserve Banks shall be for the sole account of such Lender. (e) By executing and delivering an Assignment and Acceptance, each assignee Lender thereunder will be confirming to and agreeing with Borrower, Administrative Agent and each other Lender Party that such assignee understands and agrees to the terms hereof, including Article IX hereof. (f) Administrative Agent shall maintain a copy of each Assignment and Acceptance and a register for the recordation of the names and addresses of Lenders and the Percentage Shares of, and principal amount of the Loans owing to, each Lender from time to time (in this section called the "Register"). The entries in the Register shall be conclusive, in the absence of manifest error, and Borrower and each Lender Party may treat each Person whose name is recorded in the Register as a Lender Party hereunder for all purposes. The Register shall be available for inspection by Borrower or any Lender Party at any reasonable time and from time to time upon reasonable prior notice. (g) Except for sales of participations under the immediately preceding subsection, no Lender shall make any assignment or transfer of any kind of its commitments or any of its rights under the Loans or under its Loan Documents, except for assignments to an Eligible Transferee or, subject to the provisions of subsection (h) below to an Affiliate, and then only if such assignment is made in accordance with the following requirements. (h) Any Lender may assign or transfer its commitment or its rights under its Loans or under the Loan Documents to (i) any Affiliate that is wholly-owned direct or indirect subsidiary of such Lender or of any Person that wholly owns, directly or indirectly, such Lender, or (ii) if such Lender is a fund that makes or invests in bank loans, any other fund that invests in bank loans and is advised or managed by (A) the same investment advisor as any Lender or (B) any Affiliate of such investment advisor that is a wholly-owned direct or indirect subsidiary of any Person that wholly owns, directly or indirectly, such investment advisor, subject to the following additional conditions: (x) any right of such Lender assignor and such assignee to vote as a Lender, or any other direct claims or rights against any other Persons, shall be uniformly exercised or pursued in the manner that such Lender assignor would have so exercised such vote, claim or right if it had not made such assignment or transfer; (y) such assignee shall not be entitled to payment from any Restricted Person under Sections 3.2 through 3.7 of amounts in excess of those payable to such Lender assignor under such sections (determined without regard to such assignment or transfer); and 71 (z) if such Lender assignor is a Revolver Lender that assigns or transfers to such assignee any of such Lender Revolver Commitment, assignee may become primarily liable for such Revolver Commitment, but such assignment or transfer shall not relieve or release such Lender from such Revolver Commitment. Section 10.6. Confidentiality. Each Lender Party agrees (on behalf of itself and each of its Affiliates, and each of its and their directors, officers, agents, attorneys, employees, and representatives) that it (and each of them) will take all reasonable steps to keep confidential any non-public information supplied to it by or at the direction of any Restricted Person so identified when delivered, provided, however, that this restriction shall not apply to information which (a) has at the time in question entered the public domain, (b) is required to be disclosed by Law (whether valid or invalid) of any Tribunal, (c) is disclosed to any Lender Party's Affiliates, auditors, attorneys, or agents, (d) is furnished to any other Lender Party or to any purchaser or prospective purchaser of participations or other interests in any Loan or Loan Document (provided each such purchaser or prospective purchaser first agrees to hold such information in confidence on the terms provided in this section), or (d) is disclosed in the course of enforcing its rights and remedies during the existence of an Event of Default. Section 10.7. GOVERNING LAW; SUBMISSION TO PROCESS. EXCEPT TO THE EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN DOCUMENT, THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER HEREBY AGREES THAT ANY LEGAL ACTION OR PROCEEDING AGAINST BORROWER WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OF THE LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AS LENDER PARTIES MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, BORROWER ACCEPTS AND CONSENTS FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. BORROWER AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THE LOAN DOCUMENTS AND WAIVES ANY RIGHT TO STAY OR TO DISMISS ANY ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON CONVENIENS. IN FURTHERANCE OF THE FOREGOING, BORROWER HEREBY IRREVOCABLY DESIGNATES AND 72 APPOINTS CORPORATION SERVICE COMPANY, 80 STATE STREET, ALBANY, NEW YORK 12207, AS AGENT OF BORROWER TO RECEIVE SERVICE OF ALL PROCESS BROUGHT AGAINST BORROWER WITH RESPECT TO ANY SUCH PROCEEDING IN ANY SUCH COURT IN NEW YORK, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. COPIES OF ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY REGISTERED MAIL TO BORROWER AT ITS ADDRESS SET FORTH BELOW, BUT THE FAILURE OF BORROWER TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS AS AFORESAID. BORROWER SHALL FURNISH TO LENDER PARTIES A CONSENT OF CORPORATION SERVICE COMPANY AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER PARTIES TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. IF FOR ANY REASON CORPORATION SERVICE COMPANY SHALL RESIGN OR OTHERWISE CEASE TO ACT AS BORROWER'S AGENT, BORROWER HEREBY IRREVOCABLY AGREES TO (A) IMMEDIATELY DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO ADMINISTRATIVE AGENT TO SERVE IN SUCH CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE SUBSTITUTED FOR CORPORATION SERVICE COMPANY FOR ALL PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO AGENT THE WRITTEN CONSENT (IN FORM AND SUBSTANCE SATISFACTORY TO ADMINISTRATIVE AGENT) OF SUCH NEW AGENT AGREEING TO SERVE IN SUCH CAPACITY. Section 10.8. Limitation on Interest. Lender Parties, Restricted Persons and the other parties to the Loan Documents intend to contract in strict compliance with applicable usury Law from time to time in effect. In furtherance thereof such persons stipulate and agree that none of the terms and provisions contained in the Loan Documents shall ever be construed to provide for interest in excess of the maximum amount of interest permitted to be charged by applicable Law from time to time in effect. Neither any Restricted Person nor any present or future guarantors, endorsers, or other Persons hereafter becoming liable for payment of any Obligation shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the maximum amount that may be lawfully charged under applicable Law from time to time in effect, and the provisions of this section shall control over all other provisions of the Loan Documents which may be in conflict or apparent conflict herewith. 73 Section 10.9. Termination; Limited Survival. In its sole and absolute discretion Borrower may at any time that no Obligations are owing or outstanding elect in a written notice delivered to Administrative Agent to terminate this Agreement. Upon receipt by Administrative Agent of such a notice, if no Obligations are then owing or outstanding this Agreement and all other Loan Documents shall thereupon be terminated and the parties thereto released from all prospective obligations thereunder. Notwithstanding the foregoing or anything herein to the contrary, any waivers or admissions made by any Restricted Person in any Loan Document, any Obligations under Sections 3.2 through 3.6, and any obligations which any Person may have to indemnify or compensate any Lender Party shall survive any termination of this Agreement or any other Loan Document. At the request and expense of Borrower, Administrative Agent shall prepare and execute all necessary instruments to reflect and effect such termination of the Loan Documents. Administrative Agent is hereby authorized to execute all such instruments on behalf of all Lenders, without the joinder of or further action by any Lender. Section 10.10. Severability. If any term or provision of any Loan Document shall be determined to be illegal or unenforceable all other terms and provisions of the Loan Documents shall nevertheless remain effective and shall be enforced to the fullest extent permitted by applicable Law. Section 10.11. Counterparts. This Agreement may be separately executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to constitute one and the same Agreement. Section 10.12. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. TO THE EXTENT PERMITTED BY LAW, LENDER PARTIES AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF SUCH PERSONS OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER PARTIES' ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. BORROWER AND EACH LENDER PARTY HEREBY FURTHER (A) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES," AS DEFINED BELOW, (B) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (C) 74 ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] 75 IN WITNESS WHEREOF, this Agreement is executed as of the date first written above. PLAINS ALL AMERICAN INC., Borrower By: /s/ Phil Kramer ------------------------------ Phil Kramer Executive Vice President Address: 500 Dallas Street Suite 700 Houston, Texas 77002 Attention: Phil Kramer Telephone: (713) 654-1414 Fax: (713) 654-1523 ING (U.S.) CAPITAL CORPORATION, Administrative Agent and Lender By: /s/ Christopher R. Wagner ------------------------------ Christopher R. Wagner Senior Vice President Address: ING (U.S.) Capital Corporation 135 East 57th Street New York, New York Attention: Christopher Wagner Telephone: (212) 409-1500 Fax: (212) 832-3616 76 ING BARING (U.S.) CAPITAL CORPORATION, Syndication Agent By: /s/ Christopher R. Wagner ------------------------------ Christopher R. Wagner Senior Vice President Address: ING Baring (U.S.) Capital Corporation 135 East 57th Street New York, New York Attention: Telephone: (212) Fax: (212) BANKBOSTON, N.A., Documentation Agent, LC Issuer and Lender By: /s/ Terrence Ronan ------------------------------ Name: Terrence Ronan Title: Vice President Address: 100 Federal Street Boston, Massachusetts 02110 Attention: Terrence Ronan Mail Code: 01-08-04 Telephone: (617) 434-5472 Fax: (617) 434-3652 77 BANK OF SCOTLAND By: /s/ Annie Chin Tat ------------------------------ Name: Annie Chin Tat Title: Senior Vice President Address: 565 Fifth Avenue New York, New York 10017 Attention: Annie Chin Tat Telephone: (212) 450-0871 Fax: (212) 557-9460 With Copy to: 1200 Smith Street Houston, Texas 77002 Attention: Richard C. Butler Telephone: (713) 651-1870 Fax: (713) 651-9714 78 CHASE BANK OF TEXAS, NATIONAL ASSOCIATION By: /s/ Russell A. Johnson ------------------------------ Name: Russell A. Johnson Title: Vice President Address: 600 Travis Street Chase Tower 20th Floor Houston, Texas 77002 Attention: Russell Johnson Telephone: (713) 216-5617 Fax: (713) 216-4295 79 DEN NORSKE BANK ASA By: /s/Byron L. Cooley ------------------------------ Name: Byron L. Cooley Title: Senior Vice President By: /s/ William V. Moyer ------------------------------ Name: William V. Moyer Title: First Vice President Address: Three Allen Center 333 Clay Street, Suite 4890 Houston, Texas 77002 Attention: Byron L. Cooley Telephone: (713) 844-9258 Fax: (713) 757-1167 80 WELLS FARGO BANK (TEXAS) NATIONAL ASSOCIATION By: /s/ Ann M. Rhoads ------------------------------ Ann M. Rhoads Vice President Address: 1000 Louisiana, 3rd Floor Houston, Texas 77002 Attention: Ann Rhoads Telephone: (713) 250-4035 Fax: (713) 850-7912 81 COMERICA BANK - TEXAS By: /s/ James Kimble ------------------------------ Name: James Kimble Title: Vice President Address: 910 Louisiana, Suite 410 Houston, Texas 77002 Attention: Jim Kimble Telephone: (713) 220-5614 Fax: (713) 220-5650 82 NATIONSBANK, N.A. By: /s/ James R. Allred ------------------------------ Name: James R. Allred Title: Senior Vice President Address: 700 Louisiana, 8th Floor Houston, Texas 77002 Attention: James R. Allred Telephone: (713) 247-6327 Fax: (713) 247-6432 83 THE SANWA BANK LIMITED By: /s/ C. Lawrence Murphy ------------------------------ C. Lawrence Murphy Senior Vice President Address: 55 East 52nd Street New York, New York 10055 Attention: Kentaro Yamagishi Telephone: (212) 339-6207 Fax: (212) 754-2360 84 SOCIETE GENERALE, SOUTHWEST AGENCY By: /s/ Thierry Namuroy ------------------------------ Name: Thierry Namuroy Title: Vice President Address: 1111 Bagby Street, Suite 2020 Houston, Texas 77002 Attention: Thierry Namuroy Telephone: (713) 759-6316 Fax: (713) 650-0824 85 MEESPIERSON CAPITAL CORP. By: /s/ Darrell W. Holley ------------------------------ Name: Darrell W. Holley Title: Senior Vice President By: /s/ Deirdre M. Sanborn ------------------------------ Name: Deirdre M. Sanborn Title: Assistant Vice President Address: Three Stamford Plaza 301 Tresser Blvd. Stamford, Connecticut 06901-3239 Attention: Darrell W. Holley Telephone: (214) 953-9307 Fax: (214) 754-5981 86 THE FUJI BANK, LIMITED By: /s/ Teiji Teramoto ------------------------------ Name: Teiji Teramoto Title: Vice President & Manager Address: 1221 McKinney, Suite 4100 Houston, Texas 77010 Attention: Mark Polasek Telephone: (713) 650-7863 Fax: (713) 759-0717 87 CREDIT AGRICOLE INDOSUEZ By: /s/ Katherine L. Abbott ------------------------------ Name: Katherine L. Abbott Title: First Vice President By: /s/ W. Leroy Startz ------------------------------ Name: W. Leroy Startz Title: First Vice President Address: 600 Travis Street, Suite 2340 Houston, Texas 77002 Attention: Brian Knezeak Telephone: (713) 223-7001 Fax: (713) 223-7029 88 THE SAKURA BANK, LIMITED - NEW YORK BRANCH By: /s/ Taminiro Kawauchi ------------------------------ Name: Taminiro Kawauchi Title: Senior Vice President & Group Head Real Estate-Project Finance Group Address: 277 Park Avenue New York, New York 10172-0098 Attention: Vincas Snipas Telephone: (212) 756-6978 Fax: (212) 888-7651 89 NATEXIS BANQUE By: /s/ John H. Thieroff ------------------------------ Name: John H, Thieroff Title: Vice President By: /s/ Mark A. Harrington ------------------------------ Name: Mark A. Harrington Title: Vice President & Regional Manager Address: Southwest Representative Office 333 Clay Street, Suite 4340 Houston, Texas 77002 Attention: John. H. Thieroff Telephone: (713) 759-9401 Fax: (713) 759-9908 90 BHF-BANK AKTIENGESELLSCHAFT By: /s/ Thomas J. Scifo ------------------------------ Name: Thomas J. Scifo Title: Assistant Vice President By: /s/ Anthony Heyman ------------------------------ Name: Anthony Heyman Title: AssistantVice President Address: 590 Madison Avenue New York, New York 10022 Attention: Tom Sciffo Telephone: (212) 756-5912 Fax: (212) 756-5536 91 BALANCED HIGH-YIELD FUND I LTD. By: BHF-BANK AKTIENGESELLSCHAFT, ACTING THROUGH ITS NEW YORK BRANCH AS ATTORNEY IN FACT By: /s/ Thomas J. Scifo ------------------------------ Name: Thomas J. Scifo Title: Assistant Vice President By: /s/ John Sykes ------------------------------ Name: John Sykes Title: Vice President Address: 59 Madison Avenue New York, New York 10022 Attention: Tom Sciffo Telephone: (212) 756-5912 Fax: (212) 756-5536 92 MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST By: /s/ Sheila A. Finnerty ------------------------------ Name: Sheila A. Finnerty Title: Vice President Address: c/o Dean Witter InterCapital, Inc. Two World TradeCenter 72nd Floor New York, New York 10048 Attention: Sheila Finnerty Telephone: (212) 392-5686 Fax: (212) 392-5345 93 BANKERS TRUST COMPANY By: /s/ Rosemary F. Dunne ------------------------------ Name: Rosemary F. Dunne Title: Vice President Address: 130 Liberty Street New York, New York 10006 Attention: Joanne Dobson Telephone: (212) 250-2407 Fax: (212) 250-5256 94 SENIOR HIGH INCOME PORTFOLIO, INC. By: /s/ Gilles Marchand ------------------------------ Name: Gilles Marchand Title: Certified Public Accountant Address: c/o Merrill Lynch Asset Management 800 Scudders Mill Road - Area 1B Plainsboro, New Jersey 08536 Attention: Gilles Marchand Telephone: (609) 282-3348 Fax: (609) 282-2756 95 MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: /s/ Gilles Marchand ------------------------------ Name: Gilles Marchand Title: Certified Public Accountant Address: c/o Merrill Lynch Asset Management 800 Scudders Mill Road - Area 1B Plainsboro, New Jersey 08536 Attention: Gilles Marchand Telephone: (609) 282-3348 Fax: (609) 282-2756 96 ING HIGH INCOME PRINCIPAL PRESERVATION FUND HOLDINGS, LDC By: ING Capital Advisors, Inc., as Investment Advisor By: /s/ Michael P. McAdams ------------------------------ Name: Michael P. McAdams Title: Managing Director Address: 333 S. Grand Avenue, Suite 4250 Los Angeles, California 90071 Attention: Michael McAdams Telephone: (213) 346-3970 Fax: (213) 346-3995 97 ARCHIMEDES FUNDING, L.L.C. By: ING Capital Advisors, Inc., as Collateral Manager By: /s/ Michael P. McAdams ------------------------------ Name: Michael P. McAdams Title: Managing Director Address: 333 S. Grand Avenue, Suite 4250 Los Angeles, California 90071 Attention: Michael McAdams Telephone: (213) 346-3970 Fax: (213) 346-3995 98 KZH-ING-1 CORPORATION By: /s/ Dennis Kildea ------------------------------ Name: Dennis Kildea Title: Authorized Agent Address: c/o The Chase Manhattan Bank 450 West 33rd Street - 15th Floor New York, New York 10001 Attention: Virginia Conway Telephone: (212) 946-7575 Fax: (212) 946-7776 99 EX-2.3 3 STOCK PURCHASE AGREEMENT EXHIBIT 2.3 STOCK PURCHASE AGREEMENT Dated as of July 30, 1998 By and Among Plains Resources Inc. and The Purchasers Named Herein TABLE OF CONTENTS
ARTICLE PAGE 1 - DEFINITIONS........................................................ 1 1.1 Certain Defined Terms........................................ 1 1.2 Accounting Terms............................................. 4 1.3 References................................................... 4 1.4 Singular and Plural.......................................... 4 1.5 Certain Terms................................................ 4 2 - PURCHASE AND SALE OF THE SHARES.................................... 4 2.1 Sale and Purchase............................................ 4 2.2 Certificate of Designation................................... 4 3 - PURCHASE PRICE AND CLOSING......................................... 4 3.1 Purchase Price............................................... 4 3.2 Closing...................................................... 5 3.3 Deliveries of the Company.................................... 5 3.4 Deliveries of Purchasers..................................... 5 4 - REGISTRATION RIGHTS................................................ 5 4.1 Registration................................................. 5 4.2 Registration Procedures...................................... 6 4.3 Registration Expenses........................................ 9 4.4 Indemnification; Contribution................................ 10 4.5 Participation in Underwritten Registrations.................. 12 4.6 Rule 144..................................................... 13 5 - REPRESENTATIONS AND WARRANTIESOF THE COMPANY....................... 13 5.1 Organization................................................. 13 5.2 Authority.................................................... 13 5.3 Authorization................................................ 13 5.4 Binding Agreement............................................ 14 5.5 No Conflicts................................................. 14 5.6 Capitalization............................................... 14 5.7 Valid Issuance............................................... 14 5.8 Absence of Bankruptcy Proceedings............................ 15 5.9 Brokers...................................................... 15 5.10 Financial Statements......................................... 15 5.11 No Material Adverse Change................................... 15 5.12 Commission Documents......................................... 15 5.13 Properties................................................... 15 5.14 Registration Rights.......................................... 16 5.15 Offering..................................................... 16
(i) 5.16 No Defaults................................................. 16 5.17 Litigation.................................................. 16 5.18 Compliance with Laws........................................ 17 5.19 Taxes....................................................... 17 5.20 ERISA....................................................... 17 5.21 Compliance with Environmental Laws.......................... 17 6 - REPRESENTATIONS AND WARRANTIES OF PURCHASERS...................... 18 6.1 General..................................................... 18 6.2 Accredited Investor, Etc.................................... 19 7 - COVENANTS OF THE COMPANY.......................................... 19 7.1 Operation of the Business of the Company Pending Closing.... 19 7.2 Taking of Necessary Action.................................. 20 7.3 Restrictions on Certain Actions............................. 20 7.4 Use of Proceeds............................................. 20 7.5 Reservation of Common Stock................................. 20 8 - CLOSING CONDITIONS................................................ 20 8.1 The Company's Closing Conditions............................ 20 8.2 Purchasers' Closing Conditions.............................. 21 9 - TERMINATION....................................................... 22 9.1 Grounds for Termination..................................... 22 9.2 Effect of Termination....................................... 22 10 - MISCELLANEOUS..................................................... 22 10.1 Survival of Representations and Warranties.................. 22 10.2 Indemnification............................................. 23 10.3 Antitrust Laws.............................................. 23 10.4 Notices..................................................... 23 10.5 Incidental Expenses......................................... 23 10.6 Entire Agreement............................................ 24 10.7 Governing Law............................................... 24 10.8 Counterparts................................................ 24 10.9 Waiver...................................................... 24 10.10 Binding Effect; Assignment.................................. 24 10.11 Brokers..................................................... 24 10.12 Construction................................................ 24
(ii) Schedule A Purchased Shares Exhibit A Certificate of Designation Exhibit B Opinion of Fulbright & Jaworski L.L.P. Exhibit C Opinion of Michael R. Patterson (iii) STOCK PURCHASE AGREEMENT THIS AGREEMENT (this "Agreement"), dated as of the 30th day of July, 1998, is by and among Plains Resources Inc., a Delaware corporation (the "Company"), on the one hand, and the Purchasers named on Schedule A hereto on the other hand (collectively, "Purchasers"). W I T N E S S E T H: WHEREAS, the Company desires to issue and sell to each Purchaser, and each Purchaser desires to purchase from the Company, in the amount indicated opposite such Purchaser's name on Schedule A hereto, shares of the Company's authorized but unissued Series E Cumulative Convertible Preferred Stock, par value $1.00 per share (the "Preferred Stock"), which shares shall have such rights, preferences, privileges and restrictions as set forth in the Certificate of Designation, Preferences and Rights of Series E Cumulative Convertible Preferred Stock of Plains Resources Inc. attached hereto as Exhibit A (the "Certificate of Designation") on the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties set forth in this Agreement, the parties to this Agreement hereby agree as follows: ARTICLE 1 - DEFINITIONS 1.1 Certain Defined Terms. The following terms, as used in this Agreement, shall have the following meanings: "Celeron Acquisition" means the consummation of the transactions contemplated by the Celeron Agreement. "Celeron Agreement" means the Stock Purchase Agreement among the Company, Plains All American Inc. and Wingfoot Ventures Seven, Inc. dated as of March 15, 1998. "Closing" has the meaning given such term in Section 3.2. "Closing Date" has the meaning given such term in Section 3.2. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations thereunder as in effect on the date hereof. "Commission Documents" has the meaning given such term in Section 5.12. "Common Stock" means the common stock, $.10 par value, of the Company. "Conversion Shares" means the shares of Common Stock issuable upon the conversion of Preferred Stock into, or exchange of Preferred Stock for, Common Stock. "Environmental Laws" has the meaning given such term in Section 5.21. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" means the Securities Exchange Act of 1934, or any successor statute, as at the time in effect. Reference to a particular section of such Act shall include a reference to the comparable section, if any, of such successor statute. "Financial Statements" means the financial statements of the Company and its consolidated subsidiaries, including the notes thereto, as of and for the year ended December 31, 1997 and as of and for the three months ended March 31, 1998. "GAAP" means generally accepted accounting principles, as set forth in the opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements of the Financial Accounting Standards Board or in such opinions and statements of such other entities as shall be approved by a significant segment of the accounting profession in the United States of America. "Governmental Authority" means (i) the United States of America or any state within the United States of America and (ii) any court or any governmental department, commission, board, bureau, agency or other instrumentality of the United States of America or of any state within the United States of America. "Holder" means the Purchasers and any other holder from time to time of Preferred Stock or Registrable Securities (other than the Company or any Subsidiary). "ING Agreement" means that certain $325,000,000 limited recourse bank facility made available to Plains All American by ING (U.S.) Capital Corporation and BankBoston, N.A. and certain other lenders. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "Inspectors" has the meaning given such term in Section 4.2(h). "Law" means any applicable statute, law, ordinance, regulation, rule, ruling, order, restriction, requirement, writ, injunction, decree or other official act of or by any Governmental Authority. "Material Adverse Effect" with respect to a Person means a material and adverse effect on the financial condition, results of operations, business or properties of such Person and its consolidated subsidiaries, taken as a whole. "Person" means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a limited liability company, a government or any department or agency of a government. -2- "Plains All American" means Plains All American Inc., a Delaware corporation and a Subsidiary of the Company. "Pollutants" has the meaning given such term in Section 5.21. "Purchase Price" has the meaning given such term in Section 3.1. "Records" has the meaning given such term in Section 4.2(h). "Registrable Securities" means Conversion Shares until such time as such shares are sold in a public distribution pursuant to a Registration Statement under the Securities Act or pursuant to transactions exempt from registration under the Securities Act where Securities sold in such transaction may be resold without subsequent registration under the Securities Act. "Registration Expenses" has the meaning given such term in Section 4.3. "Registration Statement" has the meaning given such term in Section 4.2(a). "Releases" has the meaning given such term in Section 5.21. "SEC" means the United States Securities and Exchange Commission or any successor agency. "Securities Act" means the Securities Act of 1933, or any successor statute, as at the time in effect. Reference to a particular section of such Act shall include a reference to the comparable section, if any, of such successor statute. "Selling Holder" means a holder of Registrable Securities who is selling such Registrable Securities pursuant to a Registration Statement. "Shares" has the meaning given such term in Section 2.1. "Shelf Registration Statement" has the meaning given such term in Section 4.1(b). "Subsidiary" means (a) a corporation a majority of whose voting stock is at the time, directly or indirectly, owned by the Company, by one or more subsidiaries of the Company or by the Company and one or more subsidiaries of the Company or (b) any other Person (other than a corporation) in which the Company, a subsidiary of the Company or the Company and one or more subsidiaries of the Company, directly or indirectly, at the date of determination thereof, has (i) at least a majority ownership or (ii) the power to elect or direct the election of the directors or other governing body of such Person. -3- 1.2 Accounting Terms. For the purposes of this Agreement, all accounting terms not otherwise defined in this Agreement shall have the meanings assigned to such terms in accordance with GAAP. 1.3 References. Unless the context otherwise indicates, references in this Agreement to a particular section, exhibit or schedule are to the corresponding section of, or the corresponding exhibit or schedule to, this Agreement. 1.4 Singular and Plural. The definitions contained in Section 1.1 are equally applicable to both the singular and plural form of the terms defined in such Section. 1.5 Certain Terms. As used in this Agreement, the term "knowledge" means actual knowledge, without any requirement for independent investigation or verification, of any fact, circumstance or condition by the executive officers (or any of them) of the party involved, and does not include (i) knowledge imputed to the party involved by reason of knowledge of or notice to any person, firm or corporation other than its executive officers or (ii) knowledge deemed to have been constructively given by reason of any filing, registration or recording of any document or instrument in any public record or with any Governmental Authority. As used in this Agreement, the term "day" means any calendar day. As used in this Agreement, all references to "dollars" or the symbol "$" shall refer to lawful currency of the United States of America. ARTICLE 2 - PURCHASE AND SALE OF THE SHARES 2.1 Sale and Purchase. Subject to the terms and conditions set forth in this Agreement, at the Closing each Purchaser agrees to purchase, and the Company agrees to issue and sell to each Purchaser, the number of shares of the Preferred Stock (the "Shares") set forth opposite such Purchaser's name on Schedule A, free and clear of all liens, claims, pledges, security interests or other encumbrances. At the Closing, each Purchaser will pay the portion of the Purchase Price set forth opposite its name in Schedule A. 2.2 Certificate of Designation. The Preferred Stock shall have the rights and preferences set forth in the Certificate of Designation. ARTICLE 3 - PURCHASE PRICE AND CLOSING 3.1 Purchase Price. The aggregate purchase price that shall be payable at the Closing by Purchasers to the Company for the Shares shall be $85,000,000 (the "Purchase Price"). At the Closing, each Purchaser shall pay in immediately available funds to the account designated by the Company the portion of the Purchase Price set forth opposite its name on Schedule A. 3.2 Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall be held on the date and at the location designated for the closing under the Celeron Agreement and at a location mutually agreed upon by the Company and the Purchasers, or at such other date or place as the parties may agree in writing (the "Closing Date"). -4- 3.3 Deliveries of the Company. At Closing, the Company shall deliver to Purchasers certificates representing the Shares, each such certificate to be executed by the Company's President and Secretary and to be appropriately registered in the name of each Purchaser. 3.4 Deliveries of Purchasers. At Closing, Purchasers shall deliver to the Company the Purchase Price in immediately available funds to the Company as provided in Section 3.1. ARTICLE 4 - REGISTRATION RIGHTS 4.1 Registration. (a) The Company shall, as promptly as reasonably possible, but, in any event, within 90 days of the Closing, prepare and file with the SEC a shelf registration statement (the "Shelf Registration Statement") on an appropriate form pursuant to Rule 415 (or any similar provision that may be adopted by the SEC) under the Securities Act with respect to the Registrable Securities. (b) The Company agrees to use its best efforts to have the Shelf Registration Statement declared effective as soon as practicable after the filing thereof and to keep the Shelf Registration Statement continuously effective until the earlier of (1) the fourth anniversary of the Closing Date; or (2) such time as all of the Registrable Securities can be resold pursuant to Rule 144(k) under the Securities Act (or any successor provision). Further, the Company shall cause the Registrable Securities to be listed on the American Stock Exchange as soon as practicable after the Closing Date, when and as issued, and shall maintain the listing of such Registrable Securities after their issuance; provided that the Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would reasonably be expected to result in Holders of Registrable Securities covered thereby not being able to offer and sell such Registrable Securities during that period using the prospectus included in the Shelf Registration Statement, unless such action is required by applicable law (including, but not limited to, reasonable periods necessary to prepare appropriate disclosure); and provided, further, that the foregoing proviso shall not apply to actions taken by the Company in good faith and for business reasons ("Suspension Event"), including, without limitation, a merger, consolidation or similar transaction, the acquisition or divestiture of assets and the offering or sale of securities, so long as the Company promptly thereafter complies with the requirements of Section 4.2(f) hereof, if applicable, and so long as the Company gives prompt notice of the existence of such Suspension Event to Holders of Registrable Securities. Any such period during which the Company fails to keep the Shelf Registration Statement effective and usable for offers and sales of Registrable Securities is referred to as a "Suspension Period." A Suspension Period shall commence on and include the date that the Company gives notice that the Shelf Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of Registrable Securities and shall end on the date when each Selling Holder either receives the copies of the supplemented or amended prospectus contemplated by Section 4.2(f) hereof or -5- is advised in writing by the Company that use of the prospectus may be resumed. If one or more Suspension Periods occur, the date referenced in (1) above shall be extended by the number of days in each such Suspension Period. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, as the case may be, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the SEC and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading other than statements or omissions made in reliance upon and in conformity with information furnished to the Company in writing by the Holders of Registrable Securities expressly for use in such Shelf Registration Statement and the related prospectus or any amendment or supplement thereto. 4.2 Registration Procedures. In connection with any registration pursuant to Section 4.1 hereof, the following provisions shall apply: (a) The Company shall (i) prior to filing the Shelf Registration Statement or any other registration statement registering Registrable Securities (in either case, "Registration Statement") or prospectus or any amendments or supplements thereto, furnish to one counsel selected by the Holders of Registrable Securities of a majority in aggregate principal amount or number of shares, as the case may be, of the Registrable Securities covered by such Registration Statement copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel, and (ii) as soon as reasonably possible, furnish to each Selling Holder, prior to filing a Registration Statement, copies of such Registration Statement as proposed to be filed, and thereafter furnish to such Selling Holder such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such Registration Statement (including each preliminary prospectus) and such other documents as such Selling Holder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Selling Holder. (b) The Company shall notify the Selling Holders in writing: (i) when the Registration Statement and any amendment thereto has been filed with the SEC and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the SEC for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; -6- (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; and (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. (c) The Company shall use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any Selling Holder reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Selling Holder to consummate the disposition in such jurisdictions of the Registrable Securities owned by such Selling Holder; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (c), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction. (d) The Company shall use reasonable efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible time. (e) The Company shall use its best efforts to cause such Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holder or Selling Holders thereof to consummate the disposition of such Registrable Securities. (f) The Company shall notify each Selling Holder of such Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and promptly file with the SEC and make available to each Selling Holder any such supplement or amendment, provided that no such filing shall be required during the existence of a Suspension Event. (g) If requested in writing by the Holders beneficially owning at least 25% collectively of the Registrable Securities, the Company shall enter into customary agreements (including an underwriting agreement in customary form with underwriters selected by such Holders and reasonably approved by the Company), shall take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities, and shall notify each other Holder of Registrable Securities of such underwritten -7- offerings and offer such Holders the opportunity to have their Registrable Securities included in such underwritten offering; provided, however, that the Company shall not be required to participate in more than two underwritten offerings under the Shelf Registration Statement pursuant to this Section 4.2(g). (h) The Company shall make available for inspection by any Selling Holder of such Registrable Securities, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other professional retained by any such Selling Holder or underwriter (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company and its Subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's and its subsidiaries' officers, directors and employees to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Each Selling Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections which is deemed confidential shall not be used by it as the basis for any market transactions in securities of the Company unless and until such is made generally available to the public by, on behalf of or with the consent of, the Company. Notwithstanding the previous sentence, the parties agree that the Company shall have no obligation to make generally available to the public any confidential information, regardless of whether the Company provides such data to the Selling Holders or the Inspectors. Except as required by law or judicial process, no Selling Holder shall disclose any such confidential information to any Person other than an Inspector, and each Selling Holder will cause any Inspector retained by it to maintain the confidentiality of such information. Each Selling Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential. (i) In the event of a sale pursuant to an underwritten offering, the Company shall use its best efforts to obtain (i) a comfort letter or comfort letters from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by comfort letters as the Selling Holders of a majority of Registrable Securities being sold or the managing underwriter reasonably requests and (ii) an opinion of counsel to the Company covering such matters as are customarily covered by such opinions, which opinion may be that of the Company's General Counsel as to matters upon which the Company's underwriters have relied upon the opinions of such General Counsel in connection with the Company's prior underwritten offerings of its securities. (j) The Company will use its best efforts to comply with all the rules and regulations of the SEC to the extent and so long as they are applicable to the Registration Statement and will make generally available to its security holders after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Securities Act. -8- The Company may require each Selling Holder of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding the distribution of such Registrable Securities as the Company may from time to time reasonably request in writing and such other information as may be legally required in connection with such registration. Each Selling Holder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4.2(f) hereof, such Selling Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Selling Holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 4.2(f) hereof, and, if so directed by the Company, such Selling Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Selling Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. 4.3 Registration Expenses. All expenses incident to the Company's performance of or compliance with this Article 4, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), printing expenses, messenger and delivery expenses, internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed, and fees and disbursements of counsel for the Company and its independent certified public accountants (including the expenses of any special audit or comfort letters required by or incident to such performance), securities acts liability insurance (if the Company elects to obtain such insurance), the reasonable fees and expenses of any special experts retained by the Company in connection with such registration, fees and expenses of other persons retained by the Company, and reasonable fees and expenses of one counsel for the Holders (who shall be reasonably acceptable to the Company) incurred in connection with each registration hereunder (but not including any underwriting discounts or commissions attributable to the sale of Registrable Securities) (all such expenses being herein called "Registration Expenses"), will be borne by the Company. 4.4 Indemnification; Contribution. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless each Selling Holder of Registrable Securities, its officers, directors, partners and agents and each person, if any, who controls such Selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages (whether in contract, tort or otherwise), liabilities and expenses (including reasonable costs of investigation) whatsoever (as incurred or suffered) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement or prospectus relating to the Registrable Securities or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such -9- losses, claims, damages, liabilities or expenses arise out of, or are based upon, any such untrue statement or omission or allegation thereof based upon information furnished in writing to the Company by such Selling Holder or on such Selling Holder's behalf expressly for use therein. The Company also agrees to indemnify any underwriters of the Registrable Securities, their officers, partners and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Selling Holders provided in this Section 4.4(a) or such other indemnification customarily obtained by underwriters at the time of offering. (b) Conduct of Indemnification Proceedings. If any action or proceeding (including any governmental investigation) shall be brought or asserted against any Selling Holder (or its officers, directors, partners or agents) or any person controlling any such Selling Holder in respect of which indemnity may be sought from the Company, the Company shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Selling Holder, and shall assume the payment of all expenses. Such Selling Holder or any controlling person of such Selling Holder shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Selling Holder or such controlling person unless (i) the Company has agreed to pay such fees and expenses or (ii) the named parties to any such action or proceeding (including any impleaded parties) include both such Selling Holder or such controlling person and the Company, and such Selling Holder or such controlling person shall have been advised by counsel that there may be one or more legal defenses available to such Selling Holder or such controlling person which conflict with those available to the Company (in which case, if such Selling Holder or such controlling person notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense of such action or proceeding on behalf of such Selling Holder or such controlling person, it being understood, however, that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for such Selling Holder and such controlling persons, which firm shall be designated in writing by such Selling Holder). The Company shall not be liable for any settlement of any such action or proceeding effected without the Company's written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the Company agrees to indemnify and hold harmless such Selling Holder and such controlling person from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. (c) Indemnification by Selling Holders. Each Selling Holder agrees, severally but not jointly, to indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, as amended, to the same extent as the foregoing indemnity from the Company to such Selling Holder, but only with respect to information furnished in writing by such Selling Holder or on such Selling Holder's behalf -10- expressly for use in any registration statement or prospectus relating to the Registrable Securities, or any amendment or supplement thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or its directors or officers, or any such controlling person, in respect of which indemnity may be sought against such Selling Holder, such Selling Holder shall have the rights and duties given to the Company, and the Company or its directors or officers or such controlling person shall have the rights and duties given to such Selling Holder, by the preceding paragraph. Each Selling Holder also agrees to indemnify and hold harmless underwriters of the Registrable Securities, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Company provided in this Section 4.4(c). (d) Contribution. If the indemnification provided for in this Section 4.4 is unavailable to the Company, the Selling Holders or the underwriters in respect of any losses, claims, damages, liabilities or judgments referred to herein, then each such indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities and judgments (i) as between the Company and the Selling Holders on the one hand and the underwriters on the other, in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Holders on the one hand and the underwriters on the other from the offering of the Registrable Securities, or if such allocation is not permitted by applicable law, in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Holders on the one hand and of the underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations and (ii) as between the Company on the one hand and each Selling Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of each Selling Holder in connection with such statements or omissions, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Holders on the one hand and the underwriters on the other shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and the Selling Holders bear to the total underwriting discounts and commissions received by the underwriters, in each case as set forth in the table on the cover page of the prospectus. The relative fault of the Company and the Selling Holders on the one hand and of the underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Holders or by the underwriters. The relative fault of the Company on the one hand and of each Selling Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. -11- The Company and the Selling Holders agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4(d), no underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, and no Selling Holder shall be required to contribute any amount in excess of the amount by which the total price at which the Registrable Securities of such Selling Holder were offered to the public exceeds the amount of any damages which such Selling Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 4.5 Participation in Underwritten Registrations. No person may participate in any underwritten registration hereunder unless such person (a) agrees to sell such person's securities on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and this Agreement. 4.6 Rule 144. The Company covenants that it will file any reports required to be filed by it under the Securities Act and the Exchange Act, and that it will take such further action as any holder of Conversion Shares may reasonably request, all to the extent required from time to time to enable holders of Conversion Shares to sell Conversion Shares without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any holder of Conversion Shares, the Company will deliver to such holder a written statement as to whether it has complied with such requirements. ARTICLE 5 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Purchasers as follows: 5.1 Organization. The Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. -12- The Company and each of its Subsidiaries is duly qualified or licensed to do business as a foreign corporation, and in good standing, in every jurisdiction in which its ownership of property or the conduct of its business requires such qualification or licensing, except where the failure to be so qualified or licensed would not have a Material Adverse Effect upon the Company. Attached hereto as Exhibit A is a true and complete copy of the Certificate of Designation. True and complete copies of the Second Restated Certificate of Incorporation and Bylaws of the Company, each as amended to date, have been provided to Purchasers. 5.2 Authority. The Company has all requisite corporate power and authority to carry on its business as presently conducted and to enter into this Agreement and the Celeron Agreement and to perform its obligations contemplated hereunder or thereunder. Plains All American has all requisite corporate power and authority to carry on its business as presently conducted and as contemplated to be conducted after the consummation of the Celeron Acquisition and to enter into the Celeron Agreement and the ING Agreement and to perform its obligations contemplated thereunder. 5.3 Authorization. The execution, delivery and performance of this Agreement and the Celeron Agreement and the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action on the part of the Company and its stockholders. The execution, delivery and performance of the Celeron Agreement and the ING Agreement and the transactions contemplated thereby have been duly and validly authorized by all requisite corporate action on the part of Plains All American. 5.4 Binding Agreement. Each of this Agreement and the Celeron Agreement has been duly executed and delivered by the Company and each of the Celeron Agreement and the ING Agreement has been duly executed and delivered by Plains All American and each of this Agreement, the Celeron Agreement and the ING Agreement constitutes a legal, valid and binding obligation of the Company or Plains All American, as the case may be, enforceable against it in accordance with its terms, subject to applicable bankruptcy and other similar laws of general application with respect to creditors and subject to principles of equity and public policy that affect enforceability of agreements generally. 5.5 No Conflicts. Neither the execution or delivery of this Agreement, the Celeron Agreement or the ING Agreement, nor the consummation of the transactions contemplated hereby and thereby, will result in a breach or violation of, or constitute a default under, the certificate of incorporation, bylaws or other governing documents of the Company or its Subsidiaries, or any agreement, indenture or other instrument to which any of the Company or its Subsidiaries is a party or by which any of them is bound or to which any of their properties are subject, nor will the performance by the Company and its Subsidiaries of any of their obligations hereunder or thereunder violate any Law or result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or assets of the Company or its Subsidiaries other than liens pursuant to the ING Agreement. No permit, consent, approval, authorization or order of any Governmental Authority or other Person is required in connection with the consummation by the Company and its Subsidiaries of the transactions contemplated by this Agreement, the Celeron Agreement or the ING Agreement, except such as have been obtained. -13- 5.6 Capitalization. The authorized capital stock of the Company consists of 50,000,000 shares of common stock, par value $.10 per share, of which 16,851,879 are issued and outstanding, and 2,000,000 shares of preferred stock, par value $1.00 per share, of which there are 46,600 shares of Series D Cumulative Convertible Preferred Stock issued and outstanding. All of the outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof. The Company has reserved a total of 3,226,853 shares of Common Stock for issuance pursuant to existing employee benefit plans, of which 2,865,591 shares are currently issuable upon exercise. In addition, 1,000,000 shares of Common Stock are issuable upon exercise of various outstanding warrants. Except for the foregoing, there are no outstanding subscriptions, options, warrants, rights, convertible securities or other agreements or commitments of any character obligating the Company to purchase, redeem, issue, transfer or deliver any shares of Common Stock, preferred stock or other equity security. 5.7 Valid Issuance. (a) The issuance, sale and delivery of the Shares in accordance with this Agreement have been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and the Shares when so issued, sold and delivered against payment therefor in accordance with this Agreement will be duly and validly issued, fully paid and nonassessable. (b) The issuance and delivery of the Conversion Shares has been duly authorized by all necessary corporate action on the part of the Company and its stockholders, and the Conversion Shares have been duly reserved for issuance and, when issued, will be duly and validly issued, fully paid and nonassessable. 5.8 Absence of Bankruptcy Proceedings. There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to the knowledge of the Company, threatened against, the Company. 5.9 Brokers. No broker or finder has acted for or on behalf of the Company in connection with the investment in the Preferred Stock by the Purchasers, and no broker or finder is entitled to any brokerage or finder's fee or commission in respect thereof based in any way on agreements, arrangements or understandings made by or on behalf of the Company in connection with the investment in the Preferred Stock by the Purchasers. 5.10 Financial Statements. The Financial Statements (i) present fairly the financial position of the Company and its consolidated Subsidiaries as of December 31, 1997 and March 31, 1998, (ii) present fairly the results of operations, cash flows and changes in stockholders' equity of the Company and its consolidated Subsidiaries for the year ended December 31, 1997 and the three months ended March 31, 1998 and (iii) were prepared in accordance with GAAP consistently followed throughout the periods involved, except as otherwise noted therein. The Company has no material liabilities, contingent or otherwise, not reflected in the balance sheet as of December 31, 1997 (or the notes thereto) or the balance sheet as of March 31, 1998 (or the notes thereto) included -14- in the Financial Statements, other than any such liabilities incurred in the ordinary course of business since December 31, 1997. 5.11 No Material Adverse Change. Since December 31, 1997, there has not been any material adverse change in the financial condition, results of operations, business or properties of the Company. 5.12 Commission Documents. The Company has filed all registration statements, proxy statements, reports and other documents required to be filed by it under the Securities Act or the Exchange Act, and all amendments thereto (collectively, the "Commission Documents"). Each Commission Document complied as to form when filed in all material respects with the rules and regulations of the SEC and did not on the date of filing contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 5.13 Properties. (a) Each of the Company and its Subsidiaries has good and defensible title to all of its respective interests in oil and gas leases, free and clear of any encumbrances, except as described in the Commission Documents, subject only to liens for taxes or charges of mechanics or materialmen not yet due and to encumbrances under gas sales contracts, operating agreements, unitization and pooling agreements and other similar agreements as are customarily found in connection with comparable drilling and producing operations and to title defects and other encumbrances that are, singularly and in the aggregate, not material in amount and do not interfere with its use or enjoyment of its oil and gas properties. Each of the Company and its Subsidiaries has complied in all material respects with the terms of the oil and gas leases in which it purports to own an interest, and all of such leases are in full force and effect (except where the failure so to comply or to be in full force and effect will not have a Material Adverse Effect upon the Company). (b) The Company and its Subsidiaries do not own any material properties or other assets that are not described in the Commission Documents. Each of the Company and its Subsidiaries has good and defensible title to all properties and assets described in the Commission Documents as owned by it, in valid, subsisting and enforceable leases for the properties described in the Commission Documents as leased by them, in each case free and clear of all liens, charges, encumbrances or restrictions, except for such as are described in the Commission Documents and such as do not have a Material Adverse Effect on the Company. 5.14 Registration Rights. Except for the Registration Rights Agreement dated February 25, 1991 by and among the Company, The Aetna Casualty and Surety Company and Aetna Life Insurance Company, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to include such securities in the Shelf Registration Statement. -15- 5.15 Offering. Subject to the accuracy of the Purchasers' representations in Article 6 hereof, the offer, sale and issuance of the Shares and the Conversion Shares as contemplated by this Agreement are exempt from the registration requirements of the Securities Act and the securities laws of any state having jurisdiction with respect to the transactions contemplated by this Agreement, and neither the Company nor anyone acting on its behalf has or will take any action that would cause the loss of such exemption. 5.16 No Defaults. Neither the Company nor any Subsidiary is (a) in violation of any provision of its charter or bylaws, (b) in breach, violation or default, in any material respect, of or under any material contract, lease, commitment or instrument to which it is a party or by which it is bound or to which any of its properties or assets are subject, and no event has occurred which (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute such a breach, violation or default or (c) in material violation of any Law. 5.17 Litigation. There is no action, suit, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company or its Subsidiaries or any properties or rights of any of them by or before any Governmental Authority that (i) relates to or challenges the legality of this Agreement, the Celeron Agreement, the ING Agreement or the Preferred Stock, (ii) would reasonably be expected to have a Material Adverse Effect upon the Company (except as disclosed in the Commission Documents) or (iii) would reasonably be expected to impair the ability of the Company to perform fully on a timely basis any obligations that it has under this Agreement, the Celeron Agreement, or any documents related hereto and thereto, or the ability of Plains All American to perform fully on a timely basis any obligations that it has under the Celeron Agreement, the ING Agreement or any documents related thereto. 5.18 Compliance with Laws. The Company and its Subsidiaries are in compliance in all material respects with all laws and regulations in all jurisdictions in which the Company and its Subsidiaries are presently doing business and where the failure to effect such compliance would reasonably be expected to have a Material Adverse Effect upon the Company. 5.19 Taxes. All tax returns required to be filed by the Company and its Subsidiaries in any jurisdiction have been so filed, and all taxes, assessments, fees and other charges shown thereon to be due and payable have been paid, other than those being contested in good faith. The Company does not know of any actual or proposed material additional tax assessments for any fiscal period against it or any of its Subsidiaries. None of the Company's or its Subsidiaries' tax returns are under audit, and no waivers of the statute of limitations or extensions of time with respect to any tax returns have been granted to the Company or any of its Subsidiaries, except such audits, waivers or extensions as would not reasonably be expected to have a Material Adverse Effect upon the Company. 5.20 ERISA. Neither the execution and delivery of this Agreement nor the sale of the Shares to be purchased by the Purchasers is a prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) on the part of the Company or any of its Subsidiaries that is not exempt by statute, regulation or class exemption. The Company is in compliance in all material respects with all presently applicable provisions of ERISA; no "reportable event" (as defined -16- in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any material liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Section 412 (whether or not waived) or 4971 of the Code; and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, that would cause the loss of such qualification. 5.21 Compliance with Environmental Laws. The business and properties of the Company and its Subsidiaries have been operated in compliance with all applicable federal, state or local laws, rules, regulations or orders (collectively, "Environmental Laws") relating to pollution or protection of the environment, including, without limitation, any law, rule, regulation or order relating to emissions, discharges, releases or threatened releases ("Releases") of chemicals, pollutants, contaminants, wastes, petroleum or petroleum products, toxic substances or hazardous substances ("Pollutants") for which noncompliance would have a Material Adverse Effect upon the Company. Neither the Company nor any Subsidiary has received any written communication, whether from a Governmental Authority, citizens' group, landowner, employee or otherwise, nor, to the knowledge of the Company, has the Company or any Subsidiary received any oral communication from a Governmental Authority, alleging that (i) the Company or any such Subsidiary is not in compliance with any Environmental Law applicable to it and its business and properties, or (ii) any employee or third party has suffered bodily injury or property damage as a result of one or more Releases of Pollutants arising out of or resulting from the operations of the Company, its Subsidiaries, or prior owners and operators of their business or property, which allegation, if true, would have a Material Adverse Effect upon the Company. Except as disclosed in the Commission Documents, neither the Company nor any Subsidiary has any material obligation to remediate, repair or replace any property, whether real or personal, owned by the Company, its Subsidiaries or any third party, as a result of one or more Releases of Pollutants arising out of or resulting from the operations of the Company, its Subsidiaries, or prior owners and operators of their business or properties. ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF PURCHASERS 6.1 General. Each Purchaser other than State Street Research and Management Company on behalf of Bell South Master Pension Trust severally represents and warrants with respect to itself to the Company as of the date hereof as follows: (a) Organization. Each Purchaser that is a corporation, limited liability company or limited partnership is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. (b) Authority. Each Purchaser that is a corporation, a limited partnership or a limited liability company has all requisite power and authority to enter into this Agreement and the other documents and agreements contemplated hereby, to purchase the Shares on the terms described in this Agreement, and to perform its other obligations contemplated by this Agreement. -17- (c) Authorization. The execution, delivery and performance of this Agreement and the transactions contemplated hereunder have been duly and validly authorized by all requisite corporate, partnership or limited liability company action on the part of each Purchaser that is a corporation, a limited partnership or a limited liability company. (d) Binding Agreement. This Agreement has been duly executed and delivered by each Purchaser and constitutes a legal, valid and binding obligation of such Purchaser enforceable against such Purchaser in accordance with its terms, subject to bankruptcy and other similar laws of general application with respect to creditors and subject to principles of equity and public policy that affect enforceability of agreements generally. (e) No Conflicts. Neither the execution nor delivery of this Agreement nor the consummation of the transactions contemplated hereby will result in a breach or violation of, or constitute a default under, the governing documents of any Purchaser that is a corporation, a limited partnership or a limited liability company, or any material agreement, indenture or other instrument to which the Purchasers are a party or by which any of them are bound or to which any of their properties are subject, nor will the performance by the Purchasers of their obligations hereunder violate any Law or result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or assets of the Purchasers. No permit, consent, approval, authorization or order of any Governmental Authority or other Person is required in connection with the consummation by the Purchasers of the transactions contemplated by this Agreement, except such as have been obtained and as otherwise contemplated by this Agreement. (f) Absence of Bankruptcy Proceedings. There are no bankruptcy, reorganization or arrangement proceedings pending against, being contemplated by, or to any Purchaser's knowledge, threatened against, any Purchaser. (g) No Brokers. No broker or finder has acted for or on behalf of Purchasers in connection with the investment in the Preferred Stock by the Purchasers, and no broker or finder is entitled to any brokerage or finder's fee or commission in respect thereof based in any way on agreements, arrangements or understandings made by or on behalf of Purchasers in connection with the investment in the Preferred Stock by the Purchasers. 6.2 Accredited Investor, Etc. Each Purchaser severally represents and warrants that it is an "accredited investor" within the meaning of Rule 501 under the Securities Act. Each Purchaser severally represents and warrants that it is acquiring the Shares for its own account and not for distribution or resale, with no present intention of distributing or reselling said Shares or Conversion Shares or any part thereof; provided that the disposition of such Purchaser's property shall at all times remain within its control. Each Purchaser severally agrees: (a) that such Purchaser will not sell, assign, pledge, give, transfer or otherwise dispose of the Shares or any interest therein, or make any offer or attempt to do any of the foregoing, except pursuant to a registration of the Shares under the Securities Act and all applicable state securities laws or in a transaction which, in the written opinion of counsel for such Purchaser satisfactory to the Company (which requirement may be waived by the Company upon advice of counsel), is exempt from the registration provisions of the Securities Act and all applicable state securities laws; (b) that the certificate(s) for the Shares will bear a legend -18- making reference to the foregoing restrictions for so long as such legend may be required pursuant to applicable federal securities laws; and (c) that the Company and any transfer agent for the Shares shall not be required to give effect to any purported transfer of any of the Shares except upon compliance with the foregoing restrictions. ARTICLE 7 - COVENANTS OF THE COMPANY 7.1 Operation of the Business of the Company Pending Closing. From and after the date of execution of this Agreement and until the Closing, except as otherwise consented to by Purchasers in writing and subject to the constraints of applicable operating and other agreements, the Company will continue to operate its business in the ordinary course of business, in accordance, in all material respects, with all applicable Laws. 7.2 Taking of Necessary Action. Subject to the terms and conditions of this Agreement and to applicable law, each of the parties to this Agreement shall use all reasonable efforts promptly to take or cause to be taken all action and promptly to do or cause to be done all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. 7.3 Restrictions on Certain Actions. From and after the date hereof to the day immediately following the issuance of the Shares hereunder, the Company will not: (a) Pay or declare any dividend payable in shares of its Common Stock or take any other action which, if taken after the date of such issuance, would result under the terms of the Certificate of Designation in a change in the number of Conversion Shares into which the Shares may be converted; or (b) Make any amendment to the Second Restated Certificate of Incorporation of the Company, or file any resolution of the board of directors with the Delaware Secretary of State containing any provisions, which would materially and adversely affect or otherwise impair the rights of the Holders. 7.4 Use of Proceeds. The Company shall contribute the proceeds from the sale of the Shares to Plains All American as a capital contribution to be used for the consummation of the Celeron Acquisition. 7.5 Reservation of Common Stock. The Company shall at all times provide for, reserve and keep available out of its authorized but unissued Common Stock, solely for the purpose of issuance upon conversion or exchange of the Preferred Stock, such number of shares of Common Stock as shall then be issuable upon conversion or exchange of all issued and outstanding shares of Preferred Stock. -19- ARTICLE 8 - CLOSING CONDITIONS 8.1 The Company's Closing Conditions. The obligations of the Company under this Agreement are subject, at the option of the Company, to the satisfaction at or prior to the Closing of the following conditions: (a) All representations of Purchasers contained in this Agreement shall be true at and as of the Closing as if such representations were made at and as of the Closing, and Purchasers shall have performed and satisfied all agreements required by this Agreement to be performed and satisfied by Purchasers at or prior to the Closing; (b) Simultaneously with the sale of the shares hereunder, the transactions contemplated by the Celeron Agreement and the ING Agreement shall be consummated; (c) As of the Closing Date, no suit, action or other proceeding (excluding any such matter initiated by the Company) shall be pending or threatened before any Governmental Authority seeking to restrain the Company or prohibit the Closing or seeking damages against the Company as a result of the consummation of this Agreement. 8.2 Purchasers' Closing Conditions. The obligations of Purchasers under this Agreement are subject, at the option of Purchasers, to the satisfaction at or prior to the Closing of the following conditions: (a) All representations of the Company contained in this Agreement shall be true at and as of the Closing as if such representations were made at and as of the Closing, and the Company shall have performed and satisfied all agreements required by this Agreement to be performed and satisfied by the Company at or prior to the Closing; (b) Simultaneously with the sale of the shares hereunder, the transactions contemplated by the Celeron Agreement and the ING Agreement shall be consummated; (c) Purchasers shall have received a certificate dated as of the Closing, executed by a duly authorized officer of the Company, to the effect that to such officer's knowledge the conditions set forth in Section 8.2(a) and (b) above are satisfied at and as of the Closing; (d) Purchasers shall have received a legal opinion dated as of the Closing from Fulbright & Jaworski L.L.P., in substantially the form of Exhibit B hereto; (e) Purchasers shall have received a legal opinion dated as of the Closing from Michael R. Patterson, general counsel of the Company, in substantially the form of Exhibit C hereto; (f) Purchasers shall have received a certificate of the Secretary or the Assistant Secretary of the Company certifying, among other things, as to the due authorization of the transactions contemplated hereby; -20- (g) Purchaser shall have received certificates of existence and good standing for the Company and each of its Subsidiaries in the jurisdiction of its incorporation and each jurisdiction in which it is qualified or licensed to do business and own material assets; (h) As of the Closing Date, no suit, action or other proceeding (excluding any such matter initiated by Purchasers) shall be pending or threatened before any Governmental Authority seeking to restrain Purchasers or prohibit the Closing, seeking damages against Purchasers as a result of the consummation of this Agreement or seeking to restrain or prohibit the closing of the Celeron Acquisition or the transactions contemplated by the ING Agreement; (i) The Certificate of Designation shall have been duly filed by the Company with the Secretary of State of the State of Delaware and the Purchasers shall have received satisfactory evidence thereof; (j) Except for the Certificate of Designation, no amendments to the Second Restated Certificate of Incorporation or Bylaws of the Company as in effect on the date hereof shall have been effected; and (k) Purchasers shall have received a copy of any required written consent or waiver by any third party or Governmental Authority to the transactions contemplated hereby and by any Governmental Authority to the transactions contemplated by the Celeron Agreement or the ING Agreement. ARTICLE 9 - TERMINATION 9.1 Grounds for Termination. This Agreement may be terminated at any time prior to Closing: (a) By mutual agreement of the Company, on one hand, and the Purchasers, on the other hand; and (b) By the Company or any Purchaser if the Closing shall not have occurred on or before September 30, 1998, provided, however, that no party shall be entitled to terminate this Agreement under this Section 9.1(b) if the Closing has failed to occur because such party negligently or willfully failed to perform or observe in any material respect its covenants and agreements hereunder. 9.2 Effect of Termination. In the event that the Closing does not occur as a result of any party hereto exercising its rights to terminate pursuant to this Article 9, then this Agreement shall be null and void and, except as expressly provided herein, no party shall have any rights or obligations under this Agreement, except that nothing herein shall relieve any party from liability for any willful or negligent failure to perform or observe in any material respect any agreement or covenant contained herein. In the event the termination of this Agreement results from the willful or negligent failure of any party to perform in any material respect any agreement or covenant herein, then the -21- other parties shall be entitled to all remedies available at law or in equity and shall be entitled to recover court costs and reasonable attorneys' fees in addition to any other relief to which such party may be entitled. ARTICLE 10 - MISCELLANEOUS 10.1 Survival of Representations and Warranties. All representations, warranties, covenants and agreements of the Company contained in this Agreement or made in writing by the Company in connection herewith, and all representations and warranties of any Purchaser contained in this Agreement or made in writing by any Purchaser in connection herewith, shall survive the execution, delivery and performance of this Agreement and the transfer of the Shares, regardless of any investigation made by such party or on such party's behalf and without any other document being delivered at the Closing. 10.2 Indemnification. The Company shall indemnify and hold harmless each Purchaser, and each Purchaser shall severally and not jointly indemnify and hold harmless the Company, from and against any and all claims, losses, damages and liabilities (and actions in respect thereof) and any and all costs and expenses (including reasonable attorneys' fees and expenses) that such person may sustain or incur as a result of any misrepresentation or breach of warranty or the nonperformance of any obligation on the part of the other under this Agreement. 10.3 Antitrust Laws. Purchasers and the Company agree to use their best efforts to make such filings with and provide such information to the Federal Trade Commission or the Department of Justice with respect to the transactions contemplated by this Agreement as may be required under the HSR Act, sufficiently in advance of any transaction which may require such filing so as to permit the lapse of the normal waiting periods described in the HSR Act in advance of such transaction and to join in a request for early termination. Purchasers and the Company agree to use such best efforts to obtain all governmental approvals required to consummate the transactions contemplated by this Agreement and to cause early termination of the waiting period under the HSR Act. 10.4 Notices. Except as otherwise expressly provided in this Agreement, all communications required or permitted under this Agreement shall be in writing and any such communication or delivery shall be deemed to have been duly given and received when actually delivered to the address set forth below of the party to be notified personally (by a recognized commercial courier or delivery service that provides a receipt) or by telecopier (confirmed in writing by a personal delivery as set forth above), addressed as follows: If to the Company: Plains Resources Inc. 500 Dallas, Suite 700 Houston, Texas 77002 Attention: Mr. Michael R. Patterson Telecopy No.: (713) 654-1523 If to Purchasers, to them at the addresses as listed on Schedule A: -22- Any party may, by written notice so delivered to the other, change the address to which delivery shall thereafter be made. 10.5 Incidental Expenses. The Company shall promptly pay after receipt of an invoice all accrued fees and expenses of Purchasers, including fees and expenses of Baker & Botts, L.L.P., counsel to Purchasers, in connection with the negotiation, preparation, execution and delivery of the Agreement and related documents and the consummation of the transactions contemplated hereby. 10.6 Entire Agreement. This Agreement embodies the entire agreement between the parties with respect to the subject matter of this Agreement (superseding all prior agreements, arrangements, understandings and solicitations of interest or offers related to the subject matter of this Agreement), and this Agreement may be supplemented, altered, amended, modified or revoked by writing only, signed by the Company and the Holders of at least 66 2/3% of the Registrable Securities. The headings in this Agreement are for convenience only and shall have no significance in the interpretation of any term or provision of this Agreement. 10.7 Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO RULES CONCERNING CONFLICTS OF LAWS. 10.8 Counterparts. This Agreement may be executed in any number of counterparts, and each and every counterpart shall be deemed for all purposes one agreement. 10.9 Waiver. Any of the terms, provisions, covenants, representations, warranties or conditions contained in this Agreement may be waived only by a written instrument executed by the party waiving compliance. No waiver by any party of any condition, or of the breach of any term, provision, covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of the breach of any other term, provision, covenant, representation or warranty. 10.10 Binding Effect; Assignment. All the terms, provisions, covenants, representations, warranties and conditions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties to this Agreement and their respective successors and assigns; but this Agreement and the rights and obligations hereunder shall not be assignable or delegable by any party without the express written consent of the non-assigning or non-delegating parties. 10.11 Brokers. Without limiting the parties' respective representations in Sections 5.9 and 6.1, each party agrees to indemnify and hold the other harmless from and against any claim for a brokerage or finder's fee or commission in connection with this Agreement to the extent such claim arises from or is attributable to the actions of such indemnifying party. 10.12 Construction. Each party hereby acknowledges and agrees that such party has consulted legal counsel in connection with the negotiation of this Agreement and that such party has bargaining power equal to that of the other party in connection with the negotiation and execution -23- of this Agreement. Accordingly, the parties agree the rule of contract construction to the effect that an agreement shall be construed against the draftsman shall have no application in the construction or interpretation of this Agreement. -24- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized officers as of the date first above written. PLAINS RESOURCES INC. By: /s/ Michael R. Patterson ------------------------------ Name: Michael R. Patterson Title: Vice President ENCAP ENERGY CAPITAL FUND III, L.P. Encap Investments L.C., General Partner By: /s/ Gary R. Petersen ------------------------------ Name: Gary R. Petersen Title: Managing Director ENCAP ENERGY CAPITAL FUND III-B, L.P. Encap Investments L.C., General Partner By: /s/ Gary R. Petersen ------------------------------ Name: Gary R. Petersen Title: Managing Director BOCP ENERGY PARTNERS, L.P. Encap Investments L.C., Manager By: /s/ Gary R. Petersen ------------------------------- Name: Gary R. Petersen Title: Managing Director ENERGY CAPITAL INVESTMENT COMPANY PLC By: /s/ Gary R. Petersen ------------------------------ Name: Gary R. Petersen Title: Director ARBCO ASSOCIATES, L.P. Kayne Anderson Investment Management, Inc., General Partner By: /s/ David Shladovsky ------------------------------ Name: David Shladovsky Title: General Counsel and Secretary KAYNE, ANDERSON NON-TRADITIONAL INVESTMENTS, L.P. Kayne Anderson Investment Management, Inc., General Partner By: /s/ David Shladovsky ------------------------------ Name: David Shladovsky Title: General Counsel and Secretary OFFENSE GROUP ASSOCIATES, L.P. Kayne Anderson Investment Management, Inc., General Partner By: /s/ David Shladovsky ------------------------------ Name: David Shladovsky Title: General Counsel and Secretary OPPORTUNITY ASSOCIATES, L.P. Kayne Anderson Investment Management, Inc., General Partner By: /s/ David Shladovsky ------------------------------ Name: David Shladovsky Title: General Counsel and Secretary KAYNE ANDERSON ENERGY FUND, L.P. Kayne Anderson Investment Management, Inc., General Partner By: /s/ David Shladovsky ------------------------------ Name: David Shladovsky Title: General Counsel and Secretary KAYNE ANDERSON OFFSHORE LIMITED By: /s/ W. T. Miller ------------------------------ Name: W. T. Miller Title: Chief Financial Officer GLACIER WATER SERVICES, INC. By: /s/ Jerry A. Gordon ------------------------------ Name: Jerry A. Gordon Title: President and Chief Operating Officer NORTH POINTE FINANCIAL SERVICES, INC. By: /s/ J. H. Berry ------------------------------ Name: John H. Berry Title: Chief Financial Officer QUEENSWAY INTERNATIONAL INDEMNITY GROUP By: /s/ Karen L. Simmons ------------------------------ Name: Karen L. Simmons Title: Assistant Vice President J. RODERICK MACARTHUR FOUNDATION By: /s/ Marylou Bane ------------------------------ Name: Marylou Bane Title: Administrator CM & RH NEWMAN CHARITABLE TRUST By: /s/ Dexter F. Lowry ------------------------------ Name: Dexter F. Lowry Title: VP-Trust Officer, Union Bank of California PHILIP D. AND HENRIETTA B. ADLER FOUNDATION By: /s/ Marlin M. Volz ------------------------------ Name: Marlin M. Volz, Trustee Title: Sr. Vice President, Norwest Bank I.A By: /s/ Betty A. Schermer ------------------------------ Name: Betty Schermer, Trustee INTERMATIC, INC. By: /s/ Douglas M. Kinney ------------------------------ Name: Douglas M. Kinney Title: Chairman of the Board COMER FOUNDATION By: /s/ Jeffrey J. Budzisz ------------------------------ Name: Jeffrey J. Budzisz Title: Account Administrator, Marshall & Ilsley Trust MRMB CHARITABLE REMAINDER TRUST By: /s/ Michael Tepper ------------------------------ Name: Michael Tepper Title: Trustee RH NEWMAN TTE UNDER THE RH NEWMAN LIVING TRUST U/A/D 4/18/89 By: /s/ Dexter F. Lowry ------------------------------ Name: Dexter F. Lowry Title: VP-Trust Officer, Union Bank of California DM KINNEY P/S TRUST By /s/ Douglas M. Kinney ------------------------------- Name: Douglas M. Kinney ARNOLD & ELLEN RISSMAN By: /s/ Patricia Pates ------------------------------- Name: Pat Pates Title: Account Administrator/Agent GREGORY S. REID By: /s/ Gregory S. Reid ------------------------------- Name: Gregory S. Reid CIRCLE OF SERVICE FOUNDATION By: /s/ Joseph E. Cohen ------------------------------- Name: Joseph Cohen Title: Treasurer DAVID B. HELLER P/T ROLLOVER IRA By: /s/ David B. Heller ------------------------------- Name: David B. Heller BETTY A. SCHERMER AS TRUSTEE OF THE BETTY A. SCHERMER DECL OF TRUST DTD 11/17/89 By: /s/ Patricia Pates ------------------------------- Name: Pat Pates Title: Account Administrator/Agent LLOYD G. SCHERMER AS TRUSTEE OF THE LLOYD G. SCHERMER DECL OF TRUST DTD 11/17/89 By: /s/ Patricia Pates ------------------------------- Name: Pat Pates Title: Account Administrator/Agent HOWARD KRANE FOUNDATION By: /s/ Howard G. Krane ------------------------------- Name: Howard G. Krane Title: President RHN CORPORATION By: /s/ David B. Heller ------------------------------- Name: David B. Heller Title: President DAVID MATTENSON P/S TRUST By: /s/ David Mattenson ------------------------------- Name: David Mattenson DAVID & HEATHER GLICKMAN By: /s/ David Glickman ------------------------------- Name: David Glickman CHARLES SCHWAB & CO., INC. F/B/O BRIEN M. O'BRIEN IRA By: /s/ Brien M. O'Brien ------------------------------- Name: Brien M. O'Brien STROME PARTNERS, L.P. By its General Partner, SSCO Inc. By: /s/ Jeffery S. Lambert ------------------------------- Name: Jeffery S. Lambert Title: Chief Financial Officer STROME SUSSKIND HEDGECAP FUND, L.P. By its General Partner, SSCO Inc. By: /s/ Jeffery S. Lambert ------------------------------- Name: Jeffery S. Lambert Title: Chief Financial Officer STROME HEDGECAP LIMITED By: /s/ Jeffery S. Lambert ------------------------------- Name: Jeffery S. Lambert Title: Director STROME OFFSHORE LIMITED By its General Partner, SSCO Inc. By: /s/ Jeffery S. Lambert ------------------------------- Name: Jeffery S. Lambert Title: Director STATE STREET RESEARCH & MANAGEMENT COMPANY ON BEHALF OF METROPOLITAN LIFE INSURANCE COMPANY SEPARATE ACCOUNT EN By: /s/ Peter C. Bennett ------------------------------- Name: Peter C. Bennett Title: Executive Vice President STATE STREET RESEARCH & MANAGEMENT COMPANY ON BEHALF OF BELL SOUTH MASTER PENSION TRUST By: /s/ Peter C. Bennett ------------------------------- Name: Peter C. Bennett Title: Executive Vice President STATE STREET RESEARCH & MANAGEMENT COMPANY ON BEHALF OF STATE STREET RESEARCH ENERGY AND NATURAL RESOURCES HEDGE FUND, LLC By: /s/ Peter C. Bennett ------------------------------- Name: Peter C. Bennett Title: Executive Vice President SAWTOOTH CAPITAL MANAGEMENT, INC. By: /s/ Bartley B. Blout ------------------------------- Name: Bartley B. Blout Title: President /s/ Richard Kayne ----------------------------------- Richard Kayne /s/ John E. Anderson ----------------------------------- John Anderson /s/ Robert Sinnott ----------------------------------- Robert Sinnott /s/ Howard Zelikow ----------------------------------- Howard Zelikow /s/ Michael B. Targoff ----------------------------------- Michael B. Targoff /s/ Arthur E. Hall ----------------------------------- Arthur E. Hall, President /s/ Ken Iscol ----------------------------------- Ken Iscol /s/ Daniel O. Conwill, IV ----------------------------------- Daniel O. Conwill, IV SYMONDS TRUST CO., LTD. By: /s/ J. Taft Symonds ------------------------------- Name: J. Taft Symonds Title: President /s/ William M. Hitchcock ---------------------------------- William M. Hitchcock /s/ Tom H. Delimitros ---------------------------------- Tom H. Delimitros /s/ John H. Lollar ---------------------------------- John H. Lollar GARY C. COMER By: /s/ Jeffrey J. Budzisz ------------------------------- Name: Jeffrey J. Budzisz Title: Account Administrator, Marshall & Ilsley Trust GRANT E. SCHERMER By: /s/ Patricia Pates ------------------------------- Name: Pat Pates Title: Account Administrator/Agent, American National Bank DOUGLAS M. KINNEY PERSONAL By: /s/ Douglas M. Kinney ------------------------------- Name: Douglas M. Kinney STEPHEN HASSENFELD TRUST F/B/O ELLEN H. BLOCK DTD 11/23/84 By: /s/ Ellen H. Block, Trustee ------------------------------- Name: Ellen H. Block, Trustee PLAINS RESOURCES INC. SERIES E CUMULATIVE CONVERTIBLE STOCK ORIGINAL ISSUANCE - 7/30/98
NO. PURCHASER SHARES $ AMOUNT EnCap Energy Capital Fund III , L.P. 21,240 10,620,000 c/o EnCap Investments L.C. Attn: Gary R. Petersen, Managing Director 1100 Louisiana, Suite 3150 Houston, Texas 77002 713/659-6100 713/659-6130-fax EnCap Energy Capital Fund III-B, L.P. 16,063 8,031,500 c/o EnCap Investments L.C. Attn: Gary R. Petersen, Managing Director 1100 Louisiana, Suite 3150 Houston, Texas 77002 713/659-6100 713/659-6130-fax Energy Capital Investment Company PLC 7,500 3,750,000 c/o EnCap Investments L.C. Attn: Gary R. Petersen, Managing Director 1100 Louisiana, Suite 3150 Houston, Texas 77002 713/659-6100 713/659-6130-fax BOCP Energy Partners, L.P. 5,197 2,598,500 c/o EnCap Investments L.C. Attn: Gary R. Petersen, Managing Director 1100 Louisiana, Suite 3150 Houston, Texas 77002 713/659-6100 713/659-6130-fax Arbco Associates, L.P. 3,300 1,650,000 Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2/nd/ Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax
NO. PURCHASER SHARES $ AMOUNT Kayne Anderson Non-Traditional Investments, L.P. 3,000 1,500,000 Attn: David Shladovsky 1800 Avenue of the Stars, 2/nd/ Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax Offense Group Associates, L.P. 3,000 1,500,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2/nd/ Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax Opportunity Associates, L.P. 1,400 700,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2/nd/ Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax Kayne Anderson Offshore Limited 800 400,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2/nd/ Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax Glacier Water Services, Inc. 3,000 1,500,000 Attn: Jerry Gordon 2261 Cosmos Court Carlsbad, California 92009 619/930-2420 619/930-1206-fax North Pointe 2,000 1,000,000 Attn: Celaska Fredianelli 28819 Franklin Road P. O. Box 2223 Southfield, MI 48037-2223 248/358-1171 248/357-3895-fax
NO. PURCHASER SHARES $ AMOUNT Queensway International Indemnity Group 1,000 500,000 Attn: Karen Simmons 2910 Miller Road Decatur, Georgia 30035 770/981-7100 770/593-2121-fax Kayne Anderson Energy Fund, L.P. 32,550 16,275,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2nd Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax Richard Kayne 2,150 1,075,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2nd Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax John Anderson 2,000 1,000,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2nd Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax Robert Sinnott 1,000 500,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2nd Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax Howard Zelikow 1,000 500,000 c/o Kayne Anderson Investment Management, Inc. Attn: David Shladovsky 1800 Avenue of the Stars, 2nd Floor Los Angeles, California 90067 310/284-6438 310/284-6444-fax
NO. PURCHASER SHARES $ AMOUNT Michael B. Targoff 1,400 700,000 1330 Avenue of the Americas 36th Floor New York, New York 10019 Arthur E. Hall 1,650 825,000 P. O. Box 1479 Minden, Nevada 89423 310/284-6438 Ken Iscol 1,000 500,000 c/o Zackiva Communications 63 Lyndel Road Pound Ridge, New York 10576 Daniel O. Conwill, IV 200 100,000 400 Poydras, Suite 2140 New Orleans, Louisiana 70130 Union Bank of California F/B/O RH Newman TTEE 350 175,000 Under the RH Newman Living Trust U/A/D 4/18/89 c/o Union Bank of California Attn: Pam Lloyd 475 Sansome Street San Francisco, California 94111 Charles Schwab & Co., Inc. 200 100,000 Gregory S. Reid c/o Charles Schwab & Co., Inc. Attn: Securities Processing 101 Montgomery Street San Francisco, CA 94104 Charles Schwab & Co., Inc. F/B/O 1,000 500,000 David B. Heller P/T Rollover IRA c/o Charles Schwab & Co., Inc. Attn: Securities Processing 101 Montgomery Street San Francisco, CA 94104 Charles Schwab & Co., Inc. F/B/O 200 100,000 Howard Krane Foundation c/o Charles Schwab & Co., Inc. Attn: Securities Processing 101 Montgomery Street San Francisco, CA 94104
NO. PURCHASER SHARES $ AMOUNT Charles Schwab & Co., Inc. F/B/O 800 400,000 RHN Corporation c/o Charles Schwab & Co., Inc. Attn: Securities Processing 101 Montgomery Street San Francisco, CA 94104 Charles Schwab & Co., Inc. F/B/O 400 200,000 David Mattenson P/S Trust c/o Charles Schwab & Co., Inc. Attn: Securities Processing 101 Montgomery Street San Francisco, CA 94104 Charles Schwab & Co., Inc. F/B/O 200 100,000 David & Heather Glickman c/o Charles Schwab & Co., Inc. Attn: Securities Processing 101 Montgomery Street San Francisco, CA 94104 DEVACO Tax ID # 36-2987067, F/B/O 3,200 1,600,000 J. Roderick MacArthur Foundation c/o LaSalle National Bank Attn: Gail Levine 135 S. LaSallle Street Chicago, IL 60605 Union Bank of California F/B/O CM & RH 400 200,000 Newman Charitable Trust c/o Union Bank of California Attn: Pam Lloyd 475 Sansome Street San Francisco, CA 94111 Auer & Co. 800 400,000 c/o Norwest Bank IA Attn: Window 42 16 Wall Street, 4th Floor New York, NY 10015
NO. PURCHASER SHARES $ AMOUNT DEVACO Tax ID #36-2987067, F/B/O 3,200 1,600,000 Intermatic, Inc. c/o LaSalle National Bank Attn: Gail Levine 135 LaSalle Street Chicago, IL 60605 DEVACO Tax ID #36-2987067, F/B/O 600 300,000 MRMB Charitable Remainder Trust c/o LaSalle National Bank Attn: Gail Levine 135 LaSalle Street Chicago, IL 60605 DEVACO Tax ID #36-2987067, F/B/O 600 300,000 DM Kinney P/S Trust c/o LaSalle National Bank Attn: Gail Levine 135 LaSalle Street Chicago. IL 60605 DEVACO Tax ID #36-2987067, F/B/O 200 100,000 Circle of Service Foundation c/o LaSalle National Bank Attn: Gail Levine 135 S. LaSalle Street Chicago, IL 60605 Charles Schwab & Co., Inc. F/B/O 50 25,000 Brien M. O'Brien IRA c/o Charles Schwab & Co., Inc. Attn: Securities Processing 101 Montgomery Street San Francisco, CA 94104 Marshall & Ilsley F/B/O Comer Foundation 2,000 1,000,000 c/o Marshall & Ilsley Attn: Caroline Stevens 1000 N. Water Street Milwaukee, WI 53202 Arnold & Ellen Rissman in care of 600 300,000 American National Bank, 10/th/ Floor Attn: Pat Pates 120 S. LaSalle Street Chicago, IL 60603
NO. PURCHASER SHARES $ AMOUNT Betty A. Schermer as Trustee of the 800 400,000 Betty A. Schermer Decl. Of Trust DTD 11/17/89 in care of American National Bank Attn: Pat Pates 120 S. LaSalle Street, 10/th/ Floor Chicago, IL 60603 Lloyd G. Schermer as Trustee of the 800 400,000 Lloyd G. Schermer Decl. Of Trust DTD 11/17/89 Attn: Pat Pates in care of American National Bank 120 S. LaSalle Street, 10/th/ Floor Chicago, Illinois 60603 312/565-1414 312/565-2002-Fax Strome Partners L.P. 4,368 2,184,000 Attn: Jeff Lambert 100 Wilshire Blvd., 15/th/ Floor Santa Monica, California 90401 800/964-9034 310/917-6600 310/917-6613-fax Strome Susskind Hedgecap Fund, L.P. 1,360 680,000 Attn: Jeff Lambert 100 Wilshire Boulevard, 15th Floor Santa Monica, California 90401 800/964-9034 310/917-6600 310/917-6613-fax Strome Susskind Hedgecap Fund, L.P. 2,809 1,404,500 Attn: Jeff Lambert 100 Wilshire Boulevard, 15th Floor Santa Monica, California 90401 800/964-9034 310/917-6600 310/917-6613-fax
NO. PURCHASER SHARES $ AMOUNT Strome Offshore Limited 5,339 2,669,500 Attn: Jeff Lambert 100 Wilshire Boulevard. 15th Floor Santa Monica, California 90401 800/964-9034 310/917-6600 310/917-6613-fax Sandpiper & Co. 11,000 5,500,000 Chase Manhattan Bank A/C State Street Bank and Trust Co. Attn: Jennifer John 4 New York Plaza Ground Floor/Outsource Department New York, New York 10004 Portfolio 2G79 212/623-5953 Marine Crew & Co. 5,000 2,500,000 Chase Manhattan Bank A/C State Street Bank and Trust Co. Attn: Jennifer John 4 New York Plaza Ground Floor/Outsource Department New York, New York 10004 212/623-5953 Royter & Co. 2,000 1,000,000 NSCC, New York Window Concourse Level/S Building Account: Morgan Sanley New York Energy and Natural Resources Hedge Fund, LLC 55 Water Street New York, New York 10041-0002 Sawtooth Partners, L.P. 2,800 1,400,000 Attn: Bartley B. Blout 100 Wilshire Blvd., Suite 1500 Santa Monica, California 90401 310/260-6876 310/260-6845-fax
NO. PURCHASER SHARES $ AMOUNT Sawtooth Offshore Limited 600 300,000 Attn: Bartley B. Blout 100 Wilshire Blvd., Suite 1500 Santa Monica, California 90401 310/260-6876 310/260-6845-fax Polaris Prime Small Cap Value, L.P. 1,000 500,000 Attn: Bartley B. Blout 100 Willshire Blvd., Suite 1500 Santa Monica, California 90401 William M. Hitchcock 2,000 1,000,000 c/o Avalon Financial, Inc. 4550 Post Oak Place, Suite 119 Houston, Texas 77027 713/961-0534 713/961-0574-fax Symonds Trust Co. Ltd. 400 200,000 Attn: J. Taft Symonds, President 2040 North Loop West, Suite 200 Houston, Texas 77018 713/681-5461 713/681-7554-fax Tom H. Delimitros 50 25,000 6813 Golf Drive Dallas, Texas 75205 214/696-3828 214/905/9761-fax John H. Lollar 100 50,000 c/o Newgulf Exploration L.P. 1100 Louisiana, Suite 1470 Houston, Texas 77002 713/756-1190, ext. 559 713/756-1196-fax Marshall & Ilsley F/B/O Gary C. Comer 2,000 1,000,000 c/o Marshall & Ilsley Attn: Caroline Stevens 1000 N. Water Street Milwaukee, WI 53202
NO. PURCHASER SHARES $ AMOUNT Grant E. Schermer in care of 600 300,000 American National Bank Attn: Pat Pates 120 S. LaSalle Street, 10th Floor Chicago, IL 60603 DAVACO Tax ID #36-2987067, F/B/O 400 200,000 Douglas M. Kinney, Personal c/o LaSalle National Bank Attn: Gail Levine 135 S. LaSalle Street Chicago, IL 60605 Stephen Hassengeld Trust F/B/O Ellen H. Block 600 300,000 DTP 11/23/1984 c/o Harris Trust and Savings Bank Attn: Eileen Rea Strome Hedgecap Limited 240 120,000 Attn: Jeff Lambert 100 Wilshire Boulevard, 15th Floor Santa Monica, California 90401 800/964-9034 310/917-6600 310/917-6613-fax Strome Hedgecap Limited 484 242,000 Attn: Jeff Lambert 100 Wilshire Boulevard, 15th Floor Santa Monica, California 90401 800/964-9034 310/917-6600 310/917-6613-fax Total 170,000 $85,000,000
EX-3.1 4 CERTIFICATE OF DESIGNATION EXHIBIT 3.1 PLAINS RESOURCES INC. Certificate of Designation, Preferences and Rights of a Series of Preferred Stock by Resolution of the Board of Directors Providing for an Issue of 250,000 Shares of Preferred Stock Designated "SERIES E CUMULATIVE CONVERTIBLE PREFERRED STOCK" Plains Resources Inc., a Delaware corporation (hereinafter called the "Company"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware does hereby state and certify that pursuant to the authority expressly vested in the Board of Directors of the Company by the Certificate of Incorporation, as amended, the Board of Directors, at a meeting thereof duly called and held on March 19, 1998, at which meeting a quorum was present and acting throughout, duly adopted the following resolutions providing for the issue of shares of Preferred Stock hereinafter referred to, and further providing with respect to such issue of shares of Preferred Stock for such powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, as are hereinafter set forth, in addition to those set forth in said Certificate of Incorporation; RESOLVED, that pursuant to Article FOURTH of the Certificate of Incorporation (which authorizes 2,000,000 shares of Preferred Stock, $1.00 par value), the Board of Directors hereby provides for the issue of a series of 250,000 shares of Preferred Stock designated "Series E Cumulative Convertible Preferred Stock"; and RESOLVED, that the powers, designations, preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of the shares of the Series E Cumulative Convertible Preferred Stock shall be as follows: SECTION 1. Designation and Rank. The designation of the series of Preferred Stock created by this resolution shall be "Series E Cumulative Convertible Preferred Stock" (hereinafter called this "Series"), and the number of shares constituting this Series shall be 250,000. Shares of this Series shall have a stated value of $500 per share. The number of authorized shares of this Series may be reduced by further resolution duly adopted by the Board and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such reduction has been so authorized, but the number of authorized shares of this Series shall not be increased, except as provided in Section 2(b) hereof. The shares of this Series shall rank prior to the Junior Stock (as defined in Section 10) as to distribution of assets and payment of dividends. The shares of this Series shall be of equal rank as to distribution of assets and payment of dividends with all other series of Preferred Stock, except as provided in a certificate of designation with regard to such other series of Preferred Stock filed pursuant to Section 151 of the General Corporation Law of the State of Delaware with the Secretary of State of the State of Delaware. SECTION 2. Dividends. (a) Shares of this Series shall be entitled to receive, when and as declared by the Board of Directors, dividends as provided in this Section 2 on the stated value per share of this Series, and no more. Such dividends shall be cumulative, shall accrue (whether or not declared and whether or not there shall be funds legally available for the payment of dividends) from the date of original issue of such shares and shall be payable in arrears, out of assets legally available therefor, when and as declared by the Board of Directors of the Company, on April 1 and October 1 of each year, commencing October 1, 1998 (except that if any such date is a Saturday, Sunday or a legal holiday then such dividend shall be payable without interest on the next day that is not a Saturday, Sunday or legal holiday) (each six-month period (or such period from the date of original issue until October 1, 1998) expiring on a dividend payment date being referred to herein as a "Dividend Period"). Each of such dividends shall be paid to the holders of record of shares of this Series as they appear on the stock register of the Company on such record dates, not exceeding 30 days preceding the payment dates thereof, as shall be fixed by the Board. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board. (b) With respect to each dividend declared and timely paid on shares of this Series, the Company may pay a cash dividend at the Dividend Rate (as defined in Section 10) or, at its option, and in lieu of payment in cash, may pay such dividend by issuing additional fully paid and nonassessable shares, or fractions thereof, of this Series having an aggregate stated value equal to the cash dividend otherwise payable. Each dividend that accrues during each Dividend Period shall be deemed to be timely paid only if it is paid on the dividend payment date on which such Dividend Period expires. Any dividend not declared and timely paid on shares of this Series may thereafter be paid only by (i) issuing additional fully paid and nonassessable shares of this Series, or fractions thereof ("Arrearage Shares"), having an aggregate stated value equal to the cash that would have been paid had such dividend been timely paid in cash and (ii) paying an amount in cash equal to the aggregate amount of cash dividends, if any, that would have accrued on such Arrearage Shares had such Arrearage Shares been issued on the dividend payment date for such dividend, or, at the Company's option, and in lieu of such cash payment, issuing additional fully paid and nonassessable shares, or fractions thereof, of this Series having an aggregate stated value equal to the cash payment otherwise to be made. Each fractional share of this Series outstanding shall be entitled to a ratably proportionate amount of all dividends accruing with respect to each outstanding share of this Series pursuant to Section 2(a) hereof, and all such dividends with respect to such outstanding fractional shares shall be fully cumulative and shall accrue (whether or not declared) and shall be payable in the same manner and at such times as provided for in Section 2(a) hereof with respect to dividends on each outstanding share of this Series. The Board of Directors shall authorize additional shares of this Series to be available for issuance as dividends if the number of authorized shares of this Series is insufficient to continue accruing or paying dividends in shares of this Series. 2 (c) No full dividends shall be declared or paid or set apart for payment on Parity Stock (as defined in Section 10) or Junior Stock for any period unless full cumulative dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on this Series for all Dividend Periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not paid in full, as aforesaid, upon the shares of this Series and of any other series of Parity Stock, all dividends declared upon shares of this Series and of any other series of Parity Stock shall be declared pro rata so that the amount of dividends declared per share on this Series and such other series of Parity Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of this Series and such other series of Parity Stock bear to each other. Holders of shares of this Series shall not be entitled to any dividend, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on this Series. Except as set forth in Section 2(b) above, no interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on this Series that may be in arrears. (d) So long as any shares of this Series are outstanding, no dividend (other than a dividend in Junior Stock or other than as provided in Section 2(c)) shall be declared or paid or set aside for payment or other distribution declared or made upon the Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of Junior Stock) by the Company (except by conversion into or in exchange for Junior Stock) unless, in each case, the full cumulative dividends on all outstanding shares of this Series then payable shall have been paid. (e) Dividends payable on this Series for any period less than a full Dividend Period shall be computed on the basis of the ratio of the number of days in such partial period to the actual number of days in such full Dividend Period. SECTION 3. Redemption. (a) On July 30, 2012, the Company shall redeem, to the extent it has legally available funds therefor, all shares of this Series then outstanding at a redemption price per share equal to the sum of $500 per share plus the Deemed Arrearage Value (as defined in Section 10) per share. At any time when the Company shall not have redeemed the full number of shares of this Series required to be redeemed pursuant to this Section 3(a), no dividends (other than in Junior Stock or other than as provided in Section 2(c) shall be declared or paid or set aside for payment, or other distribution declared or made, upon the Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Company (except by conversion into or in exchange for Junior Stock), nor shall any Parity Stock be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any Parity Stock) by the Company (except by conversion into or in exchange for Junior Stock), unless, in the case of the mandatory redemption of, repurchase of, or fulfillment of a sinking fund obligation in respect of, any other series of Parity Stock, payments made 3 in respect of the mandatory redemption of, repurchase of, or fulfillment of a sinking fund obligation in respect of, this Series and all other series of Parity Stock then issued and outstanding and entitled to such mandatory payments are made pro rata, as nearly as practicable, so that the amounts of such payments made on this Series and such other series of Parity Stock shall in all cases bear to each other the same ratio, as nearly as practicable, that such mandatory payments required to be made on this Series and such other series of Parity Stock bear to each other. (b) From and after March 31, 1999, the Company, at its option, may redeem shares of this Series, as a whole or in part, at any time or from time to time, at the following redemption prices per share, in each case together with the Deemed Arrearage Value per share: REDEMPTION PRICE IF REDEEMED DURING THE PERIOD: - ---------- --------------------------------- $550.00 From April 1, 1999 through December 31, 1999 525.00 From January 1, 2000 through December 31, 2003 500.00 From January 1, 2004 and thereafter (c) In the event that fewer than all of the outstanding shares of this Series are to be redeemed, the number of shares to be redeemed shall be determined by the Board and the shares to be redeemed shall be determined in a pro rata manner. (d) At such time as the Company shall redeem shares of this Series, notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the redemption date, to each holder of record of the shares to be redeemed, at such holder's address as the same appears on the stock register of the Company. Each such notice shall state: (i) the redemption date; (ii) the number of shares of this Series to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (iii) the redemption price; (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date. (e) Notice having been mailed as aforesaid, from and after the redemption date (unless default shall be made by the Company in providing money for the payment of the redemption price) dividends on the shares of this Series so called for redemption shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders thereof as stockholders of the Company (except the right to receive from the Company the redemption price plus the Deemed Arrearage Value to the redemption date) shall cease. Upon surrender in accordance with said notice of the certificates for any shares so redeemed (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such shares shall be redeemed by the Company at the redemption price aforesaid. In case fewer than all the shares represented by any such certificate are 4 redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (f) Any shares of this Series that shall at any time have been redeemed or purchased by the Company, or exchanged for shares of Common Stock pursuant to Section 7, shall, after such redemption, have the status of authorized but unissued shares of Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board. (g) Notwithstanding the foregoing provisions of this Section 3, if any dividends on this Series are in arrears, no shares of this Series shall be redeemed pursuant to Section 3(b) unless all outstanding shares of this Series are simultaneously redeemed, and the Company shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. SECTION 4. Voting. (a) Except as otherwise required by law, the holders of shares of this Series shall not have any right or power to vote on any question or in any proceeding or to be represented at or to receive notice of any meeting of holders of capital stock of the Company. On any matters on which the holders of shares of this Series shall be entitled to vote, they shall be entitled to one vote for each share held. (b) So long as any shares of this Series remain outstanding, the affirmative vote or consent of the holders of a majority of the shares of this Series outstanding at the time, given in person or by proxy, either in writing or at a meeting, shall be necessary to permit, effect or validate (i) the authorization, creation or issuance, or any increase in the authorized or issued amount, of any class or series of Senior Stock and (ii) the amendment, alteration or repeal of any of the provisions of the Second Restated Certificate of Incorporation, as amended, which would materially and adversely affect any right, preference, privilege or voting power of shares of this Series or of the holders thereof in a manner disproportionate to the effect thereof on the holders of any other shares of the Company's capital stock. However, the creation and issuance of other series of Parity Stock or Junior Stock shall not be deemed to affect materially and adversely said rights, preferences, privileges or voting power. (c) So long as at least 10,000 shares of this Series remain outstanding, the holders of shares of this Series outstanding at the time shall be entitled to vote to permit, effect or validate the authorization of a merger or consolidation of the Company or any compulsory shares exchange pursuant to which the Common Stock is converted into other securities, cash or property. The holders of shares of this Series shall be entitled to that number of votes equal to the number of whole shares of Common Stock into which all shares of this Series held by such holders could be converted pursuant to the provisions of Section 6 hereof, at the record date for the determination of the stockholders entitled to vote on such matters or, if no record date is established, at the day prior to 5 the date such vote is taken or any written consent of stockholders is first executed, such votes to be counted together with all other shares of capital stock having general voting powers and not separately as a class. SECTION 5. Liquidation. In the event of any complete liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of shares of this Series shall each be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of this Series a sum equal to the Deemed Arrearage Value of such share plus $500.00 before any distribution shall be made to the holders of Junior Stock of the Company, and if the assets of the Company shall be insufficient to pay in full such amounts, then such assets shall be distributed among such holders and the holders of any Parity Stock ratably in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. In the event of any complete liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of shares of this Series shall not be entitled to receive the liquidation price of such shares held by them until the liquidation price of all Senior Stock shall have been paid in full. SECTION 6. Conversion. (a) Each share of this Series shall be convertible at the option of the record holder thereof at any time prior to the third Trading Day before the redemption date for such share, by presentation of the certificate representing such share by the record holder in person or by registered mail, return receipt requested with postage prepaid thereon, at the principal office of the Company, and at such other offices, if any, as the Board of Directors may determine, into the number of shares of fully paid and nonassessable shares of Common Stock determined by dividing the sum of $500.00 plus the Deemed Arrearage Value by the Conversion Price in effect at the time of conversion. (b) The Company covenants that it will at all times reserve and keep available, out of its authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Series as herein provided, free from preemptive rights or any other actual or contingent purchase rights of Persons other than the holders of shares of this Series, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of this Series. The Company covenants that all shares of Common Stock that shall be so issuable shall upon issue be duly and validly issued and fully paid and nonassessable. SECTION 7. Exchange. (a) At the option of the Company, each outstanding share of this Series shall be exchanged for the number of shares of fully paid and nonassessable shares of Common Stock determined pursuant to Section 7(b); provided that such option shall not be exercisable unless and until either: (i) (A) either (x) the Midstream Entities have merged or consolidated with Plains All American Inc., or (y) the Company has received at least $180 million in gross proceeds from a public offering of up to 35% of the equity interests in an entity taxable as a partnership for 6 federal income tax purposes that then owns, directly or through subsidiaries, substantially all of the Midstream Entities or has otherwise succeeded to substantially all of the business and assets of the Midstream Entities; (B) the average of the Per Share Market Values of the Common Stock for any 30 consecutive Trading Days prior to the mailing of the notice as required by Section 7(d) and subsequent to the sale of shares of this Series shall have equaled or exceeded the First Threshold Price; and (C) notice of exercise pursuant to Section 7(d) is mailed no later than December 31, 1999; or (ii) the average of the Per Share Market Values of the Common Stock for any 30 consecutive Trading Days prior to the mailing of the notice as required by Section 7(d) and subsequent to the sale of shares of this Series shall have equaled or exceeded the Second Threshold Price. (b) If the conditions required under subsection 7(a)(i) have been met, then the number of shares of Common Stock for which each outstanding share of this Series may be exchanged pursuant to Section 7(a) shall be determined by dividing the sum of $500.00 plus the Deemed Arrearage Value of such share by the Exchange Price in effect at the time of such exchange. If the condition required under subsection 7(a)(ii) has been met, then, without regard to whether the conditions set forth in subsection 7(a)(i) have also been met, the number of shares of Common Stock for which each outstanding share of this Series may be exchanged pursuant to Section 7(a) shall be determined by dividing the sum of $500.00 plus the Deemed Arrearage Value of such share by the Conversion Price in effect at the time of such exchange. (c) Notwithstanding any other provision of this Section 7(a), in the event that (i) no registration statement with respect to the shares of Common Stock to be issued upon exchange of shares of this Series has been declared effective, (ii) such registration statement has been declared effective but ceases to be effective, (iii) the prospectus which is a part thereof cannot be used at the time of the exchange, (iv) necessary consents and filings with any Governmental Authority relating to the issuance of Common Stock and the exchange have not been obtained, accomplished or waived or (v) the shares of Common Stock to be issued upon exchange in accordance with Section 7(a) have not been approved for listing on the principal securities exchange on which the Common Stock is then listed, such exchange shall be delayed until such time as none of the foregoing is continuing, provided that such exchange will occur on the Trading Day following the first day that none of the foregoing is continuing and the Per Share Market Value has equaled or exceeded the First Threshold Price with respect to an exchange under Section 7(a)(i) or the Second Threshold Price with respect to an exchange under Section 7(a)(ii). (d) The Company shall exercise its option under Section 7(a) by giving notice of such election by first class mail, postage prepaid, mailed (i) not more than 10 business days after each of the conditions required under subsection 7(a)(i) have been met or the condition in subsection 7(a)(ii) has been met (and provided that none of the conditions in Section 7(c) then exist), and (ii) not less than 30 nor more than 60 days prior to the exchange date, to each holder of record of the shares of this Series to be exchanged, at such holder's address as the same appears on the stock register of the 7 Company. Each such notice shall state: (i) that the Board of Directors of the Company has determined in good faith that each of the conditions required under subsection 7(a)(i) have been met or the condition set forth in subsection 7(a)(i) has been met (and that none of the conditions in Section 7(c) exist); (ii) the exchange date; (iii) the number of shares of Common Stock to be exchanged for each share of this Series; (iv) the place or places where certificates for such shares are to be surrendered in exchange for shares of Common Stock; and (v) that dividends on the shares of this Series to be exchanged will cease to accrue on such exchange date. (e) Notice having been mailed as aforesaid, from and after the exchange date, dividends on the shares of this Series so called for exchange shall cease to accrue, and said shares shall no longer be deemed to be outstanding, and all rights of the holders as holders of share of this Series (except the right to receive from the Company the number of shares of Common Stock issuable pursuant to this Section 7) shall cease. Upon surrender in accordance with said notice of the certificates for shares of this Series so exchanged (properly endorsed or assigned for transfer, if the Board shall so require and the notice shall so state), such certificates shall be exchanged for certificates representing the number of shares of Common Stock for which shares of this Series have been exchanged. Until so surrendered, certificates for shares of this Series shall represent, after the exchange date, the number of shares of Common Stock for which shares of this Series have been exchanged. Share certificates representing shares of this Series that are so surrendered shall be canceled. (f) Notwithstanding the foregoing provisions of this Section 7, if any dividends on this Series are in arrears, no shares of this Series shall be exchanged pursuant to Section 7(a) unless all outstanding shares of this Series are simultaneously exchanged, and the Company shall not purchase or otherwise acquire any shares of this Series; provided, however, that the foregoing shall not prevent the purchase or acquisition of shares of this Series pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of this Series. SECTION 8. Adjustment of Conversion Price, Exchange Price, First Threshold Price and Second Threshold Price. (a) The Conversion Price initially shall be $18.00 (the "Conversion Price"), and the Exchange Price initially shall be $15.00 (the "Exchange Price"). The Conversion Price and the Exchange Price shall be subject to adjustment from time to time as follows: (i) If the Company, at any time while any shares of this Series are outstanding, shall (A) pay a stock dividend or stock dividends or otherwise make a distribution or distributions on shares of its capital stock payable in shares of Common Stock (or in securities convertible into shares of Common Stock), (B) except as set forth in clause (A) above, pay a stock dividend or make a distribution on shares of its capital stock payable in shares of its capital stock of any class other than Common Stock or a class convertible into Common Stock, (C) subdivide outstanding shares of Common Stock into a larger number of shares, (D) combine outstanding shares of Common Stock into a smaller number of shares, or (E) issue by reclassification of shares of Common Stock any shares of capital stock of the Company of any 8 class or classes, the Conversion Price and the Exchange Price in effect immediately prior to such action shall be adjusted so that the holder of any shares of this Series thereafter surrendered for conversion or exchanged shall be entitled to receive the number and class or classes of shares of the capital stock of the Company which he would have owned or have been entitled to receive immediately after the happening of any of the events described above, had such shares of this Series been converted or exchanged on or immediately prior to the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification, as the case may be. Notwithstanding the foregoing, no adjustment in the Conversion Price or the Exchange Price shall be made by reason of the payment of dividends on shares of Preferred Stock in additional shares of Preferred Stock. An adjustment made pursuant to this subsection 8(a)(i) shall become effective immediately after the record date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. (ii) In case the Company, at any time while any shares of this Series are outstanding, shall issue rights or warrants to all holders of Common Stock entitling them (for a period expiring within 45 days after the record date mentioned below) to subscribe for or purchase shares of Common Stock at a price per share less than the then Per Share Market Value of Common Stock at the record date mentioned below, the Conversion Price and the Exchange Price shall be reduced by multiplying the Conversion Price and the Exchange Price, as the case may be, in effect prior to such record date by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered would purchase at such Per Share Market Value. Such adjustment shall be made whenever such rights or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants. However, upon the expiration of any right or warrant to purchase Common Stock the issuance of which resulted in an adjustment in the Conversion Price and the Exchange Price pursuant to this subsection 8(a)(ii), if any such right or warrant shall expire and shall not have been exercised, the Conversion Price and the Exchange Price shall immediately upon such expiration, be recomputed and effective immediately upon such expiration be increased to the prices which they would have been (but reflecting any other adjustments in the Conversion Price and Exchange Price made pursuant to the provisions of this Section 8 after the issuance of such rights or warrants) had the adjustment of the Conversion Price and the Exchange Price made upon the issuance of such rights or warrants been made on the basis of offering for subscription or purchase only that number of shares of Common Stock actually purchased upon the exercise of such rights or warrants actually exercised. 9 (iii) In case the Company, at any time while shares of this Series are outstanding, shall distribute to all holders of Common Stock evidences of its indebtedness or assets (excluding cash dividends or cash distributions paid out of earned surplus) or rights or warrants to subscribe for or purchase any security (excluding those referred to in subsection 8(a)(ii) above) then in each such case the Conversion Price and the Exchange Price shall be determined by multiplying the Conversion Price or the Exchange Price, as the case may be, in effect prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction, of which the denominator shall be the Per Share Market Value of Common Stock determined as of the record date mentioned above, and of which the numerator shall be such Per Share Market Value of the Common Stock, less the then fair market value (as determined by the Board of Directors of the Company in good faith, whose determination shall be conclusive if made in good faith; provided, however, that in the event of a distribution or series of related distributions exceeding 10% of the net assets of the Company, then such fair market value shall be determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company) selected in good faith by the Board of Directors of the Company, and in either case shall be described in a statement provided to all registered holders of this Series) of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. (iv) If the Company, at any time while any shares of this Series are outstanding, shall issue or sell shares of Common Stock (excluding stock issuances referred to in other provisions of this Section 8(a)) for a consideration per share which is less than the Per Share Market Value of Common Stock on the date of such issuance or sale, the Conversion Price and the Exchange Price shall be reduced by multiplying the Conversion Price and the Exchange Price in effect immediately prior to the date of such issuance or sale by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of such issuance or sale plus the number of additional shares of Common Stock issued or sold, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of such issuance or sale plus the number of shares which the aggregate consideration received or receivable by the Company for the total number of shares so issued or sold would purchase at such Per Share Market Value. Such adjustment shall be made whenever such shares are issued, and shall become effective immediately after such issuance. If the consideration received or receivable by the Company for such issuance or sale of shares of Common Stock is not cash, the fair market value of such consideration shall be determined by the Board, an investment banking firm, or certified public accountants in the manner specified in subsection 8(b). 10 (v) If the Company, at any time while any shares of this Series are outstanding, shall issue rights, options, or warrants (excluding those referred to in other provisions of this Section 8(a)) which entitle the holders thereof to purchase shares of Common Stock (such rights, options, or warrants collectively referred to as "Purchase Rights") at a price per share less than the then Per Share Market Value of Common Stock on the date of the issuance of such Purchase Rights, the Conversion Price and the Exchange Price shall be reduced by multiplying the Conversion Price and the Exchange Price in effect immediately prior to the date of issuance of such Purchase Rights by a fraction, of which the denominator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such Purchase Rights plus the number of additional shares of Common Stock offered for purchase, and of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding on the date of issuance of such Purchase Rights plus the number of shares which the aggregate consideration received or receivable by the Company in connection with the grant as well as the exercise of such Purchase Rights would purchase at such Per Share Market Value. Such adjustment shall be made whenever such Purchase Rights are issued, and shall become effective immediately after the issuance of such Purchase Rights. However, upon the expiration of any such Purchase Right the issuance of which resulted in an adjustment in the Conversion Price and the Exchange Price pursuant to this subsection 8(a)(v), if such Purchase Right shall not have been fully exercised, the Conversion Price and the Exchange Price shall immediately upon such expiration be recomputed and effective immediately upon such expiration be increased to the prices which they would have been (but reflecting any other adjustments in the Conversion Price and the Exchange Price made pursuant to the provisions of this Section 8 after the issuance of such Purchase Rights) had the adjustment of the Conversion Price and the Exchange Price made upon the issuance of such Purchase Right been made on the basis of offering for purchase only that number of shares of Common Stock actually purchased upon the exercise of such Purchase Rights which were actually exercised. If the consideration for the Purchase Rights received or receivable by the Company for the grant or exercise of such Purchase Rights is not cash, the fair market value of such consideration shall be determined by the Board, an investment banking firm, or certified public accountants in the manner specified in subsection 8(b). (vi) No notification to the holders of any adjustment in the Conversion Price or the Exchange Price otherwise required by this Section 8 shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustment which by reason of this subsection 8(a)(vi) is not required to be made shall be carried forward and taken into account in any subsequent adjustments, and that upon presentment of shares of this Series for conversion, all adjustments shall be made calculating the conversion rights of such holder. All calculations under this Section 8 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. (vii) Whenever the Conversion Price or the Exchange Price is adjusted, as herein provided, the Company shall promptly mail to each registered holder of shares of this Series 11 a notice setting forth the Conversion Price and the Exchange Price after such adjustment and setting forth a brief statement of facts requiring such adjustment. Such notice prepared in good faith shall be conclusive evidence of the correctness of such adjustment absent manifest error. (viii) In case of any reclassification of the Common Stock, any consolidation or merger of the Company with or into another person, sale or transfer of all or substantially all of the assets of the Company or any compulsory share exchange pursuant to which share exchange the Common Stock is converted into other securities, cash or property, then the holders of the shares of this Series then outstanding shall have the right thereafter to convert such shares only into the kind and amount of shares of stock and other securities and property receivable upon or deemed to be held following such reclassification, consolidation, merger, sale, transfer or share exchange by a holder of a number of shares of the Common Stock of the Company into which such shares of this Series could have been converted immediately prior to such reclassification, consolidation, merger, sale, transfer or share exchange. This provision shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges. (ix) In case: (A) the Company shall declare a dividend (or any other distribution) on the Common Stock payable otherwise than in cash out of its earned surplus; or (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of its Common Stock; or (C) the Company shall authorize the granting to the holders of the Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock of the Company (other than a subdivision or combination of the outstanding shares of Common Stock), any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) of the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of the shares of this Series, and shall cause to be mailed to the holders of record 12 of the shares of this Series at their last addresses as they shall appear upon the stock books of the Company, at least 10 days prior to the applicable record date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, redemption, rights or warrants are to be determined, or (y) the date on which such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, share exchange, dissolution, liquidation or winding up (but no failure to mail such notice or any defect therein or in the mailing thereof shall affect the validity of the corporate action required to be specified in such notice). (b) In case at any time conditions shall arise by reason of action taken by the Company, which, in the opinion of the Board of Directors of the Company, are not adequately covered by the other provisions hereof and which might materially and adversely affect the rights of the holders of shares of this Series, or in case at any time any such conditions are expected to arise by reason of any action contemplated by the Company, the Board of Directors of the Company shall appoint a nationally recognized or major regional investment banking firm or a firm of independent certified public accountants of recognized standing (which may be the firm that regularly examines the financial statements of the Company), who shall give their opinion as to the adjustment, if any (not inconsistent with the standards established in this Section 8), of the Conversion Price or the Exchange Price (including, if necessary, any adjustment as to the securities into which shares of this Series may thereafter be convertible or exchangeable) which is or would be required to preserve without dilution the rights of the holders of shares of this Series. The Board of Directors of the Company shall make the adjustment recommended forthwith upon the receipt of such opinion or the taking of any such action contemplated, as the case may be; provided, however, that no such adjustment of the Conversion Price or the Exchange Price shall be made which in the opinion of the investment banking firm or firm of accountants giving the aforesaid opinion would result in an increase of the Conversion Price or the Exchange Price to more than the Conversion Price or the Exchange Price, respectively, then in effect. (c) Upon any adjustment of the Conversion Price and the Exchange Price pursuant to this Section 8, then the First Threshold Price and the Second Threshold Price shall be adjusted, as of the date of such adjustment of the Conversion Price and the Exchange Price, to that price determined by multiplying the First Threshold Price and the Second Threshold Price in effect immediately prior to such adjustment of the Conversion Price and the Exchange Price by a fraction (i) the numerator of which shall be the Conversion Price in effect immediately after such adjustment of the Conversion Price, and (ii) the denominator of which shall be the Conversion Price in effect immediately prior to such adjustment. 13 SECTION 9. Fractional Shares; Transfer Taxes; HSR Act. (a) The Company shall not be required to issue stock certificates representing fractions of shares of Common Stock, but may, if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the Per Share Market Value at such time. If the Company elects not, or is unable, to make such a cash payment, the holder of a share of this Series shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. (b) The issuance of certificates for shares of Common Stock on conversion of this Series shall be made without charge to the holders thereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of this Series converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. (c) The exercise by a holder of shares of this Series of the conversion rights granted in Section 6 and the exercise by the Company of the exchange rights as set forth in Section 7 are subject in all respects to and conditioned upon compliance by the parties with the HSR Act, and rules and regulations promulgated pursuant thereto, to the extent that said act, rules and regulations are applicable to such exercise. The Company and such holder agree to make such filings with and provide such information to the Federal Trade Commission and the Department of Justice with respect to such exercise as are required in connection with the HSR Act in a timely manner and to join each others request for early termination. The Company and such holder will use such reasonable efforts to obtain all governmental approval required to permit such exercise and to cause early termination of the waiting period under the HSR Act. SECTION 10. Definitions. For the purposes hereof, the following terms shall have the following respective meanings: "Arrearage Shares" has the meaning given such term in Section 2(b). "Common Stock" means shares now or hereafter authorized of the class of Common Stock, $.10 par value, of the Company presently authorized and stock of any other class into which such shares may hereafter have been reclassified or changed. "Conversion Price" has the meaning given such term in Section 8(a). "Deemed Arrearage Value" of a share of this Series means (i) the cash dividend accrued at the Dividend Rate on such share during the partial Dividend Period ending on the date of conversion, the date fixed for redemption, the exchange date or the date of payment upon liquidation, as the case may be, and (ii) if one or more dividends has accrued and has 14 not been timely paid on such share, an amount in cash equal to $500 multiplied by the number of whole and fractional shares of this Series that would have been issued as dividends on such share had all such accrued and unpaid dividends been timely paid in shares of this Series, together with the aggregate amount of cash dividends that would have accrued on such dividend shares to the date of conversion, the date fixed for redemption, the exchange date or the date of payment upon liquidation, as the case may be. "Dividend Period" has the meaning given such term in Section 2(a). "Dividend Rate" means 9.5% per annum. "Exchange Price" has the meaning given such term in Section 8(a). "First Threshold Price" of a share of Common Stock shall initially be $18.00. The First Threshold Price is subject to adjustment pursuant to Section 8(c). "Governmental Authority" shall mean (i) the United States of America or any state within the United States of America and (ii) any court or any governmental department, commission, board, bureau, agency or other instrumentality of the United States of America or of any state within the United States of America. "Junior Stock" means the Common Stock of the Company and any other stock of the Company over which shares of this Series has a preference as to distribution of assets. "Midstream Entities" means Plains Marketing & Transportation Inc, Plains Terminal & Transfer Corporation, PLX Crude Lines Inc. and PLX Ingleside Inc. "Parity Stock" means any stock of the Company ranking as to distribution of assets on a parity with this Series. "Per Share Market Value" means on any particular date (a) the last sale price per share of the Common Stock on such date on the principal stock exchange on which the Common Stock has been listed or, if there is no such price on such date, then the last price on such exchange on the date nearest preceding such date, or (b) if the Common Stock is not listed on any stock exchange, the final bid price for a share of Common Stock in the over-the-counter market, as reported by the Nasdaq National Market at the close of business on such date, or the last sales price if such price is reported and final bid prices are not available, or (c) if the Common Stock is not quoted on the Nasdaq National Market, the final bid price for a share of Common Stock in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices), or (d) if the Common Stock is no longer publicly traded, as determined by a nationally recognized or major regional investment banking firm or firm of independent certified public accountants of recognized standing (which may be the firm that 15 regularly examines the financial statements of the Company) selected in good faith by the Board of Directors of the Company, provided, that none of the transactions related to the foregoing shall include purchases by any "affiliate" (as such term is defined in the General Rules and Regulations under the Securities Act of 1933) of the Company. "Person" means a corporation, an association, a partnership, an organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Preferred Stock" means the Company's Preferred Stock, $1.00 par value. "Second Threshold Price" of a share of Common Stock shall initially be $21.60. The Second Threshold Price is subject to adjustment pursuant to Section 8. "Senior Stock" means any shares or class of the Company that are by their terms expressly given priority over this Series as to distribution of assets on any liquidation of the Company. "Trading Day" means (a) a day on which the Common Stock is traded on the principal stock exchange on which the Common Stock has been listed, or (b) if the Common Stock is not listed on any stock exchange, a day on which the Common Stock is quoted in the over-the-counter market, as reported by the Nasdaq Stock Market, or (c) if the Common Stock is not quoted on the Nasdaq Stock Market, a day on which the Common Stock is quoted in the over- the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices). 16 IN WITNESS WHEREOF, said Plains Resources Inc. has caused this Certificate to be signed by a duly authorized officer, this 24th day of July, 1998. PLAINS RESOURCES INC. By: /s/ Phillip D. Kramer ---------------------------------- Name: Phillip D. Kramer Title: Executive Vice President ATTEST: By: /s/ Michael R. Patterson ------------------------------ Name: Michael R. Patterson Title: Secretary 17 -----END PRIVACY-ENHANCED MESSAGE-----