Exhibit 10.1

Execution Version

 

 

FIFTH AMENDED AND RESTATED

SENIOR REVOLVING CREDIT AGREEMENT

DATED AS OF

AUGUST 2, 2010

AMONG

PETROHAWK ENERGY CORPORATION,

AS BORROWER,

BNP PARIBAS,

AS ADMINISTRATIVE AGENT,

BANK OF AMERICA, N.A. AND

BANK OF MONTREAL,

AS CO-SYNDICATION AGENTS,

JPMORGAN CHASE BANK, N.A.,

WELLS FARGO BANK, N.A.,

ROYAL BANK OF CANADA AND

BARCLAYS BANK PLC,

AS CO-DOCUMENTATION AGENTS,

AND

THE LENDERS PARTY HERETO

SOLE LEAD ARRANGER AND SOLE BOOKRUNNER

BNP PARIBAS SECURITIES CORP.

 

 

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TABLE OF CONTENTS

 

            Page

ARTICLE I

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01

    

Terms Defined Above

   1

Section 1.02

    

Certain Defined Terms

   1

Section 1.03

    

Types of Loans and Borrowings

   23

Section 1.04

    

Terms Generally; Rules of Construction

   23

Section 1.05

    

Accounting Terms and Determinations; GAAP

   23

ARTICLE II

THE CREDITS

Section 2.01

    

Commitments

   24

Section 2.02

    

Loans and Borrowings.

   25

Section 2.03

    

Requests for Borrowings

   26

Section 2.04

    

Interest Elections.

   27

Section 2.05

    

Funding of Borrowings.

   28

Section 2.06

    

Termination and Reduction of Aggregate Maximum Credit Amounts.

   29

Section 2.07

    

Borrowing Base.

   29

Section 2.08

    

Letters of Credit.

   32

ARTICLE III

PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES

Section 3.01

    

Repayment of Loans

   37

Section 3.02

    

Interest.

   37

Section 3.03

    

Alternate Rate of Interest

   38

Section 3.04

    

Prepayments.

   38

Section 3.05

    

Fees.

   40

ARTICLE IV

PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS

Section 4.01

    

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

   41

Section 4.02

    

Presumption of Payment by the Borrower

   42

Section 4.03

    

Certain Deductions by the Administrative Agent

   42

Section 4.04

    

Disposition of Proceeds

   42

Section 4.05

    

Payments and Deductions to a Defaulting Lender.

   43

ARTICLE V

INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES

Section 5.01

    

Increased Costs.

   45

Section 5.02

    

Break Funding Payments

   46

Section 5.03

    

Taxes.

   46

Section 5.04

    

Mitigation Obligations; Replacement of Lenders.

   47

 

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ARTICLE VI

CONDITIONS PRECEDENT

Section 6.01

    

Effective Date

   49

Section 6.02

    

Each Credit Event

   51

ARTICLE VII

REPRESENTATIONS AND WARRANTIES

Section 7.01

    

Organization; Powers

   52

Section 7.02

    

Authority; Enforceability

   52

Section 7.03

    

Approvals; No Conflicts

   53

Section 7.04

    

Financial Condition; No Material Adverse Change.

   53

Section 7.05

    

Litigation.

   53

Section 7.06

    

Environmental Matters

   54

Section 7.07

    

Compliance with the Laws and Agreements; No Defaults.

   55

Section 7.08

    

Investment Company Act

   55

Section 7.09

    

Taxes

   55

Section 7.10

    

ERISA.

   55

Section 7.11

    

Disclosure; No Material Misstatements

   56

Section 7.12

    

Insurance

   57

Section 7.13

    

Restriction on Liens

   57

Section 7.14

    

Subsidiaries

   57

Section 7.15

    

Location of Business and Offices

   57

Section 7.16

    

Properties; Titles, Etc.

   57

Section 7.17

    

Maintenance of Properties

   58

Section 7.18

    

Gas Imbalances, Prepayments

   59

Section 7.19

    

Marketing of Production

   59

Section 7.20

    

Swap Agreements

   59

Section 7.21

    

Use of Loans and Letters of Credit

   59

Section 7.22

    

Solvency

   60

Section 7.23

    

Transportation Contracts

   60

ARTICLE VIII

AFFIRMATIVE COVENANTS

Section 8.01

    

Financial Statements; Ratings Change; Other Information

   60

Section 8.02

    

Notices of Material Events

   64

Section 8.03

    

Existence; Conduct of Business

   64

Section 8.04

    

Payment of Obligations

   64

Section 8.05

    

Performance of Obligations under Loan Documents

   65

Section 8.06

    

Operation and Maintenance of Properties

   65

Section 8.07

    

Insurance

   66

Section 8.08

    

Books and Records; Inspection Rights

   66

Section 8.09

    

Compliance with Laws

   66

Section 8.10

    

Environmental Matters.

   66

Section 8.11

    

Further Assurances.

   67

Section 8.12

    

Reserve Reports.

   68

Section 8.13

    

Title Information.

   68

 

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Section 8.14

    

Additional Collateral; Additional Guarantors.

   69

Section 8.15

    

ERISA Compliance

   70

Section 8.16

    

Swap Agreements

   71

Section 8.17

    

Unrestricted Subsidiaries

   71

Section 8.18

    

Marketing Activities

   71

Section 8.19

    

Midstream Assets and Midstream Services Contracts.

   72

ARTICLE IX

NEGATIVE COVENANTS

Section 9.01

    

Financial Covenants.

   72

Section 9.02

    

Debt

   72

Section 9.03

    

Liens

   74

Section 9.04

    

Dividends, Distributions and Redemptions; Repayment of Senior Notes.

   74

Section 9.05

    

Investments, Loans and Advances

   75

Section 9.06

    

Designation and Conversion of Restricted and Unrestricted Subsidiaries; Debt of
Unrestricted Subsidiaries.

   77

Section 9.07

    

Nature of Business; International Operations

   77

Section 9.08

    

Limitation on Leases

   77

Section 9.09

    

Proceeds of Loans

   78

Section 9.10

    

ERISA Compliance.

   78

Section 9.11

    

Sale or Discount of Receivables

   78

Section 9.12

    

Merger, Etc

   79

Section 9.13

    

Sale of Properties

   79

Section 9.14

    

Environmental Matters

   80

Section 9.15

    

Transactions with Affiliates

   80

Section 9.16

    

Subsidiaries

   80

Section 9.17

    

Negative Pledge Agreements; Dividend Restrictions

   80

Section 9.18

    

Gas Imbalances, Take-or-Pay or Other Prepayments

   81

Section 9.19

    

Swap Agreements

   81

Section 9.20

    

Midstream Services Contracts

   82

ARTICLE X

EVENTS OF DEFAULT; REMEDIES

Section 10.01

    

Events of Default

   82

Section 10.02

    

Remedies.

   84

ARTICLE XI

THE AGENTS

Section 11.01

    

Appointment; Powers

   85

Section 11.02

    

Duties and Obligations of Administrative Agent

   85

Section 11.03

    

Action by Administrative Agent

   86

Section 11.04

    

Reliance by Administrative Agent

   86

Section 11.05

    

Subagents

   87

Section 11.06

    

Resignation or Removal of Agents

   87

Section 11.07

    

Agents as Lenders

   87

Section 11.08

    

No Reliance

   87

Section 11.09

    

Administrative Agent May File Proofs of Claim

   88

 

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Section 11.10

    

Authority of Administrative Agent to Release Collateral and Liens

   88

Section 11.11

    

The Arranger, the Co-Syndication Agents and the Co-Documentation Agents

   89

ARTICLE XII

MISCELLANEOUS

Section 12.01

    

Notices.

   89

Section 12.02

    

Waivers; Amendments.

   90

Section 12.03

    

Expenses, Indemnity; Damage Waiver.

   91

Section 12.04

    

Successors and Assigns.

   94

Section 12.05

    

Survival; Revival; Reinstatement.

   96

Section 12.06

    

Counterparts; Integration; Effectiveness.

   97

Section 12.07

    

Severability

   98

Section 12.08

    

Right of Setoff

   98

Section 12.09

    

GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

   98

Section 12.10

    

Headings

   99

Section 12.11

    

Confidentiality

   99

Section 12.12

    

Interest Rate Limitation

   100

Section 12.13

    

EXCULPATION PROVISIONS

   101

Section 12.14

    

Collateral Matters; Swap Agreements

   101

Section 12.15

    

No Third Party Beneficiaries

   101

Section 12.16

    

USA Patriot Act Notice

   102

 

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ANNEXES, EXHIBITS AND SCHEDULES

 

Annex I

    

List of Maximum Credit Amounts

  

Exhibit A

    

Form of Note

  

Exhibit B

    

Form of Borrowing Request

  

Exhibit C

    

Form of Interest Election Request

  

Exhibit D

    

Form of Compliance Certificate

  

Exhibit E

    

Security Instruments

  

Exhibit F

    

Form of Assignment and Assumption

  

Schedule 7.05

    

Litigation

  

Schedule 7.14

    

Subsidiaries and Partnerships; Unrestricted Subsidiaries

  

Schedule 7.18

    

Gas Imbalances

  

Schedule 7.19

    

Marketing Contracts

  

Schedule 7.20

    

Swap Agreements

  

Schedule 7.23

    

Transportation Contracts

  

Schedule 9.05

    

Investments

  

 

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THIS FIFTH AMENDED AND RESTATED SENIOR REVOLVING CREDIT AGREEMENT dated as of
August 2, 2010 is among: Petrohawk Energy Corporation, a corporation duly formed
and existing under the laws of the State of Delaware (the “Borrower”); each of
the Lenders from time to time party hereto; BNP Paribas (in its individual
capacity, “BNP Paribas”), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the “Administrative
Agent”); Bank of America, N.A. and Bank of Montreal, as co-syndication agents
for the Lenders (in such capacity, together with their successors in such
capacity, the “Co-Syndication Agent”); and JPMorgan Chase Bank, N.A., and Wells
Fargo Bank, N.A., as co-documentation agents for the Lenders (in such capacity,
together with their successors in such capacity, the “Co-Documentation Agents”).

R E C I T A L S

A. The Borrower, the Administrative Agent and other agents and lenders party
thereto have entered into that certain Fourth Amended and Restated Senior
Revolving Credit Agreement dated as of October 14, 2009, pursuant to which such
lenders provided certain loans and extensions of credit to the Borrower (as
renewed, extended, amended or restated from time to time, the “Existing Credit
Agreement”).

B. The Borrower has requested the Lenders, and the Lenders have agreed, to amend
and restate the Existing Credit Agreement subject to the terms and conditions of
this Agreement.

C. In consideration of the mutual covenants and agreements herein contained and
of the loans, extensions of credit and commitments hereinafter referred to, the
parties hereto agree as follows:

ARTICLE I

Definitions and Accounting Matters

Section 1.01 Terms Defined Above. As used in this Agreement, each term defined
above has the meaning indicated above.

Section 1.02 Certain Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:

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

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

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

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

“Agents” means, collectively, the Administrative Agent, the Co-Syndication
Agents and the Co-Documentation Agents; and “Agent” shall mean either the
Administrative Agent, any Co-Syndication Agent or any Co-Documentation Agent, as
the context requires.

“Aggregate Maximum Credit Amounts” at any time shall equal the sum of the
Maximum Credit Amounts, as the same may be reduced or terminated pursuant to
Section 2.06.

“Agreement” means this Fifth Amended and Restated Senior Revolving Credit
Agreement, as the same may from time to time be amended, modified, supplemented
or restated.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective
Rate in effect on such day plus  1/2 of 1% and (c) the Adjusted LIBO Rate for a
one month Interest Period on such day (or if such day is not a Business Day, the
immediately preceding Business Day) plus 1.5%, provided that, for the avoidance
of doubt, the Adjusted LIBO Rate for any day shall be based on the rate (rounded
upwards, if necessary, to the next 1/100 of 1%) appearing on Reuters Screen
LIBOR01 Page (or on any successor or substitute page of such service, or any
successor to or substitute for such service, providing rate quotations
comparable to those currently provided on such page of such service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. Any change in the
Alternate Base Rate due to a change in the Prime Rate, the Federal Funds
Effective Rate or the Adjusted LIBO Rate shall be effective from and including
the effective date of such change in the Prime Rate, the Federal Funds Effective
Rate or the Adjusted LIBO Rate, respectively.

“Applicable Margin” means, for any day, with respect to any ABR Loan or
Eurodollar Loan, as the case may be, the rate per annum set forth in the
Borrowing Base Utilization Grid below based upon the Borrowing Base Utilization
Percentage then in effect:

 

Borrowing Base

Utilization Percentage

   <25 %    ³25

<50

% 

% 

  ³50

<75

% 

% 

  ³75

<90

% 

% 

  ³90 % 

LIBOR Margin

   2.00 %    2.25 %    2.50 %    2.75 %    3.00 % 

ABR Margin

   1.00 %    1.25 %    1.50 %    1.75 %    2.00 % 

Each change in the Applicable Margin shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next such change, provided, however, that if at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 8.12(a),
then the “Applicable Margin” means the rate per annum set forth on the grid when
the Borrowing Base Utilization Percentage is at its highest level.

 

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“Applicable Percentage” means, with respect to any Lender, the percentage of the
Aggregate Maximum Credit Amounts represented by such Lender’s Maximum Credit
Amount as such percentage is set forth on Annex I.

“Approved Counterparty” means (a) any Lender or any Affiliate of a Lender or
(b) any other Person whose long term senior unsecured debt rating is A-/A3 by
S&P or Moody’s (or their equivalent) or higher.

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

“Approved Petroleum Engineers” means Netherland, Sewell & Associates, Inc. and
any other independent petroleum engineers reasonably acceptable to the
Administrative Agent.

“Arranger” means BNP Paribas Securities Corp., in its capacity as the sole lead
arranger and sole bookrunner hereunder.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 12.04(b)), and accepted by the Administrative Agent, in the form of
Exhibit F or any other form approved by the Administrative Agent.

“Availability Period” means the period from and including the Effective Date to
but excluding the Termination Date.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America or any successor Governmental Authority.

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

“Borrowing Base” means at any time an amount equal to the amount determined in
accordance with Section 2.07(a), as the same may be adjusted from time to time
pursuant to Sections 2.07(b), (c) and (d).

“Borrowing Base Utilization Percentage” means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Credit Exposures of the Lenders on such day, and the denominator of which is the
Borrowing Base in effect on such day.

“Borrowing Request” means a request by the Borrower for a Borrowing in
accordance with Section 2.03.

 

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“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Borrowing or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such Borrowing or continuation, payment,
prepayment, conversion or Interest Period, any day which is also a day on which
dealings in dollar deposits are carried out in the London interbank market.

“Capital Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, recorded as capital leases
on the balance sheet of the Person liable (whether contingent or otherwise) for
the payment of rent thereunder.

“Cash Equivalent” means cash held in US dollars and all Investments of the type
identified in Section 9.05(c).

“Casualty Event” means any loss, casualty or other insured damage to, or any
nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Restricted
Subsidiaries having a fair market value in excess of $25,000,000.

“Change in Control” means: (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof) of Equity Interests representing
more than 35% of the aggregate ordinary voting power represented by the issued
and outstanding Equity Interests of the Borrower, or (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of the
Borrower by Persons who were neither (i) nominated by the board of directors of
the Borrower nor (ii) appointed by directors so nominated.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 5.01(b)), by any lending office of such Lender or by
such Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

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

“Collateral Assignment of Midstream Services Contracts” means an agreement
executed by Hawk Field Services and its Restricted Subsidiaries in form and
substance reasonably acceptable to the Administrative Agent and Hawk Field
Services, assigning the contracts for Midstream Services between Hawk Field
Services and its Restricted Subsidiaries and the Borrower and its Restricted
Subsidiaries to the Administrative Agent as collateral to secure the
Indebtedness, as the same may be amended, modified or supplemented from time to
time.

 

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“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Loans and to acquire participations in Letters of Credit hereunder,
expressed as an amount representing the maximum aggregate amount of such
Lender’s Revolving Credit Exposure hereunder, as such commitment may be
(a) modified from time to time pursuant to Section 2.06 and (b) modified from
time to time pursuant to assignments by or to such Lender pursuant to
Section 12.04(b). The amount representing each Lender’s Commitment shall at any
time be the lesser of such Lender’s Maximum Credit Amount and such Lender’s
Applicable Percentage of the then effective Borrowing Base.

“Consolidated Net Income” means with respect to the Borrower and its
Consolidated Restricted Subsidiaries for any period, the aggregate of the net
income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries
after allowances for taxes for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (a) the net income of
any Person in which the Borrower or any Consolidated Restricted Subsidiary has
an interest (which interest does not cause the net income of such other Person
to be consolidated with the net income of the Borrower and the Consolidated
Restricted Subsidiaries in accordance with GAAP), except to the extent of the
amount of dividends or distributions actually paid in cash during such period by
such other Person to the Borrower or to a Consolidated Restricted Subsidiary;
(b) the net income (but not loss) during such period of any Consolidated
Restricted Subsidiary to the extent that the declaration or payment of dividends
or similar distributions or transfers or loans by that Consolidated Restricted
Subsidiary is not at the time permitted by operation of the terms of its charter
or any agreement, instrument or Governmental Requirement applicable to such
Consolidated Restricted Subsidiary or is otherwise restricted or prohibited, in
each case determined in accordance with GAAP; (c) any extraordinary non-cash
gains or losses during such period and (d) any gains or losses attributable to
writeups or writedowns of assets, including ceiling test writedowns; and
provided further that if the Borrower or any Consolidated Restricted Subsidiary
shall acquire or dispose of any Property during such period or a Subsidiary
shall be redesignated as either an Unrestricted Subsidiary or a Restricted
Subsidiary, then Consolidated Net Income shall be calculated after giving pro
forma effect to such acquisition, merger, disposition or redesignation, as if
such acquisition, merger, disposition or redesignation had occurred on the first
day of such period.

“Consolidated Net Income-HFS” means with respect to Hawk Field Services and its
Consolidated Restricted Subsidiaries for any period, the aggregate of the net
income (or loss) of Hawk Field Services and its Restricted Subsidiaries after
allowances for taxes for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (a) the net income of
any Person in which Hawk Field Services or any of its Restricted Subsidiaries
has an interest (which interest does not cause the net income of such other
Person to be consolidated with the net income of Hawk Field Services and its
Restricted Subsidiaries in accordance with GAAP), except to the extent of the
amount of dividends or distributions actually paid in cash during such period by
such other Person to Hawk Field Services or to one of its Restricted
Subsidiaries; (b) the net income (but not loss) during such period of any
Restricted Subsidiary of Hawk Field Services to the extent that the declaration
or payment of dividends or similar distributions or transfers or loans by that
Restricted Subsidiary is not at the time permitted by operation of the terms of
its charter or any agreement, instrument or Governmental Requirement

 

5

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applicable to such Restricted Subsidiary or is otherwise restricted or
prohibited, in each case determined in accordance with GAAP; (c) any
extraordinary non-cash gains or losses during such period and (d) any gains or
losses attributable to writeups or writedowns of assets, including ceiling test
writedowns; and provided further that if Hawk Field Services or any of its
Restricted Subsidiaries shall acquire or dispose of any Property during such
period or a Subsidiary of Hawk Field Services shall be redesignated as either an
Unrestricted Subsidiary or a Restricted Subsidiary, then Consolidated Net
Income-HFS shall be calculated after giving pro forma effect to such
acquisition, merger, disposition or redesignation, as if such acquisition,
merger, disposition or redesignation had occurred on the first day of such
period.

“Consolidated Restricted Subsidiaries” means any Restricted Subsidiaries that
are Consolidated Subsidiaries.

“Consolidated Subsidiaries” means, as to any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which shall be (or should have been) consolidated with the
financial statements of such Person in accordance with GAAP.

“Consolidated Unrestricted Subsidiaries” means any Unrestricted Subsidiaries
that are Consolidated Subsidiaries.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 35% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to “control” such other Person. “Controlling” and
“Controlled” have meanings correlative thereto.

“Current Production” means, for each month, the lesser of (a) the prior month’s
production of crude oil and natural gas, calculated on a natural gas equivalent
basis, of the Borrower and its Restricted Subsidiaries and (b) the internally
forecasted production of crude oil and natural gas, calculated on a natural gas
equivalent basis, of the Borrower and its Restricted Subsidiaries for each month
for the next 48 months.

“Debt” means, for any Person, the sum of the following (without duplication):
(a) all obligations of such Person for borrowed money or evidenced by bonds,
bankers’ acceptances, debentures, notes or other similar instruments; (b) all
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the

 

6

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lesser of the amount of such Debt and the maximum stated amount of such
guarantee or assurance against loss; (h) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or covenants
of others or to purchase the Debt or Property of others; (i) obligations to
deliver commodities, goods or services, including, without limitation,
Hydrocarbons, in consideration of one or more advance payments for periods in
excess of 120 days prior to the day of delivery, other than gas balancing
arrangements in the ordinary course of business; (j) obligations to pay for
goods or services whether or not such goods or services are actually received or
utilized by such Person; (k) any Debt of a partnership for which such Person is
liable either by agreement, by operation of law or by a Governmental Requirement
but only to the extent of such liability; (l) Disqualified Capital Stock; and
(m) the undischarged balance of any production payment created by such Person or
for the creation of which such Person directly or indirectly received payment.
The Debt of any Person shall include all obligations of such Person of the
character described above to the extent such Person remains legally liable in
respect thereof notwithstanding that any such obligation is not included as a
liability of such Person under GAAP; provided, however, the contingent
obligations of Borrower or any Subsidiary of Borrower pursuant to any purchase
and sale agreement, stock purchase agreement, merger agreement or similar
agreement shall not constitute “Debt” within this definition so long as none of
the same contains an obligation to pay money over time.

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

“Defaulting Lender” means any Lender, as reasonably determined by the
Administrative Agent, that has (a) failed to fund any portion of its Loans or
participations in Letters of Credit within three (3) Business Days of the date
required to be funded by it hereunder, unless with respect to the Loans, the
subject of a good faith dispute, (b) notified the Borrower, the Administrative
Agent, the Issuing Bank or any Lender in writing that it does not intend to
comply with any of its funding obligations under this Agreement or has made a
public statement to the effect that it does not intend to comply with its
funding obligations under this Agreement, unless the reason such Lender is not
complying with such obligations is due to a good faith dispute with regard to
such obligations, (c) otherwise failed to pay over to the Administrative Agent
or any other Lender any other amount required to be paid by it hereunder within
three (3) Business Days of the date when due, unless the subject of a good faith
dispute, or (d) become the subject of a bankruptcy or insolvency proceeding, or
has had a receiver, conservator, trustee or custodian appointed for it, or has
taken any action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment or has a parent company that
has become the subject of a bankruptcy or insolvency proceeding, or has had a
receiver, conservator, trustee or custodian appointed for it, or has taken any
action in furtherance of, or indicating its consent to, approval of or
acquiescence in any such proceeding or appointment, provided that a Lender shall
not be a Defaulting Lender solely by virtue of the ownership or acquisition of
any Equity Interest in such Lender or parent company thereof by a Governmental
Authority or agency thereof.

“Disqualified Capital Stock” means any Equity Interest that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a

 

7

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sinking fund obligation or otherwise, or is convertible or exchangeable for Debt
or redeemable for any consideration other than other Equity Interests (which
would not constitute Disqualified Capital Stock) at the option of the holder
thereof, in whole or in part, on or prior to the date that is one year after the
earlier of (a) the Maturity Date and (b) the date on which there are no Loans,
LC Exposure or other obligations hereunder outstanding and all of the
Commitments are terminated.

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

“Domestic Subsidiary” means any Restricted Subsidiary that is organized under
the laws of the United States of America or any state thereof or the District of
Columbia.

“EBITDA” means, for any period, the sum of Consolidated Net Income for such
period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization and all other non-cash charges, minus all non-cash
income to the extent included in Consolidated Net Income.

“EBITDA-HFS” means, for any period, the sum of Consolidated Net Income-HFS for
such period plus (a) the following expenses or charges to the extent deducted
from Consolidated Net Income in such period: interest, income taxes,
depreciation, depletion, amortization and all other non-cash charges and
(b) minus all non-cash income to the extent included in Consolidated Net
Income-HFS and minority interest income of Newco.

“Effective Date” means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).

“Engineering Reports” has the meaning assigned such term in
Section 2.07(b)(ii)(A).

“Environmental Laws” means any and all Governmental Requirements pertaining in
any way to health, safety the environment or the preservation or reclamation of
natural resources, in effect in any and all jurisdictions in which the Borrower
or any Restricted Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Restricted Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 (“OPA”), as
amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 (“RCRA”), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements.
The term “oil” shall have the meaning specified in OPA, the terms “hazardous
substance” and “release” (or “threatened release”) have the meanings specified
in CERCLA, the terms “solid waste” and “disposal” (or “disposed”) have the
meanings specified in RCRA and the term “oil and gas waste” shall have the
meaning specified in Section 91.1011 of the Texas Natural Resources Code
(“Section 91.1011”); provided, however, that (a) in the event either OPA,
CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of

 

8

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such amendment and (b) to the extent the laws of the state or other jurisdiction
in which any Property of the Borrower or any Restricted Subsidiary is located
establish a meaning for “oil,” “hazardous substance,” “release,” “solid waste,”
“disposal” or “oil and gas waste” which is broader than that specified in either
OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.

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

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute.

“ERISA Affiliate” means each trade or business (whether or not incorporated)
which together with the Borrower or a Subsidiary would be deemed to be a “single
employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b),
(c), (m) or (o) of section 414 of the Code.

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

“Event of Default” has the meaning assigned such term in Section 10.01.

“Excepted Liens” means: (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (d) contractual Liens which arise
in the ordinary course of business under operating agreements, joint venture
agreements, oil and gas partnership agreements, oil and gas leases, farm-out
agreements, division orders, contracts for the sale, transportation or exchange
of oil and natural gas, unitization and pooling declarations and agreements,
area of mutual interest agreements, overriding royalty agreements, marketing
agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which

 

9

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adequate reserves have been maintained in accordance with GAAP, provided that
any such Lien referred to in this clause does not materially impair the use of
the Property covered by such Lien for the purposes for which such Property is
held by the Borrower or any Restricted Subsidiary or materially impair the value
of such Property subject thereto; (e) Liens arising solely by virtue of any
statutory or common law provision relating to banker’s liens, rights of set-off
or similar rights and remedies and burdening only deposit accounts or other
funds maintained with a creditor depository institution, provided that no such
deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
Borrower or any of its Restricted Subsidiaries to provide collateral to the
depository institution; (f) easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any Property of the
Borrower or any Restricted Subsidiary for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment,
which in the aggregate do not materially impair the use of such Property for the
purposes of which such Property is held by the Borrower or any Restricted
Subsidiary or materially impair the value of such Property subject thereto;
(g) Liens on cash or securities pledged to secure performance of tenders, surety
and appeal bonds, government contracts, performance and return of money bonds,
bids, trade contracts, leases, statutory obligations, regulatory obligations and
other obligations of a like nature incurred in the ordinary course of business;
(h) judgment and attachment Liens not giving rise to an Event of Default,
provided that any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceeding may be initiated shall not have
expired and no action to enforce such Lien has been commenced; and (i) Liens
arising from Uniform Commercial Code financing statement filings regarding
operating leases entered into in the ordinary course of business covering only
the Property under any such operating lease; provided, further that Liens
described in clauses (a) through (e) shall remain “Excepted Liens” only for so
long as no action to enforce such Lien has been commenced and no intention to
subordinate the first priority Lien granted in favor of the Administrative Agent
and the Lenders is to be hereby implied or expressed by the permitted existence
of such Excepted Liens.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrower or any Guarantor hereunder or under
any other Loan Document, (a) income or franchise taxes imposed on (or measured
by) its net income by the United States of America or such other jurisdiction
under the laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable lending
office is located, (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the
Borrower or any Guarantor is located and (c) in the case of a Foreign Lender
(other than an assignee pursuant to a request by the Borrower under
Section 5.04(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 5.03(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts with respect
to such withholding tax pursuant to Section 5.03 or Section 5.03(c).

 

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“Existing Credit Agreement” has the meaning assigned such term in Recital A.

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

“Financial Officer” means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person. Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.

“Financial Statements” means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“Foreign Subsidiary” means any Restricted Subsidiary that is not a Domestic
Subsidiary.

“Formation and Contribution Agreement” means that certain Formation and
Contribution Agreement by and among the Borrower, Hawk Field Services and KM
Gathering LLC made and entered into as of April 12, 2010.

“GAAP” means generally accepted accounting principles in the United States of
America as in effect from time to time subject to the terms and conditions set
forth in Section 1.05.

“Gas Balancing Obligations” means those obligations set forth on Schedule 7.18.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government over the
Borrower, any Restricted Subsidiary, any of their Properties, any Agent, the
Issuing Bank or any Lender.

“Governmental Requirement” means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.

 

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“Guarantors” means, collectively:

(a) as of the Effective Date, each of the following:

 

  •  

Petrohawk Operating Company, a Texas corporation;

 

  •  

P-H Energy, LLC, a Texas limited liability company;

 

  •  

Petrohawk Holdings, LLC, a Delaware limited liability company;

 

  •  

Hawk Field Services, LLC, an Oklahoma limited liability company;

 

  •  

Petrohawk Properties, LP, a Texas limited partnership;

 

  •  

Winwell Resources, L.L.C., a Louisiana limited liability company;

 

  •  

WSF, Inc., a Louisiana corporation;

 

  •  

KCS Resources, LLC, a Delaware limited liability company;

 

  •  

KCS Energy Services, Inc., a Delaware corporation;

 

  •  

Medallion California Properties Company, a Texas corporation;

 

  •  

Proliq, Inc., a New Jersey corporation;

 

  •  

One TEC, LLC, a Texas limited liability company;

 

  •  

One TEC Operating, LLC, a Texas limited liability company;

 

  •  

HK Energy Marketing, LLC, a Delaware limited liability company;

 

  •  

HK Transportation, LLC, an Oklahoma limited liability company;

 

  •  

Bison Ranch LLC, an Idaho limited liability company;

 

  •  

Big Hawk Services, LLC, a Delaware limited liability company; and

(b) each other Material Domestic Subsidiary or other Domestic Subsidiary that
guarantees the Indebtedness pursuant to Section 8.14(b).

“Guaranty Agreement” means an agreement executed by the Guarantors in form and
substance reasonably acceptable to the Administrative Agent and the Guarantors,
unconditionally guarantying on a joint and several basis, payment of the
Indebtedness, as the same may be amended, modified or supplemented from time to
time.

“Hawk Field Services” means Hawk Field Services, LLC, an Oklahoma limited
liability company.

 

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“Highest Lawful Rate” means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Loans or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.

“Hydrocarbon Interests” means all rights, titles, interests and estates now or
hereafter acquired in and to oil and gas leases, oil, gas and mineral leases, or
other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.

“Hydrocarbons” means oil, gas, casinghead gas, drip gasoline, natural gasoline,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and all
products refined or separated therefrom.

“Indebtedness” means any and all amounts owing or to be owing by the Borrower,
any Restricted Subsidiary or any Guarantor: (a) to the Administrative Agent, the
Issuing Bank or any Lender under any Loan Document, (b) to any Person under any
Swap Agreement between the Borrower or any Restricted Subsidiary and such Person
if either (i) at the time such Swap Agreement was entered into, such Person was
a Lender or Affiliate of a Lender or (ii) such Swap Agreement was in effect on
the Effective Date and such Person or its Affiliate was a Lender on the
Effective Date, in each case after giving effect to all netting agreements
relating to such Swap Agreement, and (c) all renewals, extensions and/or
rearrangements of any of the above.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Initial Reserve Report” means the report of the Borrower prepared by or under
the supervision of its chief reserve engineer with respect to the proved Oil and
Gas Properties of the Borrower and its Restricted Subsidiaries as of
December 31, 2009.

“Interest Election Request” means a request by the Borrower to convert or
continue a Borrowing in accordance with Section 2.04.

“Interest Expense” means, for any period, the sum (determined without
duplication) of the aggregate of (i) all cash dividends paid on the Borrower’s
preferred Equity Interests and (ii) gross interest expense of the Borrower and
the Consolidated Restricted Subsidiaries for such period, including to the
extent included in interest expense under GAAP: (a) amortization of debt
discount, (b) capitalized interest and (c) the portion of any payments or
accruals under Capital Leases allocable to interest expense, plus the portion of
any payments or accruals under Synthetic Leases allocable to interest expense
whether or not the same constitutes interest expense under GAAP.

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

 

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

“Interim Redetermination” has the meaning assigned such term in Section 2.07(b).

“Interim Redetermination Date” means the date on which an Oil and Gas Borrowing
Base that has been redetermined pursuant to an Interim Redetermination becomes
effective as provided in Section 2.07(b)(iii).

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

“Issuing Bank” means BNP Paribas, in its capacity as the issuer of Letters of
Credit hereunder, and its successors in such capacity as provided in
Section 2.08(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term “Issuing Bank” shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate.

“Knowledge” means, with respect to an individual, his or her actual knowledge
and with respect to any corporation, limited liability company, partnership or
other business entity, the actual knowledge of any officer, general partner or
individual being a member of the executive management of such entity.

 

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“LC Commitment” at any time means Fifty Million Dollars ($50,000,000).

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

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

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

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

“Letter of Credit Agreements” means all letter of credit applications and other
agreements (including any amendments, modifications or supplements thereto)
submitted by the Borrower, or entered into by the Borrower, with the Issuing
Bank relating to any Letter of Credit.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor
or substitute page of such service, or any successor to or substitute for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Administrative Agent from time
to time for purposes of providing quotations of interest rates applicable to
dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with respect to such Eurodollar Borrowing for
such Interest Period shall be the rate (rounded upwards, if necessary, to the
next 1/100 of 1%) at which dollar deposits of an amount comparable to such
Eurodollar Borrowing and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.

“Lien” means any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties. The term “Lien” shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Restricted Subsidiaries shall
be deemed to be the owner of any Property which it has acquired or holds subject
to a conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.

 

15

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“Loan Documents” means this Agreement, the Notes, if any, the Letter of Credit
Agreements, the Letters of Credit and the Security Instruments.

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

“Majority Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%)
of the Aggregate Maximum Credit Amounts; and at any time while any Loans or LC
Exposure is outstanding, Lenders holding at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding aggregate principal amount of the Loans or
participation interests in Letters of Credit (without regard to any sale by a
Lender of a participation in any Loan under Section 12.04(c)).

“Material Adverse Effect” means a material adverse effect on (a) the business,
operations, Property or condition (financial or otherwise) of the Borrower and
the Restricted Subsidiaries taken as a whole, (b) the ability of the Borrower,
any Restricted Subsidiary or any Guarantor to perform any of its material
obligations under any Loan Document, (c) the validity or enforceability of any
Loan Document or (d) the rights and remedies of or benefits available to the
Administrative Agent, any other Agent, the Issuing Bank or any Lender under any
Loan Document.

“Material Domestic Subsidiary” means, as of any date, any Domestic Subsidiary
that (a) is a Wholly-Owned Subsidiary and (b) together with its Restricted
Subsidiaries, owns Property having a fair market value of $1,000,000 or more.

“Material Indebtedness” means Debt (other than the Loans and Letters of Credit),
or obligations in respect of one or more Swap Agreements, of any one or more of
the Borrower and its Restricted Subsidiaries in an aggregate principal amount
exceeding $10,000,000. For purposes of determining Material Indebtedness, the
“principal amount” of the obligations of the Borrower or any Restricted
Subsidiary in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary would be required to pay if such Swap Agreement were terminated
at such time.

“Maturity Date” means July 1, 2014.

“Maximum Credit Amount” means, as to each Lender, the amount set forth opposite
such Lender’s name on Annex I under the caption “Maximum Credit Amounts”, as the
same may be (a) reduced or terminated from time to time in connection with a
reduction or termination of the Aggregate Maximum Credit Amounts pursuant to
Section 2.06(b) or (b) modified from time to time pursuant to any assignment
permitted by Section 12.04(b).

“Midstream Assets” means all of the gas gathering, processing, treatment,
compression, trunk lines and associated equipment owned by Hawk Field Services
and its Restricted Subsidiaries.

 

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“Midstream Component” means, for any period between Midstream Component
Determination Dates, an amount equal to the lesser of (a) $100,000,000 and
(b) the product of 3.5 and the Midstream EBITDA for the most recently ended
fiscal quarter for which financial statements have been delivered, as the same
may be adjusted from time to time pursuant to Section 9.13.

“Midstream Component Determination Date” means each date on which the Borrower
delivers the consolidating financial reports pursuant to Section 8.01(r).

“Midstream EBITDA” means the EBITDA-HFS for the most recent four quarters for
which financial information is available.

“Midstream Services” means the provision of gathering, transporting,
terminalling, storing, processing, dehydrating hydrocarbons and other similar
activities.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto that
is a nationally recognized rating agency.

“Mortgaged Property” means any Property owned by the Borrower or any Guarantor
which is subject to the Liens existing and to exist under the terms of the
Security Instruments.

“Multiemployer Plan” means a Plan which is a multiemployer plan as defined in
section 3(37) or 4001 (a)(3) of ERISA.

“Net Cash Proceeds” means in connection with any issuance or sale of Equity
Interests or Debt securities or instruments or the incurrence of loans, the cash
proceeds received from such issuance or incurrence, net of attorneys’ fees,
investment banking fees, accountants’ fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.

“Newco” means KinderHawk Field Services LLC, a Delaware limited liability
company, and a joint venture company owned as of the date hereof directly or
indirectly by Hawk Field Services (50%) and Kinder Morgan Energy Partners, L.P.
(50%).

“Newco LLC Agreement” means the limited liability company agreement of Newco
entered into pursuant to the Formation and Contribution Agreement.

“New Oil and Gas Borrowing Base Notice” has the meaning assigned such term in
Section 2.07(b)(iii).

“Non-Defaulting Lender” means, at any time, each Lender that is not a Defaulting
Lender at such time.

“Non-Recourse Debt” means any Debt of any Unrestricted Subsidiary, in each case
in respect of which: (a) the holder or holders thereof (i) shall have recourse
only to, and shall have the right to require the obligations of such
Unrestricted Subsidiary to be performed, satisfied, and paid only out of, the
Property of such Unrestricted Subsidiary and/or one or more of its Subsidiaries
(but only to the extent that such Subsidiaries are Unrestricted Subsidiaries)
and/or

 

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any other Person (other than Borrower and/or any Restricted Subsidiary) and
(ii) shall have no direct or indirect recourse (including by way of guaranty,
support or indemnity) to the Borrower or any Restricted Subsidiary or to any of
the Property of Borrower or any Restricted Subsidiary (other than Equity
Interests of such Unrestricted Subsidiary), whether for principal, interest,
fees, expenses or otherwise; and (b) the terms and conditions relating to the
non-recourse nature of such Debt are in form and substance reasonably acceptable
to the Administrative Agent.

“Notes” means the promissory notes of the Borrower as requested by a Lender and
described in Section 2.02(d) and being substantially in the form of Exhibit A,
together with all amendments, modifications, replacements, extensions and
rearrangements thereof.

“Oil and Gas Borrowing Base” means at any time an amount equal to the amount
determined in accordance with Section 2.07(b), as the same may be adjusted from
time to time pursuant to Section 8.13(c) or Section 9.13(e).

“Oil and Gas Properties” means (a) Hydrocarbon Interests; (b) the Properties now
or hereafter pooled or unitized with Hydrocarbon Interests; (c) all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Governmental Authority) which
may affect all or any portion of the Hydrocarbon Interests; (d) all operating
agreements, contracts and other agreements, including production sharing
contracts and agreements, which relate to any of the Hydrocarbon Interests or
the production, sale, purchase, exchange or processing of Hydrocarbons from or
attributable to such Hydrocarbon Interests; (e) all Hydrocarbons in and under
and which may be produced and saved or attributable to the Hydrocarbon
Interests, including all oil in tanks, and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; (f) all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests and (g) all Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment, rental equipment or other personal Property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.

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

“Participant” has the meaning set forth in Section 12.04(c)(i).

 

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“Permitted Refinancing Debt” means Debt (for purposes of this definition, “new
Debt”) incurred in exchange for, or proceeds of which are used to refinance, all
or any Senior Notes (the “Refinanced Debt”); provided that (a) such new Debt is
in an aggregate principal amount not in excess of the aggregate principal amount
then outstanding of the Refinanced Debt (or, if the Refinanced Debt is exchanged
or acquired for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount);
(b) such new Debt has a stated maturity no earlier than the stated maturity of
the Refinanced Debt and an average life no shorter than the average life of the
Refinanced Debt; (c) such new Debt does not contain any covenants which are
materially more onerous to the Borrower and its Restricted Subsidiaries than
those imposed by the Refinanced Debt and (d) such new Debt (and any guarantees
thereof) is subordinated in right of payment to the Indebtedness (or, if
applicable, the Guaranty Agreement) to at least the same extent as the
Refinanced Debt.

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

“Plan” means any employee pension benefit plan, as defined in section 3(2) of
ERISA, which (a) is currently or hereafter sponsored, maintained or contributed
to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at any time
during the six calendar years preceding the date hereof, sponsored, maintained
or contributed to by the Borrower or a Subsidiary or an ERISA Affiliate.

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by the Administrative Agent as its prime rate in effect at its principal
office in New York City; each change in the Prime Rate shall be effective from
and including the date such change is publicly announced as being effective.
Such rate is set by the Administrative Agent as a general reference rate of
interest, taking into account such factors as the Administrative Agent may deem
appropriate; it being understood that many of the Administrative Agent’s
commercial or other loans are priced in relation to such rate, that it is not
necessarily the lowest or best rate actually charged to any customer and that
the Administrative Agent may make various commercial or other loans at rates of
interest having no relationship to such rate.

“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible, including, without limitation,
cash, securities, accounts and contract rights.

“Proposed Oil and Gas Borrowing Base” has the meaning assigned to such term in
Section 2.07(b)(ii)(A).

“Proposed Oil and Gas Borrowing Base Notice” has the meaning assigned to such
term in Section 2.07(b)(ii)(B).

“Redemption” means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt; provided, however, the term “Redemption” shall not include early
termination of a Swap Agreement due to an ISDA “Termination Event” to the extent
the amount due at such termination exceeds $15,000,000. “Redeem” has the
correlative meaning thereto.

 

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“Redetermination Date” means, with respect to any Scheduled Redetermination or
any Interim Redetermination, the date that the redetermined Oil and Gas
Borrowing Base related thereto becomes effective pursuant to
Section 2.07(b)(iii).

“Register” has the meaning assigned such term in Section 12.04(b)(iv).

“Regulation D” means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.

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

“Remedial Work” has the meaning assigned such term in Section 8.10(a).

“Required Lenders” means, at any time while no Loans or LC Exposure is
outstanding, Lenders having at least eighty-five percent (85%) of the Aggregate
Maximum Credit Amounts; and at any time while any Loans or LC Exposure is
outstanding, Lenders holding at least eighty-five percent (85%) of the
outstanding aggregate principal amount of the Loans or participation interests
in Letters of Credit (without regard to any sale by a Lender of a participation
in any Loan under Section 12.04(c)).

“Reserve Report” means a report, in form and substance reasonably satisfactory
to the Administrative Agent, setting forth, as of each December 31st or
June 30th (or such other date in the event of an Interim Redetermination) the
oil and gas reserves attributable to the Oil and Gas Properties of the Borrower
and the Restricted Subsidiaries, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date, based upon the pricing
assumptions consistent with SEC reporting requirements at the time.

“Responsible Officer” means, as to any Person, the Chief Executive Officer, the
President, any Financial Officer or Executive Vice President-Finance and
Administration of such Person. Unless otherwise specified, all references to a
Responsible Officer herein shall mean a Responsible Officer of the Borrower.

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

“Restricted Subsidiary” means (i) as to the Borrower, any Subsidiary of the
Borrower that is not an Unrestricted Subsidiary and (ii) as to Hawk Field
Services, any Subsidiary of Hawk Field Services that is not an Unrestricted
Subsidiary.

 

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

“Scheduled Redetermination” has the meaning assigned such term in
Section 2.07(b).

“Scheduled Redetermination Date” means the date on which an Oil and Gas
Borrowing Base that has been redetermined pursuant to a Scheduled
Redetermination becomes effective as provided in Section 2.07(b)(iii).

“SEC” means the Securities and Exchange Commission or any successor Governmental
Authority.

“Security Instruments” means the Guaranty Agreement, the Collateral Assignment
of Midstream Services Contracts, mortgages, deeds of trust and other agreements,
instruments or certificates described or referred to in Exhibit E, and any and
all other agreements, instruments or certificates previously entered into or
filed with respect to the Existing Credit Agreement or now or hereafter executed
and delivered by the Borrower or any other Person (other than Swap Agreements
with the Lenders or any Affiliate of a Lender or participation or similar
agreements between any Lender and any other lender or creditor with respect to
any Indebtedness pursuant to this Agreement) in connection with, or as security
for the payment or performance of the Indebtedness, the Loans, the Notes, if
any, this Agreement, or reimbursement obligations under the Letters of Credit,
as such agreements may be amended, modified, supplemented or restated from time
to time.

“Senior Indentures” means, collectively or individually, as the context
requires, any indenture or other agreement pursuant to which any Senior Notes
are issued, as the same may be amended, restated or supplemented, subject to the
terms of Section 9.04(b).

“Senior Notes” means any unsecured senior or senior subordinated notes issued by
the Borrower and outstanding on the Effective Date or thereafter issued under
Section 9.02(i) and, in each case, any guarantees thereof by the Borrower or a
Guarantor.

“S&P” means Standard & Poor’s Ratings Group, a division of The McGraw-Hill
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.

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

 

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“Subsidiary” means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Restricted Subsidiaries is a
general partner. Unless otherwise indicated herein, each reference to the term
“Subsidiary” shall mean a Subsidiary of the Borrower.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction, collar or option or similar agreement, whether
exchange traded, “over-the-counter” or otherwise, involving, or settled by
reference to, one or more interest rates, currencies, commodities, equity or
debt instruments or securities, or economic, financial or pricing indices or
measures of economic, financial or pricing risk or value or any similar
transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
the Borrower or the Subsidiaries shall be a Swap Agreement.

“Synthetic Leases” means, in respect of any Person, all leases which shall have
been, or should have been, in accordance with GAAP, treated as operating leases
on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.

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

“Termination Date” means the earlier of the Maturity Date and the date of
termination of the Commitments.

“Total Debt” means, at any date, all Debt of the Borrower and the Consolidated
Restricted Subsidiaries on a consolidated basis less (i) Cash Equivalents,
(ii) surety bonds permitted under Section 9.02(e) to the extent the aggregate
face amount of all such bonds does not exceed $55,000,000 and (iii) all
liabilities associated with deferred put premiums to the extent the same
constitutes Debt.

“Transactions” means, with respect to (a) the Borrower, the execution, delivery
and performance by the Borrower of this Agreement, each other Loan Document, the
borrowing of Loans, the use of the proceeds thereof and the issuance of Letters
of Credit hereunder, and the grant of Liens by the Borrower on Mortgaged
Properties and other Properties pursuant to the Security Instruments and
(b) each Guarantor, the execution, delivery and performance by such Guarantor of
each Loan Document to which it is a party, the guaranteeing of the Indebtedness
and the other obligations under the Guaranty Agreement by such Guarantor and
such

 

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Guarantor’s grant of the security interests and provision of collateral
thereunder, and the grant of Liens by such Guarantor on Mortgaged Properties and
other Properties pursuant to the Security Instruments.

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

“Unrestricted Subsidiary” means any Subsidiary of the Borrower designated as
such on Schedule 7.14 or which the Borrower has designated in writing to the
Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 9.06
and, in the event Newco becomes a Subsidiary of Hawk Field Services and/or the
Borrower, Newco.

“Wholly-Owned Subsidiary” means any Restricted Subsidiary of which all of the
outstanding Equity Interests (other than any directors’ qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries or by the Borrower and one or
more of the Wholly-Owned Subsidiaries.

Section 1.03 Types of Loans and Borrowings. For purposes of this Agreement,
Loans and Borrowings, respectively, may be classified and referred to by Type
(e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).

Section 1.04 Terms Generally; Rules of Construction. The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The word “will” shall be construed to have the same meaning and
effect as the word “shall”. Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any law shall be construed as referring to such law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained herein), (d) the words “herein”, “hereof” and “hereunder”, and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (e) with respect to the
determination of any time period, the word “from” means “from and including” and
the word “to” means “to and including” and (f) any reference herein to Articles,
Sections, Annexes, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Annexes, Exhibits and Schedules to, this
Agreement. No provision of this Agreement or any other Loan Document shall be
interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.

Section 1.05 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and

 

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certificates and reports as to financial matters required to be furnished to the
Administrative Agent or the Lenders hereunder shall be prepared, in accordance
with GAAP, applied on a basis consistent with the Financial Statements except
for changes in which Borrower’s independent certified public accountants concur
and which are disclosed to Administrative Agent on the next date on which
financial statements are required to be delivered to the Lenders pursuant to
Section 8.01(a); provided that, unless the Borrower and the Majority Lenders
shall otherwise agree in writing, no such change shall modify or affect the
manner in which compliance with the covenants contained herein is computed such
that all such computations shall be conducted utilizing financial information
presented consistently with prior periods.

ARTICLE II

The Credits

Section 2.01 Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Loans to the Borrower during the Availability Period
in an aggregate principal amount that will not result in (a) such Lender’s
Revolving Credit Exposure exceeding such Lender’s Commitment or (b) the total
Revolving Credit Exposures exceeding the total Commitments. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Borrower
may borrow, repay and reborrow the Loans. On the Effective Date (or as soon as
practicable with respect to (iii)):

(i) the Borrower shall pay all accrued and unpaid commitment fees, break funding
fees under Section 5.02 and all other fees that are outstanding under the
Existing Credit Agreement for the account of each “Lender” under the Existing
Credit Agreement;

(ii) each “ABR Loan” and “Eurodollar Loan” outstanding under the Existing Credit
Agreement shall be deemed to be repaid with the proceeds of a new ABR Loan or
Eurodollar Loan, as applicable, under this Agreement;

(iii) the Administrative Agent shall use reasonable efforts to cause such
“Lender” under the Existing Credit Agreement to deliver to the Borrower as soon
as practicable after the Effective Date the Note issued by the Borrower to it
under the Existing Credit Agreement, marked “canceled” or otherwise similarly
defaced;

(iv) each Letter of Credit issued and outstanding under the Existing Credit
Agreement shall be deemed issued under this Agreement without the payment of
additional fees; and

(v) the Existing Credit Agreement and the commitments thereunder shall be
superceded by this Agreement and such commitments shall terminate.

It is the intent of the parties hereto that this Agreement not constitute a
novation of the obligations and liabilities existing under the Existing Credit
Agreement or evidence repayment of any such obligations and liabilities and that
this Agreement amend and restate in its entirety the Existing Credit Agreement
and re-evidence the obligations of the Borrower outstanding thereunder.

 

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Section 2.02 Loans and Borrowings.

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

(b) Types of Loans. Subject to Section 3.03, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.

(c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of
each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an
aggregate amount that is an integral multiple of $1,000,000 and not less than
$1,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be
in an aggregate amount that is an integral multiple of $1,000,000 and not less
than $1,000,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.08(e). Borrowings of more than one Type may be outstanding at the same
time, provided that there shall not at any time be more than a total of 8
Eurodollar Borrowings outstanding. Notwithstanding any other provision of this
Agreement, the Borrower shall not be entitled to request, or to elect to convert
or continue, any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.

(d) Notes. Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder. The
Administrative Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the Type thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from the Borrower to each Lender hereunder and
(iii) the amount of any sum received by the Administrative Agent hereunder for
the account of the Lenders and each Lender’s share thereof. The entries made in
the accounts maintained pursuant to this Section 2.02(d) shall be prima facie
evidence of the existence and amounts of the obligations recorded therein;
provided that the failure of any Lender or the Administrative Agent to maintain
such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loans in accordance with the terms of this
Agreement. Any Lender may request that Loans made by it be evidenced by a Note.
In such event, the Borrower shall prepare, execute and deliver to such Lender a
Note payable to the order of such Lender and substantially in the form of
Exhibit A dated, in the case of (i) any Lender party hereto as of the date of
this Agreement, as of the date of this Agreement or (ii) any Lender that becomes
a party hereto pursuant to an Assignment and Assumption, as of the effective
date of the Assignment and Assumption, payable to the order of such Lender in a
principal amount equal to its Maximum Credit Amount as in effect on such date,
and otherwise duly completed. Thereafter, the Loans evidenced by such Note and
interest thereon shall at all times (including after assignment

 

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pursuant to Section 12.04) be represented by one or more Notes in such form
payable to the order of the payee named therein (or, if such Note is a
registered note, to such payee and its registered assigns). In the event that
any Lender’s Maximum Credit Amount increases or decreases for any reason
(whether pursuant to Section 2.06, Section 12.04(b) or otherwise), the Borrower
shall deliver or cause to be delivered on the effective date of such increase or
decrease, a new Note payable to the order of such Lender in a principal amount
equal to its Maximum Credit Amount after giving effect to such increase or
decrease, and otherwise duly completed. The date, amount, Type, interest rate
and, if applicable, Interest Period of each Loan made by each Lender, and all
payments made on account of the principal thereof, shall be recorded by such
Lender on its books for its Note, and, prior to any transfer, may be endorsed by
such Lender on a schedule attached to such Note or any continuation thereof or
on any separate record maintained by such Lender. Failure to make any such
notation or to attach a schedule shall not affect any Lender’s or the Borrower’s
rights or obligations in respect of such Loans or affect the validity of such
transfer by any Lender of its Note.

Section 2.03 Requests for Borrowings. To request a Borrowing, the Borrower shall
notify the Administrative Agent of such request by telephone, fax (or transmit
by electronic communication, if arrangements for doing so have been approved by
the Administrative Agent) (a) in the case of a Eurodollar Borrowing, not later
than 12:00 noon, New York City time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 12:00
noon, New York City time, on the date of the proposed Borrowing; provided that
no such notice shall be required for any deemed request of an ABR Borrowing to
finance the reimbursement of an LC Disbursement as provided in Section 2.08(e).
Each such telephonic (or electronic communication) Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in substantially the form of
Exhibit B and signed by the Borrower. Each such telephonic, electronic
communication, and written Borrowing Request shall specify the following
information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

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

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

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

(v) the amount of the then effective Borrowing Base, the current total Revolving
Credit Exposures (without regard to the requested Borrowing) and the pro forma
total Revolving Credit Exposures (giving effect to the requested Borrowing); and

(vi) the location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.

 

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If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month’s duration. Each Borrowing
Request shall constitute a representation that the amount of the requested
Borrowing shall not cause the total Revolving Credit Exposures to exceed the
total Commitments (i.e., the lesser of the Aggregate Maximum Credit Amounts and
the then effective Borrowing Base).

Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender’s Loan to be made as part of the
requested Borrowing.

Section 2.04 Interest Elections.

(a) Conversion and Continuance. Each Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Borrowing, shall have an initial Interest Period as specified in such Borrowing
Request. Thereafter, the Borrower may elect to convert such Borrowing to a
different Type or to continue such Borrowing and, in the case of a Eurodollar
Borrowing, may elect Interest Periods therefor, all as provided in this
Section 2.04. The Borrower may elect different options with respect to different
portions of the affected Borrowing, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Borrowing,
and the Loans comprising each such portion shall be considered a separate
Borrowing.

(b) Interest Election Requests. To make an election pursuant to this
Section 2.04, the Borrower shall notify the Administrative Agent of such
election by telephone, fax (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Bank) by the time
that a Borrowing Request would be required under Section 2.03 if the Borrower
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such telephonic (or electronic
communication) Interest Election Request shall be irrevocable and shall be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Interest Election Request in substantially the form of Exhibit C and
signed by the Borrower.

(c) Information in Interest Election Requests. Each telephonic, electronic
communication and written Interest Election Request shall specify the following
information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to Section 2.04(c)(iii) and (iv) shall
be specified for each resulting Borrowing);

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

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

 

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

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

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

(e) Effect of Failure to Deliver Timely Interest Election Request and Events of
Default on Interest Election. If the Borrower fails to deliver a timely Interest
Election Request with respect to a Eurodollar Borrowing prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
an Event of Default has occurred and is continuing: (i) no outstanding Borrowing
may be converted to or continued as a Eurodollar Borrowing (and any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective)
and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.

Section 2.05 Funding of Borrowings.

(a) Funding by Lenders. Each Lender shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 1:00 p.m., New York City time, to the account of the Administrative
Agent most recently designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower maintained with the Administrative Agent in New York, New York and
designated by the Borrower in the applicable Borrowing Request; provided that
ABR Loans made to finance the reimbursement of an LC Disbursement as provided in
Section 2.08(e) shall be remitted by the Administrative Agent to the Issuing
Bank.

(b) Presumption of Funding by the Lenders. Unless the Administrative Agent shall
have received notice from a Lender prior to the proposed date of any Borrowing
that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may assume that such
Lender has made such share available on such date in accordance with
Section 2.05(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry

 

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rules on interbank compensation or (ii) in the case of the Borrower, the
interest rate applicable to the requested Borrowing. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender’s Loan included in such Borrowing.

Section 2.06 Termination and Reduction of Aggregate Maximum Credit Amounts.

(a) Scheduled Termination of Commitments. Unless previously terminated, the
Commitments shall terminate on the Maturity Date. If at any time the Aggregate
Maximum Credit Amounts or the Borrowing Base is terminated or reduced to zero,
then the Commitments shall terminate on the effective date of such termination
or reduction.

(b) Optional Termination and Reduction of Aggregate Credit Amounts.

(i) The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Maximum Credit Amounts; provided that (A) each reduction of the
Aggregate Maximum Credit Amounts shall be in an amount that is an integral
multiple of $5,000,000 and not less than $10,000,000 and (B) the Borrower shall
not terminate or reduce the Aggregate Maximum Credit Amounts if, after giving
effect to any concurrent prepayment of the Loans in accordance with
Section 3.04(c), the total Revolving Credit Exposures would exceed the total
Commitments.

(ii) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Maximum Credit Amounts under
Section 2.06(b)(i) at least three Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section 2.06(b)(ii) shall be irrevocable; provided
that a notice of termination of the Aggregate Maximum Credit Amounts delivered
by the Borrower may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Borrower (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination or reduction
of the Aggregate Maximum Credit Amounts shall be permanent and may not be
reinstated. Each reduction of the Aggregate Maximum Credit Amounts shall be made
ratably among the Lenders in accordance with each Lender’s Applicable
Percentage.

Section 2.07 Borrowing Base.

(a) Borrowing Base. The Borrowing Base shall be equal to the sum of (i) the Oil
and Gas Borrowing Base and (ii) the Midstream Component.

(b) Oil and Gas Borrowing Base. The Oil and Gas Borrowing Base shall be
determined in accordance with this Section 2.07(b). For the period from and
including the Effective Date to but excluding the next Redetermination Date, the
amount of the Oil and Gas Borrowing Base shall be $1,025,000,000.
Notwithstanding the foregoing, the Oil and Gas Borrowing Base may be subject to
further adjustments from time to time pursuant to Section 2.07(e),
Section 8.13(c) or Section 9.13.

 

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(i) Scheduled and Interim Redeterminations. The Oil and Gas Borrowing Base shall
be redetermined semi-annually in accordance with this Section 2.07(b) (a
“Scheduled Redetermination”), and, subject to Section 2.07(b)(iii), such
redetermined Oil and Gas Borrowing Base shall become effective and applicable to
the Borrower, the Agents, the Issuing Bank and the Lenders on May 1st and
November 1st of each year, commencing November 1, 2010. In addition, the
Borrower may, by notifying the Administrative Agent thereof, and the
Administrative Agent may, at the direction of the Majority Lenders, by notifying
the Borrower thereof, one time during any 12 month period, each elect to cause
the Oil and Gas Borrowing Base to be redetermined between Scheduled
Redeterminations (an “Interim Redetermination”) in accordance with this
Section 2.07(b).

(ii) Scheduled and Interim Redetermination Procedure.

(A) Each Scheduled Redetermination and each Interim Redetermination shall be
effectuated as follows: Upon receipt by the Administrative Agent of (1) the
Reserve Report and the certificate required to be delivered by the Borrower to
the Administrative Agent, in the case of a Scheduled Redetermination, pursuant
to Section 8.12(a) and (c), and, in the case of an Interim Redetermination,
pursuant to Sections 8.12(b) and (c), and (2) such other reports, data and
supplemental information, including, without limitation, the information
provided pursuant to Section 8.12(c), as may, from time to time, be reasonably
requested by the Majority Lenders (the Reserve Report, such certificate and such
other reports, data and supplemental information being the “Engineering
Reports”), the Administrative Agent shall evaluate the information contained in
the Engineering Reports and shall, in good faith, propose a new Oil and Gas
Borrowing Base (the “Proposed Oil and Gas Borrowing Base”) based upon such
information and such other information (including, without limitation, the
status of title information with respect to the Oil and Gas Properties as
described in the Engineering Reports and the existence of any other Debt) as the
Administrative Agent deems appropriate and consistent with its normal oil and
gas lending criteria as it exists at the particular time. In no event shall the
Proposed Oil and Gas Borrowing Base plus the Midstream Component at such time
exceed the Aggregate Maximum Credit Amounts.

(B) The Administrative Agent shall notify the Borrower and the Lenders of the
Proposed Oil and Gas Borrowing Base (the “Proposed Oil and Gas Borrowing Base
Notice”):

(1) in the case of a Scheduled Redetermination (I) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the
Borrower pursuant to Sections 8.12(a) and (c) in a timely and complete manner,
then on or before April 15th and October 15th of such year following the date of
delivery or (II) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to
Sections 8.12(a) and (c) in a timely and complete manner, then promptly after
the Administrative Agent has received complete Engineering Reports from the
Borrower and has had a reasonable opportunity to determine the Proposed Oil and
Gas Borrowing Base in accordance with Section 2.07(b)(ii)(A); and

 

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(2) in the case of an Interim Redetermination, promptly, and in any event,
within fifteen (15) days after the Administrative Agent has received the
required Engineering Reports.

(C) Any Proposed Oil and Gas Borrowing Base that would increase the Oil and Gas
Borrowing Base then in effect must be approved or deemed to have been approved
by each of the Lenders as provided in this Section 2.07(b)(ii)(C); and any
Proposed Oil and Gas Borrowing Base that would decrease or maintain the Oil and
Gas Borrowing Base then in effect must be approved or be deemed to have been
approved by the Majority Lenders as provided in this Section 2.07(b)(ii)(C).
Upon receipt of the Proposed Oil and Gas Borrowing Base Notice, each Lender
shall have fifteen (15) days to agree with the Proposed Oil and Gas Borrowing
Base or disagree with the Proposed Oil and Gas Borrowing Base by proposing an
alternate Oil and Gas Borrowing Base. If at the end of such fifteen (15) days,
any Lender has not communicated its approval or disapproval in writing to the
Administrative Agent, such silence shall be deemed to be an approval of the
Proposed Oil and Gas Borrowing Base. If, at the end of such 15-day period, each
of the Lenders, in the case of a Proposed Oil and Gas Borrowing Base that would
increase the Oil and Gas Borrowing Base then in effect, or the Majority Lenders,
in the case of a Proposed Oil and Gas Borrowing Base that would decrease or
maintain the Oil and Gas Borrowing Base then in effect, have approved or deemed
to have approved, as aforesaid, then the Proposed Oil and Gas Borrowing Base
shall become the new Oil and Gas Borrowing Base, effective on the date specified
in Section 2.07(b)(iii). If, however, at the end of such 15-day period, all of
the Lenders or Majority Lenders, as applicable, have not approved or deemed to
have approved, as aforesaid, then the Administrative Agent shall poll the
Lenders to ascertain the highest Oil and Gas Borrowing Base then acceptable to
the Majority Lenders for purposes of this Section 2.07(b) and, so long as such
amount does not increase the Oil and Gas Borrowing Base then in effect, such
amount shall become the new Oil and Gas Borrowing Base, effective on the date
specified in Section 2.07(b)(iii).

(iii) Effectiveness of a Redetermined Oil and Gas Borrowing Base. After a
redetermined Oil and Gas Borrowing Base is approved or is deemed to have been
approved by each of the Lenders or the Majority Lenders, as applicable, pursuant
to Section 2.07(c)(iii), the Administrative Agent shall notify the Borrower and
the Lenders of the amount of the redetermined Oil and Gas Borrowing Base (the
“New Oil and Gas Borrowing Base Notice”), and such amount shall become the new
Oil and Gas Borrowing Base, effective and applicable to the Borrower, the
Agents, the Issuing Bank and the Lenders:

(A) in the case of a Scheduled Redetermination, (1) if the Administrative Agent
shall have received the Engineering Reports required to be delivered by the
Borrower pursuant to Sections 8.12(a) and (c) in a timely and complete manner,
then on May 1st or November 1st, as applicable, following such notice, or (2) if
the Administrative Agent shall not have received the Engineering Reports
required to be delivered by the Borrower pursuant to Sections 8.12(a) and (c) in
a timely and complete manner, then on the Business Day next succeeding delivery
of such notice; and

(B) in the case of an Interim Redetermination, on the Business Day next
succeeding delivery of such notice.

 

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Such amount shall then become the Oil and Gas Borrowing Base until the next
Scheduled Redetermination Date, the next Interim Redetermination Date or the
next adjustment to the Oil and Gas Borrowing Base under Section 8.13(c) or
Section 9.13, whichever occurs first. Notwithstanding the foregoing, no
Scheduled Redetermination or Interim Redetermination shall become effective
until the New Oil and Gas Borrowing Base Notice related thereto is received by
the Borrower.

(c) Midstream Component. The Midstream Component shall be determined by the
Administrative Agent and effective on each Midstream Component Determination
Date. For the period from and including the Effective Date to but excluding the
next Midstream Component Determination Date, the amount of the Midstream
Component shall be $28,735,000. Notwithstanding the foregoing, the Midstream
Component may be subject to further adjustment pursuant to Section 9.13.

(d) Reduction of Borrowing Base Upon Issuance of Permitted Senior Notes.
Notwithstanding anything to the contrary contained herein, upon the issuance of
any Senior Notes in accordance with Section 9.02(i), the Borrowing Base then in
effect shall be reduced by an amount equal to the product of 0.25 multiplied by
the stated principal amount of such Senior Notes (without regard to any initial
issue discount), and the Borrowing Base as so reduced shall become the new
Borrowing Base immediately upon the date of such issuance, effective and
applicable to the Borrower, the Agents, the Issuing Bank and the Lenders on such
date until the next redetermination or modification thereof hereunder.

Section 2.08 Letters of Credit.

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

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (not less than three (3) Business Days in advance of the
requested date of issuance, amendment, renewal or extension unless otherwise
consented to by the Issuing Bank) a notice:

(i) requesting the issuance of a Letter of Credit or identifying the Letter of
Credit to be amended, renewed or extended;

(ii) specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day);

 

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(iii) specifying the date on which such Letter of Credit is to expire (which
shall comply with Section 2.08(c));

(iv) specifying the amount of such Letter of Credit;

(v) specifying the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit; and

(vi) specifying the amount of the then effective Borrowing Base and whether a
Borrowing Base deficiency exists at such time, the current total Revolving
Credit Exposures (without regard to the requested Letter of Credit or the
requested amendment, renewal or extension of an outstanding Letter of Credit)
and the pro forma total Revolving Credit Exposures (giving effect to the
requested Letter of Credit or the requested amendment, renewal or extension of
an outstanding Letter of Credit).

Each notice shall constitute a representation that after giving effect to the
requested issuance, amendment, renewal or extension, as applicable, (i) the LC
Exposure shall not exceed the LC Commitment and (ii) the total Revolving Credit
Exposures shall not exceed the total Commitments (i.e. the lesser of the
Aggregate Maximum Credit Amounts and the then effective Borrowing Base).

If requested by the Issuing Bank, the Borrower also shall submit a letter of
credit application on the Issuing Bank’s standard form in connection with any
request for a Letter of Credit.

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

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in Section 2.08(e), or of any reimbursement payment
required to be refunded to the Borrower for any reason. Each Lender acknowledges
and agrees that its obligation to acquire participations pursuant to this
Section 2.08(d) in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.

(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by
paying to the

 

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Administrative Agent an amount equal to such LC Disbursement not later than
12:00 noon, New York City time, on the date that such LC Disbursement is made,
if the Borrower shall have received notice of such LC Disbursement prior to
10:00 a.m., New York City time, on such date, or, if such notice has not been
received by the Borrower prior to such time on such date, then not later than
12:00 noon, New York City time, on (i) the Business Day that the Borrower
receives such notice, if such notice is received prior to 10:00 a.m., New York
City time, on the day of receipt, or (ii) the Business Day immediately following
the day that the Borrower receives such notice, if such notice is not received
prior to such time on the day of receipt; provided that if such LC Disbursement
is equal to or greater than $1,000,000, the Borrower shall, subject to the
conditions to Borrowing set forth herein, be deemed to have requested, and the
Borrower does hereby request under such circumstances, that such LC Disbursement
be financed with an ABR Borrowing in an equivalent amount and, to the extent so
financed, the Borrower’s obligation to make such payment shall be discharged and
replaced by the resulting ABR Borrowing. If the Borrower fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and such Lender’s Applicable Percentage thereof. Promptly following
receipt of such notice, each Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.05 with respect to Loans made by such Lender
(and Section 2.05 shall apply, mutatis mutandis, to the payment obligations of
the Lenders), and the Administrative Agent shall promptly pay to the Issuing
Bank the amounts so received by it from the Lenders. Promptly following receipt
by the Administrative Agent of any payment from the Borrower pursuant to this
Section 2.08(e), the Administrative Agent shall distribute such payment to the
Issuing Bank or, to the extent that Lenders have made payments pursuant to this
Section 2.08(e) to reimburse the Issuing Bank, then to such Lenders and the
Issuing Bank as their interests may appear. Any payment made by a Lender
pursuant to this Section 2.08(e) to reimburse the Issuing Bank for any LC
Disbursement (other than the funding of ABR Loans as contemplated above) shall
not constitute a Loan and shall not relieve the Borrower of its obligation to
reimburse such LC Disbursement.

(f) Obligations Absolute. The Borrower’s obligation to reimburse LC
Disbursements as provided in Section 2.08(e) shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of
(i) any lack of validity or enforceability of any Letter of Credit, any Letter
of Credit Agreement or this Agreement, or any term or provision therein,
(ii) any draft or other document presented under a Letter of Credit proving to
be forged, fraudulent or invalid in any respect or any statement therein being
untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a
Letter of Credit against presentation of a draft or other document that does not
comply substantially with the terms of such Letter of Credit or any Letter of
Credit Agreement, or (iv) any other event or circumstance whatsoever, whether or
not similar to any of the foregoing, that might, but for the provisions of this
Section 2.08(f), constitute a legal or equitable discharge of, or provide a
right of setoff against, the Borrower’s obligations hereunder. Neither the
Administrative Agent, the Lenders nor the Issuing Bank, nor any of their Related
Parties shall have any liability or responsibility by reason of or in connection
with the issuance or transfer of any Letter of Credit or any payment or failure
to make any payment thereunder (irrespective of any of the circumstances
referred to in the preceding sentence), or any error, omission, interruption,
loss or delay in transmission or delivery of any draft, notice or other
communication under or relating to any Letter of Credit (including any

 

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document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank’s failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised all requisite care in each such
determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its reasonable discretion, either
accept and make payment upon such documents without responsibility for further
investigation, or refuse to accept and make payment upon such documents if such
documents are not in strict compliance with the terms of such Letter of Credit.

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

(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
until the Borrower shall have reimbursed the Issuing Bank for such LC
Disbursement (either with its own funds or a Borrowing under Section 2.08(e)),
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to ABR Loans. Interest accrued pursuant to this Section 2.08(h) shall be for the
account of the Issuing Bank, except that interest accrued on and after the date
of payment by any Lender pursuant to Section 2.08(e) to reimburse the Issuing
Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any
time by written agreement among the Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 3.05(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall
remain a party hereto and shall continue to have all the rights and obligations
of the Issuing Bank under this Agreement with respect to Letters of Credit
issued by it prior to such replacement, but shall not be required to issue
additional Letters of Credit.

 

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(j) Cash Collateralization. If (i) any Event of Default shall occur and be
continuing and the Borrower receives notice from the Administrative Agent or the
Majority Lenders demanding the deposit of cash collateral pursuant to this
Section 2.08(j), or (ii) the Borrower is required to pay to the Administrative
Agent the excess attributable to an LC Exposure in connection with any
prepayment pursuant to Section 3.04(c), then the Borrower shall deposit, in an
account with the Administrative Agent, in the name of the Administrative Agent
and for the benefit of the Lenders, an amount in cash equal to, in the case of
an Event of Default, the LC Exposure, and in the case of a payment required by
Section 3.04(c), the amount of such excess as provided in Section 3.04(c), as of
such date plus any accrued and unpaid interest thereon; provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower or any Restricted Subsidiary described in
Section 10.01(h) or Section 10.01(i). The Borrower hereby grants to the
Administrative Agent, for the benefit of the Issuing Bank and the Lenders, an
exclusive first priority and continuing perfected security interest in and Lien
on such account and all cash, checks, drafts, certificates and instruments, if
any, from time to time deposited or held in such account, all deposits or wire
transfers made thereto, any and all investments purchased with funds deposited
in such account, all interest, dividends, cash, instruments, financial assets
and other Property from time to time received, receivable or otherwise payable
in respect of, or in exchange for, any or all of the foregoing, and all
proceeds, products, accessions, rents, profits, income and benefits therefrom,
and any substitutions and replacements therefor. The Borrower’s obligation to
deposit amounts pursuant to this Section 2.08(j) shall be absolute and
unconditional, without regard to whether any beneficiary of any such Letter of
Credit has attempted to draw down all or a portion of such amount under the
terms of a Letter of Credit, and, to the fullest extent permitted by applicable
law, shall not be subject to any defense or be affected by a right of set-off,
counterclaim or recoupment which the Borrower or any of its Subsidiaries may now
or hereafter have against any such beneficiary, the Issuing Bank, the
Administrative Agent, the Lenders or any other Person for any reason whatsoever.
Such deposit shall be held as collateral securing the payment and performance of
the Borrower’s and the Guarantor’s obligations under this Agreement and the
other Loan Documents. The Administrative Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such account.
Interest or profits, if any, on such deposit shall accumulate in such account.
Moneys in such account shall be applied by the Administrative Agent to reimburse
the Issuing Bank for LC Disbursements for which it has not been reimbursed and,
to the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the Borrower for the LC Exposure at such time or,
if the maturity of the Loans has been accelerated, be applied to satisfy other
obligations of the Borrower and the Guarantors under this Agreement or the other
Loan Documents. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, and
the Borrower is not otherwise required to pay to the Administrative Agent the
excess attributable to an LC Exposure in connection with any prepayment pursuant
to Section 3.04(c), then such amount (to the extent not applied as aforesaid)
shall be returned to the Borrower within three Business Days after all Events of
Default have been cured or waived.

 

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ARTICLE III

Payments of Principal and Interest; Prepayments; Fees

Section 3.01 Repayment of Loans. The Borrower hereby unconditionally promises to
pay to the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Loan on the Termination Date.

Section 3.02 Interest.

(a) ABR Loans. The Loans comprising each ABR Borrowing shall bear interest at
the Alternate Base Rate plus the Applicable Margin, but in no event to exceed
the Highest Lawful Rate.

(b) Eurodollar Loans. The Loans comprising each Eurodollar Borrowing shall bear
interest at the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Margin, but in no event to exceed the Highest
Lawful Rate.

(c) Post-Default Rate. Notwithstanding the foregoing, if any principal of or
interest on any Loan or any fee or other amount payable by the Borrower or any
Guarantor hereunder or under any other Loan Document is not paid when due,
whether at stated maturity, upon acceleration or otherwise, such overdue amount
shall bear interest, after as well as before judgment, at a rate per annum equal
to two percent (2%) plus the rate applicable to ABR Loans as provided in
Section 3.02(a), but in no event to exceed the Highest Lawful Rate.

(d) Interest Payment Dates. Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and on the Termination Date;
provided that (i) interest accrued pursuant to Section 3.02(c) shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than an optional prepayment of an ABR Loan prior to the Termination Date),
accrued interest on the principal amount repaid or prepaid shall be payable on
the date of such repayment or prepayment, and (iii) in the event of any
conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.

(e) Interest Rate Computations. All interest hereunder shall be computed on the
basis of a year of 360 days, unless such computation would exceed the Highest
Lawful Rate, in which case interest shall be computed on the basis of a year of
365 days (or 366 days in a leap year), except that interest computed by
reference to the Alternate Base Rate at times when the Alternate Base Rate is
based on the Prime Rate shall be computed on the basis of a year of 365 days (or
366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.

 

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Section 3.03 Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

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

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

then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.

Section 3.04 Prepayments.

(a) Optional Prepayments. The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part, subject to prior
notice in accordance with Section 3.04(b).

(b) Notice and Terms of Optional Prepayment. The Borrower shall notify the
Administrative Agent by telephone and/or fax (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing,
not later than 12:00 noon, New York City time, three Business Days before the
date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not
later than 12:00 noon, New York City time, on the date of prepayment. Each such
notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid. Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.02. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 3.02.

(c) Mandatory Prepayments.

(i) If, after giving effect to any termination or reduction of the Aggregate
Maximum Credit Amounts pursuant to Section 2.06(b), the total Revolving Credit
Exposures exceeds the total Commitments, then the Borrower shall (A) prepay the
Borrowings on the date of such termination or reduction in an aggregate
principal amount equal to such excess, and (B) if, as a result of an LC
Exposure, any excess remains after prepaying all of the Borrowings pay to the
Administrative Agent on behalf of the Lenders an amount equal to such excess to
be held as cash collateral as provided in Section 2.08(j).

 

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(ii) Upon any redetermination of or adjustment to the amount of the Oil and Gas
Borrowing Base in accordance with Section 2.07(b)(i) or Section 8.13(c) and/or
the Midstream Component pursuant to Section 2.07(c), if the total Revolving
Credit Exposures exceeds the redetermined or adjusted Borrowing Base, then the
Borrower shall (A) prepay the Borrowings in an aggregate principal amount equal
to such excess, and (B) if, as a result of an LC Exposure, any excess remains
after prepaying all of the Borrowings pay to the Administrative Agent on behalf
of the Lenders an amount equal to such excess to be held as cash collateral as
provided in Section 2.08(j). The Borrower shall be obligated to make such
prepayment and/or deposit of cash collateral within forty-five (45) days
following its receipt of the New Oil and Gas Borrowing Base Notice in accordance
with Section 2.07(b)(iii) or the date the adjustment occurs; provided that all
payments required to be made pursuant to this Section 3.04(c)(ii) must be made
on or prior to the Termination Date.

(iii) Upon any adjustments to the Borrowing Base pursuant to Section 2.07(d), if
the total Revolving Credit Exposures exceeds the Borrowing Base as adjusted,
then the Borrower shall (A) prepay the Borrowings in an aggregate principal
amount equal to such excess, and (B) if, as a result of an LC Exposure, any
excess remains after prepaying all of the Borrowings pay to the Administrative
Agent on behalf of the Lenders an amount equal to such excess to be held as cash
collateral as provided in Section 2.08(j). The Borrower shall be obligated to
make such prepayment and/or deposit of cash collateral on the date it or any
Subsidiary receives cash proceeds as a result of the incurrence of such Senior
Notes.

(iv) Upon any adjustments to the Oil and Gas Borrowing Base or the Midstream
Component pursuant to Section 9.13, if the total Revolving Credit Exposures
exceeds the Borrowing Base as adjusted, then the Borrower shall (A) prepay the
Borrowings in an aggregate principal amount equal to such excess, and (B) if, as
a result of an LC Exposure, any excess remains after prepaying all of the
Borrowings pay to the Administrative Agent on behalf of the Lenders an amount
equal to such excess to be held as cash collateral as provided in
Section 2.08(j). The Borrower shall be obligated to make such prepayment and/or
deposit of cash collateral on the date it or any Subsidiary receives cash
proceeds as a result of such disposition.

(v) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied, first, ratably to any ABR Borrowings then outstanding, and, second, to
any Eurodollar Borrowings then outstanding, and if more than one Eurodollar
Borrowing is then outstanding, to each such Eurodollar Borrowing in order of
priority beginning with the Eurodollar Borrowing with the least number of days
remaining in the Interest Period applicable thereto and ending with the
Eurodollar Borrowing with the most number of days remaining in the Interest
Period applicable thereto.

(vi) Each prepayment of Borrowings pursuant to this Section 3.04(c) shall be
applied ratably to the Loans included in the prepaid Borrowings. Prepayments
pursuant to this Section 3.04(c) shall be accompanied by accrued interest to the
extent required by Section 3.02.

(d) No Premium or Penalty. Prepayments permitted or required under this
Section 3.04 shall be without premium or penalty, except as required under
Section 5.02.

 

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Section 3.05 Fees.

(a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for
the account of each Lender a commitment fee, which shall accrue at 0.5% on the
average daily amount of the unused amount of the Commitment of such Lender
during the period from and including the date of this Agreement to but excluding
the Termination Date, provided that, for purposes of determining the Commitment
of a Lender for this Section 3.05(a), each Lender’s Applicable Percentage of the
then effective Borrowing Base shall be equal to such Lender’s Applicable
Percentage of the sum of (i) the then effective Oil and Gas Borrowing Base and
(ii) $100,000,000. Accrued commitment fees shall be payable in arrears on the
last day of March, June, September and December of each year and on the
Termination Date, commencing on the first such date to occur after the date
hereof. All commitment fees shall be computed on the basis of a year of 360
days, unless such computation would exceed the Highest Lawful Rate, in which
case interest shall be computed on the basis of a year of 365 days (or 366 days
in a leap year), and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

(b) Letter of Credit Fees. The Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the same Applicable
Margin used to determine the interest rate applicable to Eurodollar Loans on the
average daily amount of such Lender’s LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the date of this Agreement to but excluding the later of the date on
which such Lender’s Commitment terminates and the date on which such Lender
ceases to have any LC Exposure, (ii) to the Issuing Bank a fronting fee, which
shall accrue at the rate of 0.125% per annum on the average daily amount of the
LC Exposure (excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the date of this Agreement
to but excluding the later of the date of termination of the Commitments and the
date on which there ceases to be any LC Exposure, provided that in no event
shall such fee be less than $125 during any quarter, and (iii) to the Issuing
Bank, for its own account, its standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the date of this Agreement; provided that all
such fees shall be payable on the Termination Date and any such fees accruing
after the Termination Date shall be payable on demand. Any other fees payable to
the Issuing Bank pursuant to this Section 3.05(b) shall be payable within 10
days after demand. All participation fees and fronting fees shall be computed on
the basis of a year of 360 days, unless such computation would exceed the
Highest Lawful Rate, in which case interest shall be computed on the basis of a
year of 365 days (or 366 days in a leap year), and shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day).

(c) Administrative Agent Fees. The Borrower agrees to pay to the Administrative
Agent, for its own account, fees payable in the amounts and at the times
separately agreed upon between the Borrower and the Administrative Agent.

 

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ARTICLE IV

Payments; Pro Rata Treatment; Sharing of Set-offs

Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Payments by the Borrower. The Borrower shall make each payment required to
be made by it hereunder (whether of principal, interest, fees or reimbursement
of LC Disbursements, or of amounts payable under Section 5.01, Section 5.02,
Section 5.03 or otherwise) prior to 12:00 noon, New York City time, on the date
when due, in immediately available funds, without defense, deduction,
recoupment, set-off or counterclaim. Fees, once paid, shall not be refundable
under any circumstances. Any amounts received after such time on any date may,
in the discretion of the Administrative Agent, be deemed to have been received
on the next succeeding Business Day for purposes of calculating interest
thereon, but shall be considered received on the date paid for purposes of
Section 10.01. All such payments shall be made to the Administrative Agent at
its offices specified in Section 12.01, except payments to be made directly to
the Issuing Bank as expressly provided herein and except that payments pursuant
to Section 5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made
directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in dollars.

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

(c) Sharing of Payments by Lenders. If any Lender shall, by exercising any right
of set-off or counterclaim or otherwise, obtain payment in respect of any
principal of or interest on any of its Loans or participations in LC
Disbursements resulting in such Lender receiving payment of a greater proportion
of the aggregate amount of its Loans and participations in LC Disbursements and
accrued interest thereon than the proportion received by any other Lender, then
the Lender receiving such greater proportion shall purchase (for cash at face
value) participations in the Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Loans and
participations in LC Disbursements; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this

 

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Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Borrower
or any Subsidiary or Affiliate thereof (as to which the provisions of this
Section 4.01(c) shall apply). The Borrower consents to the foregoing and agrees,
to the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrower
in the amount of such participation.

Section 4.02 Presumption of Payment by the Borrower. Unless the Administrative
Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders or
the Issuing Bank that the Borrower will not make such payment, the
Administrative Agent may assume that the Borrower has made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Bank, as the case may be, the amount
due. In such event, if the Borrower has not in fact made such payment, then each
of the Lenders or the Issuing Bank, as the case may be, severally agrees to
repay to the Administrative Agent forthwith on demand the amount so distributed
to such Lender or Issuing Bank with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.

Section 4.03 Certain Deductions by the Administrative Agent. If any Lender shall
fail to make any payment required to be made by it pursuant to Section 2.05(b),
Section 2.08(d), Section 2.08(e) or Section 4.02 then the Administrative Agent
may, in its discretion (notwithstanding any contrary provision hereof), apply
any amounts thereafter received by the Administrative Agent for the account of
such Lender to satisfy such Lender’s obligations under such Sections until all
such unsatisfied obligations are fully paid.

Section 4.04 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower’s or
each Guarantor’s interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Restricted Subsidiaries and (b) the Lenders hereby authorize the Administrative
Agent to take such actions as may be necessary to cause such proceeds to be paid
to the Borrower and/or such Restricted Subsidiaries.

 

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Section 4.05 Payments and Deductions to a Defaulting Lender.

(a) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(b), Section 2.08(d), Section 2.08(e) or Section 4.02
then the Administrative Agent may, in its discretion (notwithstanding any
contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations under such Sections until all such unsatisfied obligations are fully
paid in cash.

(b) If a Defaulting Lender as a result of the exercise of a set-off shall have
received a payment in respect of its Revolving Credit Exposure which results in
its Revolving Credit Exposure being less than its Applicable Percentage of the
aggregate Revolving Credit Exposures, then no payments will be made to such
Defaulting Lender until such time as all amounts due and owing to the Lenders
have been equalized in accordance with each Lender’s respective pro rata share
of the aggregate Revolving Credit Exposures. Further, if at any time prior to
the acceleration or maturity of the Loans, the Administrative Agent shall
receive any payment in respect of principal of a Loan or a reimbursement of an
LC Disbursement while one or more Defaulting Lenders shall be party to this
Agreement, the Administrative Agent shall apply such payment first to the
Borrowing(s) for which such Defaulting Lender(s) shall have failed to fund its
pro rata share until such time as such Borrowing(s) are paid in full or each
Lender (including each Defaulting Lender) is owed its Applicable Percentage of
all Loans then outstanding. After acceleration or maturity of the Loans, subject
to the first sentence of this Section 4.05(b), all principal will be paid
ratably as provided in Section 10.02(c).

(c) Notwithstanding any provision of this Agreement to the contrary, if any
Lender becomes a Defaulting Lender, then the following provisions shall apply
for so long as such Lender is a Defaulting Lender:

(i) Fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 3.05.

(ii) The Commitment, the Maximum Credit Amount, the outstanding principal
balance of the Loans and participation interests in Letters of Credit of such
Defaulting Lender shall not be included in determining whether all Lenders or
the Majority Lenders have taken or may take any action hereunder (including any
consent to any amendment or waiver pursuant to Section 12.02), provided that any
waiver, amendment or modification requiring the consent of each affected Lender
and which affects such Defaulting Lender, shall require the consent of such
Defaulting Lender; and provided further that any redetermination or affirmation
of the Oil and Gas Borrowing Base shall occur without participation of a
Defaulting Lender, but the Commitments (i.e., the Applicable Percentage of the
Borrowing Base of a Defaulting Lender) may not be increased without the consent
of such Defaulting Lender.

(iii) If any LC Exposure exists at the time a Lender becomes a Defaulting Lender
then:

(A) all or any part of such LC Exposure shall be reallocated among the
Non-Defaulting Lenders in accordance with their respective Applicable
Percentages but only to the extent (1) the sum of all Non-Defaulting Lenders’
Revolving Credit Exposures plus such Defaulting Lender’s LC Exposure does not
exceed the total of all Non-Defaulting Lenders’ Commitments and (2) the
conditions set forth in Section 6.02 are satisfied at such time;

 

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(B) if the reallocation described in clause (A) above cannot, or can only
partially, be effected, then the Borrower shall, within one Business Day
following notice by the Administrative Agent, cash collateralize such Defaulting
Lender’s LC Exposure (after giving effect to any partial reallocation pursuant
to clause (A) above) in accordance with the procedures set forth in
Section 2.08(e) for so long as such LC Exposure is outstanding;

(C) if the Borrower cash collateralizes any portion of such Defaulting Lender’s
LC Exposure pursuant to this Section 4.05 then the Borrower shall not be
required to pay any fees to such Defaulting Lender pursuant to Section 3.05(b)
with respect to such Defaulting Lender’s LC Exposure during the period such
Defaulting Lender’s LC Exposure is cash collateralized;

(D) if the LC Exposure of the Non-Defaulting Lenders is reallocated pursuant to
Section 4.05(c), then the fees payable to the Lenders pursuant to
Section 3.05(a) and Section 3.05(b) shall be adjusted in accordance with such
Non-Defaulting Lenders’ Applicable Percentages; or

(E) if any Defaulting Lender’s LC Exposure is neither cash collateralized nor
reallocated pursuant to Section 4.05(c)(iii), then, without prejudice to any
rights or remedies of the Issuing Bank or any Lender hereunder, all commitment
fees that otherwise would have been payable to such Defaulting Lender (solely
with respect to the portion of such Defaulting Lender’s Commitment that was
utilized by such LC Exposure) and letter of credit fees payable under
Section 3.05(b) with respect to such Defaulting Lender’s LC Exposure shall be
payable to the Issuing Bank until such LC Exposure is cash collateralized and/or
reallocated.

(d) So long as any Lender is a Defaulting Lender, the Issuing Bank shall not be
required to issue, amend or increase any Letter of Credit, unless it is
satisfied that the related exposure will be 100% covered by the Commitments of
the Non-Defaulting Lenders and/or cash collateral will be provided by the
Borrower in accordance with Section 4.05(c), and participating interests in any
such newly issued or increased Letter of Credit shall be allocated among
Non-Defaulting Lenders in a manner consistent with Section 2.08(d) (and
Defaulting Lenders shall not participate therein).

(e) In the event that the Administrative Agent, the Borrower and the Issuing
Bank each agrees that a Defaulting Lender has adequately remedied all matters
that caused such Lender to be a Defaulting Lender, then the LC Exposure of the
Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment
and on such date such Lender shall purchase at par such of the Loans or
participations in Letters of Credit of the other Lenders as the Administrative
shall determine may be necessary in order for such Lender to hold such Loans in
accordance with its Applicable Percentage.

 

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ARTICLE V

Increased Costs; Break Funding Payments; Taxes

Section 5.01 Increased Costs.

(a) Eurodollar Changes in Law. If any Change in Law shall:

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

(ii) impose on any Lender or the London interbank market any other condition
affecting this Agreement or Eurodollar Loans made by such Lender;

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

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

(c) Certificates. A certificate of a Lender or the Issuing Bank setting forth
the amount or amounts necessary to compensate such Lender or the Issuing Bank or
its holding company, as the case may be, as specified in Section 5.01(a) or
(b) shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender or the Issuing Bank, as the case may
be, the amount shown as due on any such certificate within 30 days after receipt
thereof.

(d) Effect of Failure or Delay in Requesting Compensation. Failure or delay on
the part of any Lender or the Issuing Bank to demand compensation pursuant to
this Section 5.01 shall not constitute a waiver of such Lender’s or the Issuing
Bank’s right to demand such compensation; provided that the Borrower shall not
be required to compensate a Lender or the Issuing Bank pursuant to this
Section 5.01 for any increased costs or reductions incurred more than 180 days
prior to the date that such Lender or the Issuing Bank, as the case may be,
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender’s or the Issuing Bank’s intention to claim
compensation therefor; provided further that, if the Change in Law giving rise
to such increased costs or reductions is retroactive, then the 180-day period
referred to above shall be extended to include the period of retroactive effect
thereof.

 

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Section 5.02 Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the conversion of any Eurodollar Loan into an ABR Loan other than on the
last day of the Interest Period applicable thereto, or (c) the failure to
borrow, convert, continue or prepay any Eurodollar Loan on the date specified in
any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar
Loan other than on the last day of the Interest Period applicable thereto as a
result of a request by the Borrower pursuant to Section 5.04(b), then, in any
such event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event. In the case of a Eurodollar Loan, such loss,
cost or expense to any Lender shall be deemed to include an amount determined by
such Lender to be the excess, if any, of (i) the amount of interest which would
have accrued on the principal amount of such Loan had such event not occurred,
at the Adjusted LIBO Rate that would have been applicable to such Loan, for the
period from the date of such event to the last day of the then current Interest
Period therefor (or, in the case of a failure to borrow, convert or continue,
for the period that would have been the Interest Period for such Loan), over
(ii) the amount of interest which would accrue on such principal amount for such
period at the interest rate which such Lender would bid were it to bid, at the
commencement of such period, for dollar deposits of a comparable amount and
period from other banks in the eurodollar market.

A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

Section 5.03 Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03), the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.

(b) Payment of Other Taxes by the Borrower. The Borrower shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within 10 days after
written demand therefor, for the full amount of any Indemnified Taxes or Other
Taxes paid by the Administrative

 

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Agent, such Lender or the Issuing Bank, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrower hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 5.03) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate of the
Administrative Agent, a Lender or the Issuing Bank as to the amount of such
payment or liability under this Section 5.03 shall be delivered to the Borrower
and shall be conclusive absent manifest error.

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

(e) Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement or any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.

(f) Tax Refunds. If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section 5.03, it shall pay
over such refund to the Borrower (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrower under this Section 5.03 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in
the event the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority. This Section 5.03 shall not be construed
to require the Administrative Agent or any Lender to make available its tax
returns (or any other information relating to its taxes which it deems
confidential) to the Borrower or any other Person. The agreements in this
Section 5.03(f) shall survive the termination of this Agreement and the payment
of the Loans and the other amounts payable hereunder.

Section 5.04 Mitigation Obligations; Replacement of Lenders.

(a) Designation of Different Lending Office. If any Lender requests compensation
under Section 5.01, or if the Borrower is required to pay any additional amount
to any Lender or any Governmental Authority for the account of any Lender
pursuant to Section 5.03, then such

 

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Lender shall use reasonable efforts to designate a different lending office for
funding or booking its Loans hereunder or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 5.01 or Section 5.03, as the case may be, in
the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.

(b) Replacement of Lenders. If any Lender requests compensation under
Section 5.01, or the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 5.03, any Lender becomes a Defaulting Lender or any Lender has failed to
consent to a proposed amendment, waiver, discharge or termination that requires
the consent of all the Lenders (or the affected Lenders and such Lender is an
affected Lender) pursuant to Section 12.02 and with respect to which the
Required Lenders have consented, then the Borrower may, at its sole expense,
upon notice to such Lender and the Administrative Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in Section 12.04(b)), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) the Borrower shall have received the prior
written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 5.01 or payments required to be made
pursuant to Section 5.03, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.

(c) Replacement for Oil and Gas Borrowing Base Increase. If (i) an existing
Lender does not approve a proposed Oil and Gas Borrowing Base increase and
(ii) each of the Lenders have approved such proposed Oil and Gas Borrowing Base
increase, then the Borrower may, at its sole expense, within 3 Business Days
after the Borrower receives the New Oil and Gas Borrowing Base Notice with
respect to such increase, at the discretion of such existing Lender either:

(A) cause such existing Lender to assign and delegate, without recourse, all its
interests, rights and obligations under this Agreement to one or more assignees
proposed by the Borrower that shall assume such obligations (which assignees may
be another Lender, if a Lender accepts such assignment), provided that such
existing Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee(s) (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts),
or

 

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(B) cause such existing Lender to reduce its Maximum Credit Amount based upon a
new Applicable Percentage for such existing Lender that is calculated by
dividing such existing Lender’s then outstanding Revolving Credit Exposure by
the Borrowing Base determined after the increase of the Oil and Gas Borrowing
Base and assigning the balance of its Maximum Credit Amount to an assignee or
assignees proposed by the Borrower that shall assume such amount of the
assigning Lender’s Maximum Credit Amount (which assignee may be another Lender,
if a Lender accepts such assignment).

Any such replacement of an existing Lender or partial assignment of an existing
Lender’s Maximum Credit Amount shall be in accordance with and subject to the
restrictions contained in Section 12.04(b).

ARTICLE VI

Conditions Precedent

Section 6.01 Effective Date. The obligations of the Lenders to amend and restate
the Existing Credit Agreement, to make Loans and of the Issuing Bank to issue
Letters of Credit hereunder shall not become effective until the date on which
each of the following conditions is satisfied (or waived in accordance with
Section 12.02):

(a) The Administrative Agent, the Arranger and the Lenders shall have received
all fees and other amounts due and payable on or prior to the Effective Date,
including, to the extent invoiced, reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder.

(b) The Administrative Agent shall have received a certificate of the Secretary
or an Assistant Secretary of the Borrower and each Guarantor setting forth
(i) resolutions of its board of directors (or comparable managing body) with
respect to the authorization of the Borrower or such Guarantor to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the Borrower
or such Guarantor (y) who are authorized to sign the Loan Documents to which the
Borrower or such Guarantor is a party and (z) who will, until replaced by
another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of such authorized officers, and
(iv) the articles or certificate of incorporation and bylaws (or other
organizational documents) of the Borrower and such Guarantor, certified as being
true and complete. The Administrative Agent and the Lenders may conclusively
rely on such certificate until the Administrative Agent receives notice in
writing from the Borrower to the contrary.

(c) The Administrative Agent shall have received certificates of the appropriate
State agencies with respect to the existence, qualification and good standing of
the Borrower and each Guarantor.

(d) The Administrative Agent shall have received a compliance certificate which
shall be substantially in the form of Exhibit D, duly and properly executed by a
Responsible Officer and dated as of the date of Effective Date.

 

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(e) The Administrative Agent shall have received from each party hereto
counterparts (in such number as may be requested by the Administrative Agent) of
this Agreement signed on behalf of such party.

(f) The Administrative Agent shall have received duly executed Notes, if
requested, payable to the order of each Lender in a principal amount equal to
its Maximum Credit Amount dated as of the date hereof.

(g) The Administrative Agent shall have received from each party thereto duly
executed counterparts (in such number as may be requested by the Administrative
Agent) of the Security Instruments, including the Guaranty Agreement and the
other Security Instruments described on Exhibit E. In connection with the
execution and delivery of the Security Instruments, the Administrative Agent
shall:

(i) be reasonably satisfied that the Security Instruments create first priority,
perfected Liens (subject only to Excepted Liens identified in clauses (a) to
(d) and (f) of the definition thereof, but subject to the provisions at the end
of such definition) on (A) substantially all of the Midstream Assets and (B) at
least 80% of the total value of the Oil and Gas Properties evaluated in the
Initial Reserve Report; and

(ii) have received certificates, together with undated, blank stock powers for
each such certificate, representing all of the issued and outstanding Equity
Interests of each of the Guarantors and not less than 65% of all of the issued
and outstanding capital stock of each Foreign Subsidiary with total assets in
excess of $500,000 that is not a Guarantor, which is directly owned by either
the Borrower or a Domestic Subsidiary.

(h) The Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying that attached to such certificate are true
and complete copies of the Senior Indentures, as amended on or prior to the
Effective Date. The structure, terms, conditions and documentation for the
Senior Indentures shall be reasonably satisfactory to the Administrative Agent.

(i) The Administrative Agent shall have received an opinion of (i) Porter &
Hedges L.L.P., special counsel to the Borrower, in form and substance reasonably
acceptable to the Administrative Agent, and (ii) local counsel in each of the
following states: Arkansas and Louisiana and any other jurisdictions requested
by the Administrative Agent, in form and substance reasonable satisfactory to
the Administrative Agent.

(j) The Administrative Agent shall have received a certificate of insurance
coverage of the Borrower evidencing that the Borrower is carrying insurance in
accordance with Section 7.12.

(k) The Administrative Agent shall be reasonably satisfied with the status of
title to the Oil and Gas Properties evaluated in the Initial Reserve Report.

(l) The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries.

 

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(m) The Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower certifying that the Borrower has received all consents
and approvals required by Section 7.03.

(n) The Administrative Agent shall have received the financial statements
referred to in Section 7.04(a) and the Initial Reserve Report accompanied by a
certificate covering the matters described in Section 8.12(c).

(o) The Administrative Agent shall have received appropriate UCC search
certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the Restricted Subsidiaries for each of the following
jurisdictions: Texas, Oklahoma, Louisiana and New Mexico and any other
jurisdiction requested by the Administrative Agent; other than those being
assigned or released on or prior to the Effective Date or Liens permitted by
Section 9.03.

(p) The Administrative Agent and the Lenders shall be reasonably satisfied with
the form and substance of the Midstream Services contracts of Hawk Field
Services and its Restricted Subsidiaries listed in Schedule 7.23.

(q) The Administrative Agent shall have received such other documents as the
Administrative Agent or special counsel to the Administrative Agent may
reasonably request.

The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 12.02)
at or prior to 2:00 p.m., New York City time, on August 31, 2010 (and, in the
event such conditions are not so satisfied or waived, the Commitments shall
terminate at such time).

Section 6.02 Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing (including the initial funding), and of the
Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject
to the satisfaction of the following conditions:

(a) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.

(b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no event, development or circumstance has occurred or shall then
exist that has resulted in, or could reasonably be expected to have, a Material
Adverse Effect.

(c) The representations and warranties of the Borrower and the Guarantors set
forth in this Agreement and in the other Loan Documents shall be true and
correct on and as of the date of such Borrowing or the date of issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, except
to the extent any such representations and warranties are expressly limited to
an earlier date, in which case, on and as of the date of such Borrowing or the

 

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date of issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, such representations and warranties shall continue to be true and
correct as of such specified earlier date.

(d) The making of such Loan or the issuance, amendment, renewal or extension of
such Letter of Credit, as applicable, would not conflict with, or cause any
Lender or the Issuing Bank to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan, the issuance, amendment, renewal, extension or repayment of any Letter
of Credit or any participations therein or the consummation of the transactions
contemplated by this Agreement or any other Loan Document.

(e) The receipt by the Administrative Agent of a Borrowing Request in accordance
with Section 2.03 or a request for a Letter of Credit in accordance with
Section 2.08(b), as applicable.

Each Borrowing and each issuance, amendment, renewal or extension of any Letter
of Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in Section 6.02(a)
through (d).

ARTICLE VII

Representations and Warranties

The Borrower represents and warrants to the Lenders that:

Section 7.01 Organization; Powers. Each of the Borrower and the Restricted
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have
such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.

Section 7.02 Authority; Enforceability. The Transactions are within the
Borrower’s and each Guarantor’s constituent powers and have been duly authorized
by all necessary corporate, limited liability company or partnership, and, if
required, stockholder action (including, without limitation, any action required
to be taken by any class of directors of the Borrower, whether interested or
disinterested, in order to ensure the due authorization of the Transactions).
Each Loan Document to which the Borrower and each Guarantor is a party has been
duly executed and delivered by the Borrower and such Guarantor and constitutes a
legal, valid and binding obligation of the Borrower and such Guarantor, as
applicable, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors’ rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

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Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require any
consent or approval of, registration or filing with, or any other action by, any
Governmental Authority or any other third Person, nor is any such consent,
approval, registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the Transactions,
except such as have been obtained or made and are in full force and effect other
than (i) the recording and filing of the Security Instruments as required by
this Agreement and (ii) those third party approvals or consents which, if not
made or obtained, would not cause a Default hereunder, could not reasonably be
expected to have a Material Adverse Effect or do not have an adverse effect on
the enforceability of the Loan Documents, (b) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
the Borrower or any Restricted Subsidiary or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any Restricted
Subsidiary or its Properties, or give rise to a right thereunder to require any
payment to be made by the Borrower or such Restricted Subsidiary and (d) will
not result in the creation or imposition of any Lien on any Property of the
Borrower or any Restricted Subsidiary (other than the Liens created by the Loan
Documents).

Section 7.04 Financial Condition; No Material Adverse Change.

(a) The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet and statements of income, stockholders equity and cash flows
(i) as of and for the fiscal year ended December 31, 2009, reported on by
Deloitte & Touche LLP, independent public accountants, and (ii) as of and for
the fiscal quarter and the portion of the fiscal year ended March 31, 2010. Such
financial statements present fairly, in all material respects, the financial
position and results of operations and cash flows of the Borrower and its
Consolidated Subsidiaries as of such dates and for such periods in accordance
with GAAP, subject to year-end audit adjustments and the absence of footnotes in
the case of the unaudited quarterly financial statements.

(b) Since December 31, 2009, (i) there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Restricted
Subsidiaries has been conducted only in the ordinary course consistent with past
business practices.

(c) Neither the Borrower nor any Restricted Subsidiary has on the date hereof
any material Debt (including Disqualified Capital Stock) or any contingent
liabilities, off-balance sheet liabilities or partnerships, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments (other than the Gas Balancing
Obligations and the Swap Agreements listed on Schedule 7.20) which are not
referred to or reflected or provided for in the Financial Statements.

Section 7.05 Litigation.

(a) Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the Knowledge of the Borrower, threatened
against or affecting the Borrower or any Restricted Subsidiary (i) not fully
covered by insurance (except for normal deductibles) as to which there is

 

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a reasonable possibility of an adverse determination that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) that involve any Loan Document or
the Transactions.

(b) Since the date of this Agreement, there has been no change in the status of
the matters disclosed in Schedule 7.05 that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material Adverse
Effect.

Section 7.06 Environmental Matters. Except as could not be reasonably expected
to have a Material Adverse Effect (or with respect to (b), (c), (d) and
(e) below, where the failure to take such actions could not be reasonably
expected to have a Material Adverse Effect):

(a) neither any Property of the Borrower or any Restricted Subsidiary nor the
operations conducted thereon violate any order or requirement of any court or
Governmental Authority or any Environmental Laws.

(b) no Property of the Borrower or any Restricted Subsidiary nor the operations
currently conducted thereon or, to the Knowledge of the Borrower, by any prior
owner or operator of such Property or operation, are in violation of or subject
to any existing, pending or threatened action, suit, investigation, inquiry or
proceeding by or before any court or Governmental Authority or to any remedial
obligations under Environmental Laws.

(c) all notices, permits, licenses, exemptions, approvals or similar
authorizations, if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Borrower and each Restricted
Subsidiary, including, without limitation, past or present treatment, storage,
disposal or release of a hazardous substance, oil and gas waste or solid waste
into the environment, have been duly obtained or filed, and the Borrower and
each Restricted Subsidiary are in compliance with the terms and conditions of
all such notices, permits, licenses and similar authorizations.

(d) all hazardous substances, solid waste and oil and gas waste, if any,
generated at any and all Property of the Borrower or any Restricted Subsidiary
have in the past been transported, treated and disposed of in accordance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and, to the
Knowledge of the Borrower, all such transport carriers and treatment and
disposal facilities have been and are operating in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any Governmental
Authority in connection with any Environmental Laws.

(e) the Borrower has taken all steps reasonably necessary to determine and has
determined that no oil, hazardous substances, solid waste or oil and gas waste,
have been disposed of or otherwise released and there has been no threatened
release of any oil, hazardous substances, solid waste or oil and gas waste on or
to any Property of the Borrower or any Restricted Subsidiary except in
compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment.

 

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(f) to the extent applicable, all Property of the Borrower and each Restricted
Subsidiary currently satisfies all design, operation, and equipment requirements
imposed by the OPA, and the Borrower does not have any reason to believe that
such Property, to the extent subject to the OPA, will not be able to maintain
compliance with the OPA requirements during the term of this Agreement.

(g) neither the Borrower nor any Restricted Subsidiary has any known contingent
liability or Remedial Work in connection with any release or threatened release
of any oil, hazardous substance, solid waste or oil and gas waste into the
environment.

Section 7.07 Compliance with the Laws and Agreements; No Defaults.

(a) Each of the Borrower and each Restricted Subsidiary is in compliance with
all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.

(b) Neither the Borrower nor any Restricted Subsidiary is in default nor has any
event or circumstance occurred which, but for the expiration of any applicable
grace period or the giving of notice, or both, would constitute a default or
would require the Borrower or a Restricted Subsidiary to Redeem or make any
offer to Redeem under any indenture, note, credit agreement or instrument
pursuant to which any Material Indebtedness is outstanding or by which the
Borrower or any Restricted Subsidiary or any of their Properties is bound.

(c) No Default has occurred and is continuing.

Section 7.08 Investment Company Act. Neither the Borrower nor any Subsidiary is
an “investment company” or a company “controlled” by an “investment company,”
within the meaning of, or subject to regulation under, the Investment Company
Act of 1940, as amended.

Section 7.09 Taxes. Each of the Borrower and its Subsidiaries has timely filed
or caused to be filed all Tax returns and reports required to have been filed
and has paid or caused to be paid all Taxes required to have been paid by it,
except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves in accordance with GAAP or (b) to the
extent that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of Taxes and other governmental charges
are, in the reasonable opinion of the Borrower, adequate. No Tax Lien has been
filed and, to the Knowledge of the Borrower, no claim is being asserted with
respect to any such Tax or other such governmental charge.

Section 7.10 ERISA.

(a) The Borrower, the Subsidiaries and each ERISA Affiliate have complied in all
material respects with ERISA and, where applicable, the Code regarding each
Plan.

 

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(b) Each Plan is, and has been, established and maintained in substantial
compliance with its terms, ERISA and, where applicable, the Code.

(c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
subsections (c), (i), (l) or (m) of section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary
duty liability damages under section 409 of ERISA.

(d) Full payment when due has been made of all amounts which the Borrower, the
Subsidiaries or any ERISA Affiliate is required under the terms of each Plan or
applicable law to have paid as contributions to such Plan as of the date hereof.

(e) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate sponsors,
maintains, or contributes to an employee welfare benefit plan, as defined in
section 3(1) of ERISA, including, without limitation, any such plan maintained
to provide benefits to former employees of such entities, that may not be
terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its sole
discretion at any time without any material liability.

(f) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate sponsors,
maintains or contributes to, or has at any time in the six-year period preceding
the date hereof sponsored, maintained or contributed to, any employee pension
benefit plan, as defined in section 3(2) of ERISA, that is subject to Title IV
of ERISA, section 302 of ERISA or section 412 of the Code.

Section 7.11 Disclosure; No Material Misstatements. None of the reports,
financial statements, certificates or other information furnished by or on
behalf of the Borrower or any Restricted Subsidiary to the Administrative Agent
or any Lender or any of their Affiliates in connection with the negotiation of
this Agreement or any other Loan Document or delivered hereunder or under any
other Loan Document (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time (it being understood that actual results may vary from
the projected financial information). There is no fact peculiar to the Borrower
or any Restricted Subsidiary which could reasonably be expected to have a
Material Adverse Effect or in the future is reasonably likely to have a Material
Adverse Effect and which has not been set forth in this Agreement or the Loan
Documents or the other documents, certificates and statements furnished to the
Administrative Agent or the Lenders by or on behalf of the Borrower or any
Restricted Subsidiary on the date hereof in connection with the transactions
contemplated hereby. No statements or conclusions exist in any Reserve Report
which are based upon or include misleading information or which fail to take
into account material information regarding the matters reported therein to the
extent such misstatement, misleading information or failure could reasonably be
expected to have a Material Adverse Effect.

 

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Section 7.12 Insurance. The Borrower has, and has caused all its Restricted
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Restricted
Subsidiaries. The Administrative Agent and the Lenders have been named as
additional insureds in respect of such liability insurance policies and the
Administrative Agent has been named as loss payee with respect to Property loss
insurance.

Section 7.13 Restriction on Liens. Neither the Borrower nor any of the
Restricted Subsidiaries is a party to any material agreement or arrangement
(other than Capital Leases creating Liens permitted by Section 9.03(c), but then
only on the Property subject of such Capital Lease, and pursuant to the Newco
LLC Agreement with respect to Hawk Field Services’s Equity Interest in Newco),
or subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the Administrative Agent and
the Lenders on or in respect of their Properties to secure the Indebtedness and
the Loan Documents.

Section 7.14 Subsidiaries. Except as set forth on Schedule 7.14 or as disclosed
in writing to the Administrative Agent (which shall promptly furnish a copy to
the Lenders), which shall be a supplement to Schedule 7.14, the Borrower has no
Subsidiaries and the Borrower has no Foreign Subsidiaries. Schedule 7.14, as may
be supplemented from time to time, identifies each Subsidiary as either
Restricted or Unrestricted, and each Restricted Subsidiary on such schedule is a
Wholly-Owned Subsidiary.

Section 7.15 Location of Business and Offices. The Borrower’s jurisdiction of
organization is Delaware; the name of the Borrower as listed in the public
records of its jurisdiction of organization is Petrohawk Energy Corporation; and
the organizational identification number of the Borrower in its jurisdiction of
organization is 3828463 (or, in each case, as set forth in a notice delivered to
the Administrative Agent pursuant to Section 8.01(m) in accordance with
Section 12.01). The Borrower’s principal place of business and chief executive
offices are located at the address specified in Section 12.01 (or as set forth
in a notice delivered pursuant to Section 8.01(m) and Section 12.01(c)). Each
Restricted Subsidiary’s jurisdiction of organization, name as listed in the
public records of its jurisdiction of organization, organizational
identification number in its jurisdiction of organization, and the location of
its principal place of business and chief executive office is stated on Schedule
7.14 (or as set forth in a notice delivered pursuant to Section 8.01(m)).

Section 7.16 Properties; Titles, Etc.

(a) Each of the Borrower and the Restricted Subsidiaries has good and defensible
title to the Oil and Gas Properties evaluated in the most recently delivered
Reserve Report, the Midstream Assets and good title to all its other personal
Properties, in each case, free and clear of all Liens except Liens permitted by
Section 9.03. After giving full effect to the Excepted Liens, the Borrower or
the Restricted Subsidiary specified as the owner owns the net interests in
production attributable to the Hydrocarbon Interests as reflected in the most
recently delivered Reserve Report, and the ownership of such Properties shall
not in any material respect obligate

 

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the Borrower or such Restricted Subsidiary to bear the costs and expenses
relating to the maintenance, development and operations of each such Property in
an amount in excess of the working interest of each Property set forth in the
most recently delivered Reserve Report that is not offset by a corresponding
proportionate increase in the Borrower’s or such Restricted Subsidiary’s net
revenue interest in such Property.

(b) All material leases and agreements necessary for the conduct of the business
of the Borrower and the Restricted Subsidiaries are valid and subsisting, in
full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which could reasonably be expected
to have a Material Adverse Effect.

(c) The rights and Properties presently owned, leased or licensed by the
Borrower and the Restricted Subsidiaries including, without limitation, all
easements and rights of way, include all rights and Properties necessary to
permit the Borrower and the Restricted Subsidiaries to conduct their business in
all material respects in the same manner as its business has been conducted
prior to the date hereof.

(d) All of the Properties of the Borrower and the Restricted Subsidiaries which
are reasonably necessary for the operation of their businesses are in good
working condition and are maintained in accordance with prudent business
standards.

(e) The Borrower and each Restricted Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and such
Restricted Subsidiary does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect. The Borrower
and its Restricted Subsidiaries either own or have valid licenses or other
rights to use all databases, geological data, geophysical data, engineering
data, seismic data, maps, interpretations and other technical information used
in their businesses as presently conducted, subject to the limitations contained
in the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to have a
Material Adverse Effect.

Section 7.17 Maintenance of Properties. Except for such acts or failures to act
as could not be reasonably expected to have a Material Adverse Effect, the Oil
and Gas Properties (and Properties unitized therewith) of the Borrower and its
Restricted Subsidiaries and the Midstream Assets have been maintained, operated
and developed in a good and workmanlike manner and in conformity with all
Governmental Requirements and in conformity with the provisions of all leases,
subleases or other contracts comprising a part of the Hydrocarbon Interests and
other contracts and agreements forming a part of the Oil and Gas Properties of
the Borrower and its Restricted Subsidiaries. Specifically in connection with
the foregoing, except for those as could not be reasonably expected to have a
Material Adverse Effect, (i) no Oil and Gas Property of the Borrower or any
Restricted Subsidiary is subject to having allowable production reduced below
the full and regular allowable (including the maximum permissible tolerance)
because of any overproduction (whether or not the same was permissible at the
time) and (ii) none of the wells

 

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comprising a part of the Oil and Gas Properties (or Properties unitized
therewith) of the Borrower or any Restricted Subsidiary is deviated from the
vertical more than the maximum permitted by Governmental Requirements, and such
wells are, in fact, bottomed under and are producing from, and the well bores
are wholly within, the Oil and Gas Properties (or in the case of wells located
on Properties unitized therewith, such unitized Properties) of the Borrower or
such Restricted Subsidiary. All pipelines, wells, gas processing plants,
platforms and other material improvements, fixtures and equipment owned in whole
or in part by the Borrower or any of its Restricted Subsidiaries that are
necessary to conduct normal operations are being maintained in a state adequate
to conduct normal operations, and with respect to such of the foregoing which
are operated by the Borrower or any of its Restricted Subsidiaries, in a manner
consistent with the Borrower’s or its Restricted Subsidiaries’ past practices
(other than those the failure of which to maintain in accordance with this
Section 7.17 could not reasonably be expected to have a Material Adverse
Effect).

Section 7.18 Gas Imbalances, Prepayments. Except as set forth on Schedule 7.18
or on the most recent certificate delivered pursuant to Section 8.12(c), on a
net basis there are no gas imbalances, take or pay or other prepayments which
would require the Borrower or any of its Restricted Subsidiaries to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding a volume
equal to 1% of the total proved reserves (on an mcf equivalent basis) set forth
in the most recently delivered Reserve Report in the aggregate.

Section 7.19 Marketing of Production. Except for contracts listed and in effect
on the date hereof on Schedule 7.19, and thereafter either disclosed in writing
to the Administrative Agent or included in the most recently delivered Reserve
Report (with respect to all of which contracts the Borrower represents that it
or its Restricted Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property’s delivery capacity), no material agreements exist which
are not cancelable on 60 days notice or less without penalty or detriment for
the sale of production from the Borrower’s or its Restricted Subsidiaries’
Hydrocarbons (including, without limitation, calls on or other rights to
purchase production, whether or not the same are currently being exercised) that
(a) pertain to the sale of production at a fixed price and (b) have a maturity
or expiry date of longer than six (6) months from the date hereof.

Section 7.20 Swap Agreements. Schedule 7.20, as of the date hereof, and after
the date hereof, each report required to be delivered by the Borrower pursuant
to Section 8.01(e), sets forth, a true and complete list of all Swap Agreements
of the Borrower and each Restricted Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.

Section 7.21 Use of Loans and Letters of Credit. The proceeds of the Loans and
the Letters of Credit shall be used to provide working capital for exploration
and production operations, to provide funding for general corporate purposes,
including the issuance of letters of credit. The Borrower and its Subsidiaries
are not engaged principally, or as one of its or their

 

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important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board). No part of the
proceeds of any Loan or Letter of Credit will be used for any purpose which
violates the provisions of Regulations T, U or X of the Board.

Section 7.22 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as
a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the
Borrower and the Guarantors will not have incurred or intended to incur, and
will not believe that it will incur, Debt beyond its ability to pay such Debt
(after taking into account the timing and amounts of cash to be received by each
of the Borrower and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrower and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.

Section 7.23 Transportation Contracts. Schedule 7.23, as of the date hereof, and
after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 8.01(s)(ii), sets forth a true and complete list of all
contracts of Hawk Field Services and its Restricted Subsidiaries for Midstream
Services and each counterparty thereto which are longer than 6 months in
duration or greater than $250,000 in expected revenue.

ARTICLE VIII

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full and all Letters of
Credit shall have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

Section 8.01 Financial Statements; Ratings Change; Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:

(a) Annual Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 90 days after the end of
each fiscal year of the Borrower, its audited consolidated balance sheet and
related statements of operations, stockholders’ equity and cash flows as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Borrower and its Consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied.

 

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(b) Quarterly Financial Statements. As soon as available, but in any event in
accordance with then applicable law and not later than 45 days after the end of
each of the first three fiscal quarters of each fiscal year of the Borrower, its
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
one of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries or Hawk Field Services, as applicable, on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes.

(c) Certificate of Financial Officer — Compliance. Concurrently with any
delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit D hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 8.13(b) and Section 9.01 and (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 7.04 and, if any
such change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate.

(d) Certificate of Financial Officer — Consolidating Information. If, at any
time, all of the Consolidated Subsidiaries of the Borrower are not Consolidated
Restricted Subsidiaries, then concurrently with any delivery of financial
statements under Section 8.01(a) or Section 8.01(b), a certificate of a
Financial Officer setting forth consolidating spreadsheets that show all
Consolidated Unrestricted Subsidiaries and the eliminating entries, in such form
as would be presentable to the auditors of the Borrower.

(e) Certificate of Financial Officer — Swap Agreements. Concurrently with any
delivery of any Reserve Report or at such other times as may be reasonably
requested by the Administrative Agent, a certificate of a Financial Officer, in
form and substance satisfactory to the Administrative Agent, setting forth as of
the last Business Day of the calendar month preceding the delivery of such
Reserve Report, a true and complete list of all Swap Agreements of the Borrower
and each Restricted Subsidiary, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
mark-to-market value therefor, any new credit support agreements relating
thereto not listed on Schedule 7.20, any margin required or supplied under any
credit support document, and the counterparty to each such agreement.

(f) Certificate of Insurer — Insurance Coverage. Concurrently with any delivery
of financial statements under Section 8.01(a), a certificate of insurance
coverage from each insurer with respect to the insurance required by
Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.

 

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(g) Other Accounting Reports. Promptly upon receipt thereof, a copy of each
other material report or opinion submitted to the Borrower or any of its
Subsidiaries by independent accountants in connection with any annual, interim
or special audit made by them of the books of the Borrower or any such
Subsidiary, and a copy of any response by the Borrower or any such Subsidiary,
or the Board of Directors of the Borrower or any such Subsidiary, to such
material report or opinion.

(h) SEC and Other Filings; Reports to Shareholders. Promptly after the same
become publicly available, and upon the request of the Lenders, copies of all
periodic and other reports, proxy statements and other materials filed by the
Borrower or any Subsidiary with the SEC, or with any national securities
exchange and distributed by the Borrower to its shareholders. Documents required
to be delivered pursuant to Sections 8.01(a), 8.01(b) and this 8.01(h) may be
delivered electronically and if so delivered, shall be deemed to have been
delivered on the date on which the Administrative Agent receives notice from the
Borrower, electronically or in writing, that such documents have been posted to
EDGAR (or such other free, publicly-accessible internet database that may be
established and maintained by the SEC as a substitute for, or successor to,
EDGAR).

(i) Notices Under Material Instruments. Promptly after the furnishing thereof,
copies of any financial statement, report or notice furnished to or by any
Person pursuant to the terms of any preferred stock designation, indenture, loan
or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.

(j) Lists of Purchasers. Concurrently with the delivery of the annual financial
statements in accordance with Section 8.01(a), a list of Persons who purchase
(or did purchase in the last 12 months) at least 70% of the Hydrocarbons from
the Borrower or any Restricted Subsidiary.

(k) Notice of Sales of Oil and Gas Properties. In the event the Borrower or any
Restricted Subsidiary intends to sell, transfer, assign or otherwise dispose of
at least $25,000,000 worth of any Oil or Gas Properties, of at least $25,000,000
worth of any Midstream Assets or any Equity Interests in any Subsidiary in
accordance with Section 9.13, prior written notice of such disposition, the
price thereof and the anticipated date of closing.

(l) Notice of Casualty Events. Prompt written notice, and in any event within
three Business Days after the Borrower obtains knowledge of the occurrence of
any Casualty Event or the commencement of any action or proceeding that could
reasonably be expected to result in a Casualty Event.

(m) Information Regarding Borrower and Guarantors. Prompt written notice (and in
any event within ten (10) days prior thereto) of any change (i) in the Borrower
or any Guarantor’s corporate name or in any trade name used to identify such
Person in the conduct of its business or in the ownership of its Properties,
(ii) in the location of the Borrower or any Guarantor’s chief executive office
or principal place of business, (iii) in the Borrower or any Guarantor’s
identity or corporate structure or in the jurisdiction in which such Person is
incorporated or formed, (iv) in the Borrower or any Guarantor’s jurisdiction of
organization or such Person’s organizational identification number in such
jurisdiction of organization, and (v) in the Borrower or any Guarantor’s federal
taxpayer identification number.

 

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(n) Production Report and Lease Operating Statements. Within forty-five
(45) days after the end of each fiscal quarter, a report setting forth, for each
calendar month during the then current fiscal year to the end of such fiscal
quarter on a production date basis, the volume of production and sales
attributable to production (and the prices at which such sales were made and the
revenues derived from such sales) for each such calendar month from the Oil and
Gas Properties, and setting forth the related ad valorem, severance and
production taxes and lease operating expenses attributable thereto and incurred
for each such calendar month.

(o) Notices of Certain Changes. Promptly, but in any event within five
(5) Business Days after the execution thereof, copies of any amendment,
modification or supplement to the certificate or articles of incorporation,
by-laws, any preferred stock designation or any other organic document of the
Borrower or any Restricted Subsidiary.

(p) Ratings Change. Promptly after Moody’s or S&P shall have announced a change
in the rating, established or deemed to have been established for the Borrower
or any Material Indebtedness, written notice of such rating change.

(q) Production Report. Promptly after preparation but no later than 45 days
after the end of each fiscal quarter, a report from the Borrower in form and
substance reasonably satisfactory to the Administrative Agent setting forth the
production of crude oil and natural gas, each calculated separately, for each
month in such quarter. With each such report, the Borrower shall either
(i) certify, represent and warrant that the internally forecasted production
from the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries
for all months in which the Borrower or one of its Restricted Subsidiaries has
Swap Agreements equals or exceeds their prior month’s production of each of
crude oil and natural gas, calculated separately, or (ii) deliver an additional
detailed forecasted production of each of crude oil and natural gas, calculated
separately, for the next 48 months or if any Swap Agreements have a tenor in
excess of 48 months, for a period corresponding to the tenor of such Swap
Agreements.

(r) Hawk Field Services Financials. Concurrently with the delivery of the
financial statements under Sections 8.01(a) and (b), unaudited consolidating
financial statements with a separate presentation in such statements of the
financials of Hawk Field Services and its Subsidiaries and a calculation of the
Midstream EBITDA as of the date of such financial statements.

(s) Midstream Services Contracts.

(i) Promptly upon receipt thereof, copies of all material notices, requests and
other documents (including material changes) received by Hawk Field Services or
any of its Restricted Subsidiaries under or pursuant to any Midstream Services
contract.

(ii) Concurrently with any delivery of the financial information of Hawk Field
Services pursuant to Section 8.01(r), a certificate of a Financial Officer, in
form and substance satisfactory to the Administrative Agent, setting forth as of
such date, a true and complete list of all Midstream Services contracts of Hawk
Field Services and its Restricted Subsidiaries not previously listed on Schedule
7.23, and the counterparty to each such agreement.

 

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(t) Other Requested Information. Promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of the Borrower or any Subsidiary (including, without limitation, any
Plan or Multiemployer Plan and any reports or other information required to be
filed under ERISA), or compliance with the terms of this Agreement or any other
Loan Document, as the Administrative Agent or any Lender may reasonably request.

(u) Delivery of Information Electronically. Notices to the Administrative Agent
and the Lenders under this Section 8.01 may be delivered or furnished by
electronic communications pursuant to procedures approved by the Administrative
Agent, including broadcast email to the Lenders that the available information
has been made available to the Lenders on either the Borrower’s “Intralinks”
page or the Borrower’s website at www.petrohawk.com.

Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of, or the threat in writing of, any action,
suit, proceeding, investigation or arbitration by or before any arbitrator or
Governmental Authority against or affecting the Borrower or any Affiliate
thereof not previously disclosed in writing to the Lenders or any material
adverse development in any action, suit, proceeding, investigation or
arbitration previously disclosed to the Lenders that could reasonably be
expected to be adversely determined and result in liability in excess of
$25,000,000 not fully covered by insurance, subject to normal deductibles; and

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

Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.

Section 8.03 Existence; Conduct of Business. The Borrower will, and will cause
each Restricted Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.12.

Section 8.04 Payment of Obligations. The Borrower will, and will cause each
Restricted Subsidiary to, pay its obligations, including Tax liabilities of the
Borrower and all of

 

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its Subsidiaries before the same shall become delinquent or in default, except
where (a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) the Borrower or such Restricted Subsidiary has set
aside on its books adequate reserves with respect thereto in accordance with
GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect or result in the
seizure or levy of any Property of the Borrower or any Subsidiary.

Section 8.05 Performance of Obligations under Loan Documents. The Borrower will
pay the Loans according to the reading, tenor and effect thereof, and the
Borrower will, and will cause each Restricted Subsidiary to, do and perform
every act and discharge all of the obligations to be performed and discharged by
them under the Loan Documents, including, without limitation, this Agreement, at
the time or times and in the manner specified.

Section 8.06 Operation and Maintenance of Properties. Except for matters that
could not reasonably be expected to result in a Material Adverse Effect, the
Borrower, at its own expense, will, and will cause each Restricted Subsidiary
to:

(a) operate its Oil and Gas Properties, the Midstream Assets and other material
Properties or cause such Oil and Gas Properties, Midstream Assets and other
material Properties to be operated in a careful and efficient manner in
accordance with the practices of the industry and in compliance with all
applicable contracts and agreements and in compliance with all Governmental
Requirements, including, without limitation, applicable pro ration requirements
and Environmental Laws, and all applicable laws, rules and regulations of every
other Governmental Authority from time to time constituted to regulate the
development and operation of Oil and Gas Properties and the production and sale
of Hydrocarbons and other minerals therefrom.

(b) keep and maintain the Midstream Assets and all other Property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted preserve, maintain and keep in good repair, working order and
efficiency (ordinary wear and tear excepted) all of its Oil and Gas Properties,
Midstream Assets and other Properties, including, without limitation, all
equipment, machinery and facilities.

(c) promptly pay and discharge, or make reasonable and customary efforts to
cause to be paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting or
pertaining to the Midstream Assets or its Oil and Gas Properties and will do all
other things necessary to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder.

(d) promptly perform or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations required by
each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties, Midstream
Assets and other material Properties.

(e) to the extent the Borrower is not the operator of any Property, the Borrower
shall use reasonable efforts to cause the operator to comply with this
Section 8.06.

 

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Section 8.07 Insurance. The Borrower will, and will cause each Restricted
Subsidiary to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations. The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as “additional insureds” and provide that the insurer will endeavor
to give at least 30 days prior notice of any cancellation to the Administrative
Agent.

Section 8.08 Books and Records; Inspection Rights. The Borrower will, and will
cause each Restricted Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its Properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and
independent accountants, all at such reasonable times during normal business
hours and as often as reasonably requested.

Section 8.09 Compliance with Laws. The Borrower will, and will cause each
Restricted Subsidiary to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

Section 8.10 Environmental Matters.

(a) The Borrower shall at its sole expense: (i) comply, and shall cause its
Properties and operations and each Subsidiary and each Subsidiary’s Properties
and operations to comply, with all applicable Environmental Laws, the breach of
which could be reasonably expected to have a Material Adverse Effect; (ii) not
dispose of or otherwise release, and shall cause each Subsidiary not to dispose
of or otherwise release, any oil, oil and gas waste, hazardous substance, or
solid waste on, under, about or from any of the Borrower’s or its Subsidiaries’
Properties or any other Property to the extent caused by the Borrower’s or any
of its Subsidiaries’ operations except in compliance with applicable
Environmental Laws, the disposal or release of which could reasonably be
expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower’s or its Subsidiaries’
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the “Remedial Work”) in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future disposal or other release of any oil, oil and gas waste, hazardous
substance or solid waste on, under, about or

 

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from any of the Borrower’s or its Subsidiaries’ Properties, which failure to
commence and diligently prosecute to completion could reasonably be expected to
have a Material Adverse Effect; and (v) establish and implement, and shall cause
each Subsidiary to establish and implement, such procedures as may be necessary
to continuously determine and assure that the Borrower’s and its Subsidiaries’
obligations under this Section 8.10(a) are timely and fully satisfied, which
failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.

(b) The Borrower will promptly, but in no event later than five days after the
occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any landowner or
other third party against the Borrower or its Subsidiaries or their Properties
of which the Borrower has Knowledge in connection with any Environmental Laws
(excluding routine testing and corrective action) if the Borrower reasonably
anticipates that such action will result in liability (whether individually or
in the aggregate) in excess of $25,000,000, not fully covered by insurance,
subject to normal deductibles.

(c) The Borrower will, and will cause each Subsidiary to, provide environmental
audits and tests in accordance with American Society of Testing Materials
standards upon request by the Administrative Agent and the Lenders and no more
than once per year in the absence of any Event of Default (or as otherwise
required to be obtained by the Administrative Agent or the Lenders by any
Governmental Authority), in connection with any future acquisitions of Oil and
Gas Properties or other Properties.

Section 8.11 Further Assurances.

(a) The Borrower at its expense will, and will cause each Restricted Subsidiary
to, promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the Administrative
Agent to comply with, cure any defects or accomplish the conditions precedent,
covenants and agreements of the Borrower or any Restricted Subsidiary, as the
case may be, in the Loan Documents, including the Notes, if requested, or to
further evidence and more fully describe the collateral intended as security for
the Indebtedness, or to correct any omissions in this Agreement or the Security
Instruments, or to state more fully the obligations secured therein, or to
perfect, protect or preserve any Liens created pursuant to this Agreement or any
of the Security Instruments or the priority thereof, or to make any recordings,
file any notices or obtain any consents, all as may be reasonably necessary or
appropriate, in the reasonable discretion of the Administrative Agent, in
connection therewith.

(b) The Borrower hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Mortgaged Property without the signature of the Borrower or any
other Guarantor where permitted by law. A carbon, photographic or other
reproduction of the Security Instruments or any financing statement covering the
Mortgaged Property or any part thereof shall be sufficient as a financing
statement where permitted by law.

 

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Section 8.12 Reserve Reports.

(a) On or before April 1st and October 1st of each year, commencing October 1,
2010, the Borrower shall furnish to the Administrative Agent and the Lenders a
Reserve Report. The Reserve Report as of December 31st of each year shall be
prepared by one or more Approved Petroleum Engineers, and the June 30th Reserve
Report of each year shall be prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true and
accurate in all material respects and to have been prepared in accordance with
the procedures used in the immediately preceding December 31st Reserve Report.

(b) In the event of an Interim Redetermination, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate in all material respects and to have been
prepared in accordance with the procedures used in the immediately preceding
December 31st Reserve Report. For any Interim Redetermination requested by the
Administrative Agent or the Borrower pursuant to Section 2.07(b), the Borrower
shall provide such Reserve Report with an “as of” date as required by the
Administrative Agent as soon as possible, but in any event no later than thirty
(30) days following the receipt of such request.

(c) With the delivery of each Reserve Report, the Borrower shall provide to the
Administrative Agent and the Lenders a certificate from a Responsible Officer
certifying that in all material respects: (i) the information contained in the
Reserve Report and any other information delivered in connection therewith is
true and correct in all material respects, (ii) the Borrower or its Restricted
Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 9.03, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances, take or
pay or other prepayments in excess of the volume specified in Section 7.18 with
respect to its Oil and Gas Properties evaluated in such Reserve Report which
would require the Borrower or any Restricted Subsidiary to deliver Hydrocarbons
either generally or produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv) none of
their Oil and Gas Properties have been sold since the date of the last Oil and
Gas Borrowing Base determination except as set forth on an exhibit to the
certificate, which certificate shall list all of its Oil and Gas Properties sold
and in such detail as reasonably required by the Administrative Agent,
(v) attached to the certificate is a list of all marketing agreements entered
into subsequent to the later of the date hereof or the most recently delivered
Reserve Report which the Borrower could reasonably be expected to have been
obligated to list on Schedule 7.19 had such agreement been in effect on the date
hereof and (vi) attached thereto is a schedule of the Oil and Gas Properties
evaluated by such Reserve Report that are Mortgaged Properties and demonstrating
that the Borrower is in compliance with Section 8.14(a).

Section 8.13 Title Information.

(a) On or before the delivery to the Administrative Agent and the Lenders of
each Reserve Report required by Section 8.12(a), the Borrower will deliver title
information in form and substance acceptable to the Administrative Agent
covering enough of the Oil and Gas

 

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Properties evaluated by such Reserve Report that were not included in the
immediately preceding Reserve Report, so that the Administrative Agent shall
have received, together with title information previously delivered to the
Administrative Agent, reasonably satisfactory title information on at least 75%
of the total value of the Oil and Gas Properties evaluated by such Reserve
Report.

(b) If the Borrower has provided title information for additional Properties
under Section 8.13(a), the Borrower shall, within 90 days of notice from the
Administrative Agent that title defects or exceptions exist with respect to such
additional Properties, either (i) cure any such title defects or exceptions
(including defects or exceptions as to priority) which are not permitted by
Section 9.03 raised by such information, (ii) substitute acceptable Mortgaged
Properties with no title defects or exceptions except for Excepted Liens (other
than Excepted Liens described in clauses (e), (g) and (h) of such definition)
having an equivalent value or (iii) deliver title information in form and
substance acceptable to the Administrative Agent so that the Administrative
Agent shall have received, together with title information previously delivered
to the Administrative Agent, reasonably satisfactory title information on at
least 75% of the total value of the Oil and Gas Properties evaluated by such
Reserve Report.

(c) If the Borrower is unable to cure any title defect requested by the
Administrative Agent or the Lenders to be cured within the 90-day period or the
Borrower does not comply with the requirements to provide acceptable title
information covering 75% of the Oil and Gas Properties evaluated in the most
recent Reserve Report, such default shall not be a Default, but instead the
Administrative Agent and/or the Majority Lenders shall have the right to
exercise the following remedy in their sole discretion from time to time, and
any failure to so exercise this remedy at any time shall not be a waiver as to
future exercise of the remedy by the Administrative Agent or the Lenders. To the
extent that the Administrative Agent or the Majority Lenders are not satisfied
with title to any Mortgaged Property after the 90-day period has elapsed, such
unacceptable Mortgaged Property shall not count towards the 75% requirement, and
the Administrative Agent may send a notice to the Borrower and the Lenders that
the then outstanding Oil and Gas Borrowing Base shall be reduced by an amount as
determined by the Majority Lenders to cause the Borrower to be in compliance
with the requirement to provide acceptable title information on 75% of the value
of the Oil and Gas Properties. This new Oil and Gas Borrowing Base shall become
effective immediately after receipt of such notice.

Section 8.14 Additional Collateral; Additional Guarantors.

(a) In connection with each redetermination of the Oil and Gas Borrowing Base,
the Borrower shall review the Reserve Report and the list of current Mortgaged
Properties (as described in Section 8.12(c)(vi)) to ascertain whether the
Mortgaged Properties represent at least 80% of the total value of the Oil and
Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production. In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its Restricted Subsidiaries to, grant, within thirty (30) days of delivery
of the certificate required under Section 8.12(c), to the Administrative Agent
as security for the Indebtedness a first-priority Lien interest (subject only to
Excepted Liens of the type described in clauses (a) to (d) and (f) of the
definition thereof, but

 

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subject to the provisos at the end of such definition) on additional Oil and Gas
Properties not already subject to a Lien of the Security Instruments such that
after giving effect thereto, the Mortgaged Properties will represent at least
80% of such total value. All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for recording
purposes. In order to comply with the foregoing, if any Restricted Subsidiary
places a Lien on its Oil and Gas Properties and such Restricted Subsidiary is
not a Guarantor, then it shall become a Guarantor and comply with
Section 8.14(b).

(b) In the event that (i) the Borrower determines that any Restricted Subsidiary
is a Material Domestic Subsidiary or (ii) any Domestic Subsidiary incurs or
guarantees any Debt, the Borrower shall promptly cause such Restricted
Subsidiary to guarantee the Indebtedness pursuant to the Guaranty Agreement. In
connection with any such guaranty, the Borrower shall, or shall cause such
Restricted Subsidiary to, (A) execute and deliver a supplement to the Guaranty
Agreement executed by such Subsidiary, (B) pledge all of the Equity Interests of
such new Subsidiary (including, without limitation, delivery of original stock
certificates evidencing the Equity Interests of such Subsidiary, together with
an appropriate undated stock powers for each certificate duly executed in blank
by the registered owner thereof) and (C) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.

(c) In the event that the Borrower or any Domestic Subsidiary becomes the owner
of a Foreign Subsidiary which has total assets in excess of $10,000,000, then
the Borrower shall promptly, or shall cause such Domestic Subsidiary to
promptly, guarantee the Indebtedness pursuant to the Guaranty Agreement. In
connection with any such guaranty, the Borrower shall, or shall cause such
Domestic Subsidiary to, (i) execute and deliver a supplement to the Guaranty
Agreement, (ii) pledge 65% of all the Equity Interests of such Foreign
Subsidiary (including, without limitation, delivery of original stock
certificates evidencing such Equity Interests of such Foreign Subsidiary,
together with appropriate stock powers for each certificate duly executed in
blank by the registered owner thereof) and (iii) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.

(d) With the delivery of each April 1 Reserve Report, the Borrower shall provide
information to the Administrative Agent on all Midstream Assets acquired since
the last April 1 Reserve Report in such detail as reasonably required by the
Administrative Agent and the Borrower and its Restricted Subsidiaries owning
such Midstream Assets shall execute Security Instruments acceptable to the
Administrative Agent granting first priority Liens to the Administrative Agent
in substantially all of the Midstream Assets.

Section 8.15 ERISA Compliance. The Borrower will promptly furnish and will cause
the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor or the Internal Revenue Service, copies of each annual
and other report with respect to each Plan or any trust created thereunder, and
(ii) promptly upon becoming aware of the occurrence of any “prohibited

 

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transaction,” as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by the President or the principal Financial Officer, the
Subsidiary or the ERISA Affiliate, as the case may be, specifying the nature
thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is
taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service or the Department of Labor
with respect thereto if such action could reasonably be expected to result in
liability (whether individually of in the aggregate) in excess of $25,000,000.

Section 8.16 Swap Agreements. The Borrower shall or shall cause one or more of
its Restricted Subsidiaries (which is a Guarantor) to maintain the hedged
position established by the Swap Agreements included in Schedule 7.20 during the
period from the Effective Date until the next redetermination of the Oil and Gas
Borrowing Base and shall neither assign, terminate or unwind any such Swap
Agreements nor sell any Swap Agreements if the effect of such action (when taken
together with any other Swap Agreements executed contemporaneously with the
taking of such action) would have the effect of canceling its positions under
such Swap Agreements required hereby.

Section 8.17 Unrestricted Subsidiaries. The Borrower:

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

(b) will not, and will not permit any of the Restricted Subsidiaries to, incur,
assume, guarantee or be or become liable for any Debt of any of the Unrestricted
Subsidiaries.

(c) will not permit any Unrestricted Subsidiary to hold any Equity Interest in,
or any Debt of, the Borrower or any Restricted Subsidiary.

Section 8.18 Marketing Activities. The Borrower will not, and will not permit
any of its Restricted Subsidiaries to, engage in marketing activities for any
Hydrocarbons or enter into any contracts related thereto other than
(i) contracts for the sale of Hydrocarbons scheduled or reasonably estimated to
be produced from their proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrower and its Restricted Subsidiaries that the Borrower or one of its
Restricted Subsidiaries has the right to market pursuant to joint operating
agreements, unitization agreements or other similar contracts that are usual and
customary in the oil and gas business and (iii) other contracts for the purchase
and/or sale of Hydrocarbons of third parties (A) which have generally offsetting
provisions (i.e. corresponding pricing mechanics, delivery dates and points and
volumes) such that no “position” is taken and (B) for which appropriate credit
support has been taken to alleviate the material credit risks of the
counterparty thereto.

 

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Section 8.19 Midstream Assets and Midstream Services Contracts.

(a) To the extent the Oil and Gas Properties of the Borrower and its Restricted
Subsidiaries are in a field serviced by the Midstream Assets, the Borrower shall
dedicate the production and transportation of such Oil and Gas Properties to
Hawk Field Services or one of its Restricted Subsidiaries, as applicable, except
to the extent such production and transportation is provided by a third party
under a contract for such in effect on the Effective Date.

(b) The Borrower shall cause Hawk Field Services and each of its Restricted
Subsidiaries to perform and observe in all material respects all the terms and
provisions of each Midstream Services contract of Hawk Field Services and its
Restricted Subsidiaries to be performed or observed by them, maintain each such
Midstream Services contract in full force and effect, and enforce each such
Midstream Services contract in accordance with its terms.

ARTICLE IX

Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full and all Letters of
Credit have expired or terminated and all LC Disbursements shall have been
reimbursed, the Borrower covenants and agrees with the Lenders that:

Section 9.01 Financial Covenants.

(a) Interest Coverage Ratio. The Borrower will not, as of the last day of any
fiscal quarter, permit its ratio of EBITDA for the period of four fiscal
quarters then ending to Interest Expense for such period to be less than 2.5 to
1.0.

(b) Current Ratio. The Borrower will not permit, as of the last day of any
fiscal quarter, its ratio of (i) consolidated current assets (including the
unused amount of the total Commitments, but excluding any non-cash gains on Swap
Agreements and any deferred income tax, to (ii) consolidated current liabilities
(but excluding any non-cash losses on Swap Agreements and any deferred tax
liabilities and any current maturities of long-term Debt) to be less than 1.0 to
1.0.

Section 9.02 Debt. The Borrower will not, and will not permit any Restricted
Subsidiary to, incur, create, assume or suffer to exist any Debt, except:

(a) the Loans, any Notes or other Indebtedness arising under the Loan Documents
or any guaranty of or suretyship arrangement for the Loans, any Notes or other
Indebtedness arising under the Loan Documents, and any deferred put premiums
associated with Swap Agreements entered into with an Approved Counterparty.

 

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(b) Debt of the Borrower and its Restricted Subsidiaries existing on the date
hereof that is reflected in the Financial Statements.

(c) accounts payable and accrued expenses, liabilities or other obligations to
pay the deferred purchase price of Property or services, from time to time
incurred in the ordinary course of business which are not greater than sixty
(60) days past the date of invoice or delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP.

(d) Debt (including guarantees) under Capital Leases, provided that the
aggregate amount of such Debt and Debt incurred pursuant to Sections 9.02(k) and
(l) does not exceed $50,000,000 at any one time outstanding.

(e) Debt associated with bonds or surety obligations required by Governmental
Requirements in connection with the operation of the Oil and Gas Properties.

(f) intercompany Debt between the Borrower and any Restricted Subsidiary or
between Restricted Subsidiaries to the extent permitted by Section 9.05(g);
provided that such Debt is not held, assigned, transferred, negotiated or
pledged to any Person other than the Borrower or one of its Wholly-Owned
Subsidiaries, and, provided further, that any such Debt owed by either the
Borrower or a Guarantor shall be subordinated to the Indebtedness on terms set
forth in the Guaranty Agreement.

(g) endorsements of negotiable instruments for collection in the ordinary course
of business.

(h) Debt under any Senior Notes outstanding on the Effective Date and any
Permitted Refinancing Debt in respect thereof.

(i) Debt under any Senior Notes issued after the Effective Date, provided that
(1) at the time of incurring such Debt (a) no Default has occurred and is then
continuing and (b) no Default would result from the incurrence of such Debt
after giving effect to the incurrence of such Debt (and any concurrent repayment
of Debt with the proceeds of such incurrence), (2) such Debt does not have any
scheduled amortization prior to one year after the Maturity Date, (3) such Debt
does not mature sooner than one year after the Maturity Date, (4) the terms of
such Debt are not materially more onerous, taken as a whole, than the terms of
this Agreement and the other Loan Documents, (5) such Debt and any guarantees
thereof are on prevailing market terms for similar situated companies and
(6) the Borrowing Base is adjusted as contemplated by Section 2.07(d) and the
Borrower makes any prepayment required under Section 3.04(c)(iii).

(j) Debt incurred to finance insurance premiums.

(k) Debt incurred solely for the purpose of financing the acquisition,
construction or improvement of any fixed or capital assets, including Debt
assumed in connection with the acquisition of such assets; provided that (i) the
principal amount of such Debt does not exceed the cost of acquiring,
constructing or improving such fixed or capital assets and (ii) the aggregate
amount of such Debt and Debt incurred pursuant to Sections 9.02(d) and (l) does
not exceed $50,000,000 at any one time outstanding.

 

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(l) other Debt, provided that the aggregate amount of such Debt and Debt
incurred pursuant to Sections 9.02(d) and (k) does not exceed $50,000,000 at any
one time outstanding.

For the avoidance of doubt, an issue of Senior Notes may be comprised of Debt
only a portion of which constitutes Permitted Refinancing Debt to the extent the
aggregate principal amount thereof exceeds the current principal amount of the
Senior Notes being refinanced or replaced.

Section 9.03 Liens. The Borrower will not, and will not permit any Restricted
Subsidiary to, create, incur, assume or permit to exist any Lien on any of its
Properties (now owned or hereafter acquired), except:

(a) Liens securing the payment of any Indebtedness.

(b) Excepted Liens.

(c) Liens securing (i) Capital Leases permitted by Section 9.02(d) but only on
the Property under lease and (ii) Debt for any fixed or capital assets pursuant
to Section 9.02(k) but only on the fixed or capital assets financed by such
Debt.

(d) Liens on Letters of Credit issued hereunder pledged to secure obligations
under any Swap Agreement permitted by Section 9.19.

(e) Liens securing Debt permitted by Section 9.02(j) or other obligations
related to the payment of insurance premiums; provided that such Liens do not
extend to any Property of the Borrower or its Restricted Subsidiaries other than
Property of the type customarily subject to such Liens (including rights under
the insurance policies purchased by such premiums).

(f) Liens on Property not constituting collateral for the Indebtedness or
Properties used in determining the Borrowing Base and not otherwise permitted by
the foregoing clauses of this Section 9.03; provided that the aggregate
principal or face amount of all Debt secured under this Section 9.03(e) shall
not exceed $25,000,000 at any time.

Section 9.04 Dividends, Distributions and Redemptions; Repayment of Senior
Notes.

(a) Restricted Payments. The Borrower will not, and will not permit any of its
Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of its Property to its Equity Interest holders, except
(i) the Borrower may declare and pay dividends with respect to its Equity
Interests payable solely in additional shares of its Equity Interests (other
than Disqualified Capital Stock), (ii) Subsidiaries may declare and pay
dividends or any other distributions with respect to their Equity Interests,
(iii) the Borrower may make Restricted Payments pursuant to and in accordance
with stock option plans or other benefit plans for management or employees of
the Borrower and its Subsidiaries, and (iv) the Borrower may terminate its
directors’ or employees’ option agreements or restricted stock agreements under
any of Borrower’s incentive stock plans provided, however, that the aggregate
amounts paid in respect thereof do not exceed $5,000,000.

 

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(b) Redemption of Senior Notes; Amendment of Senior Indentures. The Borrower
will not, and will not permit any Restricted Subsidiary to, prior to the date
that is ninety-one (91) days after the Maturity Date: (i) call, make or offer to
make any optional or voluntary Redemption of or otherwise optionally or
voluntarily Redeem (whether in whole or in part) the Senior Notes; provided that
the Borrower may (A) Redeem any Senior Notes in a principal amount not exceeding
the Net Cash Proceeds of any sale of Equity Interests (other than Disqualified
Capital Stock) of the Borrower or with the aggregate principal amount of
Permitted Refinancing Debt and (B) Redeem or otherwise repurchase any issue of
Senior Notes if (1) the outstanding principal balance of such issue is less than
$25,000,000, (2) no Default or Event of Default has occurred and is continuing
or would exist after giving effect to such Redemption or repurchase and
(3) after giving pro forma effect to any such Redemption or repurchase, the
Borrower would have at least $100,000,000 of unused availability under the
Borrowing Base, (ii) amend, modify, waive or otherwise change, consent or agree
to any amendment, supplement, modification, waiver or other change to, any of
the terms of the Senior Notes or any Senior Indenture if (A) the effect thereof
would be to shorten its maturity or average life or increase the amount of any
payment of principal thereof or increase the rate or shorten any period for
payment of interest thereon, or (B) such action requires the payment of a
consent fee (howsoever described) in connection with a tender offer for such
Senior Notes in excess of a reasonable amount under the circumstances then
applicable, as determined in good faith by the board of directors (or a duly
appointed committee thereof) of the Borrower, provided that the foregoing shall
not prohibit the execution of supplemental indentures to add guarantors if
required by the terms of any Senior Indenture provided such Person complies with
Section 8.14(b).

Section 9.05 Investments, Loans and Advances. The Borrower will not, and will
not permit any Restricted Subsidiary to, make or permit to remain outstanding
any Investments in or to any Person, except that the foregoing restriction shall
not apply to:

 

(a) Investments reflected in the Financial Statements or which are disclosed to
the Lenders in Schedule 9.05.

 

(b) accounts receivable arising in the ordinary course of business.

(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof.

(d) commercial paper maturing within one year from the date of creation thereof
rated in the highest grade by S&P or Moody’s.

(e) deposits maturing within one year from the date of creation thereof with,
including certificates of deposit issued by, any Lender or any office located in
the United States of any other bank or trust company which is organized under
the laws of the United States or any state thereof, has capital, surplus and
undivided profits aggregating at least $100,000,000 (as of the date of such bank
or trust company’s most recent financial reports) and has a short term deposit
rating of no lower than A2 or P2, as such rating is set forth from time to time,
by S&P or Moody’s, respectively or, in the case of any Foreign Subsidiary, a
bank organized in a jurisdiction in which the Foreign Subsidiary conducts
operations having assets in excess of $500,000,000 (or its equivalent in another
currency).

 

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(f) deposits in money market funds investing exclusively in Investments
described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).

(g) Investments (i) made by the Borrower in or to the Guarantors, (ii) made by
any Restricted Subsidiary in or to the Borrower or any Guarantor, (iii) made by
the Borrower or any Restricted Subsidiary in or to all other Domestic
Subsidiaries which are not Guarantors in an aggregate amount at any one time
outstanding not to exceed $1,000,000, and (iv) made by the Borrower or any
Restricted Subsidiary in or to any Foreign Subsidiary in an aggregate amount at
any one time outstanding not to exceed $500,000.

(h) subject to the limits in Section 9.07, Investments (including, without
limitation, capital contributions) in general or limited partnerships or other
types of entities (each a “venture”) entered into by the Borrower or a
Restricted Subsidiary with others in the ordinary course of business; provided
that (i) any such venture is engaged exclusively in oil and gas exploration,
development, production, processing and related activities, including
transportation, (ii) the interest in such venture is acquired in the ordinary
course of business and on fair and reasonable terms and (iii) such venture
interests acquired and capital contributions made (valued as of the date such
interest was acquired or the contribution made) do not exceed, in the aggregate
at any time outstanding an amount equal to $25,000,000.

(i) subject to the limits in Section 9.07, Investments in direct ownership
interests in additional Oil and Gas Properties and gas gathering systems related
thereto or related to farm-out, farm-in, joint operating, joint venture or area
of mutual interest agreements, gathering systems, pipelines or other similar
arrangements which are usual and customary in the oil and gas exploration and
production business located within the geographic boundaries of the United
States of America.

(j) loans or advances to employees, officers or directors in the ordinary course
of business of the Borrower or any of its Restricted Subsidiaries, in each case
only as permitted by applicable law, including Section 402 of the Sarbanes Oxley
Act of 2002, but in any event not to exceed $200,000 in the aggregate at any
time.

(k) Investments in stock, obligations or securities received in settlement of
debts arising from Investments permitted under this Section 9.05 owing to the
Borrower or any Restricted Subsidiary as a result of a bankruptcy or other
insolvency proceeding of the obligor in respect of such debts or upon the
enforcement of any Lien in favor of the Borrower or any of its Restricted
Subsidiaries; provided that the Borrower shall give the Administrative Agent
prompt written notice in the event that the aggregate amount of all Investments
held at any one time under this Section 9.05(k) exceeds $5,000,000.

(l) Investments in Newco from its date of inception and after the contribution
of the Hawk Field Services Louisiana Midstream Assets in an aggregate amount of
up to $201,300,000.

(m) Other Investments (including investments in Unrestricted Subsidiaries) not
to exceed $25,000,000.

 

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Section 9.06 Designation and Conversion of Restricted and Unrestricted
Subsidiaries; Debt of Unrestricted Subsidiaries.

(a) Unless designated as an Unrestricted Subsidiary on Schedule 7.14 as of the
date hereof or thereafter, assuming compliance with Section 9.06(b), any Person
that becomes a Subsidiary of the Borrower or any of its Restricted Subsidiaries
shall be classified as a Restricted Subsidiary.

(b) The Borrower may designate by written notification thereof to the
Administrative Agent, any Restricted Subsidiary, including a newly formed or
newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after
giving effect, to such designation, neither a Default nor a Borrowing Base
deficiency would exist and (ii) such designation is deemed to be an Investment
in an Unrestricted Subsidiary in an amount equal to the fair market value as of
the date of such designation of the Borrower’s direct and indirect ownership
interest in such Subsidiary and such Investment would be permitted to be made at
the time of such designation under Section 9.05(l). Except as provided in this
Section 9.06(b), no Restricted Subsidiary may be redesignated as an Unrestricted
Subsidiary. Notwithstanding anything herein to the contrary, in the event Newco
becomes a Subsidiary of Hawk Field Services and/or the Borrower, Newco shall be
an Unrestricted Subsidiary.

(c) The Borrower may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary if after giving effect to such designation, (i) the representations
and warranties of the Borrower and its Restricted Subsidiaries contained in each
of the Loan Documents are true and correct on and as of such date as if made on
and as of the date of such redesignation (or, if stated to have been made
expressly as of an earlier date, were true and correct as of such date), (ii) no
Default would exist and (iii) the Borrower complies with the requirements of
Section 8.14, Section 8.17 and Section 9.16. Any such designation shall be
treated as a cash dividend in an amount equal to the lesser of the fair market
value of the Borrower’s direct and indirect ownership interest in such
Subsidiary or the amount of the Borrower’s cash investment previously made for
purposes of the limitation on Investments under Section 9.05(l).

(d) The Borrower shall not permit the aggregate principal amount of all
Non-Recourse Debt outstanding at any one time to exceed $25,000,000; provided
that if Newco becomes an Unrestricted Subsidiary, such amount may not exceed
$250,000,000.

Section 9.07 Nature of Business; International Operations. Neither the Borrower
nor any Restricted Subsidiary will allow any material change to be made in the
character of its business (a) as an independent oil and gas exploration,
development and production company, (b) of providing Midstream Services, and
(c) activities incidental to the foregoing. From and after the date hereof, the
Borrower and its Domestic Subsidiaries will not acquire or make any other
expenditure (whether such expenditure is capital, operating or otherwise) in or
related to, any Oil and Gas Properties not located within the geographical
boundaries of the United States.

Section 9.08 Limitation on Leases. Neither the Borrower nor any Restricted
Subsidiary will create, incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal but
excluding Capital Leases and leases of Hydrocarbon Interests and firm
transportation contracts or arrangements), under leases or lease

 

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agreements which would cause the aggregate amount of all payments made by the
Borrower and the Restricted Subsidiaries pursuant to all such leases or lease
agreements, including, without limitation, any residual payments at the end of
any lease, to exceed $25,000,000 in any period of twelve consecutive calendar
months during the life of such leases.

Section 9.09 Proceeds of Loans. The Borrower will not permit the proceeds of the
Loans to be used for any purpose other than those permitted by Section 7.21.
Neither the Borrower nor any Person acting on behalf of the Borrower has taken
or will take any action which might cause any of the Loan Documents to violate
Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.

Section 9.10 ERISA Compliance.

(a) The Borrower will not, and will not permit any Subsidiary to, at any time:

(b) engage in, or permit any ERISA Affiliate to engage in, any transaction in
connection with which the Borrower, a Subsidiary or any ERISA Affiliate could be
subjected to either a civil penalty assessed pursuant to subsections (c), (i),
(l) or (m) of section 502 of ERISA or a tax imposed by Chapter 43 of Subtitle D
of the Code, if either of which would have a Material Adverse Effect.

(c) fail to make, or permit any ERISA Affiliate to fail to make, full payment
when due of all amounts which, under the provisions of any Plan, agreement
relating thereto or applicable law, the Borrower, a Subsidiary or any ERISA
Affiliate is required to pay as contributions thereto, if such failure could
reasonably be expected to have a Material Adverse Effect.

(d) contribute to or assume an obligation to contribute to, or permit any ERISA
Affiliate to contribute to or assume an obligation to contribute to (i) any
employee welfare benefit plan, as defined in section 3(1) of ERISA, including,
without limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by such entities in their
sole discretion at any time without any material liability, or (ii) any employee
pension benefit plan, as defined in section 3(2) of ERISA, that is subject to
Title IV of ERISA, section 302 of ERISA or section 412 of the Code.

Section 9.11 Sale or Discount of Receivables. Except for receivables obtained by
the Borrower or any Restricted Subsidiary out of the ordinary course of business
or the settlement of joint interest billing accounts in the ordinary course of
business or discounts granted to settle collection of accounts receivable or the
sale of defaulted accounts arising in the ordinary course of business in
connection with the compromise or collection thereof and not in connection with
any financing transaction, neither the Borrower nor any Restricted Subsidiary
will discount or sell (with or without recourse) any of its notes receivable or
accounts receivable.

 

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Section 9.12 Merger, Etc. The Borrower will not, and will not permit any
Restricted Subsidiary to, merge into or consolidate with any other Person, or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property to any other Person
(whether now owned or hereafter acquired) (any such transaction, a
“consolidation”), or liquidate or dissolve; provided that the Borrower or any
Restricted Subsidiary may participate in a consolidation with any other Person;
provided that:

(a) any Restricted Subsidiary (including a Foreign Subsidiary) may participate
in a consolidation with the Borrower (provided that the Borrower shall be the
continuing or surviving corporation) or any other Restricted Subsidiary that is
a Domestic Subsidiary (provided that if one of such parties to the consolidation
is a Foreign Subsidiary, such Domestic Subsidiary shall be the continuing or
surviving Person) and if one of such Restricted Subsidiaries is a Wholly-Owned
Subsidiary, then the surviving Person shall be a Wholly-Owned Subsidiary; and

(b) any Foreign Subsidiary of the Borrower may participate in a consolidation
with any one or more Foreign Subsidiaries; provided that if one of such Foreign
Subsidiaries is a Wholly-Owned Subsidiary, the survivor shall be a Wholly-Owned
Subsidiary.

Section 9.13 Sale of Properties. The Borrower will not, and will not permit any
Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise transfer
any Property except for (a) the sale of Hydrocarbons in the ordinary course of
business; (b) farmouts of undeveloped acreage and assignments in connection with
such farmouts; (c) the sale or transfer of equipment that is no longer necessary
for the business of the Borrower or such Restricted Subsidiary or is replaced by
equipment of at least comparable value and use; (d) the sale, transfer or other
disposition of Equity Interests in Unrestricted Subsidiaries; (e) the sale or
other disposition (including Casualty Events) of any Oil and Gas Property or any
interest therein or any Restricted Subsidiary owning Oil and Gas Properties;
provided that (i) 75% of the consideration received in respect of such sale or
other disposition shall be cash (and any non-cash consideration received shall
be pledged as collateral to secure the Indebtedness), provided that if a
Borrowing Base Deficiency exists at such time 100% of such consideration shall
be cash, (ii) the consideration received in respect of such sale or other
disposition shall be equal to or greater than the fair market value of the Oil
and Gas Property, interest therein or Restricted Subsidiary subject of such sale
or other disposition (as reasonably determined by the board of directors of the
Borrower and, if requested by the Administrative Agent, the Borrower shall
deliver a certificate of a Responsible Officer of the Borrower certifying to
that effect), (iii) if such sale or other disposition of Oil and Gas Property or
Restricted Subsidiary owning Oil and Gas Properties included in the most
recently delivered Reserve Report during any period between two successive
Scheduled Redetermination Dates is sold for a price in excess of 7% of the Oil
and Gas Borrowing Base then in effect, individually or in the aggregate, then
the Oil and Gas Borrowing Base shall be reduced, effective immediately upon such
sale or disposition, by an amount equal to the value, if any, assigned such
Property in the most recently delivered Reserve Report and (iv) if any such sale
or other disposition is of a Restricted Subsidiary owning Oil and Gas
Properties, such sale or other disposition shall include all the Equity
Interests of such Restricted Subsidiary; (f) the sale or other disposition
(including Casualty Events) of any Midstream Assets or any interest therein or
any Restricted Subsidiary owning Midstream Assets; provided that (i) 75% of the
consideration received in respect of such sale or other disposition

 

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shall be cash (and any non-cash consideration received shall be pledged as
collateral to secure the Indebtedness), provided that if a Borrowing Base
Deficiency exists at such time 100% of such consideration shall be cash,
(ii) the consideration received in respect of such sale or other disposition
shall be equal to or greater than the fair market value of the Midstream Assets,
interest therein or Restricted Subsidiary subject of such sale or other
disposition (as reasonably determined by the board of directors of the Borrower
and, if requested by the Administrative Agent, the Borrower shall deliver a
certificate of a Responsible Officer of the Borrower certifying to that effect),
(iii) the Midstream Component shall be reduced, effective immediately upon such
sale or disposition, by an amount equal to the EBITDA-HFS contribution of such
Midstream Assets for the most recent four quarters for which financial
statements have been received by the Administrative Agent multiplied time 3.5
and (iv) if any such sale or other disposition is of a Restricted Subsidiary
owning Midstream Assets, such sale or other disposition shall include all the
Equity Interests of such Restricted Subsidiary; (g) sales and other transfers of
Properties between the Borrower and any Restricted Subsidiary or between any
Restricted Subsidiary and any other Restricted Subsidiary; (h) contribution of
the Haynesville Assets (as such term is defined in the Formation and
Contribution Agreement) to Newco contemporaneous with the execution of the Newco
LLC Agreement; and (i) sales and other dispositions of Properties not regulated
by Section 9.13(a) to (f) having a fair market value not to exceed $25,000,000
during any 12-month period.

Section 9.14 Environmental Matters. The Borrower will not, and will not permit
any Restricted Subsidiary to, cause or permit any of its Property to be in
violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.

Section 9.15 Transactions with Affiliates. The Borrower will not, and will not
permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than the Guarantors and
Wholly-Owned Subsidiaries of the Borrower) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm’s length
transaction with a Person not an Affiliate.

Section 9.16 Subsidiaries. The Borrower will not, and will not permit any
Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary
or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless the
Borrower gives written notice to the Administrative Agent of such creation or
acquisition and complies with Section 8.14 (b) and Section 8.14(c). The Borrower
shall not, and shall not permit any Restricted Subsidiary to, sell, assign or
otherwise dispose of any Equity Interests in any Restricted Subsidiary except in
compliance with Section 9.13(e), (f) or (g).

Section 9.17 Negative Pledge Agreements; Dividend Restrictions. The Borrower
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any contract, agreement or understanding which in any
way prohibits or restricts the granting,

 

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conveying, creation or imposition of any Lien on any of its Property in favor of
the Administrative Agent and the Lenders or restricts any Restricted Subsidiary
from paying dividends or making distributions to the Borrower or any Guarantor,
or which requires the consent of or notice to other Persons in connection
therewith; provided, however, the preceding restrictions will not apply to
encumbrances or restrictions arising under or by reason of (a) this Agreement or
the Security Instruments, (b) any leases, licenses or similar contracts as they
affect any Property or Lien subject to a lease or license, (c) any contract,
agreement or understanding creating Liens on Capital Leases permitted by
Section 9.03(c) (but only to the extent related to the Property on which such
Liens were created, (d) any restriction with respect to a Subsidiary imposed
pursuant to an agreement entered into for the direct or indirect sale or
disposition of all or substantially all of the equity or Property of such
Subsidiary (or the Property that is subject to such restriction) pending the
closing of such sale or disposition, (e) any restriction with respect to Hawk
Field Services’s Equity Interest in Newco imposed by the Newco LLC Agreement,
(f) customary provisions with respect to the distribution of Property in joint
venture agreements, (g) prohibitions, encumbrances or other restrictions imposed
by law, (h) in the case of any Subsidiary that is a Wholly-Owned Subsidiary of
the Borrower, prohibitions, encumbrances or restrictions imposed by its
organizational documents or any related joint venture or similar agreement,
provided that such prohibitions, encumbrances or restrictions apply only to such
Subsidiary and to any Equity Interests in such Subsidiary but only with respect
to granting, conveying, creation or imposition of any Lien and (i) prohibitions,
encumbrances or other restrictions imposed by any agreement relating to secured
Debt permitted by Section 9.02(j), provided that such prohibitions, encumbrances
or other restrictions apply only to the assets securing such Debt.

Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower will
not allow gas imbalances, take-or-pay or other prepayments with respect to the
Oil and Gas Properties of the Borrower or any Restricted Subsidiary that would
require the Borrower or such Restricted Subsidiary to deliver Hydrocarbons at
some future time without then or thereafter receiving full payment therefor to
exceed a volume equal to 1% of the total proved reserves (on an mcf equivalent
basis) set forth in the most recently delivered Reserve Report in the aggregate.

Section 9.19 Swap Agreements. The Borrower will not, and will not permit any
Restricted Subsidiary to, enter into any Swap Agreements with any Person other
than (a) Swap Agreements in respect of commodities (i) with an Approved
Counterparty and (ii) the notional volumes for which (when aggregated with other
commodity Swap Agreements then in effect other than basis differential swaps on
volumes already hedged pursuant to other Swap Agreements) do not exceed, as of
the date such Swap Agreement is executed and at any time thereafter, (A) 100% of
the Current Production for each month during the period during which such Swap
Agreement is in effect for crude oil and natural gas, calculated on a natural
gas equivalent basis, for the period of 24 months following the date such Swap
Agreement is executed; (B) 75% of the Current Production for each month during
the period during which such Swap Agreement is in effect for crude oil and
natural gas, calculated on a natural gas equivalent basis, for the period of 25
to 36 months following the date such Swap Agreement is executed; and (C) 50% of
the Current Production for each month during the period during which such Swap
Agreement is in effect for crude oil and natural gas, calculated on a natural
gas equivalent basis, for the period of 37 to 48 months following the date such
Swap Agreement is executed, and (b) Swap Agreements in respect of interest rates
with an Approved Counterparty,

 

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as follows: (i) Swap Agreements effectively converting interest rates from fixed
to floating, the notional amounts of which (when aggregated with all other Swap
Agreements of the Borrower and its Restricted Subsidiaries then in effect
effectively converting interest rates from fixed to floating) do not exceed 50%
of the then outstanding principal amount of the Borrower’s Debt for borrowed
money which bears interest at a fixed rate and (ii) Swap Agreements effectively
converting interest rates from floating to fixed, the notional amounts of which
(when aggregated with all other Swap Agreements of the Borrower and its
Restricted Subsidiaries then in effect effectively converting interest rates
from floating to fixed) do not exceed 75% of the then outstanding principal
amount of the Borrower’s Debt for borrowed money which bears interest at a
floating rate. In no event shall any Swap Agreement contain any requirement,
agreement or covenant for the Borrower or any Restricted Subsidiary to post
collateral or margin to secure their obligations under such Swap Agreement or to
cover market exposures except to the extent permitted by Section 9.03(d).

Section 9.20 Midstream Services Contracts. The Borrower will not permit Hawk
Field Services or any of its Subsidiaries to (a) enter into any material
contracts for Midstream Services except on an arm’s length basis or (b) cancel
or terminate any material contract for Midstream Services or consent to or
accept any cancellation or termination thereof, materially amend or otherwise
materially modify any material Midstream Services contract, waive any material
default under or material breach of any material Midstream Services contract,
agree in any manner to any other material amendment, modification or change of
any material term or condition of any Midstream services contract or take any
other material action in connection with any Midstream Services contract that
would materially impair the value of the interest or rights of Hawk Field
Services or any of its Restricted Subsidiaries, as applicable, thereunder or
that would materially impair the interest, rights remedies or benefits available
to the Administrative Agent or any Lender.

ARTICLE X

Events of Default; Remedies

Section 10.01 Events of Default. One or more of the following events shall
constitute an “Event of Default”:

(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise.

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in Section 10.01(a)) payable
under any Loan Document, when and as the same shall become due and payable, and
such failure shall continue unremedied for a period of three Business Days.

(c) any representation or warranty made or deemed made by or on behalf of the
Borrower or any Restricted Subsidiary in or in connection with any Loan Document
or any amendment or modification of any Loan Document or waiver under such Loan
Document, or in any report, certificate, financial statement or other document
furnished pursuant to or in connection with any Loan Document or any amendment
or modification thereof or waiver thereunder, shall prove to have been incorrect
when made or deemed made.

 

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(d) the Borrower or any Restricted Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in Section 8.02(a), Section 8.03
(with respect to Borrower’s or any Restricted Subsidiary’s existence only) or in
ARTICLE IX.

(e) the Borrower or any Restricted Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in this Agreement (other than
those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d)) or
any other Loan Document, and such failure shall continue unremedied for a period
of 30 days after the earlier to occur of (A) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) or (B) a Responsible Officer of the Borrower or such Restricted
Subsidiary otherwise becoming aware of such default.

(f) the Borrower or any Restricted Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness prior to the longer of (i) three (3) Business Days after
the same shall become due and payable or (ii) the expiration of any applicable
grace period.

(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the Redemption
thereof or any offer to Redeem to be made in respect thereof, prior to its
scheduled maturity or require the Borrower or any Restricted Subsidiary to make
an offer in respect thereof.

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Borrower or any Restricted Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Restricted Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 30 days or an order or decree approving
or ordering any of the foregoing shall be entered.

(i) the Borrower or any Restricted Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in Section 10.01(h), (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Restricted Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing.

 

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(j) the Borrower or any Restricted Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due.

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $10,000,000 (to the extent not covered by independent third party
insurance provided by reputable insurers as to which the insurer does not
dispute coverage and is not subject to an insolvency proceeding) shall be
rendered against the Borrower, any Restricted Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 30 consecutive
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to attach or levy upon any assets of the
Borrower or any Restricted Subsidiary to enforce any such judgment.

(l) the Loan Documents after delivery thereof shall for any reason, except to
the extent permitted by the terms thereof, cease to be in full force and effect
and valid, binding and enforceable in accordance with their terms against the
Borrower or a Guarantor party thereto or shall be repudiated by any of them, or
cease to create a valid and perfected Lien of the priority required thereby on
any of the collateral purported to be covered thereby, except to the extent
permitted by the terms of this Agreement, or the Borrower or any Restricted
Subsidiary or any of their Affiliates shall so state in writing.

(m) a Change in Control shall occur.

Section 10.02 Remedies.

(a) In the case of an Event of Default other than one described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent, at
the direction of the Majority Lenders, shall, by notice to the Borrower, take
either or both of the following actions, at the same or different times:
(i) terminate the Commitments, and thereupon the Commitments shall terminate
immediately, and (ii) declare the Notes, if any, and the Loans then outstanding
to be due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and all fees and other
obligations of the Borrower and the Guarantors accrued hereunder and under the
Loans, the Notes, if any, and the other Loan Documents (including, without
limitation, the payment of cash collateral to secure the LC Exposure as provided
in Section 2.08(j)), shall become due and payable immediately, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby waived by the
Borrower and each Guarantor; and in case of an Event of Default described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), the Commitments shall
automatically terminate and the Notes, if any, and the principal of the Loans
then outstanding, together with accrued interest thereon and all fees and the
other obligations of the Borrower and the Guarantors accrued hereunder and under
the Loans, the Notes, if any, and the other Loan Documents (including, without
limitation, the payment of cash collateral to secure the LC Exposure as provided
in Section 2.08(j)), shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor.

 

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(b) In the case of the occurrence of an Event of Default, the Administrative
Agent and the Lenders will have all other rights and remedies available at law
and equity.

(c) All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Loans, whether by
acceleration or otherwise, shall be applied: first, to reimbursement of expenses
and indemnities provided for in this Agreement and the Security Instruments;
second, to accrued interest on the Loans; third, to fees; fourth, pro rata to
principal outstanding on the Loans and Indebtedness referred to in clause (b) of
the definition of “Indebtedness” owing to a Lender or an Affiliate of a Lender;
fifth, to any other Indebtedness; sixth, to serve as cash collateral to be held
by the Administrative Agent to secure the LC Exposure; and any excess shall be
paid to the Borrower or as otherwise required by any Governmental Requirement.

ARTICLE XI

The Agents

Section 11.01 Appointment; Powers. Each of the Lenders and the Issuing Bank
hereby irrevocably appoints the Administrative Agent as its agent and authorizes
the Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof and the
other Loan Documents, together with such actions and powers as are reasonably
incidental thereto.

Section 11.02 Duties and Obligations of Administrative Agent. The Administrative
Agent shall not have any duties or obligations except those expressly set forth
in the Loan Documents. Without limiting the generality of the foregoing, (a) the
Administrative Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether a Default has occurred and is continuing, (b) the
Administrative Agent shall not have any duty to take any discretionary action or
exercise any discretionary powers, except as provided in Section 11.03, and
(c) except as expressly set forth herein, the Administrative Agent shall not
have any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any of its Subsidiaries that is
communicated to or obtained by the bank serving as Administrative Agent or any
of its Affiliates in any capacity. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and shall not be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with this Agreement or any
other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or under any other Loan Document or in connection
herewith or therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or in any
other Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, any other Loan Document or any other agreement,
instrument or document, (v) the satisfaction of any condition set forth in
ARTICLE VI or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent or as to those conditions
precedent expressly required to be to the Administrative Agent’s satisfaction,
(vi) the existence, value, perfection or priority of any collateral security or
the financial or other condition of the Borrower and its Subsidiaries or any
other obligor or guarantor, or (vii) any failure by the Borrower or any other
Person (other than itself) to perform any of its obligations hereunder or under
any other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein.

 

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Section 11.03 Action by Administrative Agent. The Administrative Agent shall not
have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby
that the Administrative Agent is required to exercise in writing as directed by
the Majority Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 12.02) and in all
cases the Administrative Agent shall be fully justified in failing or refusing
to act hereunder or under any other Loan Documents unless it shall (a) receive
written instructions from the Majority Lenders or the Lenders, as applicable,
(or such other number or percentage of the Lenders as shall be necessary under
the circumstances as provided in Section 12.02) specifying the action to be
taken and (b) be indemnified to its satisfaction by the Lenders against any and
all liability and expenses which may be incurred by it by reason of taking or
continuing to take any such action. The instructions as aforesaid and any action
taken or failure to act pursuant thereto by the Administrative Agent shall be
binding on all of the Lenders. If a Default has occurred and is continuing, then
the Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with
indemnities) described in this Section 11.03, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law. If a Default has occurred and
is continuing, neither any Co-Syndication Agents nor any Co-Documentation Agent
shall have any obligation to perform any act in respect thereof. No Agent shall
be liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise no Agent shall be liable for any
action taken or not taken by it hereunder or under any other Loan Document or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY
NEGLIGENCE, except for its own gross negligence or willful misconduct.

Section 11.04 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon, and shall not incur any liability for relying upon,
any notice, request, certificate, consent, statement, instrument, document or
other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrower, the Lenders and the Issuing Bank hereby waives the right to dispute
the Administrative Agent’s record of such statement, except in the case of gross
negligence or willful misconduct by the Administrative Agent. The Administrative
Agent may consult with legal counsel (who may be counsel for the Borrower),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts. The Agents may deem and treat the
payee of the Note, if any, as the holder thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Administrative Agent.

 

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Section 11.05 Subagents. The Administrative Agent may perform any and all its
duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

Section 11.06 Resignation or Removal of Agents. Subject to the appointment and
acceptance of a successor Agent as provided in this Section 11.06, any Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower,
and any Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall have
the right, with the consent of the Borrower, which consent shall not be
unreasonably withheld or delayed, to appoint a successor. If no successor shall
have been so appointed and shall have accepted such appointment within 30 days
after the retiring Agent gives notice of its resignation or removal of the
retiring Agent, then the retiring Agent may, on behalf of the Lenders and the
Issuing Bank, appoint a successor Agent, or an Affiliate of any such bank. Upon
the acceptance of its appointment as Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.
After the Agent’s resignation hereunder, the provisions of this ARTICLE XI and
Section 12.03 shall continue in effect for the benefit of such retiring Agent,
its sub-agents and their respective Related Parties in respect of any actions
taken or omitted to be taken by any of them while it was acting as Agent.

Section 11.07 Agents as Lenders. Each bank serving as an Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not an Agent, and such bank and its
Affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or any Subsidiary or other Affiliate thereof
as if it were not an Agent hereunder.

Section 11.08 No Reliance. Each Lender acknowledges that it has, independently
and without reliance upon the Administrative Agent, any other Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party. Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent, any
other Agent or any other Lender and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions
in taking or not taking action under or based upon this Agreement, any other
Loan Document, any related agreement or any document furnished hereunder or
thereunder. The Agents shall not be required to keep themselves informed as to
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any of its Subsidiaries of this Agreement, the Loan Documents or any other
document referred to or provided for herein or to inspect the Properties or
books of the Borrower or its Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder, no Agent or the Arranger shall have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of such Agent or any of
its Affiliates. In this regard, each Lender acknowledges that Vinson & Elkins
L.L.P. is acting in this transaction as special counsel to the Administrative
Agent only, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document. Each other party hereto will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.

Section 11.09 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:

(a) to file and prove a claim for the whole amount of the principal and interest
owing and unpaid in respect of the Loans and all other Indebtedness that are
owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 12.03) allowed in such judicial proceeding;
and

(b) to collect and receive any monies or other property payable or deliverable
on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 12.03.

Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 11.10 Authority of Administrative Agent to Release Collateral and Liens.
Each Lender and the Issuing Bank hereby authorizes the Administrative Agent to
release any collateral

 

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that is permitted to be sold or released pursuant to the terms of the Loan
Documents. Each Lender and the Issuing Bank hereby authorizes the Administrative
Agent to execute and deliver to the Borrower, at the Borrower’s sole cost and
expense, any and all releases of Liens, termination statements, assignments or
other documents reasonably requested by the Borrower in connection with any sale
or other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.13 or is otherwise authorized by the terms
of the Loan Documents.

Section 11.11 The Arranger, the Co-Syndication Agents and the Co-Documentation
Agents. The Arranger, the Co-Syndication Agents and the Co-Documentation Agents
shall have no duties, responsibilities or liabilities under this Agreement and
the other Loan Documents other than their duties, responsibilities and
liabilities in their capacity as Lenders hereunder.

ARTICLE XII

Miscellaneous

Section 12.01 Notices.

(a) Except in the case of notices and other communications expressly permitted
to be given by telephone (and subject to Section 12.01(b)), all notices and
other communications provided for herein shall be in writing (i) delivered by
hand or overnight courier service, mailed by certified or registered mail,
(ii) sent by telecopy or (iii) sent by email, as follows:

(A) if to the Borrower, to it at 1000 Louisiana, Suite 5600, Houston, Texas
77002, Attention: Mark Mize (Telecopy No. (832) 204-2832, email
mmize@petrohawk.com); with copies to General Counsel, Attention: David S.
Elkouri (Telecopy No. (832) 204-2872, email delkouri@petrohawk.com); and
Associate General Counsel-Corporate, Attention: Travis L. Counts (Telecopy No.
(832) 325-1127, email tcounts@petrohawk.com);

(B) if to the Administrative Agent, to it at 525 Washington Blvd., Loan
Servicing – 8th Floor, Jersey City, New Jersey 07310, Attention: Dina Wilson
(Telecopy No. (201) 850-4020, email agency.ls.support@americas.bnpparibas.com),
with a copy to 1200 Smith Street, Suite 3100, Houston, Texas 77002, Attention:
Donna Verwold (Telecopy No. (713) 659-6915, email
donna.verwold@americas.bnpparibas.com);

(C) if to the Issuing Bank, to it at 525 Washington Blvd., Jersey City, New
Jersey 07310, Attention: Trade Finance Services/Standby Letters of Credit
(Telecopy No. (201) 850-4021, email houtfs_support@us.bnpparibas.com and
robert.bruce@americas.bnpparibas.com), with a copy to 1200 Smith Street, Suite
3100, Houston, Texas 77002, Attention: Donna Verwold (Telecopy No.
(713) 659-6915, email donna.verwold@americas.bnpparibas.com); and

(D) if to any other Lender, to it at its address (or telecopy number) set forth
in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative

 

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Agent; provided that the foregoing shall not apply to notices pursuant to
ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V unless otherwise agreed by the
Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

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

Section 12.02 Waivers; Amendments.

(a) No failure on the part of the Administrative Agent, the Issuing Bank or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege, or any abandonment or discontinuance
of steps to enforce such right, power or privilege, under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any of the Loan Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of the Administrative Agent,
the Issuing Bank and the Lenders hereunder and under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by the Borrower therefrom shall in any
event be effective unless the same shall be permitted by Section 12.02(b), and
then such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. Without limiting the generality of the
foregoing, the making of a Loan or issuance of a Letter of Credit shall not be
construed as a waiver of any Default, regardless of whether the Administrative
Agent, any Lender or the Issuing Bank may have had notice or knowledge of such
Default at the time.

(b) Neither this Agreement nor any provision hereof nor any Security Instrument
nor any provision thereof may be waived, amended or modified except pursuant to
an agreement or agreements in writing entered into by the Borrower and the
Majority Lenders or by the Borrower and the Administrative Agent with the
consent of the Majority Lenders; provided that no such agreement shall
(i) increase the Maximum Credit Amount or Commitment of any Lender without the
written consent of such Lender affected thereby, (ii) increase the Oil and Gas
Borrowing Base or increase the Midstream Component above $100,000,000 without
the written consent of each of the Lenders, decrease or maintain the Oil and Gas
Borrowing Base without the consent of the Majority Lenders, or modify
Section 2.07 without the consent of each Lender, (iii) reduce the principal
amount of the Loan or LC Disbursement or reduce the rate of interest thereon, or
reduce any fees payable hereunder, or reduce any other Indebtedness hereunder or
under any other Loan Document, without the written consent of each Lender
affected thereby, (iv) postpone the scheduled date of payment or prepayment of
the principal amount of the Loan or LC Disbursement, or any interest thereon, or
any fees payable hereunder, or any other Indebtedness hereunder or under any
other Loan Document, or reduce the amount of, waive or excuse any such payment,
or postpone or extend the Termination Date without the written consent of each

 

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Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender affected thereby, (vi) waive or amend
Section 3.04(c), Section 6.01 or Section 8.14 or change the definition of the
terms “Domestic Subsidiary”, “Foreign Subsidiary”, “Material Domestic
Subsidiary” or “Subsidiary”, without the written consent of each Lender,
(vii) release any Guarantor (except as set forth in the Guaranty Agreement),
release a substantial portion of the collateral (other than as provided in
Section 11.10), or reduce the percentage set forth in Section 8.14(a) to less
than 80%, without the written consent of each Lender, or (viii) modify the terms
of Section 10.02(c) or Section 12.14 without the consent of each Lender
adversely affected thereby and the consent of each Person that is adversely
affected hereby and a party to a Swap Agreement secured by the Security
Instruments which is not a Lender (or an Affiliate of a Lender) at the time of
such agreement, or (ix) change (A) any of the provisions of this
Section 12.02(b) without the consent of each Lender affected thereby, (B) the
definitions of “Majority Lenders”, “Midstream Component” or “Midstream EBITDA”,
or (C) any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or under any other Loan
Documents or make any determination or grant any consent hereunder or any other
Loan Documents, without the written consent of each Lender; provided further
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent or the Issuing Bank hereunder or under any
other Loan Document without the prior written consent of the Administrative
Agent or the Issuing Bank, as the case may be. Notwithstanding the foregoing,
any supplement to Schedule 7.14 (Subsidiaries) shall be effective simply by
delivering to the Administrative Agent a supplemental schedule clearly marked as
such and, upon receipt, the Administrative Agent will promptly deliver a copy
thereof to the Lenders.

Section 12.03 Expenses, Indemnity; Damage Waiver.

(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by
the Administrative Agent and its Affiliates, including, without limitation, the
reasonable fees, charges and disbursements of counsel and other outside
consultants for the Administrative Agent, the reasonable travel, photocopy,
mailing, courier, telephone and other similar expenses, including all Intralinks
expenses, and the cost of environmental audits and surveys and appraisals, in
connection with the syndication of the credit facilities provided for herein,
the preparation, negotiation, execution, delivery and administration (both
before and after the execution hereof and including advice of counsel to the
Administrative Agent as to the rights and duties of the Administrative Agent and
the Lenders with respect thereto) of this Agreement and the other Loan Documents
and any amendments, modifications or waivers of or consents related to the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all costs, expenses, Taxes,
assessments and other charges incurred by any Agent or any Lender in connection
with any filing, registration, recording or perfection of any security interest
contemplated by this Agreement or any Security Instrument or any other document
referred to therein, (iii) all reasonable out-of-pocket expenses incurred by the
Issuing Bank in connection with the issuance, amendment, renewal or extension of
any Letter of Credit or any demand for payment thereunder, (iv) all reasonable
out-of-pocket expenses incurred by any Agent, the Issuing Bank or any Lender,
including the fees, charges and disbursements of any counsel for any Agent, the
Issuing Bank or any Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement or any other Loan

 

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Document, including its rights under this Section 12.03, or in connection with
the Loans made or Letters of Credit issued hereunder, including, without
limitation, all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ISSUING BANK, THE ARRANGER AND
EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH
PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE HARMLESS
FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES,
INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY
INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY
OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY RESTRICTED SUBSIDIARY TO
COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH
ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN
ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS
DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR LETTER OF CREDIT OR THE USE
OF THE PROCEEDS THEREFROM, INCLUDING, WITHOUT LIMITATION, (A) ANY REFUSAL BY THE
ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE
DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
THE TERMS OF SUCH LETTER OF CREDIT, OR (B) THE PAYMENT OF A DRAWING UNDER ANY
LETTER OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE DOCUMENTS PRESENTED IN CONNECTION THEREWITH,
(v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF THE BUSINESS
OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES,
(vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE PRESENCE, GENERATION, STORAGE, RELEASE,
THREATENED RELEASE, USE, TRANSPORT, DISPOSAL, ARRANGEMENT OF DISPOSAL OR
TREATMENT OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON
ANY OF THEIR PROPERTIES, (ix) THE BREACH OR NON-COMPLIANCE BY THE BORROWER OR
ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF
THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES

 

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WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT
LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT, DISPOSAL,
GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR TRANSPORT OR
ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS
SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR
ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS
MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF
ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE
BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH
OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL
OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF
THE FOREGOING THAT MAY BE BROUGHT BY THE BORROWER, ANY GUARANTOR, ANY OF THEIR
RESPECTIVE AFFILIATES OR ANY OTHER PERSON OR ENTITY, WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY
THERETO, AND SUCH INDEMNITY SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE
SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER
ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT
(SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED
THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE
DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE
JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH
INDEMNITEE.

(c) To the extent that the Borrower fails to pay any amount required to be paid
by it to any Agent or the Issuing Bank under Section 12.03(a) or (b), each
Lender severally agrees to pay to such Agent or the Issuing Bank, as the case
may be, such Lender’s Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against such Agent or the Issuing Bank in its capacity as such.

(d) To the extent permitted by applicable law, no party hereto shall assert, and
each party hereto hereby waives, any claim against each other party, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or Letter
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(e) All amounts due under this Section 12.03 shall be payable not later than 5
days after written demand therefor.

Section 12.04 Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent, the Issuing Bank and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.

(b)(i) Subject to the conditions set forth in Section 12.04(b)(ii), any Lender
may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it) with the prior written consent (such
consent not to be unreasonably withheld) of:

(A) the Borrower, provided that no consent of the Borrower shall be required for
an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an
Event of Default has occurred and is continuing, any other assignee; and

(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment to an assignee that is a Lender
immediately prior to giving effect to such assignment.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans, the amount of the Commitment or Loans of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement;

 

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(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

(iii) Subject to Section 12.04(b)(iv) and the acceptance and recording thereof,
from and after the effective date specified in each Assignment and Assumption
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Section 5.01,
Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 12.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 12.04(c).

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Maximum Credit Amount of, and principal amount
of the Loans and LC Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be
conclusive, and the Borrower, the Administrative Agent, the Issuing Bank and the
Lenders may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower, the Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice. In connection with any
changes to the Register, if necessary, the Administrative Agent will reflect the
revisions on Annex I and forward a copy of such revised Annex I to the Borrower,
the Issuing Bank and each Lender.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in Section 12.04(b) and any written
consent to such assignment required by Section 12.04(b), the Administrative
Agent shall accept such Assignment and Assumption and record the information
contained therein in the Register. No assignment shall be effective for purposes
of this Agreement unless it has been recorded in the Register as provided in
this Section 12.04(b).

(c)     (i) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one or more
banks or other entities (a “Participant”) in all or a portion of such Lender’s
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such

 

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Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative Agent,
the Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 12.02 that affects such Participant. In
addition such agreement must provide that the Participant be bound by the
provisions of Section 12.03. Subject to Section 12.04(c)(ii), the Borrower
agrees that each Participant shall be entitled to the benefits of Section 5.01,
Section 5.02 and Section 5.03 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 12.04(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 12.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 4.01(c) as though it were a Lender.

(ii) A Participant shall not be entitled to receive any greater payment under
Section 5.01 or Section 5.03 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 5.03 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 5.03(e) as
though it were a Lender.

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

(e) Notwithstanding any other provisions of this Section 12.04, no transfer or
assignment of the interests or obligations of any Lender or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower and the Guarantors to file a registration statement
with the SEC or to qualify the Loans under the “Blue Sky” laws of any state.

Section 12.05 Survival; Revival; Reinstatement.

(a) All covenants, agreements, representations and warranties made by the
Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
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making of any Loans and issuance of any Letters of Credit, regardless of any
investigation made by any such other party or on its behalf and notwithstanding
that the Administrative Agent, the Issuing Bank or any Lender may have had
notice or knowledge of any Default or incorrect representation or warranty at
the time any credit is extended hereunder, and shall continue in full force and
effect as long as the principal of or any accrued interest on any Loan or any
fee or any other amount payable under this Agreement is outstanding and unpaid
or any Letter of Credit is outstanding and so long as the Commitments have not
expired or terminated. The provisions of Section 5.01, Section 5.02,
Section 5.03 and Section 12.03 and ARTICLE XI shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the expiration or termination of the Letters
of Credit and the Commitments or the termination of this Agreement, any other
Loan Document or any provision hereof or thereof.

(b) To the extent that any payments on the Indebtedness or proceeds of any
collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent’s and the Lenders’ Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect. In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.

Section 12.06 Counterparts; Integration; Effectiveness.

(a) This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.

(b) This Agreement, the other Loan Documents and any separate letter agreements
with respect to fees payable to the Administrative Agent constitute the entire
contract among the parties relating to the subject matter hereof and thereof and
supersede any and all previous agreements and understandings, oral or written,
relating to the subject matter hereof and thereof. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND
THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

(c) Except as provided in Section 6.01, this Agreement shall become effective
when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.

 

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Section 12.07 Severability. Any provision of this Agreement or any other Loan
Document held to be invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.

Section 12.08 Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other obligations (of whatsoever kind, including,
without limitations obligations under Swap Agreements) at any time owing by such
Lender or Affiliate to or for the credit or the account of the Borrower or any
Restricted Subsidiary against any of and all the obligations of the Borrower or
any Restricted Subsidiary owed to such Lender now or hereafter existing under
this Agreement or any other Loan Document, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 12.08 are in addition to other rights and remedies
(including other rights of setoff) which such Lender or its Affiliates may have.

Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

(a) THIS AGREEMENT AND THE NOTES, IF ANY, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE EXTENT THAT UNITED
STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE, RECEIVE, RESERVE
OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER
IS LOCATED. CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL NOT APPLY
TO THIS AGREEMENT, THE LOANS OR THE NOTES, IF ANY.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS SHALL BE
BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY
LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS
SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM
OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING
JURISDICTION.

 

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(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT THE ADDRESS
SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS SPECIFIED PURSUANT TO
SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH SERVICE TO BECOME
EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF A PARTY OR ANY HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
ANOTHER PARTY IN ANY OTHER JURISDICTION.

(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (ii) 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,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.

Section 12.10 Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

Section 12.11 Confidentiality. Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party to this Agreement or any other Loan Document, (e) in
connection with the exercise of any remedies hereunder or under any other Loan
Document or any suit, action or proceeding relating to this Agreement or any
other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing provisions substantially the same as
those of this Section 12.11, to (i) any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement or (ii) any actual or prospective counterparty (or its
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Agreement relating to the Borrower and its obligations, (g) with the consent of
the Borrower or (h) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 12.11 or
(ii) becomes available to the Administrative Agent, the Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Borrower. For the
purposes of this Section 12.11, “Information” means all information received
from the Borrower or any Restricted Subsidiary relating to the Borrower or any
Restricted Subsidiary and their businesses, other than any such information that
is available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by the Borrower or a Restricted
Subsidiary; provided that, in the case of information received from the Borrower
or any Restricted Subsidiary after the date hereof, such information is clearly
identified at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section 12.11
shall be considered to have complied with its obligation to do so if such Person
has exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.

Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Loans, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Loans
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Loans is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Lender,
be amortized, prorated, allocated and spread throughout the stated term of the
Loans, until payment in full so that the rate or amount of interest on account
of any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise
payable to such Lender would be less than the amount of interest payable to such
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Highest Lawful Rate applicable to such Lender, then the amount of interest
payable to such Lender in respect of such subsequent interest computation period
shall continue to be computed at the Highest Lawful Rate applicable to such
Lender until the total amount of interest payable to such Lender shall equal the
total amount of interest which would have been payable to such Lender if the
total amount of interest had been computed without giving effect to this
Section 12.12. To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate applicable to a
Lender, such Lender elects to determine the applicable rate ceiling under such
Chapter by the weekly ceiling from time to time in effect. Chapter 346 of the
Texas Finance Code does not apply to the Borrower’s obligations hereunder.

Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO SPECIFICALLY
AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS AGREEMENT
AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS
AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL
COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS
ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT
IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF
THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH
LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE
VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE
OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

Section 12.14 Collateral Matters; Swap Agreements. The benefit of the Security
Instruments and of the provisions of this Agreement relating to any collateral
securing the Indebtedness shall also extend to and be available on a pro rata
basis to any Person under any Swap Agreement between the Borrower or any
Restricted Subsidiary and such Person if either (a) at the time such Swap
Agreement was entered into, such Person was a Lender or Affiliate of a Lender
hereunder or (b) such Swap Agreement was in effect on the Effective Date and
such Person or its Affiliate was a Lender on the Effective Date, in each case,
after giving effect to all netting arrangements relating to such Swap
Agreements. Except as set forth in Section 12.02(b)(viii), no Person shall have
any voting rights under any Loan Document as a result of the existence of
obligations owed to it under any such Swap Agreements.

Section 12.15 No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans and the Issuing Bank
to issue, amend, renew or extend Letters of Credit hereunder are solely for the
benefit of the Borrower, and no other Person (including, without limitation, any
Subsidiary of the Borrower, any obligor, contractor, subcontractor, supplier or
materialsman) shall have any rights, claims, remedies or

 

101

--------------------------------------------------------------------------------

privileges hereunder or under any other Loan Document against the Administrative
Agent, any other Agent, the Issuing Bank or any Lender for any reason
whatsoever. There are no third party beneficiaries.

Section 12.16 USA Patriot Act Notice. Each Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.

SIGNATURES BEGIN NEXT PAGE

 

102

--------------------------------------------------------------------------------

The parties hereto have caused this Agreement to be duly executed as of the day
and year first above written.

 

BORROWER:        PETROHAWK ENERGY CORPORATION     By:  

/s/ Mark J. Mize

      Mark J. Mize       Executive Vice President – Chief Financial Officer and
Treasurer

 

Signature Page - 1

--------------------------------------------------------------------------------

ADMINISTRATIVE AGENT:      

BNP PARIBAS,

as Administrative Agent

    By:  

/s/ Evans Swann

      Evans Swann       Managing Director     By:  

/s/ Juan Carlos Sandoval

      Juan Carlos Sandoval       Vice President CO-SYNDICATION AGENT:     BANK
OF AMERICA, N.A., as Co-Syndication Agent     By:  

/s/ Jeffrey H. Rathkamp

    Name:   Jeffrey H. Rathkamp     Title:   Managing Director

CO-SYNDICATION AGENT:

    BANK OF MONTREAL, as Co-Syndication Agent     By:  

/s/ James V. Ducote

    Name:   James V. Ducote     Title:   Director

CO-DOCUMENTATION AGENT:

    JPMORGAN CHASE BANK, N.A., as Co- Documentation Agent     By:  

/s/ Michael A. Kamauf

    Name:   Michael A. Kamauf     Title:   Vice President

CO-DOCUMENTATION AGENT:

    WELLS FARGO BANK, N.A., as Co-Documentation Agent     By:  

/s/ Scott Hodges

    Name:   Scott Hodges     Title:   Director

 

Signature Page - 2

--------------------------------------------------------------------------------

LENDERS:

    BNP PARIBAS     By:  

/s/ Evans Swann

      Evans Swann       Managing Director     By:  

/s/ Juan Carlos Sandoval

      Juan Carlos Sandoval       Vice President

 

Signature Page - 3

--------------------------------------------------------------------------------

BANK OF AMERICA, N.A.

By:

 

/s/ Jeffrey H. Rathkamp

Name:

  Jeffrey H. Rathkamp

Title:

  Managing Director

 

Signature Page - 4

--------------------------------------------------------------------------------

BANK OF MONTREAL

By:

 

/s/ James V. Ducote

Name:

  James V. Ducote

Title:

  Director

 

Signature Page - 5

--------------------------------------------------------------------------------

JPMORGAN CHASE BANK, N.A.

By:

 

/s/ Michael A. Kamauf

Name:

  Michael A. Kamauf

Title:

  Vice President

 

Signature Page - 6

--------------------------------------------------------------------------------

WELLS FARGO BANK, N.A.

By:

 

/s/ Scott Hodges

Name:

  Scott Hodges

Title:

  Director

 

Signature Page - 7

--------------------------------------------------------------------------------

ROYAL BANK OF CANADA

By:

 

/s/ Jay T. Sartain

Name:

  Jay T. Sartain

Title:

  Authorized Signatory

 

Signature Page - 8

--------------------------------------------------------------------------------

BARCLAYS BANK PLC

By:

 

/s/ Sam Yoo

Name:

  Sam Yoo

Title:

  Assistant Vice President

 

Signature Page - 9

--------------------------------------------------------------------------------

CREDIT AGRICOLE CORPORATE AND

INVESTMENT BANK

By:

 

/s/ Sharada Manne

Name:

  Sharada Manne

Title:

  Director

By:

 

/s/ Page Dillehunt

Name:

  Page Dillehunt

Title:

  Managing Director

 

Signature Page - 10

--------------------------------------------------------------------------------

CREDIT SUISSE AG, CAYMAN ISLANDS
BRANCH (fka, Credit Suisse, Cayman Islands Branch) By:  

/s/ Mikhail Faybusovich

Name:   Mikhail Faybusovich Title:   Vice President By:  

/s/ Vipul Dhadda

Name:   Vipul Dhadda Title:   Associate

 

Signature Page - 11

--------------------------------------------------------------------------------

DEUTSCHE BANK TRUST COMPANY AMERICAS

By:

 

/s/ Omayia Laucella

Name:

  Omayia Laucella

Title:

  Vice President

By:

 

/s/ Paul O’Leary

Name:

  Paul O’Leary

Title:

  Director

 

Signature Page - 12

--------------------------------------------------------------------------------

CAPITAL ONE, N.A.

By:

 

/s/ Wesley Fontana

Name:

  Wesley Fontana

Title:

  Vice President

 

Signature Page - 13

--------------------------------------------------------------------------------

MORGAN STANLEY BANK, N.A. By:  

/s/ S.E. Saxe

Name:   S.E. Saxe Title:   SCO MORGAN STANLEY SENIOR FUNDING, INC. By:  

/s/ S.E. Saxe

Name:   S.E. Saxe Title:   MD

 

Signature Page - 14

--------------------------------------------------------------------------------

CITIBANK, N.A. By:  

/s/ Angela McCracken

Name:   Angela McCracken Title:   Vice President

 

Signature Page - 15

--------------------------------------------------------------------------------

AMEGY BANK NATIONAL ASSOCIATION

By:

 

/s/ Charles W. Patterson

Name:

  Charles W. Patterson

Title:

  Senior Vice President

 

Signature Page - 16

--------------------------------------------------------------------------------

NATIXIS

By:

 

/s/ Donovan C Broussard

Name:

  Donovan C Broussard

Title:

  Managing Director

By:

 

/s/ Liana Tchernysheva

Name:

  Liana Tchernysheva

Title:

  Director

 

Signature Page - 17

--------------------------------------------------------------------------------

BANK OF TEXAS, N.A.

By:

 

/s/ Mari Salazar

Name:

  Mari Salazar

Title:

  Senior Vice President

 

Signature Page - 18

--------------------------------------------------------------------------------

ALLIED IRISH BANKS p.l.c

By:

 

/s/ Vaughn Buck

Name:

  Vaughn Buck

Title:

  Director

By:

 

/s/ Joseph Augustini

Name:

  Joseph Augustini

Title:

  Senior Vice President

 

Signature Page - 19

--------------------------------------------------------------------------------

MIZUHO CORPORATE BANK, LTD.

By:

 

/s/ Leon Mo

Name:

  Leon Mo

Title:

  Authorized Signatory

 

Signature Page - 20

--------------------------------------------------------------------------------

ANNEX I

LIST OF MAXIMUM CREDIT AMOUNTS

Aggregate Maximum Credit Amounts

 

Name of Lender

   Applicable Percentage     Maximum
Credit Amount

BNP Paribas

   9.500000000 %    $ 190,000,000.00

Bank of America, N.A

   7.500000000 %    $ 150,000,000.00

Bank of Montreal

   7.500000000 %    $ 150,000,000.00

JP Morgan Chase Bank, N.A.

   7.500000000 %    $ 150,000,000.00

Wells Fargo Bank, N.A.

   7.500000000 %    $ 150,000,000.00

Royal Bank of Canada

   7.500000000 %    $ 150,000,000.00

Barclays Bank PLC

   7.500000000 %    $ 150,000,000.00

Credit Agricole CIB

   6.333333333 %    $ 126,666,666.67

Credit Suisse, Cayman Islands Branch

   6.333333333 %    $ 126,666,666.67

Deutsche Bank Trust Company Americas

   6.333333333 %    $ 126,666,666.67

Capital One, N.A.

   4.666666667 %    $ 93,333,333.33

Morgan Stanley Bank, N.A.

   4.500000000 %    $ 90,000,000.00

Morgan Stanley Senior Funding, Inc.

   3.000000000 %    $ 60,000,000.00

Citibank, N.A.

   2.666666667 %    $ 53,333,333.33

Amegy Bank National Association

   2.666666667 %    $ 53,333,333.33

Natixis

   2.366666667 %    $ 47,333,333.33

Bank of Texas, N.A.

   2.333333333 %    $ 46,666,666.67

Allied Irish Bank p.l.c.

   2.300000000 %    $ 46,000,000.00

Mizuho Corporate Bank, Ltd.

   2.000000000 %    $ 40,000,000.00

TOTAL

   100.000000000 %    $ 2,000,000,000.00

 

Annex I - 1

--------------------------------------------------------------------------------

EXHIBIT A

FORM OF NOTE

 

$[        ]

   [            ], 201    

FOR VALUE RECEIVED, Petrohawk Energy Corporation, a Delaware corporation (the
“Borrower”), hereby promises to pay to the order of
[                                ] (the “Lender”), at the principal office of
BNP Paribas, as administrative agent (the “Administrative Agent”), at
[                                ], the principal sum of [         ] Dollars
($[        ]) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Borrower under the
Credit Agreement, as hereinafter defined), in lawful money of the United States
of America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.

The date, amount, Type, interest rate, Interest Period and maturity of each Loan
made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, may be endorsed by the Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Lender. Failure to make any such notation or to attach a schedule shall
not affect any Lender’s or the Borrower’s rights or obligations in respect of
such Loans or affect the validity of such transfer by any Lender of this Note.

This Note is one of the Notes referred to in the Fifth Amended and Restated
Senior Revolving Credit Agreement dated as of August 2, 2010 among the Borrower,
the Administrative Agent, and the other agents and lenders signatory thereto
(including the Lender), and evidences Loans made by the Lender thereunder (such
Fifth Amended and Restated Senior Revolving Credit Agreement as the same may be
amended, supplemented or restated from time to time, the “Credit Agreement”).
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.

This Note is issued pursuant to the Credit Agreement and is entitled to the
benefits provided for in the Credit Agreement and the other Loan Documents. The
Credit Agreement provides for the acceleration of the maturity of this Note upon
the occurrence of certain events, for prepayments of Loans upon the terms and
conditions specified therein and other provisions relevant to this Note.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF TEXAS.

 

PETROHAWK ENERGY CORPORATION By:  

 

Name:  

 

Title:  

 

 

Exhibit A-1

--------------------------------------------------------------------------------

EXHIBIT B

FORM OF BORROWING REQUEST

[            ], 201[    ]

PETROHAWK ENERGY CORPORATION, a Delaware corporation (the “Borrower”), pursuant
to Section 2.03 of the Fifth Amended and Restated Senior Revolving Credit
Agreement dated as of August 2, 2010 (together with all amendments,
restatements, supplements or other modifications thereto, the “Credit
Agreement”) among the Borrower, BNP Paribas, as Administrative Agent and the
other agents and lenders (the “Lenders”) which are or become parties thereto
(unless otherwise defined herein, each capitalized term used herein is defined
in the Credit Agreement), hereby requests a Borrowing as follows:

 

  (i) Aggregate amount of the requested Borrowing is $[        ];

 

  (ii) Date of such Borrowing is [            ], 201[    ];

 

  (iii) Requested Borrowing is to be [an ABR Borrowing] [a Eurodollar
Borrowing];

 

  (iv) In the case of a Eurodollar Borrowing, the initial Interest Period
applicable thereto is [                    ];

 

  (v) Amount of Borrowing Base in effect on the date hereof is $[        ];

 

  (vi) Amount of Oil and Gas Borrowing Base in effect on the date hereof is
$[        ];

 

  (vii) Total Revolving Credit Exposures on the date hereof (i.e., outstanding
principal amount of Loans and total LC Exposure) is $[        ]; and

 

  (viii) Pro forma total Revolving Credit Exposures (giving effect to the
requested Borrowing) is $[        ]; and

 

  (ix) Location and number of the Borrower’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05 of the
Credit Agreement, is as follows:

 

        [                                  ]

        [                                  ]

        [                                  ]

        [                                  ]

        [                                  ]

 

Exhibit B-1

--------------------------------------------------------------------------------

The undersigned certifies that he/she is the [                                ]
of the Borrower, and that as such he/she is authorized to execute this
certificate on behalf of the Borrower. The undersigned further certifies,
represents and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested Borrowing under the terms and conditions of the Credit
Agreement.

 

PETROHAWK ENERGY CORPORATION

By:  

 

Name:  

 

Title:  

 

 

Exhibit B-2

--------------------------------------------------------------------------------

EXHIBIT C

FORM OF INTEREST ELECTION REQUEST

[        ], 201[    ]

PETROHAWK ENERGY CORPORATION, a Delaware corporation (the “Borrower”), pursuant
to Section 2.04 of the Fifth Amended and Restated Senior Revolving Credit
Agreement dated as of August 2, 2010 (together with all amendments,
restatements, supplements or other modifications thereto, the “Credit
Agreement”) among the Borrower, BNP Paribas, as Administrative Agent and the
other agents and lenders (the “Lenders”) which are or become parties thereto
(unless otherwise defined herein, each capitalized term used herein is defined
in the Credit Agreement), hereby makes an Interest Election Request as follows:

 

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

 

  (ii) The effective date of the election made pursuant to this Interest
Election Request is [                                ], 201[    ];[and]

 

  (iii) The resulting Borrowing is to be [an ABR Borrowing] [a Eurodollar
Borrowing][; and]

 

  [(iv) [If the resulting Borrowing is a Eurodollar Borrowing] The Interest
Period applicable to the resulting Borrowing after giving effect to such
election is [                                ]].

The undersigned certifies that he/she is the [                                ]
of the Borrower, and that as such he/she is authorized to execute this
certificate on behalf of the Borrower. The undersigned further certifies,
represents and warrants on behalf of the Borrower that the Borrower is entitled
to receive the requested continuation or conversion under the terms and
conditions of the Credit Agreement.

 

PETROHAWK ENERGY CORPORATION By:  

 

Name:  

 

Title:  

 

 

Exhibit C-1

--------------------------------------------------------------------------------

EXHIBIT D

FORM OF

COMPLIANCE CERTIFICATE

The undersigned hereby certifies that he/she is the
[                                ] of PETROHAWK ENERGY CORPORATION, a Delaware
corporation (the “Borrower”), and that as such he/she is authorized to execute
this certificate on behalf of the Borrower. With reference to the Fifth Amended
and Restated Senior Revolving Credit Agreement dated as of August 2, 2010
(together with all amendments, restatements, supplements or other modifications
thereto being the “Agreement”) among the Borrower, BNP Paribas, as
Administrative Agent, and the other agents and lenders (the “Lenders”) which are
or become a party thereto, and such Lenders, the undersigned represents and
warrants as follows (each capitalized term used herein having the same meaning
given to it in the Agreement unless otherwise specified):

(a) The representations and warranties of the Borrower contained in Article VII
of the Agreement and in the Loan Documents and otherwise made in writing by or
on behalf of the Borrower pursuant to the Agreement and the Loan Documents were
true and correct when made, and are repeated at and as of the time of delivery
hereof and are true and correct in all material respects at and as of the time
of delivery hereof, except to the extent such representations and warranties are
expressly limited to an earlier date or the Majority Lenders have expressly
consented in writing to the contrary.

(b) The Borrower has performed and complied with all agreements and conditions
contained in the Agreement and in the Loan Documents required to be performed or
complied with by it prior to or at the time of delivery hereof [or specify
default and describe].

(c) Since December 31, 2009, no change has occurred, either in any case or in
the aggregate, in the condition, financial or otherwise, of the Borrower or any
Restricted Subsidiary which could reasonably be expected to have a Material
Adverse Effect [or specify event].

(d) There exists no Default or Event of Default [or specify Default and
describe].

(e) Attached hereto are the detailed computations necessary to determine whether
the Borrower is in compliance with Section 9.01 as of the end of the [fiscal
quarter][fiscal year] ending [                    ].

EXECUTED AND DELIVERED this [        ] day of [            ].

 

PETROHAWK ENERGY CORPORATION By:  

 

Name:  

 

Title:  

 

 

Exhibit D - 1

--------------------------------------------------------------------------------

EXHIBIT E

SECURITY INSTRUMENTS

1. Fifth Amended and Restated Guaranty Agreement dated as of August 2, 2010 by
the Borrower, the Subsidiaries party thereto as Guarantors, in favor of the
Administrative Agent and the Lenders

2. Amended and Restated Collateral Assignment of Midstream Services Contracts
dated as of August 2, 2010 by Hawk Field Services and its Restricted
Subsidiaries party thereto, in favor of the Administrative Agent and the Lenders

3. First Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and
Financing Statement dated effective August 2, 2010 from One TEC Operating, LLC
to Brian M. Malone, as Trustee for the benefit of BNP Paribas, as Administrative
Agent, and the other Secured Parties. (Cleburne and Van Buren Counties,
Arkansas)

4. First Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust, Fixture
Filing, Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 from Petrohawk Properties, LP, as
mortgagor, to Brian M. Malone, as Trustee for the benefit of BNP Paribas, as
Administrative Agent, and others. (Shelby County, Texas)

5. First Amendment to Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated effective August 2,
2010 from Petrohawk Properties, LP, as mortgagor, for the benefit of BNP
Paribas, as Mortgagee and Administrative Agent, for the benefit of the Lenders.
(Sabine Parish, Louisiana)

6. Second Amendment to Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated effective August 2,
2010 from Petrohawk Properties, LP, as mortgagor, for the benefit of BNP
Paribas, as Mortgagee and Administrative Agent, for the benefit of the Lenders.
(Bienville Parish, Louisiana)

7. Second Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust, Fixture
Filing, Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 from Petrohawk Properties, LP, as
mortgagor, to Brian M. Malone, as Trustee for the benefit of BNP Paribas, as
Administrative Agent, and others. (La Salle, McMullen and Nacogdoches Counties,
Texas)

8. Second Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and
Financing Statement dated effective August 2, 2010 between KCS Resources, LLC,
as mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of the
Lenders. (Arkansas)

9. Second Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and
Financing Statement dated effective August 2, 2010 between One TEC, LLC, as
mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of the
Lenders. (Arkansas)

 

Exhibit E - 1

--------------------------------------------------------------------------------

10. Second Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement, Fixture Filing and
Financing Statement dated effective August 2, 2010 between Petrohawk Properties,
LP, as mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of
the Lenders. (Arkansas)

11. Second Amendment to Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated effective August 2,
2010 between Winwell Resources, L.L.C., as mortgagor, and BNP Paribas, as
Administrative Agent, for the benefit of the Lenders. (Louisiana)

12. Third Amendment to Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated effective August 2,
2010 between KCS Resources, LLC, as mortgagor, and BNP Paribas, as
Administrative Agent, for the benefit of the Lenders. (Louisiana)

13. Third Amendment to Mortgage, Fixture Filing, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated effective August 2,
2010 between Petrohawk Properties, LP, as mortgagor, and BNP Paribas, as
Administrative Agent, for the benefit of the Lenders. (Louisiana)

14. Third Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 between KCS Resources, LLC, as
mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of the
Lenders. (Oklahoma and Texas)

15. Fourth Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 between WSF, Inc., as mortgagor, and
BNP Paribas, as Administrative Agent, for the benefit of the Lenders.
(Louisiana)

16. Fifth Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 between KCS Resources, LLC, as
mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of the
Lenders. (Louisiana)

17. Sixth Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 between Petrohawk Properties, LP, as
mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of the
Lenders. (Louisiana)

18. Sixth Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 between Winwell Resources, L.L.C., as
mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of the
Lenders. (Louisiana)

19. Seventh Amendment to Mortgage, Line of Credit Mortgage, Deed of Trust,
Assignment of As-Extracted Collateral, Security Agreement and Financing
Statement dated effective August 2, 2010 between Petrohawk Properties, LP, as
mortgagor, and BNP Paribas, as Administrative Agent, for the benefit of the
Lenders. (Louisiana, Oklahoma and Texas)

 

Exhibit E - 2

--------------------------------------------------------------------------------

20. First Amendment to Deed of Trust, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective August 2, 2010 from Hawk Field
Services, LLC to Brian M. Malone, as Trustee for BNP Paribas, as Administrative
Agent, for the benefit of the Lenders. (Arkansas)

21. First Amendment to Deed of Trust, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective August 2, 2010 from Hawk Field
Services, LLC to Brian M. Malone, as Trustee for BNP Paribas, as Administrative
Agent, for the benefit of the Lenders. (Faulkner County, Arkansas)

22. First Amendment to Deed of Trust, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective August 2, 2010 from Hawk Field
Services, LLC to Brian M. Malone, as Trustee for BNP Paribas, as Administrative
Agent, for the benefit of the Lenders. (Texas)

23. First Amendment to Deed of Trust, Assignment, Security Agreement, Fixture
Filing and Financing Statement dated effective August 2, 2010 from Hawk Field
Services, LLC to Brian M. Malone, as Trustee for BNP Paribas, as Administrative
Agent, for the benefit of the Lenders. (McMullen County, Texas)

24. Deed of Trust, Assignment, Security Agreement, Fixture Filing and Financing
Statement dated effective August 2, 2010 from Hawk Field Services, LLC to Brian
M. Malone, as Trustee for BNP Paribas, as Administrative Agent, for the benefit
of the Lenders. (Texas)

25. Deed of Trust, Assignment, Security Agreement, Fixture Filing and Financing
Statement dated effective August 2, 2010 from Hawk Field Services, LLC to Brian
M. Malone, as Trustee for BNP Paribas, as Administrative Agent, for the benefit
of the Lenders. (Arkansas)

 

Exhibit E - 3

--------------------------------------------------------------------------------

EXHIBIT F

FORM OF ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Fifth Amended and Restated Senior Revolving Credit
Agreement identified below (as amended, the “Credit Agreement”), receipt of a
copy of which is hereby acknowledged by the Assignee. The Standard Terms and
Conditions set forth in Annex 1 attached hereto are hereby agreed to and
incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit and guarantees included in
such facilities) and (ii) to the extent permitted to be assigned under
applicable law, all claims, suits, causes of action and any other right of the
Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

 

1.    Assignor:   ________________________________ 2.    Assignee:  
________________________________      [and is an Affiliate/Approved Fund of
[identify Lender]1 ] 3.    Borrower:   Petrohawk Energy Corporation 4.   
Administrative Agent:   BNP Paribas, as the administrative agent under the
Credit Agreement 5.    Credit Agreement:   The Fifth Amended and Restated Senior
Revolving Credit Agreement dated as of August 2, 2010 among Petrohawk Energy
Corporation, the Lenders parties thereto, BNP Paribas, as Administrative Agent,
and the other agents parties thereto

 

1

Select as applicable.

 

Exhibit F - 1

--------------------------------------------------------------------------------

6.    Assigned Interest:   

 

Commitment Assigned

 

Aggregate Amount of

Commitment/Loans for

all Lenders

   Amount of
Commitment/Loans
Assigned    Percentage Assigned of
Commitment/Loans2   $                                                
$                                                         %  
$                                                 $                             
                           %   $                                                
$                                                          %

Effective Date:              , 201     [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR [NAME OF ASSIGNOR] By:  

 

Title:   ASSIGNEE [NAME OF ASSIGNEE] By:  

 

Title:  

 

2

Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

 

Exhibit F - 2

--------------------------------------------------------------------------------

Consented to and Accepted:

BNP Paribas, as Administrative Agent

 

By  

 

Title:   By  

 

Title:  

 

[Consented to:]3

Petrohawk Energy Corporation

By

 

 

Title:

 

 

 

3

To be added only if the consent of the Borrower and/or other parties (e.g.
Issuing Bank) is required by the terms of the Credit Agreement.

 

Exhibit F - 3

--------------------------------------------------------------------------------

ANNEX 1

PETROHAWK ENERGY CORPORATION FIFTH AMENDED AND RESTATED SENIOR

REVOLVING CREDIT AGREEMENT

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Fifth Amended and Restated Senior Revolving Credit Agreement or any other Loan
Document, (ii) the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any collateral thereunder,
(iii) the financial condition of the Borrower, any of its Subsidiaries or
Affiliates or any other Person obligated in respect of any Loan Document or
(iv) the performance or observance by the Borrower, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Fifth Amended and Restated Senior
Revolving Credit Agreement, (ii) it satisfies the requirements, if any,
specified in the Fifth Amended and Restated Senior Revolving Credit Agreement
that are required to be satisfied by it in order to acquire the Assigned
Interest and become a Lender, (iii) from and after the Effective Date, it shall
be bound by the provisions of the Fifth Amended and Restated Senior Revolving
Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Fifth Amended and Restated Senior Revolving Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 8.01 thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on the Administrative Agent or
any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment
and Assumption is any documentation required to be delivered by it pursuant to
the terms of the Fifth Amended and Restated Senior Revolving Credit Agreement,
duly completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, 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, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

 

Exhibit F - 4

--------------------------------------------------------------------------------

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of Texas.

 

Exhibit F - 5

--------------------------------------------------------------------------------

SCHEDULE 7.05

LITIGATION

None.

 

Schedule 7.05 - 1

--------------------------------------------------------------------------------

SCHEDULE 7.14

SUBSIDIARIES AND PARTNERSHIPS; UNRESTRICTED SUBSIDIARIES

 

Subsidiaries

  

Jurisdiction

of

Organization

  

Organizational
Identification

Number

  

Taxpayer

Identification

Number

  

Principal Place of

Business

and Chief Executive

Office

Bison Ranch LLC    Idaho    W-55188    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

Hawk Field Services, LLC    Oklahoma    3500620355    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

HK Energy Marketing, LLC

   Delaware    4618598    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

HK Transportation, LLC    Oklahoma    3512133820    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

KCS Energy Services, Inc.    Delaware    2666373    76-0516389   

1000 Louisiana

Suite 5600

Houston, TX 77002

KCS Resources, LLC    Delaware    2353570   

86-0876964

76-0413320

KCS Resources, Inc. ID # may be used for certain state regulatory filing

  

1000 Louisiana

Suite 5600

Houston, TX 77002

Medallion California Properties Company

   Texas    109992200    76-0267470   

1000 Louisiana

Suite 5600

Houston, TX 77002

One TEC Operating, LLC    Texas    800274901    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

One TEC, LLC    Texas    800156535    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

Petrohawk Holdings, LLC    Delaware    3990561    20-3066517   

1000 Louisiana

Suite 5600

Houston, TX 77002

Petrohawk Operating Company

   Texas    01262202-00    75-2472880   

1000 Louisiana

Suite 5600

Houston, TX 77002

Petrohawk Properties, LP    Texas    9759210    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

 

Schedule 7.14 - 1

--------------------------------------------------------------------------------

Subsidiaries

  

Jurisdiction

of

Organization

  

Organizational
Identification

Number

  

Taxpayer

Identification

Number

  

Principal Place of

Business

and Chief Executive

Office

P-H Energy, LLC    Texas    800414887    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

Proliq, Inc.    New Jersey    9081403000    22-1516527   

1000 Louisiana

Suite 5600

Houston, TX 77002

Winwell Resources, L.L.C.    Louisiana    34473413K   

86-0876964

72-1277420

Winwell Resources, Inc. ID# may be used for certain state regulatory filing

  

1000 Louisiana

Suite 5600

Houston, TX 77002

WSF, Inc.    Louisiana    34357779D    72-1169871   

1000 Louisiana

Suite 5600

Houston, TX 77002

Big Hawk Services, LLC    Delaware    4820240    86-0876964   

1000 Louisiana

Suite 5600

Houston, TX 77002

 

Schedule 7.14 - 2

--------------------------------------------------------------------------------

SCHEDULE 7.18

GAS IMBALANCES

As of June 30, 2010 the net underproduced balance was 1,468,094 Mcfe.

 

Schedule 7.18 - 1

--------------------------------------------------------------------------------

SCHEDULE 7.19

MARKETING CONTRACTS

None.

 

Schedule 7.19 -1

--------------------------------------------------------------------------------

SCHEDULE 7.20

SWAP AGREEMENTS

[See Attached]

 

Schedule 7.20 - 1

--------------------------------------------------------------------------------

Petrohawk Energy Corporation

Open Positions Summary - 6/30/10

Natural Gas Contracts

 

          Data in Btu               

Counterparty

  

Type

   Total
Mmbtu’s    Fixed
Price    Collar
Floor    Collar
Ceiling    Start
Month    Last
Month    6/30/2010
MTM                         BNP Paribas    Price Swap    920,000    $ 8.22     
—        —      Jan-10    Dec-10    3,120,214 JP Morgan    Collar - Def. Prem.
   1,840,000      —      $ 7.00    $ 10.00    Jan-10    Dec-10    4,048,170 Bank
of Montreal    Collar - Def. Prem.    1,840,000      —      $ 7.00    $ 10.00   
Jan-10    Dec-10    4,048,170 Bank of Montreal    Collar - Def. Prem.   
1,840,000      —      $ 7.00    $ 10.00    Jan-10    Dec-10    4,048,170 BNP
Paribas    Collar - Def. Prem.    3,680,000      —      $ 7.00    $ 10.00   
Jan-10    Dec-10    8,096,537 BNP Paribas    Collar - Def. Prem.    1,840,000   
  —      $ 7.00    $ 10.00    Jan-10    Dec-10    4,048,269 Citibank, NA   
Collar - Def. Prem.    1,840,000      —      $ 7.00    $ 10.00    Jan-10   
Dec-10    4,048,170 Citibank, NA    Collar - Def. Prem.    1,840,000      —     
$ 7.00    $ 10.00    Jan-10    Dec-10    4,048,170 Citibank, NA    Collar -
Def. Prem.    1,840,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10   
2,343,440 Citibank, NA    Collar - Def. Prem.    1,840,000      —      $ 6.00   
$ 9.00    Jan-10    Dec-10    2,343,440 JP Morgan    Collar - Def. Prem.   
3,680,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10    4,682,509
Citibank, NA    Collar - Def.Prem.    1,840,000      —      $ 6.00    $ 9.00   
Jan-10    Dec-10    2,343,440 BNP Paribas    Collar - Def.Prem.    1,840,000   
  —      $ 6.00    $ 9.00    Jan-10    Dec-10    2,343,440 Citibank, NA   
Collar - Def.Prem.    1,840,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10
   2,343,440 Bank of Montreal    Collar - Def.Prem.    1,840,000      —      $
6.00    $ 9.00    Jan-10    Dec-10    2,343,440 JP Morgan    Collar - Def.Prem.
   1,840,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10    2,341,255 JP
Morgan    Collar - Def.Prem.    1,840,000      —      $ 6.00    $ 9.00    Jan-10
   Dec-10    2,341,255 JP Morgan    Collar - Def.Prem.    1,840,000      —     
$ 6.00    $ 9.00    Jan-10    Dec-10    2,341,255 Bank of America    Collar -
Def.Prem.    1,840,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10   
2,343,440 Bank of America    Collar - Def.Prem.    1,840,000      —      $ 6.00
   $ 9.00    Jan-10    Dec-10    2,343,440 Barclays    Collar - Def.Prem.   
1,840,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10    2,341,255 Barclays
   Collar - Def.Prem.    1,840,000      —      $ 6.00    $ 9.00    Jan-10   
Dec-10    2,341,255 BNP Paribas    Collar - Def.Prem.    3,680,000      —      $
6.00    $ 9.00    Jan-10    Dec-10    4,686,881 Citibank, NA    Collar -
Def.Prem.    1,840,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10   
2,343,440 Citibank, NA    Collar - Def.Prem.    1,840,000      —      $ 6.00   
$ 9.00    Jan-10    Dec-10    2,343,440 Barclays    Collar - Def.Prem.   
1,840,000      —      $ 6.00    $ 9.00    Jan-10    Dec-10    2,341,255 BNP
Paribas    Collar - Def.Prem.    1,840,000      —      $ 6.00    $ 9.00   
Jan-10    Dec-10    2,343,440

--------------------------------------------------------------------------------

Bank of Montreal    Collar - Def. Prem.    1,840,000    —      $ 5.00    $ 9.00
   Jan-10    Dec-10      874,809 BNP Paribas    Collar - Def. Prem.    1,840,000
   —      $ 5.00    $ 9.00    Jan-10    Dec-10      874,809 BNP Paribas   
Collar - Def. Prem.    3,680,000    —      $ 5.00    $ 9.00    Jan-10    Dec-10
     1,749,617 Barclays    Collar - Def. Prem.    3,680,000    —      $ 5.00   
$ 9.00    Jan-10    Dec-10      1,747,917 JP Morgan    Collar - Def. Prem.   
1,840,000    —      $ 5.00    $ 9.00    Jan-10    Dec-10      874,011 BNP
Paribas    Collar - Def. Prem.    1,840,000    —      $ 5.00    $ 9.00    Jan-10
   Dec-10      874,809 BNP Paribas    Collar - Def. Prem.    1,840,000    —     
$ 5.00    $ 9.00    Jan-10    Dec-10      874,809 BNP Paribas    Put - Def.
Prem.    1,840,000    —      $ 5.00      —      Jul-10    Dec-10      898,942
Bank of Montreal    Put - Def. Prem.    1,840,000    —      $ 5.00      —     
Jul-10    Dec-10      898,942 Credit Suisse    Put - Def. Prem.    1,840,000   
—      $ 5.00      —      Jul-10    Dec-10      898,942 Barclays    Put - Def.
Prem.    1,840,000    —      $ 5.00      —      Jul-10    Dec-10      898,942
Calyon    Put - Def. Prem.    1,840,000    —      $ 5.00      —      Jul-10   
Dec-10      898,942 Bank of America    Put - Def. Prem.    1,840,000    —      $
5.00      —      Jul-10    Dec-10      898,942 Wells Fargo    Put - Def. Prem.
   1,840,000    —      $ 5.00      —      Jul-10    Dec-10      898,942 BNP
Paribas    Put - Def. Prem.    1,840,000    —      $ 5.00      —      Jul-10   
Dec-10      898,942 Barclays    Put - Def. Prem.    1,840,000    —      $ 5.00
     —      Jul-10    Dec-10      898,942 JP Morgan    Put - Def. Prem.   
1,840,000    —      $ 5.00      —      Jul-10    Dec-10      898,068           
                  

2010 Total Hedged Natural Gas Volumes

   89,240,000                   $ 101,559,957                                   
     Data in Btu               

Counterparty

  

Type

   Total
Mmbtu’s    Fixed
Price    Collar
Floor    Collar
Ceiling    Start
Month    Last
Month    6/30/2010
MTM BNP Paribas    Costless Collar    10,950,000    —      $ 5.50    $ 10.05   
Jan-11    Dec-11      8,380,335 Bank of Montreal    Costless Collar    7,300,000
   —      $ 5.50    $ 10.00    Jan-11    Dec-11      5,577,388 Wells Fargo   
Costless Collar    3,650,000    —      $ 5.50    $ 10.00    Jan-11    Dec-11   
  2,788,695 Wells Fargo    Costless Collar    3,650,000    —      $ 5.50    $
10.00    Jan-11    Dec-11      2,788,695 Calyon    Costless Collar    7,300,000
   —      $ 5.50    $ 10.00    Jan-11    Dec-11      5,577,388 Barclays   
Costless Collar    7,300,000    —      $ 5.50    $ 10.00    Jan-11    Dec-11   
  5,577,388 Bank of Montreal    Costless Collar    7,300,000    —      $ 5.50   
$ 10.00    Jan-11    Dec-11      5,577,388 BNP Paribas    Costless Collar   
7,300,000    —      $ 5.50    $ 10.10    Jan-11    Dec-11      5,596,139 Wells
Fargo    Costless Collar    3,650,000    —      $ 5.50    $ 10.10    Jan-11   
Dec-11      2,798,071 Bank of America    Costless Collar    3,650,000    —     
$ 5.50    $ 10.10    Jan-11    Dec-11      2,798,071 BNP Paribas    Costless
Collar    7,300,000    —      $ 5.50    $ 10.10    Jan-11    Dec-11     
5,596,139 Bank of Montreal    Costless Collar    3,650,000    —      $ 5.50    $
10.10    Jan-11    Dec-11      2,798,071

--------------------------------------------------------------------------------

          Data in Btu               

Counterparty

  

Type

   Total
Mmbtu’s    Fixed
Price    Collar
Floor    Collar
Ceiling    Start
Month    Last
Month    6/30/2010
MTM Bank of Montreal    Costless Collar    3,650,000    —      $ 5.50    $ 10.30
   Jan-11    Dec-11      2,815,434 Calyon    Costless Collar    3,650,000    —  
   $ 5.50    $ 10.10    Jan-11    Dec-11      2,798,071 JP Morgan    Costless
Collar    3,650,000    —      $ 5.50    $ 10.25    Jan-11    Dec-11     
2,807,715 Citibank    Costless Collar    3,650,000    —      $ 5.50    $ 10.00
   Jan-11    Dec-11      2,788,695 JP Morgan    Costless Collar    3,650,000   
—      $ 5.75    $ 10.00    Jan-11    Dec-11      3,364,864 BNP Paribas   
Costless Collar    1,825,000    —      $ 5.75    $ 10.00    Jan-11    Dec-11   
  1,684,536 Barclays    Costless Collar    7,300,000    —      $ 5.50    $ 10.15
   Jan-11    Dec-11      5,605,144 Barclays    Costless Collar    3,650,000   
—      $ 5.50    $ 10.05    Jan-11    Dec-11      2,793,445 Barclays    Costless
Collar    7,300,000    —      $ 5.75    $ 10.00    Jan-11    Dec-11     
6,738,151 JP Morgan    Costless Collar    3,650,000    —      $ 5.75    $ 10.05
   Jan-11    Dec-11      3,369,609 Bank of Montreal    Costless Collar   
3,650,000    —      $ 5.75    $ 10.00    Jan-11    Dec-11      3,369,075 BNP
Paribas    Collar - Def. Prem.    7,300,000    —      $ 6.00    $ 9.00    Jan-11
   Dec-11      7,725,713 JP Morgan    Collar - Def. Prem.    3,650,000    —     
$ 5.50    $ 9.00    Jan-11    Dec-11      2,655,240 BNP Paribas    Collar - Def.
Prem.    1,825,000    —      $ 5.50    $ 9.00    Jan-11    Dec-11      1,329,388
Barclays    Collar - Def. Prem.    7,300,000    —      $ 5.50    $ 9.00   
Jan-11    Dec-11      5,317,547 JP Morgan    Collar - Def. Prem.    3,650,000   
—      $ 5.50    $ 9.00    Jan-11    Dec-11      2,655,240 Wells Fargo    Collar
- Def. Prem.    3,650,000    —      $ 5.50    $ 9.00    Jan-11    Dec-11     
2,658,773 JP Morgan    Collar - Def. Prem.    3,650,000    —      $ 5.50    $
9.00    Jan-11    Dec-11      2,655,240 BNP Paribas    Collar - Def. Prem.   
7,300,000    —      $ 5.50    $ 9.00    Jan-11    Dec-11      5,317,547 Bank of
Montreal    Collar - Def. Prem.    3,650,000    —      $ 5.50    $ 9.00   
Jan-11    Dec-11      2,658,773 Barclays    Collar - Def. Prem.    14,600,000   
—      $ 5.50    $ 9.00    Jan-11    Dec-11      10,635,094 Calyon    Collar -
Def. Prem.    3,650,000    —      $ 5.50    $ 9.00    Jan-11    Dec-11     
2,658,773 Wells Fargo    Collar - Def. Prem.    3,650,000    —      $ 5.50    $
9.00    Jan-11    Dec-11      2,658,773 Bank of Montreal    Collar - Def. Prem.
   3,650,000    —      $ 5.50    $ 9.00    Jan-11    Dec-11      2,658,773 BNP
Paribas    Collar - Def. Prem.    3,650,000    —      $ 5.50    $ 9.00    Jan-11
   Dec-11      2,658,773                              

2011 Total Hedged Natural Gas Volumes

   189,800,000                   $ 148,232,154                              

--------------------------------------------------------------------------------

          Data in Btu                            Total    Fixed    Collar   
Collar    Start    Last    6/30/2010  

Counterparty

  

Type

   Mmbtu’s    Price    Floor    Ceiling    Month    Month    MTM  

Bank of Montreal

   Collar - Def. Prem.    1,830,000      —      $ 5.00    $ 8.00    Jan-12   
Dec-12      428,533   

Barclays

   Collar - Def. Prem.    3,660,000      —      $ 5.00    $ 8.00    Jan-12   
Dec-12      857,064   

BNP Paribas

   Collar - Def. Prem.    3,660,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      581,064   

Natixis

   Collar - Def. Prem.    3,660,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      581,064   

Bank of Montreal

   Collar - Def. Prem.    3,660,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      581,064   

Barclays

   Collar - Def. Prem.    7,320,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      1,162,129   

BNP Paribas

   Collar - Def. Prem.    7,320,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      1,162,129   

Bank of Montreal

   Collar - Def. Prem.    3,660,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      581,064   

BNP Paribas

   Collar - Def. Prem.    3,660,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      581,064   

Barclays

   Collar - Def. Prem.    7,320,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      1,162,129   

BMO

   Collar - Def. Prem.    7,320,000      —      $ 5.00    $ 7.65    Jan-12   
Dec-12      1,342,696   

Barclays

   Collar - Def. Prem.    7,320,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      1,162,129   

Credit Agricole

   Collar - Def. Prem.    10,980,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      1,743,190   

Barclays

   Collar - Def. Prem.    7,320,000      —      $ 5.00    $ 7.50    Jan-12   
Dec-12      1,162,129                                   

2012 Total Hedged Natural Gas Volumes

   78,690,000                   $ 13,087,448                                   

Total Natural Gas Contracts

   357,730,000                   $ 262,879,559                                 
  Oil Contracts                                    Data in Bbls                 

Counterparty

  

Type

   Total Bbls    Fixed
Price    Collar
Floor    Collar
Ceiling    Start
Month    Last
Month    6/30/2010
MTM  

BNP Paribas

   Price Swap    92,000    $ 75.15    $ —      $ —      Jan-10    Dec-10     
(163,999 ) 

BNP Paribas

   Price Swap    46,000    $ 75.55    $ —      $ —      Jan-10    Dec-10     
(63,632 ) 

Bank of Montreal

   Costless Collar    184,000       $ 80.00    $ 96.75    May-10    Dec-10     
1,120,501   

Bank of America

   Costless Collar    184,000       $ 80.00    $ 97.00    May-10    Dec-10     
1,123,225                                   

2010 Total Hedged Oil Volumes

   506,000                   $ 2,016,095                                   

--------------------------------------------------------------------------------

          Data in Btu                          Total    Fixed    Collar   
Collar    Start    Last    6/30/2010

Counterparty

  

Type

   Mmbtu’s    Price    Floor    Ceiling    Month    Month    MTM

Citibank

   Collar - Def. Prem.    365,000       $ 75.00    $ 101.00    Jan-11    Dec-11
     1,752,864

JP Morgan

   Costless Collar    365,000       $ 80.00    $ 100.20    Jan-11    Dec-11     
2,541,796

Bank of Montreal

   Costless Collar    365,000       $ 80.00    $ 100.10    Jan-11    Dec-11     
2,538,931

BNP Paribas

   Costless Collar    365,000       $ 80.00    $ 100.05    Jan-11    Dec-11     
2,535,693                              

2011 Total Hedged Oil Volumes

   1,460,000                   $ 9,369,284                                     
   Data in Btu               

Counterparty

  

Type

   Total
Mmbtu’s    Fixed
Price    Collar
Floor    Collar
Ceiling    Start
Month    Last
Month    6/30/2010
MTM

JP Morgan

   Costless Collar    366,000       $ 80.00    $ 102.00    Jan-12    Dec-12     
2,255,259

Calyon

   Costless Collar    366,000       $ 80.00    $ 102.00    Jan-12    Dec-12     
2,261,043

Bank of Montreal

   Costless Collar    366,000       $ 80.00    $ 102.25    Jan-12    Dec-12     
2,281,074

Wells Fargo

   Costless Collar    366,000       $ 80.00    $ 102.45    Jan-12    Dec-12     
2,297,030                              

2012 Total Hedged Oil Volumes

   1,464,000                   $ 9,094,406                              

Total Oil Contracts

      3,430,000                     20,479,785                              

--------------------------------------------------------------------------------

SCHEDULE 7.23

GATHERING CONTRACTS

(as of August 2, 2010)

 

1. Firm Gas Gathering Agreement effective January 1, 2008 between Petrohawk
Operating Company (Shipper) and Hawk Field Services, LLC (Gatherer)

 

2. Firm Gas Gathering Agreement effective June 1, 2009 between Petrohawk
Operating Company (Shipper) and Hawk Field Services, LLC (Gatherer)

 

3. Dedicated Interruptible Gas Gathering Agreement date January 1, 2008 between
KCS Resources, LLC (Shipper) and Hawk Field Services, LLC (Gatherer)

 

4. Dedicated Interruptible Gas Gathering Agreement date January 1, 2008 between
One TEC Operating, LLC (Shipper) and Hawk Field Services, LLC (Gatherer)

 

5. Dedicated Interruptible Gas Gathering Agreement date July 1, 2009 between
Chesapeake Energy Marketing, Inc. (Shipper) and Hawk Field Services, LLC
(Gatherer), as amended November 13, 2009

 

6. Dedicated Interruptible Gas Gathering Agreement date July 24, 2009 between
Common Resources, L.L.C. (Shipper) and Hawk Field Services, LLC (Gatherer),
assigned to Talisman Energy USA Inc. effective June 1, 2010

 

7. Gas Gathering Agreement dated September 12, 2009 between Regency Field
Services LLC (Gather) and Hawk Field Services, LLC (Shipper)

 

8. Dedicated Interruptible Gas Gathering Agreement dated May 1, 2010 between XTO
Energy, Inc. (Shipper) and Hawk Field Services, LLC (Gatherer)

 

9. Dedicated Interruptible Gas Gathering Agreement date November 23, 2009
between San Isidro Development Company, L.C.(Shipper) and Hawk Field Services,
LLC (Gatherer)

Letter Agreement dated June 24, 2010 re: Firm Gas Gathering Agreement between
GeoSouthern

Energy Corporation (Shipper) and Hawk Field Services, LLC (Gatherer)

 

Schedule 7.23 - 1

--------------------------------------------------------------------------------

SCHEDULE 9.05

INVESTMENTS

None.

 

Schedule 9.05 - 1